Throughout March 2013, the National Appeals Court (Audiencia Nacional) adopted four judgments concerning the Spanish Competition Commission’s (“CNC”) decision imposing sanctions in the Sherry Wine Cartel case, with five further judgments concerning other appellants pending adoption and/or publication. In July 2010, the CNC fined various Sherry firms, FEDEJEREZ (the sectorial association) and the Regulatory Council of the Designation of Origin (Consejo Regulador de la Denominación de Origen) a total of 6.7 million euros for a cartel infringement.

These judgments appear to be in line with the declarations of the National Appeals Court in relation to the other two cases in which fines had been imposed by the CNC in this sector. Thus, in December 2010, the Court reduced by 75% the fine imposed by the CNC on the Regulatory Council in the case of the so-called “sale quotas”, finding the uncertain legal context to be a mitigating factor. Equally, in October 2011 the Court annulled the fines imposed by the CNC in the Grape and Grape-juice case, on the basis of the absence of the subjective element of culpability.

To understand these National Appeals Court judgments it is vital to understand in the first place how the CNC initially defined this Sherry Wine cartel, which it separated into three clearly differentiated parts. The first stage was between 2001 and 2002. During this time, the so-called “BOB (Buyer’s Own Brand) Committee” met, which, according to the CNC, used various instruments to limit the production to be marketed (thus avoiding a fall in prices), share out the BOB market and not offer to sell below a reference price.

In the second period, the Sherry firms engaged in contacts between March 2004 and the middle of 2005 with a view to submitting their proposals to the Regulatory Council for the amendment of article 32.1 of the Regulation governing the Sherry Designation of Origin. This modification in practice meant the reduction of production volumes (“quotas”) which the Sherry firms could sell. In fact, the CNC itself had fined the Regulatory Council in case 2779/07 for applying these quotas in a discriminatory manner, i.e. a different quota for each Sherry firm.

Finally, with respect to the third time period of the cartel, the CNC alleged that from mid-2005 until 2008, an attempt had been made to revert to using the restrictive agreements of the first period.

The National Appeals Court reduced the fines on the basis of the uncertain legal context, limiting the fines to 5% of the turnover in the BOB market in 2009. Somewhat curiously, it returned the file to the CNC solely in order for it to calculate this figure. The Court held that the Department of Agriculture of the Andalusia Regional Government had approved the regulatory change which involved the introduction of the new quotas fixed by the Regulatory Council of the Designation of Origin by Order of 19 February 2007. The Regional Government had thus “helped to give the appearance of legality to the conduct which exclusively involved the fixing of a sales quota.” That is, although the mitigating factor refers to facts relating to the second period of the breach (which the CNC also calls the intermediate or reflection period), the impact on fines is very significant. It is estimated that the reduction of the fines imposed by the CNC could exceed 80% of the total. The Court only retained the fine of 200,000 euros originally imposed on the Regulatory Council by the CNC on the basis that it had already taken this fact into account when calculating the fine.

Nevertheless, the Court confirmed the CNC Decision with respect to the existence of a single and continuous breach. In this regard, the appellants alleged that the last two time periods did not constitute a cartel infringement and therefore the limitation period relating to the conduct during the first time period had expired. Thus, the appellants alleged that after the first period in which the BOB Committee had met, during the so-called “reflection period” between March 2004 and mid-2005 there was no evidence of a breach. The only communications relied on by the CNC as evidence of the existence of contacts in the reflection period referred to the revision of the Regulatory Council Regulation and the sales quotas, conduct for which the CNC had already fined the Council on 9 June 2009.

The CNC alleged that the important factor for the existence of a single infringement is the existence of a single objective with respect to the different conducts engaged in, so that they complement each other and contribute, through their interaction, to achieving the restrictive effects sought by their authors within the context of a global plan. The Court concludes that the evidence of the intermediate period expressed the will to continue working in order to put into effect certain of the measures which had been proposed in different meetings of the BOB committee. Specifically, actions were taken tending to achieve the objective of reducing the amount of Sherry which could be marketed, which led to the amendment of article 32.1 of the Regulation.

Despite the fact that certain aspects in relation to quotas had already been sanctioned by the CNC, the Court considered that the latter was entitled to include them as conduct which comprised the infringement, since they complemented the other conduct required by the case law. In addition, the non bis in ídem rule had not been infringed, since both the infringing parties and the conduct were different.

With respect to the final period of the infringement, the appellants alleged that none of the contacts and meetings had led to an agreement, although the Court found that on 30 May 2006 the Marketing Committee had been set up, relying on the case law that held an infringement to exist even where such a committee is merely at the negotiation or planning stage.

The CNC calculated the fine by applying a figure of 10% of the turnover in the market affected, i.e. the BOB market, for the time that each company participated (in general, approximately 7 years). Moreover, the five companies which composed the initial cartel were fined an additional 5% of their turnover for three financial years.

Applying the mitigating factor of the uncertain legal context, the National Appeals Court has now held that the sanction should be reduced to 5% of the BOB market turnover in 2009. The Court ruled that if the Spanish Competition Law provided that the maximum fine is 10% of the turnover in the market affected by the infringement in the financial year immediately prior to the one in which the fine was imposed, in this case it was appropriate to set the fine at 5% of the turnover for the year in question.