Article 9 of the Competition Act prohibits agreements that restrict competition, including cartel agreements (i.e., agreements and concerted practices between competitors whose object or effect is the restriction of competition by, inter alia, directly or indirectly fixing sale or purchase prices or any other transaction conditions, by limiting or controlling production, distribution or technical development or investments or by sharing markets (including bid rigging), through import or export restrictions and through anticompetitive actions against other competitors).
The PCA is an independent entity responsible for the enforcement of competition law in Portugal and for conducting administrative infringement procedures under the Competition Act. The PCA's decisions may be appealed to the Competition, Regulation and Supervision Court (appeals were previously heard by the Commercial Court of Lisbon).
In Portugal, cartels are administrative (not criminal) offences sanctioned with fines not exceeding 10 per cent of the offending undertaking's turnover in the year preceding the decision, even though criminal law principles apply to this type of infringement. According to general rules subsidiarily applicable to administrative offences, when there is more than one infringement, the maximum fine may be twice the abstract maximum applicable to the most serious offence, which in a cartel would be 20 per cent of the turnover of the offending undertakings. Fines imposed to date in cartel cases have generally amounted to around 5 per cent of the infringing undertaking's turnover.
The members of the board of directors of the offending undertakings, as well as any individuals responsible for the management or supervision of the areas of activity in which there has been an administrative offence, when they know of, or it is their duty to know of, an infringement committed and they have not adopted appropriate measures to end the infringement immediately, are liable to be sanctioned under the Competition Act, unless they are subject to a more serious sanction under a different legal provision. The fine imposed on individuals cannot exceed 10 per cent of the individual's annual income deriving from the exercise of their functions in the undertaking concerned.
As an ancillary sanction under Article 71 of the Competition Act, a ban of up to two years on the right to take part in tendering processes for public works contracts, public service concessions, the leasing or acquisition of moveable assets or the acquisition of services or procedures involving the award of licences or authorisations by public entities, may be imposed. The ban may be imposed in cases in which the practice leading to an administrative offence punishable by a fine occurred during or as a result of those processes.
Article 29 of the Competition Act establishes that the PCA may also impose behavioural or structural measures to end the prohibited practices or their effects.
Under the Competition Act, and as regulated by the PCA, undertakings or individuals connected to the cartel may apply for immunity for a reduction of the fine if they provide valuable information about the cartel.
The Competition Act also establishes the possibility of cases being settled, at the PCA's discretion, before a decision is issued.i Significant cases
The PCA's cartel cases have included the Glucose Diagnostic Strips case (decided in 2005), the Salt case (decided in 2006 and upheld by the Commercial Court of Lisbon in 2008), the Flower Mills case (decided in 2005, overturned by the Commercial Court of Lisbon and subject to a new decision of the PCA in 2009), the Catering Services case (which resulted from a leniency submission from a former director of one of the undertakings involved in the cartel), and the Flexible Polyurethane Foam case (decided in 2013).
The largest fines in a cartel case, to date, totalled €16 million and were imposed on Abbot, Bayer, Johnson & Johnson, Menarini and Roche in 2005 for bid rigging in several public offers presented in the context of tendering processes for the supply of glucose diagnostic strips. The Commercial Court of Lisbon (which previously had jurisdiction over appeals of PCA decisions) joined the case with another related to similar charges, and ordered the PCA to correct specific formal irregularities. The PCA issued a new decision, imposing fines of €13.5 million.
The PCA also sanctioned a cartel involving undertakings operating in the printing and graphics sector. Several undertakings were fined for a price-fixing and market-sharing agreement concerning the market for application form paper after an investigation triggered by a leniency application. The fines totalled €1.798 million. In addition, three board members were fined €6,000 for being aware of the cartel and failing to take action to put an end to it.
In 2013, the PCA sanctioned a cartel in the market for polyurethane foam for comfort products. This case is very important, as the PCA's investigation was conducted in parallel with a cartel investigation in the same market by the Spanish Competition Authority. The investigation was triggered by a leniency request by an undertaking that received full immunity (as well as for its board members), and all the sanctioned undertakings and individuals benefited from substantial fine reductions in view of the settlement procedure. The PCA imposed fines amounting to €993,000 on two undertakings and to €7,000 on board members.
More recently, in December 2018, the PCA sanctioned two insurance companies, Fidelidade and Multicare, and their respective board members, with fines amounting to €12 million for alleged coordination on the offer related to corporate clients. As there are other undertakings still being investigated by the PCA on this matter, it is possible that the overall amount of the fines, in this case, will be the highest, so far.
Furthermore, in the area of public procurement, the PCA has also sanctioned five undertakings for anticompetitive practices in public tenders for the supply and assembly of prefabricated dwellings that would be used to enable the normal course of school activities during the reconstruction of certain schools, under a governmental public works initiative named Parque Escolar. In this case, the undertakings involved have waived their right to appeal against the PCA's decision, in order to benefit from a 10 per cent reduction in their fines. Therefore, the fines imposed by the PCA upon the five undertakings amounted to €831,810.
Public procurement procedures were also included in the PCA's enforcement actions, in 2018, with the PCA sanctioning Sacyr and one of its directors for bid rigging in a tender for the provision of maintenance services to railways.
Although not related to cartel cases, there have been a number of cases involving recommendations and decisions issued by trade associations. In some cases, the infringements are similar to standard antitrust cases (e.g., price fixing). In most cases involving trade associations, the investigated behaviour nevertheless related to recommended practices, as well as maximum prices, which were understood by the undertakings to be mandatory.
For instance, the PCA fined the Association of Navigation Agents of Portugal for alleged price-fixing practices, and stated that the National Association of Freighters had issued a decision that, in the PCA's view, constituted a collective refusal to deal with a specific terminal operator and in 2011, the National Association of Parking Lot Companies was fined nearly €2 million for its recommendation regarding pricing criteria in response to the introduction of new legislation on parking lots.
More recently, the PCA fined the Portuguese Association of Driving Schools in the amount of €400,000 for alleged price-fixing practices. In this case, the President of the Association was also fined in approximately €13,776, since the PCA concluded that he was aware and had allegedly been directly responsible for the adoption and effective execution of the anticompetitive practice.
It should also be mentioned that, in 2017, the PCA closed, with commitments (after a public consultation period), two separate proceedings regarding statistical information systems within trade associations (the Portuguese Association of Specialised Credit and the Portuguese Association of Leasing, Factoring and Renting). The commitments offered by the two associations made significant changes to their respective systems, with regard to the historic nature of the information and the adequate scope of access to the relevant market data.
The PCA's investigations into professional associations are also of interest. The PCA has fined several national professional associations, such as the Veterinarians Association, the Dentists Association, the Doctors Association and the Chartered Accountants Association, as a result of decisions that had an effect on their members' pricing (including recommended and maximum prices considered mandatory by the members). More recently, the PCA opened proceedings against the Psychologists Association because of clauses in their code of conduct that allegedly had a restrictive effect on the functioning of the market. In order to address the PCA's concerns, the Psychologists Association offered to amend its code of conduct accordingly and to make the alterations public. These commitments were later accepted and deemed mandatory by the PCA.ii Trends, developments and strategies
Under the previous legal framework in Portugal, antitrust decisions were not generally published on the PCA's website, and current access to antitrust decisions is still very limited in cases with pending judicial appeals, even though the PCA has been making an effort to increase the scope of decisions available on its website. The PCA has also continued to publish the issuance of statements of objections and information regarding the carrying out of unannounced inspections, through press releases.
According to publicly available information, the sanctioning of antitrust conduct in Portugal has occurred, more frequently, with regard to restrictive practices within trade and professional associations, including price fixing, and to bid-rigging cartels. Hence, in 2016 the PCA published an antitrust compliance guide for trade associations, aimed at better elucidating the associations and its members on which behaviours or decisions could present competition risks and should therefore be avoided.
In addition, the settlement mechanism established in the Competition Act has proven to be a very useful instrument for the PCA to investigate and prove cartel cases, as well as other antitrust infringements. The settlement procedure was used in the above-mentioned 2018 decisions in the railway and insurance sectors.
The PCA has also made it clear that the state must refrain from promoting arrangements between competitors, as addressed in the case concerning meetings promoted by the government of the Azores with several milk producers in which commercial conditions might have been discussed. The PCA closed the case without imposing any sanctions, but recommended that the government of the Azores end the practice and refrain from acting in any way that could potentially facilitate collusive behaviour in the region.
The PCA will continue to pay attention to practices within trade associations, having carried out dawn raids in at least two trade associations in 2018, as shall be discussed in further detail below.
The PCA is also expected to issue the remaining decisions in the insurance and railway cartels, as several of the undertakings to which the PCA has addressed the statement of objections in these cases have yet to receive a final decision. The separate closing of the cases for each individual participant, normally using settlement procedures, is currently the most common approach of the PCA to restrictive practices investigations.iii Outlook
The PCA will continue to make cartel cases a priority for 2019 and will seek to continuously improve its internal investigative procedures, in order to make full use of the most appropriate tools for evidence collection and treatment, namely in a digital environment. Indeed, the PCA has affirmed that it will pay close attention to the eventual use of algorithms or artificial intelligence so that these cannot be a way of exempting responsibility.
The Competition Act strengthened the PCA's investigative powers, which should encourage more effective enforcement of competition law. For instance, within antitrust proceedings, the PCA may carry out, subject to receiving a judicial search warrant, searches of not only an undertaking's premises and vehicles, but also of the homes of shareholders and members of managerial bodies and employees, if there is reason to believe that evidence of serious anticompetitive practices exists. As mentioned, several decisions concerning the insurance and railway sectors are expected in 2019. In 2018, as far as we are aware, the PCA carried out searches in the premises of telecommunication operators, of an advertising trading association and of a food sector trade association, and, therefore, we expect developments with regard to the investigations of restrictive practices in these sectors, in principle, in 2019.
The PCA will continue to promote its leniency policy as an essential instrument for cartel investigations. In fact, the leniency programme gave rise to the above-mentioned investigation in the insurance sector.