In its recent judgments dated 1 October 2019 (in connection with appeals 5280/20181 and 5244/20182), the Spanish Supreme Court (the "SSC") has found that the legal representatives and members of the management boards of undertakings that infringe competition rules need not have a decisive or significant role in the infringement; they can be penalised for their "passive behaviour" or inaction.
Specifically, the SSC concluded that the application of article 63.2 of the Spanish Competition Law 15/2007, of 3 July (Ley 15/2007, de 3 de julio, de Defensa de la Competencia, or "LDC"), which establishes the possibility of imposing penalties on officers or legal representatives of offending undertakings, does not limit the application of that provision to cases where the involvement of those officers or legal representatives has been decisive in passing the anti-competitive resolution or decision. According to the SSC, article 63.2 LDC does not exclude less significant involvement, including passive conduct such as by attending meetings where infringing decisions or resolutions were passed without expressly opposing them.
The SSC thus rejects the position taken up to now by Spain's National Court, the Audiencia Nacional3, which required that the legal representatives or officers of undertakings that infringe competition rules have a decisive or significant involvement in the infringement – equivalent to a co-offender – for penalties to be imposed on them pursuant to article 63.2 LDC.
Background: officers subject to penalties imposed by the CNMC in the AIO case
The SSC's judgments are a result of two contentious-administrative appeals (one ordinary and another for the protection of fundamental rights) lodged by two officers (the "Appellant" or "Appellants") penalised by Spain's National Markets and Competition Commission (the "CNMC") in its decision of 26 May 2016 delivered in case S/DC/0504/14 AIO. This was the first decision in which the CNMC penalised a number of officers of undertakings involved in a cartel in violation of article 1 of the current and former LDC, and article 101 of the Treaty on the Functioning of the European Union.
In that case, the CNMC decided to impose fines of €128.8 million on a number of companies, a sector-wide association and a series of officers of the companies involved in a cartel in the wholesale distribution of severe urinary incontinence absorbers financed by Spain's National Healthcare System, through pharmacy outlets.
The Appellants were fined €6,000 and €4,000, respectively, in their role as members of the management body of FENIN (Spanish Federation of Healthcare Technology Companies, Federación Española de Empresas de Tecnología Sanitaria). The CNMC also fined an officer of INDAS €4,000 and an officer of PROCTER & GAMBLE €15,000. It should be pointed out that the CNMC has imposed much larger fines on officers in subsequent cases4, some of which have exceeded €59,0005.
In particular, the CNMC fined one of the Appellants in her capacity first as executive director and, later, as secretary general of FENIN; the other Appellant was fined in her capacity as executive director of FENIN, as a result of their active involvement in the infringement. According to the CNMC's decision, the Appellants had had an active involvement in the management of the association that they represented, and performed actions aimed at the design, promotion, coordination and supervision of the infringing conduct.
The judgments of the Audiencia Nacional: requirement that the officer have a "decisive involvement" in the infringement
The Appellants lodged contentious-administrative appeals (one ordinary and the other for the protection of fundamental rights) at the Audiencia Nacional against the CNMC's decision. The Audiencia Nacional upheld both appeals on the basis that the Appellants' involvement in the infringement had been "secondary" and had not been decisive in adopting the sanctioned anticompetitive practice.
Specifically, the Audiencia Nacional understood that the application of article 63.2 LDC required that the penalised individual have a decisive involvement in the infringement. In other words, it required that legal representative or officers have displayed conduct as co-offenders along with the undertaking to which they belong, given the significant nature of their involvement in passing the anticompetitive resolution or resolutions. In the opinion of the Audiencia Nacional, article 63.2 LDC could only apply when the individual's involvement in the anticompetitive conduct has been decisive.
The Audiencia Nacional did not understand that this was the case of the Appellants, who had merely played a secondary role in the punished anticompetitive practices. Specifically:
- The Audiencia Nacional found that, in the case of the Appellant who first held the position of executive director and subsequently of secretary general of FENIN, it had only been proven that she had attended meetings that passed anticompetitive resolutions between 1997 and 2001 – but not at subsequent meetings – and that her involvement was secondary, consisting of providing information, offering a record of the content of previous meetings and holding meetings with representatives of the public authorities and sectors involved.
- As for the other Appellant, who held the position of executive director of FENIN at the same time the other Appellant held the position of secretary general, the Audiencia Nacional admitted that she had participated in certain meetings of the cartel at which anticompetitive resolutions had been passed and had provided advice at those meetings; however, it also found that her conduct did not amount to decisive or particularly active involvement with the purpose of establishing or running the cartel.
As a result, as the Appellants' involvement in the punished anticompetitive conduct had not been decisive, but rather secondary, the Audiencia Nacional considered that it did not meet the requirements to fall within the scope of application of article 63.2 LDC. As a result, it upheld the contentious-administrative appeals and annulled the CNMC's decision.
The Spanish Supreme Court's judgments: officers are subject to penalty for their passive conduct in an infringement
The State Attorney's Office lodged a cassation appeal against the Audiencia Nacional's judgments on the grounds that, among other things, the application of article 63.2 LDC does not require that an undertaking's legal representatives or officers have a decisive involvement in making the anticompetitive decision or resolution, – in the form of necessary cooperation –; it suffices that their involvement be secondary or ancillary.
The SSC accepted the State Attorney's Office's arguments and concluded that the determining factor in applying article 63.2 LDC and, therefore, imposing penalties on individuals for infringements of competition rules is that they be an officer or legal representative, not the individual's degree of involvement in the anticompetitive conduct: "Thus, the involvement in the infringing resolution or decision is only punishable under article 63.2 LDC if performed by certain persons, the legal representatives or management bodies of the offending undertaking; if the conduct is performed by other persons, whatever the import of their involvement, that conduct would fall outside the scope of application of that provision".
As a result, the SSC upheld the cassation appeal lodged by the State Attorney's Office and established case law that "article 63.2 LDC does not necessarily only apply to the conduct of legal representatives or the members of the management bodies of undertakings when their involvement is decisive in or particularly significant to the passing of the anticompetitive resolution or decision, and it does not exclude other less significant involvement by those individuals in the offending conduct, including passive conduct such as the attendance at meetings at which infringing resolutions or decisions are passed without expressly opposing them".
The SSC, however, did uphold the contentious-administrative appeals lodged by the Appellants against the CNMC's decision and annulled those decisions on grounds that it had not been proven that the Appellants had taken part in the punished anticompetitive conduct in their capacity as officers of FENIN.
- As a result of the judgments, the CNMC may impose penalties on the officers or legal representatives of undertakings that infringe competition rules who have been involved in the anticompetitive conduct, irrespective of their level of involvement in that conduct.
- Therefore, from now on the legal representatives and officers of undertakings must take into account that they may be punished individually if their companies receive sanction for anticompetitive practices, even if their involvement has been passive or a result of inaction, for example, by attending meetings at which infringing decisions were taken or them having been aware of the infringing decisions taken without having expressly opposed them.