An extract from The Public Competition Enforcement Review, Edition 13

Cartels

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).7

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 Portugal in the year preceding the decision, even though criminal law principles apply to this type of infringement. Some argue that 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.8

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.9

i Significant cases

The PCA's most significant cases were related to cartel cases and included the Glucose Diagnostic Strips case,10 the Salt case,11 the Flower Mills case,12 the Catering Services case,13 the Flexible Polyurethane Foam case,14 Pre-Fabricated Modules cartel,15 the Cleaning Companies cartel,16 the Office Consumables cartel,17 the alleged Insurance cartel,18 the alleged Train Maintenance cartel19 and the alleged Telecommunication cartel.20

Since 2019, the PCA has demonstrated its increasing interest in prosecuting anticompetitive practices and unprecedented sanctions have been imposed.

In July 2019, a first case concluded with the application of large fines, totalling €54 million, was imposed on five insurance companies: Fidelidade, Lusitania, Multicare, Seguradoras Unidas and Zurich Insurance. In this case, the PCA concluded that said companies had, between 2014 and 2017, acted in coordination, agreeing on prices and allocating clients in the market of workplace, health and car insurance to large corporations. This investigation started as a result of a leniency agreement with Seguradoras Unidas, which was granted an exemption of the fine under the leniency programme. Fidelidade and Multicare (which are part of the Seguradora Unidas group) also settled the case, which resulted in the reduction of their fines by 50 per cent. Finally, the PCA also imposed sanction on individuals: three board members of Lusitania and one of Zurich, were fined amounts between €6,000 and €24,000.21

In September 2019, the PCA levied the – at the time – largest fines in a horizontal case totalling €225 million and imposed on 14 companies active in the banking sector. Although not analysed as a cartel, the proceedings were initiated subsequent to a leniency application, and the PCA concluded that the defendants had, between 2002 and 2013, exchanged sensitive competitive information regarding retail banking credit products, such as mortgage, consumer and corporate loans. This case also requires an additional mention, since the fines imposed have not followed a pattern, as the PCA has imposed fines that range from 0.18 per cent to 9.57 per cent of the offending undertaking's turnover in Portugal in the year preceding the decision. This case was appealed and is currently being assessed by the Portuguese Competition, Regulation and Supervision Court.

In 2020, the PCA levied its largest fines ever in two consecutive cases. First, in early December, by sanctioning a telecommunications operator with a fine of €84 million for alleged market sharing and price fixing of mobile and fixed telecommunications services, under a mobile virtual network operators relationship, between January and November 2018. The other participant benefited from the leniency programme and was exempted from both the pecuniary fine as well as any ancillary sanctions.22 Also in the telecommunication sector, the PCA opened a proceeding against the four main telecommunications companies in Portugal for allegedly participating in a cartel aiming to limit competition in online advertising on the Google search engine, by limiting the possibility of comparison between their offers, thus reducing the transparency of this market.23

Subsequently, in a horizontal case in the food retail sector six, large retail food chains, two suppliers and two individuals, were sanctioned for alleged price fixing through hub-and-spoke arrangements made between 2007 or 2008 and 2017, with a total fine of €304 million, including the highest individual fine of €121.9 million.24 In addition, the PCA is currently pursuing investigations in at least eight more proceedings for similar practices in this sector that are likely to lead to more decisions in the course of 2021 with a very high potential for fines.25

In December 2019, the PCA published a note to the OECD providing an overview on issues involved in the analysis of hub-and-spoke cartel cases.26 The note highlighted as potential issues: (1) the analysis of hub-and-spoke evidence (e.g., retail price setting and alignment; control and monitoring of retail prices in the market; retail price deviation corrections; coercion or retaliation, or both); (2) the legal frame of the arrangement (horizontal versus vertical); (3) the identification of the instrument used to implement the anticompetitive practice (such as RPM); and (4) the intent and awareness of the involved undertakings. Nevertheless, the challenges involved in the prosecution of this type of conduct, the PCA indicated that all the identified issues 'should not deter enforcement, but rather call for increased robustness of the analysis of the underlying evidence and theories of harm'.

Concerning earlier cases, 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. 27

In 2013, the PCA sanctioned a cartel in the market for polyurethane foam for comfort products. This case is very relevant, 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. 28

Furthermore, in the area of public procurement, the PCA has also sanctioned infringement almost since its incorporation.

In one of the first high-profile investigation, the PCA has sanctioned a cartel involved in bid rigging. It levied fines against 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.29

Subsequently, the PCA has 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 €831,810.30

In 2018, the PCA sanctioned Sacyr and one of its directors for bid rigging in a tender for the provision of maintenance services to railways.31 In addition, within the scope of this infraction, in 2019, the PCA has also sanctioned Mota-Engil32 and Futrifer33 and their respective director in charge of the conduct. Lastly, in 2020 the PCA also sanctioned Fergrupo and Somafe, as well as a member of each of their administrations, for their participation in this conduct. The total amount of fines in this procedure was €3.4 million, although three of these companies collaborated with the PCA, forgoing their right to judicially contest this decision, and benefited from the settlement procedure and a reduction in the fine.34 The PCA imposed, on the two companies that did not use the settlement procedure, an additional penalty of a ban of up to two years on participation in public tenders, limited to the tenders relating to the market for maintenance services for track equipment on the national rail network, which was the first time the PCA imposed this type of sanction.

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 price-fixing practices,35 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 operator36 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.37

In addition, the PCA has also 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 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.38

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.39

Similarly, the PCA also closed with commitments an investigation of the Northern Bread and Cake Industries Association, following its president's public allegations that the prices in bread would rise around 20 per cent. As a consequence, the PCA agreed to close the proceedings contingent on the compliance with some commitments by the Association, such as the release of a public statement asserting the total independence of its associates in setting prices.40

In July 2019, the PCA issued a statement of objection against two associations in the advertising sector.41 The object of this process is a rule set by these associations limiting the maximum number of participants in private tenders, with the aim of restricting competition between associates. Following this statement, in October 2020, the PCA fined one of the associations in question, the Portuguese Association of Advertising, Communication and Marketing Agencies, €3.6 million. The case was closed for lack of sufficient evidence in relation to the other one.42

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).43 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.44 These commitments were later accepted and deemed mandatory by the PCA.45 In addition, in 2020, the PCA also opened a procedure against the National Association of Land Surveyors for price fixing, due to the publication of price chart, with the aim of standardising prices of its associates' activities.46

In June 2019, the PCA published a press release47 warning business associations to refrain from making public statements about prices of goods or services or other business conditions that may promote or facilitate the coordination of their associates' behaviour. The warning comes from the decision imposed on the Association of Bakery Industry (AIPAN), which included an obligation to clarify that their associates had total freedom and autonomy in pricing, minimising the potential restrictive effects of a statement made by the AIPAN's president on the price of bread. In May 2020, the PCA ordered the Portuguese League of Professional Football to suspend one of its deliberations, which constituted a no-poach agreement regarding the football players who rescinded their contracts during the covid-19 pandemic.48

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; however, during the last year the PCA has updated its website and decision directory, greatly facilitating research on previous decision practice as well as current proceedings. In addition, the PCA also continues 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 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 2019 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.49

The PCA is also expected to issue the remaining decisions in retail and wholesale of food and beverages, which seems to be its main focus. 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 2021. In particular, the PCA will prioritise the investigation of cartels with greater impact on consumers, mainly in sectors that are particularly susceptible to being exploited, in the current context of pandemic, such as the food retail sector. The PCA 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. Following this trend, in 2020, the PCA created an inter-departmental taskforce for the digital sector, which will continue to operate in 2021.

In 2020, as far as we are aware, the PCA carried out searches in the premises of food distribution companies in the Madeira island,50 as such, we expect developments with regard to the investigation of restrictive practices in this sector in 2021.

The PCA will continue to promote its leniency policy as an essential instrument for cartel investigations. In fact, it was the leniency programme that gave rise to most of the above-mentioned investigations into cartel cases, as well as the banking case, which was initiated through a leniency application, although it is not assessed as a cartel.