Nº 25, May 2012INDEX

EUROPEAN UNION

EUROPEAN COMMISSION DECISIONSA. The Commission adopts a package of four decisions on aid granted by Germany,

Belgium, France and Greece to their postal service companies

B. The Commission prohibits the merger between Deutsche Börse and NYSE Euronext

C. The Commission clears the acquisition of Motorola Mobility by Google

RECENT CASE LAWA. Cisco and Messagenet challenge the Commission Decision clearing the purchase of

Skype by Microsoft without commitments

B. The GC partially annuls a Commission Decision declaring aid granted by theNetherlands to ING to be compatible with the common market

C. The GC declares inadmissible the annulment action brought by Iberdrola against theCommission Decision declaring article 12.5 of the Spanish Corporate Tax Law to beillegal and incompatible aid

SPAIN

LEGISLATIONA. The CNC publishes its report concerning the Draft Bill creating the National Markets

and Competition Commission

B. Creation of a Surveillance Unit within the CNC’s Directorate of Investigation

CNC DECISIONSA. The CNC sanctions Gestamp and Essa for breach of a duty to notify a concentration

B. The CNC fines Abertis Telecom S.A.U. €13,755,000 for abuse of a dominant position

C. The CNC imposes fines totaling more than €11m on various cement companies forparticipating in a cartel

D. The CNC fines Iberdrola more than €10 million

E. The CNC fines maritime transport companies which operate in the Balearic Islands forparticipating in a cartel

F. The CNC fines Endesa Distribución Eléctrica for breach of a dominant position

RECENT LAW CASEThe Supreme Court confirms a fine of more than €38 million imposed by the TDC onIberdrola for abuse of a dominant position

PORTUGAL

Bill to amend the Portuguese Competition Law

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European Union

EUROPEAN COMMISSIONDECISIONS

A. The Commission adopts apackage of four decisions on aidgranted by Germany, Belgium,France and Greece to their postalservice companies

The postal sector has been progressivelyliberalized through three directives of theEuropean Union (‘the EU’).1 Under theThird Postal Directive (Directive2008/06/EC), 16 Member States had toguarantee that the market was fully open tocompetition by the end of 2010, whileanother 11 Member States were given untilthe end of 2012 to achieve this goal. In thisregard, the European Commission (‘theCommission’) has declared that theliberalization process has three goals:2 ‘toensure a level playing field for postaloperators, to promote competition betweenthem, and to ensure that high quality postalservices can continue to be delivered ataffordable prices.’ The main question isworking out how to liberalize the marketwithout endangering the provision ofuniversal services and/or services of generaleconomic interest (‘SGEIs’) enjoyed by EUcitizens.

Before the full liberalization of the sector,Member States granted State aid to postalservice providers, generally incumbents, as

1 First Postal Directive (97/67/EC), SecondPostal Directive (2002/39/EC) and ThirdPostal Directive (2008/06/EC).

2 Technical MEMO on the Postal Sectoraccompanying the state aid decisionsregarding Deutsche Post /Belgian Post(BPost) / French La Poste /Hellenic Post(ELTA). MEMO/12/43 of January 25, 2012.

compensation for the public servicesimposed on them. The Commission closelymonitored the situation to ensure that suchaid was proportionate, being limited to theminimum amount necessary.

This monitoring power of the Commissionis based on Article 106(2) of the Treaty onthe Functioning of the European Union(‘the TFEU’), under which thecompensation for costs derived from theprovision of an SGEI may be compatiblewith the internal market, yet theovercompensation of costs would beincompatible State aid, recoverable fromthe beneficiary.

In this context, on January 25, 2012 theCommission adopted four decisions onState aid, evaluating the costs incurred inthe provision of the SGEIs by Belgian Post(‘BPost’), Deutsche Post, French La Posteand the Greek entity, ELTA.

With respect to BPost (MEMO/12/38), theCommission declared that both thecompensation for the high pension costs ofBPost employees on changing their statusfrom civil servants to employees and thecapital injections carried out by Belgiumwere compatible with the State aid rules.However, it considered that BPost hadreceived excessive compensation for thecost of the newspaper and magazinedelivery service and ordered the recovery of€417 million of incompatible State aid.

As regards Deutsche Post (MEMO/12/37),the Commission found that noovercompensation whatsoever had beenpaid for postal services provided between1990 and 1995. However, it ordered therecovery of between €500 million and€1000 million in relation to compensationgranted after 1995 on the basis that part ofthe costs incurred had already beencompensated through the increased price ofthe stamps.

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La Poste (MEMO/12/36) was also paidcompensation of €1200 million for the costsincurred in transporting and delivering thepress between 2008 and 2012, which theCommission declared to be compatible aid.Nor did it consider overcompensation toexist with respect to the €764 million taxrelief granted for the cost of maintaining ahigh density of post offices in rural areas.

Finally, ELTA (MEMO/12/39) received€52 million for modernizing itsinfrastructure and improving the quality ofits services. Here, the Commission alsotook the view that no overcompensationexisted.

The four cases were examined in the lightof the Framework adopted by theCommission in 2005,3 which laid down therules on the compatibility of aid for theprovision of SGEIs (part of the ‘MontiPackage’). These guidelines have beenrecently revised in the ‘Almunia Package’,4

3 OJEU 29.11.2005, C 297/4.

4 The ‘Almunia Package’ includes: (i)Communication for the Commission on theapplication of the EU State aid rules tocompensations granted for the provision ofSGEI (EU Communications on SGEI) - OJ11.1.2012 C 8/4, (ii) Commission decisionon the application of Article 106 (2) TFEUto State aid in the form of public servicecompensation granted to certainundertakings entrusted with the operation ofSGEI (‘EU Decision on SGEI’) - OJ11.1.2012 L 7/3; (iii) Communication of theCommission EU framework for State aid inthe form of public service compensation (‘EIFramework on SGEI’) - OJ 11.1.2012 C8/15; and (iv) draft Commission Regulation(EU (on the application of Article 107 and108 of the TFEU to de minimis aid grantedto undertakings providing SGEI (‘draftSGEI de minimis Regulation’) - OJ11.1.2012 C 8/23.

which have made certain amendments (insome cases significant ones) to thecompatibility criteria.

In general terms, the key issue continues tobe guaranteeing the absence of excessivecompensation but other procedural andsubstantive requirements have also beenincluded such as the nature of efficiencyrequirements, the characteristics of theaward act or the fact that the SGEI providermust be selected through a public tenderprocess.

The question that arises is whether this typeof measure in favor of incumbents willcontinue to be compatible under the newlegal framework. This will depend on theCommission’s future practice, but a stricteranalysis of compatibility is to be expected,at least for aid to SGEIs of great economicvalue and those provided by dominantoperators.

María Muñoz (Brussels)

B. The Commission prohibits themerger between Deutsche Börseand NYSE Euronext

On February 1, 2012, the EuropeanCommission prohibited the merger betweenDeutsche Börse and NYSE Euronext on thebasis of Article 2(3) of the MergerRegulation.5 Prior to the adoption of thisdecision, the parties offered divestmentcommitments with respect to specific areasbut the Commission considered that thesewere clearly insufficient in view of thepossible competition problems whichimplementation of the merger would cause.

5 Council Regulation (EC) No. 139/2004 of20 January 2004, on the control ofconcentrations between undertakings (‘theEC Merger Regulation’), OJEU L 024, p. 1-22.

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In its Decision, the Commissionparticularly emphasized the possible effectsof the operation on the financial derivativesmarket. After a detailed investigation of thismarket, the Commission concluded that thenegotiated financial derivatives (ETDs) didnot belong to the same market as thosenegotiated outside of these markets (OTCs).

With respect to financial derivatives basedon European underlyings, the Eurex(operated by Deutsche Börse) and Liffe(operated by NYSE-Euronext) platformscurrently hold a joint position in the marketwhich cannot be challenged by any otheroperator. The Commission considered thatallowing a merger between them wouldhave led to the creation of a quasimonopoly, to the detriment of the finalconsumers of these products and healthycompetition. Contrary to the parties’arguments that the merger would create amore secure environment with greaterfinancial liquidity, the Commission foundthat the approval of the operation wouldlead to firms being excluded from themarket, higher commissions and thecreation of significant barriers to entry as aresult of the market structure.

In relation to the possibly entry ofcompetitors, the Commission consideredthat this would be difficult for two reasons:(i) the marketing of a financial productrequires access to the license of theunderlying, which is ultimately granted bythe same Stock Exchange Operator thatmanages these contracts; and (ii) possiblecompetitors would have to convince thecompanies marketing the products toincrease their collateral assignment to beable to create a new clearing house or,alternatively, request access to that of thealready established operator. Unfortunately,market practice suggests that this would bedifficult to achieve since the networkeffects and the strategies of the two mainexisting operators would not allow it tohappen.

That said, the Commission did recognizethat the proposed merger could give rise toefficiencies, although it considered thatthese were minor and not enough to offsetthe possible damage that it would cause tofinal consumers if cleared.

This merger was approved by the UScompetition authorities in December 2011.Deutsche Börse has announced that it willappeal to the General Court of the EuropeanUnion (‘the GC’).

Gonzalo García (Brussels)

C. The Commission clears theacquisition of Motorola Mobilityby Google

On February 13, 2012, the Commissionpublished,6 in compliance with the EUmerger control rules, its decision not tooppose the acquisition of MotorolaMobility Holdings, Inc., (‘MotorolaMobility’) by Google Inc. (‘Google’), bothUS companies.

The purchasing company, Google, offersonline search and advertising services,while also being the owner of Android, theOperating System (‘OS’) for mobiledevices. In turn, Motorola Mobilitymanufactures mobile devices and has awide portfolio of the standard essentialpatents7 (‘SEPs’) used in thetelecommunications industry.

6 Commission Decision of February 13, 2012,in Google/Motorola Mobility,COMP/M.6381, available online at:http://ec.europa.eu/competition/mergers/cases/decisions/m6381_20120213_20310_2277480_EN.pdf .

7 SEPs are defined by the EuropeanTelecommunications Standards Institute(‘ETSI’) as those patents in relation to which‘it is not possible on technical […] grounds,

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The Decision mainly analyses the effectthat the merger would have on verticalrelationships in two EU markets: that of OSmobiles and that of SEPs, analyzed in otherDecisions.8

With respect to the OS mobile market, theCommission examined whether Googlecould, as a result of the merger, impedeaccess to Android for manufacturers whocurrently load this key input onto theirdevices, thus obtaining Motorola Mobilitydevices at a relatively lower price. TheCommission found that although Googlecould restrict access to Android, thiscapacity would not arise as a result of theintegration process in question. In addition,the regulator underlined the fact thatGoogle had little to gain from engaging inthis practice, since 96% of its income camefrom the online advertising business, ratherthan via Android. Moreover, faced with apossible attempt to restrict access toAndroid, manufacturers of mobile devicescould respond by using an alternative OS.In fact, between 60 and 70% of themanufacturers who install Android on theirmobile devices do not do so on an exclusivebasis; instead, their portfolio of productscontains models which use an alternativeOS.

taking into account normal technicalpractice and the state of the art generallyavailable at the time of standardization, tomake, sell, lease, otherwise dispose of,repair, use or operate equipment or methodswhich comply with a standard withoutinfringing that IPR.’ Commission Decisionof February 13, 2012, in Google/MotorolaMobility, COMP/M.6381, para 52.

8 Commission Decision of July 2, 2008, inCase Nokia/Navteq, COMP/M.4942, paras137 and 139.

As regards the effect that the merger couldhave on the SEP market, the Commissionrecognized that prior to the concentration,Google did not own any of these patents,and therefore the transaction objectivelyincreased the possibility of the acquiringparty distorting the market. For example,Google could increase, in an abusivemanner, the royalties which MotorolaMobility previously charged, oblige theoperators which needed the SEPs owned byGoogle to enter into cross licenseagreements or simply refuse to grant SEPlicenses to certain operators to excludethem from the market.

However, although Google would purchasea significant portfolio of SEPs, the numberinvolved was relatively small compared tothe total quantity of patents in the market(and, also, compared to the SEP portfolioowned by some competitors, such asMicrosoft, Oracle, HP or Sony). Inaddition, Google had previously publiclystated in writing9 that it undertook tomaintain the conditions of the SEP licenseagreements existing prior to theconcentration, and to foster new licenseagreements with conditions similar to theold ones on fair, reasonable and non-discriminatory terms.

Accordingly, the Commission clearedGoogle’s purchase of Motorola Mobility onthe basis that it did not, per se, obstruct freecompetition in the internal market.

Miquel López (Barcelona)

9 Open letter from Google to StandardizationOrganizations and the EuropeanCommission, online at:

http://www.google.com/press/motorola/patents.

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RECENT CASE LAW

A. Cisco and Messagenet challengethe Commission Decision clearingthe purchase of Skype byMicrosoft without commitments

On February 15, 2012 Cisco Systems(‘Cisco’) and Messagenet filed an action forannulment with the General Court againstthe Commission Decision clearing thepurchase of Skype by Microsoft in the firstphase without commitments.10 Theapplicants alleged that the Commission hadincurred in a manifest error of assessmentby concluding that, even on the basis of thenarrowest possible market definition, noreasonable doubt existed as to whether theoperation could give rise to competitionconcerns in the unified communicationssector.

On April 14, 2012 a formal summary of theallegations raised by Cisco and Messagenetwas published in the Official Journal of theEuropean Union (‘OJEU’). Essentially, theapplicants claimed that the Decision erredin not appreciating the existence of strongnetwork effects in the market and,therefore, for failing to analyze theincidence of these network effects onMicrosoft’s incentives to guarantee theinteroperability required to ensure theexistence of competition on the merits.

First, the applicants pointed out that themerger gave rise to a joint market share of80-90% in the narrowest possible marketexamined in the Decision (video-callservices for consumers on Windows-basedPCs). Cisco and Messagenet pointed outthat this high market share, combined withthe powerful network effects whichbenefited the widest installed base of users

10 Commission Decision of October 7, 2011 inMicrosoft Corporation and Skype Sarl,OJEU C 341, p. 2.

and Microsoft’s control of the Windowsoperating system and other connectedapplications, would strengthen thedominant position and eliminate anyincentive which the merged entity mayhave to offer interoperability withcompetitors’ products.

The Commission denied the existence ofany risk to competition, relying on theargument that network effects were notrelevant in the market, since consumerstended to communicate in reduced groups,and therefore a given group of consumerswould not face high switching costs if itwished to abandon the network whichoffered a greater number of connections. Intheir application, Cisco and Messagenetrejected this reasoning, explaining why itwas incorrect to claim that consumerscommunicated in so-called autarkicnodules. According to the applicants, if theCommission had not made this mistake itwould have reached the conclusion that themerger did, in fact, pose a threat toeffective competition.

Second, Cisco and Messagenet highlightedthe fact that the Commission alsocommitted a manifest error of assessmentwhen finding that the concentration wouldundoubtedly not give rise to anyanticompetitive effect in the enterpriseunified communications market. Theapplicants alleged that, given the increasingpopularity of unified communicationsservices for consumers (such as Skype orWindows Live Messenger), companieswished to connect with consumers throughsuch services. In this regard, thestrengthening of Microsoft/Skype’s positionin the consumer segment would affect thiscompany’s capacity and incentives toguarantee that users of Lync (Microsoft’sunified communications product forenterprises) had exclusive or privilegedaccess to the Skype and Windows LiveMessenger user base. The effects ofexclusion which would arise from a

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strategy of reducing interoperability of thistype would also be strengthened byMicrosoft’s dominant position in relation toconnected products, such as OS andapplications for enterprises (Office,Outlook etc).

The applicants also noted that thechallenged Decision was a radical departurefrom the Commission’s decision-makingpractice and the case law of the Court ofJustice of the European Union (‘CJEU’) inrelation to the importance of networkeffects in the technological andcommunications markets and the need toensure interoperability to preserveconsumers’ effective choice when suchnetwork effects exist. On a subsidiary basis,Cisco and Messagenet also alleged that theCommission had failed to give sufficientgrounds for diverging from the relevantprecedents.

Gonzalo García (Brussels)

B. The GC partially annuls aCommission Decision declaringaid granted by the Netherlands toING to be compatible with thecommon market

On March 2, 2012, the GC passed judgmentin the joined cases The Netherlands vCommission and ING Groep NV v.Commission (‘the Judgment’).11

The Judgment resolved the actions forannulment brought by the Netherlands andING against the Commission Decision ofNovember 18, 2009, in which the

11 Judgment of the General Court (FirstChamber) of March 2, 2012 in Joined CasesT-29/10 and T-33/10, Kingdom of theNetherlands (T-29/10) and ING Groep NV(T-33/10) v. Commission, pendingpublication.

Commission declared that the bank hadreceived State aid compatible with theinternal market (‘the appealed Decision’).12

The Commission found that State aidexisted, inter alia, because ING was able torepay the aid received (which had beenpreviously approved by the Commission13)on better conditions than those initiallycontained in the Commission decisionapproving its recapitalization.

Thus, based on the terms initially agreed bythe bank and the Dutch State, the securitiesissued could be: (i) repurchased by ING at aprice of €15 per security (representing aredemption premium of 50% over the issueprice of €10 per security) or; (ii) convertedinto ordinary shares on a one-for-one basis.If ING chose the second option, the DutchState would, in any event, have the right toreceive the face value of the securitiesissued (€10 per security) plus accruedinterest. In any event, a coupon on thesecurities would only be paid to the DutchState if ING paid a dividend to the holdersof ordinary shares.

Subsequently, these repurchase terms wereamended and notified to the Commission.Under the new terms, the Dutch State andING agreed that the latter would repurchasehalf of the securities issued at their facevalue, plus the interest accrued at an annualrate of 8.5%, and a share premium if INGshares were valued at more than €10 each.This operation allowed the Dutch State to

12 Commission Decision 2010/608/EC, of 18November 2009, on State aid C 10/09 (ex N138/09) implemented by the Netherlands forING’s Illiquid Assets Back Facility andRestructuring Plan, OJEU no. L 274, of19/10/2010, p.139.

13 Commission Decision C(2008) 6936, of 12November 2008 in Case N 528/08, on Stateaid granted by the Kingdom of Netherlandsto ING.

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obtain an internal rate of return on itsinvestment of 15%. However, according tothe appealed Decision, these new termscould amount to fresh aid to ING, which theCommission calculated as amounting toapproximately €2,000 million.

An action for annulment was broughtagainst the Commission’s Decision by bothING and the Dutch State. The main groundsfor the appeal were that, with respect to therepurchase conditions, the Commission hadnot assessed whether the behavior of theState would have been equally acceptable ifengaged in by a private investor who foundhimself in the same position (and thereforethere would not be aid on the basis of the‘private investor principle’). In addition,ING contested the price leadership banimposed on it, as well as other measurescontained in its restructuring plan, on thebasis that they were disproportionate sincethey went beyond what could be required ofING under the restructuringCommunication.14

According to the GC, the Commissionfailed to show sufficiently that themodification of the terms for repayment ofthe capital injection received did notconstitute an advantage which a privateinvestor placed in the same situation as theDutch State would not also have beengranted. As the GC pointed out, this wasparticularly so since the initial terms of theissue only granted ING the option torepurchase on payment of a 50%redemption premium, rather than a right infavor of the State.

14 Commission Communication on the returnto viability and the assessment ofrestructuring measures in the financial sectorin the current crisis under the State aid rulesOJEU no. C 195 19/08/2009 p. 9.

Consequently, the GC annulled theDecision to the extent that it was based onthe finding that the modification of theterms for repurchasing the securities issuedamounted to additional aid to ING of €2billion. Since ING was successful on themain ground of its appeal, the GC did notexamine the additional issues raised by thebank regarding whether the conditionsimposed on its restructuring plan compliedwith the proportionality principle.

Jose Manuel Panero (Brussels)

C. The GC declares inadmissible theannulment action brought byIberdrola against theCommission Decision declaringarticle 12.5 of the SpanishCorporate Tax Law to be illegaland incompatible aid

On March 8, 2012, the GC passed judgmentin Case T-221/10 declaring theinadmissibility of the annulment actionbrought by Iberdrola against CommissionDecision 2011/5/EC, of October 28, 2009,on the tax amortization of financialgoodwill for foreign shareholdingacquisitions (‘the Decision’).15 Thisjudgment came about as a result of the pleaof inadmissibility raised by the Commissionin this case.

According to the Commission, thedefendant failed to show that it wasindividually concerned by the Decision(since, in principle, it concerned an aidscheme) or that it had a legal interest inbringing the action.

Iberdrola alleged that it was individuallyconcerned since it had been a beneficiary ofthe aid scheme which had been declared

15 No. C 45/2007 (ex NN 51/2007, ex CP9/2007), which give rise to Case T-221/10.

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incompatible, since in 2008 and 2009 it hadacquired shares in a Greek company andprior to December 21, 2007 (date on whichthe Commission recognized the legitimateexpectations in its Decision) it had acquiredshares in a British company as well as aGreek one. Accordingly, the applicantconsidered that both of these circumstancesbrought it within the closed class ofbeneficiaries under the scheme, as requiredby the case law of the European courts. Inaddition, Iberdrola emphasized the fact thatit had been actively involved in theadministrative procedure before theCommission. Finally, it also relied onArticle 263(4) in fine of the TFEU, whenalleging that, since the challenged Decisionwas a regulatory act which did not includeimplementing measures, it was notnecessary to show that it was individuallyconcerned.

However, GC rejected all of the argumentsput forward by the applicant and upheld theCommission’s plea.

Thus, as regards whether the applicantbelonged to a closed class of beneficiariesof the scheme, the GC found that, withrespect to the operations carried out in 2008and 2009, Iberdrola had not shown in itsapplication that it had applied the aidscheme since, despite having carried out theoperations, in its tax declarations it had notdeducted the amortization allowed byarticle 12.5 of the Amended Text of theSpanish Corporate Tax Law (TextoRefundido de la Ley del Impuesto deSociedades or ‘TRLIS’), and therefore itwould merely be a potential beneficiary ofthat scheme and, as such, according to thecase law, not individually concerned.

With regard to the operations carried outprior to December 21, 2007, the GC notedthat these would be covered by thelegitimate expectations recognized in theDecision and that the fact that thedeclaration on legitimate expectations had

also been appealed against by DeutscheTelekom (who brought the action againstthe Commission in Case T-207/10), evenwhen it was more a question of legalinterest to bring the action than ofindividual concern, was not sufficient todifferentiate Iberdrola from other operators.In addition, the GC recalled that theinadmissibility of its action, despite theclaim brought by Deutsche Telekom or theexistence of possible claims at a nationallevel, did not amount to any breach of itsright to effective legal protection since inany national legal proceedings, Iberdrolacould ask the national judge to make areference for a preliminary ruling to theCJEU regarding the validity of theDecision, under Article 267 of the TFEU.

Moreover, the GC held that Iberdrola’sinvolvement in the administrativeprocedure did not give it per se a legalinterest to bring an action, since suchinvolvement did not differentiate it fromother operators either.

Finally, the GC decided on the possibleapplication of Article 263(4) in fine of theTFEU to State aid decisions. Nevertheless,rather than carrying out an in-depth analysisof the situation, the Court limited itself tonoting that, given that the operating part ofthe Decision contained a reference to theexistence of ‘national measures taken toimplement [it]’, i.e. those measures aimedat recovering the State aid and derogatingthe measure, this provision did not apply toState aid.

In short, this is a ‘conservative’ ruling onthe question of admissibility whichmaintains a strict position regarding therequirements of legal interest to bringproceedings and, therefore, limits the accessto the judicial review of the Europeancourts for beneficiaries under State aidschemes. On the other hand, being one ofthe first judgments (if not the first) on theinterpretation of new Article 263(4) in fine

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of the TFEU with respect to State aid, moredetailed reasoning regarding this provision,rather than the scant analysis contained inthe GC judgment, would have been helpful.It remains to be seen whether, in any appealon a point of law, the CJEU - or the GCitself in subsequent rulings – adds to orqualifies the criterion applied in this case.

Napoleón Ruiz (Brussels)

Spain

LEGISLATION

A. The CNC publishes its reportconcerning the Draft Bill creatingthe National Markets andCompetition Commission

Last March 15, the Council of the NationalCompetition Commission (‘the CNC’)approved the Report on the Draft Billcreating the National Markets andCompetition Commission (‘the CNMC’),which will take over the functions that arecurrently exercised by the National EnergyCommission, the TelecommunicationsMarket Commission, the NationalCompetition Commission, the RailwayRegulatory Committee, the AirportEconomic Regulation Commission and thePostal Sector National Commission.

The report fundamentally criticizes the wayin which the draft Bill has been prepared,contrasting it with the much more reflectiveand consensus-based approach taken in thepreparation of the current Spanish AntitrustLaw (Ley 15/2007, de 3 de julio de Defensade la Competencia, ‘LDC’). The CNCtherefore suggests the need for a more in-depth and transparent procedure,particularly as regards unifying into a singlebody the specific functions of thecompetition authority with those of othersupervisory and regulatory bodies. Thereport also points out that the Draft Bill is

not accompanied by the correspondingreport on the analysis of the impact of theproposed legislation with the resulting lackof any legal, economic and budgetaryanalysis of the institutional modification.

With regard to the content of the Draft Bill,the CNC notes in its report a series of issuesthat are not clearly defined and that need tobe reconsidered. First, it points to the needfor an adequate institutional structure forthe application of the LDC whichguarantees the functional separation ofinvestigatory and decision-making bodiesin the handling of sanctions proceedings. Inaddition, it suggests that the futurelegislation should include the basicinstitutional design of the CNMC,specifying the functioning and the form inwhich the governing bodies will exercisetheir functions. The CNC also expresses itsconcern about the transitional period untilthe new body is operational, since itconsiders that the provisions in this regardare insufficient. Similarly, it proposes thatregulations should be laid down regardingthe employees and civil servants who are toform part of this new body and how theywill join the same. Finally, the report dealswith the manner in which the CNMC willbe financed, of fundamental importance toensure the adequate funding of theregulatory body and the correct exercise ofits functions, while safeguarding itsindependence from the Government.

Elisa Uría (Madrid)

B. Creation of a Surveillance Unitwithin the CNC’s Directorate ofInvestigation

On February 10, 2012, the Council ofMinisters approved Royal Decree 345/2012implementing the basic organic structure ofthe Ministry of Economic Affairs andCompetitiveness. The Second FinalProvision of this legislation made twochanges to the CNC’s Bylaws, approved by

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Royal Decree 331/2008, of February 29,namely the creation of two new units,Surveillance on the one hand andInformation Systems and Communicationson the other.

The new Surveillance Unit, which formspart of the Directorate of Investigation, willtake over the investigatory tasks withrespect to the monitoring of compliancewith the obligations, decisions andresolutions referred to in article 41 of theSpanish Competition Law (the LDC), as ameans of ensuring the fully effective natureof the CNC’s declarations.

According to article 41 of the LDC, theCNC must monitor the implementation ofand compliance with the obligations laiddown in the LDC, together with thedecisions and resolutions which are adoptedin application thereof, both as regardsrestrictive conduct and interim measuresand merger control. The LDC, in forcesince 2007, lays down a procedure fortermination by way of settlement ofbehavioral cases, which has led to anincrease in such cases and, in turn, ofsurveillance cases.

The initial years in which the new LDC hasbeen in force have shown that monitoringcompliance with the decisions andresolutions adopted by the CNC Council isa priority in order to restore immediatelycompetition in those markets where it mayhave been eliminated or reduced. This,linked to efficiency reasons, makes itadvisable to consider surveillanceindependently of the investigation ofsanctions or merger proceedings, which, ininstitutional terms, has meant the need toseparate the surveillance functions of thefour units currently existing in theDirectorate of Investigation.

In addition, this Unit will extend itsfunctions to cover allocation andcoordination procedures referred to inarticles 2, 3 and 5 of Law 1/2002, ofFebruary 22, in order to foster cooperationand coordination with the regionalcompetition authorities, particularly asregards the coordination of cases, ensuringthe uniform application of the AntitrustLaw throughout national territory.

Finally, the Information Systems andCommunications Unit will form part of theCNC General Secretariat, being responsiblefor the preparation and application of theCNC’s Information Systems Plan, themanagement of computer and telematicresources and the provision of technicalassistance to and training of CNC users,including assistance in inspections ofpremises.

Jose Luis Azofra (Madrid)

CNC DECISIONS

A. The CNC sanctions Gestamp andEssa for breach of a duty tonotify a concentration

On August 12, 2011, the CNC was notifiedof the concentration consisting in thepurchase by Gestamp ManufacturingAutochassis, S.L. (‘Gestamp’) and GrupoEstampaciones Sabadell, S.L. and Bonmor,S.L. (‘Essa’) of joint control of Essa Palau,S.A. (‘Essa Palau’).

The parties had decided to divide theoperation into two parts. First, Gestamptook a 10% stake in the share capital ofEssa Palau while an additional 30% was tobe acquired subsequently. The partiesconsidered that the initial purchase of the10% stake did not involve any change ofcontrol in Essa Palau and, therefore, could

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be done without the CNC’s prior approval.However, authorization was required forthe implementation of the second part of theoperation, i.e. purchase of the 30% stake.Thus, although the parties notified thewhole operation to the CNC on August 12,2011, they did not consider it necessary towait for clearance before implementing thefirst part of the operation.

On September 7, 2011, the CNC Councilauthorized the notified concentration in thefirst phase on the basis that it did not giverise to competition concerns in the marketsconcerned. The concentration was alsoauthorized by the German and Czechcompetition authorities in the first phase.

However, immediately after clearance, onSeptember 14, 2011, the CNC decided toinitiate sanctions proceedings againstGestamp and Essa for a possible breach ofthe obligation to notify concentrations priorto implementation, in accordance witharticle 9 of the LDC. The reason for thiswas that CNC considered that the grant toGestamp of veto rights over the approval ofthe annual accounts and financial debtoperations of Essa Palau in the first part ofthe operation amounted to joint control ofthe latter by Gestamp and Essa.Accordingly, the first part of the operationshould have been referred to the CNC forclearance.

On January 18, 2012, the CNC Councilconfirmed the Proposed Decision issued bythe Directorate of Investigation (‘DI’),considering that the prior implementation ofthe operation without first obtainingclearance was a violation of article 9.2 ofthe LDC. As a result, it found Gestamp andEssa liable and fined them €124,400 on ajoint and several basis.

It is worth considering the extent to whichthis Decision amounts to a change ofapproach by the CNC as regardsdetermining those matters subject to a veto

that confer control on a minorityshareholder. Thus, the Commission’sGuidelines in this area16 require anexamination of the entire operation and thelist which they contain is not exhaustive.However, based on the precedents, it is atleast debatable whether a veto over theannual accounts and financial indebtedness,without being linked to vetoes over thebudget, the business plan, investment or theappointment of directors, would confercontrol. It will be interesting to see theopinion of the courts in the event that anappeal is lodged against the Decision. Inany event, at present it would seemadvisable to take particular care with regardto vetoes granted to those with a minoritystake because the CNC appears to bewidening the definition of controllingshareholder.

Andrea Riba / Yolanda Martínez (Barcelona)

B. The CNC fines Abertis TelecomS.A.U. €13,755,000 for abuse of adominant position

On February 8, 2012, the CNC Counciladopted a Decision17 in which it found thatAbertis Telecom S.A.U (‘Abertis’) hadviolated article 2 of the LDC and Article102 of the TFEU. This violation consistedin an abuse of a dominant position in thewholesale service markets regarding accessto its network of premises and DigitalTerrestrial Television (‘DTT’) broadcastingcenters in Spain and services for the retail

16 Commission Consolidated JurisdictionalNotice under Council Regulation (EC) No139/2004, on the control of concentrationsbetween undertakings, OJEU C 95 of16.04.2008, p.1.

17 CNC Council Decision of February 8, 2012in Case S/0207/09 Transporte Televisión.

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distribution transport of DTT signals in thesame country, through engaging in thepractice of margin squeeze from April 2009until the present.

Following a complaint by a competitorcompany, Ses Astra Ibérica S.A, (‘Astra’),the DI commenced sanctions proceedingsagainst Abertis for an alleged abuse of adominant position in April 2010. It is worthnoting that the latter was obliged, byregulation of the TelecommunicationsMarket Commission (‘CMT’), to allowaccess to its network of premises and DTTbroadcasting centers to other operators, onthe basis that they constituted an essentialasset for the provision of the service of thetransmission and broadcast of the TDTsignal. The DI found that, in view of theprice and other conditions on which Abertisprovided access to its centers, competitorsas efficient as it had no margin to operate inthe market for the distribution transport ofthe TDT signal. In other words, Abertisengaged in the anticompetitive conductknown as margin squeeze. Accordingly, theCNC Council found a breach of the above-mentioned provisions to exist and fined thecompany €13,775,000.

Finally, it should be noted that Abertis hasalready been sanctioned for abuse of adominant position in May 200918 withrespect to practices that led to marketforeclosure, by imposing abusive conditionsand an excessive duration in the contractsentered into with other companies in thesector and for having offered discounts forjoint broadcasting contracts in allterritories, leading to foreclosure in themarket for the transmission of thebroadcasting signal to these operators.

Elisa Uría (Madrid)

18 CNC Council Decision of May 19, 2009 inCase 646/08 Axión/Abertis.

C. The CNC imposes fines totalingmore than €11m on variouscement companies forparticipating in a cartel

In its Decision of January 12, 2012,19 theCNC Council imposed fines of between€500,000 and €5,700,000 on Canteras deEchauri y Tiebas, S.A. (‘Cetya’), CementosPortland Valderrivas, S.A. (‘CPV’),Hormigones Beriain, S.A. (‘Berian’),Cemex España, S.A. (‘Cemex’) andCanteras y Hormigones Vre, S.A. (‘Vresa’)for fixing the prices of concrete, mortar andaggregate and participating in a marketsharing agreement in the Navarre provinceand adjacent areas from June 2008 untilSeptember 22, 2009.

The case arose following a complaint filedagainst three cement companies (CPV,Cetya and Berain) which attachedtranscripts of recordings of telephoneconversations and meetings held betweendifferent companies, plus othersupplementary documents. The preliminaryinformation-gathering phase was openedand inspections took place of the premisesof the companies complained of as well asHolcim and Cemex, and on December 15,2009 the DI commenced sanctionsproceedings for breach of article 1 of theLDC.

In its Decision of January 12, 2012, theCNC Council found that the companiesconcerned had (with varying degrees ofparticipation) entered into agreements forthe fixing and gradual increase of the pricesof concrete, aggregate and mortar, and toshare the market for these products. Theseagreements were implemented through asystem of allocation of the building worksto which the participating companies couldsupply these products within each of the

19 Case S/0179/09 Hormigón y productosrelacionados.

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defined areas in accordance with quotasestablished by them. These concertedpractices materialized through meetings andtelephone calls.

Although some of the companies allegedthat the documents which, according to theDI, showed their compliance with theagreement were nothing more than theirinternal estimates and many of the buildingworks were ultimately not carried out bythe companies, the Council decided that theevidence gathered from the inspectionsshowed that the agreements existed and hadbeen complied with, apart from the fact thatthe cartel amounted to a per se violation,there being breaches which did not reducethe liability of the cartel members.

In relation to the geographic market, thecompanies alleged that it was smaller thanthat of the Navarre province, although theCNC Council responded by differentiatingbetween ‘relevant geographic market’ and‘geographic market concerned’. Thus, theformer established the territory where thecompetition conditions were relativelyhomogeneous in order to analyze theimpact on the possible anti-competitivebehavior, while the latter was thegeographic area in which the infringementin question took place or was capable ofproducing effects on the actual competitionconditions. In addition, the CNC Councilstated that the companies concernedthemselves defined the geographic marketin question through their agreements,dividing the territory into at least sixgeographic areas and assigning quotas toeach of them. The fact that some companiesdid not operate in all of these areas or didnot produce all of the products did notprevent the conclusion being reached thatthey were all responsible for a single cartelinfringement, which was defined in theLDC as ‘any secret agreement between twoor more competitors whose purpose is the

fixing of prices, production or sales quotas,market sharing, including bid rigging, orthe restriction of imports or exports.’

María Antonia Labrador (Madrid)

D. The CNC fines Iberdrola morethan €10 million

On February 24, 2012 the CNC Counciladopted a Decision in Iberdrola Sur, inwhich it declared that Iberdrola, S.A.(‘Iberdrola), Iberdrola Comercialización deÚltimo Recurso, S.A.U. (‘Iberdrola CUR’)and Iberdrola Distribución Eléctrica, S.A.(‘Iberdrola Distribución’) had breachedarticle 3 of the LDC, concerning thedistortion of free competition throughunfair acts. As a result, the companies inquestion were fined €10,685,000 on a jointand several basis.

The context in which the anti-competitiveconduct took place was the liberalization ofthe retail market for the supply ofelectricity, with the entry into operation ofthe last resort supply (‘SUR’) system andthe last resort tariff (‘TUR’) on July 1,2009. In this liberalization process, twotypes of consumers may be distinguished:(i) consumers who qualified for the TUR,namely those who consume electricity via alow voltage connection with a contractedpower of up to 10 KW; and (ii) consumerswho do not qualify for the TUR, namelythose with a high voltage connection andlow voltage users who consume more than10KW.

With the entry into force of the SUR onJuly 1, 2009, the second type of consumers,who, until then, had been supplied underthe tariff system, had to switch to beingsupplied under free market conditions.Nevertheless, to avoid these clients beingautomatically cut off, the legislationprovided that customers without any right

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to SUR who had not entered into a supplycontract with a supplier when the SURcame into force had to be supplied by thesupplier of last resource (‘CUR’) of thebusiness group which owned thedistribution network for the area in whichthey were located. In such cases, the pricepaid by these consumers for electricityconsumed was not the TUR but rather itincluded a penalty aimed at encouraging thesignature of the contract in question,culminating with the service being cut offon December 31, 2012.

In this context, the specific conduct forwhich the Iberdola Group companies werefined was that after Iberdrola CUR had, inaccordance with the sectoral regulations,taken on responsibility for supplying470,791 consumers who found themselvesin the situation described above, 268,001 ofthese consumers were automaticallytransferred from Iberdrola CUR toIberdrola, the group company responsiblefor supplying electricity in the free market.

Accordingly, the conduct which the CNCfound to be a breach of the LDC consistedin the transfer of contracts from the CUR tothe free-market supplier without firstobtaining the consumer’s express consent,as required by the applicable legislation.According to the CNC, this led to asignificant increase in the number ofconsumers who were loyal toIBERDROLA, and therefore the conducteffectively reduced the size of the marketthat other suppliers could reasonablycapture and strengthened barriers to entry.

This is not the first time that the CNC hasfined electricity companies for violations ofthe competition rules in relation to theliberalization of the electricity market.Thus, with respect to Iberdrola Groupcompanies, the CNC has previouslyimposed two fines, one of €15 million onIberdrola Distribución in

Centrica/Iberdrola20 and the other of€17,865,000 on Iberdrola in UNESA yAsociados.21

Desiré Martín (Madrid)

E. The CNC fines maritimetransport companies whichoperate in the Balearic Islandsfor participating in a cartel

In its Decision of February 23, 2012, theCNC Council found a violation of article 1of the LDC to have been committed by thefollowing shipowners: CompañíaTransmediterránea S.A.(‘Transmediterránea’), Balearia EurolíneasMarítimas S.A. (‘Balearia’), IsleñaMarítima de Contenedores S.A.(‘Iscomar’), Servicios y ConcesionesMarítimas de Contenedores S.A.(‘Sercomisa’) and Mediterránea PitiusaS.A. (‘Mediterránea Pitiusa’).22

20 CNC Council Decision of April 2, 2009 inCase 644/08 Centrica/Iberdrola, in whichIberdrola Distribución was sanctioned forrefusing to give Centrica unconditional andmass access to its Supply Point InformationSystem, and for discriminatory treatment ofcompetitors of the group’s supplier,Iberdrola, in relation to access toinformation on clients.

21 CNC Council Decision of May 13, 2011 inCase S/0159/09 UNESA y Asociados, inwhich Iberdrola was fined a total of€21,612,000 for different types of conduct.For the specific market liberalizationinfringement, i.e. obstructing the change ofsupplier in the market for the supply ofelectricity to small clients, it was fined€17,865,000.

22 CNC Council Decision of February 23, 2012in Case S/0244/10 Navieras Baleares.

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The case arose following a complaintlodged in April 2010 by Consell Insular deIbiza for possible anticompetitive conductin the Balearic maritime transport market.Dawn raids of the headquarters of variouscompanies were then carried out, whichresulted in the DI deciding to commencesanctions proceedings against Balearia,Transmediterránea and Iscomar.Subsequently, two more companies,Sercomisa and Mediterránea Pitiusa, werealso joined as defendants.

According to the CNC Council, the illegalconduct consisted in entering intoagreements to fix prices and otherconditions (commercial, service, productionlimitation and market sharing) in relation tothe maritime transport of goods andpassengers between the Spanish mainlandand the Balearic Islands and between theislands themselves. First, the CNC found acartel to exist on the Mainland-BalearicIslands routes which had lasted for nineyears, between 2001 and 2010, whichBalearia, Transmediterránea e Iscomar hadformed part of. In addition, the Council alsofound that Balearia, Sercomisa andMediterránea Pitiusa had agreed to shareout the maritime transport market betweenIbiza and Formentera between 1995 and2011. For all of the above reasons, theCouncil fined shipowners a total of €54million, Transmediterránea being hit withthe single biggest fine (€36.1 million).23

23 In the case of Transmediterránea and itssubsidiary Europa Ferrys S.A. (‘EuropaFerrys’), this fine is in addition to that of €2million imposed five months previously forobstructing the inspection work of the DI inthe searches of the premises carried out at itsheadquarters, the highest sanction imposedto date by the CNC for a violation of thistype. See the CNC Council Decision ofSeptember 21, 2011 in Case SNC/0014/11Transmediterránea and Antitrust Newsletterno. 24 (November 2011).

Two aspects of the Decision deserve specialattention. As regards the first type ofconduct, the Council considered that asingle continuous infringement over timeexistence, reflected in the evidence of theholding of meetings, agreements, draftagreements, and minutes of meetings orconversations over a decade that wereprogressively specified through differentforms of anticompetitive cooperation with acommon purpose: to obtain maritimetransport services between the Spanishmainland and the Balearic Islands that weremore profitable than would have been thecase had competition existed. To this end,the companies coordinated their behaviorthrough various basic parameters orbehavioral elements (eg prices, exchanges,surcharges, discounts, withdrawal ofvessels, etc.).

The Council has also pointed out theanticompetitive intentions of the cartelparticipants and their knowledge of theillegality of the behavior, havingpresumably agreed the application of smallprice differences at different moments intime and not always to all clients, the pointof which was to cover up certainagreements which, if they had been appliedwith identical parameters, would havelooked suspicious. According to theCouncil, where isolated breaches of theseagreements took place, whether real orapparent, the immediate reaction was tocensure the conduct and to pressurize thefirm in question to ‘toe the line’ andcomply with the agreements. Although thefacts related more to one period thananother, the Council found that theinformation available, despite beingfragmented and dispersed, was sufficient toshow the consistency, coordination andcomplementary nature of the parts of anoverall plan to achieve a commonanticompetitive goal.

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With respect to the second type of behavior,the Council considered that it had not beenshown that Mediterránea Pitiusa andSercomisa knew and contributed to theoverall plan to restrict competition onroutes between the Spanish mainland andthe Balearic Islands, routes on which theydid not even provide a service.Accordingly, the Council defined thepractice concerning the transport ofpassengers between Ibiza and Formenteraas an independent infringement, isolatedfrom the former and put into practicethrough specific instruments.

It is equally striking that the DI proposed tothe CNC Council that the fine imposed onBalearia be significantly reduced – thiscompany had filed a leniency request afterthe inspections were carried out – yet theCouncil rejected the request, taking theview that the attitude of Balearia could notbe defined as ‘full, continuous anddiligent’, given that the company (i) madeup to ten oral declarations; (ii) waited morethan five months before providing freshevidence concerning the first type ofconduct and almost one year with respectthe second conduct; and (iii) did not bringan end to the infringement concerning thesecond type of conduct at the time ofadducing the evidence which accompaniedits leniency request.

According to the Council, Balearia failed tocomply with the cumulative requirementslaid down in the LDC. Therefore, despitethe fact that it provided evidence whichmade it possible to (i) increase theinfringement period with respect tomaritime transport between the BalearicIslands and the Spanish mainland; and (ii)to include Mediterránea Pitiusa as regardsthe illegal conduct on the Formentera-Ibizaline, its cooperation was only defined as amere mitigating circumstance.

It is worth noting that the maritimetransport sector has been in the competitionauthorities’ sights for the last ten years.Thus, last year the CNC fined variousmaritime transport companies (includingBalearia and Transmediterránea) forengaging in similar anticompetitiveconduct,24 and fines have also been imposedin other earlier cases.25 In any event, theDecision of February 23, 2012 is unlikelyto be the last one, since sanctionsproceedings are currently on foot againstvarious shipowners for an alleged breach ofarticle 1 of the LDC.26

Álvaro González (Madrid)

F. The CNC fines EndesaDistribución Eléctrica for breachof a dominant position

Last February 21, 2012, the CNC Councilimposed27 on Endesa Distribución Eléctrica,S.L.U. (‘EDE’) two fines of €14,967,960and €8,158,000 for two types of conduct;first, a breach of article 6 of the formerSpanish Antitrust Law (Law 16/1989) andArticle 102 TFEU, and second, conductcontrary to article 2 of the LDC, consisting

24 CNC Council Decision of November 10,2011 in Case S/0241/10 Navieras Ceuta 2.

25 See CNC Council Decisions of September 8,2010 in Case S/0080/08 Navieras Línea deCabotaje Ceuta-Algeciras and the nowdefunct Spanish Antitrust Tribunal (‘theTDC’) of July 21, 2004 in Case 555/03Líneas Marítimas Estrecho; of May 26,2004 in Case 561/03 Líneas MarítimasEstrecho 2 and of June 13, 2003 in Case543/02Transmediterránea/Euroferrys/Buquebús.

26 Case S/331/11 Navieras Marruecos(pending decision).

27 CNC Council Decision of February 21, 2012in Case S/0211/09, Endesa Instalación.

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in, respectively, preventing thedevelopment of effective competition in themarket for electrical installations that werenot reserved to the distribution companyand the payment for the carrying out of thework of connecting the extensioninstallation to the distribution network.

In the same sanctions proceedings, the CNCruled out the existence of any abuse as aresult of favoring the supplier of thesanctioned group by using EDE’s businessnames and trademarks in the offers madefor various unregulated services.

According to its own precedents in thesector,28 the CNC identified two relevantmarkets in its Decisions. In the first place,the electricity distribution market, operatedexclusively by distributor companies, whichcovers all of those activities which aim toensure that electricity reaches finalconsumers from the high voltagetransmission network.

Secondly, the electricity installationsmarket, which, in turn, is sub-divided intothe market for electrical installationsreserved to distributors (work necessary forthe connection to the distribution networkof the receptor installations of the finalusers) and the electricity installations which

28 CNC Council Decision of September 20,2011 in Case S/0089/08, Unión FenosaInstalación and CNC Council Decision ofSeptember 20, 2011 in Case 2795/07Hidrocantábrico Instalación.

Decision of the now defunct TDC, ofDecember 14, 2006 in Case 606/05, Asinem-Endesa. The definition of markets containedin this Decision was subsequently confirmedby the judgment of the National AppealsCourt (Audiencia Nacional) of April 21,2008 (6th Legal Ground) JUR 2008\170828and the judgment of the Spanish SupremeCourt of February 10, 2011 (8th LegalGround) RJ 2011\384.

are not reserved to the distributors. In thelatter case, each final user may contract theservices of any authorized installer in orderto carry them out.

According to the electricity sectorlegislation,29 with respect to the carryingout of certain non-reserved installations, toconnect a new supply point to the network,the manager of the distribution network (thedistribution company) must notify thetechnical and economic informationrequired to the client so that the latter maychoose the installation company on marketconditions. There is also a legal obligationnot to charge for this service, i.e. EDE mustitself bear the cost of the connection work.

First, the CNC found that EDE infringedthe first of the obligations described abovewhen, in its capacity as the distributor, ittook advantage of the privilegedinformation which it had as a result ofholding that position, thus giving it anadvantage over other installationcompanies, by providing certain clients ortheir representatives with specific estimatesfor the carrying out of the connection work.In other words, EDE used its privilegedposition to choose the largest installationsin the market, making it difficult for otheroperators to compete with it on an equalfooting.

As regards the second type of conduct, theCNC considered that EDE abused itsdominant position by charging clients for

29 See articles 41 and 42 of Electricity SectorLaw 54/1997, of November 27 (‘LSE’),Official Gazette (BOE) no. 285, ofNovember 28, 1997, together with article 44et seq and article 103 of Royal Decree1955/2000, of December 1, governing theactivities of transport, distribution,marketing, supply and procedures for theauthorization of electrical energyinstallations, Official Gazette (BOE) no. 310of December 27, 2000.

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the carrying out of connection work. Thecompetition authority took the view thatEDE breached the obligation contained inthe legislation not to charge the price inquestion for the service. As a result, theCNC considered that the profit in questionhad been illegally earned from the clientsbecause it was the result of abusivebehavior in the market.

With this Decision, the CNC continues itsongoing task of controlling the Spanishelectricity sector and of applying thelegislation which liberalizes the market inquestion.

Ismael Gutiérrez (Barcelona)

RECENT LAW CASE

The Supreme Court confirms a fineof more than €38 million imposed bythe TDC on Iberdrola for abuse of adominant position

Last January 30, 2012, the SpanishSupreme Court passed judgment in theappeal brought by Iberdrola Generación,S.A.U. (‘Iberdrola’) against the ruling ofthe National Appeals Court (AudienciaNacional) of July 2, 2009 rejecting theclaim for judicial review brought byIberdrola (the ‘Contested Judgment’). Theoriginal action had been brought byIberdrola against the Decision adopted bythe TDC in plenary session in Case 601/05in which the company was fined€38,710,349 for abuse of a dominantposition. The illegal practice in questionconsisted of offering prices in the electricityspot market aimed at causing a technicalrestraint situation in which it would be theonly offeror. According to the TDC, thisconduct was continuously engaged inbetween December 18, 2002 and May 27,2003 with regard to the Castellón powerstation and between October 25, and

December 31, 2003 with regard to theEscombreras 4 and Escombreras 5 powerstations.

Iberdrola based its case on three grounds.First, it argued that the TDC hadsubstantially altered the accusationprepared by the Spanish CompetitionService (‘the SDC’), in breach of article 24of the Constitution. Thus, the TDC’saccusation diverged from the legalassessment contained in the Statement ofObjections and the Report-Proposalprepared by the SDC and, although theTDC considered that the same infringementhad been committed (abuse of a dominantposition under article 6.1 of the LDC), itdefined this in terms of an offer to supplyelectrical energy at excessively high pricesin order that this would not be matched andthat it would be required in the technicalrestraints phase, which was different fromthe SDC’s description of the violation(limited to the supply of electricity atabusive prices on two specific days). Inaddition, new facts were added (the supplyof electricity from the Escombreras 5 powerstation in 2003 is included and longerperiods were contemplated for the supplyfrom the Castellón 3 power stationsthroughout 2002 and 2003 and Escombreras4 in 2003, instead of a single day for eachof these two power stations).

In this regard, the Supreme Court rejectedthe contention that, with respect toadministrative sanctions proceedings, thenew definition contained in article 43(currently article 51) of the LDC could onlyconsist in a change in the definition of theoffence committed, without there being theslightest alteration of the facts pleaded ascoming within in the defined conduct inquestion. It therefore dismissed the firstground of the appeal, concluding that therewas neither a breach of the accusatorialprinciple nor of the defendant’s defenserights, since at all times the company wasaware of the accusations made, which was

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always related to the same conduct and itcould make allegations and defend itself atall times.

As regards Iberdrola’s second ground, thatno abuse of a dominant position existed,both the TDC and, subsequently, theNational Appeals Court relied on twopresumptions in reaching the oppositeconclusion: (i) with respect to thecomparison with the previous prices offeredby the power stations concerned, that itmust be supposed that these prices wereabove cost, unless the economicallyirrational behavior of operating at a losswas accepted; and (ii) with respect to thecomparison with prices at which demandfor electricity was being matched in theperiods concerned, that if they were offeredat markedly higher prices than those atwhich supply and demand was normallymatched in the spot market this clearlyshowed that Iberdrola’s intention was thatits offers should not be matched. Given thedominant position of its power stations inthe areas in question, this inevitably meantthat they would be called on to resolve thetechnical restraints.

In this regard, the Supreme Courtconsidered that Iberdrola could easily haverebutted both presumptions, which wereperfectly legitimate and appropriate to showthe existence of the conduct in question,simply by providing the real data relating toits operating costs. Thus, by not adducingthis evidence in either the administrative orcourt proceedings, the Supreme Courtconcluded that these presumptions acquiredsufficient credibility to enable the court tofind the existence of an abuse of a dominantposition by Iberdrola.

With respect to the third ground, Iberdrolaclaimed that the Contested Judgmentreversed the burden of proof. Thisallegation was rejected by the SupremeCourt, since the Contested Judgment: (i)declared certain undisputed facts to be

proved, that is, the prices at whichelectricity was offered during certainperiods and that this behavior usually gaverise to a technical restraints situation arisingas a result of such offers not being matched;and (ii) presumed that such prices were notjustified by the costs, given that in otherperiods electricity was offered at lowerprices and that this behavior was aimed atcausing a technical restraints situation inareas where Iberdrola had a dominantposition in the production of electricity. TheCourt also added that Iberdrola had at itsdisposal the means of rebutting thesepresumptions by simply producing data onits own real costs, and it made no attemptwhatsoever to do this.

It should be noted that one judge dissentedfrom the majority’s interpretation of article43 of Law 16/1989 (now article 51 of theLDC) on the basis that the Supreme Court’sapproach was ‘new’. Thus, until thisjudgment, the Supreme Court hadconsidered that the provision in questionmakes possible a legal definition of theconduct which was the subject matter of thesanctions proceedings different from thatproposed in the statement of objections, butin any event complying with the applicablelimit of the same facts contained in saidstatement of objections.

This judgment diverges from the SupremeCourt’s approach in its rulings of January27, 201030 and January 28, 2010,31 whichannulled the decisions of the TDC whichhad found certain sporadic conduct byelectricity generating companies called onto resolve technical constraints situations tobe an abuse of a dominant position.

Enrique Ferrer (Madrid)

30 Decisions 12078/2007 and 5569/2010.

31 Appeal 1278/2007.

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Portugal

Bill to amend the PortugueseCompetition Law

On March 22, 2012, the PortugueseParliament approved a Bill introduced bythe Portuguese government to amend thePortuguese Competition Law 18/2003, ofJune 11, 2003 and the Portuguese LeniencyLaw 39/2005, of August 25, 2005.

The revision of the Portuguese competitionlegal framework was one of thecommitments given by the Portuguesegovernment to the European Commission,the European Central Bank and theInternational Monetary Fund, in the contextof its request for financial support.

The most notable features of the proposedamendments are the following:

The Bill gives the Portuguese CompetitionAuthority (‘the PCA’) more discretion todetermine how to carry on its activity, as itwill be less constrained by the principle oflegality, which determines that allcomplaints received must be investigated,and more able to act according to theprinciple of appropriateness, notably byassessing the relevance of the complaintssubmitted and deciding which cases topursue so as to promote competition andprotect the public interest.

Regarding the transactions subject tomandatory notification, the Bill keeps thetwo main tests currently in force todetermine which transactions must benotified (turnover and market share), whilechanging the thresholds for notification.The following transactions must bepreviously notified to the PCA: (i)transactions leading to the creation orstrengthening of a market share equivalentto or exceeding 50% in the national marketfor a given product or service, or a

substantial part thereof; (ii) transactionsleading to the creation or strengthening of amarket share equal to or exceeding 30%and below 50% in the national market for agiven product or service, or a substantialpart thereof, provided that the individualturnover in Portugal of at least two of theundertakings concerned exceeded €5million in the previous year; or (iii) wherethe turnover of the undertakings concernedin Portugal exceeded €100 million in theprevious year, provided that the individualturnover in Portugal of at least two of theundertakings concerned exceeded €5million.

The procedural rules applicable to theinvestigation by the PCA of restrictivepractices, as well as the rules applying tothe assessment by this authority ofconcentrations subject to mandatorynotification, have been greatly broadened,to widen the scope of matters beingregulated. In particular, the powers of thePCA to investigate restrictive practiceshave been extended and in some casesclarified. A notable example is the power ofthe PCA to make household searches(regarding partners, directors or employeesof the undertakings) and seal computers orother electronic storage equipment.

Lastly, by contrast to the procedure underthe current rules, with respect to the judicialreview of a decision adopted by the PCAdetermining the imposition of fines, underthe Bill the appeal would not generally havethe effect of staying the proceedings and,therefore, the infringing undertaking wouldnot be able to wait for a final court rulingbefore paying the fine. Another importantchange proposed in this regard is that thecourt would have the power to increase thefines imposed by the PCA.

Ana Ferreira Neves (Lisbon)

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CONTACT INFORMATION

¨ MadridMarcos AraujoGarriguesC/ Hermosilla, 328001 Madrid (Spain)Tel. +34 915 145 200Fax +34 913 992 408

¨ BarcelonaLluis CasesGarriguesAvda. Diagonal, 654, 1ª, Esc. B.08034 Barcelona(Spain)Tel. +34 932 533 700Fax +34 932 533 750

¨ BrusselsJosé Luis BuendíaGarriguesAvenue d'Auderghem, 22-281040 Brussels, BelgiumTel. +32 2 545 37 00Fax + 32 2 545 37 99

¨ LisbonJoao Paulo Teixeira de MatosGarrigues Portugal, S.L.P.Av. Eng.º Duarte PachecoAmoreiras, Torre 1 – 15º1070-101 Lisbon (Portugal)Tel. +35 121 382 12 00Fax +35 121 382 12 90

The selection of news items chosen for this document does not aim to offer a complete overview of newdevelopments in this area; its objective is solely to give guidance and its contents should not be applied to specificsituations without first obtaining proper professional advice. While it has been prepared with all reasonable care,Garrigues is not responsible for any error that it may contain, whether due to its negligence or otherwise, nor for anyloss or damage occasioned to any person, for whatever reason. The descriptions, references or access to otherpublications contained herein does not imply their recommendation.