Spain Among First EU Member States to Implement ECN+ Directive
Background: European Parliament and Council Directive (EU) 2019/1 ("ECN+") required EU Member States to adopt, by February 4, 2021, minimum standards related to national competition authority ("NCA") antitrust enforcement. ECN+ aims to promote cooperation among NCAs and the European Commission and to minimize uneven enforcement by establishing minimum common investigative powers and decision-making procedures.
The Development: In late April, Spain amended the Spanish Competition Act ("LDC Amendments") to implement ECN+. The LDC Amendments introduce significant changes to the Comisión Nacional de los Mercados y la Competencia ("CNMC") procedures regarding leniency, fines, and investigatory powers, among other topics. Together with Germany and (partially) France, Spain is one of the first large EU jurisdictions to have implemented ECN+. The remaining EU Member States are expected to do so later this year.
Looking Ahead: Companies in Spain should expect to see uptick in leniency applications to the CNMC, with a parallel increase in cartel enforcement. In addition, companies with operations in Spain should counsel employees about new rules related to CNMC investigations.
Spain recently amended the Spanish Competition Act ("LDC Amendments") to implement Directive (EU) 2019/1 ("ECN+") of the European Parliament and Council. ECN+ establishes minimum standards for national competition authority ("NCA") antitrust enforcement across the European Union. The most significant changes in Spain, detailed below, relate to cooperation among the Comisión Nacional de los Mercados y la Competencia ("CNMC"), NCAs, and the European Commission ("EC"); enhanced CNMC investigatory authority; increased fines; and policies that encourage cartel participants to self-report to the CNMC and seek leniency.
Strengthening of Mutual Assistance Among European Authorities
The LDC Amendments expand the collaboration mechanisms among the European Commission, the CNMC, and the other EU NCAs. For instance, the CNMC and other EU competition authorities may exchange leniency applications, either with the consent of the applicant or where the receiving competition authority also has received a leniency application relating to the same potential violation from the same applicant. The reform also allows NCAs to collaborate regarding interviews and inspections outside their respective territories.
Enhanced Investigatory Authority
The LDC Amendments extend the CNMC's inspection and investigation powers by permitting the CNMC to examine the premises of a company under investigation, including the private residences of its personnel. The CNMC now may interview, in the presence of a lawyer if requested, any company representative or individual when those personnel might have relevant data or information. The CNMC also may access a company's information stored in third-party computer systems and digital platforms.
The LDC now classifies anticompetitive agreements and abuses of a dominant position as very serious infringements in all cases, which subject such violations to penalties of up to 10% of the company's total global revenue. Prior to the LDC Amendments, vertical agreements and unqualified abuses of dominance were classified as serious infringements, sanctioned with a maximum of 5% of the company's revenue.
The LDC Amendments also increase the penalties for companies and their personnel who fail to comply with the CNMC's enhanced powers, including, now, participation in interviews. In the past, failing to comply with the CNMC’s investigative mandates was a minor infringement that carried a penalty of up to 1% of a company's revenue. That conduct is now a serious infringement, with the possibility of fines up to 5% of global revenue. However, an interviewee may refuse to provide incriminating information or admit to an antitrust violation.
As noted above, the LDC Amendments apply penalties to the company's total worldwide revenue. The LDC Amendments therefore settle a long-standing debate about whether the penalty percentage applied to a company's revenue only in Spain or its global revenue.
The LDC Amendments also increase the potential size of coercive fines (e.g., for lack of cooperation) from a maximum of EUR 12,000 to as much as 5% of a company's total global revenue.
Changes to Leniency Policy
The LDC Amendments introduce a marker system, comparable to other jurisdictions, that incentivizes companies or individuals to submit early notification of a potential cartel violation. At the early stages of an internal investigation, the company might not have sufficient information to determine whether a violation has occurred. A marker reserves an applicant's eligibility for leniency for a limited time while it collects evidence to determine whether a violation has occurred and to submit the necessary evidence to perfect a leniency application.
The LDC Amendments also introduce a number of reforms that are likely to encourage applicants to report potential cartel violations. For example, the LDC Amendments now empower the CNMC to waive, for successful leniency applicants, a rule that otherwise prohibits a company guilty of a cartel violation in Spain from contracting with government entities. The LDC Amendments also enhance the confidentiality protections for leniency applications. Under prior rules, plaintiffs in private damage actions could request otherwise confidential leniency-application documents from the CNMC to support follow-on damage claims.
Prioritization of Complaints
The LDC Amendments now permit the CNMC to take no action on complaints that are not considered a priority. That could be the case, for instance, where there is little or weak evidence of a violation or when conduct has a limited potential anticompetitive effect in a market.
Statute of Limitations
The LDC features a statute of limitations for administrative liability. The LDC Amendments, however, introduce a tolling period that pauses the statute of limitations when another NCA or the European Commission has opened and not completed an investigation. The LDC Amendments also now pause the statute of limitations throughout a judicial review of an infringement decision.
The amendments are effective immediately. However, CNMC proceedings initiated prior to April 28, 2021 are governed by the rules of the previous regime.
Jimena García Munier, in the Madrid office, assisted in the preparation of this Commentary.
Four Key Takeaways
- The LDC Amendments provide enhanced incentives for companies involved in cartel conduct to self-report and seek leniency from the CNMC. Companies that have uncovered evidence of a cartel agreement in Spain should quickly consider whether to submit a leniency marker. The first leniency applicant may be eligible to receive full immunity. Subsequent applicants may benefit from a reduced fine for producing evidence that enhances the CNMC's investigation.
- The LDC Amendments strengthen Spain's collaboration with other European competition authorities, facilitating exchange leniency applications and cooperation related to extraterritorial interviews and investigations. Expect to see more multijurisdictional investigations and enhanced coordination among the European competition authorities.
- The LDC Amendments expand the CNMC's authority to inspect a company's offices and interview personnel. Companies with operations in Spain should train employees to handle a surprise CNMC inspection. Employees who lack proper training might conceal or destroy evidence or impede the investigation, intentionally or not, which can lead to additional financial penalties for the company.
- The LDC Amendments clarify that the CNMC calculates penalties for competition law violations based on the infringing company's total worldwide revenue.
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