I ENFORCEMENT POLICIES AND GUIDANCE
The Portuguese Competition Authority (AdC; the Authority) is empowered to enforce Law 19/2012 (Competition Act), investigate breaches of the law and apply fines and other foreseen sanctions. Its powers include being able to issue injunctions and to prohibit undertakings that have breached antitrust law in public procurement procedures to participate in new procedures for a period of up to two years.2 The AdC is an independent body headed by a council whose members are appointed by the government. The board is independent from the government, and its mandate can only be terminated in the case of a serious breach of the law.3
The AdC is empowered to apply Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) in Portugal, and is the Portuguese member of the European Competition Network.4 The material rules of EU law are not elaborated on in this chapter; our comments on the position and powers of the AdC are, in principle, applied to the cases where the AdC enforces EU law. The main features of the Competition Act and the powers of the AdC are reviewed below.
i Autonomy of the AdC and its priorities
The Competition Act provides the Authority an opportunity test on whether to investigate any alleged breaches of the law that it becomes aware of. Under the previous Act, the AdC was bound by a rule of legality that obliged it to investigate all possible breaches of competition law of which it became aware. The new opportunity test raises some uncertainty regarding private parties, and is a departure from the tradition of Portuguese administrative law.
Although such rule is obviously important with regard to the allocation of the resources of the AdC, the wide scope of discretion that the Competition Act allows for was criticised by several commentators. To limit the scope of that discretion, the Act requires the AdC to define its priorities of investigation on an annual basis. Although the communication of the AdC’s priorities for each year is now mandatory, the norm that imposes this obligation is rather vague, and it specifically prevents an indication of the sectors that will be scrutinised.
This seems to be confirmed by the first policy priorities adopted by the Authority for 2013, which included a number of valid institutional and organisational issues, but had only a general reference to specific infringements.5
In its priorities for 2017, the Authority identified cartels as one of its main areas of interest for the coming year. Following an initiative taken during 2016 on the relevance of competition law for public procurement, cartels in state purchase proceedings are to be subject to a particular scrutiny.
The importance of the leniency programme as a fundamental tool in discovering cartels continues to be recognised by the Authority. Several measures have been announced for 2017 to reinforce the leniency programme, including a leniency web portal and a direct line.6 The Authority has also set the target of commencing between 15 per cent and 20 per cent of all cases for breach of the competition rules by its own decision (i.e., not on the basis of a leniency application or a complaint lodged by a third party). The 2017 priorities also refer to public procurement issues, suggesting that the Authority considers that some of cases will be the outcome of investigations on public sector purchases.
The Authority will continue to be open to agreeing on transaction arrangements both before and after the adoption of a statement of objections. In addition, the Authority has announced a number of internal measures that will affect its decision-making. For example, a formal internal review procedure has been created, which will take place before a decision is reached. Specific details are not yet known, but this seems to point to some equivalent of the European Commission Hearing Officer system. This is a welcome move and will hopefully lead to more robust decisions.
A number of cases and initiatives can be seen to have reflected the AdC’s priorities in recent years. This was particularly clear in relation to vertical conducts, which were listed as a priority. In 2014, the AdC launched a huge sector inquiry on distribution that covered the relationships between suppliers, and both modern (supermarkets) and traditional distribution. Food distribution was one of the main areas of the inquiry, but it also included non-food goods. It is not known when the inquiry will lead to follow-up measures, including a full report, but the inquiry may lead to cartel investigations (this was specifically admitted by the AdC).
The reference to the impact of competition law in public tenders, an issue that the Authority has prioritised, is probably linked to one of the decisions of 2016 listed below, Teva/AstraZeneca.
In addition to its list of policy priorities, the Authority has issued guidelines on the way it will prioritise the use of its powers.7 Its priorities, as outlined in the guidelines, are not limited to a specific period. Particularly important is the fact that the Authority will consider, when assessing whether to pursue the investigation of a possible infringement, the probability of proving such infringement and the importance of the investigation measures that may have to be undertaken. This obviously puts a burden on plaintiffs.8 It is generally understood that the AdC is very cautious in its investigation of complaints and, in practical terms, this leads to a long assessment period of any complaints lodged.
ii Review of decisions taken in 2016
A final decision was taken in the Office Envelopes case, with the lenient applicant benefiting from full immunity and three other companies being fined.9
The case was based on a leniency applications lodged by Tompla in 2011, which lead to two different cases, one in office supplies, which was closed in 2014, and another one in the envelopes sector, which is now closed. A second leniency application was filed later by another participant in the agreement, Antalis.
The substance of the case seems clear, with the companies being accused of having organised a sharing of clients in the relevant sector. However, in procedural terms, the case is unusual. In May 2016 the Authority reached an agreement with Antalis, and closed the case. In this decision the Authority applied the rules on negotiation of undertakings with companies that are foreseen in the Competition Act. Antalis, which was entitled to a reduction of 50 per cent of the fine that would otherwise be applicable, benefited from a further reduction by recognising its role in the agreement. Thus the Authority issued two separate decisions: the first, in May 2016, addressed to Antalis, includes an agreement in which the company confessed participation in the illicit agreement with competitors; and the second, in November 2016, closed the case against the initial leniency applicant and the remaining companies, which neither applied for leniency nor entered into agreements with the Authority. It is expected that those companies will lodge an appeal against the decision. Although in a totally different market, the combined use of leniency and the negotiation of undertakings has already been used in the past. Thus, in 2015, the Authority fined several companies for participating in a cartel that was active in public tender processes to supply the Ministry for Education. The case was opened following a leniency application, but the companies targeted entered into agreements with the AdC, accepting fines of relatively low amounts in exchange for an undertaking not to appeal against the AdC’s decision.10
In the port services sector, the Authority opened a case on the basis of a leniency application, which led to a dawn raid against several companies. However, the Authority eventually came to the conclusion that there was no evidence of an illicit agreement. According to the released decision, it was concluded that there had been an attempt to organise some sort of coordinated behaviour between companies providing tug services, but that such attempt had not had any follow-up. The information available on the case is scarce, but the decision seems unusual. It has generally been accepted that even a mere attempt of establishing an agreement is a breach of the competition rules. In this case, even if there was enough evidence to lead the Authority to open a case and to obtain a judicial mandate to conduct a dawn raid, it was eventually concluded that such an attempt was not evidence of wrongdoing. Obviously an assessment of the consequences of the decision in terms of interpretation could only be made if the documents (attempt to organise collusion, reaction of the other participants) could be reviewed, which is not the case.11
The case also stands out because one of the companies involved was the port authority, which, under Portuguese law, is a state-owned company that administers and manages the port facilities. It is quite exceptional to have a state-owned body as the target of an antitrust case.
A case brought against the Association of Psychologists exemplifies a long-standing initiative against professional associations that tend to adopt rules on pricing and other areas of service that are a clear breach of antitrust rules. This particular case did not lead to fines but was closed with an undertaking by the Association to eliminate certain practices that limited the possibility of choice by the patients.12
In the Car Guarantee and Maintenance case, the Authority continued to target the restrictions imposed by the fabricants. Thus two importers of cars, SIVA and FCA, have been pursued for imposing limitations on the warranty extension contracts if the client did not follow very strict rules that required it to use only authorised suppliers or garages.13 Both cases were closed with an undertaking by the car importers to amend the rules.
In Teva/AstraZeneca, the Authority assessed the consequences of an agreement reached between a pharma company that owned IP rights over a drug and a generics producer.14 The parties were apparently in conflict about the extension of AstraZeneca’s IP rights, which was subsequently resolved by an agreement. Under the terms of that agreement, Teva had to withdraw from the Portuguese market.
The Ministry for Health informed the Authority of the fact that one of the companies had informed it was leaving the market and a dawn raid took place.
In its decision, the Authority declared that an agreement closing an IP dispute could only be in breach of antitrust rules if it went beyond the scope of the IP matter. That would be the case if the company that accepted to leave the market was compensated for that fact. In the case, no evidence was found that Teva had received any compensation and, as a result, the case was closed.
The case is interesting for several reasons. It is unusual for a government body to lodge a complaint with the Authority, and the fact that the Ministry of Health decided to do so in this case could be the result of the effort undertaken by the Authority to make the public sector more aware of the impact of competition law on everyday activities, in particular, in public procurement matters. The case is also interesting because of the Authority’s interpretation. It follows from the decision that, in the context of an IP settlement, it is illegal for compensation to be paid to a company that leaves the market. However, the decision also seems to admit that there could be other forms of breach of competition law, even if payment was not involved, since it refers specifically to the requirement that the agreement is limited to what is necessary to settle the IP-related issue. Consequently, it would seem that, even if payment is not involved, if an agreement goes beyond what is necessary to settle an IP dispute, it could be a breach of competition law.
A review of AdC decisions taken in 2016 confirms the importance it has given to leniency. It conducted dawn raids of several companies in the Port Services case (as mentioned above) and closed the Office Envelopes case, which was based on a leniency request.15
iii Procedural issues
Cases before the Authority comprise two parts: an initial inquiry, during which the AdC assesses whether there is evidence of anticompetitive behaviour and whether it is empowered to undertake measures such as dawn raids; and a formal investigation, which takes place if the AdC finds substance to issue a statement of objections, and that begins with that statement. In both phases, the undertakings concerned will be able to enter into a negotiation with the AdC that will allow the closing of the file through the imposition of conditions upon the company. EU law allows these kinds of agreements after a statement of objections is issued. The fact that, in Portuguese law, this will now be possible even at the inquiry phase is an important innovation of the new law.
In a decision of 18 July 2013, the Authority applied the rules of the new law allowing for settlements with companies in the investigation phase, in the context of an ongoing case, although the facts had occurred before the approval of the new law.16
In March 2015, the AdC reached an agreement with a pay per view TV company following a case opened after a complaint about an abuse of dominance in the broadcasting of football matches. This settlement procedure was applied during the inquiry phase (i.e., before a statement of objections was issued) and closed a case that had begun in 2012.17 The procedure for a settlement during an inquiry requires the Authority to publish the main facts and the substance of the undertakings given by the companies targeted by the inquiry. Interested third parties are given a period to submit comments on the proposed undertakings. The final decision issued by the Authority does not condemn the company for a breach of the law but obliges it to fulfil the undertakings it gave. The lack of a decision on a breach of the law is obviously important as regards follow-up indemnification procedures, since a condemnation by the AdC facilitates the position of the claimant in such actions. This is a powerful instrument to put pressure on companies to accept this kind of agreement.
In the ongoing Banking case, where the majority of the commercial banks operating in Portugal stand accused of an illicit exchange of information, one of the applicants has lodged an appeal regarding access to the file. In a decision of September 2015, the specialised Judicial Court for Competition and Regulation confirmed that the AdC has a wide margin of discretion in its organisation of parties’ access to the file. However, it declared that, even concerning documents that contain business secrets but that have not been used as evidence in a statement of objections, the AdC is under a duty to provide parties with a summary of such documents in order to allow them to decide whether to ask for access to those documents, and to provide grounds for such access.
The Authority decided to provide access to those documents, but limited it to the legal advisers of the parties. However, the courts declared that, where the released documents appear to contain information protected by banking secrecy, access cannot be given before such information is suppressed. Thus the case law seems to impose a strong obligation on the Authority to scrutinise even the documents that it does not use in the statement of objections.
A new feature of AdC practice in 2015 was its prosecution of the provision of wrong or misleading information by companies. In a number of cases concerning the auto parts market, importers of cars were fined because they had provided incorrect or misleading information in response to the AdC’s requests for information.18 A notable feature of these cases is that the procedure was extremely quick, taking about four months from the opening of the case to the AdC’s final decision.
A company of the state-owned national railway operator, CP, was also fined for the same reason following a request for information in a case concerning an abuse of dominance.19
Interestingly, two of the three cases where the wrong information had been provided were closed without fines being imposed, as the target companies had agreed to close the cases with undertakings.
A breach of the duty to provide accurate information is punishable with fines of up to 1 per cent of the turnover of companies in Portugal.
Appeals against AdC decisions can be lodged before the Judicial Court for Competition and Regulation. The appeal does not suspend the obligation to pay the fines to which the appellant company has been condemned, which is also a departure from the previous rule. However, it is possible to obtain interim measures suspending the obligation to pay the fine, under Article 92, No. 2 of the Competition Act.
iv The rules defining agreements, concerted practices and abuses of dominance
The Competition Act prohibits agreements and concerted practices and abuses of a dominant position. The relevant concepts (agreement, concerted practice, dominant position, abuse, etc.) follow the same concepts used in EU law, in particular in Articles 101 and 102 of the TFEU, and the AdC openly refers to the practice of the Commission when assessing cases under national law. However, there are some material differences between EU law and the Competition Act on this point, and in particular on the definition of agreement and concerted practices: under Portuguese law, only agreements or practices that affect competition ‘to a considerable extent’ are prohibited (see below for an interpretation of this concept). It is difficult to find decisions where the Authority elaborates on a definition of what affects competition to a considerable extent, arguably because such cases do not lead to the adoption of a decision. In a judgment on the appeal brought by the companies fined in the Salt cartel,20 the court considered that, even if the market shares had not been calculated in the decision, it could be assumed that those shares were high, and thus that the agreement entered into between the companies had affected competition to considerable extent. It seems to follow that, independently from the form of behaviour that breaches the law, high market shares will lead to competition being affected to a considerable extent. This case law certainly lowers the standard that the AdC’s decisions have to meet.
Abuse of economic dependence is also prohibited by the Competition Act. Economic dependence is defined as a situation where a company cannot find an equivalent alternative to an existing commercial relationship with a customer or a supplier. The law qualifies as dependence situations where the good or service concerned is provided by a limited number of companies; and where the company that claims to be a victim of the abuse cannot find other commercial parties within a reasonable period.21
Agreements and concerted practices that have as their object or effect the prevention, distortion or restriction of competition to a considerable extent in the domestic market are prohibited, and the undertakings that are party to those agreements and practices can be fined. Article 9 of the Competition Act lists several examples of agreements and practices that are illicit (e.g., agreements on prices or on the conditions applicable to transactions, market splitting). However, since these are merely examples and not a closed list of illicit agreements, in practice the decisions of the AdC do not attach a particular importance to them, and there have been several decisions where the examples listed under Article 9 are not even mentioned.
Decisions by associations of undertakings may be qualified as agreements or concerted practices.
The concept of agreement
The Competition Act does not include a definition of agreement. In several cases, the AdC has referred indistinctly to agreements or concerted practices when assessing the conduct of companies. Under the previous Act, two cases shine a light on the concept of agreement applied by the AdC.
In Vatel,22 the AdC declared the existence of an agreement on the basis of evidence of a meeting between the parties and the consequences of that meeting, although neither the date nor contents of the meeting were assessed in the decision. The parties did not deny, on appeal, the existence of the agreement, and the decision was confirmed by the courts. Therefore, the mere evidence of a meeting can qualify for this purpose, at least insofar as the AdC is concerned.
In Helisul,23 the AdC declared that the fact that two companies entered into a consortium for the provision of services to a public body through a public tender was an illicit agreement since those companies were the only ones that submitted bids to the tender. In this case, the consortium contract was qualified as an agreement for the purposes of the law. The decision was annulled by the courts on the grounds that the agreement did not have as its effect a limitation of the number of competitors, since there were other companies that could have submitted a tender to the bid.
The notion of concerted practice
The AdC considers that a concerted practice exists where it gathers evidence of coordinated behaviour in the market. In these cases, the standard applied to the assessment of any contacts that lead to such outcome in the market seems to be relatively soft. Evidence of contact between competitors followed by a form of action in the market that qualifies as a coordinated practice has been deemed sufficient to qualify as a concerted practice. Thus, in Case 06/08,24 phone contact between competitors followed by price alignment was qualified as evidence of a concerted practice. However, the case law requires specific evidence of the existence of, at least, contact between competitors, even when it admits no further evidence of the contents of such contact. Thus, in the appeal against Case 06/08, the fine applied to one of the alleged cartelists was quashed because, although there was evidence of an alignment of prices, there was no evidence of contact between that particular company and the remaining cartelists. Consequently, the company on which there was no evidence of contacts was seen as not being part of the practice.
In the ongoing banking exchange of investigation case, the AdC found that there was a concerted practice on the basis of mail exchanges between the participating companies. It did not consider that it was necessary to show that there had been specific contact between the competitors, accepting the mail exchanges as sufficient evidence.
The distortion of competition
Agreements and concerted practices are only prohibited if they restrict, or are able to restrict, competition ‘to a considerable extent’.
This requirement has been interpreted as a form of de minimis rule. There are very few elements clarifying what the test is for the level of restriction of competition that meets the legal standard, in view of the fact that the AdC does not systematically disclose the cases where it does not consider that there has been breach of the law. In some cases, however, an agreement affecting a small market or involving companies with a limited share of the market has been declared as breaching the law. In its decision on the appeal brought by the companies fined in the Salt cartel,25 the court considered that, even if the market shares of the companies that were part to the agreement had not been calculated in the decision, it could be assumed that those shares were high, and thus the agreement entered into between the companies had affected competition to considerable extent.
Agreements and practices may restrict competition by object or by effect. The ongoing banking exchange of information case is quite interesting, because it considers that an exchange of information is an infraction per object even when it does not concern future behaviour.
One of the more important decisions of 2015 concerned vertical restraints imposed by an oil and gas company on its bottled gas distributors. The company was fined €9.2 million. The decision is particularly important because of its impact on the law on vertical restrictions, but it also shows that the test for a restriction ‘to a considerable extent’ will be applied in small local markets, as in those for distribution of bottled gas.26 In 2016, the first instance court reduced the fine to €4.1 million on the grounds that the gas company had acted negligently by keeping the contractual restrictions in place. This was confirmed by the court of appeal. The reduced fine is, however, still very high for what has been qualified as a breach of the law by negligence.
Decisions by associations
Decisions by trade associations are qualified as agreements under Article 9 of the Competition Act. For historical reasons, until Portugal joined what is now the European Union in 1986, professional associations had often been given the power to determine the prices of the services of their members. In some cases, such powers are foreseen in legal acts, but often they resulted from the practice of the associations or from their internal rules. Although such laws and practices are not compliant with the requirements of EU law, and thus should have been revoked or terminated after Portugal’s accession to the European Union, they continued until recently. This was mostly the case for some liberal professions.
The AdC has therefore issued several decisions condemning professional associations for defining prices, for example veterinaries,27 dentists28 and medical doctors.29 Case PRC 7/2004, against an association of shipping agents, is particularly interesting, since the determination of maximum prices (as opposed to the more common rules on minimum prices) was declared illegal. The decision was confirmed on appeal.
In 2010, the association of owners of parking companies was fined because it issued a recommendation that each member company should inform the association of every change of price. The decision was confirmed on appeal.30
In 2008, the bread makers association of Lisbon was fined for price recommendation. The decision was confirmed by the appeal court in 2014.31
Decisions by trade associations on matters other than price-fixing have also been prosecuted. In Case PRC 23/2004, an association of road hauliers was accused of deciding on a collective boycott of a client by several of the companies that were members of the association. On appeal, the decision was annulled because the court found that the decision had been taken by the companies outside the scope of the association, the association having only communicated the decision to its members.
iv Key policies
Under the previous Competition Act, the AdC was not obliged to announce its priorities or any areas of concern. As explained below, this will change under the new Act. Even when it was not obliged to disclose its priorities, however, an analysis of the decisions of the AdC under the previous Competition Act clearly revealed the existence of areas of concern.
On the basis of that analysis, four areas of concern over the past few years can be identified.
The role of professional associations
The number of decisions targeting professional associations is quite high.32 In view of the relatively open policies of price-fixing that many of these associations had, it can be argued that the impact of these decisions in the market was obvious. Since the AdC was, under the previous Competition Act, subject to a rule of legality (i.e., it was obliged to investigate all possible breaches of the law of which it became aware), it could not ignore the outcome of the activities of the associations, even where its effects were minor.
A further reason can probably be found in the fact that the breaching behaviours of trade or professional associations was relatively easy to investigate because of its open nature.
Several decisions have been issued in cases arising out of public tenders. In the press releases that are usually made when decisions are adopted, the AdC refers to the need to protect against the use of public resources from the activities of cartelists. For example, Helisul33 concerned an alleged cartel in a tender to offer helicopter firefighting services to the government.
A more important case was the Blood Testing Strips cartel.34 In 2005, five pharmaceutical companies were fined because of price collusion in a tender for the provision of blood strips to a hospital. Afterwards, the AdC discovered evidence of several other tenders where a similar form of collusion had also taken place, and the two cases were merged. The amount of the fines was a record at the time, totalling more than €16 million and reaching about 6 per cent of the turnover in Portugal of some of the companies. At the time, the decision was seen as marking a detailed scrutiny of anticompetitive activity in the tenders launched by the public administration, with the creation of a special group to investigate this kind of offence that included representatives of the Public Prosecutor’s Office.
In the Ministry of Education Supplies cartel (see footnote 8), a number of companies were fined because of a cartel that distorted the public procurement rules used by the Ministry. In view of the fact that the case was closed by an agreement, only a limited amount of information is available.
Although public procurement was included in the AdC’s list of priorities for 2015, this is, as far as is publicly known, the only decision concerning the sector this year. In December 2015, a Guideline on good practice to prevent collusion in public administration tenders was adopted. This guidance document is addressed to tender authorities, and aims to help them to identify illicit agreements.
The AdC has clearly focused its attention, in particular between 2003 and 2008, on the telecommunications and media sector. Most of the cases concerned alleged abuses of dominance by the leading telecoms provider in Portugal, Portugal Telecom, which led to the highest single fine ever applied by the AdC (€38 million) for an abusive refusal to give access to conducts (final loop to provide telecoms services to households) to competitors. In 2008, the same company was fined again because of the structure of the discounts it used.
In the area of collusive practices, an agreement between Portugal Telecom and a private TV network, SIC, was declared illegal because of the exclusivity clauses that it included.
Several complaints against telecoms providers have also been investigated. Complaints against TV providers and media companies have also been investigated. The leader of sport content television, Sport TV, was fined €3.7 million for abuse of dominance through its practice of price discrimination. The case was interesting because, in a previous merger control decision involving Sport TV, the AdC has imposed certain behavioural conditions that included price discrimination. On a complaint by a cable distributor, Cabovisão, Sport TV was subsequently found guilty of abusive behaviour arising from that specific condition. This decision was confirmed on appeal.35
The AdC is also empowered to launch sector inquiries and to make recommendations to the government. Two in-depth reviews have been conducted in the food distribution sector (on 29 October 2010) and in the fuel distribution sector (31 March 2009). These studies allowed the AdC to identify competition issues, in particular those of a structural nature.
In 2014, the AdC launched a huge inquiry in the distribution sector that was based on the vertical relations being singled out as a priority for the action of the agency for 2014. No outcome of the inquiry was published in 2015.
In 2015, an investigation was launched in the ports sector. A draft report has been published by the AdC, and companies have been invited to submit their observations about it. The draft report identifies several issues in the sector, mainly concerning the rules applied to the award of concessions of port terminals. The final report is expected in 2016.
A number of recommendations have also been issued relating to pharmacies (Recommendation 1/2006) and public notaries (Recommendation 1/2007).
In addition to its definition of its priorities, the publication of sector inquiries and recommendations has proven a very useful way to identify the issues set out by the AdC.
Perhaps the most important feature of the recent (2015) practice of the AdC can be seen in the number of its decisions in cases concerning vertical issues.
Galp, the main oil and gas company in the Portuguese market, was fined for imposing territorial restrictions on the distribution of bottled gas. The very high level of fine (€9.2 million) and the fact that it was applied although the illegal clauses were, allegedly, not enforced, shows the AdC’s high level of commitment to the repression of vertical restrictions (see footnote 19). The fine was reduced on appeal, but the court confirmed the condemnation decision.36
The automotive repair sector was also targeted in several cases concerning restrictions on the guarantees on new cars if a non-authorised repair shop was used by car owners. Ford, Peugeot, Volkswagen, Audi and Skoda agreed to offer undertakings to change their contractual clauses in exchange for a decision closing the case.37 In 2016, this was extended to Fiat.38
To date, the AdC has not been very active in the investigation of vertical restrictions. The high fines applied to Galp suggest that this category of restrictions is considered as highly damaging.
The decisions in the automotive sector identified restrictions that affected the right to repair under guarantee, effectively closing the network of repair shops that provide services under guarantee and thus creating conditions to impose higher prices.
v Applicability ex tempore
The Competition Act is applicable in all situations where an inquiry into possible breaches of its rules has been opened by the Authority after 9 July 2012. Under Article 17 of the Competition Act, the Authority may open an inquiry for breaches of the rules that prohibit agreements and concerted practices when it receives a complaint or suspects that such activities are occurring.
II COOPERATION WITH OTHER JURISDICTIONS
The AdC is part of the European Competition Network (ECN), and participates regularly in its meetings and activities.39 As follows from the rules applicable to the ECN, there is the exchange of evidence and experiences between the members of the network. It should be assumed that these exchanges with other authorities concern both new and ongoing cases, and that the AdC can request information from other authorities and cooperate with them. However, any evidence used in cases under the Competition Act will have to be obtained under the rules of the Act (e.g., evidence has to be gathered following the Portuguese rules).
The special role of the European Commission should be considered since, as follows from Regulation (EC) No. 1/2003, there are several situations where the AdC should defer to decisions taken by the Commission, in particular concerning the possibility of the Commission investigating cases that fall under EU law, even if they concern Portugal.
In terms of extradition, the Portuguese Constitution forbids the extradition of nationals. Since antitrust violations are not criminalised in Portugal, there would be no ground to ask a foreign country to extradite one of its nationals to Portugal in the context of an antitrust investigation.
The AdC is also part of the Association of European Competition Authorities and of other international networks.
III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
Portuguese competition law applies to all economic activities by private companies or state-owned entities. Agreements or concerted practices that take place in the Portuguese territory or that have effects in Portugal are subject to the Competition Act. We are not aware of any decisions where cartels that occurred outside Portugal but that have effects in the country have been investigated.
The fact that a company does not have a legal presence in Portugal does not prevent the AdC from investigating it if such company has activities in the territory. Thus, a company that distributes its products in Portugal through a distribution agreement can be part of an investigation opened by the AdC.
Companies that are separate legal entities are considered as a single undertaking if one of them has the majority of the share capital, the majority of the votes, has the power to nominate more than half of the members of the directing bodies of the company or, in general, has the power to manage its activities. In substance, economic groups are seen as a single company. This is particularly important with regard to the limit of the fines that may be applied by the AdC. Fines for breaches of the antitrust rules are capped at 10 per cent of the turnover of the companies involved. The practice of the AdC under the previous law was to include in the relevant turnover, for the purposes of the determination of the cap to the fines, the turnover of the entire group (see below). Thus, the maximum amount of a fine has to be calculated taking into account the turnover of all the companies that are under the same control. It should be noted that although the law does not specify what geographical reference of the turnover is to be considered, the practice of the AdC is to consider only the turnover in Portugal.
IV LENIENCY PROGRAMMES
The first Portuguese leniency programme was introduced by Law 39/2006, of 25 August.
Before Law 39/2006 was adopted, in at least one case the parties negotiated with the AdC an exemption of fines in the context of cooperation with an investigation. This has been done on a fragile legal basis, since the law then applicable merely allowed the AdC to take into account the behaviour of the offending company, and specifically its cooperation with the AdC.40
This norm was interpreted as enabling the AdC to consider this cooperation if it went beyond the normal duties of the provision of information and of cooperation to which companies are subject. However, there was very little certainty about the use of this specific rule, since it did not provide a framework for the cooperation and, in particular, it did not determine the powers of the AdC to reduce the applicable fines.
Law 39/2006 allowed the AdC to exempt from the applicable fines companies that voluntarily provide information that allows the AdC to verify the existence of a breach of the rules on agreements and concerted practices as long as an investigation was not already taking place. Companies that provided information and evidence on a matter already under investigation that was not yet known to the AdC, and that was determinant for the investigation and proof of the breach of the law, were entitled to a reduction of at least 50 per cent of the amount of the fine. A second company providing information on a matter already under investigation was entitled to a reduction of up to 50 per cent of the applicable fine.
The outcome of this first leniency programme was limited. The wording of the law was ambiguous. In particular, the fact that, in order to qualify for an exemption, the company had to provide information allowing the AdC to verify the existence of a breach of the law probably made the standard too difficult to reach. Companies were clearly faced with the risk that it could be considered that the proof of the cartel was not the result of the information they provided. Thus, the level of legal certainty arising from the programme was limited.
There have been a limited number of cases where Law 39/2006 was applied.41
The Competition Act revoked Law 39/2006 and includes a new leniency framework. The wording of the new Act addresses some of the critics of Law 39/2006 and provides more certainty to a company planning to cooperate. In particular, it is now clear that the fact of providing information that allows the AdC to undertake a dawn raid is enough to qualify for the exemption. Thus the ambiguity around the need to have evidence provided that was strong enough to allow the AdC to ‘verify’ a breach of the law has been suppressed.
The new rules allow a reduction of fines for companies that, successively, provide new information on an investigation that is already ongoing. Thus, companies are entitled to an exemption if they are the first to provide information on a cartel, or to a reduction of between 20 and 50 per cent if they provide further information.
The procedure to obtain a marker is relatively simple. The AdC actively encourages companies to cooperate and has adopted forms that have to be filled. The level of information that has to be provided, at least in the first contact, is not too high. In practical terms, it is possible to obtain a marker with a limited amount of information as long as more complete information is subsequently provided.
As explained above, directors or individuals that have positions of responsibility in a company can be fined for their participation in cartel activities. The fines applicable to individuals are capped at 10 per cent of their annual remuneration.
Such individuals can benefit from the leniency framework if they apply under those rules. However, they can also benefit from a reduction of fines, even if they do not formally apply for leniency, if they fully cooperate with the AdC. This is an important form of obtaining the individual cooperation of directors and other individuals involved in the practices, since it rewards their cooperation even outside a formal decision of applying for leniency. Directors have often been fined by the AdC.
The position of an individual applying for leniency is potentially in conflict with the position of the company. Thus, although it is possible that the application for leniency of the company also includes its directors and related individuals, it could be advisable that they seek independent counsel.
The Competition Act includes several rules that limit access by third parties to documents and information provided by an applicant in a leniency case. Companies and individuals that are accused of cartel activities on the basis of information provided in a leniency application can have access to the file, but are not authorised to copy any documents that are part of it. Third parties (including possible claimants) are not given access to the file unless such is authorised by the applicant for leniency.
In 2014, the court confirmed fines applied by the AdC in 2012 following a leniency application by a company involved in a cartel in the printed forms sector. On the basis of the application, the Authority undertook a dawn raid that led to a statement of objections against four companies. The court reduced the fines that had been applied, including also fines against the directors of the involved companies.42 The leniency applicant was not fined.
The leniency application that led to the Printed Forms case originated another investigation in the envelopes sector. A dawn raid took place in 2015, and a statement of objections was issued.43
In a number of decisions adopted in 2015, the AdC made extensive use of the possibility of closing cases with undertakings before a statement of objections is issued. Although they are not necessarily linked to leniency applications, these cases involve a negotiation between the companies and the AdC, and usually the recognition of some form of wrongdoing.
This possibility has been used in the Controlinvest/Sport TV case where, following a complaint lodged by the association of football clubs, the target companies submitted a number of undertakings that have been approved by the AdC. This approach is logical regarding the use of investigation resources. The AdC avoids the risks of a long procedure and the need to defend its final decision in court. The companies involved, on the other hand, close what could be a difficult case without a sanction and a mere amendment of their illegal practice.
However, the fact that the amount of information in these cases that becomes public is limited implies that the effect of these cases in clarifying the law is somewhat limited. Thus, third parties do not have access to a detailed analysis of the facts by the AdC and of the position of the parties in cases.
Parties to agreements or concerted practices that breach the Competition Act can be fined up to 10 per cent of their annual turnover in the year prior to the decision of the Authority. In the case of individuals that are employees or directors of a company, the limit is 10 per cent of their annual remuneration.
The Competition Act requires the companies that are fined to pay the full amount even if they appeal (the appeal does not suspend the application of the sanction). This rule has recently been declared in breach of the constitution in a specific case, where the company alleged that its financial situation did not allow it to pay the fine. Under the constitutional rules, it does not follow from this decision that the rule is automatically unconstitutional, but parties can invoke this precedent before the courts.44
On 20 December 2012, the AdC published its Guidelines on the determination of fines.45 The relevant turnover for the determination of a fine is turnover related to the infringement of the competition rules. Where it is not possible to determine that turnover, or where the information available on that matter is not dependable, the entire turnover of the group may be considered. The entire turnover of the group may also be considered if the economic impact of the law breaching acts is disproportionate to the turnover that is related to those acts.
For trade associations, the turnover to be considered is the sum of the turnover of the members of the association.
Other sanctions can also be applied, including the publication of the decision of the ADC in newspapers. If the fine is applied because of a breach of the law that took place during a public tender, the company found guilty can be prohibited from participating in similar tenders for up to two years.
The amount of the sanction is defined by the AdC taking into account a number of factors:
- a the seriousness of the illegal activity;
- b the nature and dimension of the market affected;
- c the duration of the law-breaching activity;
- d the role of the company in the activity;
- e the economic advantages that it received;
- f its behaviour with regard to termination of the illegal activity and the compensation for the damages caused;
- g the economic situation of the company;
- h its past record in the area of antitrust; and
- i the cooperation it provided to the AdC during the case.
The Guidelines refer in detail to the principles used by the AdC in determining the fines, including the criteria for increasing the amount of the fine on the basis of the duration of the infraction. It should be noted that, where the economic benefit that results from the infraction is bigger than the maximum applicable fine, the AdC considers, on the basis of general law (i.e., not on the basis of the Competition Act) that the maximum can be increased by one-third; the maximum applicable fine in those cases can be as much as 13.3 per cent of the turnover related to the infraction.
During the investigation of a case, either before or after a statement of objections is issued, a party suspected of cartel behaviour can offer to negotiate with the AdC in view of reaching a settlement. Following the negotiation, if the company agrees that it has breached the law, the case will be closed with the application of a fine (and possibly other sanctions). The company will be entitled to a reduction of the applicable fine, but the law does not specify the amount of the reduction. The facts that are confessed in the settlement procedure cannot be disputed in an appeal against the decision.
The negotiation procedure has a certain similarity with the leniency application: third parties cannot have access to the proposal of settlement unless the company involved authorises it. As explained in Section I.ii, supra, in the Office Envelopes case the Authority seemed quite open to negotiate agreements with parties that were already entitled to a partial reduction of a fine, because of a leniency application, which allowed them further reductions.
As a general rule, the AdC seems inclined to be quite lenient in cases where parties agree to negotiate commitments. This is in line with the fact that, since 2015, the AdC has recognised the importance of leniency when defining its investigation priorities.
VI ‘DAY ONE’ RESPONSE
The AdC has broad investigative powers. It can launch dawn raids, hear companies and individuals (who can be fined if they refuse to provide information) and issue requests for information; companies that do not comply with these requests can also be fined. It can also search for documents and information, including on computers. The search powers include all premises of the suspected company and also cars used by staff. The AdC can apprehend documents and goods if they are deemed important for the investigation.
Private addresses of shareholders, directors and employees of companies can be raided, but the decision to raid private addresses has to be authorised by a judge, while dawn raids on the premises of companies may only be authorised by a public prosecutor. Offices of attorneys can be searched as long as a member of the Portuguese Bar Association is present.
In view of the scope of the powers the AdC possesses, it is extremely important that specialised advice is sought during a dawn raid. At the very least, the decision authorising the raid has to be assessed in order to check whether the conditions foreseen in the law are met. The limits on accessing emails are not entirely clear and, depending on the circumstances, there may be scope to dispute access by the AdC to those files.
VII PRIVATE ENFORCEMENT
Private enforcement is possible under Portuguese law. Any affected third party can bring an action against a company that entered into a cartel, since cartelisation is an illegal activity and the damages suffered as a result of it are the source of a duty to compensate.
However, third-party liability requires proof of an illegal act that has caused damages. Although the courts are empowered to apply the Competition Act, it will be almost impossible to convince a court that there has been a cartel if there is no investigation or previous decision by the AdC in such matter. Thus, follow up actions are much more probable. There are a few ongoing cases based on decisions taken by the AdC. In principle, any third party that shows a legitimate interest can have access to a file and obtain copies of the documents that are part of it (with the exception of documents that are confidential because they contain business secrets). It is unclear if access to documents produced by leniency applicants will benefit from this rule, and the position of the AdC on this matter is not known. Thus, private enforcement will take place after a decision is taken by the AdC and a final court decision on the merits of the case has been taken. The time span involved is very long, and such time limitation is an obvious concern.
A claimant will have to show the damages it suffered, and the only possible compensation is for the amount of those damages, since there is no clear ground for punitive damages under Portuguese law.
As previously explained, the rules on leniency are relatively recent, and it is not clear how a claimant can obtain access to findings and documents existing in the files of the AdC in order to use them in a private enforcement action. The leniency rules seem to prevent access by third parties to documents in the file, but these rules have not yet been tested.
There are no known decisions on cases of private enforcement in Portugal, although there are several ongoing court cases. Since contingency fees are not allowed by the Portuguese Bar, the conditions for the development of private enforcement are not ideal.
VIII CURRENT DEVELOPMENTS
The new Competition Act represents a significant change to Portuguese competition law, and has given the AdC important new powers. The fact that cases can be closed by agreement between the AdC and the parties is particularly important in view of the length of proceedings and the general uncertainty that follows a judicial review of competition decisions. Thus, the AdC now has the legal resources to pursue a more effective competition enforcement strategy in Portugal.
1 Carlos Pinto Correia is a partner at Linklaters LLP.
2 See Article 71, (a) (b) of the Competition Act; and Case PRC 2005/20, Aeronorte, where companies bidding for the provision of helicopter transportation services to the government were accused of cartelisation and prohibited from entering into public tenders for a certain period.
3 Statutes of the AdC, Decree Law 125/2014, Articles 1.1 and 15.4, respectively.
4 See Statutes of the Authority, Decree Law 125/2014, Article 10.1.
5 See the priorities of the competition policy for 2017, issued on 29 December 2016, available at www.concorrencia.pt.
6 See priorities for 2017, Section I.i, supra.
7 See the Guidelines on the enforcement priorities of 1 February 2013, available at
8 See Guidelines, Section 18.
9 PRC 10/2011, decision of 16 November 2016.
10 See press release 18/2015 of 10 August.
11 PRC 2015/10, Aguanave et al., decision of 7 December 2016.
12 PRC 2015/6, decision of 10 November 2016.
13 PRC 2015/05, Siva Automóveis, decision of 21 January 2016 and PRC 2015/02, FCA, decision of 18 February 2016.
14 PRC2014/4, Teva/AstraZeneca, decison of 29 March 2016.
15 See press release 24/2015 of 29 September, available at www.concorrencia.pt.
16 See press release 19/2013 on a decision of the Authority of 18 July 2013 condemning Flex 2000, Flexipol and Eurospuma regarding a cartel on prices. The facts occurred before the entry into force of the current Competition Act, which allows for settlements both during the inquiry and the investigation phases. The case started with a leniency application by Flex 2000. The Authority applied the settlement procedure to the other companies during the investigation phase, although the Competition Act that was applicable at the time of the facts did not foresee such settlements.
17 See press release 10/2015, of 3 March 2015, available on the AdC website.
18 See press release 12/2015, of 22 June, applying a fine of €150,000 to Automóveis Peugeot; and 21/2015, of 22 September, applying a fine to Ford on the same grounds.
19 See press release 15/2015, of 16 July, CP Carga.
20 PRC 28/2005, Vatel, Salexport and others, decision of 23 March 2005.
21 Competition Act, Article 12. In view of the scope of this publication, this chapter does not develop the issues of abuse of dominance and abuse of economic dependence.
22 Case PRC 28/2005.
23 Case PRC 20/2005, Helisul and Aeronorte, decision of 23 June 2005.
24 PRC 6/2008, Driving Schools, decision of 15/May 2008.
25 Case PRC 28/2005.
26 See press release 1/2015, of 3 February. The case is currently on appeal.
27 Case PRC 28/2004.
28 Case PRC 29/2004.
29 Case PRC 7/2005.
30 See AdC press release 06/2014, where reference is made to a decision by the Constitutional Court rejecting the appeal brought by the fined association.
31 See AdC press release 05/2014, where reference is made to a decision by the Lisbon Court of Appeal.
32 Decisions have been issued against the Medical Doctors’ Association, the Dentists’ Association, the Veterinarians’ Association, the Association of Shipping Agents, the Association of Road Hauliers, the Association of Producers of Bread, the Association of Owners of Parking Companies and the Association of Psychologists.
33 Case No. 20/2005.
34 PRC 4/2005. A second decision was later issued on the same facts. The appeal court confirmed part of the decision, but nullified it for one of the appellants.
35 Press release 08/2014. The court reduced the fine to €2.7 million.
36 The Authority decision was announced in February 2015, and the court decision is of January 2016. See press release 1/2016 at www.concorrencia.pt.
37 See press releases 28/2015, of 2 December (Volkswagen, Audi and Skoda); 20/2015, of 19 September (Ford Lusitana); and 7/2015, of 23 March (Peugeot).
38 See footnote 14, supra.
39 EU Regulation No. 1/2003. See Commission Notice on cooperation within the Network of Competition Authorities, Official Journal No. C101, of 27 April 2004 pp. 43–53; and the Joint Statement of the Council and the Commission on the Functioning of the Network of Competition Authorities of 10 December 2003.
40 Case PRC 4/2005, supply of blood strips to hospitals.
41 There are five cases, as far as it is public, that started on the basis of a leniency application: Polyurethane Foam cartel, decision of 18 July 2013; Printed Forms cartel, of 20 December 2012; Blood Strips cartel (PRC 4/2005); and in public tender processes to supply to the Ministry for Education, press release 18/2015. In addition, there is publicly available information according to which a dawn raid launched in March 2013 on the banking sector was based on a leniency application by one of the banks.
42 Press release 16/2014, Case 08/2010. The case involved Contiforme, Litho Formas and Formato.
43 See press release 2/2015 and the analysis above on the outcome of this case.
44 Decision of the Constitucional Court, first section, 674/2016, of 13 December 2015, Case 206/2016.
45 Guidelines on the methodology to use in the application of fines, 20 December 2012, available on the Authority website.