i INTRODUCTION

In addition to the EU competition rules, including Article 101 and Article 102 of the Treaty on the Functioning of the European Union (the TFEU), the main legal framework applicable to competition issues in Portugal is Law 19/2012, of 8 May (the Portuguese Competition Law), as amended.2

The Portuguese Competition Authority (the PCA) is the central entity for the public enforcement of competition law in Portugal and its decisions can be challenged before the Competition Court – a specialised court of appeal – and subsequently before the Lisbon Court of Appeal. When applicable, courts may also lodge appeals before the Supreme Court of Justice.3 Competition issues mainly related to contractual relationships, and, to some degree, issues related to damages, are decided by the common civil courts. However, after the transposition of the damages directive, Directive 2014/104/EU, into Portuguese law, by Law 23/2018, of 5 June, the Competition Court now has exclusive competence to decide on damages requests solely based on competition law breaches.

Within this institutional context, undertakings carrying out their activity in Portugal should mainly take into account the guidance included in the PCA’s decision-making practice and in the Competition Court’s case law, which generally reflects the EU Regulations and guidelines, the decision practice of the European Commission (the EC) and the rulings of the Court of Justice of the European Union (the CJEU).

As regards the legal framework applicable to unilateral acts by undertakings with market power, both the Portuguese Competition Law and the TFEU set forth the prohibition of abuse of a dominant position. Similarly to the provisions of Article 102 of the TFEU, Article 11 of the Portuguese Competition Law sets forth that ‘any abuse by one or more undertakings of a dominant position in the domestic market, or in a substantial part of it, is prohibited.’

Considering the general nature of this provision, paragraph 2 of Article 11 provides an open list of possible abuses of a dominant position:

  1. imposing, directly or indirectly, unfair purchase or sale prices or other unfair trading conditions;
  2. limiting production, markets or technical development to the detriment of consumers;
  3. applying dissimilar conditions to equivalent transactions with trading parties, thereby placing them at a competitive disadvantage;
  4. making the execution of contracts subject to the acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts; and
  5. refusing another undertaking access to a network or other essential facilities that it controls, when appropriate payment for access is offered, in a situation where the other undertaking cannot, therefore, in fact or in law, act as a competitor of the undertaking in a dominant position in the market, upstream or downstream, unless the dominant undertaking can demonstrate that, for operational or other reasons, such access cannot reasonably be provided.

Nevertheless, the Portuguese Competition Law took a step forward by including, under Article 12, a prohibition without parallel at the EU level, prohibiting the abuse of a situation of economic dependency. According to this provision ‘It is prohibited for one undertaking or more undertakings to abuse the economic dependency under which any of its suppliers or customers may find itself as a result of the fact that any equivalent alternative is not available, to the extent that such a practice affects the way the market or competition operate.’

With the above-mentioned legal framework as the relevant background we will provide an overview, illustrating the way Article 11 of the Portuguese Competition Law and Article 102 of the TFEU has been applied by the relevant Portuguese public authorities.

ii YEAR IN REVIEW

The most significant dominance case in Portugal in 2018 concerned the PCA’s intervention to expand the scope of the access, by competing operators, to CTT’s postal network (CTT was the previous incumbent of the now privatised postal services). In this case, the PCA considered, quite atypically, that it was sufficient to adopt a decision that rendered a set of commitments legally binding. According to the authority, the commitments expanded the scope of CTT’s offer regarding access to its postal network, available to competing postal operators, which the authority concluded could broaden consumer choice.4

The PCA’s investigation began on 13 February 2015, after a complaint from competitors, apparently in the corporate mail segment. The investigation revealed the existence of an alleged number of obstacles to the development of effective competition in the market for mail services relating to the alleged limitations in terms of access to the standard mail delivery network owned by CTT, and necessary for the development of the activity of the competitors that cannot replicate the previous incumbent’s national coverage. This finding prompted a statement of objections on 12 August 2016.5

The commitments, submitted by CTT on 22 December 2017, under Article 28 of the Portuguese Competition Law (commitments after the statement of objections), and subject to a market consultation during the first weeks of 2018, included:

  1. the availability of new postal services in the access offer at the disposal of competitors, notably publishing, priority and registered mail services;
  2. the availability of new access points in CTT’s postal network, further downstream in the postal distribution chain, notably to the inward sorting centres and to a wide range of CTT post offices;
  3. faster delivery time for access at CTT post offices concerning standard mail weighing more than 50g and publishing mail;
  4. the possibility for competing postal operators to carry out additional sorting tasks, notably sorting mail according to the delivery area of delivery offices and street name; and
  5. access prices below retail prices for final customers, differentiated according to the access point, postal service and sorting tasks carried out by the competing postal operator.

The PCA intervention in this case may be considered uncharacteristic, since, in the previous cases decided by the authority, a statement of objections in the event of an abuse of a dominant position has normally resulted in the imposition of a fine.6 Also, we may wonder if the complaints addressed by the PCA could not be better resolved by an intervention of the regulator of the sector, as they concern the access obligations that are set forth for this type of infrastructure.

The other main event in terms of public enforcement in the field of the abuse of a dominant position was the issuance of a statement of objections by the PCA addressed to EDP Produção, for an alleged abuse of dominance that led to price increases in the electricity supplied to Portuguese consumers.7

Once again, the PCA is investigating a former incumbent in a liberalised market. As we will further explain, this is a trend that has, to a great extent, defined the authority’s enforcement in terms of Article 11 of the Portuguese Competition Law and Article 102 of the TFEU. Nevertheless, this time the investigation is for an exploitation abuse, rather than the exclusionary abuse we described above in the context of the CTT case.

According to the PCA’s investigation, between 2009 and 2013, EDP Produção, the main supplier of electric energy in Portugal, limited the supply to certain power plants under the Contractual Balance Maintenance Costs (CMEC). The CMEC is a special compensation regime created by the state to attenuate the limitation of the previously existing incentives for investment in renewable power plants, in order to provide the service through its power plants operated under market conditions, not covered by the CMEC regime. Those power plants would thus obtain double compensation, at the expense of consumers. In this regard, on the one hand, EDP Produção obtained public compensation that increased with the underproduction of plants operating under the CMEC regime; on the other hand, EDP Produção benefitted from higher revenues from the power plants operating under market conditions due to the increase in market prices.

According to the statement of objections, the alleged conduct of EDP Produção caused estimated damages to the national electric system and consumers of approximately
€140 million, since its alleged dominant position, in a context of rigid demand, granted EDP Produção the ability to influence price formation in the market for providing secondary balancing reserve.

If confirmed, the conduct of EDP Produção is serious, considering that the sector is also of primary importance for the competitiveness of the economy, as well as for the welfare and purchasing power of consumers.

At this stage of the procedure, EDP Produção is given the opportunity to exercise its rights of defence against the alleged infringement and possible applicable sanctions and probably a final decision on this case will not be issued before the end of 2019, or the beginning of 2020.

Finally, as regards public enforcement, in setting out the PCA’s priorities for 2019, it has referred to the need to monitor the new ways to abuse a dominant position, using algorithms or artificial intelligence, albeit in a rather superficial manner.8

iii MARKET DEFINITION AND MARKET POWER

The PCA and the Portuguese courts have adopted similar criteria to those set by the European Commission and developed by the European courts, as regards the concept of ‘relevant market’, ‘dominant position’ and ‘abuse’.

The PCA has expressly stated that to determine the existence of an abuse of a dominant position, it is necessary, first, to determine whether the allegedly dominant undertaking holds a dominant position in a relevant market, which requires the identification of the relevant product (or service) and geographic market (or markets).

Thereafter, and as per European Union practice, an undertaking is deemed to be in a dominant position where it is ascertained that, due to its position of economic strength, it has the ability to behave, to an appreciable extent, independently of its competitors, suppliers, clients and, ultimately, consumers. This position may be due to the characteristics of the undertaking (its market share, financial capacity or vertical integration) or to market characteristics (barriers to entry or expansion, network effects or legal obstacles to entry), or to both.

iv ABUSE

i Overview

As previously stated, the Portuguese Competition Law provides for a non-exhaustive list of abuses, and the PCA, similarly to the European Commission and the European courts’ practice, has increasingly adopted an effects-based approach. The PCA has often focused its practice on previous incumbents, but it has also allowed the recognition of the existence of atypical abuses in some decisions.

Following European case law, the PCA considers that holding a dominant position confers a special responsibility on the undertaking concerned, the scope of which must be considered in light of the specific circumstances of each case. This special responsibility is not, in itself, an abuse, but means that conduct that would be deemed lawful when carried out by a non-dominant undertaking may constitute an infringement when carried out by a dominant undertaking.

In an abuse of economic dependence, which is not expressly foreseen by European Union competition law, the exploitation targets the economic dependence of another undertaking due to the absence for the latter of an equivalent alternative for the supply of goods or the provision of services.

ii Exclusionary abuses

The PCA has dealt with exclusionary abuses in several cases, as in the CTT case, discussed in detail above, related to alleged obstacles to the access to the national postal services network by competitors active in the corporate mail segment.

Also, a particularly high-profile and sui generis case was the PCA sanctioning, in 2010, of the Portuguese Association of Chartered Accountants for alleged restrictions imposed in the market for the training of certified accountants, which also constituted an exclusionary abuse. Even though the appeal court reduced the fine, the PCA’s interpretation was confirmed by the courts, including by the European Court of Justice, via preliminary ruling, and by the Portuguese Constitutional Court.9

More recently, the PCA has sanctioned the National Association of Pharmacies and three other undertakings of the same group (Farminveste SGPS, Farminveste – Investimentos, Participações e Gestão, SA and HMR – Health Market Research, Lda) with a fine amounting to €10.34 million for abuse of a dominant position in the markets for both pharmaceutical commercial data and market studies based on pharmaceutical commercial data, to exclude competing undertakings from these markets. In 2016, this decision was upheld by the Competition, Regulation and Supervision Court, even though the amount of the fine has been reduced to €6.89 million.10

iii Discrimination (including discriminatory pricing)

The major cases regarding the abuse of a dominant position involved the previous incumbent in the now liberalised telecom sector, Portugal Telecom (PT), and included discriminatory pricing. PT allegedly offered more favourable prices, through special discounts, to operators from its group if compared to competing retailers. PT was also sanctioned for alleged margin-squeezing practices and for an alleged refusal to grant access to its underground conduit network, which the PCA considered to be an essential facility. The most significant sanction imposed amounted to approximately €53 million, although the appellate court considered the infringement to be time-barred.11

Discriminatory pricing was also sanctioned by the PCA in the Sport TV case. Sport TV, an undertaking active in the supply of premium sports content for television platforms, was subject to a fine of €3.7 million for an alleged abuse of a dominant position consisting of applying discriminatory commercial conditions to several pay-per-view operators.12

For our analysis of these cases, the issue of discriminatory pricing was raised, taking into consideration the circumstances of each case, in which the dominant firm was, typically, the main beneficiary of the discriminatory pricing.

iv Exploitative abuses (including excessive pricing)

The main cases on excessive prices were closed by the PCA without the imposition of fines. In fact, in 2014 the PCA closed its investigation on telecommunication operators TMN, Vodafone Portugal and Optimus for alleged abuses, including possible excessive pricing in the wholesale offer of termination services for SMS in their respective mobile networks, since the existence of a dominant position by these undertakings in the mobile telecommunications markets was not demonstrated.13

Subsequently, after a complaint by PT, the PCA started an investigation on GDA, the Portuguese copyright cooperative, for discriminatory and excessive pricing for pay TV operators. However, the PCA understood that, even though GDA was a monopoly in the collective marketing of copyright, there was insufficient evidence that the prices were excessive when compared to other jurisdictions, also highlighting that the pay TV operators had countervailing power and that copyright prices were a very small part of these operators’ costs.14

The investigation into the alleged abuse of dominant position, by EDP, discussed above, concerns excessive pricing and is still ongoing.

v REMEDIES AND SANCTIONS

i Sanctions

In Portugal, an abuse of a dominant position is an administrative offence (misdemeanour) sanctioned with fines not exceeding 10 per cent of the offending undertaking’s turnover in the year preceding the decision, even though criminal law principles apply to this type of infringement.15

The members of the board of directors of the offending undertakings, as well as any individuals responsible for the management or supervision of the areas of activity in which there has been an administrative offence, when they know of, or it is their duty to know of, an infringement committed and they have not adopted appropriate measures to end the infringement immediately, are liable to be sanctioned under the Portuguese Competition Law, unless they are subject to a more serious sanction under a different legal provision. The fine imposed on individuals cannot exceed 10 per cent of the individual’s annual income deriving from the exercise of their functions in the undertaking concerned.

For the assessment of fines, the PCA, in December 2012, issued Guidelines on the fining methodology that are in line with the European Commission’s Guidelines on the subject, even though, in practice, the establishment of the sanctions is typically more flexible.

Further accessory penalties may also be imposed by the PCA, including the publication of an extract from the PCA’s decision in the Official Gazette as well as in one of the highest-circulation newspapers in the relevant geographic area (whether national, regional or local), and, as an ancillary sanction under Article 71 of the Competition Law, a ban of up to two years on the right to take part in tendering processes for public works contracts, public service concessions, the leasing or acquisition of movable assets or the acquisition of services or procedures involving the award of licences or authorisations by public entities, may be imposed. This ban may be imposed in cases in which the practice leading to an administrative offence punishable by a fine occurred during, or as a result of, those processes.

ii Behavioural remedies (including interim measures)

Article 29 of the Portuguese Competition Law establishes that the PCA may also impose behavioural or structural measures to end the prohibited practices or their effects. Behavioural remedies, such as the imposition of restrictions on access to the infrastructure, as in the CTT case, mentioned above, or this amendment of contractual clauses, as in the Sugalidal case, also discussed, are often imposed to bring an infringement to an end and to avoid persisting violations of the competition rules.

iii Structural remedies

Article 29 of the Portuguese Competition Law, as stated, also allows structural measures to end the prohibited practices or their effects. To date, the PCA has never imposed structural measures.

vi PROCEDURE

To exercise its sanctioning powers, the PCA may act on its own initiative or upon a complaint. Although the PCA is receptive to informal contacts, there is no formal procedure that offers guidance on individual cases.

The decision to initiate an antitrust investigation is dependent on:

  1. the priorities of the current competition policy;
  2. the elements of fact and of law submitted to the file by the parties;
  3. the seriousness of the alleged infringement;
  4. the likelihood of proving its existence; and
  5. the extent of the investigation required to make the PCA’s mission possible to ensure compliance with the respective provisions of the Portuguese Competition Law and the TFEU.

If the PCA decides not to initiate proceedings or concludes, after an investigation has been initiated, that there is no reasonable likelihood of an infringement decision being adopted, it must inform the complainant, which may file observations and, in the event that the PCA does not change its view, appeal against the PCA’s decision to close the case.

If the PCA opens an investigation and decides to pursue the case, it must issue a statement of objections and give the defendant the opportunity to access the file, express its views, produce exculpatory evidence and request that additional investigations be conducted.

In principle, the PCA shall conclude its inquiries within 18 months and, in the event of an statement of objections, the final decision should be adopted within 12 months of its issuance. Nevertheless, the PCA’s practice in the majority of cases has been to extend these deadlines on the basis of the complexity of the investigation concerned. As regards the access to the file, the PCA has faced several judicial setbacks in relation to the confidentiality of the information and has even published draft guidelines on confidentiality.16

During the course of an investigation, the PCA allows defendants to enter into a settlement discussion with a view to defining the conditions necessary to close the investigation and to obtain a fine reduction, conditioned on acknowledging liability for an infringement. With a view to closing investigations, the Portuguese Competition Law also accepts the submission of commitments to cease the practices that are the object of investigation without acknowledging liability.17

Commitments have been well accepted by the PCA in the past, leading to the closing of several investigations, in particular with respect to vertical restrictions. They have also become more frequent in proceedings for abuse of dominance, as explained above, even after the issuance of the statement of objections, as in the CTT’s case.

In cases where an investigation indicates that an abuse is on the point of causing serious and irreparable harm to competition, the PCA may, at any phase in the proceedings, issue interim measures ordering the involved undertaking to immediately suspend the practice, or to adopt any other temporary measure needed for restoring competition or required for the final decision on the case to be effective. These urgent measures may remain in force for a period of no longer than 90 days, unless 90-day extensions are granted and duly substantiated, with the PCA having to issue its decision on the proceedings within 180 days. These measure were only issued in one case that was not connected with an abuse of a dominant position.18

vii PRIVATE ENFORCEMENT

On the private enforcement front, the developments are still scarce, prior to the effective implementation of the law transposing the damages directive, Directive 2014/104/EU, into Portuguese law, by Law 23/2018, of 5 June.

However, the rather incipient cases still being decided in civil court are connected to cases following on from abuse of a dominant position claims connected to the alleged abuses by PT; these have been initiated by Tevetel, Optimus and ONI. Also, according to the public information available, there is a collective action under way against Sport TV regarding the alleged abuse of a dominant position in the supply of premium sport content, with an alleged impact in terms of price increases.19

viii FUTURE DEVELOPMENTS

The main PCA pending investigation on abuse of a dominant position concerns EDP Produção. In our view, this could amount to a rather complex case, as this sector has a specific legal framework and regulatory intervention.

Also, as regards public enforcement, the PCA’s priorities for 2019 refer, in a rather abstract manner, to the need to monitor the new ways to abuse a dominant position, by using algorithms or artificial intelligence.20

Finally, private enforcement will necessarily grow in the future, even though there are uncertainties regarding the cases to which the new damages legal framework applies.


Footnotes

1 Tânia Luísa Faria is a managing associate and Inês Drago is a trainee lawyer at Uría Menéndez-Proença de Carvalho.

2 The Portuguese Competition Law replaced the 2003 Competition Law (Law 18/2003, of 11 June) and the 2006 Leniency Law (Law 39/2006, of 25 August). The last amendment has arisen from the transposition of the damages directive into Portuguese Law (Law 5/18, of 10 May).

3 The by-laws of the PCA were approved by Decree-Law 10/2003, of 18 January. As regards the appeal courts, see Articles 83–93 of the Portuguese Competition Law.

4 Press release 8/2018, of 5 July 2018.

5 Press release 17/2018, of 22 August 2016.

6 In 2009, the PCA dismissed, subject to specific conditions and still during the investigation phase, an investigation against the food undertaking Sugalidal. The investigation was due the claim it had allegedly abused its dominant position in the market for purchasing tomatoes for processing by requiring its suppliers to use a specific variety of seeds produced by a company of its group. Sugalidal undertook to remove the illegal clause from its contractual arrangements and to publicise the removal.

7 Press release of 12/2018 of 3 September 2018.

9 Press release 31/2015, of 31 December 2015 and Press release 20/2016, of 20 October 2016.

10 Press release 16/2014, of 22 December 2014.

11 PRC/2003/05, de 28 August 2009.

12 PRC/2010/02, of 14 June 2013.

13 PRC/2013/04, of 21 November 2014.

14 PRC/2015/07, of 19 March 2015.

15 According to general rules of subsidiarity applicable to administrative offences, when there is more than one infringement, the maximum fine may be twice the abstract maximum applicable to the most serious offence, which in a cartel would be 20 per cent of the turnover of the offending undertakings.

17 As set forth in Articles 23 and 28 of the Portuguese Competition Law.

18 Press release of 6 January 2009.

20 Prioridades de Política de Concorrência para 2019.