The Portuguese Competition Act,2 which has been in force since 2012, modified the legal standards for the handling of complaints by the Portuguese Competition Authority (PCA), giving the PCA greater discretion to decide when to open an investigation based on certain criteria.
According to the Competition Act, the PCA will exercise its sanctioning powers whenever it is in the public interest to prosecute and punish an infringement of competition rules, taking into account the goals of its competition policy, the facts that are known to it, the severity of the alleged infringement, the probability of proving its existence and the scope of the investigation that is required.
To increase transparency, at the end of each year, the PCA publishes its strategic priorities regarding competition policy for the following year on its website. The PCA recently issued its statement of priorities for 2018, which will be the following:3
- proactively acting to detect anticompetitive practices;
- implementing a sound economic analysis to detect collusion in public procurement;
- detection of gun-jumping cases;
- combating cartels in the Portuguese economy;
- raising awareness of the leniency programme;
- ensuring more efficient merger control;
- reinforcing transparency and accountability to further the PCA’s public credibility;
- carrying out of market studies and implementation of competitive impact analysis; and
- promoting the consolidation of a competition culture in Portugal.
These strategic priorities are organised around three main ideas: the need for the PCA’s active and effective role in the defence of competition; the need to foster a sense of transparency and rigour; and the need to promote effective competition in the market.
i Enforcement agenda
The PCA’s statement of objections for 2018 indicates that the PCA will continue to focus on combating cartels and to promote ex officio investigations as an essential instrument to identify possible anticompetitive practices. In fact, according to its statement of priorities, in 2018 the PCA will decide a high number of investigations regarding antitrust proceedings that were initiated during 2017.
Moreover, the PCA intends to make full use of all the available tools for evidence collection, and in this context is planning on reinforcing its investigative capacity in the digital environment and in the context of the digital economy. Additionally, the PCA mentions that it will also focus on delivering more legally and economically robust decisions, with sanctioning levels aimed at deterrence (either general or specific).
The PCA has also set as one of its priorities for 2018 the promotion and consolidation of a competition culture in Portugal. It intends to foster the perception that competition between undertakings is beneficial to citizens in general, and therefore should be seen not only as a public good but as a right: the right to competition. Moreover, it plans to emphasise the positive correlation between competition, innovation, productivity and competitiveness.
Finally, it must be noted that 2018 marks 15 years since the creation of the PCA. A closer look at its strategic priorities demonstrates that, although the PCA is fostering the continuity and consolidation of its activities in previous years, it is also embracing the new challenges and trends facing competition policy.
Article 9 of the Competition Act prohibits agreements that restrict competition, including cartel agreements (i.e., agreements and concerted practices between competitors whose object or effect is the restriction of competition by, inter alia, directly or indirectly fixing sale or purchase prices or any other transaction conditions by limiting or controlling production, distribution or technical developments or investments, or by sharing markets (including bid rigging) through import or export restrictions and through anticompetitive actions against other competitors).4
The PCA is an independent entity responsible for the enforcement of competition law in Portugal and for conducting administrative infringement procedures under the Competition Act. The PCA’s decisions may be appealed to the Competition, Regulation and Supervision Court (appeals were previously heard by the Commercial Court of Lisbon).
In Portugal, cartels are administrative (not criminal) offences sanctioned with fines not exceeding 10 per cent of the offending undertaking’s turnover in the year preceding the decision. According to general rules subsidiarily applicable to administrative offences, when there is more than one infringement, the maximum fine may be twice the abstract maximum applicable to the most serious offence, which in a cartel would be 20 per cent of the turnover of the offending undertakings.5 Fines imposed to date in cartel cases have generally amounted to around 5 per cent of the infringing undertaking’s turnover.
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 have been an administrative offence, when they know of, or it is their duty to know of, an infringement committed and they have not adopted appropriate measures to end the infringement immediately, are liable to be sanctioned under the Competition Act, unless they are subject to a more serious sanction under a different legal provision. The fine imposed on individuals cannot exceed 10 per cent of the individual’s annual income deriving from the exercise of their functions in the undertaking concerned.
As an ancillary sanction under Article 71 of the Competition Act, a ban of up to two years on the right to take part in tendering processes for public works contracts, public service concessions, the leasing or acquisition of movable assets, or the acquisition of services or procedures involving the award of licences or authorisations by public entities, may be imposed. The ban may be imposed in cases in which the practice leading to an administrative offence punishable by a fine occurred during or as a result of those processes.
Article 29 of the Competition Act establishes that the PCA may also impose behavioural or structural measures to end the prohibited practices or their effects.
Under the Competition Act, and as regulated by the PCA, undertakings or individuals connected to the cartel may apply for immunity or a reduction of a fine if they provide information about the cartel.
The Competition Act also establishes the possibility of cases being settled, at the PCA’s discretion, before a decision is issued.6
i Significant cases
The PCA’s most significant cartel cases to date have been the Glucose Diagnostic Strips case (decided in 2005),7 the Salt case (decided in 2006 and upheld by the Commercial Court of Lisbon in 2008),8 the Flower Mills case (decided in 2005, overturned by the Commercial Court of Lisbon and subject to a new decision of the PCA in 2009),9 the Catering Services case (which resulted from a leniency submission from a former director of one of the undertakings involved in the cartel),10 the Flexible Polyurethane Foam case (decided in 2013)11 and the Cleaning Companies case (decided in 2011 and upheld by the Lisbon Court of Appeal in 2014).12
The largest fines in a cartel case totalled €16 million and were imposed on Abbot, Bayer, Johnson & Johnson, Menarini and Roche in 2005 for bid rigging in several public offers presented in the context of tendering processes for the supply of glucose diagnostic strips. The Commercial Court of Lisbon (which previously had jurisdiction over appeals of PCA decisions) joined the case with another related to similar charges, and ordered the PCA to correct specific formal irregularities. The PCA issued a new decision, imposing fines of €13.5 million.13
The PCA also sanctioned a cartel involving undertakings operating in the printing and graphics sector. Several undertakings were fined for a price-fixing and market-sharing agreement concerning the market for application form paper after an investigation triggered by a leniency application. The fines totalled €1.798 million. In addition, three board members were fined €6,000 for being aware of the cartel and failing to take action to put an end to it.
In 2013, the PCA sanctioned a cartel in the market for polyurethane foam for comfort products. This case is very important, because the PCA’s investigation was conducted in parallel with a cartel investigation in the same market by the Spanish Competition Authority. The investigation was triggered by a leniency request by an undertaking that received full immunity (as well as for its board members), and all the sanctioned undertakings and individuals benefited from substantial fine reductions in view of the settlement procedure. The PCA imposed fines amounting to €993,000 on two undertakings and to €7,000 on board members.14
Furthermore, in the area of public procurement, the PCA sanctioned five undertakings for anticompetitive practices in public tenders for the supply and assembly of prefabricated dwellings that would be used to enable the normal course of school activities during the reconstruction of certain schools, under a governmental public works initiative called Parque Escolar. In this case, the undertakings involved have waived their right to appeal against the PCA’s decision in order to benefit from a 10 per cent reduction in their fines. Therefore, the fines imposed by the PCA upon the five undertakings amounted to €831,810.15
Although not related to cartel cases, there have been a number of cases involving recommendations and decisions issued by trade associations. In some cases, the infringements are similar to standard antitrust cases (e.g., price fixing). In most cases involving trade associations, the investigated behaviour nevertheless related to recommended practices, as well as maximum prices, which were understood by the undertakings to be mandatory.
For instance, the PCA fined the Association of Navigation Agents of Portugal for alleged price-fixing practices,16 and stated that the National Association of Freighters had issued a decision that, in the PCA’s view,17 constituted a collective refusal to deal with a specific terminal operator,18 and in 2011, the National Association of Parking Lot Companies was fined nearly €2 million for its recommendation regarding pricing criteria in response to the introduction of new legislation on parking lots.19
More recently, the PCA fined the Portuguese Association of Driving Schools an amount of €400,000 for alleged price-fixing practices. In this case, the President of the Association was also fined in approximately €13,776, since the PCA concluded that he was aware of and had allegedly been directly responsible for the adoption and effective execution of the anticompetitive practice.20
The PCA’s investigations into professional associations are also of interest. The PCA has fined several national professional associations, such as the Veterinarians Association, the Dentists Association, the Doctors Association and the Chartered Accountants Association, as a result of decisions that had an effect on their members’ pricing (including recommended and maximum prices considered mandatory by the members).21 More recently, the PCA opened proceedings against the Psychologists Association due to some clauses in their code of conduct that allegedly had a restrictive effect on the functioning of the market. To address the PCA’s concerns, the Psychologists Association offered to amend its code of conduct accordingly and to make the alterations public.22 These commitments were later accepted and deemed mandatory by the PCA.23
ii Trends, developments and strategies
Under the previous legal framework in Portugal, antitrust decisions were not generally published on the PCA’s website, and current access to antitrust decisions is still very limited in cases with pending judicial appeals. As such, the public’s knowledge of antitrust issues is limited, to a great extent, to the press releases published by the PCA. Notwithstanding, the PCA is attempting to become more transparent, and recently the issuance of statements of objections and information regarding the carrying out of unannounced inspections has been publicised through press releases. In its priorities for 2018, the PCA has expressly stated that it will continue to ensure the wide publication of its decisions, as well as the subsequent court decisions, in order to promote its accountability and credibility among the stakeholders.
According to publicly available information, the sanctioning of antitrust conduct in Portugal has occurred more frequently with regard to restrictive practices within trade and professional associations, including price fixing, and to bid-rigging cartels. In 2016, the PCA published an antitrust compliance guide for trade associations aimed at better elucidating the associations and its members on which behaviours or decisions could present competition risks and should therefore be avoided.
The PCA has resorted to the leniency programme with increasing frequency, and has specifically mentioned in its strategic priorities that it intends to further promote the programme in 2018. Individual sanctions have also been imposed. In addition, the settlement mechanism established in the Competition Act has proven to be a very useful instrument for the PCA to investigate and prove cartel cases, as well as other antitrust infringements.
The PCA has also made it clear that the state must refrain from promoting arrangements between competitors, as addressed in the case concerning meetings promoted by the government of the Azores with several milk producers, in which commercial conditions might have been discussed. The PCA closed the case without imposing any sanctions, but recommended that the government of the Azores end the practice and refrain from acting in any way that could potentially facilitate collusive behaviour in the region.24
Cartel cases will continue to be a PCA priority in 2018. In its priorities for 2018,25 the PCA again emphasised that it will focus on combating cartels, devoting particular attention to the area of public procurement and also to agreements that might have an immediate and direct effect on final consumers. To better detect collusion in public procurement, from 2018 the PCA will have direct access to the electronic platform that monitors all the public tenders that take place pursuant to the Portuguese Public Procurement Code.26
Moreover, the PCA will seek to continuously improve its internal investigative procedures to make full use of the most appropriate tools for evidence collection and treatment, namely in a digital environment. In its 2018 priorities, the PCA has specifically mentioned that it will reinforce its investigative capacity in the context of the digital economy, being particularly vigilant regarding situations where technology may facilitate or enable anticompetitive behaviour or cartelisation. The PCA has confirmed that it will pay close attention to the eventual use of algorithms and artificial intelligence so that these cannot be a way of exempting responsibility.
The Competition Act strengthened the PCA’s investigative powers, which should encourage more effective enforcement of the competition law. For instance, within antitrust proceedings, the PCA may now carry out, subject to receiving a judicial search warrant, searches of not only an undertaking’s premises and vehicles, but also of the homes of shareholders and members of managerial bodies and employees, if there is reason to believe that evidence of serious anticompetitive practices exists.27 In 2017, as far as we are aware, the PCA carried out searches within the driving instruction association sector,28 the insurance sector29 and the railway maintenance sector.30
The PCA will continue to promote its leniency policy as an essential instrument for cartel identification, particularly through the imposition of dissuasive fines, in order to stress the advantages of such a regime. The PCA will also engage more closely with relevant stakeholders with the intention of promoting the leniency programme within the business and legal communities. Additionally, the PCA will continue to improve its online whistle-blowing system to ensure secure communication with anonymous whistle-blowers.
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
As previously indicated, the Competition Act prohibits agreements, concerted practices and trade association decisions, including cartels, whose object or effect is to restrict competition (Article 9 of the Competition Act). It also prohibits undertakings in a position of dominance from abusing their position (Article 12 of the Competition Act). Abusive conduct includes:
- imposing, directly or indirectly, unfair purchase or sale prices or other unfair trading conditions;
- limiting production, markets or technical development to the detriment of consumers;
- applying dissimilar conditions to equivalent transactions with trading parties, thereby placing them at a competitive disadvantage;
- 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
- 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.
The Portuguese legal framework on restrictive practices and the abuse of dominant positions is very similar to that applied at the EU level; however, the Competition Act also includes provisions on the abuse of a situation of economic dependence.31 An abuse of a situation of economic dependence may include any of the types of conduct previously mentioned and identified as potentially abusive under the abuse of dominance rules, as well as the full or partial rupture of an established commercial relationship, in view of past commercial relations, trade practices in the relevant market and contractual conditions.
i Significant cases
The major cases regarding abuse of a dominant position involved Portugal Telecom (PT), the former telecommunications incumbent. PT was sanctioned for discriminatory pricing for allegedly offering more favourable prices, through special discounts, to operators from its group compared to competing retailers. It 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.32 The most significant sanction imposed amounted to approximately €53 million, although the appellate court considered the infringement to be time-barred.
In 2009, the PCA dismissed, subject to certain conditions, a case against the food undertaking Sugalidal on the basis that 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 seed produced by a company of its group. Sugalidal undertook to remove the illegal clause from its contractual arrangements and to publicise the removal.33
The PCA also sanctioned Sport TV, an undertaking active in the supply of premium sports content for television platforms, with 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.34
The PCA has also sanctioned a professional association for abuse of a dominant position: in 2010, the Portuguese Chartered Accountants Association was fined for alleged restrictions imposed in the market for the training of certified accountants.
More recently, the PCA 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. In 2016, this decision was upheld by the Competition, Regulation and Supervision Court; however, the amount of the fine was reduced to €6.89 million.35
In connection with vertical restrictions, the PCA closed a procedure against Bayer regarding a clause in its standard contract with wholesalers, according to which wholesalers were allegedly obliged to carry Bayer products, exclusively, for five years.36 Bayer removed the clause from the contracts and proposed an amended contract to the PCA as a remedy. The PCA also fined the dairy company Lactogal €341,098 for resale price maintenance practices (minimum price fixing) in the on-trade distribution market for dairy products, considering it a vertical agreement.37
More recently, the PCA sanctioned Petrogal, Galp Açores and Galp Madeira (all of which are part of the Galp Energia group and active in the liquefied petroleum gas sector) with fines amounting to €9.29 million for exclusive distribution agreements that allegedly restricted passive sales.38 This decision was upheld by the Competition, Regulation and Supervision Court (although the Court reduced the fines to €4.1 million) and more recently by the Lisbon Court of Appeal, which confirmed the Court’s decision in full.39
ii Trends, developments and strategies
The cases concerning PT’s abuse of its dominant position faced many judicial obstacles. In fact, the decision imposing a fine of €38 million against PT for refusing to provide competitors access to what the PCA considered an essential facility – PT’s underground conduit network – was overturned on appeal. The appellate court also considered the most significant sanction applied in this context – €53 million – to be time-barred.40
More recently, in 2016 the PCA issued a statement of objections against CTT – Correios de Portugal SA (CTT) (the national post services incumbent) for its alleged abuse of a dominant position in refusing access to its distribution network.41 By the end of 2017, CTT presented to the PCA a set of commitments designed to mitigate its anticompetitive behaviour, being those afterwards submitted to public consultation by the PCA.42
The PCA has also sanctioned undertakings for having provided false or misleading information in the context of a request by the PCA for information. It imposed a fine of €150,000 on Peugeot Portugal,43 a fine of €100,000 on CP Carga,44 and a fine of €150,000 on Ford.45 CP Carga, Peugeot Portugal and Ford appealed these decisions to the Competition, Regulation and Supervision Court, which upheld all of the appeals.46
In 2015, the PCA addressed several vertical antitrust concerns in the automobile sector. For instance, in a case against Peugeot Automobiles, this undertaking offered commitments designed to address the PCA’s concerns about the alleged existence of a warranty extension agreement that prevented consumers from getting their cars repaired in independent garages. The published proposals were submitted to public consultation, and were then accepted and deemed mandatory by the PCA.47 Similar commitments were offered by Ford Lusitana48 and SIVA (an importer and distributor of the automobile manufacturers Audi, Volkswagen and Skoda).49 The commitments proposed were also accepted and deemed mandatory by the PCA.50
In 2016, the PCA opened proceedings against DIA Portugal (a supermarket chain) for alleged antitrust concerns arising from the company’s franchise system. To address the PCA’s concerns, DIA Portugal offered commitments designed to clarify that it did not impose minimum prices to its franchisees’ network.51 The commitments were later accepted and deemed mandatory by the PCA.52
Later in 2016, the PCA also issued a statement of objections against the EDP Group and the SONAE Group, and fined the companies in 2017, with a global sanction amounting to €38.3 million for alleged anticompetitive market-allocation practices in 2012.53
It should also be mentioned that in 2017, the PCA closed with commitments (after a public consultation period) two separate proceedings regarding statistical information systems within trade associations (the Portuguese Association of Specialised Credit and the Portuguese Association of Leasing, Factoring and Renting ). The commitments offered by the Associations made significant changes to their respective systems regarding the historic nature of the information and the adequate scope of access to relevant market data.54
The PCA has established as one of its priorities for 2018 the detection and investigation of anticompetitive practices. Moreover, it is expected to continue its efforts to promote access to its decisions and the decisions of the courts of appeal, and to disseminate accurate and complete information on the competition rules. Moreover, as previously mentioned, the PCA’s online whistle-blowing system will be renewed, enabling a more efficient screening of complaints.
Additionally, the PCA will continue to promote the adoption of commitments whenever important procedural gains can be anticipated.
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
The Competition Act applies to all areas of the economy, including regulated sectors. The PCA has been monitoring several sectors in recent years, and the PCA’s supervisory powers have been strengthened.
i Significant cases
The most significant cases involving undertakings operating in regulated sectors were the three abuse of dominance cases brought against PT (discussed above). The existence of regulations in the telecommunications sector did not impede the application of the competition rules.
The PCA has conducted sector-wide investigations and released reports on several markets over the years, including studies on consumer mobility within the retail banking market, on the liquid fuel and bottled gas retail markets, in electronic communications and on relations between large food retailers and their suppliers.55
ii Trends, developments and strategies
The PCA will continue to conduct market studies and surveys in various sectors of the economy to better identify possible anticompetitive conduct. As previously mentioned, the PCA will focus primarily on controlling possible concerted practices in public procurement.
During 2015, the PCA closely monitored the port sector and, as a result of a market study on the sector, submitted to public consultation some recommendations to enhance competition.56 In 2016, the PCA set out as priorities the monitoring of the telecommunications and gas sectors, and issued some recommendations for the activity of passenger transport in chauffeur-driven light-duty vehicles.57
In 2017, the PCA issued a report on the liquefied petroleum gas industry in Portugal and a sectoral inquiry on the market for the supply of natural gas to industrial consumers. In both documents, the PCA identified some alleged competitive concerns (in its view) and submitted recommendations on how to mitigate them with regulatory action.58
According to its priorities for 2018, the PCA will focus on the following sectors: banking, insurance and financial markets, telecommunications and media, energy and fuels, health and pharmaceutical industry, education, food and distribution, environment and resource management, liberal professions, transport and infrastructure, as well as construction.
As indicated above, the PCA’s supervisory powers have been strengthened by the Competition Act and include, apart from requiring information from undertakings or associations, the possibility of carrying out inspections and audits. These inspections and audits have proven to contribute to the detection of inefficiencies by the PCA in some markets and sectors, and will increasingly do so. Additionally, as previously mentioned, the PCA has set as one of its priorities for 2018 the implementation of mechanisms for an impact assessment of public policies with regard to competition policy, intending to work closely with the relevant public entities.
V STATE AID
Article 65 of the Competition Act establishes that aid provided by the state or any other public body may not restrict, distort or appreciably affect competition in all or a substantial part of Portugal. The PCA may issue recommendations on any public assistance provided and monitor the implementation of those recommendations, for which purpose it may request information from any party. The recommendations are published on the PCA’s website.
The PCA’s powers in this matter are very limited, as the European Commission is the entity with jurisdiction to assess the compatibility of state aid with the EUs rules on state aid. In any case, the PCA follows the Commission’s activities closely, having identified the monitoring of state aid matters as one of its international cooperation goals.59
i Significant cases
One of the most important rulings on state aid involving Portugal was the European Court of Justice (ECJ) ruling on appeal in the Azores case.60 The ECJ ruled on the application of territorial selectivity criteria in cases involving autonomous regions (such as the Azores region), and set the necessary conditions to be met for an autonomous region to be considered as the benchmark as opposed to the national territory as a whole.
We also highlight one of the most high-profile cases decided by the European Commission regarding state aid granted by Portugal, which involved assistance that the state gave to shipyards in Viana.61
The Portuguese banking sector, in the past few years, has also been the subject of several state aid decisions. In 2014, the European Commission found that the resolution plan of the Portuguese bank Banco Espírito Santo (BES) was in line with the EU state aid rules (the European Commission assessed the plan under its rules on state aid to banks in the context of the financial crisis and acknowledged that a disorderly resolution of BES could create a serious disturbance in the Portuguese market).62 In December 2015, following the Bank of Portugal’s decision to put the Portuguese bank Banif into resolution, the Commission approved Portuguese plans to provide about €2.25 billion of state aid to cover the funding gap in the resolution of Banif, deeming that it was in line with the EU state aid rules.63
In 2017, the European Commission found that Portugal’s plans to strengthen the capital position of the fully state-owned Caixa Geral de Depósitos by €3.9 billion were in line with the EU state aid rules,64 and more recently, the Commission approved the Portuguese restructuring plan and support for the sale of the bridge bank Novo Banco, completing the 2014 resolution of BES.65
ii Trends, developments and strategies
The banking sector in Portugal has been particularly subject in the past few years to state aid procedures. Further to the above-mentioned resolution cases, in should be mentioned that the capitalisation programmes for Portuguese banks66 and the creation of the Portuguese Finance Development Institution67 have followed the applicable state aid rules as established in cooperation with the European Commission.
Apart from the financial sector, which may continue to be monitored, regional aid is going to be particularly relevant in the next few years. In 2014, the European Commission approved, under the EU state aid rules, Portugal’s state aid plan for 2014 to 2020. These guidelines set out the conditions under which Member States can grant state aid to businesses for regional development purposes, and are expected to foster growth and greater cohesion in the single market.
Under the aid map currently in force, regions accounting for 69.01 per cent of Portugal’s population will be eligible for regional investment aid at maximum aid intensities ranging from 25 per cent of the eligible costs of the relevant investment projects in mainland Portugal, over 35 per cent in Madeira and up to 45 per cent in the Azores.68
It is also possible that aid to projects related to innovation, the environment and energy may be more frequently given. For instance, in 2015, the European Commission found a Portuguese scheme aimed at promoting renewable energy technologies to be in line with the EU state aid rules, in particular in view of its 2014 Guidelines on state aid for environmental protection and energy.69
More recently, in 2016 the European Commission found Portuguese plans to support the purchase of low-emission buses for public infrastructure in urban areas to be in line with the EU state aid rules: specifically, the Commission deemed that the project’s contribution to EU environmental goals outweighed any potential distortion of competition.70
VI MERGER REVIEW
The PCA has exclusive jurisdiction to enforce the merger control rules established in the Competition Act. Only concentrations, as defined in Article 36 of the Competition Act, which meet one of the notification thresholds established in Article 37(1), are subject to merger control review. The basis of the concept of concentration lies in the notion of change of control on a lasting basis, and the definition of ‘control’ adopted in Article 36(3) of the Competition Act is similar to that used in the European Merger Control Regulation (i.e., the possibility of exercising decisive influence on an undertaking).
The Competition Act, unlike the EU Merger Regulation and the laws of most Member States (except for Spain), establishes alternative turnover and market share notification thresholds, even though a de minimis rule was introduced in 2012.
In brief, undertakings must notify a concentration if any of the following conditions is met:
- the combined aggregate turnover in Portugal of all the undertakings exceeds €100 million, provided that the individual turnover in Portugal of each of at least two of the undertakings concerned exceeds €5 million;
- the concentration results in the acquisition, creation or increase of a market share in Portugal equal to or greater than 50 per cent; or
- the concentration results in the acquisition, creation or increase of a market share in Portugal equal to or greater than 30 per cent and less than 50 per cent, provided that the individual turnover in Portugal of at least two of the undertakings concerned exceeds €5 million.
The time limit for the PCA to issue a decision is 30 business days for normal Phase I proceedings and 90 business days as from the initial notification for cases requiring in-depth investigations. These time limits can be suspended if additional information is requested from the parties and, in general, at the parties’ request or if commitments are offered, or if the parties are invited to comment on the PCA’s draft decision.
The PCA has also approved new filing forms, including, for the first time, a simplified form to be used in concentrations that, in view of certain parameters (e.g., no market overlap or limited joint market shares), will not raise competition concerns.71
Since the enactment of the Competition Act currently in force, and similarly to the EU Merger Regulation provisions, the parties no longer have a specific deadline to notify (unlike previously, where parties had seven business days to do so). The parties nevertheless are obliged to suspend the implementation of the concentration until the PCA has issued a clearance decision. Breach of this obligation entails a fine of no more than 10 per cent of the turnover of the undertaking in breach. Pursuant to the Competition Act, any act or transaction implementing the concentration prior to clearance from the PCA is unenforceable.
The most important exception to the referred standstill obligation is the possibility to implement public takeover bids, provided that, in general, the acquirer does not exercise the voting rights in the target entity until clearance is obtained.
The Competition Act now adopts the significant impediment of effective competition test to assess concentrations instead of the dominance test that was previously used.
Merger control decisions are subject to judicial appeal and to a special administrative appeal if the merger is blocked (although such an appeal would only be upheld if the benefits to the national economy outweigh the disadvantages to competition resulting from the prohibited merger).
i Significant cases
The PCA has extensive experience in merger cases, having reviewed and decided an average of around 50 cases a year; it has issued only six prohibition decisions in merger control cases since its incorporation in 2003.72
In relation to these prohibitions, it is worth noting that the Minister of Economy, further to a special administrative appeal provided for in the PCA’s articles of association, overturned the PCA’s prohibition decision concerning a merger in the highway management sector.73 One PCA prohibition, in the media sector, was based on a binding negative opinion issued by the media sector regulator (since this decision was binding under the merger control framework).74
With regard to merger remedies, the PCA’s Guidelines on Merger Remedies are in line with EU law and practice. The PCA has also imposed structural and behavioural remedies on several occasions. For instance, it imposed behavioural remedies in the concentration between two Portuguese commercial airlines (TAP and PGA).75 The remedies in the clearance decision included freeing up slots at Lisbon and Oporto Airports, limiting the number of flights operated by the merged airlines on certain routes, as well as limitations on the prices charged. In 2015, behavioural remedies were also imposed upon two concentrations (involving the same acquiring undertaking, part of the EDP Group, which was previously the incumbent supplier of electric energy in Portugal) in the market for the production of electric energy. In both cases, the acquirer undertook to maximise the production of energy in order to avoid any negative impact on the market, in particular, a potential increase in wholesale prices.76
Regarding structural remedies, the decision practice of the PCA is also noteworthy. Remedies in two concentrations in the transportation sector included the divestment of one of the parties’ operations in the inter-urban route where competition concerns were identified in the TRPN/Internorte case,77 and the approval of an up-front buyer solution in the Powervia/Laso*Auto-Laso*Probilog*Laso Ab case.78 More recently, in the Arena Atlântida/Pavilhão Atlântico*Atlântico case, which concerned a merger involving the acquisition of Pavilhão Atlântico (the main indoor arena in Lisbon), one of the shareholders of the acquiring undertaking committed to divest its shareholding in a ticketing services company, since the PCA had identified the referred shareholding as a vertical restraint to competition.79
As regards the imposition of sanctions on undertakings that have failed to file a concentration, early in 2013 the PCA imposed fines amounting to €149,278.79 for failure to notify a concentration in the pharmaceutical sector (this decision was appealed based on formal grounds and was reissued by the PCA in 2014).80 More recently, in 2017 the PCA imposed fines amounting to € 38,500 for failure to notify a concentration in the dental clinics sector following a settlement procedure.81
ii Trends, developments and strategies
The simplified filing form and pre-notification contacts have been increasingly used, enabling a swifter assessment and earlier decisions regarding uncomplicated matters.82 The PCA is expected to continue to promote the use of the simplified filing form, as well as pre-notification contacts, to deliver swifter decisions and enhance transparency in the market.
As regards referral requests by the PCA, it is also worth noting that the European Commission recently refused a request from the PCA to refer the Altice/PT merger case for assessment under Portuguese competition law. This merger case involved the acquisition of the Portuguese telecommunications operator PT Portugal by the multinational cable and telecommunications company Altice. The European Commission concluded that, given its extensive experience in assessing cases in this sector and the need to ensure consistency in the application of merger control rules in the fixed telecommunications sector across the European Economic Area, it was better placed to deal with the case.83
The PCA has stated that one of its priorities for 2018 is the implementation of more efficient and quicker merger control proceedings. Moreover, the PCA has also mentioned that it will be particularly alert to gun-jumping cases.
It seems that the PCA’s merger control decisions are being increasingly subject to judicial review. In 2015, the Portuguese Competition, Regulation and Supervision Court rejected, on the one hand, an appeal by Media, Zon Optimus and Portugal Telecom related to the PCA’s decision to initiate an in-depth investigation of this concentration and, on the other, these undertakings claimed that the concentration had been tacitly approved.84 Again in 2015, the Competition, Regulation and Supervision Court confirmed the PCA decision in the Arena Atlântida/Pavilhão Atlântico*Atlântico case.85 The PCA’s clearance, after an in-depth investigation, of the SUMA/EGF concentration (a merger decision related to a reprivatisation in the waste sector), is currently being disputed in the courts. So far, the Competition, Regulation and Supervision Court has already rejected, in two separate proceedings, the adoption of interim measures to temporarily suspend the effects of the decision.86
The PCA continues to actively pursue the goal of protecting and promoting competition in the Portuguese economy. It is becoming more dynamic, has been investing in its technical capacity and is determined to contribute to a sound culture of competition policy in Portugal.
The PCA’s focus continues to be combating cartels and anticompetitive practices, being particularly vigilant in the context of the digital economy. Notwithstanding this focus, the PCA will also closely monitor recent mergers in order to detect eventual gun-jumping cases.
Additionally, in 2018 the PCA is expected to promote advocacy activities in order to enhance the transparency of its actions and raise awareness of the advantages of effective competition for the Portuguese economy.
1 Joaquim Caimoto Duarte is a counsel, Tânia Luísa Faria is a managing associate and Maria Francisca Couto is a junior associate at Uría Menéndez – Proença de Carvalho.
2 The Portuguese Competition Act, Law 19/2012.
3 Available at http://concorrencia.pt/vPT/A_AdC/Instrumentos_de_gestao/Prioridades/Documents/AdC_Prioridades_2018.pdf.
4 See Article 75 of the Competition Act, as well as the PCA’s Informative Communication on the Portuguese leniency programme, available at www.concorrencia.pt/vPT/Noticias_Eventos/Comunicados/Documents/DR_NOTA%20INFORMATIVA_CLEMENCIA_PosPublReguDR_03_01-2013.pdf.
5 As stated in the PCA’s Guidelines on the calculation of fines, available at www.concorrencia.pt/vPT/Noticias_Eventos/Comunicados/Documents/Linhas_de_Orientação_Coimas_DEZ2012.pdf.
6 In other antitrust infringements not connected to cartels, the PCA may decide to close an administrative procedure if it receives what it considers to be adequate remedy proposals from the undertakings. In that case, there will be no infringement under the Competition Act, but the undertakings must implement the remedies agreed with the PCA. The PCA may decide to reopen the procedure under certain circumstances within the next two years.
7 PCA press release of 11 January 2005.
8 PCA press release of 17 July 2006.
9 PCA press release of 8 July 2009.
10 PCA press release of 30 December 2009.
11 PCA press release of 12 September 2013 (19/2013).
12 PCA press release of 14 October 2014 (14/2014).
13 PCA press release of 17 January 2008.
14 PCA press release of 12 September 2013 (19/2013).
15 PCA press release of 10 August 2015 (18/2015).
16 Case PRC 2004/07.
17 Case PRC 2004/23.
18 PCA press release of 29 January 2009.
19 PCA press release of 19 January 2011.
20 PCA press release of 28 September 2017 (14/2017).
21 PCA press releases of 28 June 2005 and of 12 July 2005 and press release 14/2006.
22 PCA press release of 14 September 2016 (18/2016).
23 PCA press release of 15 November 2016 (23/2016).
24 PCA press release of 24 June 2012.
25 Available at http://concorrencia.pt/vPT/A_AdC/Instrumentos_de_gestao/Prioridades/Documents/AdC_Prioridades_2018.pdf.
26 PCA press release of 15 November 2017 (20/2017).
27 Article 19 of the Competition Act.
28 PCA press release of 17 January 2017 (01/2017).
29 PCA press release of 8 July 2017 (09/2017).
30 PCA press release of 25 July 2017 (11/2017).
31 An undertaking is considered to be in a situation of economic dependence with regard to another undertaking if it does not have an equivalent alternative to contracting with that undertaking (i.e., when the good or service at issue is provided by a limited number of undertakings and the undertaking would be unable to obtain identical conditions from other commercial partners within a reasonable period).
32 PCA press releases of 1 September 2008, of 2 September 2009 and of 2 August 2007.
33 PCA press release of 15 October 2009.
34 PCA press release of 20 June 2013.
35 PCA press release of 31 December 2015 (31/2015) and of 20 October 2016 (20/2016).
36 PCA press release 2 October 2007.
37 PCA press release of 19 July 2012.
38 PCA press release of 3 February 2015 (01/2015).
39 PCA press release of 4 January 2016 (01/2016) and of 19 January 2017 (02/2017).
40 PCA press release 2 August 2007.
41 PCA press release 22 August 2016 (17/2016).
42 PCA press release 28 December 2017 (23/2017).
43 PCA press release of 22 June 2015 (12/2015).
44 PCA press release of 16 July 2015 (15/2015).
45 PCA press release of 21 September 2015 (21/2015).
46 PCA press release of 16 December 2015 (29/2015), of 19 October 2016 (19/2016) and of 13 October 2017 (15/2017).
47 PCA press releases of 30 December 2015 (17/2014) and of 23 March 2015 (07/2015).
48 PCA press release of 27 July 2015 (16/2015).
49 PCA press release of 2 December 2015 (28/2015).
50 PCA press releases of 18 September 2015 (20/2015) and of 23 February 2016 (05/2016).
51 PCA press release of 22 March 2016 (07/2016).
52 PCA press release of 21 June 2016 (14/2016).
53 PCA press release of 4 August 2016 (16/2016) and of 5 May 2017 (05/2017).
54 PCA press release of 14 November 2017 (19/2017) and 21 December 2017 (21/2017).
55 See www.concorrencia.pt/vPT/Estudos_e_Publicacoes/Estudos_Economicos/Paginas/Estudos-Economicos.aspx.
56 PCA press release of 13 July 2015 (13/2015).
57 PCA press release of 20 July 2016 (15/2016).
58 PCA press release of 30 March 2017 (03/2017) and of 25 October 2017 (17/2017).
59 See the presentation of the chair of the PCA’s board, available at www.concorrencia.pt/vPT/Noticias_Eventos/Intervencoes_publicas/Documents/VFapresentação%20COFAP%2018%20fev%202015_VF.pdf.
60 Case C-88/03 Portugal v. Commission.
61 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-13-33_
62 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-14-901_
63 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-15-6380_
64 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-17-556_
65 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-17-3865_
66 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-09-818_
67 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-14-1214_
68 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-14-666_
69 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-15-4836_
70 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-16-3521_
71 PCA Regulation 60/2013.
72 Case 37/2004 – Barraqueiro/Arriva, Case 45/2004 – Petrogal/Esso; Case 22/2005 – VIA Oeste (Brisa)/Auto-Estradas do Oeste/Auto-Estradas do Atlântico, Case 12/2009 – TAP/SPdH; Case 41/2009 – Ongoing/Prisa/Media Capital and Case 4/2013 – Controlinveste*Zon Optimus*PT/Sport TV*Sportinveste*PPTV.
73 Case 22/2005 – VIA Oeste (Brisa)/Auto-Estradas do Oeste/Auto-Estradas do Atlântico.
74 Case 41/2009 – Ongoing/Prisa/Media Capital.
75 Case 57/2006 – TAP/PGA.
76 Case 9/2015 – EDP Renewables/Ativos ENEOP and Case 55/2015 – EDP Renewables/Sociedades Ventinveste.
77 Case 49/2010 – TRPN/Internorte.
78 Case 16/2011– Powervia/Laso*Auto-Laso*Probilog*Laso Ab.
79 Case 38/2012 – Arena Atlântida/Pavilhão Atlântico*Atlântico.
80 PCA press release of 9 January 2013.
81 PCA press release of 27 December 2017 (22/2017).
82 See the PCA press presentation available at www.concorrencia.pt/vPT/Noticias_Eventos/Intervencoes_publicas/Documents/apresentação%20COFAP%2018%20fev%202015_v3.pdf.
83 See the European Commission press release available at http://europa.eu/rapid/press-release_IP-15-4805_
84 Press release available at www.concorrencia.pt/vPT/Noticias_Eventos/Comunicados/Paginas/Comunicado_AdC_201502.aspx?lst=1&Cat=2015.
85 Court decision available at www.concorrencia.pt/vPT/Praticas_Proibidas/Decisoes_Judiciais/contraordenacionais/Documents/AAE_1_13_TCRS1jul2015.pdf.
86 Press release available at www.concorrencia.pt/vPT/Noticias_Eventos/Comunicados/Paginas/Comunicado_AdC_201527.aspx?lst=1&Cat=2015.