The Public Competition Enforcement Review: Portugal

Overview

In Portugal, the Portuguese Competition Authority (PCA) is the independent administrative body in charge of the public enforcement of competition law in all sectors of the Portuguese economy, without exception.

In force since 2012, the Portuguese Competition Act (the Act) modified the legal standards governing the PCA's handling of complaints, giving the authority greater discretion to decide when to open an investigation based on certain criteria.

According to the 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 known to it, the severity of the alleged infringement, the likelihood of proving the existence of an infringement and the scope of the investigation required.

To increase transparency, at the end of each year, the PCA publishes on its website its strategic priorities regarding competition policy for the following year.

The PCA recently issued its statement of priorities for 20222 and pledged to:

  1. continue to focus on detection and sanctioning of anticompetitive behaviour, especially practices that have a more detrimental impact on households and firms in the current crisis;
  2. investigate signs of abusive practices and collusion in the digital market; and
  3. contribute to a resilient and innovative economic recovery by promoting competition considerations in current efforts by policymakers, with an emphasis on productivity, innovation, and open labour and digital markets.

These strategic priorities combine the consolidation of internal proceedings, the strengthening of the role of the PCA as an influential voice on legislative reform, and recognition of international enforcement trends in digital markets.

The PCA also aims to reinforce its enforcement powers in the context of the transposition of the ECN+ Directive.3 In fact, over the past two years, the PCA has been leading the transposition of the ECN+ Directive into Portuguese law and in April 2020, after a public consultation, it submitted the final transposition proposal to the government. This draft is currently under discussion by Parliament, where issues have been raised regarding the constitutionality of certain provisions. On the basis of the final draft transposition proposal, it is clear that the PCA also took advantage of this opportunity to propose some adjustments to the existing Portuguese competition law framework, exceeding the scope of the ECN+ Directive and potentially leading to an increase in the PCA's investigative powers and access to evidence.4

The transposition of the Directive into the national competition framework is likely to occur in the course of 2022, given that the deadline of February 2021 has already passed.

Enforcement agenda

The PCA's statement of priorities for 2022 indicates that the authority will continue to focus its investigations on digital sectors, namely through its digital task force, launched in 2020, and by contributing to the negotiation of the Digital Markets Act (DMA) legislative process. In addition, driven by the current crisis, the PCA intends to pay more attention at labour markets, in particular regarding no-poach and wage-fixing agreements and to combatting anticompetitive behaviour that may disrupt or distort supply chains to the detriment of consumers.

The PCA emphasised that it will continue to focus on combating cartels and bid rigging in public procurement, including by conducting ex officio investigations to identify possible anticompetitive practices using mechanims such as cooperation protocols with other sector regulators (e.g., protocol signed in 2018 with Infarmed, the Portuguese regulator for medicinal and health products).5

Finally, the PCA confirmed its intention to continue monitoring more closely merger activity to identify those transactions that fail to comply with the prior-notification obligation or are implemented prior to approval (i.e., gun jumping).

Cartels

Article 9 of the Act prohibits agreements that restrict competition, including cartel agreements, namely 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 development or investments or by sharing markets (including bid rigging), through import or export restrictions and through anticompetitive actions against other competitors.6

In December 2021, Decree-Law No. 108/2021 added a new subparagraph to Article 9 that is applicable within the scope of the supply of accommodation goods or services in tourist resorts or local accommodation establishments. As a result, the amended Article 9 prohibits clauses or conditions to the effect that the other contracting party or any other entity may not offer, either on a digital platform or in premises in physical space, prices or other sales conditions more advantageous than those offered by a digital platform intermediary for the same goods or services.7

The PCA's decisions may be appealed to the Competition, Regulation and Supervision Court (the Competition Court). The decisions of the Competition Court may also be appealed at a second level, to the Lisbon Court of Appeal, which has an autonomous section dealing with intellectual property and competition, regulation and supervision.

In Portugal, cartels are administrative (not criminal) offences, therefore constitute misdemeanours, sanctioned with fines not exceeding 10 per cent of the offending undertaking's turnover in Portugal in the year preceding the decision, even though criminal law principles apply to this type of infringement. Some argue that 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 undertaking.8

Where the members of the board of directors of offending undertakings (and any individuals responsible for the management or supervision of the areas of activity in which an administrative offence has been committed) know of, or should know of, an infringement and have not adopted appropriate measures to end the infringement immediately, they will be liable to be sanctioned under the Act, unless they are subject to a more serious sanction under a different legal provision. The fines imposed on individuals cannot exceed 10 per cent of the annual income the individuals derive from the exercise of their functions in the undertaking concerned.

As an ancillary sanction under Article 71 of the Act, a ban of up to two years may be imposed in respect of 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. 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 Act establishes that the PCA may also impose behavioural or structural measures to end the prohibited practices or their effects.

Under the Act, and as implemented by the PCA, undertakings or individuals connected to the cartel may apply for immunity or a reduction of the fine if they provide valuable information about the cartel.

The Act also establishes the possibility of cases being settled before a decision is issued, at the PCA's discretion.

i Significant cases

The PCA's most significant cases have been related to cartels and included the Glucose Diagnostic Strips case,9 the Salt case,10 the Flower Mills case,11 the Catering Services case,12 the Flexible Polyurethane Foam case,13 Pre-Fabricated Modules cartel,14 the Cleaning Companies cartel,15 the Office Consumables cartel,16 the alleged Insurance cartel,17 the alleged Train Maintenance cartel,18 the alleged Telecommunications cartel19 and the alleged hub-and-spoke cartel cases in the food retail sector.20

Since 2019, the PCA has demonstrated increasing interest in prosecuting anticompetitive practices, and unprecedented sanctions have been imposed.

In July 2019, a first case concluded with large fines totalling €54 million imposed on five insurance companies. In this case, the PCA found that the companies had agreed on prices and allocating clients in the market for workplace, health and car insurance for large corporations. This investigation started as a result of a leniency agreement. Two other companies settled the case, which resulted in the reduction of their fines by 50 per cent. The PCA also imposed sanctions on individuals: three Lusitania board members and one Zurich board member were fined amounts of between €6,000 and €24,000.21

In September 2019, the PCA levied what were at the time the largest-ever fines in a horizontal competition case – totalling €225 million and imposed on 14 companies active in the banking sector. Although not assessed as a cartel, the proceedings were initiated subsequent to a leniency application and the PCA concluded that the defendants had exchanged sensitive competitive information regarding retail banking credit products. The fines imposed in this case have not followed a pattern as the PCA has imposed fines ranging from 0.18 per cent to 9.57 per cent of the offending undertaking's turnover in Portugal in the year preceding the decision. This case was appealed and is currently being assessed by the Competition Court.

Also, in December 2018,22 April 2019,23 June 201924 and March 2020,25 the PCA fined five undertakings and five directors and administrators a total of over €3.4 million for participating in the Train Maintenance cartel, which centred on public tenders for railway maintenance and included practices that could be characterised as bid rigging. The proceedings were concluded earlier than anticipated (between December 2018 and June 2019) for three of the undertakings involved, because of their collaboration with the investigation in admitting participation in the cartel, and the avoidance of judicial litigation by using the settlement procedure. The percentage of fine reduction is not clear from the publicly available information, but, typically, the PCA will allow the 10 per cent reduction set at EU level. In addition to being fined, the two companies that did not use the settlement procedure were sanctioned with a two-year ban from participation in public tenders.

In early December 2020, the PCA sanctioned a telecommunications operator with a fine of €84 million for alleged market sharing and price-fixing of mobile and fixed telecommunications services. The other participant benefited from the leniency programme and was exempted from both the pecuniary fine and ancillary sanctions.26 The PCA also opened proceedings against the four main telecommunications companies in Portugal for allegedly participating in a cartel aiming to limit competition in online advertising on the Google search engine by limiting the possibility of comparison between their offers.27

Subsequently, in a series of horizontal competition cases in the food retail sector, the main retail food chains in Portugal, various suppliers and, in some cases, individuals, were sanctioned for alleged price-fixing through hub-and-spoke arrangements, with total fines of €438.7 million, including the highest individual fine of €121.9 million.28 The PCA is currently pursuing various investigations in other proceedings concerning similar practices in this sector and these are likely to lead to more decisions with a very high potential for fines in the course of 2022.

In 2021, despite the outburst of covid-19 and its serious effects on the world economy, the pandemic does not seem to have curtailed the PCA's vigorous enforcement activity. In fact, in addition to the above-mentioned hub-and-spoke cases, the PCA instigated various other proceedings, including another alleged hub-and-spoke arrangement in the food retail sector and two cartel-related cases.

The PCA also issued sanctioning decisions in a case of price-fixing through decisions by an association of undertakings in the land surveying services market;29 a case of vertical restraint in the essential medical devices sector for an alleged vertical agreement involving market sharing and a ban on passive sales;30 a case of a non-compete agreement in the market for the provision of services to waste management systems.31 The authority also issued statements of objections for alleged cartel conduct: one in the context of public tenders in the private surveillance sector;32 for an alleged anticompetitive agreement in the labour market;33 for an alleged anticompetitive agreement in the context of sectoral associations in the healthcare sector;34 and for an alleged anticompetitive agreement in pay TV services.35

According to public information, the year 2021 was also a record year for dawn raids conducted by the PCA, with searches in companies from various sectors, including banking and finance, energy, information services and healthcare.

ii Trends, developments and strategies

During the past few years, the PCA has intensified its enforcement practice, taking an increasingly proactive approach, both in its use of investigative tools and its application of the competition rules in general. The higher number of ongoing investigations and unannounced inspections, and the significantly higher level of fines, are all evidence of this increased level of activity.

In accordance with the priorities described above, the PCA has in the past year been pioneering a set of initiatives aimed at further monitoring potential anticompetitive conduct in the labour markets, despite the fact that the application of competition law in labour markets is typically limited, if not unprecedented, in many jurisdictions.

In this context, in May 2020, the PCA ordered the Portugal League (formerly the Portuguese Professional Football League) to suspend one of its resolutions, which allegedly constituted a no-poaching agreement regarding football players who rescinded their contracts during the covid-19 pandemic.36 Further to the issuance of this order, the PCA issued a statement of objections against the League and 31 football clubs (first and second division) for an alleged anticompetitive agreement not to hire players.37 Correlatively, after a market investigation into competition conditions in the labour market in Portugal and a public consultation, on 21 September 2021, the PCA published an Issues Paper titled 'Labor market agreements and competition policy'38 and guidance titled 'Best practices in preventing anticompetitive agreements in labor markets'.39

According to publicly available information, the sanctioning of antitrust conduct in Portugal has been more frequent with regard to bid-rigging cartels and to restrictive practices by trade and professional associations, including price-fixing.

In addition, the leniency and the settlement mechanisms established in the Act have proven to be very useful instruments for the PCA in investigating and proving cartel cases, as well as other antitrust infringements. The leniency mechanism was used in several significant cases, such as the Catering Services cartel (2007),40 the Commercial Forms cartel (2012),41 the Polyurethane Foam cartel (2013),42 the Pre-Fabricated Modules cartel (2015),43 the Office Consumables cartel (2016),44 the Insurance cartel (2019),45 the Banking case (2019)46 and the Telecommunications cartel (2020).47 The settlement procedure was used in the above-mentioned 2019 decisions in the railway and insurance sectors.

iii Outlook

The PCA will continue to make cartel cases a priority for 2022. In particular, the PCA will prioritise the investigation of cartels that have a particular impact on consumers, mainly in sectors that are particularly susceptible to being exploited in the current context of pandemic, such as the food retail sector and the labour market, and with a special focus on anticompetitive agreements not to solicit or hire workers, or to fix workers' wages or other forms of remuneration.

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 those needed in a digital environment. Moreover, the PCA has affirmed that it will pay close attention to the end use of algorithms or artificial intelligence, to prevent these being used as a means of evading responsibility. Following this trend, in 2020, the PCA created an inter-departmental task force for the digital sector, which will continue to operate in 2022.

The PCA will continue to promote its leniency policy as an essential instrument for cartel investigations. As mentioned above, the leniency programme gave rise to most of the investigations into cartel cases cited here, and to the banking case initiated through a leniency application (although it was not considered to be a cartel).

Antitrust: restrictive agreements and dominance

As previously indicated, the Act prohibits agreements, concerted practices and trade association decisions, including cartels, whose object or effect is to restrict competition.48 It also prohibits undertakings in a position of dominance from abusing their position.49

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 the 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, this 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 EU level; however, the Act also includes provisions on the abuse of a situation of economic dependence. 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 goods or services at issue are 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). 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 the 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 with those for 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.50 The most significant sanction imposed amounted to approximately €53 million, although the appeal court considered the infringement to be time-barred.51

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.52

The National Association of Pharmacies and three other undertakings of the same group (Farminveste SGPS, Farminveste – Investimentos and Health Market Research) were also sanctioned 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 Court; however, the amount of the fine has been reduced to €6.89 million.53

Later in the year, the PCA issued a statement of objections against EDP and SONAE, having fined the companies in 2017 with overall fines of €38.3 million for alleged anticompetitive market-allocation practices.54 This case was appealed first to the Competition Court, which upheld the decision with a 10 per cent reduction of the fine, and subsequently to the Lisbon Court of Appeal, which submitted a request for a preliminary ruling to the ECJ in 2021, where the case is currently under discussion.55

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.56 Bayer removed the clause from the contracts and proposed an amended contract to the PCA as a remedy. The PCA has 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.57

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.58 This decision was upheld by the Competition Court (although the Court has reduced the fines to €4.1 million) and subsequently by the Lisbon Court of Appeal.

In December 2018, after several years of investigation, the PCA closed its investigation into exclusive distribution agreements between pay TV platforms and football clubs regarding certain TV sporting rights. These agreements had a duration of 10 years and the pay TV platforms concerned were shareholders of the main paid TV content channel in Portugal, Sport TV.59

During the course of 2019, the PCA imposed a fine of €48 million on EDP for abuse of a dominant position through manipulation of its production infrastructure to obtain greater revenues.60 The investigation started in 2016 and the PCA found the existence of anticompetitive practices in EDP's control of the provision of teleregulation and secondary reserve services under the Contractual Balance Maintenance Costs (CMEC) regime. According to the PCA, in diverting the provision of services from its CMEC regime infrastructure to other channels, EDP had a significant negative impact on the National Electricity System and harmed consumers.

Also, in 2019, following two complaints from former Super Bock distributors, the PCA sanctioned Super Bock, together with a board member and one of the company's directors, with fines totalling €24 million, for fixing minimum resale prices and other commercial conditions for its products (i.e., beer and other beverages) in hotels, restaurants and cafes. According to the PCA, this practice was implemented through the imposition of commercial conditions, including sanctions in cases of non-compliance, which ultimately resulted in the fixing of distributors' resale prices.

ii Trends, developments and strategies

In recent years, the PCA has favoured closing cases subject to the adoption of commitments whenever important procedural gains can be anticipated.

For example, in 2015, the PCA addressed several vertical antitrust concerns in the automobile sector. In the 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 for public consultation and were then accepted and deemed mandatory by the PCA.61 Similar commitments were offered by Ford Lusitana62 and SIVA (importer and distributor for the automobile manufacturers Audi, Volkswagen and Skoda).63 The commitments proposed were also accepted and deemed mandatory by the PCA.64

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.65 The commitments were later accepted and deemed mandatory by the PCA.66

In 2018, the PCA closed an abuse of dominant position case subject to conditions by the postal service incumbent CTT, which has undertaken to offer access to its postal network to competitors.67

iii Outlook

For 2022, the PCA has established as one of its priorities the detection and investigation of abuses of a dominant position, especially in digital ecosystems. To this end, the PCA has already issued a call for information with the purpose of collecting comments from stakeholders to help identify possible barriers to entry and expansion of companies, exclusion strategies and the use of algorithms to monitor and set prices.68 Moreover, the PCA is expected to continue its transparency efforts to promote access to its decisions and the decisions of courts of appeal, and to disseminate accurate and complete information on competition rules. As mentioned, the PCA has updated its website and decision directory, greatly facilitating research into previous decision practice, as well as current proceedings.

According to public information, it appears that the PCA is currently investigating cases of abuse of dominant position, which may result in the issuance of statements of objections during the course of 2022.

Sectoral competition: market investigations and regulated industries

The Act applies to all areas of the economy, including regulated sectors. The PCA has been monitoring several sectors in recent years and its supervisory powers have been strengthened.

i Significant cases

So far, 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 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, on electronic communications, on relations between large food retailers and their suppliers, and on fintech operators, digital operators, transport operators, liberal professions and ports.69

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 be attentive on matters of possible concerted practices in public procurement, as such, in 2020, it conveyed to Parliament its comments on the alteration of the public procurement law.

During 2015, the PCA closely monitored the port sector and, as a result of a market study on the sector, submitted for public consultation some recommendations to enhance competition.70 In 2016, the PCA set out as priorities the monitoring of the telecommunications and gas sectors and it issued some recommendations regarding passenger transport in chauffeur-driven light-duty vehicles.71

In 2017, the PCA issued a report on the liquefied petroleum gas industry in Portugal and a sectoral inquiry into the market for the supply of natural gas to industrial consumers. In both documents, the PCA identified alleged competition concerns and submitted recommendations on how to mitigate them with regulatory action.72

In 2018, the PCA's study on the port sector was released with recommendations for the liberalisation of access to port-related professions and the promotion of competition conditions for the awarding of concessions.73 Also in 2018, the PCA published a paper on technological innovation in the financial sector.

In 2020, the PCA issued its recommendations to Madeira's government in relation to its automobile inspection framework, advising measures to promote the entry of new undertakings into this market.

Later in 2020, the PCA identified barriers to the opening and expansion of haemodialysis facilities, such as multiple and long-lasting procedures, legal uncertainty as regards the regulatory framework, the greater ease of expanding existing facilities than opening new ones, and the assignment of patients to a facility, whereby they tend to remain in the same facility without the opening of a new facility nearby being considered as an alternative. Further to these conclusions, the PCA gave recommendations to the government aimed at removing the barriers identified and promoting patient choice and the well-being of chronic kidney-disease patients.74

iii Outlook

As indicated, the PCA's supervisory powers have been strengthened by the Act and as well as being able to require information from undertakings or associations the authority has the option to carry out inspections and audits. These have proven to contribute to the detection of inefficiencies by the PCA in some markets and sectors, and will continue do so increasingly. In this context, in early 2021, the PCA carried out a market study of haemodialysis services and identified barriers to the opening of centres and a limited choice of services for chronic kidney-disease patients. As noted above, the PCA then proposed recommendations aimed at improving competition in this market.75

State aid

Article 65 of the 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, and it may request information from any party for this purpose. The recommendations are published on the PCA's website.

The PCA's powers in this matter are very limited, as the European Commission (EC) is the entity with jurisdiction to assess the compatibility of state aid with the EU's rules on state aid. In any case, the PCA follows the EC's activities closely, having identified the monitoring of state-aid matters as one of its international cooperation goals.76

i Significant cases

In one of the most important rulings on state aid involving Portugal, in the Azores case, the ECJ ruled on the application of territorial selectivity criteria in cases involving autonomous regions and set the conditions necessary for an autonomous region to be considered the benchmark, rather than the national territory as a whole.77

The Portuguese banking sector, in the past few years, has also been the subject of several state-aid decisions.78

In 2018, the EC approved under EU state-aid rules a Portuguese tonnage tax scheme, which, together with a scheme to support seafarers, will encourage ship registration in Europe and contribute to the competitiveness of maritime transport while preserving employment in the sector and promoting high environmental standards.79

In 2019, the EC also approved two state-aid regimes. The first one was related to the creation of a special regime of support for biomass-operated generators close to forests in Portugal, to promote cleaning of forests and reducing fire risks.80 The second was related to the creation of a subsidy system for the training of consultants in the agricultural and forestry sectors.81

In December 2020, after conducting an in-depth investigation into the implementation of the Madeira Free Zone aid scheme, the EC concluded that the scheme was not implemented according to the European rules. The EC found evidence that the number of jobs used by Portugal for the calculation of aid under the scheme included jobs created outside the Free Zone and even outside the EU. Moreover, the profits benefiting from the tax reduction were not limited to those linked to activities effectively and materially performed in Madeira. The EC therefore imposed an eight-month deadline for recovery of the unlawful aid.82

More recently, throughout 2021, the EC approved several state-aid schemes related to the covid-19 pandemic, directed at several sectors of the Portuguese economy. In particular, schemes provided state aid to two Portuguese airlines, TAP and SATA.83 In addition to the covid-19-related relief, the EC also approved restructuring aid to TAP, totalling €2.55 billion.84 In addition, following the proposed restructuring aid for SATA, in 2020, the EC decided to open an investigation to assess whether this aid was in line with the rules for rescue and restructuring. This seemed to be finally approved in November 2021, although at the time of writing the final decision has not yet been made public.85

Finally, in 2021, Portugal also notified two aid schemes in the form of direct grants for the purchase of electricity- and hydrogen-powered buses, with the purpose of meeting greenhouse gas reduction goals, and to which the EC decided not to raise any objections.86

ii Trends, developments and strategies

In the past few years, the banking sector in Portugal has been particularly subject to state-aid procedures. In addition to the above-mentioned cases, the capitalisation programmes for Portuguese banks87 and the creation of the Portuguese Development Finance Institution88 have followed the applicable state-aid rules established in cooperation with the EC. Also in this context, in August 2020, the EC decided not to raise any objections to the creation of the Portuguese Promotional Bank, a state-owned national bank with the aim of promoting the growth of the Portuguese economy, mainly by supporting small and medium-sized enterprises and mid-caps, as well as large companies considered important in terms of the national economy.89

Finally, the state-aid decisions taken by the Portuguese government in recent years regarding airline companies demonstrate their strategic value to Portugal's tourism-dependent economy.

iii Outlook

Apart from the financial sector, which may continue to be monitored, the issue of regional aid has been particularly significant in the past few years. In 2014, under EU state-aid rules, the EC approved Portugal's state-aid plan for 2014–2020, which was extended until the end of 2021. The EU guidelines set out the conditions whereby 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 levels ranging from 25 per cent of the eligible costs of the relevant investment projects in mainland Portugal to over 35 per cent in Madeira and up to 45 per cent in the Azores.90

At present, the regional aid map for 2022–2027 has not yet been approved by the EC. In any case, as an indication of what can be expected, other than the covid-19-related aid and the airline rescue schemes, in 2021, Portugal only approved measures in accordance with its environmental goals.

It is also possible that more aid will be granted in sectors particularly affected by the covid-19 pandemic. Finally, it will also be relevant to monitor both the investigation into the aforementioned SATA aid scheme and the implementation of the €1.8 trillion EU recovery package, known as the 'European bazooka', of which more than €45 billion has been allocated to Portugal.

Merger review

The PCA has exclusive jurisdiction to enforce the merger control rules established in the Act. Only concentrations91 that 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 Act is similar to that used in the European Merger Control Regulation (i.e., the possibility of exercising decisive influence on an undertaking).

Unlike the EU Merger Regulation and the laws of most Member States (except Spain), the Act 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 are met:

  1. 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;
  2. the concentration results in the acquisition, creation of or increase in a market share in Portugal equal to or greater than 50 per cent; or
  3. the concentration results in the acquisition, creation of or increase in 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 each 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 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 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 will not raise competition concerns in relation to certain parameters (e.g., no market overlap or limited joint market shares).92

Since the enactment of the current Act, and similarly to the EU Merger Regulation provisions, the parties no longer have a specific notification deadline (whereas previously the parties had seven business days to do this). Nevertheless, the parties 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 Act, any act or transaction implementing the concentration prior to clearance from the PCA is unenforceable.

The most important exception to this standstill obligation is the option to implement public takeover bids, provided that, in general, the acquirer does not exercise voting rights in the target entity until clearance has been obtained.

The Act now adopts the 'significant impediment to 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 a special administrative 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, reviewing and deciding around 50 to 60 cases a year on average; it has issued only seven prohibition decisions in merger control cases since its incorporation in 2003, although several notifications were withdrawn by the notifying parties in view of the obstacles posed by the authority.93

Notably, in relation to these prohibitions, and further to a special administrative appeal provided for in the PCA's articles of association, the Minister for the Economy overturned a PCA decision prohibiting a merger in the highway management sector.94 Another of the PCA's prohibition decisions, 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).95

With regard to merger remedies, the PCA's guidelines are in line with EU law and practice.

The PCA has also imposed structural and behavioural remedies on several occasions. The remedies in the TAP/PGA case included freeing up slots at the Lisbon and Oporto airports, limiting the number of flights operated by the merged airlines on certain routes and limitations on the prices charged.96 In 2015, behavioural remedies were also imposed upon two concentrations (involving the same acquiring undertaking, part of the EDP Group) in the market for the production of electric energy. In both cases, the acquirer undertook to maximise the production of energy to avoid any negative impact on the market, in particular, a potential increase in wholesale prices.97

Regarding structural remedies, 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,98 and the approval of an up-front buyer solution in the Powervia/Laso*Auto-Laso*Probilog*Laso Ab case.99 More recently, in the Arena Atlântida/Pavilhão Atlântico*Atlântico case, 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 shareholding as a vertical restraint of competition.100

In 2018, divestment remedies were also offered in the Rubis/Repsol GLP case to overcome the horizontal competition concerns identified by the PCA.101 Notably, for the first time, the divestment in question was made through a 'fix it first' solution (i.e., with a suitable buyer already identified and accepted by the PCA prior to the clearance decision).

In 2020, in the Pigments/Ativos Ferro case, a transnational concentration in the tiles and pigments sector, the acquiring company committed to divest the totality of the targets' business in Portugal.102

In 2021, the PCA approved 60 transactions without conditions and acknowledged in five cases that the notification was not mandatory, given that the thresholds established in Article 37(1) were not met.103

ii Trends, developments and strategies

In terms of its recent activity, the PCA has given increasing importance and attention to gun-jumping cases, imposing more severe fines. Between 2019 and 2021, the PCA opened more than 10 investigations for alleged merger implementations without prior authorisation from the PCA and it has already issued four sanctioning decisions and two statements of objections related to this class of infringement. Before this, the PCA had issued only two sanctioning decisions, with minor fines.104

Since 2019, the authority has taken a much stricter approach to merger control compliance. Most notably, in 2019, in the Grupo HPA Saúde/Hospital São Gonçalo de Lagos merger, the PCA adopted a clearance decision based on the failing-firm defence. This was the first time this argument was used successfully in Portugal.105 However, an investigation concerning the failure to notify this merger promptly was concluded by the PCA in 2020, with the application of a fine of €155,000. It was also the first case in which the PCA accepted payment of the fine by instalments.106

Also in 2019, the PCA started an investigation into HCapital, SCA–SICAR for failing to notify the acquisition of control over Solzaima in 2016. The transaction was notified in February 2019 and approved without condition. After the approval, the PCA initiated a gun-jumping investigation and according to publicly available information this is still ongoing.107

More recently, in August 2021, the PCA issued a final decision sanctioning Fidelidade SGOIC with fine of €300,000 for failure to notify a merger related to the acquisition of a real estate investment fund – a concentration that was also found to raise competition concerns and had to be abandoned by the parties. The acquirer returned the management of the fund to the previous managing undertaking.108 Later in 2021, the PCA sanctioned two more companies, SFI Group Gestión de Participaciones Minoritarias with a fine of €60,000 and AOC Health GmbH with a fine of €35,000, for failure to notify the acquisition of White and Green Natural, and Stemlab, respectively.109 In December 2021, the PCA also issued a statement of objections to Santa Casa da Misericórdia de Lisboa over its acquisition of CVP – Sociedade de Gestão Hospitalar, for failing to notify a merger.110

This increased control is accompanied by an attempt to simplify merger control proceedings. As a Member State of the EU, Portugal requires a notification to be submitted by completing one of two types of notification form, namely the regular form or the simplified (short) form, depending on the potential impact of the transaction on the market and taking into account certain market share thresholds. In December 2021, the PCA adopted a new regulation to extend the applicability of the simplified form, which requests a less burdensome amount of information. It is now possible to use the short form where the parties' combined market share does not exceed 20 per cent when they are active in the same market. Under the previous regulation, this threshold was 15 per cent. The PCA has also reduced the amount of information requested in the regular form.

This is in line with the increasing used in recent years of the simplified filing form and pre-notification contacts, enabling swifter assessment and earlier decisions in uncomplicated matters.111 Also in this context, the PCA has continued strengthening and refining its demands in terms of remedies.

iii Outlook

Over the past few years, there has been wide-ranging discussion in the EU, and worldwide, about the adequacy of the existing merger control tools to capture and sufficiently assess concentrations that could significantly impede effective competition. These discussions are starting to materialise at the EU level with direct impact in Portugal. For instance, the new guidance issued by the EC on the application of the referral mechanism set out in Article 22 of the EU Merger Regulation,112 aims at ensuring that certain transactions that might otherwise escape merger control by falling below the relevant and existing thresholds are subject to review by the EC through referrals by Member States. Even if, to date, the PCA has not used this mechanism under these terms, this new position necessarily has a significant impact at national level, requiring careful assessment of any transaction that could warrant merger control despite not exceeding the national or EU notification thresholds. Ultimately, this introduces more uncertainty for businesses, increased costs, potential delays to closing and increased burdens in the drafting of transaction documents.

The more stringent approach to gun-jumping practices mentioned above is consistent with the generally tougher and more sophisticated practice of merger control discernible in recent years. In the context of the global pandemic, the PCA has also spent time evaluating options to strengthen competition regimes, with a special focus on innovation, and it has drawn attention to the importance of promoting innovation for a better and more sustainable economic recovery. The PCA sought to safeguard and incentivise innovation as a matter of priority in 2021 and reiterated this intention for 2022, indicating that it believes the removal of structural and legislative barriers that impede innovation, efficiency and growth ultimately contribute to greater competitiveness between companies. On the basis of these priorities, the authority also intends to take account of the digital transformation and is looking to adapt existing tools to this new reality and new business models.113

Conclusions

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 well-founded culture of competition policy in Portugal.

The PCA's focus continues to be combating cartels and anticompetitive practices, and it is particularly vigilant in relation to trade associations, public tenders and the up-and-coming digital economy. The PCA will also closely monitor mergers, ultimately to detect cases of gun jumping.

The next significant development relates to the transposition of the ECN+ Directive. The amendments proposed will impact relevant provisions of the Act, such as: (1) terminological changes with impacts on individual and companies' rights; (2) amendments to provisions on processing of anticompetitive complaints; (3) increased jurisdiction of the PCA for dawn raids and other investigatory powers; (4) power of the PCA to reclassify the confidentiality of the information; (5) procedural deadlines; and (6) methodology to determine fines and other pecuniary sanctions.

Additionally, and as already mentioned, in the context of the covid-19 crisis, the PCA assessed ways to strengthen competition regimes, focusing principally on the benefits of enhanced innovation for the Portuguese economy and for consumers in particular. The PCA is expected to continue to ensure and promote innovation as a means to achieving a better and more sustainable economic recovery, specifically through the removal of structural and legislative barriers to innovation, efficiency and growth, and with a special focus on the digital sector.

Footnotes

1 Tânia Luísa Faria is counsel and Margot Lopes Martins and Guilherme Neves Lima are junior associates at Uría Menéndez – Proença de Carvalho.

3 Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market.

4 For further information see: Nuno Salazar Casanova, Tânia Luísa Faria, Duarte Peres and Margot Lopes Martins 'A fish out of water – critical analysis of the AdC's draft proposal for the transposition of the ECN+ Directive into Portuguese law', Competition and Regulation, No. 42–43, https://www.concorrencia.pt/sites/default/files/imported-magazines/CR_42-4313_EN.pdf.

6 Article 75 of the Portuguese Competition Act (the Act) and the PCA's communication on the leniency programme, https://www.concorrencia.pt/en/leniency-programme.

7 Decree-Law No. 108/2021 of 7 December also amends (1) the legal regime on individual restrictive trade practices (enshrined in Decree-Law No. 166/2013), prohibiting tourist accommodation intermediaries from offering for sale goods or services for a price lower than the retail price agreed with the supplier, even if at the expense of a total or partial reduction of the intermediary's own contractually agreed remuneration; and (2) the Law on General Contractual Clauses (Decree-Law No. 446/85), which now prohibits any clause that establishes excessive or discriminatory remuneration commission on the basis of the nationality or place of establishment of the counterparty.

9 PRC/2003/6, 28 December 2004.

10 PRC/2005/25, 11 July 2006.

11 PRC/2004/06, 3 July 2009; the case was decided in 2005, then this was overturned by the Commercial Court of Lisbon and a new decision was issued by the PCA in 2009.

12 PRC/2007/02, 31 July 2012; the case resulted from a leniency application by a former director of one of the undertakings involved in the cartel.

13 PRC/2011/01, 18 July 2013.

14 PRC/2014/2, 9 July 2015.

15 PRC/2009/10, 1 June 2011.

16 PRC/2011/10, 30 May 2016.

17 PRC/2017/10, 30 July 2019.

18 PRC/2016/6, 3 March 2020.

19 PRC/2018/5, 3 December 2020.

20 For example, PRC/2017/1, of 18 December 2020; PRC/2017/7, of 18 December 2020; PRC/2017/13, of 2 November 2021; PRC/2017/5, of 16 November 2021.

40 PRC/2007/02, 31 July 2012.

41 PRC/2010/08, 13 December 2012.

42 PRC/2011/01, 18 July 2013.

43 PRC/2014/2, 9 July 2015.

44 PRC/2011/10, 30 May 2016.

45 PRC/2017/10, 30 July 2019.

46 PRC/2012/09, 9 September 2019.

48 Article 9 of the Act.

49 Article 12 of the Act.

50 PRC/2003/2, 1 August 2007; PRC/2004/1, 28 August 2008; PRC/2003/5, 28 September 2009.

51 PRC/2003/2, 1 August 2007.

52 PRC/2010/2, 14 June 2013.

53 PRC/2009/13, 22 December 2015.

56 PR 2 October 2007.

57 PRC/2010/4, 15 June 2012.

59 PRC/2016/2, 21 December 2018.

61 PRs 17/2014 of 30 December 2014 and 07/2015 of 23 March 2015.

67 Case 36/16.0YUSTR, 20 October 2016; PR 08/2018, of 5 July 2018.

70 PR 13/2015, of 13 July 2015.

71 PR 15/2016, of 20 July 2016.

77 Case C-88/03 Portugal v. Commission.

78 In relation to Banco Espírito Santo (BES), PR, https://europa.eu/rapid/press-release_IP-14-901_en.htm; in relation to Banif, PR, https://europa.eu/rapid/press-release_IP-15-6380_en.htm; in relation to Caixa Geral de Depósitos PR, https://europa.eu/rapid/press-release_IP-17-556_en.htm; and for the sale of the bridge bank Novo Banco, completing the 2014 resolution of BES, PR, https://europa.eu/rapid/press-release_IP-17-3865_en.htm.

91 As defined in Article 36 of the Act.

92 PCA Regulation No. 60/2013, of 14 February.

93 Ccent/37/2004 – Barraqueiro/Arriva, Ccent/45/2004 – Petrogal/Esso; Ccent/22/2005 – VIA Oeste (Brisa)/Auto-Estradas do Oeste/Auto-Estradas do Atlântico, Ccent/12/2009 – TAP/SPdH; case 41/2009 – Ongoing/Prisa/Media Capital and Ccent/4/2013 – Controlinveste*Zon Optimus*PT/Sport TV*Sportinveste*PPTV; Ccent/9/2019 – Fidelidade SGOII/ Saldeinveste*IMOFID; Ccent/51/2019 – RBI/Grupo Fundão.

94 Ccent/22/2005 – VIA Oeste (Brisa)/Auto-Estradas do Oeste/Auto-Estradas do Atlântico.

95 Ccent/41/2009 – Ongoing/Prisa/Media Capital.

96 Ccent/57/2006 – TAP/PGA.

97 Ccent/9/2015 – EDP Renewables/Ativos ENEOP and Ccent/55/2015 – EDP Renewables/Sociedades Ventinveste.

98 Ccent/49/2010 – TRPN/Internorte.

99 Ccent/16/2011– Powervia/Laso*Auto-Laso*Probilog*Laso Ab.

100 Ccent/38/2012 – Arena Atlântida/Pavilhão Atlântico*Atlântico.

101 Ccent/37/2017 – RUBIS/Ativos Repsol.

102 Ccent/16/2020 – Pigments/Ativos Ferro.

103 Ccent/2021/37 – Transdev/Concessão de Transportes da CIM Tâmega e Sousa (Lote 1); Ccent/2021/39 – Grupo BMI/Ativos Argibetão; Ccent/2021/1 – Graco BV/Hi-Tech; Ccent/2021/9 – EURODIAL/Unidade de Hemodiálise da ULSBA; Ccent/2021/20 – Páginas Civilizadas*Global Notícias*Cofina/Vasp.

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