Spain Raimundo Ortega Jones Day Regulation channels of - - PDF document

Regulation

Since 1989 the Act on the Defence of Competition (Ley 16/1989 de Defensa de la Competencia, ‘LDC’) regulates the application of com- petition law in Spain. The LDC adopted material provisions identi- cal to those existing in EC Law within a system of administrative

• enforcement. In addition, private enforcement in Spain has been dif-

ficult for a variety of reasons related, mainly, to the perceived pub- lic nature of the rules. However, the application of the new system established in the EC Regulation 1/2003 anticipates significant changes in Spain. First, as from September 2004 the new commercial courts will be able to apply Articles 81 and 82 of the EC Treaty in private litigation. An increase of private enforcement of competition law in Spain regard- ing the validity of agreements and the recovery of damages arising from restrictive practices is expected. This is particularly the case because Spanish courts have been rather flexible in the appreciation

• f an effect in trade.

In addition, the government has announced its intention of reforming the LDC in order to adopt a system similar to that of EC Regulation 1/2003. This will probably include the elimination of the individual exemption system under the LDC and allow the courts to decide on the application of LDC, which, to date, has been a power reserved to the competition authorities. In addition, the government is planning significant institutional changes such as the creation of a new revamped competition authority

Recent cases Spanish Breweries Association: Beer production statistics

In December 2002, the Asociación de Cerveceros de España (Span- ish Breweries Association, ‘the Association’) applied before the Span- ish competition authorities for an individual exemption to collect data on production of beer between its members in order to produce trade statistics. By a decision dated 30 March 2004, the Tribunal de Defensa de la Competencia (Competition Court, ‘TDC’) refused to grant the individual exemption. The Association devised a system to produce statistics of pro- duction and distribution of beer in Spain. Initially, each member of the Association would submit to a notary public appointed by the Association the number of hectolitres of beer produced or imported each month. Every two months the same information would be sub- mitted with a breakdown of the kind of container used, type of beer and brands. Every six months, each member would submit to the public notary the hectolitres of beer produced or imported with a geographic breakdown. The members would also submit to the pub- lic notary information on turnover, investment, marketing and spon- sorship once a year. Finally, the members would also send the public notary a breakdown of hectolitres of beer produced or imported with a breakdown according to their own and third party brands and

SPAIN 212 The European Antitrust Review 2005

channels of distribution. This information would be processed and aggregated by the notary who would submit it to the Association for distribution among the members. In addition, data concerning the hectolitres of beer produced or imported, as well as a breakdown per company, would be submitted by each member directly to the Association for release on the Association’s web page. The TDC decision to deny authorisation was based on the struc- ture of the market. The high degree of concentration in the Spanish market for the production of beer (in 2000 the three major brew- eries had a market share of 83 per cent) made the aggregation of data useless and would highly increase the level of transparency of the market on the production capacity of the competitors. The TDC took into account the high degree of geographic market specialisation among the breweries. In most cases, this led to a duopoly situation in geographic markets. In addition, the TDC did not accept the argument that some data was also available through independent market researchs (ie AC Nielsen) because according to the TDC, the information obtained by these companies through questionnaires addressed to the brew- eries was less accurate than the information obtained by the Associ- ation from the breweries. Finally, the TDC rejected the Association’s arguments that the sys- tem would benefit small breweries because it would provide them with information on the market that would help them to better plan their

• strategies. Together with other considerations, the fact that some of the

smaller breweries have cancelled their membership of the Association led the TDC to reject the argument that the system would have increased competition in the market between small and large breweries. In order to fully understand the TDC’s opposition to the exchange of information system requested by the Association, it should be noted that the TDC opposed the mergers of Heineken/Cruzcampo and Mahou/San Miguel in 1999 and 2000 respectively, although the Government ultimately decided not to

• ppose either concentration, subject to certain conditions.

ACS/Dragados: Fine for failing to notify a concentration

In the case ACS/Dragados, the construction company ACS was fined for carrying out the acquisition of control of Dragados before autho- risation from the competition authorities was obtained. On 18 Aprill 2002, ACS signed two contracts of sale of shares with the financial institutions SCH and Banco Madesant, through which ACS acquired 23.5 per cent of the share capital of Dragados. ACS notified this transaction on 14 May 2002 as the shareholding gave ACS exclu- sive control over Dragados. The notification was made at the request

• f the competition authorities, which had received a communication

from ACS on19 April 2002 regarding the operation and considered that a concentration as defined in article 14 of the LDC, had

• ccurred. The concentration was finally approved in the first phase.

On 22 April 2002 a proceeding was initiated against ACS for

Spain

Raimundo Ortega Jones Day

55 Spain sjc 212-214 8/9/04 9:23 am Page 212

infringement of the obligation to notify which resulted in ACS being fined €1 million. The decision was appealed before the National Court (the Court), but was upheld in the ruling of 5 November 2003. ACS alleged that it did not exercise its rights to influence Dra- gados’s commercial policy and that ACS did not adopt any decision regarding Dragados which could have had such consequences into the market. However, the Court decided that the right to influence Dragados’s commercial policy, regardless of whether or not such influence had any effect on the market, was exercised by the modi- fication of the composition of the Management Board of Dragados. The Court also declared that the fact that the merger was sub- sequently authorised (ie the merger did not pose any competition problems) is irrelevant regarding the level of the fine. The fact that ACS is a large company with legal resources to deal with competi- tion rules aggravated the infringement.

Telefónica : highest fine ever imposed in Spain for call pre-selection practices

The TDC imposed on Telefónica the highest fine ever imposed in a competition law procedure in Spain: €57 million. Following a com- plaint filed by the Asociación de Empresas Operadores y de Servi- cios de Telecomunicaciones (ASTEL), the TDC in its decision of 1 April 2004 decided that Telefónica had abused its dominant posi- tion by i) discriminating against pre-selection requests, ii) making services conditional upon clients not being pre-selected with their competitors and finally iii) implementing confusing marketing strate- gies to recover clients. After five years of liberalisation, Telefónica retains a market share in Spain in fixed telephony of 91.57 per cent, which the TDC con- sidered by itself an indication of dominance in this market. Pre-selection is a system that allows clients to choose the telephone company without initially dialling a selection code. This system allows those telephone companies that do not operate its own access network to compete with Telefónica in fixed telephony and permits end cus- tomers to be able choose the telephone company they wish to use. From February 1999 to December 2002, Telefónica launched a campaign which, according to the TDC, was designed to confuse clients in respect of the reliability of the pre-selection system of other competitors: Telefónica, by means of TV advertisements as well as

SPAIN

WWW.GLOBALCOMPETITIONREVIEW.COM

213

mailing, tried to convince the clients that by pre-selecting other com- panies, the quality of communications would be poorer and it would take longer to repair any failure in the line. In addition, Telefónica insinuated to those pre-selected clients of a different company that Tele- fónica may stop providing them with certain services or that clients not pre-selected would continue to enjoy certain services free of charge. Telefónica argued that the national regulatory authority for telecommunications, Comisión del Mercado de las Telecomunica- ciones (CMT) had previously decided on the case and, therefore, the proceedings before the competition authorities breached the general principle of law of non bis in idem. The CMT informed the compe- tition authorities that similar conduct had been analysed by the CMT in the past and it was decided that no proceedings for breach would be open. However, the TDC refused to close the file and rejected the argument that the principle of non bis in idem would have been

• infringed. The TDC considered that the CMT’s analysis of the facts

was limited to the scope of the telecommunication regulations and that the CMT (as is also the case with the energy regulator, Comisión Nacional de la Energía) did not have the competence to apply the LDC. As regards the amount of the fine, the TDC qualified the prac- tices of Telefónica as being a very serious infringement because in their view they impeded the liberalisation of the telecommunication sector, affected the entire market, the campaign was implemented during a lengthy period of time and it was not the first time Tele- fónica had breached the LDC. Telefónica has appealed against the decision and has obtained a Court order suspending the obligation to pay the fine.

Collective management of intellectual property rights

The TDC has decided on two cases regarding individual exemptions concerning different systems of collective management of intellec- tual property rights. On 22 April 2004, the TDC issued a decision regarding the indi- vidual exemption applied by the Asociación de Gestión de Derechos Intelectuales, the only collecting association for music and video com- posers in Spain, (AGEDI) and by Artistas Intérpretes o Ejecutantes, Sociedad de Gestión de España, the only collecting association for musicians in Spain, (AIE ) to implement a collective management sys- tem for public communication of musical works.

JONES DAY

VELÁZQUEZ 51, 4TH FLOOR 28001 MADRID SPAIN TEL: 34.91.520.39.39 FAX: 34.91.520.39.38 CONTACT: J JIMÉNEZ LAIGLESIA AND RAIMUNDO ORTEGA WEBSITE:WWW.JONESDAY.COM Jones Day's Antitrust & Competition Law practice consists of approximately 100 counsellors and litigators, located in 16 offices in the United States, Europe and Asia. We are recognised in professional publications and rankings as one of the leading antitrust/competition practices in the world. Many of Jones Day's antitrust lawyers have served in senior positions in enforcement agen- cies in both Europe and the United States, and in various professional organisations through-

• ut the world. Several are recognised as among the most prominent and successful

competition lawyers in numerous surveys of their peers. Jones Day has been involved in some

• f the most significant antitrust matters in history, and that pattern has continued in recent
• years. We are privileged to represent both the world's largest companies and innovative small

companies, in industries ranging from media and entertainment to waste disposal, and chip production to automobile manufacturing. We provide antitrust and competition law services with respect to mergers and acquisitions, criminal and civil investigations by government agencies, antitrust litigation, antitrust/intel- lectual property issues, and the full range of counselling subjects (including distribution, elec- tronic ventures of various kinds, pricing, trade associations, licensing, and standard-setting). In Europe and Asia, Jones Day has nearly 40 competition lawyers in Brussels, Frankfurt, London, Madrid, Milan, Munich, Paris, Shanghai and Tokyo. We have significant experience with merger notifications before the EC and national authorities, cartel investigations, the full range of competition issues involving the telecommunications industry, state aids, dominant firm issues, and a variety of counselling issues. We are qualified to and do practice before the Court of First Instance and the Court of Justice of the EC, and national and local courts in most countries where we have offices. 55 Spain sjc 212-214 8/9/04 9:23 am Page 213

SPAIN 214 The European Antitrust Review 2005

The TDC decided that no individual exemption was required since the system was authorised by the Intellectual Property Right Act (LPI). The LPI grants the right to composers and musicians to collect public communication rights. According to the LPI, this right should be made in a single payment to both the composers and the

• musicians. As there is only one association for collection of composer

rights and only one association for collection of musician rights an agreement between these two associations was indispensable in order to collect the rights for public communication of theses artists. On the other hand, in its decision dated 10 May 2004, the TDC decided that the incorporation of a collecting company for the rights

• f press clippings by several publishing groups (Gedeprensa) was a

restrictive practice that did not qualify for individual exemption. The main paper publishers in Spain, Corporación de Medios de Nuevas Tecnologías (Grupo Correo - Vocento: ABC, El Correo and El Diario Vasco), Prisacom, SA (Grupo Prisa: El País, 5 Días and AS), Reco- letos Grupo de Comunicación (Pearson: El Mundo, Marca and Expansión) and Grupo Gódo de Comunicaciones (La Vanguardia) agreed on a system to collectively manage through Gedeprensa the intellectual property rights for the communication of the press clip- pings of their respective publications. The TDC considered that the agreement implied a horizontal collaboration between the publishers that resulted in the implemen- tation of a joint commercial strategy with regard to press clippings. It was expected that the publishers would only grant the right to access to their clippings through Gedeprensa and that Gedeprensa would fix the price for the communication of the press clippings of all the publishers. In addition, Gedeprensa would be allowed to review and audit the accounts of the publishers. According to the TDC decision, that would have led to the foreclosure of the market for the distribution of press clippings of those publishers. Therefore, the TDC decided the agreement was a restrictive practice. While analysing whether the agreement would qualify for indi- vidual exemption, the TDC took into account, among other con- siderations, that no market for the exploitation of press-clipping rights as such existed in Spain and the incorporation of Gedeprensa would create a monopoly for the collection of the rights of the main newspapers in Spain preventing competition in the market. In addi- tion, the TDC considered that the publishers did not demonstrate that the management of the rights through Gedeprensa would be more efficient than the distribution of those products by themselves.

55 Spain sjc 212-214 8/9/04 9:23 am Page 214