Competition Law: Prohibited Conduct and Enforcement

Posted on Dec 9, 2024 in Law & Jurisprudence

Prohibited Conduct

Agreements or Concerted Practices

The Law on the Defense of Competition (LDC) prohibits all agreements, decisions, concerted collective recommendations, or consciously parallel practices that are directed at, produce, or can produce the effect of preventing, restricting, or distorting competition in all or part of the national market. The law seeks to understand any agreement of wills between enterprises to limit, prevent, or distort competition in any way, provided that it is affected in a meaningful way.

The law sets out a series of cases of prohibited conduct:

  • Price fixing
  • Limiting or controlling production or distribution
  • Market sharing
  • Application of dissimilar conditions to equivalent transactions

It also establishes the automatic nullity of agreements, decisions, and recommendations prohibited by law.

Abuse of Dominance

The law also prohibits the abuse by one or more businesses of its dominant position in all or part of the national market or the state of economic dependence in which their customers or suppliers may find themselves. In this way, it introduces a means of controlling the concentration of businesses and the performance of the company that has achieved dominance in the market.

The law defines a dominant position but provides a number of examples of such prohibited conduct.

The abuse may take the form (section 6.2) of:

  • Imposition of prices or other unfair trading conditions
  • Limitation of production, distribution, or technical development to the unreasonable prejudice of companies or consumers
  • Unjustified refusal to meet purchase demands
  • Application of dissimilar conditions to equivalent transactions
  • Unilateral breach of the business relationship without notice
  • Etc.

The abuse of dominance may occur even when the market dominance has been established by law or is the result of a legal monopoly.

Distortion of Competition by Unfair Acts

Acts of unfair competition may come to distort competition. To address this, Act 3/1991 on Unfair Competition was passed, but acts of unfair competition are also relevant to the Law on Competition.

Assumptions of unfair competition:

  • To be aware of the Court of Competition:
    • When the act of unfair competition seriously distorts conditions of competition in the market
    • When that serious distortion affects public order
  • Courts should know all other cases

Actions, Administrative Organization, Procedures, and Sanctions

Bodies Monitoring the Application of Competition

Court of Competition

  • Declares what conduct is prohibited or not (whether they are invalid or not) and which can be authorized
  • Issues reports, adopts agreements
  • Is a court and its decisions are final, are appealable in contentious-administrative proceedings

Service of Competition

  • Is an administrative body
  • Has a work of surveillance, investigation, and inspection
  • Its functions are:
    • Instruction of records
    • Surveillance of implementation and enforcement of judgments of the Court of Competition
    • Study of economic sectors, analyzing the degree of competition in each

Registration of Competition

  • Is public
  • Records the agreements, decisions, recommendations, and practices that the Court has authorized and declared that all or part are prohibited
  • Also enrolls the merger of companies

Procedure

The LDC distinguishes between the initiation and instruction of the procedure, which corresponds to the Service of Competition (SDC), and the resolution of the case, which corresponds to the Court of Competition (TDC).

Once the file is submitted, the SDC may propose to the TDC the necessary precautionary measures to ensure the effectiveness of the decision rendered.

The administrative procedures relating to competition are governed by specific legislation and, in a supplementary manner, by Law 30/1992.

Penalties

Violation of Law 16/1989 produces the following sanctions:

  • The Court may impose on undertakings fines of up to 901,518 Euros, which can increase by 10%. The amount is determined according to the scale of the offense.
  • Legal representatives or the persons serving on the boards of the company may be fined up to 30,050 euros (excluding persons who had not attended the meetings or who had voted against).
  • Article 11 provides that the TDC may impose coercive fines to oblige the operators concerned to cease a prohibited action.
  • This penalty system is completed by the action of compensation for damages.
  • Such infractions expire after 4 years, counting from the time the offense was committed.