Spain | Company director fined for obstructing competition authority

Competition authority sanctions for the first time an individual for obstructing inspections
Spain | Company director fined for obstructing competition authority
April 22, 2022

On March 16, 2022, the Andalusian Competition Council imposed a fine on CORALSUR MANTENIMIENTO S.L. and its sole director for obstructing the inspection that the Andalusian Competition and Economic Regulation Agency (ACREA) was conducting at the company’s headquarters.

The facts constituting the infringement

In July 2021, the Head of ACREA’s Investigation Department ordered to inspect the headquarters of CORALSUR MANTENIMIENTO in the framework of an investigation into potentially anti-competitive behavior in public tenders for the conservation and maintenance of vegetation in medians and road shoulders.

The competition authority had requested and obtained judicial authorization for these searches, which took place in October 2021.

During the raid, the officials requested CORALSUR’s sole director to provide them access to his laptop and cell phone—which he was known to use in his capacity as the company’s sole director. In particular, the cell number appeared as contact information in several procurement files together with the company seal and the director’s email address.

CORALSUR’s sole director argued that the devices were personal and refused access. He did not allow the inspection team to verify that they did not contain information on the relevant business activities. The inspectors included this in their report, and the sole director signed it.

In view of these circumstances, the Head of ACREA’s Investigation Department initiated sanctioning proceedings, without the inspected company or its director making any allegations during the preliminary investigation phase. The Andalusian Competition Council concluded that the denial of access to the cell phone and the laptop “obstructed the inspections, hiding the information contained in them from ACREA’s officials and thus enabling its subsequent destruction.” This constituted a serious infringement under article 62(3)(d) of the Spanish Law for the Defense of Competition (Ley 15/2007, de 3 de julio, de Defensa de la Competencia or LDC).

Liability for the infringement and imposition of fines 

Against this background, unlike in previous cases, the Andalusian Competition Council considered that not only the inspected company was liable for obstructing the inspections, but also its sole director.

The Andalusian Competition Council thus extended the company’s liability to its sole director, considering that “he participated directly and significantly in terms of willful misconduct in obstructing ACREA’s inspections, which makes him liable for the infringement.” 

Therefore, the Competition Council held CORALSUR MANTENIMIENTO and its sole director liable for a serious infringement of article 63(2) LDC. Consequently, it imposed a fine of EUR 67,295.20 on CORALSUR MANTENIMIENTO (equal to 2% of its worldwide turnover) and of EUR 10,000 on its sole director. 

Comments

Competition authorities’ inspection powers are quite broad (art. 40(6) LDC), even more so after Spain’s transposition of the ECN+ Directive (as explained here). Although personal information and devices are beyond the scope of these powers, inspection teams are entitled to minimally verify that a device does not contain commercial or business information that the company is trying to hide.

As regards the sanction imposed on the company director, national and regional competition authorities have increasingly resorted to the power to impose fines on legal representatives or persons who are members of management bodies for their participation in anti-competitive conduct (as we have pointed out, for example, here). However, until now, individuals had not faced fines for obstructing inspections—only the inspected companies did. Obstruction proceedings are not frequent. In fact, the Spanish National Commission for Markets and Competition has not initiated any in recent years, so it remains to be seen whether this decision is an isolated case or whether, on the contrary, it will set a precedent for other authorities. 

Regardless of its potential judicial review, the decision of the Andalusian Competition Council underlines the relevance of the general recommendation—in the framework of a competition inspection—to refrain from any action that could be construed as obstruction, which includes allowing a minimum visual check of personal devices. To facilitate this task, it is also advisable to identify and adequately separate personal information and devices.

This is particularly important now that, following the transposition of the ECN+ Directive, obstruction of inspections has become a serious infringement under the LDC—and therefore maximum fines have increased from 1% to 5% of the company’s worldwide turnover. In addition, as it seems, managers and legal representatives now face personal liability for obstructing inspections through their own actions.

April 22, 2022