On April 28, 2021, Spain passed Royal Decree-Law 7/2021 (“RD-L 7/2021”) transposing Directive (EU) 2019/1, of the European Parliament and of the Council of December 11, 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 (the “ECN+ Directive”). RD-L 7/2021 modifies various provisions, including Law 15/2007, of July 3, for the Defence of Competition(“LDC”).
The ECN+ Directive is aimed at correcting the system’s shortcomings, which have led to the uneven enforcement of articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”). The ECN+ Directive seeks to ensure that national competition authorities (“NCAs”) have the necessary independence, resources, and enforcement and fining powers to apply these articles effectively. For more information on the ECN+ Directive, see our blog entry here.
On July 31, 2020, the Government presented the Bill to amend the LDC (the “Bill”) for the transposition of Directive ECN+. The aim of the Bill was to transpose the ECN+ Directive and, in addition, to take the opportunity to modify other competition provisions not directly related to the transposition.
The long-awaited reforms proposed in the Bill, as well as the transposition of the ECN+ Directive, were expected by early February 2021, i.e., the transposition deadline. The modifications provided by RD-L 7/2021 have not been as far-reaching as the proposals included in the Bill.
We list below the most remarkable modifications proposed in the Bill that were ultimately included in the LDC reform:
- All anticompetitive agreements (article 1 LDC) and abuse of dominance practices (article 2 LDC) will be qualified as very serious infringements. The fine for these infringements will now be up to 10% of the infringer’s total worldwide turnover. Note that vertical agreements and certain abuses of dominance used to carry a fine of up to 5% of the company’s turnover.
- There will be a new specific procedure to interrupt the statute of limitations periods due to actions by other NCAs, the European Commission (“EC”) or judicial authorities.
- There will be more extensive and more specific information and cooperation requirements, and the NCAs will have further inspection powers. NCAs will be expressly allowed to interview representatives and natural persons from the companies under investigation.
- The maximum amount of the fines will now be based on the relevant company’s total worldwide turnover.
- The Bill introduces adjustments regarding (i) the amount of periodic penalty payments, going from a maximum daily limit of EUR 12,000 to 5% of the average daily total worldwide turnover; and (ii) the infringements that carry these penalties.
- The Bill introduces markers (for a place in the queue for leniency) in applications for immunity from fines while the applicant submits the necessary information and evidence.
- The National Commission for Markets and Competition (“CNMC”) is empowered to decide not to initiate investigation proceedings if it considers that certain facts are not a priority and includes, without being exhaustive, prioritization criteria for the CNMC to reject complaints.
The LDC reform has not introduced other more significant modifications proposed in the Bill, including:
- Raising the maximum amount of the fines on legal representatives and managers from EUR 60,000 (i.e., the amount under the applicable legislation) to EUR 400,000;
- Introducing a new settlement procedure providing companies under investigation with a 15% fine reduction in exchange for admitting the infringement; and,
- Extending the maximum duration of infringement proceedings from 18 to 24 months.
The preamble of RD-L 7/2021 states that the EC has initiated infringement proceedings against Spain for missing the deadline to transpose the ECN+ Directive, since the transposition deadline was February 4, 2021.
To avoid being brought before the Court of Justice of the European Union, which would declare Spain’s infringement, Spain has passed a royal decree-law, relying on an “extraordinary and urgent need,” to transpose the ECN+ Directive. This will allow Spain not to be subject to the EC’s infringement proceedings.
The preamble of RD-L 7/2021 also adds that the full transposition of the ECN+ Directive requires some minor modifications not included in the LDC, since there was a decision to transpose certain matters through a regulatory provision. Therefore, RD-L 7/2021 proposes to modify (i) various articles of the Competition Regulation passed through Royal Decree 261/2008, of February 22; and (ii) Royal Decree 2295/2004, of December 10, on the enforcement of EU competition provisions in Spain. These modifications cover matters such as the implementation of cooperation principles or leniency applications.
Regarding the cooperation principles, the CNMC will be competent to collaborate with the EC and NCAs on inspections and other investigative powers, also in accordance with the ECN+ Directive. As for leniency applications, there is a proposal to introduce markers (for a place in the queue for leniency) in applications for immunity from fines while the applicant submits the necessary information and evidence.
In any case, we expect a new LDC reform to include some of the modifications proposed in the Bill, such as introducing the settlement procedure.
See the full text of RD-L 7/2021 here.