Spanish Constitution: Free Competition & Limitations

• Article 38 of the Spanish Constitution recognizes freedom of enterprise within a market economy.
• Businesses compete for consumers in a competitive market.
• Consumers freely choose the best offers in a competitive market.
• Free competition is crucial for a market economy, leading to efficiency, innovation, and benefits for consumers.

Limitations to Free Competition

• Competition is desirable but not absolute.
• Government planning regulates some sectors, examples are price control and licensing requirements.
• Deregulation efforts have occurred in telecommunications, energy, and transport.
• Monopolies eliminate competition.
• Historically, Spain had state-established monopolies on products like salt and matches.
• Oligopolies, where a few firms dominate, can act like monopolies through collusion.

Anticompetitive Conduct by Business

• Collusive agreements involve businesses coordinating to avoid competition, for example price-fixing agreements.
• Abuse of dominant position occurs when a leading firm uses unfair practices to eliminate competitors.

Differences Between Competition Defense and Unfair Competition

• Competition defense laws (antitrust) protect overall market competition.
• Unfair competition laws protect individual businesses from dishonest competitors.
• Antitrust laws are enforced by the state through administrative penalties, but may allow for private actions for damages.
• Unfair competition laws are enforced through private lawsuits, like civil claims for damages.

Competition Authorities

• The European Commission enforces competition rules at the EU level.
• Critics argue that the European Commission's decisions are sometimes politically motivated.
• Since 2004, national competition authorities can enforce EU competition law, per Regulation 1/2003.
• In Spain, competition law enforcement was centralized under the National Markets and Competition Commission (CNMC) in 2013.
• Some regions have regional authorities, but their powers are limited.

CNMC’s Powers

• CNMC investigates and fines companies for antitrust violations.
• CNMC reviews mergers and acquisitions to prevent market dominance.
• CNMC operates independently from the government.
• Major cases decided by CNMC go to the Council of Ministers.

Collusive Practices (Cartels and Agreements)

• Article 101 TFUE and Article 1 LDC (Spanish competition law) prohibit collusion.
• Prohibited activities include price-fixing agreements, like when cement manufacturers agree on prices.
• Other prohibited activities include production or distribution limits, like restricting product availability, and market sharing, like dividing customer territories.
• Prohibited activities also include applying unfair conditions to buyers/suppliers.

Consequences of Collusion

• CNMC or the EU Commission can impose fines up to 10% of the company’s global revenue.
• Contracts resulting from collusion are void.
• Victims, including consumers and rival businesses, can sue for damages.
• Legal right to sue for damages was established since Directive 2014/104/EU.

Abuse of Dominant Position

• Dominance isn't illegal, but abusing it is.
• Article 102 TFUE and Article 2 LDC prohibit unfair pricing, discriminatory pricing, and tying contracts.
• Tying contracts force buyers to purchase an unwanted product, usually as packages.
• Refusing to supply essential goods/services is prohibited.
• Microsoft faced a €497 million fine in the EU for bundling Windows Media Player with Windows.

Mergers and Acquisitions

• Mergers can improve efficiency but can also reduce competition.
• The EU and Spain regulate mergers to prevent monopolistic power.
• Regulation 139/2004 (EU) dictates that the European Commission reviews large, multi-country mergers.
• CNMC Spanish Law (LDC Article 8) reviews mergers if the new company would control over 30% of the market or the companies involved have over €240M in combined sales in Spain.

Approval Process for Mergers and Acquisitions

• Companies must notify CNMC or the EU commission.
• Authorities analyze market impact.
• Authorities can reject, approve with conditions (e.g., selling off assets), or approve the merger.

Controversial Cases of Approval Process

• Antena 3 & La Sexta merger rejected by CNMC in 2013 but approved by the Spanish Government.