Most relevant aspects of Competition Law  

What are the most relevant aspects of Competition Law? In 2020, the CNMC accumulated judicial sanctions for more than 1,200 million euros. The consequences derived from the infringement of competition law do not only have an economic aspect. Anti-competitive conducts are typified in the Penal Code. They form part of the offenses that can be imputable to legal entities. These infractions can entail the criminal liability of commercial companies.

In this article we intend to make an approach to the most prosecuted conducts by the Defense of Competition. As well as the most relevant aspects of the same.

Basic concepts in competition law

Relevant Market. The delimitation of the relevant market is fundamental to assess whether or not a conduct may be anticompetitive. This term makes it possible to determine the competition between the companies operating in the market, to see their position and their market share. This delimitation is usually marked by two variables: product and geographic scope. The analysis of the product on the market verifies the totality of the products accessible to the consumers, and their degree of interchangeability. The geographical scope refers to the area in which the companies carry out their activities.

Restriction to free competition. This is the limitation of a company’s freedom of action in the market. Companies must act independently, deciding their business policies individually. Some of the conducts that restrict competition, are:

1. market-sharing agreements between two or more companies
2. the fixing of resale prices or boycott of a third party
3. horizontal agreements or cartels
4. restrictions on the production or distribution of products

Collusive practices. All agreements (of any kind) that prevent, restrict or distort competition.

Horizontal and vertical agreements. Competition law distinguishes between these two types of agreements when analyzing anticompetitive practices between companies. In this sense, agreements between competing companies are considered horizontal. Agreements between non-competing companies, for example, within the same production or distribution chain, are considered vertical.

Main Competition Risks

• Cartels are all those agreements between two or more competing companies to coordinate their behavior in the market. They can be horizontal agreements to fix prices, market sharing agreements, production limitation, etc.
• It is common for companies in the same sector to associate in what are known as Business Associations. The main risks of these associations, which considerably affect competition, are: (i) exchanges of sensitive information, and (ii) fixing prices or conditions among competitors, among others.
• Abuse of a dominant position. Dominant position, in itself, is not a prohibited conduct. The aim is to prevent the abuse of a dominant position by those who have it.  Abuse is understood as the use of economic power to distort competition. For example, one of the most persecuted practices is the so-called “predatory pricing” “selling below cost”. The dominant company deliberately incurs losses, excluding its competitors from the market.

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Internal competition controls

As we have indicated at the beginning of this collaboration, the anticompetitive consequences are both economic and criminal. It is therefore advisable for criminal risk prevention programs to include a competition control. Among the main measures, we highlight the following:

• Policies to prevent the flow of sensitive information in business cooperation agreements.
• Action protocols in the participation of associations or professional associations.
• External and internal communication policy, with competing companies, producers or distributors.
• Leniency program, when a competition irregularity is revealed.

Conclusions

Anticompetitive agreements are usually kept secret, among a very small number of people. Sometimes the anticompetitive conduct may be occurring outside  any higher body of the Company. The conduct of a single employee with the competition, manipulating prices, can expose an entire Company. Carrying with it significant economic and criminal consequences. But not everything happens in secret. Sometimes, companies, in business development, are not aware of possible non-compliance in competitive matters. Mere sectorial declarations, or nomenclatures in contracts, for example, UTEs, AIEs, can give rise to serious competitive breaches. The infringement can be committed either willfully or negligently. Any preventive policy, employee training, is necessary to avoid incurring in anti-competitive practices that can make a business disappear.

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Non-competition and permanency agreement