SPAIN: An Introduction to Competition/European Law

Spain: An Introduction to EU Law 

2023 has been an intense year in the EU from a regulatory standpoint. A number of significant regulations have been approved and several important judgments have been issued (some of which arise from preliminary rulings referred by Spanish courts), that affect both the legal profession and clients.

Matters of EU law that affect the legal profession

The debate surrounding the definitions of “professional secrecy” and “legal privilege” is a key consideration for legal professionals. Legal privilege and professional secrecy are not identical in all jurisdictions. Therefore, the definition of these concepts is particularly relevant within the EU and, for example, in the context of inspections carried out by the Commission regarding competition law and document confidentiality.

Additionally, the reform of the Statute of the Court of Justice of the EU is significant, as the General Court will be empowered to hear preliminary rulings in certain areas. Legal professionals should pay special attention to the extension of the pre-filtering mechanism to appeals against judgments of the General Court and the publication of pleadings after the judgment in preliminary ruling proceedings.

Matters of EU law that affect clients 

From a cross-cutting perspective, the new regulations on digital transformation, the DSA (Regulation (EU) 2022/2065) and the DMA (Regulation (EU) 2022/1925), are bringing about significant changes in the business landscape, compelling companies to understand their implications for day-to-day transactions, client relationships and supplier dynamics. It is worth asking whether any sanctions will be imposed under these regulations in 2024. Moreover, the regulation of artificial intelligence assumes critical importance, ensuring better conditions for its development while also imposing obligations on providers and professional users.

In the area of litigation, Directive (EU) 2020/1828 on representative actions promises substantial changes in mass litigation practices. In Spain, the Directive is yet to be transposed. However, once adopted, the new legislation is likely to increase such actions against companies in sectors that have suffered “massive litigation” and will highlight the role of third-party funding.

Companies must also pay attention to developments in case law concerning the interpretation of the Directive on damages (Directive 2014/104/EU), especially following preliminary rulings referred by Spanish courts concerning the so-called “Trucks Case” (Case C 312/21). The expected reform of the current regime of civil liability arising from defective products will also have important implications for business, as it completely overhauls the existing framework.

At the sector level, Financial Regulation requires special attention from companies in their relations with European bodies and institutions. Similarly, issues arising from the Single Supervisory Mechanism and Single Resolution Mechanism remain relevant as the Commission has recently adopted a proposal for reform of bank crisis management and the deposit insurance framework that draws on the lessons learned from the first years of application.

In the area of consumer protection legislation, important judgments have been issued and some are still pending. It should be noted that the CJEU has recently ruled on the commencement of the limitation period for actions for the restitution of mortgage charges (Case C 810/21). In addition, an important ruling is expected on the scope of transparency control in the context of collective actions that may set guidelines on the necessary homogeneity to exercise this type of action, following a preliminary ruling referred by a Spanish court (Case C-450/22).

Ultimately, this legislative environment underscores the importance of staying informed and keeping pace with legislative reforms and new developments in EU case law. Proactive adaptation to these changing circumstances is essential for companies that must rely on legal professionals to operate within the national and European legal framework.

Spain: An Introduction to Competition Law 

Current economic conditions affecting clients or the legal profession

Although commonplace, the environment is heavily influenced by the uncertainty around inflation levels and their impact on our clients’ investment decisions. Cost pressures have been transferred from firms to their legal counsel, who had to lower their expectations when deciding how much work to outsource to law firms or other legal service providers in 2023. The challenges facing law firms have not changed much in recent years: the challenge of attracting and retaining talent, undertaking appropriate digital transformation, or keeping up with the market’s ESG demands. At the same time, firms are experiencing significant cost increases due to rent indexation, rising energy and transportation prices, and the escalating cost of services.

It is worth highlighting the increase in policies to attract and retain talent by developing flexibility and promoting work-life balance through hybrid models and, in some cases, an increase in annual leave, the introduction of real training and constant development plans that individually enhance the skills of each professional and the application of legal technology through the use of digital and updated tools that allow professionals to optimise their time and workload.

The digital transformation is still in its infancy and we are awaiting the definitive arrival of generative artificial intelligence (nowadays digital means simultaneous translation and obtaining data by identifying key aspects in contracts).

All this has affected levels of activity in mergers and acquisitions, which in Spain are highly dependent on sectors such as real estate and energy, with telecoms also playing an important role. Spain does not yet have a very strong technology industry, and this severely limits activity in this area.

The level of activity, trends and developments in your area

Since the beginning of Cani Fernández’s mandate in 2020 as the President of the Spanish Competition Authority (the “CNMC”) and based on publicly available information from the CNMC:

• The number of authorised mergers in 2021 and 2022 amounted to 104 and 94 respectively, in comparison to the 70 approved mergers for 2020 and the 86 for the year 2019.

• Since the start of Fernandez’s mandate, there have been four Phase I merger authorisations with remedies, five Phase II initiations and four Phase II authorisations with remedies in 2021 in addition to four Phase I authorisations with remedies and Phase II initiations in 2022.

• In 2020, the CNMC launched 22 investigations for “gun-jumping” practices, added to 18 new investigations that followed in 2021. As a result of these investigations, in 2021 the CNMC fined three companies that should have notified the CNMC about their mergers for exceeding the market share threshold.

• In 2022, the CNMC fined two companies in the funeral services sector a total of €385,000. In addition, two disciplinary proceedings in the same year were held against two companies operating in the markets for call termination in a fixed network and electricity distribution in a municipality in the province of Orense respectively.

• Between 2020 and 2022, the CNMC imposed fines totalling EUR515,040,237, as a result of three sanctions from 2020, seven sanctions from 2021 and eight sanctions from 2022.

New legislation that will influence clients

Legislation:

• Royal Decree-Law 5/2023, which introduced some substantive and procedural changes to Law 15/2007, of 3 July, (the “Spanish Competition Act”). The main changes include the following:

In the context of disciplinary proceedings 

o The time limit for submitting claims to the statement of objections and to the resolution proposal was increased from 15 days to one month. 

o The time limit for the resolution of disciplinary proceedings increased from 18 to 24 months from its start date.

In the context of merger control 

o A time limit of 15 days for issuing a decision in transactions notified using the simplified procedure (and including the pre-notification phase) was established. 

o The time limit for issuing phase II decisions was increased from two to three months.

o A time limit of one month for issuing a decision in transactions notified using the preliminary consultation was established.

Soft Law: 

• Communication 1/2023, of 13 June 2023, of the CNMC, on the criteria for the determination by the CNMC of the ban on public procurement on grounds of distortion of competition.

o From the publication of the Communication on 23 June 2023, the CNMC intends to determine directly in its decisions the scope and duration of the ban on public procurement so that the ban can be in effect from the date on which the sanctioning decision becomes effective. This competence of the CNMC is currently under judicial review in Spain.

• Guidelines on quantification of damages in private actions for competition law infringements.

o The CNMC published a guide on quantification of damages in private actions for competition law infringements on 11 July 2023 (the “Guide”). It is a response to the increase in private actions proceedings for competition law infringements in Spain since the entry into force of Directive 2014/104/EU. It aims to facilitate the most complex part of consecutive claims proceedings: the quantification of the damages.

o Based on its experience, applicable legislation, and case law, as well as existing economic and legal literature, the CNMC incorporates quantification criteria from the European Commission’s 2019 Practical Reference Guide. It provides common guidelines for the calculation of damages in antitrust proceedings.

o It also includes a section on the assessment of expert reports, with checks on quantification methods, a glossary, and a practical example. It highlights the importance of the new procedural mechanisms introduced after the transposition of the Damages Directive, such as access to sources of evidence under Article 283 (a) of the Spanish Civil Procedure Act, to assist potential claimants in the preparation of damages actions.

Potential hurdles or difficulties faced by clients and how these can be overcome

Practical challenges have emerged in determining eligibility for civil actions stemming from competition law infringements in Spain. Complexities arise when claims are based on non-final administrative decisions under appeal, affecting the burden of proof and procedural rules. Questions arise regarding the adequacy of legal instruments to resolve conflicts and the advisability of suspending civil proceedings pending final decisions.

The General Court of the European Union (the “GCEU”) upholds the European Commission’s (the “EC”) new policy of allowing mergers that do not meet any Member State’s thresholds but affect trade between Member States to be examined and cleared, meaning that companies must obtain EC clearance before executing the merger to avoid gun-jumping fines, such as the one faced by pharmaceutical company Illumina for its acquisition of Grail (Judgment of the GCEU, 13 July 2022).

A new classification of claims called “hybrid” or “mixed” actions has been developed. These actions refer to formal follow-on claims, filed after an administrative decision, but without a link to the civil jurisdiction because the decision is not final and is being challenged. Examples of this situation can be found in rulings such as that of Court No. 3 of Barcelona of 12 June 2023.

From a more conceptual perspective, a potential challenge can be found in the coexistence of competition with other objectives, such as the digital and ecological transition, the strengthening of the single market and the monetary union, the sustainability of the banking sector and the adoption of measures against selective tax advantages.

Finally, it must be taken into consideration that clients will increasingly have to operate in a context of regular cooperation between European, or even global, competition culture and national competition authorities. At some point, bilateral and multilateral cooperation on a global scale through a permanent and constructive inter-institutional dialogue might play a significant role.