April 20, 2006 - Portugal
“Who's Afraid of The Big Bad Wolf?” The Portuguese Competition Authority Recent Activity
by Ms. Maria Melícias
The Portuguese legal system has had a competition law regime in force for more than two decades. Nonetheless, only recently did economic agents begin to show more awareness towards its existence, that is to say, to feel its effects. Certain factors have strongly contributed to the aforementioned circumstance, namely, the level, without precedent, of the investigation and sanctioning powers granted to the Portuguese Competition Authority (Autoridade da Concorr¨ºncia, hereinafter ¡°AC¡±) and the fact that, during the three years of its young existence, this entity has not shown any hesitation to make vigorous use of them. Just to mention a few examples: In 2004 and 2005, the AC applied the highest penalties ever in Portuguese competition law history (it should be noted that the penalties are now calculated, such as in EC Competition Law, on the basis to the annual turnover of the companies involved and can amount up to 10% of such value). A number of pharmaceutical companies were fined in more than nineteen million euros, for alleged price fixing within hospital tenders (one of those companies was even applied the maximum fine). The grinding industry was also targeted by the AC, with the application of a penalty of approximately nine million euros. Last December, several companies of the Pharmacy's National Association were subject to simultaneous inspections by the AC's agents. The first company to receive a visit of the AC (commonly known as dawn raid, because it usually happens without prior notice, at the first crack of light) had been Portugal Telecom¡, in 2004, due to suspicions of abusive practices in relation to interconnection prices. The AC rejected two concentrations, because they were deemed to create or strengthen dominant positions that could significantly restrict competition on the national market, as regards passengers collective transports and fuel supply in ports, respectively. In addition, the AC has promoted the organization of in-depth sectorial studies on markets regarded as essential for the national economy, so as to guide its future actions in that respect (such as energy, telecommunications, distribution of fast moving consumer goods, cement, wood pulp, liberal professions and supply of medicines). As to markets where the lack of competition dynamics is more due to the legal framework than to companies behavior, the AC has issued a set of recommendations to the Government, in order that administrative or legislative measures, which are further in accordance with the principle of a free market economy, are adopted (v.g. fuels, supermarkets, gas, pharmacies, etc.) Besides the intensive work illustrated above, the ability revealed by the AC to publicize its activity, which has even led it to reinforce its resources in communication and press assistance, has certainly contributed to bring competition to the spotlight, not only to companies but also to the general public. In a country characterized by a significant deficit of competition culture, one might say that these are just the first steps. Certain conducts currently qualified as hardcore anticompetitive practices such as price fixing or quota allocation between competitors have been, in a not too distant past, encouraged or promoted by the economic intervention of the State itself (which simply decided who was supposed to produce what and at which price). Such measures were regarded as beneficial to the social welfare, since they were deemed to promote desirable market stabilization. Such past has left vicious habits in multiple sectors. The announced future approval of a ¡°leniency program¡± in Portugal will further increase the likelihood of detection of serious anticompetitive arrangements, since such program will encourage the involved parties themselves to denounce such arrangements to the AC, in exchange for immunity from fines. The program will thus constitute a strong instrument in the AC's fight against the most pernicious forms of competition law infringements and, usually, also the most difficult to detect secret cartels. In short, the effective enforcement of a competition policy in Portugal requires economic agents to carry out a serious self-evaluation of their commercial practices, unless they rather be one day caught off guard by the visit of the big bad wolf.