Introduction
The competition authority has new statutes, following the recent entry into force on 1 September of Decree-Law No. 125/2014, 18 August. This act brings about a number of changes vis-à-vis the previous statutes — defined by Decree-Law No. 10/2003, 18 January — but, as one would expect, does not detract too far from the legal discipline of the framework law on independent administrative authorities, approved by Law No. 67/2013, 28 August, still under the scope of the economic and financial assistance program. It is worth analysing carefully some of the main changes.
Internal organisation
In respect to the Authority’s administrative bodies and staff, the most relevant modifications arise essentially as a result of the adjustments that were made to comply with the new rules of the framework law of regulatory authorities.
Firstly, in a welcomed effort of accountability, the appointment of members to the Authority’s board is now subject to a set of formal and substantive requirements that strengthen the legitimacy and independence of those who are entrusted with these important functions.
In practical terms, these members shall be chosen from persons with recognized integrity, technical competence, ability, professional experience and adequate training. The appointment proceeding includes a preliminary parliamentary hearing and is completed with the respective nomination by means of a reasoned decision from the Council of Ministers. In case of simultaneous designation of two or more board members, the term of their respective mandates must be staggered by at least six months, with a view to accommodate different sensitivities and experiences at the Authority’s highest level of governance. Another innovation is the need to ensure that the function of chairman of the board is alternatively performed by persons of each gender and that the remaining functions of member of the board are ensured a minimum representation of 33% of each gender.
The mandates of the members of the board of the Authority shall have a non-renewable duration of 6 years. In the current mandates, the duration is 5 years, renewable once. Under the new statutes, the current mandates shall remain in force for the term initially set, but there is no possibility of renewal.
The second organisational aspect which, in our view, deserves closer scrutiny concerns a feature that has been significantly amended vis-à-vis the previous statute.
Under the by-laws of 2003, in the two years following the term of their mandate, board members could not establish any ties or enter into any professional relationship, whether compensated or not, with entities that during their mandate had participated in concentrations subject to the Authority’s jurisdiction and had been subject to proceedings arising from anticompetitive behaviours. As a way to compensate for this impediment, such members were entitled to an allowance, precisely in the two years following the termination of their mandate, equivalent to two thirds of their respective remuneration. This compensation would cease from the moment they were hired or appointed to any remunerated public or private post or function.
In the framework of the new statutes, the range of incompatibilities and impediments was significantly strengthened, not only at the level of the board, but also with regard to the remaining staff (directors or equivalents and employees), to an extent that may be questioned from the perspective of the proportionality of the solutions at stake vis-à-vis other conflicting rights.
For instance, all the Authority’s staff (board members, directors or equivalents and employees) is now prevented from holding, for the entire period in which they exercise their functions, any shareholdings or interests in any company or association of companies. In theory, this constraint might make sense in the case of sectoral regulatory authorities, especially if the ban is directed against the regulated companiesin the sector concerned. However, in the particular case of the Authority — that is not even a real classical regulatory authority — the practical implications of this rule, if enforced in all its extension, appear to go considerably beyond what would be necessary, appropriate and proportionate to meet the requirements of independence and impartiality.
All the more, there is a considerable disparity that is hardly comprehensible between the regime of incompatibilities and impediments as applied to the members of the board and that imposed on the remaining staff. The framework law on regulatory authorities provides that the incompatibilities and impediments at stake will only apply to the members of corporate bodies that shall be appointed under the framework law. This means that such constraints are not immediately applicable to ongoing mandates of the Authority’s board members. Conversely, for directors or equivalents and employees the same framework law determines that, should there be a mismatch or an impediment as a result of the amendments brought about in this field, this group of employees will have to put an end to such situations within 6 months or to terminate their contracts.
Similarly, in the period after the termination of service, the prohibition to establish professional or contractual relationships with companies that had participated in cases conducted by the Authority is now also extended to directors or equivalents (unlike the previous statutes, where this impediment only caught board members). With regard to the board members, the law still provides for a compensation equivalent to 50% of their previous monthly salary during the 2-year moratorium, but the directors or equivalents are not awarded a similar prerogative. This seems to be an unjustified solution, likely to constitute a deterrence to attract qualified and experienced staff for senior management positions.
In any event, the Authority’s statutes ultimately did not replicate the penalty that the framework law on regulatory authorities foresees for breaches of this ban by directors or equivalents, which is the obligation to return all net remunerations perceived in the performance of the previous functions, up to a maximum of 3 years. In respect to board members, the statutes contemplate a serious penalty in case of non-compliance with the ban, consisting in the obligation to refund the amount equivalent to all net remunerations received during the period in which they exercised functions.
Again, and taking solely into account the situation of the Authority (public body with jurisdiction over all companies that carry out an economic activity with some degree of connection with the Portuguese territory), the outcome appears to be inadequate from the viewpoint of the standards of quality and professionalism that are required to attract top experts.
Extraordinary appeal in the merger field
Similarly to the previous statutes, Decree-Law No. 125/2014 kept, as an historical remnant, the possibility of the Government to overcome a block decision of a concentration issued by the Authority within some constraints. This is an exceptional expedient inspired by the German merger control regime, which has only been used once in Portugal against a decision by the Authority when in 2006 the former Minister of Economy approved the acquisition of Auto-Estradas do Oeste and Auto-Estradas do Atlântico by Brisa.
The provision of the current statutes that governs this extraordinary appeal was slightly amended with the purpose of strengthening the atypical feature of the measure. Hence, it now follows more clearly from the wording of the law that the reverse decision can only be taken ‘exceptionally’. The grounds for the decision of the Government remain the existence of benefits resulting from the merger for the attainment of fundamental interests of the national economy capable of overriding the competitive shortcomings resulting from its implementation. The addition of the (somehow tautological) requirement that such interests, apart from being fundamental, need also to be ‘strategic’ can only serve the useful purpose of ‘tightening’ the conditions for approval of this type of operations.
From a procedural point of view, the extraordinary authorisation decision is now up to the Council of Ministers, upon proposal by the Minister of Economy, when previously this decision was solely incumbent upon the latter. In the previous wording of the statutes, the Government was given the option to subject the clearance decision to conditions and obligations aimed at mitigating the negative impact of the transaction on competition. Under the new version, it seems that the imposition of such conditions and obligations is mandatory, and the same goes for the requirement of full publication of the decision in the official gazette.
Transparency of the Authority’s action
A final note to point out is that the new statutes also take an important step to deepen the effort of transparency in the Authority’s actions, which is a key element to spread and consolidate a culture of competition, compliance, and legal certainty.
For example, there are now specific provisions ‘legalising’ the best practice to conduct public consultations prior to the adoption or amendment of any regulation having external effectiveness, in principle for a period of not less than 30 days. Also, the electronic page of the Authority must provide, on a continued and updated basis, a wide range of legislative, regulatory and administrative elements, as well as administrative and judicial decisions, which are essential for an accurate advocacy of the ‘rules of the game’.
