On 22 March 2012 after one of the most publicly participated hearings on legal matters that ever took place in Portugal, the Parliament approved the new Competition Act (the ‘Act’).
The idea to revise the existing law was considered for some time, at least since 2008, but it was not until 2011 that it became one of the Government’s top priorities. In the Memorandum of Understanding on Specific Economic Policy Conditionality (MoU), entered into by the Portuguese Government, the European Commission, the European Central Bank and the International Monetary Fund on 17 May 2011, the revision of the current law was elected as one of the structural benchmarks of the financial assistance plan.
The main intentions behind the idea were to make the law as autonomous as possible from administrative and criminal law and more harmonized with the EU competition framework. In particular the MoU sets forth the following objectives: (i) simplify the law, separating clearly the rules on competition enforcement procedures from the rules on criminal procedures with a view to ensure effective enforcement of competition law; (ii) rationalise the conditions that determine the opening of investigations, allowing the Competition Authority to make an assessment of the relevance of the claims submitted; (iii) establish the necessary procedures for a greater alignment between Portuguese law on merger control and the EU Merger Regulation, namely with regard to the criteria for mandatory filing; (iv) ensure more clarity and legal certainty in the application of administrative procedural law in merger control; and (v) evaluate the appeal process and adjust it where necessary to increase fairness and efficiency in terms of due process and timeliness of proceedings.
The Act contains several improvements with regard to the existing law. However, there are reasons to fear that the new legal regime may very well fall short of the proposed objectives and raise a number of other questions.
As regards objective (i), it should be recognized that the creation of a specific competition enforcement procedure with its own rules and with indicative timelines for the conclusion of investigations is a major step forward in terms of legal certainty. The problem, though, is that, whilst instituting a special procedure for antitrust cases allegedly distinct from that of criminal matters, many antitrust matters continue to be subsidiarily governed, although it is far from clear to what extent, by the Portuguese general regime on misdemeanours and the Act awards to the Authority prerogatives which are typically of a criminal nature without due regard to the rights of defence of undertakings and individuals.
For instance, objective (i) is centred on simplifying the law by separating the rules on competition enforcement from those on criminal procedures, but the explanatory statement of the Act provides that there is an intention to safeguard the fundamental principles resulting from the applicable sanctioning legal framework, namely, the general regime on misdemeanours. This is reinforced by several provisions in the Act, according to which the rules on administrative offences apply subsidiarily to antitrust investigations and appeals. And somewhere in the middle, the Act contains both rules that are deviations from the general principles applicable to misdemeanours in Portugal (e.g., the unlimited jurisdiction of the competent courts to review antitrust decisions adopted by the Authority, the fact that the appeal does not suspend the effects of the decision, and the prerogative of the Authority to undertake further investigations and diligences after the issuance of the statement of objections and the exercise of the defence rights by the defendants) and rules that are only used in criminal offences and sometimes only in the most serious ones (e.g., the Authority’s power to conduct searches at home premises and at the offices of lawyers and doctors).
As to objective (ii) of the revision of the current law, essentially, in accordance with the Act, the Authority is no longer bound by the principle of legality in the opening, investigation and sanctioning of antitrust infringements, but instead is allowed to rank differently the priorities in the exercise of its mission. The problem with the opportunity principle is the difficulty to strike a balance between the interest of flexibility in the allocation of resources, on the one hand, and the safeguard of defence rights of complainants and defendants, on the other.
The solutions proposed on the Act aim at combining these two purposes, but it is the application of the principle itself to a national competition authority that raises many doubts. It is easy to understand why the European Commission has to work on an opportunity basis and if it refuses to accept a complaint, the plaintiff may always resort to national competition agencies. This is why it is difficult for a lawyer to accept that these agencies may decide which cases to take right from the beginning solely on the basis of priorities of a different nature or of the information put forth by the plaintiff on its own motion. The fact that, according to the Act, the decisions of the Authority refusing a complaint are subject to judicial scrutiny is not decisive, if, in the first moment, the choice of priorities by the Authority is not itself challengeable. Another potential issue is how exactly the Authority will be able to refuse to open an infringement procedure at the outset, for example, because there is a low probability to prove an infringement or the investigative measures required are too extensive, as is expressly provided in the Act. How is the Authority capable of discerning this without previously investigating? And if indeed it needs to investigate at least at a minimum to decide not to proceed, the fact is that all investigative measures of this nature should be conducted in the framework of a formal infringement procedure, so that companies and individuals are afforded the necessary right of defence.
Regarding objectives (iii) and (iv), dealing with merger control, there are relevant innovations in the Act, such as the elimination of a deadline to submit the filing, the adjustments made in the turnover thresholds in order to adapt them to a new economic reality and the creation, in phase 2 of the proceedings, of a mechanism close to the EU statement of objections.
Conversely, other aspects continue to be specificities of the Portuguese merger control regime, which may generate uncertainties for parties involved in transactions subject to notification. The main concern, in our view, is the difficulty to predict how long the investigation may take, given that any information request made by the Authority stops the clock and there is no limit to the number and length of time suspensions.
Finally, objective (v) of the new Act is about the appeal process, but we do not envisage how the proposed amendments increase fairness and efficiency in terms of due process. The idea itself that there was ever a need to amend the current law to achieve this goal and deter undertakings from challenging the Authority’s decisions in antitrust cases is, in our opinion, misleading. The presumption of innocence and the right to a fair trial are both basic universal principles in democratic societies. Facts also show that in a significant number of antitrust appeals Portuguese courts decide in favour of the appellant and end up quashing, in whole or in part, the Authority’s decisions either on procedural or substantive grounds. This confirms the need to continue keeping effective judicial scrutiny on the Authority’s activity in this field.
The most critical aspect of the Act in this context is for us the fact that appeals in antitrust cases no longer suspend the effects of the Authority’s decisions except in what concerns structural remedies. This goes against all deep-rooted beliefs in both criminal and misdemeanour proceedings and raises serious doubts from a constitutional point of view. Additionally, for the reasons explained in the preceding paragraph, this measure is not even justified from a competition policy viewpoint.
To conclude, the initiative to revise the competition regime was considered a structural benchmark of the financial assistance plan granted to Portugal as a means to foster the speed and effectiveness of the enforcement of competition rules, and thus boost the competitive position of the Portuguese economy. Time and, more importantly, the use that will be made of the new Act will determine to what extent the new Act will be up to these expectations and objectives.
It is also worth remembering that the competition legal framework is only one among several tools capable of contributing to effective enforcement of competition law. As important as the law in books, is the law in action. It is totally incomprehensible that the MoU sets forth specific targets to improve the necessary independence of the national regulatory authorities (including nomination practices, responsibilities, scope of operation, powers of intervention and the respective mechanisms of coordination with the Competition Authority) and, with respect to the Competition Authority, there is only a commitment on the part of the Government to afford it with sufficient and stable financial means to guarantee its effective and sustained operation, with no reference to the strengthening of independence. Hopefully, this aspect will be considered in the context of the undergoing revision of the legal framework of national regulators.
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1 A similar version of this article was published in the International Law Office Competition Newsletter of 1 March 2012, prior to the approval of the new Act.
