Portuguese Competition Authority imposes unusual fine for non-authorised concentration

Like the EU system, the Portuguese merger control regime is based on an ex ante assessment system, whereby a concentration that meets the relevant thresholds (of turnover and/or market share) is subject to prior mandatory notification and (safe for exceptional circumstances not dealt with hereunder) cannot be implemented without the necessary clearance. Non¬compliance with this requirement is subject to a potentially heavy fine (up to 10% of the previous year’s turnover) and other financial penalties, and the underlying transaction is considered by law to be deprived of legal effect. The PCA is entitled to initiate ex officio investigations regarding non-notified concentrations and to order the parties to present (late) notifications.

Over the past 10 years, the filing of notifications triggered by ex officio proceedings has been a common feature of the Portuguese competition landscape. In contrast, the imposition of fines for failure to notify has remained rare: the last reported fines for failure to notify were issued in 2003/2004 and concerned breaches of the notification duties arising from the 1993 Competition Act (in force until June 2003). The fines applied have ranged from €1,000 to €75,000.

In this context, the PCA’s recent decision to fine the National Pharmacy Association (“ANF”) and two subsidiaries a total of €149,278.79 for implementing a concentration without the necessary prior authorisation is of interest and may indicate a shift from the approach endorsed so far (which privileged the detection and remedying of breaches over their sanctioning).

The concentration dated back to 2008 and concerned the indirect acquisition of control over publicly listed Glintt (previously named ParaRede) by the ANF Group via its subsidiary Farminveste – Investimentos, Participações e Gestão, SA by way of the merger of Farminveste’s subsidiary Consiste into ParaRede/Glintt. Even though, post-merger, Farminveste did not gain the majority of share capital and voting rights in Glintt (in absolute terms), the PCA considered – pursuant to information and clarifications provided by the parties - that Farminveste enjoyed sole control over the Glintt, in particular in light of:

• Farminveste’s high percentage of share capital and voting rights (respectively, 49.73% and 49.83%) when compared to all remaining qualified stakeholdings in Glintt (less than 3%);
• the fact that the majority of the members appointed to the board of directors were linked to the ANF Group; and
• the board’s powers to vote on strategic matters.

Following an ex officio investigation by the PCA, Farminveste notified the transaction in November 2009 and it was cleared by the authority in May 2010.

However, in early 2012 the PCA decided to initiate an administrative offence procedure against ANF and its subsidiaries for breach of the duty not to implement a transaction without the necessary preliminary authorisation. This procedure ended in the imposition of a fine of €149,278.79. In its public announcement of the fining decision, the PCA disclosed having applied a percentage of 0,05% over turnover for each company involved, and clarified that the absence of any irreparable damage to competition stemming from the concentration had also been considered in its assessment.

It is possible that ANF’s recidivist behaviour played a role in the PCA’s decision to bring forward the administrative offence procedure. Indeed, this was not the first time the ANF had failed to file a preliminary notification with the PCA: in 2005, the acquisition of joint control over Alliance Healthcare was only notified ex-post following an ex-offcio proceeding (resulting in Case 80/2005). In addition, in 2010 Glintt itself was subject to an ex officio notification procedure for two concentrations which it had failed to notify, one of which occurred in November 2008 – a time when Glintt appeared to have already been under the control of Farminveste.

The PCA’s decision comes at a time when – following the entering in force of the new Competition Act in July 2012 – its powers to detect and punish non-notified concentrations have been somewhat reduced, with ex officio proceedings now being limited to concentrations that occurred in the preceding five years. However, this change has not resulted in a relaxation of the PCA’s enforcement powers, as this decision shows.

The punishment of parties to a transaction for implementing the transaction without the necessary authorisation – albeit uncommon – signals the PCA’s intent to strictly enforce compliance with merger control rules. This is also apparent from the content of the PCA’s own announcement, which stresses the economic relevance of an ex-ante assessment of concentrations and qualifies the breach of the rule on suspension of the concentration (before final clearance is obtained) as a serious infringement of competition law and its punishment as a priority of action for the PCA.