e-legal® Article – The New Version of the Competition Legal Regime

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I. Introduction

The Law no. 17/2022, of August 17, (the "Law") transposed into national law the Directive (EU) 2019/1 of the European Parliament and of the Council, of 11 December 2018, which aims to empower the competition authorities of the Member States to apply the law more effectively and to ensure the proper functioning of the internal market.

In this regard, the Law has changed:

i) The Competition Legal Regime (the "Legal Regime"), approved by Law no. 19/2012, of May 8; and

ii) The Statutes of the Competition Authority.

In the scope of the referred Legal Regime, the Law has amended several provisions, systematically divided as follows:

  • Chapter I – Promotion and defence of competition (articles 2.º, 3.º, 5.º, 7.º, 8.º);
  • Chapter II – Anti-competitive practices (articles 13.º to 19.º, 21.º to 25.º, 27.º to 35.º);
  • Chapter III – Merger operations (articles 43.º, 49.º, 55.º and 59.º);
  • Chapter IV – Studies, inspections and audits (article 64.º);
  • Chapter VII – Infringements and sanctions (articles 67.º to 69.º, 72.º to 74.º);
  • Chapter VIII – Waiver or reduction of fines in competition law infringement proceedings (articles 76.º to 81.º);
  • Chapter IX – Judicial appeals (articles 84.º to 87.º, 89.º to 92.º); and
  • Chapter XI – Final and transitional provisions (article 96.º).

Among the amendments to the referred provisions of the Legal Regime, the Law has materialized significant measures, of which we highlight the following:

i) The liability of parent companies and joint liability in business associations;

ii) The conditions relating to the calculation of the fine applicable to the company concerned, more particularly the total worldwide turnover;

iii) The general extension of judicial and administrative deadlines;

iv) The elimination of the "considerable loss" requisite for the obtention of suspensive effect of the judicial decision.

II. Liability of Parent Companies

As far as legal competition offences are concerned, the addressees of the rules set out in the Legal Regime are mainly companies, which is why it is important to briefly approach the concept of company set out therein.

Prior to the amendments introduced by the Law, the Legal Regime included, in its article 3.º, a concept of company already coinciding with the one assumed by the Jurisprudence of the Court of Justice of the European Union (CJEU), which introduced the theory of "economic unit". From this theory it results, in sum, that "the concept of company (...) must be understood as designating an economic unit, even if, from a legal point of view, that economic unit is made up of several natural or legal persons”[1].

Although this key idea is maintained in the current wording of the provision, the concept of company has been extended by the Law, since a company will now be considered to be "any entity exercising an economic activity, regardless of its legal status and the way it is financed" (see paragraph 1 of article 3.º of the Legal Regime) regardless of whether or not such economic activity consists of "the offer of products or services in a given market". Additionally, it should be mentioned that the consonance between National Legislation and Community Jurisprudence has, unequivocally, contributed for a more uniform application of Competition Law.

The concept of the company as an economic unit has practical consequences[2], including the following:

i) The agreements between entities of the same group (read, economic unit) cannot be considered agreements between companies, for the purposes of application of articles 101.º of the Treaty of the Functioning of the European Union (TFEU) and 9.º of the Legal Regime (correspondent to article 4.º of Law no. 18/2003, of June 11, revoked in the meantime), given that they will be considered as the same company, consisting, therefore, in agreements within the same company and not between companies;

ii) The offences committed may be imputed to the economic unit and not only to the entity at the origin of their occurrence. Thus, for example, a parent company may be held liable and sanctioned for infractions committed by its subsidiaries.

In accordance with the above, as regards to the liability of parent companies for competition infringements committed by their subsidiaries, the new version of the Legal Regime now provides, in subparagraph a) of paragraph 2 of article 73.º, the possibility of holding liable any entity (read, the parent company) which integrates the "economic unit" of the alleged infractor and exercises over it, directly or indirectly, a "decisive influence". The Legal Regime thus makes it clear that it is now accepted that persons (in other words, companies) which are part of the same economic unit and exercise decisive influence, directly or indirectly, "over the person who committed the facts constituting the infringement" may be punished for violations of competition laws, since previously there was only mention to the concept of company in paragraph 8 of the referred article 73.º of the Legal Regime. At the same time, the legislator has demonstrated, with the regime enshrined in the Legal Regime, to closely follow the Community Jurisprudence, namely the AKZO NOBEL Jurisprudence, whose understanding is that "the behaviour of the subsidiary may be imputed to the parent company”[3].

On the other hand, it is important to highlight paragraph 3 of article 73.º, introduced by the Law, which provides that, for the purposes of subparagraph a) of paragraph 2 of article 73.º, "a person is presumed to have decisive influence over another when he holds 90% or more of its share capital, unless proven otherwise". It should be noted that the presumption of decisive influence is based on the degree of control that the parent company exercises over its subsidiaries[4], whose existence is not only verified in cases where the parent company holds 90% or more of the subsidiaries share capital. Through a case-by-case analysis, which is imperative, there may be other factors demonstrating the aforementioned decisive influence and control. In this regard, we find the GOLDMAN SACHS Jurisprudence which presents as possible factors to be taken into account, in particular, the exercise of all voting rights of the subsidiary, the power to nominate members of several boards of directors, to call shareholders to meetings and to propose the removal of directors or all boards of directors[5].

Thus, we conclude that decisive influence is presumed in cases where a certain "person" holds 90% or more of the share capital of another company, assuming that the policy followed by the subsidiary is determined by the parent company because the corporate bodies that determine such policy are common to both[6]. Similarly, in cases where such percentage is not held but other factors such as those enunciated are verified which, individually or jointly, are sufficient to determine the existence of an effective exercise of decisive influence, we may be facing a situation equivalent to the triggering of the referred presumption. As an example, in National Jurisprudence, the Competition Authority has mentioned other factors, besides the percentage of share capital held, which indicate the exercise of decisive influence, namely the fact that the parent company does not have "any other staff than the members of its corporate bodies, being supported under a regime of sharing services and collaborators assigned to the subsidiaries”[7].

The expression "unless proven otherwise" in the third paragraph of article 73.º of the Legal Regime demonstrates that the presumption referred above may be rebutted if the parent company provides evidence capable of showing that its subsidiary behaves autonomously in the market. In this context, the CJEU emphasises that in order to determine the degree of autonomy of the subsidiary on the market, it is necessary to take into consideration "all the relevant factors relating to the economic, organisational and legal links between the subsidiary and the parent company, which may vary from case to case and, as such, cannot be exhaustively enumerated”[8]. The problem lies, however, in the fact that, by failing to make a list or an “exhaustive list” and by listing only certain criteria to be taken into consideration, the exercise of the parent companies right of defence may be impeded.

III. Joint and Several Liability in Business Associations

In addition to being addressed to companies, article 101.º TFEU is also applicable to associations of undertakings. It should be noted that, like the concept of undertaking, the concept of association of undertakings has a functional understanding, not being dependent on formal qualifications as to the type of association in question. Therefore, if an association of enterprises has, in the meantime, been constituted as a commercial company, that qualification cannot be ruled out, as it is evident in the MASTERCARD Jurisprudence[9].

Getting to the heart of the matter, it should be pointed out that the previous version of the Legal Regime, more specifically eighth paragraph of article 73.º, already established a regime of joint and several liability of companies whose representatives were, at the time of the infraction, members of the management bodies of an association of companies, in the event that the association was sentenced to pay a fine in an administrative offence proceeding, with the exception of cases in which those companies had made a written statement of opposition to the decision constituting the infraction or which resulted in the infraction. With the entry into force of the Law, it was provided, in the eleventh paragraph of article 73.º of the referred Legal Regime, that an association of companies which is subject to a fine or to a penalty payment and which is in a situation of insolvency, must request from the associated companies "a contribution in order to assure that payment, the fixing by the Competition Authority a deadline for the provision of that contribution".

Therefore, in this situation, the association of companies must request from all its associated companies their share of the contribution in order to assure the payment of the fine, as follows from the referred provision. If the contributions requested from the associated companies have not been fully received, there is a situation of joint and several liability of the companies whose representatives were members of the management bodies of the association of companies at the time of the infringement (see twelfth paragraph of article 73.º of the Legal Regime) and also, in the alternative, joint and several liability of the companies that "were active in the market where the infringement was committed" (see thirteenth paragraph of article 73.º of the Legal Regime). It should be noted, however, that in both mentioned cases, these companies will not be subject to joint and several liability if they demonstrate that "before the beginning of the investigation they were unaware of, or actively distanced themselves from, and did not implement the decision that constituted the infringement or resulted from it".

IV. Determining the Measure of the Fine: Worldwide Turnover

In addition to the issues relating to the liability of parent companies, another issue arises regarding the basis for calculating the fine applicable to the company. The Legal Regime, in line with the provisions of the second paragraph of article 23.º of Regulation (EC) no. 1/2003, of 16 December 2002, establishes a role model based on a percentage (maximum of 10%) of the total turnover of the company in question. It should be noted that the turnover is taken into consideration not of the entities considered individually, but of the company to which they belong[10]. However, while the Community provision referred to has always taken the total turnover of the company as a reference, the Legal Regime did not adopt the same reference for the purposes of calculating the size of the fine.

In this context, we witnessed a change in the assumptions that lead to the determination of the measure of the fine. In the previous wording, the second paragraph of article 69.º stated that "(...) the fine determined pursuant to paragraph 1 may not exceed 10 /pct. of the turnover in the financial year immediately preceding the final condemnatory decision issued by the Competition Authority (...)". The current wording of the provision (paragraph 4), given by Law, tells us that "(...) the maximum amount of the applicable fine may not exceed 10% of the total worldwide turnover achieved (...) by the group of persons that are part of each of the infringing companies (...)". It is noted the introduction of the element of “total worldwide turnover”. We point out this introduction as evidence of the Legislator's intention: the harmonisation with Regulation (EC) no. 1/2003, previously mentioned, and with the second paragraph of article 13.º of Directive (EU) 2019/1 of the European Parliament and of the Council, of 11 December 2018. Note that, in our view, worldwide turnover or total turnover are synonymous and liable to be used indiscriminately.

In our view, this is a debatable choice but, regardless of its merits, it requires three considerations.

The first concerns the ratio of the law. In fact, both the TFEU and the Legal Regime are aimed at transnational behaviours. However, the latter will also target a duly identified set of companies that operate exclusively in the national territory. In these cases, it does not seem to make sense to apply a criterion that, ab initio, cannot be applied. In the limit, we think that a proviso applicable to these cases should have been stipulated.

On the other hand, there is the specific situation of multinational companies present in Portugal. In accordance with the provisions of the first paragraph of article 18.º of the General Regime of Administrative Offences, the subparagraph b) of first paragraph of article 69.º of the Legal Regime elects "the nature and size of the market affected by the infringement" as one of the criteria for determining the fine. If a given practice takes place only in the national (read Portuguese) market which is, therefore, the affected market, it does not make much sense to use other turnover than the exclusively national market as a basis for determining the size of the fine. This is because the percentage applied on its total turnover and not on the turnover resulting from the company's activity in Portugal results in an extremely large amount, thus raising questions in terms of the principle of proportionality.

Going even further, if we were really facing a situation of violation of rules in several markets, or in the "total market" of the company's activity, we would be facing a transnational situation. However, in this type of cross-border situations, the Competition Authority does not usually enjoy powers to investigate and sanction, such responsibility falling on the European Commission, pursuant to fourth paragraph of article 1.º of Decree-Law no. 125/2014, of August 18.

It should be noted that, previously, the Legal Regime did not prevent the Competition Authority from using the total turnover of a given company as a basis for calculation. Simply, given the consideration of the "affected market" as a criterion for determining the measure of the fine, this could only happen if the censured behaviour had affected the total market in which the company operated. In other words, the assessment would always be made in a case-by-case basis, and the same legal solution would not be imposed for materially different cases.

III. Deadlines and Appeals

The new version of the Legal Regime proceeded to a general extension of the judicial and administrative deadlines. As far as the general rules on time limits are concerned, the previous Legal Regime allowed for an ad hoc extension of the initial deadline. However, the new version of the Legal Regime establishes that the extension of the time limit set by law or by decision of the Competition Authority occurs only once and has a maximum period of 30 days (paragraph 3 of article 14.º of the Legal Regime).

In turn, in relation to the instruction of the process, the new version of the Legal Regime has extended the reasonable deadline for the notice of unlawfulness, in writing, "on the issues that may be of interest to the decision of the process, on the evidence produced, as well as, if applicable, on the penalties incurred and to request the additional evidence it deems appropriate" from 20 working days to a period of no less than 30 working days (paragraph 1, article 25.º of the Legal Regime).

In addition, the new version of the Legal Regime has extended the deadline for filing an appeal against the final decision from the previous 30 working days to 60 days, in accordance with paragraph 1, article 87.º of the Legal Regime.

In what concerns appeals, the requirement to obtain suspensive effect of the judicial decision does not require the verification of "considerable loss", in opposition to the previous version of the Legal Regime. The constitutionality of the rule contained in the previous version of the Legal Regime, more specifically the interpretation regarding the requirement to provide a bond to grant suspensive effect to the appeal of the Competition Authority decision, was subject to analysis by the Constitutional Court (TC). In fact, the TC, in Judgement no. 445/2018, of October 2[11], judged unconstitutional paragraph 5, article 84.º of the Legal Regime, "for determining that the appeal of decisions issued by the Competition Authority that impose fines can only have a suspensive effect when the execution of the decision will cause considerable damage to the affected party and he provides a bond in its place, in violation of the principle of effective judicial protection enshrined in article 20.º of the Constitution, and concretized in paragraph 2, article 20.º of the Portuguese Constitution. This is a violation of the principle of effective judicial protection enshrined in article 20.º of the Constitution and specified, in the context of administrative justice, in paragraph 4 of article 268.º of the Constitution, understood in conjunction with the principle of proportionality enshrined in paragraph 2 of article 18.º and the principle of the presumption of innocence in administrative offence proceedings enshrined in paragraph 2 and 10 of article 32.º of the Constitution.”.

The declaration of unconstitutionality of the rule generated controversy (see, in this sense, the Dissenting Vote Statement of Councillor João Pedro Caupers), and the TC ended up later, in Judgement no. 776/2019, of December 17, determining that "the attribution of a merely devolutive effect to appeals against fines does not offend any constitutional precept"[12] and, therefore, "the rule of paragraph 5 of article 84.º of the Competition Law Regime, approved by Law no. 19/2012, of May 8, which determines that the judicial challenge of decisions of the Competition Authority regarding the imposition of fines does not violate any constitutional precept". Therefore, "the rule in paragraph 5 of article 84.º of the Competition Law, approved by Law no. 19/2012, of May 8, which determines that the judicial challenge of decisions of the Competition Authority that impose fines has, as a rule, a merely devolutive effect, and may only have a suspensive effect when the execution of the decision would cause considerable damage to the affected party and the latter provides security in its place" was not unconstitutional. In this context, the TC also considered that the rule in question "does not violate the principle of effective judicial protection enshrined in Article 20.º" of the Constitution of the Portuguese Republic (CRP), materialized by paragraph 4 of article 268.º, "understood in articulation with the principle of proportionality implied in article 18.º, no. 2, and the principle of presumption of innocence in administrative offence proceedings, arising from article 32.º, no. 2 and 10" of the CRP, "is not, therefore, unconstitutional". Finally, the TC also considered that "one cannot extract from the principle of effective judicial protection the constitutional imposition of the rule of suspensive effect”[13]. In this sense, the amendment of the legal precept under analysis contributed to solve this controversy.

In effect, paragraph 5 of article 84.º of the Legal Regime now provides that "in the case of decisions imposing fines or other penalties provided by law, the defendant may request, when lodging the appeal, that it have suspensive effect when he offers to provide a bond, within 20 days, in the amount of half the fine imposed, the granting of such effect being subject to the effective provision of a bond". In other words, contrary to the previous regime, in which the time limit and the amount of the bond were determined by the Court, the new version of the Legal Regime legally provides for a 20-day time limit to provide a bond and the provision of a bond in the amount of half of the fine imposed. Therefore, the role of the Court has been clearly reduced, since only the methods for the provision of the bond are now determined by the Court.

 IV. Application of the Law in Time

Pursuant to paragraph 1 of article 9.º of the Law no. 17/2022, the amendments to the Legal Regime shall apply to proceedings initiated after the entry into force of the said legal diploma. It should be noted that the entry into force of Law no. 17/2022 occurred 30 days after its publication, in accordance with the provisions of article 10.º of the Law no. 17/2022, i.e. on 16 September 2022.

V. Conclusions

The Legal Regime already presented, in its previous version, a concept of company that coincided with the one presented by CJEU case law. However, it was not clear whether it would be possible to hold companies liable as an economic unit and, if so, under what terms such liability could occur. Currently, the legal regime unequivocally presents the possibility of holding parent companies liable for violations committed by their subsidiaries. It should be noted that this issue was already quite debated in European Community Jurisprudence, which ultimately indicates a growing approximation of National Legislation to European Union Law. In addition, changes are accommodated under EU Law regarding the presumption of decisive influence and the possibility of its rebuttal, since it is within EU Law that the matter of Competition Law is predominantly developed.

In what concerns joint and several liability in business associations, the alterations introduced are of extreme importance. In effect, in the former version of the Legal Regime, despite the possibility of joint and several liability of the companies which were members of an association in case the latter was condemned to pay a fine, the terms of such liability were not defined, giving rise to doubts as to the relevance of the legislative solution itself. Currently, a more detailed and clearer regime of joint and several liability in business associations is presented.

As regards the determination/calculation of the fine, there is a significant and critical change. Previously, as in EU Law, a maximum percentage of 10% of the company's turnover was taken into consideration. However, and contrary to Community Law, it was not defined if the volume to be considered would be the national or the total volume, which in comparison with the current solution seems to be more coherent, given that it allowed the Competition Authority to choose (between national and total), depending on the cases presented to it. The need for uniformity in Competition Law is evident. However, not all legal solutions of the European Community Law will be able to be transposed, or at least totally transposed, to the national law. Therefore, we conclude that such legislative alteration should have been the object of greater attention and caution.

Finally, with regard to time limits, the alterations made resulted in a limitation to the possibility of prorogation of time limits and simultaneously in the increase of time limits, namely those relating to the pronouncement of the note of illegality and to the filing of appeals against interlocutory decisions and final decisions. Finally, we would like to point out the legislative alteration in appeals which eliminated the "considerable damage" requirement and resolved the question of the constitutionality of paragraph 5 of article 84.º, already addressed by the TC.

[1] Judgment of the Court of Justice of the European Union (Third Chamber), Case C‑97/08 P, of September 10 of 2009, paragraph 55.

[2] MIGUEL SOUSA FERRO. Práticas Restritivas da Concorrência: Súmula Orientada para a Prática Judicial, Training Course for National Judges in Competition Law, Coord. of Teresa Moreira and Miguel Sousa Ferro, 2010, p. 13. Available for consultation at: https://institutoeuropeu.eu/images/stories/E-book.pdf.

[3] Judgment of the Court of Justice of the European Union (Third Chamber), of September 10 of 2009, Case C 97/08 P, paragraph 72.

[4] Judgment of the Court of Justice of the European Union (Second Chamber), of January 27 of 2021, Case C-595/18 P, paragraph 35.

[5] Judgment of the Court of Justice of the European Union (Second Chamber), of January 27 of 2021, Case C-595/18 P, paragraphs 57 and 71.

[6] Judgment of the Court of Justice of the European Union, of October 25 of 1983, Case C-107/82, paragraph 50.

[7] Judgment of the Competition, Regulation and Supervision Court, 1st Division, of October 20 of 2016, Case 36/16.0YUSTR, page 126.

[8] Judgment of the Court of Justice of the European Union (Third Section), of September 10, Case C- 97/08 P, paragraphs 72 and 74.

[9] Judgment of the Court of Justice of the European Union (Third Section), of September 11, Case C-382/12 P, paragraph 64.

[10] MARGARIDA CALDEIRA. Da Imputação, à Sociedade-Mãe, da Conduta Ilícita da Subsidiária no âmbito do Direito da Concorrência, 2018, pp. 30-31.

[11] Case no. 1378/17.

[12] Dissenting Vote Statement of Councillor João Pedro Caupers, in the Judgment of the Constitutional Court no. 445/2018, of October 2.

[13] MARGARIDA CORREIA. Case Law Commentary - Judgment of the Constitutional Court of 8 June 2016, PEUGEOT PORTUGAL AUTOMÓVEIS, S.A. CONTRA AdC - Devolutive Effect of the Interposition of the Judicial Impugnation Appeal, p. 252. Accessible at: https://www.concorrencia.pt/sites/default/files/imported-magazines/CR_26_Jurisprudencia.pdf.