In light of the severity of recent sanctions imposed under administrative law and criminal law to anti-competitive practices, and the possibility of convicting legal persons for this type of crime, it becomes crucial for companies to delineate the scope of both legal branches with regard to infringements of competition law, to analyse the scope of the criminal offences regarding the market and consumers, and to propose some guidelines for a compliance programme to prevent or minimise the risk of committing such crime.  

The Comisión Nacional de los Mercados y la Competencia (hereafter, “CNMC”) in charge of investigating and sanctioning anti-competitive practices, has recently applied the second largest fine ever imposed in the history of this body. The CNMC issued a resolution on 26 May 2016, imposing a fine of 128,854,152 euros to eight companies and four managers for the existence of a cartel from 1996 until 2014, consisting in fixing selling prices and distribution conditions (see CNMC, Resolution of 26 May 2016, File S/DC/0504/14/AIO). This decision concerns solely the liability of natural and legal persons under administrative law.

Nevertheless, the introduction in 2010 of provisions in the Spanish Penal Code that regulate the criminal liability of legal persons (arts. 31 bis – 31 quinquies), among others, for crimes regarding the market and consumers (arts. 278-286 quáter), makes absolutely necessary to delineate the scope of violations of administrative law and of criminal law with regard to anti-competitive practices. This necessity is more patent in light of the possibility of excluding the criminal liability of the legal person if a compliance programme fulfilling the requirements of art. 31 bis is implemented. Note the severity of the penalties provided for the legal person convicted of this criminal offence, ranging from imposing a fine to ordering its dissolution (arts. 288, 33.7.b-g).

With regard to anti-competitive practices, administrative law and criminal law protect the same legal interest, namely, the free competition of products and services as a mechanism for fixing market prices (STS 867/2002, 29 July, 1st ground). Thus, differentiating the scope of both types of infringements requires the previous definition of the elements of the crime of art. 284 of the Spanish Penal Code, in which cartels for altering price levels may be subsumed. Any anti-competitive practice beyond the scope of art. 284 may only be sanctioned under administrative law. In the same sense, the Spanish case law argues that:

“There is certainly a parallel administrative legislation that deals with competition and that overlaps largely the provisions of the Penal Code … The double criminal and administrative incrimination requires determining when the first will be applied, being in any case pre-emptive. The pattern for this is precisely the means employed to deploy the illegal activity, i.e., the dissemination of false news, the use of threats or deceit or, as the current text states more accurately, besides the above, the use of inside information …” (AJCI no. 5 of 16 February 2011, 3rd ground – author’s translation; emphasis in bold added)

Accordingly, the present article aims at interpreting the criminal conduct included in art. 284 and at proposing some guidelines for a compliance programme for preventing the commission of such conduct.

I. VIOLENCE, THREATS OR DECEPTION TO ALTER PRICES

Art. 284.1 of the Spanish Penal Code provides that “the penalty … will be imposed to those who: … 1. By using violence, threats or deception, attempt to alter prices that may result from the free competition of products, goods, securities or financial instruments, services or any other movable or immovable property that are the subject matter of procurement …” (author’s translation).

With regard to the object of the offence, the goods and services named in art. 284.1 are only listed by way of example and are by no means exhaustive. This type of crime may refer to anything that may be the subject matter of procurement, that is, limited to objects of legal trade.

The crime defined in art. 284.1 may be consummated without the achievement of the price change, but with the simple performance of the conduct described in the provision. The production of a damage would be part of the so-called “agotamiento” (exhaustion) of the crime (STS 670/2015, of 30 October, 8th ground).

The criminal conduct may consist in the following elements:

i) “Altering prices” refers to any price change, as reflected in the case law:

“[I]t is not relevant that the fraudulent alteration of pricing produces effects upward or downward; what is really sanctioned is that its free fixation is hampered by employing the means described in the provision …” (STS 670/2015, 30 October, 8th ground – author’s translation – emphasis in bold added).

ii) The criminal conduct is limited to the attempt to alter prices of products or services subject to free competition, so that this crime may not be committed with regard to products or services whose price is officially fixed (SAP Madrid 645/2000, 25 October, 3rd ground).

iii) This type of crime requires the concurrence of a subjective element, consisting in the specific dolus or knowledge and intention of altering prices (AJCI no. 2 of 30 August 2011, 5th ground).

iv) “Using violence, threats or deception” as means for committing the crime. Violence, threats and deception are also referred to by the Spanish Penal Code when defining many other criminal offences.

The concept of “violence” appears e.g. in the definition of the crime of coercion (art. 172.1). This concept means “a twist of the other’s will by means of violence, in order to force an individual to carry out what he/she does not want to, … a violent conduct with material content -physical vis- or intimidating -compelling vis- that determined the conduct of the victim” (SAP Madrid 645/2000, 25 October, 3th ground, author’s translation). In addition, it may be understood in a “spiritual sense“, requiring an “open confrontation or opposition to the other’s will, since the used means … may be considered as direct and external” (SAP Barcelona of 14 February 1996, 4th ground, author’s translation). In case of concurring the elements of both the crime regarding the market and consumers and the crime of coercion, the case law has decided that the crime regarding the market and consumers applies with priority, excluding the conviction for a crime of coercion, in accordance with the principle of speciality (art. 8.1), as long as the violence pursued the specific aim of altering prices, which is already included in the scope of the crime of art. 284.1 (SAP Barcelona of 14 February 1996, 4th ground). The concept of “threat” corresponds to the definition of the crime of threat (art. 171). Violence or threats will be appropriate means of altering market prices, when exercised upon individuals with power to alter prices (AJCI no. 2 of 30 August 2011, 5th ground).

The concept of “deception” is used e.g. in the definition of the crime of fraud. If a particular conduct contains the elements of both the crime regarding the market and consumers and the crime of fraud, the case law has decided that the latter applies with priority:

“[I]f such alteration or manipulation amounts to a means for the commission [of the crime], which is able to create deception that is sufficient for producing a property loss to a third party, a crime of fraud would apply. … solved by means of the 3th rule of art. 8 CP, … since … the crime of fraud must absorb … [the crime regarding the market and consumers], covering in such way the total meaning of the prohibition. … the principle of speciality … would lead to the same conclusion…” (STS 2520/2001, 31 December, 4th ground, author’s translation; also e.g. STS 357/2004, 19 March, 6th ground).

Examples of cases where deception concurred:

  • Creating an artificial and complex contractual construction for altering the system for controlling prices provided by an administration for selling social housing (STS of 26 October 1988, 3th ground).
  • Regarding public tender procedures, the existence of an agreement between the authority and the main shareholder of a company to award to the latter a contract in exchange for a commission. The deception consisted in pretending that there was competition among the companies participating in the procedure, when they were all actually fictitious or under the control of a participant, or when one of the participants in the public tender procedure is informed about the conditions offered by other competitors to improve its offer (STS 670/2015, of 30 October, 8th ground).
  • Pretending that a real estate subject to auction had several non-existent lease and sublease contracts or implementing any technique to push a bidder away from an auction (AAP of Vizcaya 548/2004, 22 July, 3rd ground).
  • There was no deception in a case where an entity that used to sell perpetual preferred shares had no plan designed for altering prices by means of managing this product. In addition, the procedure was generally followed by other issuing entities of the same product and considered reasonable until 2010. It was also relevant that the issuing entity immediately obeyed the first order issued by the CNMC (AJCI no. 4, 10 June, 6th ground).

II. DISSEMINATION OF FALSE INFORMATION

Article 284.2 of the Spanish Penal Code provides that “the penalty … will be imposed to those who: … 2. Disseminating news or rumours, by themselves or through the media, about people or companies, which gives knowingly totally or partially false economic information, with the aim of altering or preserving the quoted market price of the security or other financial instruments, obtaining for himself or for a third person, more than 300,000 euros of economic benefit or causing a damage of the same amount” (author’s translation).

The criminal conduct may consist in the following elements:

i) Disseminating totally or partially false information, either directly or via the media, concerning the quality of the product or service, or making reference to actions undertaken or intended to be undertaken by individuals or public bodies with regard to the product or service. False information may only have an impact on the market prices if is known by a plurality of people, requiring thus extensive dissemination (AJCI no. 2 of 30 August 2011, 5th ground, author’s translation).

This element was not fulfilled in the case of the rating of the Spanish debt by rating agencies, because the mistake was committed by many actors:

[A]ssuming that rating agencies were seriously wrong, it must be recognised that they were not the only ones. Today it is generally admitted that there was a widespread failure of politicians, regulatory agencies, economists, analysts and other experts worldwide both in foreseeing the crisis itself and, above all, in appreciating its extraordinary magnitude. … “(AJCI no. 2 of 30 August 2011, 6th ground, author’s translation)

ii) A subjective element or specific dolus consisting in the aim of altering or preserving prices is required (AJCI no. 2 of 30 August 2011, 5th ground). Case law interprets this subjective element as requiring that the knowledge and intention covers both the price change and the economic benefit or damage of more than 300,000 euros:

“The lawsuit recalls the four downgrades of the Spanish debt made by the agencies … Undoubtedly … all these downgrades damaged economically Spain. There is a direct effect between the downward revisions of the Spanish debt by these rating agencies and the increasing price of the State funding through the emission of public debt … Now, the question is to determine whether such downgrade in the credit ratings were done with the purpose of causing a damage by altering the operation of the market and whether they were unfounded or arbitrary. … it does not seem that such downgrades were unfounded, since the agencies provide extensive explanations in support of the new rating …” (AJCI no. 2 of 30 August 2011, antecedentes de hecho (report of the public prosecutor), accepted by the investigating judge in 6th ground)

iii) “Obtaining … more than 300,000 euros of economic benefit or causing a damage of the same amount” indicates that this result must concur for the consummation of the crime (AAP Madrid 788/2012, 5 November, 3rd ground).

III. INSIDE INFORMATION

Article 284.3 of the Spanish Penal Code provides that “the penalty … will be imposed to those who: … 3. By using inside information, entered into transactions or issued orders to trade which are likely to give misleading signals as to the supply of, demand for or price of securities or financial instruments, or secured, by using the same information, by themselves or in agreement with others, a dominant position in the market of such securities or instruments, in order to fix their price at an abnormal or artificial level” (author’s translation).

The criminal conduct may consist in the following elements:

i) “Inside information” is defined as “information of a precise nature which has not been made public, relating, directly or indirectly, to one or more issuers of financial instruments or to one or more financial instruments and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments” (art. 1, Directive 2003/6/EC of 28 January 2003).

ii) There are three forms of conduct (transactions, orders to trade or securing a dominant position). The first one refers to a situation where, due to the advantageous use of inside information, buying or selling a security or financial instrument for him/herself or on behalf of a third party causes a price alteration. The second form of conduct refers to the price alteration caused by giving a false impression of the financial strength of the product. The third conduct refers to the attempt to create a situation of financial monopoly.

IV. IMPLICATIONS FOR A COMPLIANCE PROGRAMME

 For excluding the criminal liability of legal persons, a compliance programme must fulfil the conditions of art. 31 bis of the Spanish Penal Code, in particular para. 5, which requires, among others, “identifying the activities where crimes … may be committed” and “establishing protocols and procedures that determine the procedure of formation of the will of the legal person, of its decision-making and of execution of such decisions” (author’s translation).

The measures to be included in a compliance programme to prevent or reduce the risk of committing a crime regarding the market and consumers may consist in the following:

Introducing in the code of conduct of the company a compromise of compliance with competition law. It should include a general commitment of the company and its employees to promote free competition, refraining from any conduct that may amount to collusive behaviour, abuse of dominant positions or acts involving unfair competition, including illegal advertising, as defined in competition law.

Risk evaluation regarding the specific risks that derive from the activity of the company. It must determine, for example:- Determination of situations of risk, including e.g. launching a new product or an existing product on a new market; belonging to business associations together with competitors; regular meetings with competitors; participating in joint ventures with competitors; etc. – Whether or not the company has a dominant position in a particular market. – Which employees may be in contact with these situations of risk (e.g. departments of marketing, business development or those in charge of negotiations with competitors).

Designing and implementing a policy that includes, for instance, the following:- Reports about the aims of competition law, sanctions and risks in case of infringement of competition law. – Includes a practical and specific explanation of prohibited conducts with examples that concern the activity of the company.- Definition of rules of behaviour (how to behave in a meeting with competitors or within a business association).- Appointment of a person in charge of competition law matters.

Implementing training programmes on competition law for employees that may potentially perpetrate an infringement of competition law and employees that may be in a position to detect these anticompetitive practices. Training programmes should be practical rather than theoretical, concerning conducts and situations that may come up in light of the specific activity of the company.

Implementing mechanisms of internal investigation for the prompt detection of infringements of competition law. Its disclosure to the CNMC under certain conditions may result in excluding the responsibility under administrative law of the company and its employees. These conditions include being the first to provide evidence about the existence of a collusive behaviour, cooperating with the CNMC during the investigation and terminating the commission of the infringement.

Other measures may consist in:- Implementing internal procedures to regulate and supervise the determination of the prices of products or services, and to hinder situations that may amount to a collusive behaviour, abuse of dominant positions or acts involving unfair competition, for example, as a result of a new contract.- Establishing procedures of control that may consist in informing (ex ante and ex post) the responsible for competition law matters about the issues dealt with during meetings with competitors.- Implementing internal procedures to supervise the preparation of any offer to be submitted to any public tender procedure and to supervise negotiations with representatives of the public administration and with other participants. Attention should be paid to the existence of “alarm signals” (such as, the little amount of companies that participate therein; the participation of several companies of the same group; the price increase compared to similar public tenders; etc.).- Implementing internal procedures to supervise the preparation of any offer to be submitted to any tender procedure issued by another company for awarding a contract and to supervise negotiations with contractors and any contact with competitors. – Ensure that business associations or joint ventures where the company participates implement a policy of compliance with competition law. – Restricting the amount of employees that have access to sensitive information, in order to reduce the risk of exchanging information with competitors.- Ensuring that the departments in charge of marketing, business development and packaging remain in constant communication with the person in charge of competition law matters.