The CNMC opens a public consultation on the prohibition of companies from contracting with the administration for distorting competition

The CNMC opens a public consultation on the prohibition of companies from contracting with the administration for distorting competition

On 24 November 2022, the National Commission for Markets and Competition (CNMC) published a statement on its website, in which it opened a public consultation on the prohibition of companies from contracting with the Administration for distorting competition. 

The distortion of free competition is contemplated in Article 3 of the Law on the Defense of Unfair Competition (LDCD), which establishes that the CNMC or the competent bodies of the Autonomous Communities shall hear, under the terms established in this Law for prohibited conduct, acts of unfair competition for distorting free competition that affect the public interest. This is collusive conduct, whereby one or more companies, making use of prohibited practices and abusing their position, jointly agree to conduct that has the effect of distorting competition. 

The Consultation published by the CNMC comes as a result of the sanction imposed in the amount of 203.6 million euros on the six largest construction companies in the country (Acciona, Dragados, FCC, Ferrovial, OHLA and Sacyr), which agreed public contracts for 25 years. These companies had already accumulated sanctions in other sectors for distortion of competition practices, but this has not prevented them from continuing to apply for public tenders and winning contracts. This is why the CNMC has detected the need to regulate so that this type of behavior can be quickly punished.

Currently, the prohibition to contract with the Public Administration in case of having been sanctioned already exists and is regulated in article 71.1b) of the Public Sector Contracts Law. However, this prohibition can only be imposed in the case of a final sanction, which can make long process extened for years and allows these companies to continue to act negligently.

In the CNMC’s communication, the CNMC states that, on the basis of Article 72 LDCD and rulings 3273/2022 and 3289/2022 of the TSJ of Catalonia of 28 September 2022, the CNMC is the body which, due to its knowledge of the Competition Law and special cases, is in the best position to weigh up the consequences on the market of the conduct sanctioned and, therefore, should be competent to establish the requirements that should be taken into account when establishing the prohibition to contract with the Public Administration. 

In this case, the CNMC establishes the conditions and requirements for implementing the bans, taking into account:

As to the scope of application of this prohibition:

1. It extends the scope of the prohibition on contracting only to those infringements defined as serious infringements in the area of distortion of competition and defined in Article 62 of the Law on the Defense of Competition. These already entail a prohibition to contracting. In addition, the CNMC adds that it will only focus on infringements that are linked or related to bid rigging.
2. The prohibition applies to both natural and legal persons, and as many companies may be sanctioned as there are legal representatives or persons who are members of the management bodies of the sanctioned companies.
3. As for the temporal scope, it will apply only in cases after the entry into force of such prohibition in the law in 2015.

In terms of scope and duration:

1. Above all, and to provide greater legal certainty, the prohibition of contracting should be limited in time, territory, amount and sector of products or services that would be affected. A balance must always be struck between the action that gave rise to the sanction and the sanction itself. In any case, the sanction may not exceed the 3 years determined in art. 72.6 of the Public Sector Contracts Act.
2. To carry out a proportionate sanction, the following factors shall be taken into account.
   1. Geographical scope
   2. Product scope (good or service)
   3. Extension of the infringement in time.
   4. Gravity of the infringement.
   5. Degree of participation of the offender.
   6. Existence of aggravating and mitigating circumstances.

Finally, it should be borne in mind that there will be exemptions in those cases in which it is possible to cumulatively demonstrate, in accordance with art. 72.5 LCSP, that the infringer has undertaken to pay the penalty imposed and that it can also prove that it had adopted the technical and organizational personnel measures to avoid this type of infringement. On this point, the CNMC places special emphasis on the importance of having a regulatory compliance programme, and to this end, the CNMC has published a ”Guide on regulatory compliance programmes in relation to antitrust rules”. At Letslaw by RSM we are specialists in providing this type of advice and in creating Regulatory Compliance programmes adapted to the needs of each organisation.