Spain | Paper envelopes: the Barcelona PC concludes that specific subsidies cover the overcharge

The Barcelona Provincial Court applies the passing-on doctrine in the envelope cartel.

Spain | Paper envelopes: the Barcelona PC concludes that specific subsidies cover the overcharge
June 16, 2022

In its Judgment no. 198/2022, of March 25, the Barcelona Provincial Court (the “Court”) decides on appeal the claim filed by the Spanish Socialist Party (“PSOE”) against various paper envelope manufacturers. PSOE’s claim was based on the Spanish Competition Authority’s decision of March 25, 2013 -currently the CNMC- that found a price fixing and customer allocation cartel in the national envelope manufacturing market from 1977 to 2010.

The defendant manufacturers -now the appellants- argued that PSOE did not suffer any damage, since the purchase and mailing of campaign envelopes was subsidized by the Government during the whole infringement period. Therefore, they argued that PSOE’s claim for damages had to be dismissed or, at most, reduced, due to pass-on.

Based on Organic Act 5/1985, of June 19, on the General Electoral System (“LOREG”), in order to determine the extent of pass-on to the Government, the Court classifies subsidies as (i) general subsidies; or (ii) specific subsidies.

The Court first examines general subsidies, i.e., fixed amounts granted per vote or seat used to cover ordinary campaign expenses, which are capped under the law.

Although these campaign expenses are covered by general subsidies, the Court establishes that “in the absence of the overcharge, the claimant could have (i) increased its campaign expenses, using the overcharge; or (ii) further optimized its costs”. Therefore, the Court considers that there has been actual damage and that PSOE should be compensated.

However, the above does not apply to specific subsidies, which are granted based on the number of voters in each constituency and used to finance election expenses arising from the mailing of campaign envelopes, ballots or propaganda, “obviously including the cost of purchasing the envelopes.”

Contrary to the judgment of Barcelona Commercial Court no. 3, the Provincial Court considers that PSOE did not suffer any harm, and that therefore it cannot claim damages, since “the expenses incurred by the claimant [PSOE] to purchase the envelopes, including the overcharge, were fully covered by the specific subsidy granted by the Government for the mailing of campaign materials.”

In sum, the Court differentiates between both types of subsidies and determines that specific subsidies fully cover the overcharge, “in a way similar to the total or partial passing-on of damages.” The Court concludes that the envelope purchasing costs covered by the specific subsidy should not be taken into account when quantifying the overcharge.

June 16, 2022