The nougat case: CNMC’s sanctions annulled for lack of evidence

The Spanish High Court (Audiencia Nacional) has upheld the judicial administrative appeals brought by nougat manufacturers against a decision of the Spanish Markets and Competition Commission (CNMC) of April 7, 2016, imposing fines totaling EUR 6.2 million (proceedings no. S/DC/0503/14).

CNMC’s decision charged the companies with exchanging strategic information on prices, customers, and other commercially sensitive data with the aim of sharing the nougat manufacturing and supply market. However, some highly relevant judgments of the Spanish High Court have overturned CNMC’s decision considering that the evidence was not sufficient to prove the existence of an anticompetitive agreement.

CNMC’s decision

In April 2016, the CNMC sanctioned six well-known Spanish nougat manufacturers with fines amounting to EUR 6.2 million.

The investigation was triggered by an anonymous complaint filed with the CNMC in September 2012 regarding alleged anticompetitive practices by nougat manufacturers between April 2011 and November 2013. In particular, the complaint referred to the sharing of the private label market among the nougat manufacturers, allocating large customers to supply different nougat varieties, thus guaranteeing their market shares.

To determine whether there were grounds for initiating sanctioning proceedings, the Directorate of Investigation (now the Directorate for Competition) carried out inspections in the premises of five nougat manufacturers in November 2013. A month later, it requested information from both the companies and their large customers. Based on the information gathered, on October 6, 2014, the CNMC formally initiated sanctioning proceedings that resulted in the decision now overturned by the Spanish High Court.

The CNMC concluded that the investigated companies had exchanged strategic information on prices, customers, and other commercially sensitive data with the aim of sharing the market for the supply of private label nougat to large-scale retailers. The decision also determined that senior management of the companies were aware of the situation, arranged face-to-face meetings, had bilateral telephone contacts, and exchanged emails and instant messages to implement the agreement.

The nougat manufacturers lodged judicial administrative appeals against CNMC’s decision. They denied the exchange of commercially sensitive information and the market allocation, while alleging the insufficiency of the evidence. The companies also opposed CNMC’s classification of the infringement as single and continuous, as well as the lack of reasoning regarding the sanction imposed.

The CNMC did not sufficiently prove the violations giving rise to the sanctions

In judgments dated November 19, 2021, the Spanish High Court annulled the fines imposed and upheld the appeals, considering that the CNMC had not sufficiently proved the manufacturers’ alleged infringement.

These rulings are highly relevant since the Spanish High Court has overturned CNMC’s decision based on the insufficient evidence to substantiate the anticompetitive behavior. According to the Spanish High Court, in this case the insufficiency of the evidence is emphasized by CNMC’s classification of the infringement as “single and continuous.” This requires a higher standard of proof regarding not only the anticompetitive conduct, but also the existence of an overall plan pursuing a common anticompetitive objective—as expressed by the Court of Justice of the EU.

The Spanish High Court considers that the decision does not provide any evidence of an exchange of sensitive information—such information being in many cases publicly available or not commercially sensitive due to its content or date. In this regard, the piece-by-piece analysis of the evidence carried out by the Spanish High Court is particularly useful:

·         The CNMC failed to prove the anticompetitive nature of the alleged meeting convened by one of the companies, whose fully defined purpose was to discuss the substantial amendments to certain technical-sanitary regulations.

·         There is no evidence that the other meetings allegedly convened by email finally took place, lacking even an “indicative reference” to their content.

·         With respect to certain bilateral contacts between two manufacturers allegedly evidenced by third-party notes, the Spanish High Court cites previous rulings to affirm the need for further evidence. The information provided by a third party could be enough to launch an investigation, but additional elements must support its truthfulness and plausibility.

·         Regarding certain seized documents containing product and weight references by distribution companies, private labels by competitor and distributor, and an email sent by one of the companies with the prices of several brands at the beginning of the campaign, the Court considers that it is not commercially sensitive information referring to company secrets but publicly known data.

·         With regard to the WhatsApp messages between the managers, the Court considers that there is no incriminating evidence—either because of their content or their date, as the information was subsequent to the closing date of the contracts between the nougat manufacturers and the distributors.

·         Finally, in relation to the handwritten notes found during the inspections in one of the companies and allegedly sent by a competitor, the Court took into account the calligraphy report submitted by the appellants. Contrary to CNMC’s allegations, the report showed that the author was the director of the inspected company. 

Conclusions

The judgments of the Spanish High Court in the nougat case represent another wake-up call for the CNMC regarding the appraisal of evidence of competition law infringements. They are in line with other recent rulings annulling CNMC’s sanctions for lack of evidence, as we reported several months ago in this blog. But their relevance lies mostly in the thorough assessment of the specific evidence relating to information exchanges—thus setting a new standard for the CNMC in future similar cases.

The judgments can be found here: SAN 4889/2021, SAN 4900/2021, SAN 4895/2021, SAN 4883/2021, SAN 4960/2021, SAN 4961/2021.