The Spanish High Court warns the CNMC again: new fine annulled for lack of evidence

Last June, the Spanish High Court (Audiencia Nacional) confirmed a year-long trend by annulling two decisions of the Spanish competition authority (CNMC) for lack of evidence.

The judgments provide important insights into the interpretation of internal emails and the use of circumstantial evidence in competition investigations. They also issue a warning to the CNMC to be “more thorough” in its analysis of the evidence before sanctioning.

CNMC’s investigation and decision

In November 2016, the CNMC sanctioned two well-known companies in the security sector (PROSEGUR and LOOMIS) for an alleged single and continuous infringement consisting of agreements and concerted practices to share the cash transport and handling market between 2008 and 2015 (Case S/0555/15, PROSEGUR-LOOMIS).

The investigation was triggered by an anonymous complaint accusing both companies of having shared several tenders called by the Spanish post office (Correos) for the collection, transport and custody of money. In view of the complaint and the preliminary information submitted by Correos, the CNMC’s Competition Directorate carried out inspections at the headquarters of both companies and initiated sanctioning proceedings that resulted in the decision now overturned by Spanish High Court.

Except for certain internal emails, the CNMC did not have direct evidence of the concerted practice. However, the CNMC considered that the companies’ market behavior lacked economic rationality and could only respond to a market-sharing strategy. Specifically, it relied on three grounds to conclude that PROSEGUR and LOOMIS had colluded to share the market:

1. the companies did not participate in some public tenders or offered the maximum price—allegedly to respect each other’s service;
2. the companies respected each other’s market position prior to the bank restructuring process; and
3. the companies respected certain of each other’s customers by not participating in tenders for routes or customers operated by the other company.

Based on such alleged collusive conduct, the CNMC identified a single and continuous infringement aimed at preventing the entry of new competitors by sharing customers and routes. Accordingly, it imposed fines totaling €45 million on PROSEGUR and LOOMIS, as well as individual sanctions on an executive of each company.

The Spanish High Court annulled the decision for lack of evidence

In the judgments of June 20, 2022, the Spanish High Court annulled the fines and fully upheld the appeals on the grounds that the CNMC had not sufficiently proved the infringement.

First, the Court recalls that the existence of a single and continuous infringement requires a preconceived plan known and agreed by all parties. It then examines whether the CNMC has actually proved the existence of such concerted arrangement and the joint plan comprising collusive practices based on the available evidence.

The Spanish High Court found no documentary evidence that the behavior of the sanctioned companies followed a previously agreed plan.

According to the Court, the only documentary evidence underlying CNMC’s decision are internal emails. Relying solely on their content, the CNMC concluded that the companies were dividing up the market.

However, these emails are insufficient to prove a concerted action, since it is unclear

1. the reason why some employees included certain content in the emails;
2. whether the companies had shared these emails; and
3. whether they were sent in response to emails from the other company.

After excluding these emails, the Court considered that the only remaining evidence was the companies’ market behavior—also insufficient to rebut the presumption of innocence.

According to the Court, the appellants offered reasonable alternative explanations, which the CNMC should have considered more thoroughly before rejecting them as a justification for the alleged infringement.

In particular, the companies explained that the consistency of their behavior was due to the market structure and the legal and economic barriers, not only concerning service provision, but also commencement of operations (and the legislation)[MMF1] . In this sense, the existence of a legal obligation for the successful tenderer to take on the workers of the previous contractor, which entailed uncertain costs, discouraged participation in tenders other than those operated up to that time.

The Court considers that the alternative explanations offered by the companies are reasonable, objective and based on criteria of economic rationality and efficiency. In the absence of direct evidence of concerted practices, the explanations give rise to reasonable doubts as to whether the behavior of the companies was the result of concerted action. In this context, the CNMC’s reasoning should have been more thorough before determining the existence of collusive agreements and a joint plan between PROSEGUR and LOOMIS.

Conclusions

These judgments provide important insights into the interpretation of internal emails and the use of circumstantial evidence in competition investigations.

On the one hand, they confirm that internal emails are generally not sufficient by themselves to prove collusive behavior when there is no direct or express evidence of contacts between the companies allegedly involved.

On the other hand, they show that the High Court sustains that the CNMC cannot determine the existence of collusive practices relying solely on assumptions and interpretations based on indications that lack a direct connection with the facts. Nor can it simply ignore or reject alternative justifications and explanations provided by the companies when these are logical and based on criteria of economic rationality and efficiency—and there is no direct proof of the conduct.

Third, the Court gives significant weight to the explanations provided by the companies, particularly with regard to the obligation to take on the workers of the previous contractor. This factor plays a relevant role in many investigations carried out by competition authorities in sectors related to public procurement.

Furthermore, the rulings represent another milestone in an already marked trend in the Spanish High Court’s case law annulling CNMC’s sanctions for lack of evidence, as we reported several months ago in this blog in relation to the Cement, Nougat or, more recently, Concrete cases. In this sense, the CNMC should continue to strengthen its analysis to prevent judicial annulment of its decisions.

Click on the following links to read the judgments of the Spanish High Court: Prosegur (Rec. 21/2017) and Loomis (Rec. 550/2016).

By Alexandre Picón and Andrew Ward

Category: Competition and EU Law