Portugal: The New Competition Law

Summary

Portuguese Government has initiated a reform of the competition framework with a view to improving the competitive landscape for both Portuguese and foreign investors wanting to develop a business in Portugal. As a first step, the Portuguese Competition Authority (Autoridade da Concorrência – the "Competition Authority") was created through Decree-Law 10/2003 of 18 January 2003. Unlike its predecessor, which was a government body, the Competition Authority is an independent authority with the power to monitor competition in all sectors of the economy.

Law 18/2003 of 11 June establishes the new competition legal framework (the "Competition Law"), by revoking Decree-Law 371/93 of 29 October 1993, as amended from time to time.

The Competition Law introduces no substantial changes to the legal framework of restrictive practices.

The prohibition of restrictive practices is limited to those practices that may have as their objective or effect a "significant restriction or distortion" of competition in the whole or in part of the national market. Companies may, however, be exempted from the prohibition of such restrictive practices in case they improve the production or distribution of goods or promote economic or technological progress.

The old competition law established several assumptions for the purposes of assessing if a company held a dominant position in the market. A company would be deemed to have a dominant position if it held a share equal to or exceeding 30% of the market of a product or service. These thresholds would be increased to 50% market share for two or three companies and to 65% market share in case of four or five companies.

Under the Competition Law, these assumptions were eliminated. A company shall now be deemed to have a dominant position in the relevant market if it dominates the market and has no relevant competitors. In addition, a company or companies’ conduct shall be construed as abusive if (i) it distorts or restricts competition or (ii) it refuses to grant other companies, for reasonable consideration, access to a network or any other infrastructure, which it controls.

The concept of abuse of economic dependence has no equivalent in most European Union Member States. However, the Competition Law has kept this concept since, in some cases, the survival and the market role of companies depend on the products or services demands made by other companies, as there is no equivalent alternative.

The abuse of economic dependence is prohibited to the extent it may affect the functioning of the market or the competition structure. The adoption of restrictive practices or termination of established business relationships without cause, taking into account the nature of such relationships and the recognised business practices applicable to any such business, may be considered as abuse of economic dependence.

The Competition Law has introduced substantial changes to the rules on merger control. The main concern was to adapt the Portuguese competition framework to the European competition rules in respect of both substantial and procedural aspects.

The criterion for the authorisation or rejection of mergers remains identical to the one established in the old competition law, that is the likelihood of such operations to create or reinforce a dominant position which may significantly affect competition.

The Competition Authority shall be responsible for the definition of the criteria for the existence of a dominant position of a company or companies in the relevant market based on the precedents set by the European Court.

The merger control procedure that will be used by the Competition Authority is very similar to the review procedure set out in the European Regulations. Notification to the Competition Authority is required on the following situations: (i) the merger transaction leads to the establishment or the reinforcement of a market share exceeding 30% of the Portuguese market of any goods or services provided by the companies or of any substantial portion of any such market; (ii) the aggregate net turnover obtained in Portugal by the companies involved in the merger exceeds EUR 150 million in the previous financial year.

A merger transaction that is subject to prior notification cannot be completed before obtaining clearance from the Competition Authority. However, the companies involved in a merger operation may request a waiver to this obligation. Such waiver shall take into account the adverse consequences to the companies involved and/or to competition that might result from not completing the merger before obtaining approval.

The Competition Authority shall authorise the transaction unconditionally if (i) the transaction does not grant the buyer a dominant position in the relevant market or (ii) such dominant position will not significantly affect competition. Otherwise, it may authorise the transaction, subject to the fulfilment of certain commitments by the parties ensuring effective competition in the affected market is maintained, or prohibit the transaction if the effects on competition are significant and cannot be overcome.

The completion of a merger operation in violation of the decision of the Competition Authority refusing to approve the merger shall be subject to a fine that may go up to 10% of the previous year business volume of each of the companies involved.

The failure to notify the Competition Authority of a concentration operation subject to notification under the Competition Law shall be subject to a fine that may go up to 1% of the previous year business volume of the company.

The Competition Law does not include any procedure for controlling the legality of State aid.

However, without prejudice to the powers of the European Commission in this field, the Competition Authority may, at the request of any interested party, review any aid or projected aid and recommend the Government the measures that may required to eliminate the negative effects of such aid over competition.

© Macedo Vitorino e Associados – June 2003