Gas Natural: competition… and fairness

06/04/16

On March 15th last, the Supreme Court ruled on a case about Article 3 of Law 15/2007 of 3 July 2007 (the Spanish Competition Act, LDC). This Article allows the competition authorities to impose fines for acts of unfair competition which run counter to the general interest. As the Court of Appeal had done in first instance, the Supreme Court confirmed the 2.65 million euros fine that the former national competition authority (CNC) had imposed in July 2011 on Gas Natural Comercial SDG, S.A., for unfair competition (Case S/0184/09, ATR Gas Natural).

The CNC found that an information campaign run between May and September 2009 had infringed Article 3 LDC. Gas Natural had sent letters to clients criticising door-to-door visits by other suppliers and stating that it would not, regardless of what might have been said at such visits, assume any responsibility for the supply service. Moreover, Gas Natural expressly distanced itself from its competitors and advised clients to take precautions to preserve “the maximum guarantees for service, comfort and ease of mind” regarding gas supplies.

The Supreme Court validated the assessment of both the CNC and the Court of Appeal. All three consider that the terms of the letters infringed Articles 5, 9 and 10 of Law 3/1991 of 10 January 1991 (the Unfair Competition Act) to the extent that misled, denigrated and made comparisons. The letters dimissed competitors, brought their services into disrepute, suggested that changing supplier was risky and made some statements which were not really accurate (for instance, that the sender would not take the responsibility for supplies contracted with competitors… which was for another affiliate of the same group group of companies – Gas Natural Distribución SDG, S.A. – to do). Furthermore, contrary to what Gas Natural Comercial alleged in its defence, it was not proven that the campaign actually responded to consumer complaints, since it was launched long after such complaints.

Gas Natural’s campaign affected the general interest, which is a requirement to apply Article 3 LDC, bacause (i) all competitors in the market were targeted; (ii) the effect in the market was massive, as five million letters were sent; (iii) the Gas Natural group, being the incumbent former monopolist on all gas markets, holds a dominant position on both relevant markets; (iv) the aim was to impair market liberalisation and to harm effective competition on the market.

In other words, Gas Natural Comercial’s dominant position does not mean that any unfair competition also amounts to an abuse of such position or automatically infringes Article 3 LDC. The Supreme Court’s judgement of 20 June 2006 (annulling a fined imposed by the former Competition Tribunal on Telefónica) had already stated this, adding that, conversely, Article 3 LDC may also apply to non-dominant firms. The ‘effect on the general interest’ requirement being so vaporous, it is little wonder that competition authorities usually dodge Article 3 LDC cases (as shows this example). We are delighted that the Supreme Court confirmed an exception to this habit.