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Clifford Chance

Clifford Chance

Antitrust/FDI Insights

The CNMC imposes gun jumping fines for failure to notify transactions meeting the Spanish market share threshold

Companies should be cautious and carry out reasonable assessments prior to disregarding the need to notify a transaction based on the Spanish market share threshold

Concentrations of business operations leading to a market share of 30% or more (or of 50% or more where the target's Spanish revenues do not exceed EUR 10 million) at a national level or in a geographical market defined within Spain, need to be notified to the Spanish National Markets and Competition Commission (the "CNMC") prior to completion (the "Spanish market share threshold").

The Spanish market share threshold poses difficulties for companies, particularly where transactions affect markets that have not been previously defined by precedent of competition authorities, and requires caution even when precedent dealing with the relevant markets exists.

Indeed, on 22 July 2022, the CNMC fined both Albia Gestión de Servicios and Funespaña in the amounts of EUR 275,000 and 110,000, respectively, for failing to notify three different acquisitions in the Spanish funeral sector. According to the CNMC, the transactions met the Spanish market share threshold in a number of affected markets traditionally considered local in scope by CNMC precedent. The transactions subject to the CNMC's July decisions were disclosed to the CNMC in the context of the notification of the proposed acquisition of Funespaña by Albia's parent company, Santa Lucía.

In the past, the Spanish High Court has annulled a number of the CNMC's gun-jumping fines for failure to notify a transaction meeting the Spanish market share threshold. According to the High Court, in order to impose a fine for gun jumping on this basis, the market definition and the market share must be proved beyond reasonable doubt by the CNMC. and a fine cannot be imposed where the decision not to file was based on a product market definition that is reasonable and can be justifiable in legal terms. The High Court has also stated that the CNMC cannot argue that there is a presumption of guilt on the part of the acquirer due to a failure to use the prior consultation mechanism available under the Spanish competition law.

Nonetheless, the CNMC continues to adopt a very strict stance and has imposed fines based on the Spanish market share threshold arguing that the acquirer should have dispelled any doubts by means of prior consultation or pre-notification.

In order to minimise gun jumping risks, companies should be able to show that a reasonable assessment of the potential market definition and respective market shares has been conducted prior to disregarding the need to notify a transaction based on the Spanish market share threshold. This exercise frequently requires time and resources. In case of doubt, in order to avoid risks, it is possible to dispel them through informal consultation or pre-notification discussions with the CNMC.

Special caution is required where there is precedent pointing to narrower definitions of markets on the basis of which the threshold would be met.

In its July decisions, the CNMC argued that a decision not to file needs to be supported by reasonable criteria based on a diligent assessment of precedent and that, in order to avoid a fine, convincing arguments based on solid objective elements pointing to a broader market definition have to be submitted. In those cases, the CNMC considered that the companies in question acted negligently by not taking into account existing precedent that has consistently deemed funeral services to be local in scope and by omitting that possibility in their analysis.

To date, fines for gun jumping in Spain have remained relatively low (the highest fine ever amounted to EUR 1 million). However, fines could increase in the future following the trend in other jurisdictions in the EU such as France (as shown by the Altice cases) given that the CNMC has a wide margin of discretion to impose fines. Furthermore, gun jumping poses a reputational risk and may also impact future transactions in the same sector.