A fine line between regulation and liberalisation – DLA Piper

In order for a competition regulator to exert its jurisdiction it must be sure that its concerns relate to the way a company does business and not to failures in the sector, says Juan Jimenez-Laiglesia, competition partner at DLA Piper in Madrid.

“Problems can arise because the difference between the two may be very subtle and for clients it can be difficult to determine the precise jurisdiction of the applicable regulatory or competition policy.”

Regulation broadly offers a preventive and promotional role in terms of competition, while strict competition rules offer a more defensive remit, he explains. The energy sector, he suggests, is an example of where both competition and sectoral regulation issues have been contested.

“A strong interest lies in assessing the merger operations of companies in Spain and the internationalisation of others, through horizontal mergers, vertical ones and, more controversially, those with a conglomerate effect – and which cross the electricity and gas divide.”

Individual situations have seen the competing involvement of the European Commission, the Spanish energy regulator (Comisión Nacional de Energía – CNE) and the competition authority (Comisión Nacional de la Competencia – CNC), as well as political interference, he says.

As regards the lessons that can be learnt across sectors, Jimenez-Laiglesia is clear. “In my experience, the only lesson is to fully inform the authority – if need be informally – of your business strategy and whether the conduct adopted has an objective and valid economic justification.”

The regulator’s assessment will of course depend on a client’s market share, antitrust record, and multinational character, he suggests.

“But I think authorities welcome a friendly and non fearful approach to informing them. Under its current President, Luis Berenguer, the CNC has gained independence and resources and is searching every place under the sun for evidence of anti-competitive and now cartel activity.”