Cablegate: Spain's Competition Tribunal Travesl to Washington

This record is a partial extract of the original cable. The full text of the original cable is not available.

161631Z May 05




E.O. 12958: N/A

1. Summary: The President of Spain's Competition Tribunal
Gonzalo Solana Gonzalez travels to Washington next week to
meet with U.S. Foreign Trade Commission officials, the
Department of Justice and International Financial
Institutions (IFIs). Solana's goal is to discuss proposed
reforms to competition law in the with American counterparts
on one hand, and seek funding for their work with Latin
American competition authorities from IFIs on the other hand.
In recognition that Spain is behind other European countries
in competition policy, the Minister of Economy Pedro Solbes
has made unifying the current Competition Service of the
Ministry of Economy and the Competition Tribunal into one
independent administrative organ. End Summary.

Weaknesses of Current Competition Policy

2. Spain's current competition policy is carried out by two
separate organizations. The Ministry of Economy's
Directorate General of the Defense of Competition
(Competition Service) conducts investigations of alleged
breaches of competition. The semi-independent Competition
Tribunal then judges the cases and metes out penalties.
These two authorities are responsible for competition policy
at the national level. If a monopoly or cartel only affects
an autonomous region in Spain, regional governments have the
authority to investigate and try the case.

3. The Ministry of Economy has identified several weaknesses
with the current competition policy system in Spain.
Elimination of cartels in Spain in the past 15 years has been
poor in certain sectors, notably sugar, beer, iron and
drivers' training schools. The division of labor between the
investigative arm and the tribunal duplicates work and causes
a slow process from complaint to resolution. A recent
telecom case required two years to resolve in which time the
competitor bringing the complaint went out of business. The
final weakness noted by the Ministry is that competition
authorities are not consulted by Parliament on all laws that
affect competition such as electricity or telecom law, but
only on pure competition law.

Reform Proposal

4. The Ministry Economy's proposed reform of Spain's
competition authorities in early 2005 is one of the
centerpieces in Spain's economic reforms. The white book
describing the reforms and the Ministry's analysis was
released in late January. Other ministries and corporations
were given two months for comment. The Ministry of Economy
is currently considering the commentary and is preparing the
bill for Parliament. Once completed, the Competition
Tribunal will provide their testimony to the Parliament. The
law is expected to pass and be implemented by May 2006.

5. The broad changes made in the white book proposal begin
with the unification of the investigation and resolution
responsibilities into one independent National Commission for
the Defense of Competition (the Commission) to increase
efficiency and reduce duplication of work. The ability to
punish offenders would be conducted in an administrative
manner, and be taken to an independent court only if
requested. The nomination of members of the Commission would
be less political. Currently the majority government names
members of the Competition Tribunal, and the Minister of
Economy chooses the head of the Competition Service. The
Ministry is considering ways of making the naming process
more independent. The reform will also consider clarifying
the role of the Commission in competition policy vice the
Telecommunications Commission and energy regulators.

6. More specific technical changes that the reform proposal
addresses include an elimination of a company's ability to
request an individual exemption from competition law if the
benefits to society outweigh negatives. Such a finding will
only be made after a complaint has been filed according to EU
law. Merger decisions will devolve to the Competition
Commission that are now made by the elected government. An
issue that remains outstanding is if the government will
maintain a veto over the Commission's decisions as is allowed
in Germany.

7. Two additional points the Ministry of Economy's reform
proposes are similar to the American system. The Ministry
wants to introduce leniency for members of cartels that
participate in competition proceedings. Fifteen of the 25
European countries currently allow leniency for cooperation
and 80% of European cases begin in this manner. The law will
also propose allowing civil trials to consider competition
law parallel to the commission. Currently, all civil cases
are suspended until the Competition Tribunal makes a
decision. After reform, a company should be able to file a
complaint with the Commission, and sue in civil court.

Trip to Washington

8. The President of the Competition Authority Gonzalo Solana
Gonzalez and his Chief of Staff Antonio Guerra are traveling
to Washington next week to meet with representatives of the
Foreign Trade Commission and the Department of Justice to
receive advice on reform. They are particularly interested
with the U.S. experience on leniency in competition
investigations. Solana is also interested in learning about
private or civil enforcement of competition law in U.S.
courts. Finally, they want to ask about the FTC' and Justice'
advocacy in lobbying congress on competition issues.

9. Solana and Guerra will also be talking to IFIs
institutions in Washington such as the International Monetary
Fund, the World Bank and the Inter-American Development Bank
to seek funding for Spain's work in Latin America. Spain and
Portugal have been holding an Iberoamerican Forum on
Competition Policy with Latin American competition
authorities for five years. Spain funds a competition course
for government officials each year in Madrid. They would
like to obtain further funding to help competition
authorities develop further in the Latin American region.

10. Comment. The Ministry of Economy is interested in
assuring that competition policy in Spain becomes more
effective. Weak competition in Spain's economy remains a
problem and behind much of Europe. The Ministry wants to try
to create a more competitive and fair environment in Spain as
well as catch up with European neighbors. Spain needs to
overcome the legacy of the monopolistic corporate behavior of
the Franco years and the "national champion" policies of the
90s that have endowed Spain with strong energy, banking and
telecommunications competitors in Latin America, but have
reduced competition at home.

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