Legal development

CNMC fines renewable energy firm under competition rules for consumer deception

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    On 5 October 2022, the CNMC fined several domestic electricity and gas providers of the Audax Group a total of EUR 9.2 million for using deceptive practices to attract customers from their rivals.

    Key takeaways
    • Under Article 3 of the Spanish Competition Act ("SCA"), conduct that amounts to unfair competition may constitute an infringement of competition rules if the public interest is affected by the conduct concerned.
    • Since the COVID-19 pandemic, the CNMC has increased its enforcement of Article 3 of the SCA.

    Background

    One particular feature of the Spanish competition law regime is that undertakings can infringe competition law through unfair acts that affect the public interest.

    In April 2021, following information obtained from various complainants and from a consumers' association, the CNMC initiated infringement proceedings under Article 3 of the SCA for alleged anti-competitive practices involving several companies of the Audax Group.

    Deceptive strategies

    The CNMC's decision found that several companies within the Audax Group engaged in deceptive and misleading practices to attract domestic electricity and gas customers from their competitors. These practices included:

    • presenting themselves to potential customers using the name or logo of the customer's existing energy provider;
    • informing customers of a purported update or renewal of their tariff, whilst posing as their existing energy provider;
    • offering customers purported discounts on their tariff, whilst assuring them that their accounts would continue to be linked to their existing energy provider;
    • informing customers of a purported mandatory change of their current energy provider due to its supposed disappearance or change of name; and
    • informing customers of a purported change in the billing procedure/details or in relation to their electricity or gas distribution company.

    The CNMC found that the conduct of the Audax Group companies constituted unfair competition and was widespread in Spain, thereby affecting thousands of domestic energy customers, including vulnerable consumers. The deceptive strategies employed by the Audax Group companies caused a significant change in customer behaviour in the markets for the supply of electricity and gas supply to domestic customers, and consequently affected the public interest.

    Decision to impose fines

    The CNMC imposed a total fine of EUR 9.2 million on several Audax Group companies for a serious infringement of Article 3 of the SCA. Unlike Articles 1 and 2 of the SCA (which are equivalent to Articles 101 and 102 of the Treaty on the Functioning of the European Union ("TFEU") under EU law), where the CNMC can issue penalties of up to 10% of an undertaking's global turnover, fines imposed under Article 3 of the SCA are subject to a limit of 5% of the undertaking's global turnover.

    This is not the first time that the CNMC has imposed fines for deceptive behaviour. In a similar case in 2019, the CNMC fined the domestic energy provider Endesa under Article 3 of the SCA for providing misleading information to consumers.

    However, the CNMC's decision also proposes to prohibit Audax Group companies from contracting with public administrations in Spain. Accordingly, the CNMC has sent the decision to the State Contracting Board to determine the scope and duration of the prohibition.

    Increase of unfair competition cases during the COVID-19 pandemic

    During the COVID-19 pandemic the CNMC established a mailbox for receiving information or complaints in relation to anti-competitive practices whilst lockdown restrictions were in force. Although the CNMC's decision does not specify if the complaints that gave rise to its investigation into the Audax Group  were submitted through the dedicated COVID-19 mailbox, it is worth noting that this tool has led to the opening of several investigations involving alleged infringements of Article 3 of the SCA, which are pending a decision by the CNMC.

    For example, the CNMC has launched an investigation into an insurance company which allegedly eliminated temporary disability coverage in the policies of self-employed workers. In another case, the CNMC has opened proceedings against several banking entities as regards the conditions offered to companies in the marketing of COVID credit lines provided by the Instituto de Crédito Oficial (a public lending institution in Spain).

    The President of the CNMC has also publicly stated that Article 3 of the SCA may be a useful tool in the digital economy sector, where the requirements to define the market and establish a dominant position can hinder the effective enforcement of Article 2 of the SCA and Article 102 of the TFEU.

    With thanks to Teresa Prado of Ashurst for her contribution.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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