This summer, the National Authority for Markets and Competition in Spain ("CNMC") issued its first decision directly imposing a prohibition on contracting with the public administration, following a competition law infringement in the energy sector, marking a significant milestone in Spanish antitrust public enforcement (See Case S/0011/23 Eólica de Alfoz). 

During this procedure, the CNMC investigated an alleged abuse of a dominant position in the Spanish market for access and connection to the electricity transmission network. According to the CNMC, the sanctioned company was taking advantage of its status as Single Node Interlocutor (Interlocutor Único de Nudo or “IUN”, in Spanish), whose mission is to coordinate all requests for access and connection to the transmission network at a particular node. The processing of applications is crucial for allocating access capacity at the node, which is always limited, and the CNMC considered that this company was prioritising access for its own business projects whilst discriminating against, and excluding, competitors.

As a consequence of such behaviour, the CNMC imposed, together with an economic sanction of nearly 1 million euros, the prohibition on the undertaking to enter into contracts with public sector entities with immediate effect.

1. Legal framework of the prohibition to contract with public sector entities

In June 2023, the CNMC issued a Communication on public contracting prohibitions, aimed at shedding light on the criteria for determining their duration and scope in relation to competition law infringements. The objective was to ensure legal certainty on the application of Article 71.1.b) of Spanish Law 9/2017 on Public Sector Contracts, which establishes that undertakings sanctioned for serious and very serious competition law infringements may be subject to the prohibition from contracting with public sector entities, irrespective of whether the sanctioned conduct directly affects public procurement or not. 

The law provides that the prohibition to contract will not be applicable if certain conditions are met. Specifically, the company must demonstrate the payment of, or commitment to pay, the economic fines imposed, and implement “self-cleaning” measures by adopting appropriate technical, organisational and personnel measures to avoid future competition infringements.

Although Spanish law sets out the possibility of imposing bans to contract with the public administration since 2015, the CNMC had not previously exercised this power directly. The Spanish Supreme Court has clarified that a contracting prohibition of this nature can only take effect once its scope and duration have been precisely determined. However, until now, the application of fully determined prohibitions had only been used at regional level by the regional competition authority of Catalonia, while the CNMC had simply declared the prohibition and sent the decision to the National Public Procurement Advisory Board so that it could determine these parameters.

2. Determination of the prohibition and key enforcement considerations

In this case, for the first time, the CNMC has imposed, for the first time, the above-mentioned prohibition with a clearly determined scope and duration. More particularly, the CNMC has defined the prohibition on the following terms:

• Geographical scope: Despite the conduct occurring in a geographically limited market (i.e., the electric node controlled by the IUN), the prohibition has been imposed at a national level, reasoning that the competition infringement at issue affected the broader electricity generation market spanning the Spanish peninsular territory, and that access to electricity transmission networks has strategic importance for the national electricity market's proper functioning.
• Material scope: The CNMC has also taken into consideration the activities carried out by the sanctioned undertaking that could involve contracting with the public sector and the fact that, beyond wind energy production, the prohibition would also apply to the company's consulting, construction, operation, and maintenance of wind energy installation activities, as these were part of the undertaking’s corporate purpose and could likewise potentially be carried out through future public procurement procedures.
• Temporary scope: The CNMC considered that a 6-month duration was appropriate, balancing the 26-month duration of the infringement against the fact that the allegedly abusive conduct did not directly affect public procurement markets, and the economic sanction imposed was relatively moderate compared to the maximum penalty that could have been applied under national law.

This decision also confirms that companies can avoid the prohibition through the above-mentioned requirements. Nevertheless, in this case, the undertaking involved failed to demonstrate both the implementation of effective prevention measures and commitment to fine payment.

One of the major consequences of the CNMC determining the scope and duration of the prohibition is that it takes immediate effect upon resolution, contrary to the usual practice implemented to date, where the prohibition was imposed but not determined, as this decision was deferred to the National Public Procurement Advisory Board. The application of this prohibition can be, however, suspended until the CNMC’s decision becomes final (e.g. via potential appeals).

3. Conclusions

It is worth noting that the imposition of contracting bans may produce unintended consequences, potentially harming competition in already concentrated or fragile public procurement markets where the number of bidders is limited. As such, careful consideration will be required to ensure that the pursuit of deterrence does not undermine market efficiency or public interest in the country.

In any event, this decision signals the CNMC’s determination to fully deploy its enforcement powers, assuming a more proactive role in shaping the contours of exclusion from public contracting, given the weight of public procurement activities in Spain. 

As the first case resolved following the June 2023 Communication on contracting prohibitions, the decision sets a relevant precedent for future cases and further practical implications may still remain to be seen.

If you need more information or further guidance in this area, please contact Candela Sotés.

VISIT OUR COMPETITION LAW HOMEPAGE