Unfair Competition: Protect Your Market and Avoid CNMC Sanctions

Unfair competition law in Spain is governed by Law 3/1991 on Unfair Competition (Ley de Competencia Desleal, LCD), which prohibits acts contrary to the requirements of good faith in commercial relations — including systematic imitation, misappropriation of trade secrets, denigration, misleading practices, and comparative advertising that does not meet the conditions of Directive 2006/114/EC. Competition law (Derecho de la Competencia) is regulated by Law 15/2007 on Defence of Competition (Ley de Defensa de la Competencia, LDC), prohibiting anticompetitive agreements (Article 1), abuse of dominant position (Article 2), and controlling concentrations above the CNMC thresholds; fines for LDC infringements reach 10% of the total turnover of the economic group. Private enforcement of competition law damages before the commercial courts is available under Article 71 et seq. LDC, transposing EU Directive 2014/104/EU.

Competition law is one of the legal fields with the greatest direct economic impact and the least culture of preventive compliance among mid-sized Spanish businesses. CNMC fines can reach 10% of total group turnover. Private enforcement claims can exceed the administrative sanction in cost. And the reputational damage of being investigated, even without a sanction, can be irreversible. On the other hand, businesses that do not react to competitors’ unfair practices see their market position silently and progressively eroded.

The Unfair Competition Act: what it protects and prohibits

Law 3/1991 on Unfair Competition (LCD) is the legislation governing relationships between market competitors and protecting the proper functioning of competition, consumer interests, and the market in general. It is not administrative sanction law (that role belongs to Law 15/2007): it is civil law, enforced before the commercial courts through actions for cessation, correction, removal of effects and damages.

The most frequent acts in contentious practice are: acts of confusion (creating a risk of association with a competitor’s company, products or activities); acts of imitation (when imitation is systematic and aimed at hindering the competitor); acts of denigration (false or unnecessarily damaging statements about the competitor); misappropriation of reputation (using a competitor’s brand or renown to promote one’s own products); and trade secret violations (appropriation and use of confidential know-how). The general clause of Article 4 LCD operates as a safety net for atypical conduct that proves contrary to objective good faith in the market.

Law 15/2007 on Competition Defence: infringements and sanctions

The Competition Defence Act (LDC) and Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) prohibit anticompetitive conduct: collusive agreements between competitors (price cartels, market allocation, bid rigging) and abuse of dominant position (predatory pricing, refusal to supply, price discrimination, tying practices).

The CNMC is the body responsible for investigating and sanctioning these infringements in Spain. Its investigations may be initiated ex officio (based on its own indications), by complaint from an affected third party, or following a leniency application from one of the parties to a collusive agreement. The CNMC’s sanction procedure may last between eighteen months and four years, with significant reputational and operational impact throughout the process.

Sanctions are proportional to the gravity and duration of the infringement, with ceilings of 1% (minor infringements), 5% (serious infringements) and 10% (very serious infringements) of total group turnover, not just that of the infringing company. For international cartels, the fine is coordinated with European Commission sanctions, which apply the same ceilings.

Private enforcement: civil liability after the sanction

Directive 2014/104/EU on damages for competition law infringements (transposed into Spanish law by Royal Decree-Law 9/2017) established the legal framework for those affected by competition infringements to claim damages before the civil courts. A final CNMC or European Commission decision declaring an infringement is binding on the civil court as to the existence and nature of the infringement, greatly simplifying the claimant’s burden of proof. Alleged victims (direct or indirect purchasers who paid overcharged prices due to the cartel, competitors affected by the abuse) can claim full compensation for the damage suffered, including lost profits and interest. The five-year limitation period runs from when the infringement ceased and the claimant had sufficient knowledge.

Unfair competition and competition law advisory coordinates with the litigation and arbitration team for procedural representation before the commercial courts, with the commercial law team for review of distribution and agency contracts, and with the criminal compliance team when competition infringements have criminal implications (for example, public procurement bid rigging may constitute a corruption offence under Spanish criminal law).