National Competition Report Q1 2018 – Spain

The Spanish Supreme Court Clarifies the Scope of Judicial Review of Competition Cases

On April 10, 2018, the Spanish Supreme Court annulled a judgment of the Spanish High Court, finding an abuse of a dominant position as well as a decision of the Spanish Competition Authority (the “CNMC”) finding no infringement, and referred the case back to the CNMC.¹

Factual Background

In 2011, Hewlett Packard Company and Hewlett Packard Española, S.L. (together, “HP”) complained that Oracle Corporation and Oracle Ibérica, S.R.L. (together, “Oracle”) were abusing their dominant position in relational database management systems (“RDBMS”).  RDBMS are a means of storing digital information based on a relational model whereby the database tracks and organizes the data in or more tables, recording a unique “key” that identifies each row in the table. 

HP took issue with how Oracle was offering Enterprise Edition, a popular RDBMS, for servers built around Intel’s Itanium processors.  In particular, HP complained about how, in 2009, reduced the price for a new license for its Enterprise Edition database for servers that used a Sun processor while subsequently increasing the price for a version of the same software for servers using the Itanium processor.  Later, in 2011, Oracle announced that it was suspending all software developments for Intel’s Itanium processor.  These developments had an important impact on HP because Intel’s processor is at the heart of HP’s Integrity servers.  Oracle also sells servers, they are based around Sun processors, not Intel’s Itanium processors.      

Legal Assessment

The investigating body of the CNMC concluded that Oracle was dominant in a market for high-performance RDBMS because: (i) Oracle had a market share of 70–80%; (ii) Oracle had been strengthening its position; (iii) there had not been any new market entrants or changes in the structure of supply in recent years; and (iv) the reduced size of Oracle’s competitors Microsoft and SyBase meant that IBM was Oracle’s only significant remaining competitor. 

The investigating body of the CNMC also concluded that Oracle’s conduct in this market had been abusive and discriminatory.  In particular, the investigating body found that the changes in the pricing policy for the new licenses for Oracle’s Enterprise Edition database had made HP’s servers that used the Itanium processor less attractive.  According to the investigating body of the CNMC, Oracle’s internal emails showed that these pricing decisions had been taken with an anticompetitive aim.  The investigating body classified these price changes as abusive discrimination and found that they had had an exclusionary effect on HP. 

Similarly, the investigating body held that the refusal to make Oracle’s new software compatible with the Itanium processor was also discriminatory conduct that could be equated to a refusal to supply.  First, the investigating body concluded that compatibility with Oracle’s software was objectively necessary for HP to compete with Oracle in the market for high-end servers.  Second, the investigating body held that Oracle’s conduct was capable of excluding HP from the market for high-end servers.  Third, the investigating body concluded that Oracle’s conduct was likely to lead to consumer harm.    

On this basis, the investigating body of the CNMC made a proposal to the Council of the CNMC to find an infringement of Article 2 LDC and Article 102 TFEU.

The Council did not follow this proposal, with which it disagreed on several grounds.  First, the CNMC held that it was not justified to define a market including only high-performance RDBMS.  This would be an unjustifiably narrower market than that defined by the European Commission in Oracle/Sun,² which covered all RDBMS.  On a correctly defined market, the Council did not find that Oracle held a dominant position.  Second, regardless of market definition, the Council did not agree that Oracle’s conduct constituted an abuse.  The Council reasoned that: (i) Oracle’s software was not an indispensable input for HP to compete, and Oracle’s approach to providing this software for servers relying on Intel’s processor could not, therefore, amount to a refusal to supply; (ii) the Council was not in a position to establish the effects of Oracle’s announcement vis-à-vis HP; and (iii) there was no basis to assume that prices would increase in a hypothetical scenario where HP was eliminated essentially leaving a duopoly of IBM and Oracle. 

On February 26, 2013, the CNMC declared that Oracle had not committed an infringement of Article 2 LDC and Article 102 TFEU.³

HP appealed.  The Spanish High Court upheld the appeal and annulled the CNMC’s decision, ordering the Council of the CNMC to adopt a new decision taking the findings made by the CNMC’s investigating body as proven facts and establishing an infringement consisting of an abuse of dominance.⁴  

The CNMC and Oracle appealed this judgment to the Spanish Supreme Court, which analyzed the statement of reasons of the lower court’s judgment.  The appellants argued that the High Court’s judgment ignored the content of the administrative decision as well as the reasons stated by the CNMC for not finding a dominant position.  Moreover, they claimed that the High Court had not stated sufficient reasons to support its conclusion that there had been an abuse of dominance.  The Supreme Court upheld these pleas.  In addition, it noted that the High Court’s judgment had determined a substantial part of the content of the administrative decision adopted by the CNMC by taking a position on findings of facts and their legal classification, in violation of the constitutional right to effective judicial protection.  The Supreme Court annulled the judgment of the High Court.

The Supreme Court nevertheless agreed with the High Court that the Council of the CNMC had not carried out a detailed assessment of the evidence on the file before closing the case.  On this basis, the Supreme Court annulled the administrative decision and referred the case back to the CNMC.

Implications 

This judgment stresses the importance of the CNMC providing a fully articulated statement of reasons, particularly in cases where the authority decides to depart from the proposal of its investigating body.  It also helpfully clarifies the scope of judicial review of competition decisions.  In cases where an administrative decision is deemed to be legally flawed, it is not for the judicial body reviewing this decision to replace the errors of the administrative body with its own reasoning.  Instead, judicial review on these points should result in a judgment referring the case back to the administrative body, indicating the points of fact and law that should be examined or re-examined.

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[1] Judgment of the Spanish Supreme Court of April 10, 2018, Case 583/2018 (appeal 3568/2015), ECLI:ES:TS:2018:1362.

[2] Oracle/Sun Microsystems (Case COMP/M.5529), Commission Decision of January 21, 2010.

[3] Oracle (Case S/0354/11), CNMC Decision of February 26, 2013. [4]

[4] Judgment of the Spanish High Court of September 24, 2015, appeal 168/2013, ECLI:ES:AN:2015:3126.