Criminal Liability for Anticompetitive Conduct in Spain: The Crime of Price Manipulation under Article 284 of the Criminal Code
The proliferation of anti-competitive practices (cartels for lorries, cars, milk, etc.) is generating a growing social rejection, which suggests that these behaviors, which until now were sanctioned administratively, will begin to be prosecuted criminally due to the very serious damage they cause to the economy and consumers. In order to punish these behaviors, the Spanish Criminal Code (hereinafter, “CP”) contemplates three criminal offences aimed at protecting free competition in the market and price-fixing systems: (i) the alteration of prices in public tenders and auctions (art. 262 CP), (ii) the withdrawal of raw materials and basic necessities (art. 281 CP) and (iii) the manipulation of prices resulting from free competition (art. 284 CP).
Due to space constraints, this analysis will focus on the offense of price manipulation as defined in Article 284 CP, which is a result-based offense. Thus, for the conduct to be punishable, an actual alteration in price, whether an increase or decrease, must occur. The mere execution of the act is not sufficient if the harmful result is not achieved. This requirement is justified by the need to protect not only the assets of individual competitors or consumers but also the pricing regulations that uphold the current economic model, ultimately safeguarding the financial interests of consumers and competitors.
Article 284 CP outlines three modalities of criminal offenses:
a. Price alteration through violence, threats, deception or other means.
Firstly, the offense punishes the alteration of prices that should result from the free competition of products, goods, financial instruments, spot contracts on raw materials, reference indices, services, or any other movable or immovable items subject to contracting, by using violence, threats, deception, or any other artifice.
It seems logical that price manipulations carried out using “violence” or “threats” should be criminally sanctioned, although such practices are not the most common. Typically, these manipulations occur through collusive agreements, cartels, or abuse of a dominant position. Therefore, the offense also contemplates the possibility that the typical conduct may be committed through “any other artifice”, thus allowing for the inclusion of secret agreements or coordinated simulations among several market operators to manipulate prices.
The offense may also be committed through “deception”, either by deceiving the person responsible for setting the price or the consumers themselves, through covert agreements among competitors to alter prices. Such agreements could constitute a form of deception by omitting information from consumers, placing them at a disadvantage in their commercial transactions and defrauding their legitimate expectations.
Given that concepts like “cartel” and “collusive practices” are already addressed in Law 15/2007, of 3rd July, on the Defense of Competition, the distinction between a mere administrative infraction and a criminal offense will depend on the severity of the effects produced, which will vary based on the degree of sophistication and machination used, such as the exclusion of one or more competitors from the market, blocking access to essential goods or services, destabilizing strategic sectors, etc.
b. Price manipulation through information.
Article 284 CP also penalizes the alteration or preservation of the quoted price of a financial instrument, a spot contract on raw materials, or a reference index through false news, signals, or rumors when the perpetrator gains a benefit for himself or for a third party, provided that (a) the benefit exceeds 250,000 euros, or an equivalent loss is caused, or (b) the amount of funds employed exceeds two million euros, or (c) a severe impact on market integrity is caused.
This modality requires that the perpetrator gains a benefit for himself or for a third party (or causes a loss) of at least 250,000 euros, which facilitates the distinction between criminal and administrative offense. This threshold acts as an objective condition for punishability, implying that cases below this amount will be sanctioned administratively.
c. Operational manipulation.
Lastly, the offense also penalizes conducting operations that provide false indications about the demand, supply, or price of a financial instrument, a spot contract, or a reference index; or that secure, using the same information, by himself or in concert with others, a dominant position in the market of those instruments or contracts with the aim of fixing their prices at abnormal or artificial levels, provided one of the circumstances listed in (a), (b), or (c) above is met.
This modality seeks to punish deceptive or abusive operations aimed at altering the price formation of financial instruments, spot contracts on raw materials, or reference indices.
d. Penalties.
From a punitive standpoint, Article 284 CP, foresees in its basic form (an aggravated form also exists) the imposition of prison sentences of up to six years and special disqualification from intervening in the financial market. Additionally, it contemplates the imposition of fines, which amount is linked to the benefit obtained by the offender. This aims to deter the execution of anticompetitive practices, as administrative sanctions, which can reach up to 10% of turnover, have sometimes proven insufficient to protect the legal interest at stake, given that offenders often consider these fines as part of their operating costs and continue to find it profitable to violate competition rules. Thus, fines for individuals will range from the equivalent to triple the benefit obtained or the damage avoided; and for legal entities, fines of two to five years or triple to quintuple the benefit obtained, or what could have been obtained if the resulting amount is higher.
Finally, the offense also provides that these behaviors may be punished without prejudice to the fact that the offenders may have committed other crimes, which is particularly relevant when violence, threats, deception, or even insider information is used.
e. Conclusion.
Article 284 CP imposes criminal sanctions for the execution of anticompetitive practices that go beyond traditional administrative measures, aiming to ensure the integrity of free competition and protect consumers and competitors from the harmful effects of such conduct. Furthermore, linking the amount of the fine to the benefit obtained demonstrates a clear commitment to pursuing those who still find these anticompetitive practices profitable.
Álvaro Martín Talavera
Partner – White-collar crime practice