Farewell to the young CNMC

Written on 20 Feb 2017

The Spanish Government is concluding the negotiations with the main opposition parties to dissolve the current Spanish Commission on Markets and Competition (CNMC) and to replace it with two independent organisations.

The CNMC will be split

The CNMC was established in 2013 through the merger of six previous agencies:

  • National Competition Commission;
  • National Energy Commission;
  • Telecommunications Market Commission;
  • National Postal Sector Commission;
  • State Council for Audio-visual Media; and
  • Railway and Airport Regulation Committee.

This regulatory restructuring was widely criticised by experts. Now it seems that the idea is to return to the previous model, or at least to one more similar to the previous one, splitting market regulation and competition matters into two different bodies:

  1. Independent Regulatory Authority of the Markets (AIReM). AIReM will be in charge of the supervision and control of regulated economic sectors, namely: (i) gas and electricity markets; (ii) electronic and audio-visual communications; (iii) railway and airport transportation; (iv) postal services; and a new one, (v) gaming. It will also be responsible for the resolution of conflicts between operators. The theoretical aim is to remove all those powers from the ministries again (many of them were gained by ministries when the CNMC was created), but there is considerable suspicion around this, as it is doubtful that the government would allow this loss of power, especially in certain matters (such as fixing of electric tolls); and
  2. Independent Authority on Defence of Competition (AIDeCo). AIDeCo will be in charge of the promotion of competition, the enforcement of European and national competition law, the guarantee of the Spanish market unit and, as a new feature, the protection and defence of consumers and users, similar to other neighbouring countries.

New appointment system for commissioners

While the current CNMC has ten commissioners in two chambers (regulatory and competition), each of the new authorities will have six commissioners, and the appointment system will substantially differ. Instead of being named by the government, the government will simply propose candidates on the basis of professional criteria, which will then be validated by a committee of experts. This committee will issue a ‘fairness opinion’ and, ultimately, each new member will need to obtain the validation of the Economy Commission of the Congress on the basis of a simple majority.

This new regime intends to avoid the internal and political conflicts which hampered the activity of the CNMC, especially after its record year in 2015, in which it imposed fines amounting to €549m.

This will also pacify opposition parties as all existing commissioners have been directly appointed by the current government but, with the new system, opposition parties will also be able to make their own proposals.

And even more regulators… a real improvement?

The on-going negotiations among the parties do not only include the restructuring of the CNMC, but also the creation of new state agencies, such as the Authority for the Defence of the Financial Product Consumer (to avoid situations such as the current one with the “floor clauses” which stipulated mortgage interest rate minimums, and which were recently declared null and void due to their abusive nature), or the Insurance Regulatory Body (with powers that are currently managed by a Directorate General under the Ministry of Economy).

Although the stated intentions seem to be fair and legitimate, there is no shortage of reasons to be cautious and make a prudent evaluation. Taking into account the important interest that the proposed reform involves, it would be desirable to avoid excessive haste in order to create a broad consensus among both parliamentary groups and stakeholders, something that will surely strengthen the institutional legal framework of the CNMC’s successor bodies.