CN05 - CNMC fines canine association for abuse of dominance

On 26 May 2022, the CNMC fined the Royal Canine Society of Spain ("RSCE") almost EUR 143,000 for abusing its dominant position in several markets related to purebred dogs by hindering the activity of rival associations and discriminating against canine judges. The CNMC launched its investigation in October 2020 following a complaint from several canine associations.

Key takeaways

• Although competition law infringements committed by associations usually fall within the scope of Article 1 of the Spanish Competition Act ("SCA") and Article 101 of the Treaty on the Functioning of the European Union ("TFEU"), their behaviour may also amount to an abuse of dominance, in particular, when they have been granted exclusive or special rights.
• The abusive behaviours slowed down the expansion of national canine organisations with their own pedigree books and reduced their revenues, by decreasing the demand for pedigree certificates requested from competing associations.
• With this decision, the CNMC confirms the particular interest it has traditionally shown in the prosecution of anti-competitive behaviour by associations of undertakings.

Background

For a dog to be considered purebred in Spain, it must have a pedigree certificate. As the Spanish pedigree certification market is liberalised, this certificate can be issued by any officially recognised canine association. However, only RSCE is authorised to issue internationally recognised export certificates in Spain. Export certificates are essential to register dogs as purebred in the country of destination.

The power to issue internationally recognised export certificates is granted by the sector's most significant international association, the Fédération Cynologique Internationale ("FCI"), whose members include several national organisations (only one per country). 

Moreover, members of both the FCI and RSCE qualify judges to participate in competitions and exhibitions that allow dogs to access categories that give them greater value. The results of these activities can increase the value of dogs when they win prizes that are registered in their record.

Abusive behaviours

The decision establishes that RSCE has a dominant position in the markets for national and international certification of purebred dogs and for judge auditing services and that RSCE's behaviours amounted to single and continuous infringement of Article 2 of the SCA and Article 102 TFEU by:

• requiring owners of purebred dogs to register their dogs with RSCE (with payment of the corresponding fees) and remove their dogs from the records of any competing associations in order to obtain an export certificate issued by RSCE;
• applying discriminatory fees and eliminating the ancestral history and track records of dogs coming from other associations, as opposed to those dogs originally registered in RSCE's records;
• prohibiting canine judges trained and licensed by RSCE or by other association members of the FCI from participating in events organised by other competing national canine organisations and sanctioning any breaches; and
• creating and using an organisational structure of collaborating members and clubs, by signing exclusivity and non-competition agreements, to strengthen RSCE's dominant position.

Fining decision

The fine imposed amounts to 7.5% of RSCE's annual turnover and is therefore proportionally higher than fines applied in comparable cases: for example, (i) in case S/0041/19, Correos, the CNMC imposed a fine amounting to 5.5% of Correos' turnover for applying an exclusionary discount system and (ii) in case S/DC/0580/16, Criadores de Caballos 2, the CNMC fined the National Association of Purebred Spanish Horse Breeders 6% of its annual turnover for abusing its dominance in the purebred horse promotion market.

The decision contains a dissenting vote on the turnover to be taken into account for the purposes of calculating the fine. The dissenting view was that the aggregate turnover of members of the RSCE (instead of RSCE's turnover) should have been the starting point. This approach would have resulted in a considerably higher fine being imposed. 

The CNMC concluded that RSCE's conduct slowed down the expansion of national canine associations and hindered dog shows, competitions and events organised by competing canine associations by reducing the demand for pedigree certificates from competing associations and the number of canine judges available in the market.

With thanks to Teresa Prado of Ashurst for her contribution.