Spain: CNMC's Fines The Royal Canine Society For Abuse Of Dominance

On May 17, 2022, the Spanish Competition Authority ("CNMC") fined the Royal Canine Society of Spain ("RSCE") nearly EUR 143,000 for abuse of its dominant position in different markets related to purebred dogs, from 2011 to the present day, in violation of Art. 2 of the Spanish Competition Law and Art. 102 of TFEU. The investigation was initiated by a complaint submitted by the national German Shepherd Dog Club which was joined by three other RSCE's competitors.

1. Background of the investigation and the relevant market

RSCE had been the only entity with an official genealogical registry of purebred dogs in Spain, also known as Libro de Orígenes Español ("LOE"), since the beginning of the 20th century. In 2001, the introduction of the Royal Decree-Law 558/2001, liberalised the sector allowing any canine association that complies with the law's requirements to be recognised as a purebred dog breeders organisation and, thus, allowed to have their own genealogical registry. Nonetheless, the Royal Decree-Law 558/2001 prescribes, in its Art. 5, the principle of single registration, meaning that a purebred dog can only be registered in one genealogical registry.

RSCE is the only Spanish member of the Federation Cynologique Internationale ("FCI"), a crucial detail. FCI is the sector's most significant international association counting with 99 national organisations, only one member per country.

A key point to note is that, for a purebred dog to be recognised as such in a foreign country, it is necessary to obtain an export pedigree certificate which can only be provided by the FCI's national organisation in each country. Even though the certificate is not mandatory by law, it is in practical terms, since, under the CNMC's findings, the dog's value is highly influenced by its purebred status and there is no suitable equivalent at international level.

2. The CNMC's position on the RSCE's alleged abusive conduct

The CNMC has defined three different relevant markets in the present case (with the RSCE holding a dominant position in all of them):

However, the CNMC has also found that the RSCE's conduct may have affected the downstream markets of breeding and commercialisation of purebred dogs.

In addition, the CNMC is of the view that there are strong barriers to entry (e.g., the fact that LOE was the only genealogical registry in almost 90 years and RSCE being the FCI's Spanish member with the significant impact that it has in the export pedigree certificate), leading to a very low capacity from RSCE's competitors to threaten its dominant position in those markets.

Regarding the RSCE's behaviour, the CNMC identified four themes of conducts that, based on CJEU's case-law (e.g., Michelin I and United Brands), could be abusive, namely:

1. Demanding from the owners of purebred dogs who want an export certificate the withdrawal from the other genealogical registry and subsequently registration in the LOE;
2. Discriminating between those who used the LOE as first register and those who had previously registered in other genealogical registry, both in terms of fees (three times higher for the latter) and regarding the history and track record of dogs (e.g., deleting their previous awards or even their ancestral data with an alleged impact in dogs' valuation);
3. Prohibiting and sanctioning of canine judges – trained and licensed by RSCE or by other associations members of FCI – when they want to participate in competitors' events without RSCE's previous authorization;
4. Creating and using an exclusive organisational structure with external clubs which fostered the RSCE's dominant position. The CNMC concluded that they were reinforced RSCE's dominant position resulting in being an additional restriction to competition and, thus, incompatible with the special responsibility that RSCE, as an undertaking with a dominant position, has.

According to the CNMC's decision, the main abuse was caused by the first conduct described above, related to the mandatory link that RSCE established between issuing the FCI's export pedigree certificate and the registration in the LOE. This is mainly because RSCE and the CNMC diverge on the interpretation of Art. 5 of Royal Decree-Law 558/2001:

To reach these conclusions, the CNMC also based on the evidence brought by the complainant, who sustained that these conducts had actual impact on the relevant markets, inter alia.: i) slowing down the expansion of national canine organisations with their genealogical registries and reducing the income of these associations, ii) increasing its market share at the expense of the other canine organisations, iii) reducing the demand for pedigrees certificates issued by its rivals, iv) hindering (or even cancelling) the development of activities by competing associations, and v) reducing the number of judges available on the market.

On the basis of the above, the CNMC imposed a relatively high fine (7,5% of RSCE's turnover). The RSCE could also face private enforcement proceedings, given that potential damages were advanced in the decision. However, RSCE has already made public its intention to appeal the decision, sustaining that they were only following the provisions of the law.

3. What lies ahead? Possible impacts in other jurisdictions

The CNMC's assessment implies that the RSCE's behaviour may have an impact on intra-EU trade and that there is an apparent high concentration of the different national markets. This means that similar issues could exist in different national legal orders (e.g., creating obstacles to it in downstream markets and reinforcing the quasi-monopoly position that the FCI's associations seem to have).

Spain is not the first EU Member-State where this situation has arisen. In 1978, the German Competition Authority (Bundeskartellamt), declared as anti-competitive the FCI's regulation that only allowed for one association per country to have an official genealogical registry. Additionally, in September 2020, a German Court (see case VI–U (Kart) 4/20) stated that this kind of associations could not impose prohibitions on the FCI's judges to participate in events from other associations, given that such prohibition was contrary to EU Law.

In conclusion, the decision at hand, although not final, may be seen by the FCI's canine associations all over the world as an opportunity to review their behaviours and internal regulations in order to be compliant with competition rules.

FOR FURTHER INFORMATION, PLEASE REFER TO THE CNMC'S DECISION HERE (IN SPANISH)

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