Spain’s business cartels and the fight for fair markets

Compiled with the help of artificial intelligence, based on Spanish-language information. Source below the article.

When people hear the word cartel, criminal organisations that control the production and distribution of drugs spring immediately to mind: Medellín, Cali, Sinaloa and Jalisco are among the best known. Yet another kind of cartel is rarely discussed: the clandestine business organisations that control entire sectors of the economy.

The first documented cartel: Phoebus

The first documented case was Phoebus. On 23 December 1924, the leading executives of General Electric, Osram, Philips and other major lighting companies met at a hotel in Geneva. They were not there for a Christmas holiday. They were there to agree on the lifespan of lightbulbs, setting a maximum of 1,000 hours when the standard lifespan at the time was 2,500 hours. They put in writing inflated retail prices, each company’s market share, each one’s spheres of influence and the technical specifications for manufacturing.

They were not making a product harmful to public health, nor were they using violence in the streets. But they were at the forefront of another kind of violence: economic and environmental. It was not until 1953 that a United States federal court ruled against General Electric for conspiracy to restrict trade and monopolisation of the market.

Consumer power versus the ballot box

In representative democracies such as ours, we have the opportunity to vote for a political party at each election, generally every four years, but far more frequently we make decisions as consumers, choosing (in theory freely) between one brand and another every day. In my view, that accumulation of consumer decisions carries greater power than the single decision of a vote. Our power as consumers is greater than our power as citizens.

If we accept this premise, there must be a relationship of trust between the manufacturer or service provider and the consumer. The moment companies make agreements to harm consumers, that trust is broken, along with what the Constitution recognises as “the freedom of enterprise within the framework of a market economy” and “the legitimate economic interests of consumers”.

Bringing it home to Spain today

Let us come back down to earth and turn to present-day Spain. Business cartels still exist, but the State also has mechanisms to fight them. The CNMC (Spain’s competition and markets authority) positions itself as the leading champion in defence of free markets. Below is a summary of the main sanction proceedings brought over the past decade by this body, which reports to the Ministry of Economy, Trade and Business.

Spain’s biggest cartel sanctions of the past decade

Digital economy and travel agencies, €413.24 million: Booking.com B.V., 2024. Continued abuse of a dominant position (80% market share), restriction of competition and price parity clauses.

Construction and infrastructure, €203.6 million: Acciona, Dragados (ACS), FCC, Ferrovial, Sacyr and OHL (Audax), 2022. Weekly meetings over 25 years to coordinate technical bids and exchange confidential information on thousands of public civil works tenders.

Automotive and manufacturers, €171 million: 21 companies (SEAT, Peugeot, Renault, Toyota and others) plus two consultancies, 2015. Exchange of strategic commercial data (margins, campaigns and after-sales) covering 91% of the market and reducing discounts for buyers.

Rail transport (AVE high-speed rail), €118 million: 15 companies (Siemens, Alstom, Cobra, Elecnor, Inabensa and others), 2019. Creation of three secret cartels to fraudulently carve up public tenders for security and electrification of the AVE put out by ADIF.

Road maintenance, €61.28 million: 12 companies (Aceinsa, Alvac, API Movilidad, Ferroser and others), 2021. Systematic rigging of tenders for conservation and operation contracts on the State Road Network.

Consultancy, €5.87 million: 22 firms (Deloitte, PwC, KPMG, Indra, Everis and others), 2021. Manipulation of some 200 public contracts through agreed “cover bids” to simulate competition and drive up the cost of services.

Food and social catering, final figure pending: various food catering distributors, 2024. Illegal sharing out of public contracts to supply food to hospitals, prisons, military centres and care homes.

Business databases, variable financial penalty: Informa D&B and Bureau Van Dijk, 2023. Anti-competitive pact and carving up of the Spanish market for commercial and financial information over almost two decades.

The illness of monopolistic corporatism

The disease of monopolistic corporatism, or as many in Spain call it, crony capitalism, appears to cut across society, touching diverse sectors and covering significant areas of the economy. But the most interesting thing about this picture is not the companies that appear, but those that do not, because they have not been sanctioned owing to the authority’s lack of capacity to detect, prove and punish fraudulent activity.

The CNMC is the poor relation among its European counterparts: Spain spends €1.44 per inhabitant per year on activities to ensure free competition, while our neighbours are clearly ahead: France (€2.25), Italy (€3.39), Germany (€3.78) and the Netherlands (€5).

A call for greater investment in competition

An increase in State investment in this field, besides fostering clean markets, represents a return for the Administration in the form of penalty payments. This has been called for by the CNMC itself in its institutional reports and annual reviews, as well as by various economic experts and consumer associations. They all agree that giving the body greater financial and budgetary autonomy does not represent a net public expense, but rather a highly profitable investment for the wellbeing of citizens and the public purse.

What or who is preventing the Government of Spain from acting in this direction?

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