Fedea warns that the CNMC’s functions of avoiding these strategies, as required by the law regulating the tax, are “difficult to fit” into the regulations
While the law regulating the new extraordinary tax on banks and energy companies seeks to prevent these companies from transferring their customers through the National Competition Commission (CNMC), it will not be easy for this agency to discern whether the companies will bear the costs of the load on users. This is how Fedea understands it in a study drawn up by the organization in which it understands that the powers granted to Competition to exercise this supervision “are difficult to fit” with its usual functions as a guarantor of competition in the markets.
Fedea indicates that these new powers clash with the defense of companies’ price freedom. The law regulating the new taxes that will tax the income of financial, electricity and gas entities as a result of the profit increase in 2023 and 2024 entrusts the CNMC and the Bank of Spain with the task of oversight, so that these companies bear the cost of the tax for the customer. These organizations will be responsible for developing a formula that defines how to identify this practice and then monitor it so that it is not carried out. In any case, the law will apply a penalty of 150% to the increase in costs passed on to customers, either through electricity tariffs or higher interest or commissions.
The Asufin organization already warned at the time that it will be difficult to detect whether banks will increase prices because of market conditions or because of the new tax. In this sense, Adicae had proposed regulation of what it considers “arbitrary and abusive” commissions, taking advantage of the presentation of the tax.
This is in addition to the new oversight and sanctioning functions also assigned to the CNMC regarding the failure to pass on the fuel bonus, which has been in effect since April 2022.
The work of Fedea, drafted by Diego Rodríguez, begins by considering the broad range of powers developed by the CNMC as a national competition authority and as a national regulatory authority in various economic activities, with functions regularly expanded by new legal regulations . This leads the author to analyze to what extent the new functions assigned to the CNMC in the field of supervision and sanctions related to the payment of subsidies and taxes are consistent with the functions that the CNMC is developing.
In the case of the ban on passing on the new temporary taxes introduced to the major energy and financial companies, the author points out that it would be “exceedingly difficult” to distinguish between the different factors driving the price and and determine income movements of companies to determine that the transfer has occurred in whole or in part.
Likewise, it reflects several doubts as to what would be the procedure to be applied in this case, as the rule simply states that the offense would be subject to the general administrative sanctions regime.
However, it believes that the main question that arises is whether this oversight and sanctioning function fits in a context where companies have complete freedom in their pricing strategies. In this regard, the author recalls that the CNMC has acted on successive occasions against regulations or recommendations that affect the freedom of price discovery by market participants in activities where there is no regulated price or price restriction by a particular standard.
Along the same lines, the CNMC has also ruled on several occasions through reports highlighting the conditions of freedom of pricing by market participants. All this defines a “difficult reconciliation” between the functions conferred by the new regulation and the usual functions of the CNMC as a guarantee of competition in the markets.
With regard to fuels, it indicates that the revision of the very few sanctions decisions in application of this article, as well as the Supreme Court rulings on them, make it difficult to consider their application in case of non-transfer of the bonus to the final price of fuels.
In particular, it highlights the difficulty of verifying whether a significant advantage may have been obtained by distorting competition in the market against the public interest.
This definition, which is difficult to apply in practice, contrasts with the usual sanctioning activity of the CNMC when information problems arise in the area of prices paid by consumers at points of supply, which are sanctioned by sectoral regulations and not by the application of the Act in Defense of Competition.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
