Portugal approved a new law regulating participating loans through Decree-Law 11/2022 of 12 January 2022, which has the purpose of fostering investment and capitalise businesses.

Participating loans are onerous credit agreements, in the form of loans or debt securities. Their remuneration and repayment may depend partially or entirely on the borrower's financial results. Participating loans may be converted into equity if the agreement so allows.

Participating loans are "quasi-equity" instruments that present a higher risk than senior debt and lower risk than common equity, that results from the following:

  • Participating loans may be classified as equity, provided their remuneration depends on the financial results of the borrower/issuer and the repayment or amortization depends on the satisfaction of the conditions for the distribution of profits set out in Articles 32 and 33 of the Portuguese Companies Code;
  • The borrower cannot, among other things, repay shareholder’s loans or ancillary/supplementary capital contributions, amortizing shares or reducing the share capital without the express authorisation of the lender while the contract or securities representing the debt are not fully amortised; and
  • In the event of insolvency of the borrower/issuer, they are treated as subordinated claims, but ranked above the claims of shareholders and other persons specifically related to the debtor.

In addition to the possibility of participating in the borrower’s financial results, participating loans may include equity conversion rights, such as breach of payments obligations.

This type of instrument is not new. There is a similar regime in Spain, where this type of loan is, however, limited to shareholders. Unlike Spain, Portugal restricted the granting of participating loans to entities that are licensed to provide credit on a professional basis, such as banks, loan funds and venture capital funds, as well as certain securities investment companies. This distinction may imply a different approach in each country.

For banks, participating loans can be a tool used in the restructuring of credits of distressed companies whereas for investment funds and other entities, these loans will be an alternative to shares or convertible bonds as investment instrument.

For borrowers, it is an alternative financing instrument which allows lenders to received a variable remuneration indexed to the borrower’s results, with a positive impact on the borrower’s equity, without necessarily implying the opening of the share capital to those lenders.

The Portuguese Resilience and Recovery Plan (RRP) incentive system for the decarbonization of industry, worth 715 million Euros in non-refundable subsidies, supports up to 100% of the expenses of projects that incorporate electrification of final energy consumption, energy efficiency, renewable energy, and energy storage.

The maximum limit per new project is 500,000 Euros, of which 250,000 Euros must be used on relevant upgrades of already existing projects. This limit may be exceeded for projects that exhibit a significant potential to reduce emissions at a national level.

Under the new Regulation of the Incentive System "Decarbonization of Industry" and the Public Tender Notice, the following types of projects are eligible for these subsidies:

  • New processes, products, and business models incorporating new raw materials, waste-derived fuels (e.g., biomass and biogas), replacement/adaptation of equipment and processes for sustainable technologies and renewable energy vectors. This typology also includes projects for the electrification of final energy consumption, particularly through the electrification of final energy consumption in industry and the strengthening of access and quality of service; and/or
  • Energy efficiency measures, that reduce energy consumption and greenhouse gas emissions, in connection with the adoption of consumption monitoring and management systems; and/or
  • Measures to incorporate energy from renewable sources and energy storage, such as hydrogen and other renewable gases.

Projects must reach COD within six months from the date of approval by IAPMEI (the Portuguese investment agency), and the expenditure financed shall be maintained and allocated to the relevant activity for a maximum duration of 2 years, with the possibility of extension by IAPMEI in duly justified cases.

Applications for the public tender must be submitted via electronic form available on the IAPMEI website. The application period will run until 7 p.m. on 31 March 2022.

 

As of 1 January 2022, new rules strengthening consumers’ rights will enter into force, particularly regarding legal guarantee periods and the exercise of rights by consumers in case defective products.

Decree-Law 84/2021 of 18 October 2021 repeals Articles 9-B (Delivery of goods) and 9 -C (Transfer of risk) of the Consumer Protection Act, approved by Law 24/96 of 31 July, and Decree-Law 67/2003, of 8 April, on guarantees for consumer goods.
To adapt the rules of conformity of goods to the digital dimension of the market, the definition of "consumer goods" is extended to apply to digital goods, content, or services, for example, the purchase of digital books (eBooks), subscription to periodical publications or subscription to a streaming service. In this context, Decree-Law 84/2021 provides specific rules on the legal guarantee periods and the liability of professionals who provide digital goods, content or services through online platforms (e.g., marketplaces) of third parties.

Here is the list of the main changes introduced by Decree-Law 84/2021:

 

Extension of the legal guarantee period for movable items

The legal guarantee period for movable items is extended from two to three years, counting from the date the good is delivered to the consumer. In the first two years, the consumer will not have to demonstrate that the defect existed at the time of delivery of the good, since the consumer is entitled to a legal presumption of the existence of the defect at that date.

The obligation upon the consumer to report the defective nature of the product within a certain period from the date of its knowledge (two months in the case of movable items) no longer applies. As a result, the consumer can exercise his/ her rights without any obstacles, during the entire legal guarantee period.

 

Hierarchy between the rights to (i) repair or replacement of a good; (ii) price reduction; and (iii) termanation of the contract  

In the event of a defect in a movable item, the consumer keeps the right (i) to have the product repaired or replaced, (ii) to a proportional reduction of the price or (iii) to terminate the contract. Unlike the previous scheme, which does not establish a hierarchy of rights, these rights are now subject to different levels of precedence.

This means that in case of a defective product , the consumer must exercise the right of having the good repaired or replaced first. The repair or replacement of the good must be carried out, free of charge, by the professional within no more than 30 days.
In case of repair, the repaired good will benefit from an additional six-month guarantee for each repair, up to a limit of four repairs. The seller has to provide the parts needed to repair the product purchased by the consumer for a ten-year period.

If the defect appears in the first 30 days after the delivery of the movable item, the consumer can choose to request immediate replacement of the good or the termination of the contract, without the need for verification of any specific condition.

The exercise of the right of termination of the contract creates an obligation for the consumer to return the goods to the seller, at the seller’s expense, and for the professional to reimburse the consumer for the price paid for the goods following receipt or proof of dispatch by the consumer. Unless otherwise is agreed between the parties, and provided that the consumer does not incur in any costs for the reimbursement, reimbursement must be made by the same means of payment as for the initial transaction and within 14 days.

 

Liability of manufacturers for defective products

The possibility for the consumer to exercise rights of repair and replacement of the good directly before the manufacturer is kept, as well as the professional's right of recourse against a person at earlier stages of the contractual chain.

 

Extension of the legal guarantee for immovable property

The legal guarantee period for immovable property for construction flaws in structural elements of the property is increased from five to ten years; for all other defects, the guarantee period is five years.
In the event of a defect in immovable property, the consumer retains the right to have the defect repaired or replaced; or to terminate the contract.

 

Commercial guarantee (replacing the voluntary guarantee) and increased information obligations 

The voluntary guarantee (i.e., the undertaking or declaration, whether free of charge or not, given to the consumer by the seller, beyond the professional's legal obligations to guarantee conformity) is retained and renamed as the commercial guarantee.

The commercial guarantee must be provided to the consumer in writing (or in another durable medium) no later than the time of delivery of the goods, be drafted in Portuguese and include enhanced information obligations for the professional, including, in particular, a clear statement that the consumer is entitled to have the lack of conformity remedied, the price reduced or the contract terminated, and that those rights are not affected by the commercial guarantee.

 

Digital goods, content and services

The new legislation establishes specific rules regarding the supply of digital goods, content and services, providing the right to contract termination by the consumer in case of non-delivery. In turn, in case of non-compliance of the digital content and services, the consumer has the right to have the conformity restored, the price reduced, or the contract terminated.

The professional is under an obligation to demonstrate that the digital content or service provided was in conformity:

  • In contracts where a single act of supply or a series of individual acts of supply is agreed, during the period of one year from the date of supply;
  • In contracts where continuous supply is agreed, for the period during which the digital content or services are to be supplied.

 

Liability of professionals who provide digital goods, content or services through third-party online platforms

The new scheme provides for joint and several liability of professionals, who provide digital goods, content or services via online platforms (e.g. marketplaces), and their contractual partner towards the consumer. This means that in the event of non-delivery or non-compliance of digital goods, content or services, the consumer can exercise his/her rights against the professional who owns the online platform (referred to as the provider of the online marketplace) or the supplier of the digital good, content or service, when:

  • The contract is concluded exclusively through the means made available by the provider of the online marketplace;
  • The payment is exclusively made through the means made available by the provider of the online marketplace;
  • The terms of the contract concluded with the consumer are essentially determined by the provider of the online marketplace or the price to be paid by the consumer is likely to be influenced by the provider of the online marketplace; or
  • The associated advertising is focused on the provider of the online marketplace and not on the professional providers of the digital good, content or service.

 

Sanctions

The violation of the rules established by Decree-Law 84/2021 constitutes a serious economic offence, and may lead to the application of fines in the following amounts:

  • Natural person, from €650 to €1,500;
  • Micro company, from € 1,700 to € 3,000;
  • Small company, from €4,000 to €8,000;
  • Medium company, from €8,000 to €16,000; and
  • Large company, from €12,000 to €24,000.

Inspection, investigation of administrative offence proceedings and application of fines and additional penalties are the responsibility of the Autoridade de Segurança Alimentar e Económica (ASAE) and, limited to the rules applicable to immovable property, IMPIC, I. P..

The Portuguese framework for whistleblowers was approved by Law 93/2021, of 20 December 2021, implementing the 'Whistleblowing Directive' (Directive (EU) 2019/1937 on the protection of whistleblowers) into Portuguese law.

The publication of this law, which, according to the Directive, should have been transposed by 17 December 2021, comes with the anti-corruption strategy approved by the Portuguese Parliament, and introduces a wide range of rights for whistleblowers and mandatory obligations and procedures for Portuguese companies.

Compared to the Whistleblowing Directive, Law 93/2021 is much more comprehensive, as it was expected, considering that the Directive itself determined that its content only set minimum requirements for the Member-States.

This Law applies to complaints regarding (i) public procurement; (ii) financial markets and prevention of money laundering and terrorist financing; (iii) food safety for human and animal consumption, animal health and animal welfare; (iv) public health; (v) protection of privacy and personal data and security of network and information systems; (vi) violent and organised crime, among others.

As to the beneficiaries of the protection, Law 93/2021 is clear when considering as ''whistleblowers'' only those natural persons who report or publicly disclose an infringement based on information obtained during their professional activity regardless of the nature of the activity and the sector in which it is carried out.

“Professional activity” is not limited to employment relationships in force, as it includes relationships that have already ended, pre-contract negotiations and recruitment processes. Shareholders and members of corporate bodies of legal persons, volunteers, and interns, paid or unpaid, are just some of the examples of people who benefit from the protection of this law.
To benefit from the protection, it is only required that the whistleblower acts in good faith and has serious grounds to believe that the information is true, at the time of the report or public disclosure.

In addition to the whistleblower, the safeguard is extended to those who are related to the whistleblower, being covered (i) natural persons who confidentially assist the whistleblower in the whistleblowing procedure, in particular, trade union representatives; (ii) the third party who is connected to the whistleblower who may be subject to retaliation in a professional context; and (iii) legal persons or similar entities that are owned or controlled by the whistleblower, for which the whistleblower works or with which the whistleblower is connected in any way in a professional context.

To make a complaint, the law provides for the existence of:

  • Inside channels;
  • External channels (managed by the competent authorities); and
  • Public disclosure.

Inside reporting channels are mandatory for private and public sector entities employing 50 or more employees and legal persons operating in the fields of financial services, products and markets and the prevention of money laundering and terrorist financing ("obliged entities"). However, local governments which, despite employing 50 or more people, have less than 10,000 inhabitants been excluded from this obligation.

Inside reporting channels must meet certain requirements: (i) they must ensure the secure submission and tracking of reports to ensure completeness, integrity, and preservation of the report; (ii) they must ensure the confidentiality of the identity or anonymity of whistleblowers and the confidentiality of the identity of third parties named in the report; and (iii) they must prevent access by unauthorised persons.

Inside reporting channels may be operated: (i) internally, to receive and follow up on complaints, by persons or services designated for this purpose, or (ii) externally, to receive complaints. In either case, the law provides that independence, impartiality, confidentiality, data protection, secrecy, and absence of conflict of interest must be guaranteed.

Reports may be submitted in writing, verbally, or both. In this context, a verbal report may be made using a voice message or, at the request of the whistleblower, in a face-to-face meeting.

The whistleblower can only resort to external reporting channels when: (i) there is no inside whistleblowing or reporting channel; (ii) the inside whistleblowing channel only admits the submission of complaints by employees, and the whistleblower is not; (iii) it has reasonable grounds to believe that the breach cannot be effectively-known or resolved internally or that there is a risk of retaliation; (iv) when, although the whistleblower has initially complained internally, the measures envisaged or adopted as a result of the complaint are not communicated in the legally prescribed terms; or (v) the infraction constitutes a crime or administrative offence punishable by a fine of more than EUR 50,000.

In turn, public disclosure may only occur in very exceptional circumstances, namely when the whistleblower has reason to believe that (i) the breach may constitute an imminent or manifest danger to the public interest; that (ii) the breach cannot be effectively-known or addressed by the competent authorities, given the specific circumstances of the case; or that (iii) there is a risk of retaliation, including in the case of an external report; or (iv) he/she has made an internal and/or an external report, without adequate measures being taken within the mandatory time-limits.

As regards the procedure to be adopted, obliged entities must, within seven days of receiving the complaint, notify the complainant of the receipt and the requirements for lodging a complaint through external channels managed by competent authorities and within three months at the latest communicate the measures envisaged or taken to act on the complaint. Upon request from the complainant, obliged entities must also communicate to the complainant the outcome of the review of the complaint within fifteen days after its conclusion.

The law also establishes measures to protect whistleblowers:

  • Confidentiality of the whistleblower's identity, which can only be revealed by a legal obligation or a court order, preceded by a communication to the whistleblower indicating the reasons for disclosure;
  • Prohibition of retaliation against the whistleblower, including, for this purpose, the inversion of the burden of proof and the presumption that certain acts, such as changes in working conditions or the application of a disciplinary sanction, when committed up to two years after the complaint or public disclosure, are motivated by the complaint or public disclosure;
  • Legal protection in general terms, such as protection for witnesses in criminal proceedings; and
  • Non-imposition of a disciplinary, civil, misdemeanour or criminal liability in cases of denunciation or public disclosure of offences made by the requirements imposed by law.

The violation of these rules constitutes an administrative offence, to which procedure is to be carried by the National Anti-Corruption Mechanism:

  • Between €1,000 and €25,000 (natural persons) or €10,000 and €250,000 (legal persons), in case of a very serious offence, namely: preventing the lodging or not following up on the complaint; retaliatory acts; breach of the duty of confidentiality; communication or public dissemination of false information;
  • Between €500 and €12,500 (individuals) or €1,000 to € 125,000 (legal persons) in case of a serious administrative offence, such as not having an inside reporting channel or having an internal channel without guarantees of completeness, integrity or preservation of complaints or confidentiality of the identity or anonymity of the complainants or third parties mentioned in the complaint, or without rules preventing access to unauthorised persons; failure to inform the complainant of the outcome of the analysis of the complaint, if the complainant has requested it; failure to train the staff responsible for handling complaints; failure to record or retain the complaint received for at least five years or during the pendency of judicial or administrative proceedings.

Bearing in mind the adaptation to the new procedures and obligations, the law provides for a transitional period of 180 days, so it will come into force on 18 June 2022. During the first half of 2022, companies should prepare themselves by establishing a whistleblowing channel, allowing the guarantees of confidentiality, anonymity and independence set out in the law to be safeguarded, and with well-defined procedures to follow up on complaints within the legal deadlines, without retaliation.

After several months of public consultation, the Portuguese National Authority for Communications (ANACOM) has published on 14 December the draft Regulation on sub-assignment of E.164 numbers of the National Numbering Plan.

Under this Regulation, numbers assigned by ANACOM to companies offering electronic communications networks and services may be sub assigned to other companies, which may then offer electronic communications services using those numbers from their own retail offers and assigning them to beneficiary end users.

This means that these retail companies will present themselves to their own customers as providers of the service and will be responsible to them for its provision and quality. In this scheme, any contractual relationship is excluded between the customers and the companies on whose networks and services the offers are based.

Regarding the conditions for the sub-assignment, we highlight the following aspects:

  • The beneficiary and the electronic communications companies must inform ANACOM the start of the retail offer of the electronic communications services;
  • A contract between the electronic communications companies and the beneficiary must exist, providing for beneficiary support and the criteria for sub assignment, recovery and return of the numbers;
  • The beneficiary can only allocate the sub assigned numbers to end-users of its own retail offers, being forbidden to sub assign them;
  • Information reporting obligations to ANACOM are increased and obligations for the management and use of assigned and sub-assigned numbers are strengthened.

This business model is expected to reduce costs and charges associated with the use of numbers, which is especially relevant for companies with less national presence or operating in niche markets, promoting the competition in the provision of electronic communications networks and services.

The regulation is awaiting publication in the Portuguese official journal and will enter into force on the day following its publication.

 

Portugal has finally transposed Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019, which amends Directive (EU) 2017/1132 by opening the door to the use of digital tools and procedures regarding the registration of foreign commercial companies. Decree-Law 109-D/2021, which came into force last Friday, will allow the registration online of permanent representations of foreign limited liability companies.

Those interested in registering a company in Portugal will access a website – that needs to be set up by the Portuguese Government to make this possible - and submit copies of the following:

  • Document attesting their powers;
  • Company's resolution approving the registration of the permanent representation;
  • Appointment of the local representatives and their powers;
  • Articles of association and updated registration certificate of the company.

All this and identification details of the company will be available at no cost for consultation in the European e-Justice Portal.

Two other relevant measures have also been approved last Friday:

  • Whoever (solicitors, notaries, etc.) is registering a company online may provide his/her electronic address, to be included in the register and in the registration certificate as the person applying for the registration;
  • In the registration of directors, it becomes mandatory to submit a declaration of acceptance of the appointment and a declaration stating that the appointed directors are not aware of any circumstances that may inhibit them from holding office.

The Portuguese Government presented last week a Digital Transition Action Plan that includes Digital Innovation Hubs (DIHs) and Free Technological Zones (ZLT - Zonas Livres Tecnológicas). Digital Innovation Hubs are collaborative networks of specific digital centres in cybersecurity tourism, health, and other sectors, with the objective of disseminating advanced digital technologies to companies, especially small and medium companies, through the development, testing, and experimentation of those technologies. One of the objectives for DIHs is to be drivers of the digital transformation of companies, stimulating the incorporation and integration of artificial intelligence, cybersecurity, and supercomputing in the adaptation of different business models.

In this context, the 17 DIHs projects already approved (by Order 6269/2021) will have access to annual funding of up to one million euros each (from the Recovery and Resilience Plan) - an amount that can be doubled if these hubs become part of the European network: Produtech (industry and manufacturing), DIH4GlobalAutomative (mobility), Connect 5 (Telcos and TICE), InnovTurismo (tourism), Portugal Blue Digital Hub (sea economy), Azores Digital Innovation Hub (regional), Smart Island Hub (regional), C-Hub (cybersecurity), PTCentroDIH (regional), Defence4Tech Hub (defense), Digi4Fashion (fashion and footwear), DIGITALbuilt (construction), ATTRACT DIH (AI and data science), AI4PA Portugal (public administration), SFT-EDIH (agro-food sector), DIH4ClimateNeutrality (urban sustainability) and DigiHealthPT (health).

The Free Technological Zones (regulated by decree-law 67/2021) are geographically delimited spaces where companies/researchers will be able to experiment and test, under real conditions, products and technologies that are still in the experimentation phase. The Portuguese Government expects ZLT will bring in foreign investment and international projects to stimulate the Portuguese entrepreneurial ecosystem.

Investors interested in promoting a ZLT must submit an expression of interest to the National Innovation Agency (ANI) (filling out a specific form). The selection criteria to incorporate a ZLT are:

  • Priority areas, sectors of activity or technologies for testing - always safeguarding the possibility of testing technologies, products, services, and processes that cross several areas or sectors;
  • The geographical scope of the ZLT;
  • The objectives of boosting the business in the selected geographical delimitation;
  • The availability of resources, including human, material and infrastructure, to the promoters to conduct the tests;
  • The identification of the managing entity responsible for the management, operation and maintenance of the ZLT, or the process for selecting the managing entity; and
  • The conditions for access to the ZLT by the promoters, as well as all the requirements for conducting the tests, and for termination and suspension of the tests.

Three entities that have already filed a ZLT project with ANI: CEiiA, S. João Hospital Center and the Portuguese Navy, through its Operational Experimentation Center. The Portuguese Government has also announced the creation of three energy sector specific ZLT: one in Viana do Castelo for offshore and nearshore wind farm projects; a second one in Abrantes (at the now extinct coal power Pego unit) for renewables’ production, storage and self-consumption; and a third one at the river Mira parameter for energy-agricultural dual projects.

Following the declaration of state of calamity in the entire Portuguese continental territory until March 20, 2022, a new law (Resolution of the Council of Ministers) was published establishing exceptional and temporary measures, applicable to the entire continental territory, to contain the COVID-19 pandemic.

Here are the main measures with labor impact that come into effect as of December 1:

Remote Working

Telework is again recommended whenever the worker’s duties allow it, maintaining in force the rules regarding schedule mismatch for in-person work situations.

Teleworking is still compulsory, without the need for a written agreement between the employer and the employee, in the following situations:

  • The worker, upon medical certification, is covered by the exceptional regime of protection for people with immunosuppression conditions, pursuant to article 25-A of Decree-Law no. 10-A/2020, of March 13, as amended;
  • The employee has a disability, with a degree of incapacity equal to or greater than 60%;
  • The employee has a dependent child or other people dependent on them, regardless of age, with a disability or chronic illness, who, according to the guidelines of the health authority, is a patient at risk and is unable to attend classroom or group teaching and training activities.

Between January 2 and January 9, 2022, it is mandatory to telework, if possible, depending on the worker’s type of work, and if the employee has the adequate conditions to perform them. The obligation applies to all municipalities in mainland Portugal, with extension, with the necessary adaptations, to the Direct and Indirect Administration of the Portuguese State and the recommendation of its application to other public entities. In these situations, there is no need for a written agreement.

Exceptionally, the employer may refuse to implement remote working. In such situations, they must communicate their decision to the employee in writing and in a reasoned manner.

The employer can only refuse to implement telework in the event of: (i) Incompatibility between the employee's duties and remote work; (ii) Lack of adequate technical conditions for the implementation of remote working.

If the Employer refuses to implement telework, the employee may, in the three subsequent working days, ask ACT to verify the requirements set out in the written justification submitted by the employer.

ACT submits its decision within five working days, considering the following factors: (i) the duties for which the worker was hired; (ii) Previous performance of the duties remotely; (iii) Previous performance of the activity through other means of providing remote work.

The employee may refuse to telecommute, if he/ she considers that he/ she does not have the adequate conditions to perform their duties remotely, namely technical or housing conditions. The employee must inform the employer in writing, stating the reasons for his/ her impediment.

Teleworkers have the same rights and duties as other employees under the terms of the Labor Code or applicable Collective Regulatory Labor Instrument (IRCT).

The worker is also entitled to the necessary work equipment for the provision of telework. Even so, when such availability is not possible, with the consent of the worker, his/ her duties can be performed remotely through the worker's personal equipment. In these situations, the employer is responsible for programming and adapting the equipment.

Diagnostic tests

Workers at healthcare facilities, educational, vocational training and higher education institutions, therapeutic communities and social integration communities, temporary shelter centers and emergency accommodation centers may be tested for SARS-CoV-2. Tests may also be carried out on other workers to be defined by the Portuguese Health Authority (DGS).

The employer is prohibited from recording or storing test results, including proof of testing, associated with the person's identity, except with the person's express consent.

In situations where the test results make access to the workplace impossible, absence is considered justified.

Body temperature measuring

Workers may be subjected to body temperature measurement; no physical contact is allowed.

Temperature measurement must be performed through non-invasive means, at the access control to the workplace. Recording body temperature linked to the worker's identity is not allowed, unless expressly authorized.

Access to the workplace may be prevented whenever the worker: (i) refuses to take body temperature; (ii) has a result above normal body temperature (a temperature of 38ºC or more).

In cases in which the result of the measurement determines that it is impossible for an employee to access the respective workplace, the absence is considered justified.

A new Decree-Law that extends the deadline for several exceptional measures was also published:

  • Exceptional and transitional work organization legal framework (Decree-Law 79-A/2020, as amended) until March 31, 2022, regardless of the possibility of extension after consultation with social partners; and
  • Extraordinary income support for workers (Law 75-B/2020, of December 31, in its current wording) created to compensate losses caused by the pandemic, until the last day of February 2022.

After a public announcement session held on November 24, the first Portuguese Floating Solar Auction launched last Friday and includes 7 lots with capacity from 8 MVA (Salamonde) to 100 MVA (Alqueva), in a total of 263 MVA. The auction is two folded as it comprises the allocation of:

  • Reserve capacity for injection into the grid; and
  • Private use titles over public water domain of the seven reservoirs dams that make up the auction lots.

This auction is organized in three phases:

  • Eligibility phase: From January 29, 2022 until March 2, Promoters shall first register in the online platform https://leiloes-renovaveis.gov.pt/ and provide basic corporate information regarding to the company bidding for the auction and its legal representative, as well as a provisional deposit in the amount of 10.000€/MW calculated in accordance with their bidding intentions;
  • Bidding phase: Following the admission and exclusion of applications, the jury will notify Promoters with a prior notice of 5 days from the start date of the bidding phase. In this phase, Promoters submit a bid through the online platform applying for one of the following remuneration schemes that will remain valid for a period of 15 years from the entry into operation of the project: (i) a fixed compensation where promoters bid for a contribution to be paid to the National Electric System (SEN) in €/MWh, or (ii) a variable fee, where promoters will be entitled to receive a variable fee equal to the auction closing price in €/MWh.
  • Allocation phase: Within 5 days from the closing of the bidding phase, the winning bidders will be awarded with the reserve capacity title by the Portuguese energy authority, Direção-Geral de Energia e Geologia (DGEG), with the right to use public water resources of the relevant reservoir, on a provisional basis, by the Portuguese environmental agency, Agência Portuguesa do Ambiente (APA). Then, those promoters must provide two performance bonds: (i) one in the amount of €20,000/MVA to DGEG upon the award of the reserve capacity titles, and (ii) another in the amount of €40,000/MVA to APA upon execution of the concession contract of the reservoir dam and the granting of the production license by DGEG.

After the awarding of the bids, promoters must meet a strict deadline regarding licensing obligation, under penalty of execution of the performance bond and expiration of the titles. Counted as of the allocation of the reserve capacity title, promoters shall:

  • Obtain the production license and the approval of the execution project of the project within a period of 18 months, or 24 months (if the plant requires environmental analysis);
  • Obtain the operation license within a period of 42, or 48 months, as applicable; and
  • Start operation of the power 30 days after the award of the operation license.

Auction rules and specifications are available on the online platform and requests for clarifications may be submitted by Promoters through the email address jurisolar@dgeg.gov.pt until 1:00 p.m. (GMT+1) of January 10, 2022.

Launching this auction under the present market circumstances is a challenge to the outgoing Portuguese government energy price strategy, where the auctions of capacity have been used as an instrument to lower the energy prices to end-consumers.

The Portuguese Competition Authority (AdC) once again sanctioned three of the biggest supermarket chains in Portugal – Auchan, Modelo Continente and Pingo Doce – for a ‘hub-and-spoke’ arrangement, this time with the common food supplier Bimbo Donuts of packaged bread, Donuts, Bollycao or Manhãzitos.

‘Hub-and-spoke’ arrangements are horizontal restrictions on the supplier or retailer level (the ‘spokes’), which are carried out through vertically related players that serve as a common ‘hub’ (e.g., a common retailer or service provider). The hub enables the coordination of competition between the spokes without direct contacts between the spokes.

The three largest food retailers, Auchan, Modelo Continente and Pingo Doce, established the alignment of retail prices in their supermarkets through contracts entered upon with Bimbo Donuts. The AdC investigation determined that the practice lasted for at least eleven years - between 2005 and 2016.

Although ‘hub-and-spoke’ arrangements differ from traditional horizontal cartels in the lack of direct communication between the horizontal competitors, the adverse market effects may be similar – both may result in a hard-core price-fixing cartel, through a common supplier, thus restricting price competition between players and depriving consumers from price differentiation.

AdC considered these practices to be highly damaging to consumers since the chains involved represent a large part of the Portuguese food retail distribution market, affecting the generality of the Portuguese population. Such a practice jeopardizes competition, depriving consumers from opting for better prices, while generating profit for the entire distribution chain, including supplier and supermarket chains.

For competition authorities, it could be however challenging to prove a ‘hub-and-spoke’ arrangement. The strategic nature of information exchanged between suppliers and retailers (which could be a necessary pro-competitive practice) cannot be the ultimate criterion for an unlawful ‘hub-and-spoke’ arrangement.

It can be tricky to set boundaries between legitimate exchanges and indirect horizontal collusion and be necessary to go beyond the exchange of forward-looking pricing information and try to demonstrate that the operators’ goal was to carry out indirect horizontal collusion.

The following potential issues could arise: (i) the ‘hub-and-spoke’ evidence (e.g., retail price setting/alignment, control and monitoring of retail prices, retail price deviation corrections); (ii) the legal framework of the arrangement, depending on either it is an horizontal or vertical arrangement; (iii) the means used to carry out the anticompetitive practice, e.g. Resale Price Maintenance agreements (RPM); and (iv) the purpose and awareness of the involved players.

Considering this, it is apparently justified that AdC has provided evidence for the allegedly eleven year arrangement available at its website.

Bimbo Donuts will have to pay the largest fine amount, € 7.353 million, followed by Pingo Doce, with € 7.196 million, Modelo Continente, with € 7.161 million and Auchan with € 2.981 million, in a total of € 24.691 million. The fines imposed were determined by the sales volume of the four undertakings in the affected markets during the duration of the arrangement.

Under Portuguese Competition Law, these fines are limited up to 10% of the overall annual turnover of the involved undertaking(s). The 10% maximum limit may be based on the turnover of the group to which the undertaking belongs if the parent company of that group exercised decisive influence over the operations of the subsidiary during the infringement period.

The starting point to determine the fine is the percentage of the undertaking’s annual sales regarding product related to the infringement during the last full year of the violation. The fine is also linked to the duration of the infringement. For instance, an infringement that lasts for eleven years is assumed to be eleven times more damaging than an offense that lasts for three years.

All the undertakings involved said to reject AdC’s decision and that they were going to appeal. Appealing will not, however, suspend the execution of the fines. Undertakings may however request the appeal court to suspend the enforcement of the decisions if (i) they demonstrate that it causes them considerable prejudice and (ii) they provide an effective guarantee in its place.

In December 2020 and recently, on November 2, 2021, AdC had already sentenced these and three other supermarket chains and three beverage suppliers, Sociedade Central de Cervejas, Primedrinks and Super Bock, for the same type of practice.
‘Hub-and-spoke’ arrangements in the large retail chains sector are in the loop of AdC and it is likely that new developments are expecting in a near future.