“Hello my friend. Just for you. We already talked.“The nice message, written by a bank employee on a email addressed to someone at a rival bank, was accompanied by several attachments: Excel sheets with spreads charged to clients and risk analysis. This was sensitive information (confidential or difficult to access publicly) which, in the eyes of the Competition Authority, is proof that there was a “Concerted practice” that will have distorted the credit market in Portugal for more than a decade (2002-2013).

The case has been in court for years, it was “stalled” for two years awaiting a European ruling, but, This Friday, September 20, the sentence will be read at the Competition, Regulation and Supervision Court (TCRS) in Santarém. The deliberation, scheduled for 14:00will be read by a judge, Mariana Gomes Machado, who has already considered “awesome” the content and content of emails and telephone contacts that were shared by employees of rival banks. However, it is not certain that there will be a conviction or that the fines imposed by the Competition Authority (225 million euros in total) are not reduced.

This is what the banks asked for in the final arguments presented this Wednesday, in the same court: “merely symbolic” fines or simply “reprimands.” The argument of one of the banks is that the information that is transmitted between rival banks is concentrated in the real estate credit market (and not credit to businesses and consumers) and It happened in just three years (and not 12 years, as claimed by the Competition Authority), two ways of trying to reduce the value of the possible fine if confirmed by the court.

On the other hand, banks, in general, have always said in their defense that the context of the credit market in those years was highly competitive and that, if that information had actually allowed the market to be distorted, then there would be evidence that customers ended up paying more for the loans..

Neither the Competition Authority nor the Public Prosecutor’s Office were able to prove this, the banks argue; in fact, Santander’s lawyer went so far as to say that the practical reality was the opposite and that, at the time, Banco de Portugal “was crazy” because of concerns about the low profitability of national financial institutions. For this bank, the case has “no great real relevance” and the exchanges of information were “sporadic” and, above all, carried out by “former colleagues who wanted to save each other’s jobs”, avoiding having to go to simulators and other websites to search for that data.

However, the prosecution maintains that It is not necessary to prove that customers suffered damages. – it is sufficient to prove a restriction by “object” (i.e. doing something with the intention of harming any value, in this case the value of competition) and it is not necessary to prove that there was an infringement “by effect”. And it was to clarify this crucial point that the Portuguese Justice decided to consult the Court of Justice of the European Union.

The EU Court of Justice invalidated one of the main arguments of the banks

In April 2022, the judge Mariana Gomes Machado confirmed the facts and considered that the banks exchanged information on prices and rates (current and future) that was not in the public domain or was difficult to access and systematize. It was also shown that the banks shared monthly production values ​​and that this exchange of information, which took place in a relatively concentrated market, “alignment made easy” and allowed the “establishment of a informal coordination between banking institutions.”

However, in this 2022 deliberation, the judge decided to suspend the procedure and send a request to the Court of Justice of the European Union (CJEU) to rule on whether the facts constitute a restriction of competition by object, since it has not been demonstrated whether or not the exchange of information had any effect on consumers.

At the end of July, more than two years later, the answer came. The CJEU admitted that the exchange of information maintained by the banks for more than a decade “may constitute a restriction on competition due to its object”and that “it is enough that this exchange constitutes a form of coordination which, by its very nature, is necessarily (…) detrimental to the correct and normal functioning of competition.”

According to the CJEU, for a market to function under normal conditions, “operators must determine autonomously the policy they intend to follow and having to remain uncertain about future behavior from other participants”.

Banking cartel. The Court of Justice considers that the exchange of information between banks can restrict competition and reinforces the conviction

Following this interpretation of the European Court, it is now up to the Competition Tribunal to decide whether or not the facts constitute a “restriction by object” – national courts generally follow the understanding of the European Court – and to decide the fines to be applied to the proven facts (whether to maintain or revise the values ​​of the Competition Authority).

However, before the final arguments, five banks (CGD, BCP, Santander, BPI and BBVA) presented legal opinions that maintain that the limitation periods The administrative infringement proceedings have already been exceeded. Specifically, the banks believe that when calculating the deadlines, the time (more than two years) during which it was “suspended” should be taken into account, pending the ruling of the Court of Justice of the European Union, which only arrived at the end of July (2024).

For Paulo Vieira, the prosecutor working on this case, the opinions arrived “at 25 hours”, which is “barely understandable” and gives little time for them to be refuted. Even so, “the prescription has not yet occurred”, the prosecutor argued.

The CGD lawyer asked to speak to say that, in the case of the public bank, “The goal is not to avoid contradiction.But he warned that these opinions could be added to the process even at the appeal stage of the first instance ruling and said that the request of this bank is not only about prescriptions but also about questions of law.

After exchanging ideas with the bank’s lawyers, the judge decided to admit the opinions and that they will be part of possible appeals and that there will be room for confrontationWhatever the court’s decision, the parties can still appeal to higher courts (Court of Appeals, Supreme Court of Justice and even the Constitutional Court).

In addition to the fine from AdC, the banks also face popular actions

In addition to the banks, the Competition Authority and the Public Prosecutor’s Office also made accusations on Wednesday. The regulator argued that the CJEU’s ruling was “crystal clear” and conveyed in an “assertive” manner.so the court can confirm the fines.

The Public Prosecutor’s Office considered that this process demonstrated that the exchange of information between banks had effects on the market “with harmed customers”, by paying higher credit prices, and that, at the same time, the exchange of information allowed banks to “give credit with greater security” by knowing the competitive position of their competitors.

The bank doubles its profits with 5,600 fewer workers than in 2019

The prosecutor referred to the “excellent results” of the banks, starting in 2023, to argue that, overall, the Competition Authority’s fines are appropriate and should be confirmed by the court.We hope that this process will contribute to strengthening the reputation of the banking sector as a whole, through public visibility of its past conduct.the fundamental role of the intervention of regulators and the judicial system, of corrective conduct, however, implemented,” said prosecutor Paulo Vieira.

At the same time, the Portuguese courts accepted a few months ago the fifth of five popular actions brought by a European consumer protection association, the Ius Omnibuswhich claims more than 5 billion euros to the banks, accusing them of having defrauded millions of customers in interest on loans. The banks were initially implicated in 14, but as Banif and BES were subject to resolution measures, the action affects 12 banks.

However, the amount claimed includes damages caused by BES and Banif because Ius considers the banks to be jointly liable. The banks in question are Abanca, BBVA, BPI, BCP, Banco Santander Totta, Banif, Barclays Bank (whose complaint led to the AdC investigation), Caixa de Crédito Agrícola Mútuo, Montepio Geral, Deutsche Bank and Unión de Crédito Inmobiliarios. The banks claim, in their defence, that the data shared was public, accessible to anyone and, It may even have benefited customers rather than harmed them..