By Marlene Tobar de Torres / Senior Economist

On November 11, 2021, the Economy Commission of the Legislative Assembly issued a favorable opinion to the initiative of the President of the Republic, through the Ministry of Economy, to reform the Competition Law (LC). On November 17, the Legislative Assembly approved Decree Number 207, and it was published in the Official Gazette on December 1.

The purpose of the reform is to comply with the provisions of Article 166 of the Administrative Procedures Law (LPA), which orders to adopt the norms of any nature, which regulate administrative procedures so that they are compatible with the provisions of this law. Decree 207 contemplates interesting changes and innovations that will give the Superintendence of Competition (SC) greater capacity to fight against illicit acts and will improve the legal certainty for those administered; among them, the incorporation of a Clemency Plan for practices among competitors, the possibility of carrying out procedures electronically, among others.

The reforms touch on various aspects, however, this note focuses on the main changes made in the procedure for the authorization of Economic Concentrations; noting, that the SC had already adapted such procedure as of the entry into force of the LPA in 2019. Therefore, the reforms constitute, for the most part, the formalization of the interpretations that the authority had implemented through various resolutions of concentrations as of that date.

The main modifications of the decree, regarding Economic Concentrations (EC), are:

1. It grants the Superintendent of Competition (SIC) the power to declare the admissibility, inadmissibility, or inadmissibility of EC authorization requests. The current LC only establishes this power in the case of complaints about anti-competitive practices. Prior to the entry into force of the LPA, it was the Board of Directors (CD) who analyzed the applications and resolved this matter. The change contributes to streamlining the procedure since the meetings of the CD are held once a week.
2. The EC authorization applications must include the requirements of Art.71 LPA; in addition to those included in the LC and its Regulations. If additional documentation is submitted, it must be accompanied by a justification.
3. Regulates the procedure for economic concentrations as follows:

a. Once a request for EC Authorization is received, the SIC will have a term of 15 business days to determine its admissibility or to request additional information, in case the information submitted is not sufficient to know about the transaction.

b. Applicants shall have a term of 10 working days, extendable for 5 more days, to complete the information requested by the SIC.

c. The SIC may extend for 10 more days for the correction of the information. This extension shall be made only at the request of the parties and must be justified.

d. Once the response to the prevention is received, the SIC will have 15 working days to determine if the request is admissible or requires additional information. In case this second prevention is made to the applicants, it will have the same terms and analysis as the first one.

e. If the applicants do not deliver the requested information or deliver it incompletely, the request is declared inadmissible. Therefore, the reform limits that the SC may only request information for the admissibility of an EC authorization request on two occasions. The current LC does not set this limit.

f. The SC will have 90 working days to resolve, once the application has been admitted for processing (the current law established 90 calendar days). This change is due to the regulation of the LPA that all deadlines will be measured in business days.

g. The 90 calendar days may be suspended according to the grounds established in the LPA (Art.90). For the analysis process, the SC evaluates the competitive conditions of the markets. For this purpose, it mainly requests information from other economic agents participating in the market and from public institutions involved. The information requests made to other private agents will have a term of 10 working days, which may be extended for another 10 working days. The requirements made to other public institutions, according to the LPA, may be postponed for up to two months. This power implies that the duration of the CE authorization procedure will depend on each case. This should be taken into consideration when planning CE operations by the private sector.

h. In case economic efficiencies are presented, these should be incorporated at the time of submitting the application for CE authorization or added to the file, a maximum of 15 working days after the application is submitted.

Economic efficiencies are improvements in the doing of business that arise from the conduct of the transaction. In Competition Law, efficiencies are a counterweight when the ECS have the potential to cause harm in the market. According to the current LC (unchanged in the reform), no EC may be denied if the applicants demonstrate that there may be significant efficiency gains, such as result in cost savings and consumer benefits that cannot be achieved by other means (Art.34 current LC).

The current legislation does not establish the time at which these can be presented. Given that the identification and preparation of efficiencies involves an analysis of several economic aspects, the reform entails the need to identify and quantify the efficiencies sufficiently in advance of the filing of the application. Especially, taking into consideration that the SC is very exhaustive when assessing the acceptance or not of efficiency arguments.