The Law for the Promotion of Competition and Consumer Protection No. 7492 (the Competition Law) was enacted in Costa Rica in 1994 and came into effect in January 1995. The Competition Law contains provisions related to deregulation, competition, unfair competition, consumer protection, comparative advertising and strict liability. It also created the institutional arrangements for the competition regime and for consumer protection by creating two separate bodies ascribed to the Ministry of Economy: the Competition Promotion Commission (COPROCOM) and the National Consumer Commission, respectively. While these bodies are part of the Ministry, they are independent on technical matters. This means that the decisions of COPROCOM can neither be appealed nor revoked by the Minister of Economy. The Competition Law is based on Article 46 of the Constitution. Furthermore, Costa Rica's free trade agreement with Canada contemplates a commitment by both countries to establish mechanisms to deal with anticompetitive conducts and concentrations.

The merger control regime contained in the Competition Law was enacted as an ex post system. In 2012, the legislature finally passed an amendment to the Competition Law that includes pre-merger notification provisions. The Competition Law has been complemented by regulations issued by the government and by the Guidelines issued by COPROCOM. Merger control has absorbed much of COPROCOM's resources to the detriment of other anticompetitive cases.

In the telecommunications sector, General Telecommunication Law No. 8642, issued in 2008, contemplates specific competition regulations that include pre-merger notifications. Filings must be made before SUTEL, the telecommunications authority, and SUTEL must then request a technical opinion from COPROCOM before issuing its final decision. COPROCOM's opinion is not binding for SUTEL. The same applies to SUGEF in the banking sector, SUGEVAL regarding the stock markets, SUPEN in the pension funds sector and SUGESE regarding the insurance markets; according to the Competition Law, all these regulatory agencies must request COPROCOM's technical opinion before approving a concentration. COPROCOM must issue its opinion within 15 days of receiving a request. Again, this opinion is not binding; however, if a regulatory agency does not agree with COPROCOM's opinion and is not going to act upon it, it must explain the reasons why it will not do so.


The most significant case reviewed by COPROCOM in the past year was the proposed acquisition by Walmart of the fourth-largest retail chain in the country, Gessa, which owns 52 stores in three different formats. Walmart is the largest supermarket chain, with 250 stores (divided into four different formats). Several things made this case very special. In its resolution 93-2018, COPROCOM rejected for the first time ever a concentration, and confirmed the opinion after both parties filed an appeal for reconsideration.

Even though in Costa Rica filing can be made pre-closing or within five days after closing, the parties filed before closing. As usual, the parties signed the transaction subject to COPROCOM's approval and started preparing for closing. Despite this, COPROCOM issued a preemptive measure ordering the parties to stop all preparations for closing, including contacts between the parties. COPROCOM issued this order based on a simple statement by one party saying they were preparing for closing. There was no indication of any anticompetitive exchange of information, and no indication of implementation of the acquisition, or any other valid reason.

Walmart and Gessa filed the notification on 19 July 2018. The substance of the filing was based on an economic study prepared by an independent economist. This study contained a geographic and product market definition, and an analysis of such markets in terms of market shares, prices, barriers to entry, direct competitors and consumers' preferences, among others. The study contained economic evidence for all aspects of the case.

The study clearly showed that Gessa was not a direct competitor of Walmart because the differences in the prices charged to their customers was very significant, up to 12 per cent in many cases. So, Gessa represented a very small, if any, competitive pressure for Walmart. The study also showed that even though there was some overlap, in most geographic markets there were enough competitors to restrain Walmart, and 11 of Gessa's stores are located in a region of the country where Walmart is not present.

As part of the notification, Gessa argued that its financial situation had been deteriorating for more than two years, during which 11 stores had been closed and 300 employees' contracts had been terminated. Gessa specified this allegation in a separate and confidential document addressed to COPROCOM. Employees and consumers will be impacted if Gessa continued closing stores, particularly in those areas where Walmart is not present. Suppliers' sales will also decline as more shops go out of business.

In spite of all the economic evidence and the appeals filed by the parties, COPROCOM rejected the acquisition. The most relevant points of the resolution are the following.

i Market definition

Contrary to the evidence presented in the economic study, and with no evidence to support the finding, the product market was defined as the supermarket chain at a national level (product and geographic dimension). In this market there are five players: Automercado, Megasuper, Perimercado, Pricesmart and Walmart. So, independent supermarkets, convenient stores, minishops and small supermarkets were left outside the relevant market, because they do not do business at a national level and cannot achieve the volume, costs and economies of scale of the supermarket chains. Chain supermarkets usually offer parking spaces, a larger number of stock-keeping units and supplementary services, which independent and small shops cannot offer. The downstream market was also defined on similar basis. COPROCOM rejected the market definition offered in the economic study filed with the petition and narrowed the product definition to supermarket chains. The geographic market was also defined at the national level, which is contrary to any logic, as people only travel a certain distance to buy their groceries, and would not shop in a supermarket on the other side of the country just because it has the lowest prices.

This resulted in higher concentration ratios in both the upstream and downstream markets.

ii Market power

Based on that market definition, COPROCOM concluded that Walmart already has market power and the deal will enhance such power. Market share is 69 per cent on the downstream market and 67 per cent in the upstream market and will increase to 74 per cent post-merger. Entry barriers include large economies of scale, sunk costs (publicity, trademarks) and large purchase volumes. Therefore, the market structure is already very concentrated and there are few competitive pressures. This conclusion ignored the dynamics introduced in the market by convenience stores and neighbourhood supermarkets, which are mainly owned by Chinese entrepreneurs.

iii Anticompetitive effects

According to COPROCOM, Walmart is already too big and has market power that is used to buy large volumes and push suppliers' prices down. Taking away one large competitor would only increase such market power. The merger would: (1) increase Walmart's market power; (2) increase the risk of coordinate effects; and (3) increase Walmart's ability to increase prices for consumers. But again, no evidence was presented to support this conclusion.

COPROCOM concluded that because the market structure is already too concentrated, and the authority cannot ask the parties to improve market conditions existing before the merger, there are no structural or behavioural remedies that can be used to reduce or balance the anticompetitive effects of the proposed merger. Therefore, the authorisation to the merger was denied without pointing to the specific anticompetitive effects and without giving the parties the opportunity to propose remedies. This was probably a big mistake by COPROCOM because Walmart had announced even before the notification a plan to double the number of stores in the country. So following COPROCOM's reasoning, Walmart's market power will increase regardless of the transaction. And if that is the case, COPROCOM may have missed the opportunity to approve the transaction subject to conditions that could have addressed the alleged increase in market power.

The parties argued that according to the evidence file the concentration would have benefited consumers because prices in Walmart's stores are much lower than prices in Gessa's stores. This was particularly important for consumers located in the 11 areas where Walmart was not present and would have taken over Gessa's stores.

In the upstream market, Walmart's logistics would have introduced efficiencies in the operation of Gessa's stores, in particular by increasing the volume of the distribution centre from 50 per cent to 85 per cent, allowing suppliers to reduce their distribution costs. Walmart's support programmes would have also benefited Gessa's suppliers, particularly SMEs, and would have opened opportunities for them to increase their sales to a national or regional level.

Although some suppliers and suppliers' associations filed comments with concerns about Walmart's increase in bargaining power, the Commission did not gather any quantitative evidence to explain how suppliers would recover sales lost as a result of Gessa's deteriorating condition.

Surprisingly enough, COPROCOM requested and gathered information from only 24 suppliers, but not from consumers or consumers' associations. So, it seems that more importance was given to large suppliers than to consumers.

On a separate matter, it is important to mention that the owner of an independent drugstore filed a constitutional appeal against the sections of the law that regulate merger control, based on the allegation that the law did not allow him to actively participate in the review process of an acquisition of a drugstore chain by one of the largest distributors, which is vertically integrated and owns a large drugstore chain. This acquisition was approved subject to conditions. The constitutional appeal is under review and it may take about a year until the court issues its opinion.


The Competition Law defines concentrations as any change in control of an entity or of productive assets, as a result of a transaction between two independent entities. The Commission shall approve:

  1. concentrations that do not have the object or effect of creating or significantly increasing market power when this may result in a limitation or reduction of competition;
  2. concentrations that do not facilitate express or tacit coordination among competitors, or that may not result in adverse effects for consumers; and
  3. concentrations that do not reduce, damage or prevent competition and concurrence on similar or closely related goods or services.

i Thresholds and deadline to notify

All concentrations where the amount of the assets of the entities involved and those of their respective parent companies exceed 30,000 minimum wages (about US$15 million), or where the total income generated in Costa Rica during the last fiscal year of all entities involved in the concentration exceeds that amount, must be notified to COPROCOM. Concentrations must be notified to COPROCOM before closing, or within five calendar days after closing.

The Government Decree2 narrows this threshold, indicating that concentrations shall be notified to COPROCOM where at least two of the entities involved have operations in Costa Rica, and also indicating that when the purpose of the concentration is the acquisition of part of the assets or a specific operation of an entity, then only the value of those assets or the income of said part of the operation shall be considered. The Government Decree also clarifies that only productive assets registered in the last annual financial statement shall be considered, but they must include the value of the productive assets of all affiliates that have had business activity in Costa Rica during the two years preceding the concentration. Income shall also include sales by all affiliates in the country (excluding sales among affiliates).

Once approved, COPROCOM cannot review a merger again, unless approval was granted based on false information, or the parties do not comply with the conditions or remedies imposed by COPROCOM.

The application may be filed by any of the entities involved in the concentration, and must include:

  1. a detailed description of the transaction;
  2. a description of the entities involved;
  3. audited financial statements of the past three years; and
  4. a description of the relevant markets, competitors and market shares, and the economic justification for the transaction.

The application must also include an analysis of the possible anticompetitive effects of the concentration, and a proposal to counterbalance such effects. The Government Decree includes a more detailed list of requirements, including a description of the barriers to entry.

ii Analysis of COPROCOM

In the analysis of each concentration, COPROCOM shall determine whether the concentration is needed to achieve economies of scale or develop efficiencies that may offset the anticompetitive effects. If COPROCOM finds that the concentration may cause anticompetitive effects, it must also determine if such effects may be counterbalanced by structural or behavioural remedies or conditions. The Commission may also approve a concentration, even if it may cause anticompetitive effects, if it finds any other circumstance that may protect the interest of local consumers, including if the merger prevents productive players from leaving the market.

Efficiencies must be directly generated by the concentration, not achievable by less restrictive means, verifiable, and enough to counterbalance the potential anticompetitive effect of the concentration.

According to the Government Decree, some concentrations do not create anticompetitive effects and shall therefore be approved by COPROCOM. This will happen in concentrations where:

  1. the parties involved do not participate in the same relevant market, horizontally or vertically, when the market share of the parties is less than 25 per cent jointly, or less than 40 per cent if the delta is less than 2 per cent;
  2. when the parties do not reach a 30 per cent market share in a vertically related market where one of them has operations;
  3. when the concentration is to complete ownership of an entity already controlled by the buyer; and
  4. when the entity created does not have or will not have business in the local territory.

This presumption shall not apply if the current market share of the parties is reasonably likely to increase, when there are indications of coordination among competitors, or when COPROCOM determines that the presumption shall not apply.

The Government Decree also allows concentrations under the failing firm scenario. In this case, the concentration shall be authorised regardless of its effects, provided the financial situation of the target entity is such that it will exit the market in the short term if it cannot be reorganised under any insolvency proceeding; and when, before the concentration, efforts have been made to seek other purchasers or alternatives to the concentration.

iii Remedies and conditions

If COPROCOM finds that the concentration may cause anticompetitive effects, it may approve the concentration subject to one or more of the following conditions:

  1. transfer or sale of assets;
  2. limiting the sale of products or services;
  3. an obligation to provide or sell certain products or services;
  4. introduction, amendment or elimination of certain contractual provisions; and
  5. any other condition that may be required to prevent, reduce or counterbalance the anticompetitive effects.

Conditions and remedies must have a maximum term of 10 years, which may be extended for five additional years if there are still anticompetitive effects. The conditions imposed by COPROCOM must be to address the specific effects of the concentration, and not to improve existing market conditions.

iv Time frames

The application may be filed by any party involved in the concentration before closing, or within five days after closing. After filing, COPROCOM has 10 days to request additional information, which must be filed by the parties within 10 days. Parties may request an extension, which is usually granted. The Commission has started to dismiss cases if the additional information is not filed before the deadline.

The Commission has 30 calendar days to issue the resolution. However, in cases that are particularly complex, COPROCOM may extend this term before its expiration for an additional 60 days. Only one extension is allowed. In the telecommunications sector, the extension is only 15 working days.

If COPROCOM fails to issue the resolution within said time frames, the concentration is automatically approved.

According to the proposed regulations, temporary acquisitions do not have to be notified. This includes acquisitions where assets are subsequently sold to a third party within a year, and where the buyer does not participate in any decision-making in spite of its ownership.

v Parties' ability to accelerate the review procedure, tender offers and hostile transactions

It is important to include all information requested by the Competition Law and the regulations, and any additional information that may make it easier for COPROCOM to determine that there will be no anticompetitive effects so that the case may be completed in a 30-day term.

The application must include a description of the concentration and the possible anticompetitive effects of the concentration. Parties may also include proposals to counterbalance these anticompetitive effects. This seems to be the only way to expedite the procedure in cases where anticompetitive effects may be easily identified. If COPROCOM agrees that the concentration may cause the effects described by the applicants and determines that the proposals supplied by them will be effective in counterbalancing the anticompetitive effects, it must approve the concentration subject only to the remedies or conditions proposed by the applicants.

If COPROCOM determines that the proposal is insufficient to counterbalance the anticompetitive effects, it will notify the parties, and they will then have an additional 10-day term to submit a second proposal. If COPROCOM is still unconvinced by the proposals of the parties, it will decide whether the concentration is authorised subject to different remedies or conditions, or whether it is not authorised.

Implementing the possibilities of parties to propose remedies and conditions depends on the ability of COPROCOM to quickly understand the market and the rationale of the concentration. In this sense, the parties need to be able to approach COPROCOM to explain and discuss ideas for the proposal, and to try to anticipate what the authority's reaction might be. While approaching administrative and judicial authorities in somewhat informal meetings to discuss matters before them is quite usual in Costa Rica, the Government Decree offers a more formal approach. Both the applicants and COPROCOM's staff may take the initiative to request a meeting to clarify information filed by the parties, and a summary of the meeting must be signed by all participants at the end of the meeting. This should facilitate more realistic and effective proposals from parties.

vi Third-party access to the file and rights to challenge mergers

COPROCOM shall order the applicant to publish a brief description of the concentration in a newspaper, including a list of the parties involved. The Government Decree aims to expedite this step by indicating that applicants must make such publication within three working days after filing, and send a copy to COPROCOM within three working days after the publication. Third parties shall have 10 days to file information and evidence before COPROCOM. There is a case in which a third party intervened and appealed COPROCOM's decision to approve the transaction.

The Commission can also request information from third parties (e.g., competitors, suppliers and clients of the parties involved in the transaction), and these third parties must respond within the term granted by COPROCOM. The Government Decree establishes that this term shall be five working days.

vii Resolution of competition concerns of the authorities, appeals and judicial review

As explained above, decisions of COPROCOM cannot be revoked by the Minister of Economy. Appeals are made before COPROCOM itself to reconsider its own opinion. Opinions can also be challenged in court.

Judicial review may include both the formalities and the substance of the case. In the cases ruled up to date by the Judiciary, Courts have focused on procedural matters, but have also made some considerations on the substance of cases, which is an indication that judges have a good understanding of competition matters.

viii Effect of regulatory review

Concentrations on regulated markets (i.e., telecommunications, banking, stock, pension funds and insurance) are examined and decided by the regulatory agencies. In all cases, the regulatory agency must request COPROCOM's technical opinion and justify its own decision if it differs from COPROCOM.

ix The Merger Guidelines

The Merger Guidelines (the Guidelines), were issued by COPROCOM on 28 May 2014. They are not binding; they were issued to give stakeholders an indication of the economic analysis COPROCOM will use in merger control analysis. The Guidelines are extensive and detailed; therefore, reference is made here to the most relevant topics covered by the guidelines. Besides, application of the guidelines by COPROCOM has not been apparent.

The Guidelines include definitions of some concepts that are not covered herein (e.g., a definition of economic control, plus suggestions of a variety of ways in which a change of control may take place), and a definition of the different types of mergers and how they are likely to impact competition.

In horizontal mergers that involve intermediate goods, if COPROCOM finds a negative impact for the clients, it will assume that such impact will also affect consumers of the final goods. However, if the merger is vertical or conglomerate, COPROCOM shall seek to determine the impact on consumers.

Market shares and market concentration will be more significant in the analysis of more stable markets. With regard to market power and the calculation of market shares, COPROCOM will generally use annual sales. However, in certain markets this may not be appropriate, such as very dynamic markets or markets where transactions are rather sporadic (i.e., wind turbines); therefore, different periods of sales might be used. In some cases, units sold or production capacity will also be used instead of sales.

In mergers that involve an entity with a large market share and a recent entrant to the market, COPROCOM will also look at the potential of the entrant to challenge the established competitors. Similarly, in mergers involving a maverick, COPROCOM will look more closely at the transaction.

The general standard based on the HHI will be:

  1. no anticompetitive effects: HHI variation <100 and HHI <1,500;
  2. potential anticompetitive effects: in markets with moderate concentration (1,500–2,500), HHI variation >100, and in highly concentrated markets (HHI >2,500), HHI variation 100–200; and
  3. where market power can be increased: in highly concentrated markets (HHI >2,500), HHI variation >200, particularly if market share exceeds 50 per cent.

The Guidelines list in detail the criteria COPROCOM will use to evaluate unilateral and coordinated effects, including the specifics of bid markets. This is conducted separately for each type of merger.

With regard to efficiency gains, consumer welfare shall prevail over internal efficiencies; thus, efficiencies should create benefits for consumers. Evidence must be based on studies conducted through sound technical methodology, and the studies should probe specificity, cost estimates, likelihood, when and how benefits will be transferred to consumers, how they stimulate capacity to compete, which consumers will benefit, and any other evidence requested by COPROCOM. Reductions in variable costs will be more appreciated than reductions in fixed costs, although the latter will not be ignored.

Finally, the Guidelines include some particularities regarding the analysis of mergers in specific markets such as telecommunications, air transport, energy and financial services. For instance, according to the Guidelines, with regard to telecommunications the definition of markets made by SUTEL is for regulatory purposes only. For competition purposes, such definition is not binding, although it might be used as a reference point by COPROCOM in its definition of the relevant market on a case-by-case basis, where COPROCOM will favour supply substitution over demand substitution.


The merger control system is more a hybrid than a pure pre-merger system. The possibility to notify within five days after closing poses a challenge to everyone involved. This is not an issue in regulated markets, where pre-closing notification is compulsory for all mergers. If parties notify after closing, it is likely COPROCOM will face the same challenges that it was used to under the ex post merger control that existed before the amendment of the Competition Law. Likewise, the parties should be ready to face post-closing scrutiny that may end in an order to partially or totally undo the concentration.

Notifying before closing was a concern in local trade associations when the bid was being discussed in Congress. Many felt that notifying before closing would allow third parties to intervene, putting the transaction at risk. Thus, in those concentrations where local entities are involved, if they are not used to merger control and comparative law, it is likely they will want to notify after closing. Local entities are usually on the selling side of the transaction, and the decision of when to make the filing is more likely to fall on the buyer's side. Therefore, this has not been an issue.

In addition to the difficulties discussed above, the possibility of filing after closing makes coordination with authorities from other countries more difficult if other jurisdictions are involved, because in most other countries there is a pre-merger control system, and by the time they make their decisions, the application may not have been filed in Costa Rica.

If that is not an issue and all parties agree to notify before closing, then it is important to determine whether the possible anticompetitive effects are similar in all jurisdictions. If the possible anticompetitive effects are similar in all jurisdictions, the local authority may accept and adopt similar remedies or conditions imposed by more experienced authorities. However, because the time frame to reach a final decision is usually longer in other jurisdictions than that contained in Costa Rican law, parties to a multi-jurisdictional concentration may want to schedule the filings so that they receive a resolution from a more experienced agency first, which may then be used as reference by the less experienced agencies.


COPROCOM seems to have taken a more political rather than technical approach in some of the cases. This brings more attention to the UNCTAD's and OECD's peer reviews that called for more independence.

Costa Rica is seeking to be accepted as a member of the Organisation for Economic Co-operation and Development (OECD). As part of this process, the country is being evaluated in many aspects by the OECD's experts. Competition is one of the areas undergoing this evaluation. The OECD conducted a peer review in 2014.3

To comply with the OECD standards, the government has presented a new bid to Congress. This bid covers all aspects pointed to by the peer reviews. With regard to merger control, a whole new chapter is added to the law to simplify the procedure. The possibility to notify after closing is eliminated and the system will become an ex ante notification system. The thresholds are increased, and the authority is authorised to modify them within certain parameters. The proceeding is divided in two phases, including a fast-track phase. The bid is subject to modifications by congressmen, but it is almost certain that it will be passed this year.

In the longer term, all stakeholders face a major challenge. The association agreement signed by the Central American countries and the European Union contains a competition chapter (Chapter VII), according to which all countries in the region must have in place a competition law that includes regulations regarding horizontal and vertical conducts and merger control. If a country does not have a competition law in place (like Guatemala), it should enact one within three years of the ratification of the Agreement by all countries. In addition, within seven years Central America must have a single competition law and competition authority. While this may be far in the future, as time passes, we should begin to see greater coordination and teamwork between the competition authorities of the region.


1 Edgar Odio is a founding partner of Pragma Legal. Associate Juan Pablo Lara also contributed to the research for this chapter.

2 In September 2013, the regulations were published as a Government Decree for the proper implementation of the amendment of the Competition Law.