i Prioritisation and resource allocation of enforcement authorities
The main antitrust enforcement authority in Colombia is the Superintendence of Industry and Trade (SIC) under the supervision of the Ministry of Commerce, Industry and Tourism. Since Law 1,340 of 2009, SIC has been the sole authority in charge of implementing the standards of competition in all industries, except for the authorisation of the following operations, which remains in the hands of Aerocivil, the Colombian aeronautical authority: code-share agreements, joint operations, use of charter aircraft, and exchange and blocking of aircraft slots; and business integration or reorganisation processes of companies that are exclusively subject to the surveillance of the Financial Superintendence, which shall be subject to a decision by such Superintendence.2
SIC is responsible for enforcing competition law, as well as other regulations. To this end, it is organised into six divisions:3 Personal Data Protection, Competition Protection, Consumer Protection, Metrology, Industrial Property and Jurisdictional Matters. Within the Competition Protection Division, there are five working groups: protection of competition, an interdisciplinary group tasked with preventing collusion in public or private bids (created in 2012 due to the increase of cases regarding this matter), merger review, chambers of commerce, and the industries and economic studies group.
Since SIC has so many different divisions, resources have to be allocated among them. Owing to the recent enactment of regulations regarding data protection and the focus on collusive conducts in public procurement, SIC's recent activity and resources have focused on implementing technological solutions and special prosecution teams in those areas.
ii Enforcement agenda
The main targets in the government's agenda with regard to competition law enforcement over the past four years were:
- strengthening of competition in the Colombian markets;
- identifying regional competition problems and market deficiencies in the telecommunications markets;
- improving competition in the air travel markets;
- promoting competition in the oil, gas and power markets; and
- promoting competition in the pharmaceutical market.4
According to the WEF Global Competitiveness Report 2017–2018, the effectiveness of Colombia's antitrust policy is ranked 71st out of 137 countries, a loss of two places compared to the 2016–2017 rankings. Despite this, it is important to note SIC was nominated in 2012 by Global Competition Review as one of the best competition authorities in the Americas, and currently holds a three-star rating.
SIC's principal achievements during 2018 were as follows:5
- an improvement in the human capital and the creation of a new task force that will prosecute bid rigging exclusively;
- the substantial increase of investigations into bid-rigging conduct in public procurement processes (investigations regarding such cases increased from an average of 1.8 investigations per year during the 2000–2010 period to 26 investigations per year since 2011);
- the substantial increase of sanctions on bid-rigging conduct in public procurement processes (SIC has found bid-rigging conduct in public procurement contracts involving an amount of US$50 million, and has imposed sanctions exceeding US$17 million). This should help to encourage more bidders and more competition in public procurement processes;
- SIC has created an application process for public entities to identify potential risks of bid rigging in public procurement processes;
- SIC publishes its decisions, which provides legal certainty for agents in the market, who may verify if their conduct is in line with the competition regulation, and improves the debate on competition;
- the material increase of fines imposed by SIC in competition and consumer protection areas (competition, consumer and personal data protection and Chambers of Commerce), which increased from US$3.6 million in 2009 to up to more than US$80 million in 2013;
- the adoption of a very strict position in accepting guarantees from investigated parties to terminate antitrust investigations (before the enactment of Law 1,340 of 2009, SIC agreed to terminate most investigations due to the offering of guarantees);6
- with the assistance of the Latin American Programme for the Protection of Competition and Consumers, training has been given to administrative litigation judges regarding, inter alia, antitrust law and economics, standards of evidence used by judges in other jurisdictions and the appropriate economic tests to evaluate antitrust practices;
- SIC has created a method to establish the amount of the fines for infractions of the competition regulation based on the standards set forth in Law 1,340 of 2009 and the best practices used by the European Commission; and
- SIC conducted several workshops and seminars attended by the business community, and officers of the agency visited several Colombian cities to promote awareness about the importance of competition and the role of SIC.
The competition advocacy programme is an instrument used worldwide to protect and promote market rivalry. It implies a series of activities conducted to review, revise and provide recommendations on regulatory projects. The main target is to examine the market's impact on those activities, and identify legal provisions that may impose unnecessary or excessive costs.
SIC has the possibility of reviewing general scope regulatory projects of national-level public entities in order to examine the market's impact on activities and identify legal provisions that may impose unnecessary or excessive costs, and to provide its non-mandatory opinion. Since the enactment of Law 1,340 of 2009, SIC has issued more than 174 opinions under the competition advocacy programme; government entities have applied the opinion of SIC in some cases, while in some others they have not.
However, SIC cannot review:
- regulatory projects of public entities at a regional and municipal level;
- regulations already in force that may restrict competition;
- bills of laws; or
- contracts to be entered into by government entities.
SIC is also not encouraged to challenge, before an administrative court, regulations already in force issued by government entities that may conflict with competition laws, because in such cases, SIC would be challenging regulations issued by the same government of which it is a part.
According to the Private Competitiveness Council, the recommendations to enhance antitrust regulations in Colombia are as follows:7
- the Superintendent of Industry and Commerce should be appointed for a fixed term, and causes for removal from office should also be limited by law;
- the proceedings to determine whether an antitrust violation has occurred should be restructured so that the investigation phase is clearly separated from the adjudication phase;
- the possibility of creating a commission-like structure should be explored so that decisions are not made by the Superintendent alone or, alternatively, the advisory board currently assisting the Superintendent should be strengthened;
- ties with other governmental agencies should be strengthened, and intergovernmental collaboration memorandums should be executed to increase the effectiveness of the competition advocacy programme;
- SIC should conduct a complete review of the leniency programme framework to evaluate its effectiveness and propose changes to increase the number of applicants. The leniency programme should also be modified so that criminal prosecution is averted for applicants involved in collusion that affects public procurement;
- SIC should issue updated merger review and leniency guidelines; and
- SIC should increase the number of regulatory projects it reviews each year.
Several of these recommendations have already been addressed. For instance, the Superintendent of Industry and Commerce is now appointed for a period of four years that coincides with that of the President, and may only be removed with cause. SIC has also published and updated the merger review guidelines and the leniency rules.
Cartels have been considered an antitrust offence since Law 159 of 1959 came into force; however, this regulation did not explicitly mention cartels, but 'agreements with the purpose of, directly or indirectly, restricting the supply, distribution or consumption of raw materials, products, goods or services'. This regulation was modernised in 1992, when anticompetitive agreements were legally defined. Finally, in 2009, Law 1,340 was enacted (Competition Law), stating that SIC is the only competition enforcement authority in Colombia (with the exceptions mentioned above), increasing fines on entities and the directors that participate in the conduct, and introducing a leniency programme that allows members of a cartel to blow the whistle in exchange for benefits during the investigation.
The following agreements between competitors are considered anticompetitive per se, when they have the purpose or effect of:
- directly or indirectly fixing prices;
- fixing discriminatory conditions in commercialisation against third parties;
- market allocation among producers or distributors;
- allocating production or supplying quotas;
- allocating or limiting the supply of production inputs;
- limiting technical developments;
- mandatory bundling sales;
- refraining from producing a good or service, or affecting its production levels;
- bid rigging or having the effect of distributing contract awards of competitions, or setting terms of the request for proposals (RFP) for both public and private processes; and
- preventing third parties from accessing markets or marketing channels.8
Furthermore, Article 410a of the Colombian Criminal Code9 created a criminal offence of bid rigging in public institution RFP processes, with sanctions of six to 12 years' imprisonment, a fine of approximately US$65,000 to US$330,000, and disqualification from entering into contracts with state entities for eight years.
These provisions correlate with Article 101 of the Treaty on the Functioning of the European Union (TFEU), as it also enumerates the prohibited agreements that are considered in violation of free competition; however, Colombian law not only regulates restrictive agreements, it also regulates unilateral conducts as discussed in the next section.
i Significant cases
Since 2016, SIC has issued several major decisions against cartels in the toilet paper, baby nappies and sugar markets. The decisions involving toilet paper and baby nappies producers are significant, as the investigations began through the leniency programme and mark the first time fines have been waived due to the collaboration received during the investigation proceedings.
In the Toilet Paper case, in which SIC found evidence of a price-fixing scheme, the agency levied fines against four companies and 21 individuals for a total of 185 billion Colombian pesos, while the fines against 12 sugar mills and 12 individuals that were found to have engaged in a scheme to allocate production quotas reached 260 billion Colombian pesos.
ii Trends, developments and strategies
Since 1991, SIC has evolved significantly. During its early years, it generated its doctrine on cartels with the initial investigations, using EU and US jurisprudence as its main points of reference. Lately, SIC's investigation abilities and techniques have evolved; it has developed its own doctrine in some cases, and is trying to profit from international best practices in others. With the enactment of the Competition Law, the leniency programmes were adopted, and Decree 2,896 was issued regulating leniency agreements in 2010. In 2014 and 2015, SIC announced that several investigations had begun after receiving evidence from leniency applicants. Based on the experience with the application of the leniency rules, the government issued in July 2015 a new comprehensive regulation of the leniency programme (Decree 1523).
The Competition Law provides for possible early termination of an investigation if the offender offers sufficient guarantees (structural or behavioural) to no longer harm its competitors or consumers.10 This alternative has proven to be very effective for the early termination of anticompetitive conduct investigations, and SIC has developed specific provisions to be included in the guarantees in order to allow a close follow-up of the offender's conduct. However, the trend in the use of guarantees is that they have been decreasing to a point at which they are an exceptional mechanism.11 Indeed, in recent cases SIC has stated that, as a matter of public policy, guarantees will only be admitted in cases involving unilateral conducts.
Under the powers granted to SIC by the Competition Law, SIC may also initiate investigations and impose sanctions on companies that do not follow its instructions, or that obstruct investigations by not allowing inspections or not furnishing the required information.
After using, for the first time, the leniency programme to prosecute cartels, SIC determined that it was necessary to refine the rules governing leniency. Hence, in July 2015 the new set of rules for leniency were enacted. Although some issues that limited the application of the leniency programme were addressed, others – such as the elimination of the criminal prosecution when collaborating with SIC – would require the amendment of Law 1,340. Of particular interest is the presumption included in the Leniency Decree by which, unless evidence to the contrary exists, every applicant is deemed not to be the instigator of the cartel, as instigators are not eligible for the leniency benefits. In 2016, SIC announced the creation of a task force to investigate and prosecute bid-rigging activity that will work closely with criminal prosecutors. Since its inception, this new task force has been involved in high-profile investigations, such as the Odebrecht case, and it has also uncovered collusive practices affecting public procurement at the national and local levels.
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
Colombian law not only regulates restrictive agreements, as mentioned in Section II, it also regulates the following unilateral conducts deemed contrary to free competition per se, even in the absence of dominance: violating advertising rules contained in the Consumer Protection Statute;12 influencing a company to raise the prices of its products or services, or to desist from their intention to reduce prices; and refusing to sell or provide services to a company or discriminating against it when it may be understood as retaliation for their pricing policy.
The Constitution upholds free competition on principle, and mandates the government to prevent the abuse of market power in the Colombian market. Based on this principle, the law defines the following as abusive conduct, per se, if the offender has market power:
- the reduction of prices below costs to eliminate competitors or prevent their entry or expansion;
- the application of discriminatory conditions to equivalent transactions, which put a consumer or supplier at a disadvantage compared with another consumer or provider under similar conditions;
- conduct with the purpose or effect of subordinating the supply of a product to bundled sales;
- the sale to a consumer under conditions different from those offered to another consumer when it is intended to reduce or eliminate competition in the market;
- selling or servicing in any part of the country at a price different from that in another part of the country, when the purpose or effect of said practice is to reduce or eliminate competition in that part of the country (in this case, it will be considered abusive conduct only when the prices do not correspond to the cost structure of the transaction); and
- obstructing or preventing third-party access to markets or marketing channels.
The above list correlates with Articles 101 and 102 TFEU. The scope of the limitations is very similar, as dominance is not prohibited by the competition laws in Colombia.
i Significant cases
In 2013, SIC sanctioned Empresa de Energía de Boyacá (EBSA) in Resolution 3694 of 2013, confirmed by Resolution 12,237 of 2013. EBSA is an energy distribution and commercialisation public utilities company with private and public capital. SIC found that EBSA had market power in the commercialisation of energy services in several municipalities of Boyacá and Santander (99.9 per cent of the market share), but that it did not have such a dominant position in the calibration of energy meters market. EBSA abused its dominant position13 in the commercialisation of the energy services market by subordinating the supply of its services to the acceptance of additional obligations independent of its business object,14 such as charging for the homologation of energy meters sold by third parties. This charge had two effects:
- to exclude or reduce the market of third-party competing calibrating laboratories, since the energy meters calibrated by such laboratories would cost more than the ones calibrated directly by EBSA; and
- to exploit the market, since a higher price would have to be paid either by the third-party competitor energy meter sellers or by their users. SIC fined EBSA with the highest monetary sanction at the time (4.7 billion Colombian pesos), and its legal representative with a fine of approximately 47 million Colombian pesos.
In 2014, SIC fined the operator of the San Andres International Airport for charging gasoline providers unfair prices for access to the aeroplane platforms, due to an unreasonable increase in the tarmac access fee. This is the first time that unfair pricing has being prosecuted as a unilateral conduct. The fine was assessed at 6 billion Colombian pesos.
In 2015, SIC found that two rice mills that were part of the same business group had engaged in resale price maintenance practices by threatening to cut distributors whose prices violated the mills' policies. The fines imposed exceeded 32 billion Colombian pesos.
In 2018, SIC launched an investigation against several companies for practices relating to their invoicing policies, which limited the ability of negotiating invoices in secondary markets. Most investigations were terminated when SIC accepted the guarantees offered by the companies under investigation to ensure that invoices would be freely negotiable.
ii Trends, developments and strategies
SIC has considerably increased investigations, sanctions and fines of restrictive acts and abuse of dominance, as well as reducing the time frame of the investigations and decisions.15 It is also important to highlight that SIC does not have a general and objective rule to determine market power (i.e., there are no specific percentages for participation in the market to determine the existence of a dominant position) and market share is not considered to be the sole criterion of dominance. In addition, SIC is of the opinion that if abusive conduct is evident, there is no need for a thorough economic examination to assess whether said conduct produced any anticompetitive effects in the market or to its competitors.
It is likely that the recent enforcement trend will remain unchanged, meaning an increase in the number of investigations, and higher sanctions due to the enforcement of the sanctions under the Competition Act are expected. SIC has announced that it plans to actively prosecute false advertisements, which implies a violation of the advertising rules of the Consumer Statute can, therefore, also be prosecuted as a unilateral anticompetitive act if it significantly affects the market.
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
Article 4 of Law 1,340 of 2009 establishes that Law 155 of 1959, Decree 2,153 of 1992 and Law 1,340 of 2009 constitute the general competition framework for all industries. The law, however, sets forth that if any specific industry is regulated, said regulation will prevail over these general rules. In Colombia, regulations in the following specific industries represent major limitations to the general competition rules:
- public utilities;
- the energy sector;
- communications (including telecommunications and postal services);
- finance and insurance; and
- air transportation.
Article 8 of said Law provides that SIC shall communicate any antitrust investigation to the regulators of the specific regulated industries. The latter may, upon consideration, deliver their technical opinion in relation to the matter brought to their attention, without prejudice to the possibility of intervening, ex officio, at any time in the respective proceeding. The opinions expressed by those regulators are not binding on SIC; however, if SIC decides not to follow the respective regulator's opinion, it must explain the grounds for its decision.
In the communications industry, the Communications Regulation Commission (CRC) has been granted powers, first by Decree 2,870 of 2007 and later by Law 1,341 of 2009, to ex ante define relevant markets and regulate competition and dominance in the industry. Despite this, SIC remains the authority for the ex post enforcement of anticompetitive conduct to the general regime with respect to the telecommunications industry.
i Significant cases
In Resolution 53,403 of 2013, and Resolution 66,934 of 2013, which confirmed it, SIC ended its investigation and penalised Claro, finding that the company had abused its market power by obstructing or preventing third-party access to markets or marketing channels,16 and limited free competition17 in the mobile services market. Claro's dominance in such market had previously been declared by the CRC in Resolution 2,058 of 2009. The CRC had also issued a regulation to allow mobile numbers' portability to increase competition. Based on complaints from Claro's users, accusations made by competitors, information provided by the CRC and the internal investigation process of SIC, Claro was considered to have violated the telecommunications regulations because it:
- impeded its users from changing to another operator, since it refused to provide them with a personal identification number necessary for number portability;
- sold locked mobile phones, which could only be used with Claro and not with other carriers; and
- manipulated the number of new users migrating to Claro by encouraging its distributors (over which Claro had contractual influence) with a monetary incentive if the portability to Claro increased, for which Claro distributors made fictitious transfers of users from other operators to Claro, using false customers to increase its numbers of portability users.
SIC sanctioned Claro with a fine of 87.7 billion Colombian pesos, which at the time was the largest monetary sanction in Colombian history for a breach of the competition laws.
ii Trends, developments and strategies
Regarding the telecommunications industry, it is important to mention that the CRC has ex ante powers to regulate and impose measures for the protection of free competition, while SIC has ex post powers to sanction antitrust violations.
In 2014, the Ministry of Information Technologies and Communications (MINTIC) granted licences to Claro, Movistar, Tigo, Avantel, DirecTV and the consortium ETB-Tigo to provide 4G network mobile services in a successful auction that raised approximately US$400 million for MINTIC's social telecommunication programmes. UNE already held a licence for such services, granted by MINTIC.
In connection with the 4G services, MINTIC began an investigation against Movistar and Tigo for providing services without fulfilling the obligation of granting national roaming access to other operators. Avantel also filed an unfair competition lawsuit against Tigo, since it has not provided it with national roaming for rendering the service. Tigo filed a counter lawsuit against Avantel for unfair competition acts, since it claims that the lawsuit initiated by Avantel only intends to prevent Tigo from beginning to render such services.
The debate with respect to competition in this industry will continue, and will be one of the most important debates regarding competition in Colombia.
The law has evolved from having multiple competition authorities, where the authorities of regulated industries decided all competition issues, to one sole ex post competition authority. This is a significant change, since the decision of the regulator on competition issues could be influenced by political concerns. Nevertheless, SIC is a governmental agency where political concerns may influence the enforcement agenda.
In the case of the telecommunications industry, the CRC, which is a collegiate body specialised in the industry, holds legal powers to ex ante define relevant markets and impose measures to protect competition in the industry. The current government has discussed a new telecommunications law that could include changes to the CRC's powers. However, the bill of law, although advertised as a policy priority for the government, has not gained traction in Congress.
V STATE AID
Article 333 of the Constitution empowers the state to do whatever is necessary to prevent and avoid all kinds of interference with or restrictions on free competition. Hence, the state has an obligation to comply with this provision. However, this provision cannot be understood as an absolute prohibition on state aid. There are certain scenarios where state aid is considered to be necessary and lawful, such as:
- price stabilisation funds;
- funds for agricultural development;
- the establishment of minimum guaranteed prices;
- regulation of internal markets for agricultural products;
- chain agreements in the agricultural industry;
- the safeguards regime;
- special public utilities tariffs for the agricultural industry;
- subsidised loans for the agricultural industry; and
- state aid for commercialisation of agricultural products due to shortage of supplies.
In addition, whenever an external situation may affect or distort competition in the domestic markets, state intervention will be conducted by the government through the implementation of measures to compensate or regulate the market conditions to ensure fairness and competitiveness for domestic production.
Likewise, Article 1 of Law 155 of 1959 states that the government shall approve agreements that, although contrary to free competition, ensure the stability of an economic sector of general interest.
Colombia, as a Member State of the Andean Community of Nations (CAN), is also subject to state-aid regulation to prevent interstate market trading unfairness, such as Decision 283 of 1991 of the CAN.
i Significant cases
In 2013, SIC opened an investigation18 against the several utilities companies owned by the district of Bogotá – UAESP, EAAB and Aguas Bogotá – and the companies' most important directors, including the then Mayor of Bogotá, for alleged breaches of the general prohibition against agreements, practices, procedures and systems affecting free competition, and for preventing third parties from accessing markets or marketing channels, pursuant to Law 155 of 1959 and Decree 2,153 of 1992. The investigation began as an inquiry into the newly adopted waste management system in Bogotá and concluded with a decision in which SIC found that free competition had been impaired. SIC's initial decision, rendered in April 2014, imposed total fines in excess of 80 billion Colombian pesos on both companies and individuals, and was confirmed on review in September 2014. The then mayor of Bogotá was personally fined 400 million Colombian pesos, while EAAB received a fine of 61 billion Colombian pesos for its role in thwarting competition by foreclosing entry into the market.
ii Trends, developments and strategies
Several funds to stabilise prices of agricultural products remain operational, and are funded by the government, with no plans to terminate them or reduce their funding. Although policies to improve the competitiveness of agricultural producers have been implemented, their success has been limited.
Colombian legal regulation of state aid will evolve to ensure the proper management and control of state aid so that it does not end up in the wrong hands.
VI MERGER REVIEW
Law 1,340 of 2009 sets forth that a business integration occurs whenever there is an acquisition of shares or assets, a merger, spin-off, a joint creation of a company or a joint venture agreement between competitors, or any other type of legal agreement, in which, before the closing of the transaction, competition existed in at least one relevant market; and after the transaction, the parties involved act as a single unit in such relevant market and cease to compete.
Business integrations can take one of the following forms:
- horizontal integration: when an integration takes place between companies that perform the same or similar economic activities (such as whenever integration occurs between competitors); or
- vertical integration: when an integration takes place between companies that participate in the same economic process but at different stages of the value chain (such as when integration occurs between a manufacturer and its suppliers of raw materials or its distributors).
The relevant market is composed of the product market and the geographic market. The product market is composed of the products that directly compete and the substitute products that are considered by consumers as close-competing products. The geographic market is the smallest geographic area in which the parties involved, if acting as a single unit, may influence in a profitable manner the price, quality, variety, service, publicity, innovation and other conditions of competition of the market. The geographic market can be local, regional or national, and shall include national and imported products.
Transactions that constitute a business integration must be informed ex ante to SIC if they meet at least one of the following subjective thresholds and one of the following objective thresholds:
- subjective threshold: the companies involved in the transaction develop the same economic activity (horizontal transactions), or are part of the same value chain (vertical transactions); and
- objective threshold: the combined annual operating income of the companies involved is equal to or more than 60,000 current monthly minimum legal wages), or the total combined assets of the companies involved is equivalent to or more than 60,000 current monthly minimum legal wages, in the year prior to the transaction.
After the fulfilment of the above requirements has been assessed, the following may occur:
- If none of the above-mentioned subjective and objective thresholds are met, the business integration does not need to be reported to SIC.
- However, if the business combination meets any of the above subjective and objective thresholds, and the combined market share of the companies involved is less than 20 per cent of the relevant market, the transaction shall be deemed authorised by simply giving prior notice to SIC regarding the transaction. In this case, the information to be furnished to SIC is basically the parties involved, the legal form of the transaction (merger, acquisition of control, acquisition of shares or assets, etc.), the relevant market (product market and geographic market), the share participation in the relevant market and the methodology to calculate them.
- If the business combination meets any of the above subjective and objective thresholds, and the combined market share of the companies involved equals or exceeds 20 per cent of the relevant market, prior authorisation must be requested from SIC, subject to the following rules:
- pre-evaluation filing: the parties interested in obtaining antitrust clearance must file a summary of the business integration and a pre-evaluation request before SIC;
- review of the pre-evaluation filing: SIC has 30 business days to determine whether the business combination is approved, without further information requirements, or whether a full review must be carried out; and
- full evaluation filing (in-depth review): if SIC decides that a full review must be carried out, the involved parties must file all the information required for a complete study. After the complete filing is made, SIC has three months to decide if it approves or rejects the combination, or imposes conditions for its clearance. If antitrust clearance is not issued within the three months granted to SIC the transaction would be deemed as unconditionally authorised.
In a merger review, SIC may raise objections; raise no objections but impose certain conditions on the merger (either structural or behavioural); or raise no objections and no conditions.
The economic sanctions that SIC may impose in the case of a violation of antitrust provisions (cartels, restrictive agreements, dominance and merger review regulation) are as follows:
- fines imposed on each company involved of up to 100,000 current monthly minimum legal wages, or a fine equivalent to 150 per cent of the profit derived from the conduct – whichever is higher; and
- fines imposed on any manager, director or statutory auditor who facilitates, authorises, executes or tolerates conduct violating the rules on protection of competition of up to 2,000 current monthly minimum legal wages. In this case, it is expressly prohibited that the company, the parent company, subsidiary companies or associated companies with the same corporate group to which the manager, representative or statutory auditor belongs or belonged to, pay or guarantee the fine imposed on behalf of such individuals.
Additionally, in the case of merger review, and without prejudice to the imposition of the above-mentioned fines, SIC may order the reversal of a transaction for failure to properly report it, or for gun jumping, provided that it unduly restricts competition. Reversal of the transaction is also applicable to cases in which the transaction is closed after being blocked by SIC or when the conditions under which the operation had been approved are not fulfilled.
i Significant cases
In 2013, the government began an auction process for its 57.5 per cent share in Isagen, an energy generation and retail public utilities company that also participates in the commercialisation of natural gas in the Colombian market. Grupo Argos, a potential bidder, participates in the same markets as Isagen. Empresa de Energía de Bogotá (EEB), another potential bidder, participates indirectly in the same market through its shareholding in Emgesa and Codensa. The energy market is regulated by the Energy and Gas Regulation Commission (CREG), which has established certain restrictions, including a maximum market share of 25 per cent for energy generating and retailing companies, and a maximum power output of 3,402MW for 2012. A merger review process filing was made by both Grupo Argos and EEB. SIC conditionally approved both acquisitions based on the following:
- Grupo Argos: the merger would represent a total 3.459MW of participation in the energy generation market, which exceeded CREG's limit. Thus, SIC imposed on Grupo Argos the obligation to divest assets related to the energy sector and to neutralise the market power after the merger;19 and
- EEB: the merger would represent a 31.31 per cent share of the energy generation market, which exceeds SIC's limit. SIC imposed conditions, inter alia, that EEB must divest its voting rights in the energy companies Emgesa and Codensa, and divest certain assets, especially in the thermal generation plant Transportadora de Gas Internacional.20
In 2013, SIC raised no objections and imposed no conditions regarding the acquisition of 100 per cent of the outstanding shares in WP Roaming III by Syniverse Holdings, both global technology service providers for telecommunications companies that provide the following services:
- GSM data clearing services;
- finance and accounting business process outsourcing (F&A BPO);
- revenue assurance and fraud management;
- peer-to-peer SMS messaging (P2P SMS); and
- business intelligence.
Neither company had a subsidiary in Colombia, or a distributor or assets in the country, since they do not require a local presence to render their services and to compete. The combined market share in Colombia for F&A BPO, revenue assurance and fraud management, business intelligence and P2P SMS was less than 10 per cent; thus, it raised no concerns for SIC. For GSM data clearing services, such share was 100 per cent, since the two companies were awarded contracts for rendering services for two years by the parent companies of the Colombian mobile network operators (MNOs). However, SIC considered that the business integration did not restrict competition since it was a highly competitive global market, subject to bidding processes on which the local MNOs had no influence, and on which there were no material barriers to entry.
ii Trends, developments and strategies
In 2018, 165 cases were submitted to SIC for merger review, which represents a slight increase in cases compared with the 150 cases filed in 2017. The figures recorded for 2013 regarding the amount of time SIC took to issue a decision once a filing is presented remained more or less the same for 2018, and are as follows:
- prior notifications: 2.11 business days;
- pre-evaluation filings (fast-track): one month and 17 days; and
- full evaluation filings: three months and 10 days.
In 2015, SIC issued Resolution 10,930, in which it:
- clarified certain issues, such as the definition of control;
- outlined the events in which no merger review is required (e.g., events that do not fulfil the subjective and objective thresholds, business integrations among controlled parties21 or between parties of an entrepreneurial group);22
- outlined the criteria to determine the assets and income of the parties involved in a transaction that are to be taken into account in relation to the reporting thresholds. Specifically, it clarify the instances when foreign income should be included in the calculation; and
- adjusted some of the documents that have to be filed to SIC for merger review.
Since April 2012, all documents for merger review may be submitted online via SIC's website.23 SIC encourages this to simplify the merger review process.
Furthermore, SIC has made a clear distinction between collaboration agreements, which are subject to specific cartel and restrictive agreement regulation, and business integrations under joint venture agreements (with or without the incorporation of a new company), which are subject to merger review regulation. The main difference is that in business integrations, competition ceases definitively or for a long time between competing market agents of a relevant market, while collaboration agreements are entered into for a determined term, and at least a certain form of competition is retained between the competing market agents, which can be either actual or potential. Other differing elements are the degree of independence and integration between the competing companies. In 2018, SIC updated its merger review guidelines following an OECD recommendation.
i Pending cases and legislation
As previously mentioned, SIC is in charge of the ex post enforcement of competition regulations. There are several investigations currently open and awaiting a decision by SIC, but it is worth noting that SIC has decided to enhance its capability to undertake high-profile cases in order to issue decisions that may have exemplary effects among competitors, and to impose exemplary fines under Law 1,340 of 2009.
The statute of limitations has also been increased in the Competition Law from three to five years. Hence, SIC has ample time to conduct investigations and impose sanctions for the violations of competition laws.
The most recent amendment to the Competition Law is Decree 19 of 2012, which made some changes to the investigation procedure for violations of the rules of competition and restrictive practices. The modifications introduced include an amendment to the general structure of the administrative procedure enacted by Decree 2,153 of 1992; the notification and publication of certain administrative acts; and the opportunity for third-party interventions.
This amendment to the competition regulation also created an additional reputational sanction for offenders or investigated parties accused of anticompetitive conduct who offer guarantees in exchange for the early termination of investigations, since their conduct will be revealed to the public.
1 Enrique Álvarez is a partner and Darío Cadena is an associate at Lloreda Camacho & Co.
2 Article 6, Paragraph 1 of Article 8 and Article 9 of Law 1340 of 2009.
4 National Development Plan 2014–2018.
5 Private Competitiveness Council, National Competitiveness Reports 2013–2014, 2014–2015, 2016–2017, 2017–2018 and 2018–2019.
6 Cortazar Javier, 'A new Competition Law in Colombia – Critical and Prospective Analysis', Bogotá, 2003.
7 See footnote 5.
8 Added by Article 16 of Law 590 of 2000.
9 Law 599 of 2000 as amended by Law 1,474 of 2012.
10 Law and Competition Policy in Colombia, 2009, OECD.
11 Eliana Torrada Franco, 'The sanctions regime and the offering of guarantees on restrictive practices under Law 1,340 of 2009', Private Law Journal No. 43, Andes University, June 2010.
12 Law 1,480 of 2011.
13 Regulated by Article 50 of Decree 2,153 of 1999.
14 Section 3 of Article 50 of Decree 2,153 of 1992.
15 National Competitiveness Report 2012 and 2012–2013.
16 Section 6 of Article 50 of Decree 2,153 of 1992.
17 Article 1 of Law 155 of 1959.
18 SIC Resolution 14,902 of 2013.
19 Resolution 525 of 2014. The most important data regarding the conditions in this Resolution are confidential and were not made public.
20 Resolution 5,545 of 2014.
21 Pursuant to Section 4 of Article 45 of Decree 2,153 of 1992.
22 Pursuant to Article 28 of Law 222 of 1995.
23 SIC Competition Bulletin, First Quarter 2012, available at: www.sic.gov.co/recursos_user/documentos/publicaciones/Boletines/competencia/boletin%20de%20competencia%20ingles1/index.html.