Peru: from the enforcer
Jesús Eloy Espinoza Lozada
Technical Secretary of the Commission for the Defence of Free Competition
Tel: +511 224 7800 ext. 3101
Email: [email protected]
Questions and answers
How long is the head of agency’s term of office?
The President of the board’s legal term of office is five years, according to the Regulations of the Law for the Organization and Functions of the National Institute for the Defence of Competition and Protection of Intellectual Property (Indecopi).
When is he or she due for reappointment?
The current President of the Board of Indecopi, Mr. Julián Palacín Gutiérrez was designated through Supreme Resolution No. 100-2021-PCM issued on 14 of September 2021. For instance, the reappointment of the president will occur once the five-year term established in the Law and its Regulations is fulfilled.
Which posts within the organisation are political appointments?
The members of the Board of Indecopi, including its President, are chosen by political appointment. Its members are appointed as follows: The Prime Minister appoints two members. Among these two, the President of the Republic appoints the President of the board.
Additionally, the Minister of Economy and Finance, the Minister of Foreign Trade and Tourism, and the Minister of Production appoint one of the other three members each. All members are appointed for a fixed five-year term with the option of an additional term.
It is worth noting, however, that Indecopi enjoys functional, administrative and financial autonomy, and that the decision-making bodies within the organisation enjoy independence in their decisions.
What is the agency’s annual budget?
Indecopi has an independent legal status of internal public law and enjoys functional, technical, economic, budgetary and administrative autonomy. This institutional arrangement is expected to provide a safeguard against political and public pressures and particularly those that might arise from individual ministries responsible for individual economic sectors.
How many staff are employed by the agency?
The total staff employed by the Commission for the Defence of Free Competition and the National Directorate for Investigation and Promotion of Free Competition is 56 people.
To whom does the head of the agency report?
Indecopi is attached to the Office of the Prime Minister but according to the Law on the Organisation and Functions of Indecopi (Legislative Decree 1033), Indecopi has an independent legal status and enjoys functional, technical, economic, budgetary and administrative autonomy. This institutional arrangement provides safeguards against political pressures from individual ministries responsible for certain economic sectors.
At the same time, there is permanent interaction between Indecopi and other entities, such as the Peruvian Congress. For example, Indecopi receives inquiries about its activities in relevant markets, opinions on draft bills related to the functions of Indecopi or proposals that have an impact on competition in different markets. This interaction, however, does not compromise Indecopi’s autonomy and independence.
Do any industry-specific regulators have competition powers?
Yes, the Supervisory Agency for Private Investment in Telecommunications (Osiptel) is responsible for regulating, supervising and enforcing competition regulations in the telecommunications market. Osiptel is also attached to the Office of the Prime Minister.
If so, how do these relate to your agency’s role?
When necessary, Indecopi and Osiptel coordinate their activities to avoid divergence between the criteria they use to apply the law and the content of their decisions. To ensure consistency with Indecopi’s approach, and in view of its expertise, Osiptel asks Indecopi for technical advice regarding the criteria to analyse anticompetitive behaviour in antitrust cases. These actions and coordinations are provided in Osiptel´s regulations such as the Law on the Development of the Functions and Powers of the Supervisory Body for Private Investment in Telecommunications – OSIPTEL, its Regulations and the General Guidelines for the Application of the Rules for the Repression of Anti-competitive and Unfair Behaviour in the Telecommunications sector.
May politicians overrule or disregard authority’s decisions? If they have ever exercised this right, describe the most recent example.
There is no possibility for politicians to overrule or disregard the competition authority’s decisions. As mentioned, Indecopi has an independent legal status of internal public law and enjoys functional, technical, economic, budgetary and administrative autonomy. This institutional arrangement is expected to provide a safeguard against political and public pressures, and particularly those that might arise from individual ministries responsible for individual economic sectors. In practice, the influence of the Executive Branch or the Parliament in defining the agenda of Indecopi has been marginal: the autonomy of the Commission to decide how to handle competition proceedings is widely acknowledged by all observers.
It is important to mention that the decisions of Indecopi are subject only to judicial review.
Does the law allow non-competition aims to be considered when taking decisions?
According to the article 1 of the Peruvian Competition Act (approved by means of Legislative Decree 1034), the purpose of the Act is to promote the economic efficiency in the market for consumer welfare. In that sense, the law does not allow non-competition aims to be considered when taking decisions.
Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?
The Commission is the first-instance decision making body, and can find liability in the indicted companies, imposing fines and injunctions. At second instance, the Competition Division of the Tribunal of Indecopi decides on appeals from the Commission. All decisions rendered by the second instance of Indecopi can be appealed to the judiciary.
Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.
So far, the Commission has never blocked a merger. It has, however, imposed remedies. For example, in 2006, the Commission authorised a merger subject on the condition that the undertakings involved in the merger should not exercise, individually, their voting rights concerning a decision in an Electricity Committee, because this conduct could have benefited them at the expense of their competitors. This decision was evaluated by the second instance, which ended up overruling the remedy imposed by the Commission.
Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.
Yes, as previously stated, the authority imposed conditions in 2006 in the electricity sector, when the Commission authorised a merger subject to the condition that the undertakings involved in the merger should not exercise, individually, their voting rights concerning a decision of an Electricity Committee, because this conduct could have benefited them at the expense of their competitors. This decision was evaluated by the second instance, which ended up overruling the remedy imposed by the Commission.
The latest case where the authority has imposed conditions has occurred in 2020. In March 2020, the Commission decided to approve subject to conditions, the acquisition of Luz del Sur and Inland Energy SAC by China Three Gorges Corporation (CTG). The conditions imposed aimed at ensuring competition among electric generation undertakings in supplying regulated users and, therefore, to prevent the electricity utility tariffs of those users from increasing in the future, because of a lessening of competition. Specifically, Indecopi has approved the acquisition of Luz Del Sur, as long as the company supplies energy through competitive and transparent tenders or competitive bids that protect competition and consumer’s interest.
Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.
The Antitrust Merger Review Act establishes for the possibility to conduct Phase II investigations. However, the authority has not conducted a Phase II investigation so far.
Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.
Yes. According to Legislative Decree 1034, Peruvian Competition Act, the Technical Secretariat has the power to initiate an investigation to gather evidence about the existence of anticompetitive behaviours that could affect, wholly or partially, the Peruvian market, even though if these behaviours take place overseas.
In that sense, in a case about a cartel in the maritime transport market, the Technical Secretariat pursued companies based outside Peru as a part of the proceeding initiated against shipping lines in the roll-on roll-off maritime transport market. The shipping lines allegedly entered into a client allocation cartel involving the transportation of cars and trucks that were shipped from Asia, Europe and the United States to Peru, and lasted from 2001 to 2012, with possible effects until 2015. After leniency applications were submitted by CSAV (a Chile-based shipping line) and NYK (a Japan-based shipping line), together with a set of materials and information, the Commission considered that the investigated parties had devised a system of client allocation under which neither of them would compete with the others as regards contracts that other carriers already had with major automobile manufacturers (such as Chrysler, Renault, Ford, Toyota or Volkswagen). The first administrative instance imposed more than US$14.7 million in fines. This case is pending decision by the second administrative instance (the Tribunal of Indecopi).
Do you operate an immunity and leniency programme? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?
Peru’s leniency programme has been present for many years. However, a reform made in 2015 gave greater clarity and definition to the application and implementation of the Programme. It is important to mention that the amendments introduced about the Leniency Programme, define leniency features, such as the scope of the programme, its requirements, stages and deadlines, and the powers of Indecopi to manage the programme.
Additionally, to provide transparency and further legal certainty, in 2017 Indecopi adopted its Leniency Programme Guidelines, after receiving comments from specialists and organisations. The Guidelines define all the relevant benefits and conditions of the Leniency Programme, and so are aimed at increasing incentives to apply for leniency and strengthen Indecopi’s capabilities to detect infringements. These Guidelines also define requirements, confidentiality rules, terms and duration of the leniency proceeding, among other specifications.
Under Indecopi’s Leniency Programme, the applicant agrees to provide truthful, full, continuing and complete cooperation to the competition authority. Once the applicant provides information about a cartel, a conditional commitment is signed between the Technical Secretariat and the applicant. In this conditional commitment, conditions are stipulated that must be met for the applicant to secure a favourable decision from the Commission regarding leniency benefits, the most important being its duty to cooperate with the Technical Secretariat and the Commission throughout the sanctioning administrative proceeding. If the applicant does comply fully, the applicant is granted leniency unconditionally. Though the Commission has the final decision regarding a leniency application, it can only revoke the benefits if the applicants seriously fails to comply with the conditional commitment. To date, no benefit conditionally granted by the Technical Secretariat has been revoked by the Commission.
There are three types of leniency applications under the Peruvian Competition Act and the Leniency Guidelines:
- Leniency type A (100 per cent of immunity from sanctions) is applicable to the first party that submits a leniency application in cases in which the Technical Secretariat has no previous evidence of the existence of the cartel;
- Leniency type B (reduction from 50 to 100 per cent), applicable to the first applicant in cases where the authority already has some indications of the anticompetitive conduct, as long as the application is submitted before the Technical Secretariat initiates an administrative proceeding; and
- Leniency type C (reduction of up to 50 per cent), which is applicable to subsequent applicants that provide information with significant added value to the Technical Secretariat’s investigation, even after the initiation of an administrative proceeding by the Technical Secretariat.
Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?
On August 2020, the Congress enacted Law No. 31040, introducing criminal sanctions against anticompetitive behaviour. This criminal statute is quite recent and has not yet been applied by the public prosecutors.
As provided by the aforementioned Law, the public prosecutors (and not Indecopi) will decide on the prosecution of the abuse of economic power, hoarding and speculation, among other things.
Are there any plans to reform the competition law?
For the moment, there are no initiatives contemplating a reform to the competition law. In addition, it is important to mention that in June 2021, the Antitrust Merger Review Act entered into force, which allow for the competition authority to review mergers that meet established thresholds and constitute a merger transaction according to the Act, in all sectors of the Peruvian economy.
Do you have a separate economics team? If so, please give details.
The Competition Division has its own staff of lawyers and economists that work together on the several activities related to competition. Additionally, it is important to mention that the Economic Studies Department supports various areas of Indecopi related to consumer protection, intellectual property and competition (including free competition).
Has the authority conducted a dawn raid?
Yes. Section 15 of the Peruvian Competition Act entitles the Technical Secretary to carry out raids, with or without previous notification, at an individual’s or companies’ sites. Copies of physical files, magnetic or electronic, as well as of any other documents, pictures or videos deemed relevant may be taken.
In 2020, Indecopi published its Dawn Raids Guidelines to provide information about the exercising of these powers and about the rights and obligations that the companies have during dawn raids. Additionally, it is important to mention that due to the covid-19 emergency, the competition authority has also conducted virtual dawn raids.
Has the authority imposed penalties on officers or directors of companies for offences committed by the company? If yes, please provide the most recent instances.
Yes. The Commission can impose penalties on directors and workers of companies for their participation in infringements under the Competition Act. As an example, in 2016, after verifying that companies colluded to manipulate prices in five public procurement processes for supplying the haemodialysis service convened by EsSalud (The National Health Social Security) between 2010 and 2012, the Commission decided – in 2016 – to impose penalties on the representative of the investigated agents for more than US$26,000.
In a different case, related to the Vehicular Natural Gas (VNG) market, the Commission decided to sanction 63 companies and 30 natural persons for an agreement to fix prices and commercial conditions, by colluding to increase VNG, a fuel sold in gas stations in Lima and Callao cities between 2011 and 2015. The decision, issued in 2018, imposed penalties on the representatives for more than US$516,000 in total.
What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?
Section 6 of the Antitrust Merger Review Act establishes the pre-merger notification thresholds to be met, in order for the merger transaction to be review by the competition authority. According to the Act, a merger transaction is subject to the merger review process when the following thresholds are met concurrently:
- the total sum of the value of sales or annual gross income or value of assets in the country of the companies involved in the merger transaction that they have reached, during the fiscal year prior to that in which the transaction is notified, is equal to or more than 118,000 tax units (UIT); and
- the value of sales or annual gross income or value of assets in the country of at least two of the companies involved in the merger transaction that they have reached, during the fiscal year prior to that in which the transaction is notified, is equal to or more than 18,000 tax units (UIT) each.
Do you have a chief economist?
Yes. The chief economist´s name is Humberto Ortiz.
To whom does the chief economist report?
The chief economist reports the Director of the National Directorate for Investigation and Promotion of Free Competition
Does the chief economist have the power to hire his or her own staff?
No, but his or her opinion and criteria may be determinant when hiring economists.
How many of your economists have a PhD in industrial economics?
One of our economists has concluded his PhD studies, having industrial organisation as one of his specialisation areas.
Does the agency include a specialist economist on every case team? If not, why not?
Usually, the case team includes at least one specialist economist. We also have economy students as interns contributing to the investigations.
How much economics work is outsourced? What type of work is outsourced?
Outsourcing is rare, as Indecopi has a significant number of economists as part of its workforce. Accordingly, outsourcing will only happen in special circumstances. For example, Indecopi has hired consultants for some market studies in the context of its advocacy activities.