Latin America: Overview
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Lately I have criticised Latin America for its constant copying of foreign legislation. The countries in the region have followed, without due consideration, the statutes and decisions of certain other countries, leaving behind their own law which is born from its own culture. As a result, there is little homegrown legal creativity. Few cases can be considered as one's own original inspirations - sometimes it is enough to cite a foreign book, based on foreign rules, to silence the opponent.
As a university professor, and within my professional practice as a lawyer, I have had the opportunity to read literature about antitrust law in different continents. I have noticed that, perhaps, since antitrust law has its origin in the common law system, when the rules are adopted in the civil law system the elements of the general theory of liability are forgotten, even though they are the foundation of civil law.
Civil law is based on liability judgments that are made within a rigid structure of written rules. In most cases we talk about damage, fault (culpa) and a connection between the two, and about how to argue those elements when a person seeking recompense for the material damage he has suffered. But when it concerns administrative law, we also refer to behaviour that is typical (tipicidad), anti-legal (antijuridicidad) and with guilt (culpabilidad), returning to criminal law principles, in order for the nation to investigate conduct that causes damage to its economy.
Any liability judgment inside the civil law system must contain the aforementioned elements. By ignoring these elements the system breaks down, and is transformed into another as we rush to copy the system used in other cultures.
In theory, the path lies open in Latin America to apply elements of the general liability theory of the civil law to the rules of antitrust, which will ensure respect for the right for parties who are familiar with established civil law concepts to a defence.
The purpose of this article is not to criticise the common law system, but to call for the maintenance of the essential aspects of the continental system where antitrust law is applied. While understanding that the roots of antitrust lie within the common law culture, that is not a reason for casting aside the system of civil law and its qualities. It is important to note that, due to the differences present in both law systems, there are certain concepts or terms that do not have an exact translation in English, which is why in cases where the technical word is not exactly available as it is used in Spanish, the original term will appear in brackets.
The two global systems: civil law and common law
The common law system is distinct because its application originates in England and in common law jurisdictions. This system is based on analysis of the decisions made by the different courts or Supreme Courts. These bodies are in charge of interpreting customs, usage and general rules of conduct and allow its development. Court decisions define the real interpretation of the law, case by case, following the precedents. That is how, on several occasions and based on guidelines introduced in previous decisions, legal rules are formed incorporating the guidelines.
On the other hand, the civil law system is based on a body of laws and legal concepts and principles that are written and gathered in a code or statute. All law is written, allowing people to know the prohibitions that govern them. The civil law has statutes for different areas and matters of law: people, assets, obligations, rules of liability and family law, among others.
In other words, the two systems differ in the source of the law: in the common law system the principal source is the precedent, while in the civil law, the principal source is the written law.
Global antitrust law has been created by common law jurisprudence. The different concepts created by common law were adopted by legislatures in civil law systems, and I believe that is where the workings of our system, in our region, was forgotten. That was the moment when foreign mechanisms were adopted - leaving aside all general theory of liability - and we started to use the common law to develop antitrust. This has become evident in Latin American legal culture, where the authorities are using foreign jurisprudence to support their own decisions, despite the presence of written law in their own country.
Personally, I believe that the interaction between civil law and antitrust law have, in fact, a better path than the foreign precedent, because legal matters should always be looked at in connection with the real culture of the territory where the law is applied.
Explanation of the liability regime in the system of civil law
In the civil law each rule allows or prohibits hypothetical conduct. Those hypothetical behaviours (known as 'factual components' (supuestos fàcticos) are made up of 'elements of the rule' (elementos de la norma) which, when identified, fit a human action leading directly to a legal consequence.
Comparison of the conduct with the rule, to determine if it fits what is described in it, is known as 'typical'. However, in this system the matching of a legal rule with the behaviour only leads to an absolute legal consequence when the contents of the rule demonstrate that it refers to a 'presumption of right' (presunción de derecho), which by definition does not allow proof that will indicate otherwise. That means that if the rule demonstrates that it refers to a presumption of right, the adjustment of the rule with the conduct leads necessarily and absolutely to a single legal outcome - one not allowing proof that indicates otherwise.
But if the rule does not include a presumption of right, the result is that comparison of the rule with the human behaviour will not always lead to a legal consequence, because it allows proof that indicates otherwise. It is up to the defendant to prove that he did not injure what is being protected by the legal rule; therefore, the outcome is relative.
That is how the judgment is not merely about discovering a 'typical' behaviour (matching the legal rule with a behaviour that has been carried out), and becomes a real liability judgment, having to prove the elements of civil or administrative liability.
In this system it is important to define the legal right that is protected by the rules. It may occur that:
• there exists a rule that always punishes a form of behaviour; that is, the rule refers to hypothetical conduct that the system considers will always damage the right protected and has a legal consequence, and does not allow any proof otherwise ('presumption of right');
• a rule exists regarding hypothetical behaviour, that, despite the resemblance between the rule and the behaviour, admits proof otherwise when it can be proven that there hasn't been any damage to the right ('legal presumption' and others); and
• there is no rule that prohibits a specific conduct, but that action, even though is not prohibited, causes damage to the right that lacks of a specific rule to protect it, and taking advantage of the situation, the defendant carries out the behaviour causing damage, resulting in what is called 'abuse of right' (abuso de derecho), which is a device that is used as a last resort when there is no rule that punishes a behaviour but such conduct does cause damage.
Liability (or responsibility) is the obligation to repair the damage. It's the obligation to respond for one's acts. It is the legal penalty of behaviours. 1
Taking into account that within antitrust law there is both an administrative as well as a civil breach, it is necessary to describe some aspects of each type of responsibility to detect the structure of liability for each case.
Civil liability is applied when the behaviour affects a specific person's patrimony. That means that there will be a lawsuit due to a damage caused. When that occurs civil liability is incurred, where its structure has the following elements: (i) real damage; (ii) 'fault' or wilful misconduct, and (iii) a connection between the two elements.
Regarding administrative liability, sanctions punish the behaviours that affect the rights that are protected by the Nation. In that way the Nation safeguards the market and the economy, and whoever causes damage is liable to pay a penalty, despite the payment that might have to be made to the individuals affected. The elements of this type of liability are: (i) 'typical' behaviour; (ii) 'anti-legal' behaviour and, (iii) 'guilty' behaviour.
Structure of liability under administrative law
This type of responsibility is used by the Nation before the breach of a duty of conduct when a public interest is affected. It does not seek to repair the damage caused but instead, its objective is to punish the behaviour. The purpose of the penalty is to deter repetition of the conduct.
The State creates antimonopoly rules that are protected by administrative bodies that supervise enterprises. In the event of a violation, the State will investigate what has occurred, and if it is the case, it will impose a penalty. Because it is an expression of punishment, in the administrative sanctioning law applies the principles of criminal law. As a result, the behaviour, to be punished, must be: 'typical', 'anti-legal' and with 'guilt'.
A 'typical' behaviour occurs when an act or omission fits into a legal description formed of presumptions of right, legal presumptions and abuse of right. The idea is to prove that the behaviour carried out by the defendant is prohibited within the body of written rules concerning restriction of competition, including the abuse of rights.
A behaviour is 'anti-legal' when the protected legal interest has been injured, that could be the competition, the economy or the market of a region. In order to do that, the significance of the behaviour is measured inside a market, because there could be actions that, even though they are 'typical', do not affect the protected interest. Therefore, in antitrust investigations it is always necessary to: (i) decide on the relevant market, and (ii) determine the market power of the investigated companies inside the relevant market, and (iii) establish if within that market the behaviour carried out is relevant in order to cause damage to the protected interest as a consequence of the market power of the companies involved in the violation of the law.
By saying that the behaviour needs to be 'guilty', this means that there is a subjective element of imputation, that is formed by wilful misconduct (dolo) and 'fault' (culpa). Wilful misconduct is an action that is intended to cause damage and affect the protected legal interest. It requires knowledge and desire of the result; a clear visual of the impact the result will have, and intention. 'Fault' is understood as carrying out a conduct but without wanting the result that is produced by that behaviour, not taking the necessary measures that would have avoided the injury. It is a lack of the duty of caution that each member of a community has. A conduct with 'fault' is a deviation of the ideal model of conduct. 2 It is quite difficult to determine the level of caution that an individual has to have to determine the result that his conduct will produce. But it is reasonable to think that a person, before he acts, must identify the consequence for himself, and that exercise must be repeated regarding his surroundings. That means a person should have some sort of radar that allows him to determine the radius of the consequences of a behaviour, recognising the danger and assuming the results in case the conduct is actually carried out.
Regarding this matter, it is important to take into account care and due diligence. This is a difficult aspect, because every person has a different background and different education, therefore each person has a different perception of things and its results. I refer to economic reasons, that is, the natural knowledge and instinct of man, to point out that 'fault' requires a definition regarding the position of the person that will be judged. Whether a person is a professional or does not know anything about the subject should also be considered. A professional has certain tools that allow him to anticipate the consequences of his behaviour. However, a person that does not know anything about the subject has had a different type of life, without knowledge, and such reality must be taken into account by the law, not to exempt of liability either one, but in order to dim or worsen the sanction because of that.
Regarding restrictive business practices, the investigations usually involve people that are professionals, either because they are merchants, or because they are people with a professional degree (administrators, accountants, lawyers, etc). That's why they have to deal with professional liability, which is more demanding than that of a person that knows nothing about the subject, because the professional's conduct should have the care and diligence of a good businesssman, which is more demanding than the standard of care expected from a person that doesn't know about the subject, which is that of a good family man.
Therefore, merchants, because they are professionals, have a higher burden in their conduct. Within professional liability, each person, according to their know-how, has tools that require certain conduct standards. In other words, the lack of diligence and care of the professional merchant in his acts is the cause of the injury to the market and the economy.
According to what has been said, when there is a wilful misconduct, the reason behind the action is studied. On the other hand, 'fault' requires the study of the consequences that were caused by an action and that could have been discovered by the actor with knowledge and study within a certain period.
The following chart summarises the liability structure that has to be proven in an administrative inside an investigation due to infringement of antitrust law in the continental law system:
|'Typical' behaviour: The existence of a rule that prohibits the behaviour must be proven. If not, in a subsidiary way, the abuse of right must be proven.|
|Administrative sanctioning liability||'Anti-legal' behaviour: Within the relevant market, the market power of the participants in the infringement must be significant.|
|Wilful misconduct or behaviour with 'fault': There should have been the intention in the behaviour or an action without due care or diligence.|
However, the investigated agent can rebut each element of the structure, for example, by using: (i) causes that exclude the 'anti-legal' element, such as: the legitimate exercise of a right, legitimate defence and consensual acts; and (ii) causes that exclude the 'fault', such as: 'fault' of a third party, 'fault' of the victim, unexpected occurrence, act of God, fulfilment of a commitment, natural response of market, etc.
Using an example will allow a clearer explanation of the situation, as follows:
Let's suppose there is a horizontal cartel of four companies. If this case was managed under the administrative system, we would have:
|'Typical' behaviour: The description and article number of a statute prohibiting horizontal cartels.|
|Administrative sanctioning liability||'Anti-legal' behaviour: Determine product market and territory of the market. Determine the market power of the four companies together within the relevant market. Decide, if according to the market power of the companies, the cartel is significant within that segment and if it hurts the protected legal interest.|
|Wilful misconduct or behaviour with 'fault': Determine if the purpose of the companies was to distort competition, or if they acted without the due diligence or care, with a result that damages the competition, being a wilful misconduct or severe 'fault'.|
The defence of the for companies could be the following, for each element:
|Typical behaviour: The described conduct is not in the law. There is a legitimate use of a right. There is a fulfilment of a legal commitment.|
|Administrative sanctioning liability||Anti-legal behaviour: Incorrect segmentation of the product or territory market. Absence of market power. Absence of damages to the protected interest.|
|Wilful misconduct or behaviour with fault: Fault of the victim. Fault of a third party. Legitimate defence Necessity. Unexpected occurrence. Act of God. Due diligence. Due care.|
With this panorama the administration makes a decision, under a structure of sanctioning liability, by applying a penalty when there is an infringement.
Structure of liability within a civil judgment as a consequence of altering the competition:
Under this type of liability the individuals present their lawsuits before civil courts, and seek compensation for the violation of the antitrust laws.
Civil liability is based on the repair of the damages. The origin of this type of liability is a contract, felony, misdemeanor or law.
The first source (the contract), gathers the study of the contractual civil liability (responsibilidad contractual), which is derived from the breach of contract. The other sources are part of extracontractual civil liability (responsibilidad civil extracontractual) which is the one whose origin is outside the fulfilment of a contract. Both types of liabilities involve objective and subjective theories of liability.
In the subjective theory the intended result of the actor or the measures taken by the actor to avoid those results are important. This is technically known as wilful misconduct or fault. The goal and the will of the person responsible are always studied, as well as precaution measures used in order to avoid damages to third parties.
In order for subjective liability to exist, the presence of three elements is necessary: damage, wilful misconduct or fault and a connection between those two.
The following chart summarises subjective liability in a civil context.
|Civil liability||Wilful misconduct or fault: The infringement of the antitrust laws because the behaviour is specifically prohibited or there is an abuse of right, which means, there is illegal behaviour.|
|Connection between the previous elements: The illegal behaviour, that is, the infringement of the antitrust regime, is the cause of the wealth damage.|
Another theory is the objective theory of liability, whose grounds are not a wilful misconduct or fault, but instead, the damage itself as a consequence. What is observed is the consequence for the victim of the behaviour or non-fulfilment of the burden of the liable party. The purpose is to repair the damage caused. It is enough to prove that the damage was caused as a consequence of the behaviour of the actor, who is considered responsible just for carrying out the conduct, and not his intention.
The following chart summarises the structure of objective liability:
|Damage: General and consequential damages caused.|
|Civil liability||Action that caused the damage: The behaviour can be by action or omission, and is analysed independently from the subjective component.|
|Connection between the first two elements: The behaviour (act or omission) is the cause of the damage.|
Regarding the element of damage, in both theories it is necessary for it to be certain and direct, it must injure a legally protected interest, and it cannot have been previously compensated.
The whole damage (daño integral) is compensated, but only the certain damage, that is, the damage that has been proven. In this system there is no compensation for triple damages where the compensation has an exemplary purpose, where the idea is to set an example to the public and avoid the breaking of the law.
Each law or each decision defines if the liability that is applied to a specific matter is subjective or objective. For the issues of civil liability that lie in behaviours that affect antitrust laws, where the idea is to repair the damage, the liability is subjective. But beforehand it is necessary to determine that there has actually been an infringement of the antitrust laws, and afterwards, it can be claimed that as a result of such violation damages were suffered. However, this does not mean that it is necessary to wait for the decision of the administrative investigation to initiate a civil lawsuit. What it means is that the judge that hears this matter has to find the connection between everything, that is, the infringement of the antitrust laws and the injury caused by such violation.
Following the example above, let's add a new fact: a person claims that the cartel injured him.
|Damage: A company is excluded from the market and suffers economic damages, and claims to have them compensated.|
|Civil liability||Wilful misconduct or fault: The companies carry out a price agreement by selling under price, and that is considered a price cartel, being it an infringement of antitrust laws (this follows all the administrative liability structure, but the process if carried out by a civil judge who knew about it through a class action, for example).|
|Connection between the previous elements: The infringement to the competition (cartel) is the cause of the exclusion of the injured company from the market.|
Taking into account this context, I believe that in the cases of infringements of the antitrust laws within the continental law system, the judges have enough tools to base their decisions in the liability structure, being faithful to their own legal culture, without copying, but applying what's theirs, safeguarding the right to a due process of law and the right to a defence.