Colombia: Overview

With the enactment in 2009 of Law 1340, Colombia’s antitrust regime has been reinvigorated. The country was one of the first in Latin America to introduce a competition regime when, in 1959, Law 155 was approved by Congress under the auspices of the national government. However, it took a long time before the provisions of Law 155 were truly enforced and the existence of several agencies with concurrent antitrust enforcement powers proved problematic.

Perhaps Law 1,340’s principal achievement is the establishment of the Superintendence of Industry and Commerce (SIC) as the sole antitrust enforcement agency. SIC is now also empowered as the national competition advocate and, consequently, it has a leading role both in the establishment of regulations related to competition and the enforcement of the antitrust laws.

Whenever a state agency issues any rule relating to competition, Law 1,340 requires that SIC be consulted and, if the agency issuing the new rule disagrees with SIC’s assessment, it must state in writing the reasons it has to ignore SIC’s advice. In the field of enforcement, except from a couple of exceptions that will be discussed below, SIC now has the power to enforce the antitrust laws over almost every industry in the country. SIC’s new leading role has also been strengthened with the introduction, for the first time in Colombian history, of a leniency programme that seeks to promote cooperation from private firms.

For purposes of this brief overview, we will discuss the role of SIC, the Colombian merger review regime, the Colombian anti-competitive agreements and conducts, and the unfair competition regime, as well as the penalties SIC can impose for the violation of the antitrust laws and judicial review of SIC’s decisions. The goal is to present to the reader a broad overview of Colombia’s antitrust statute while highlighting some of its most relevant characteristics.

Merger control

The Colombian merger control regime provides for review of all sorts of types of collaborative agreements between firms; in other words, not only mergers or acquisitions are the subject of its enforcement. Law 1340 established that SIC is the agency in charge of most of the merger control, but it left a few industries out of its control. In particular, the Superintendence of Finance is the review authority for transactions involving financial institutions subject to its control and surveillance, and the aeronautical agency kept its authority to decide on code-sharing agreements between airlines. Business groups are also exempt of control when the transaction involves two firms already controlled by the same principal.

Hence, the general rule is that merger control is to be carried out by SIC. International transactions are also covered by SIC’s powers as long as the transaction has effects in the Colombian markets and the reporting requirements and thresholds are met. A transaction has to be reported when the firms involved compete in the same economic activity or are part of the same economic chain, and meet either of the following two thresholds:

• The firms had a joint or individual operational income greater than 150,000 times the Colombian minimum monthly wage (about US$44 million) during the previous fiscal year; or
• The firms had, jointly or individually, assets valued at more than 150,000 times the Colombian minimum monthly wage (about US$44 million) during the previous fiscal year.

When the thresholds are met, all the parties involved in the transaction are responsible for requesting SIC’s review and providing the relevant information. However, the Colombian regime has created two types of filings. One is called a ‘notification’ and the second is the request of the transactions’ review, which is comparable to its approval.

Notifications are less burdensome for the parties but are only available for transactions when the parties, while meeting the filing thresholds, have a market share for the relevant market lower than 20 per cent. If that is the case, then the parties involved in the transaction need only file a notice of the upcoming transaction with SIC and once they do so, the transaction can be closed without any further delays. A notification filing should include some basic information about the transaction and the parties as well as the documentation supporting the parties’ market definition and their market-share contention.

Full reviews are required when the firms involved in the transaction meet the thresholds and have a combined market share, for the relevant market affected by the transaction, of more than 20 per cent. A full review requires the filing of a letter requesting the review alongside some basic information. Once the request is received, SIC orders the publication of a merger notice in a national newspaper.

Within 30 days of receiving the information about the transaction, SIC has to determine whether the transaction poses a significant threat to competition. If the conclusion is that the there are no significant threats, SIC can clear the transaction without additional steps. On the other hand, if SIC’s study leads it to conclude that the transaction could be a threat to competition, a full review is carried out and the parties are required to file the information required for the more complex analysis.

SIC has the authority to completely or partially clear a transaction, or to block it. Once it has received all the information required from the parties, SIC has three months to render a decision. If it fails to do so, the transaction is deemed authorised and the parties can close without any other formality being needed.

Colombian law recognises that transactions capable of generating important efficiencies can be approved by SIC even when the review of the transaction may tend to support a decision to object or condition the transaction.

The so called ‘efficiency exception’ can be argued by the parties - and upheld by SIC - when there is sufficient evidence to support a claim that the transaction will generate important efficiencies and such efficiencies could not be achieved by any other means. The law also requires that any claimed efficiency can be proved and be susceptible of being transferred to the consumers. SIC also has to establish a mechanism to ensure that the efficiencies claimed by the transaction did come true and were in fact passed to the consumers (an ex-post review mechanism).

It should be noted, however, that until now nobody has been successful in getting a transaction cleared on the basis of the efficiencies it creates and that any attempt to do so will need to meet a higher hurdle of evidence to convince SIC of the transaction’s efficiencies.Conditionally cleared transactions can also be subjected to an ex-post review by SIC to ensure that competition has not been affected by the transaction and it remains unclear what consequences an ex-post finding of anti-competitive effects will carry. In a subsequent chapter we will discuss the penalties to which a firm can be exposed by failing to report a transaction to SIC, or by closing before a decision has been rendered or the time to do so has lapsed.

To protect their rights, the parties can request that the publication of notice of the transaction be waived based on public order grounds. Also, access by third parties to documents filed by the parties, held as confidential by law, can be limited by filing a request before SIC to treat the information as confidential. In both cases, SIC has the final say and can challenge the parties’ contentions.

Anti-competitive agreements

Colombian laws prohibit entering into anti-competitive agreements. Decree 2,153 of 1992 defines anti-competitive agreements as any agreement entered into with any of the following objectives or effects:

• price fixing;
• the establishment of discriminatory sales or commercialisation conditions;
• the division of markets between producers or suppliers;
• the assignation of quotas between producers or suppliers;
• the assignation, limitation or division of the raw materials or inputs required for production;
• the limitation of technical developments;
• the tying of products to the assumption of other obligations, limiting production in order to affect the product’s production levels;
• colluding in tender offers or agreeing to distribute the allocation of contracts, tender offers or to offer the same terms in a bidding; or
• the obstruction or blockade of access to a market or a distribution channel.

Anti-competitive agreements are investigated and punished by SIC and, as stated above, the sanction can be imposed if the agreement had an anti-competitive objective or effect. Hence, even agreements that have been implemented but rendered no effects can give rise to antitrust liabilities if the intent of the parties when entering into it fits any of the anti-competitive objectives listed above.

Firms involved in anti-competitive agreements can apply for SIC’s leniency programme and reduce the fines and penalties they may be exposed to. The leniency programme allows for the reduction or exoneration of any penalties for parties who report the existence of the agreement or provide evidence of it.

Leniency was established by Law 1,340 of 2009, and Decree 2,896 of 2010 further established the rules that are applicable to the programme. Firms seeking leniency cannot be the leaders or instigators of the anti-competitive agreement and have to offer effective collaboration by:

providing information and useful evidence;

facilitating the access to witnesses to the agreement;

answering, in a timely fashion, any requirements raised by SIC for further information needed to identify or clarify the anti-competitive offence; and

safeguarding information useful to the authority as evidence of the anti-competitive agreement and abstaining from destroying, altering or hiding it.

Once an eligible applicant requests leniency, it has to cease any participation in the anti-competitive agreement or it will lose the benefits of cooperating with SIC. The recently enacted Anti-corruption Statute of Colombia has awarded a new benefit to the leniency programme in the context of the criminal penalty to be imposed to individuals found guilty of the new crime which sanctions bid-rigging in public procurement contract selection processes. We will discuss this benefit in the section entitled ‘Penalties for violating the antitrust laws’, below.

Unilateral anti-competitive conducts

A number of unilateral conducts are considered anti-competitive and can be punishable as offences to the antitrust laws. In some instances the conduct may be prohibited by law without any further qualification, and in other instances the law prosecutes the abuse of dominant position by a firm.

The unilateral conducts characterised as anti-competitive, without requiring that the firm engaging in them has a dominant position in the market, are the following:

• violating the advertisement rules set forth by the Consumers Protection Statute;
• pressuring another company into raising its prices or desisting from lowering them; and
• refusing to deal with another company as a retaliation for its price policy.

Anti-competitive conducts that are considered abuse of dominant position require that the firm engaging in them be characterised as having market power. ‘Dominant position’ has been defined by Decree 2,153 of 1992 as the possibility one firm has to either directly or indirectly determine market conditions. Conducts construed as abuse of dominant position are set forth by article 50 of Decree 2,153 of 1992 and can be summarised as follows:

• predatory pricing;
• discriminatory dealings that would leave a supplier or a consumer in a disadvantaged position when compared to another supplier or consumer;
• conduct that forces the tying of a product to additional services or obligations;
• sales to a specific buyer including conditions different from those offered to other buyers and with the intent of reducing or eliminating competition;
• selling goods or offering services at different prices in a particular area of the Colombian territory without a justifiable associated transaction cost and with the intent or the effect of eliminating competition in that particular area of the territory; and
• obstructing or blocking the access to a market or distribution channel.

Unfair competition

Unfair or unloyal competition was established as a punishable offence by Law 256 of 1995 following the framework provided by the Paris Agreement to which Colombia is a party. Unfair Competition has been defined as: conduct affecting the markets and considered against mercantile customs, mercantile good faith, the usual practices of an industry and those aimed at affecting the consumers’ choices or the markets.The following are specific conduct which Colombian law considers instances of unfair competition:

• dishonest diversion of clients;
• tempering with the internal organisation of another firm;
• creating confusion about another firm’s activities or commercial offerings;
• deceiving the public about another firm’s activities or commercial offerings;
• discrediting competitors based on untruthful or incorrect assertions;
• copying a competitor’s business features and undertakings when doing so will cause confusion to consumers;
• taking advantage of a competitor’s goodwill;
• appropriating a competitor’s commercial, industrial or professional goodwill;
• violating a competitor’s trade secrets, whether by breaching a confidentiality agreement or through espionage;
• inducing workers, suppliers or clients to breach the contracts they entered into with a competitor; and
• materialising a competitive advantage achieved through the infraction of a legal provision.

Penalties for violating the antitrust laws

Law 1,340 of 2009 opted to standardise the penalties to be imposed for the violation of any of the antitrust laws. It should be noted that, under the Colombian regime, both companies and individuals can be penalised for their role in any violation of the antitrust laws (including the failure to inform SIC of a merger, when required by law, or closing a merger before SIC has issued a decision).

For companies, the fines can be as high as 100,000 times the minimum monthly wage (in 2011 about US$29.5 million) or up to 150 per cent of the profits achieved through the violation of the duty to report. For individuals, the fines can go as high as 2,000 times the minimum monthly wage (in 2011 about US$590,000). Law 1,340 established the following criteria to be used by SIC when imposing a fine on a company:

• the impact the conduct had over the market;
• the size of the affected market;
• the benefit from the conduct received by the perpetrator;
• the degree of participation of the party;
• the procedural conduct of the party;
• the market share of the party as well as the portion of its assets or sales or both involved in the conduct; and
• the assets of the perpetrator.

Additionally, the Law has established that having a leading role in the conduct, having persisted in the transgression of the law or having a record of violations of the antitrust laws are to be considered aggravating facts to be taken into account when establishing the amount of the fine.

For individuals, the law has included the following criteria to be used by SIC when determining a fine:

• the persistence in the conduct;
• the impact of the conduct in the market;
• the reiteration of the party in the conduct;
• the conduct of the party in the course of the investigation; and
• the degree of implication of the person.

Fines against individuals levied by SIC cannot be paid, insured or repaid by the firm where the person worked or its parent company.As can be seen, the general nature of the fining guidelines leaves considerable leeway to SIC when deciding the appropriate size of the penalty to be imposed. Recent decisions have carried penalties for both firms and individuals well below the maximum allowed by law, but are still considered substantial under Colombian parameters.

The law gives SIC five years as of the occurrence of the violating conduct or the last violating episode (if the conduct was carried over a period of time) to impose the fine. After the five-year period has elapsed, SIC is time-barred from imposing a fine.

Interestingly, the very recently enacted Anticorruption Statute of Colombia included a provision criminalising bid rigging in the context of public procurement. Article 27 of the Anticorruption Statute penalises with six to 12 years of prison and a fine of between 200 to 1000 times the minimum monthly wage (about US$550,00) any person who, in the course of a public procurement selection process, reaches an agreement to unlawfully alter the process.

The criminalisation of anti-competitive agreements that alter public procurement is a first in Colombia and the recently enacted provision includes a new benefit for SIC’s leniency programme. If an individual collaborates with SIC and is awarded leniency, his jail time will be reduced by a third and any criminal fine will be reduced by 40 per cent. It should be noted that criminal prosecution of the new bid-rigging crime is not carried out by SIC, but by the national prosecution office known as Fiscalía General de la Nación. However, SIC may concurrently open an investigation and sanction the parties if the existence of the anti-competitive agreement is proven, as SIC’s investigation has an administrative and not a criminal penalising nature.

Also, a number of injunctions are available for third parties seeking redress for anti-competitive conducts or unfair competition grievances suffered at the hand of competitors; but the injunctions have been rarely granted by SIC .

Judicial review

As explained above, SIC carries out proceedings of an administrative nature and its decisions can be subjected to review by administrative courts. However, Colombian law has certain procedural requirements before a decision from SIC can be contested in the courts by an unhappy party.

For a party to be able to file a complaint in court, it must appeal the decision before SIC itself. Only once SIC has issued its final ruling (an appellate decision) can the party request a court to review it. Administrative courts are not specialised in antitrust law and have tended to defer to SIC’s expertise on the issue.

A decision from an administrative court can also be appealed before an appellate tribunal and, in some limited cases, it is possible to request a review from the Council of State, the highest administrative court of Colombia. As noted above, the newly created bid-rigging crime is prosecuted by the Fiscalía General before a criminal court following the procedure set forth by the Code of Criminal Procedure, and any decision can be appealed.