Colombia: Superintendence of Industry and Commerce

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Colombia’s new leniency regime

On 16 July 2015, the Colombian government issued Decree 1523, amending the country’s leniency regime. The need for reform arose out of the Superintendency of Industry and Commerce (SIC) experience with recent leniency applications for alleged anti-competitive agreements in sensitive sectors such as nappies, toilet paper, notebooks and private security services, among others, all of which revealed the need for clearer rules in leniency proceedings. These legal amendments were also part of a broader legal reform initiative undertaken by the SIC as part of Colombia’s accession process to the Organisation of Economic Co-operation and Development.

The new text builds on the recommendations issued by an expert commission set up by the SIC, in which both experts from the private sector and the competition agency participated. The Decree modifies several procedural and substantive aspects in connection with leniency applications. First, the new Decree establishes clear and simple requirements for obtaining a marker. Second, it moderates the percentage of fine reductions available for subsequent applicants. Third, it narrows down the definition of ringleader or instigator of an anti-competitive agreement. Fourth, it provides for a system of amnesty plus to incentivise further applications. Fifth, the Decree establishes the possibility of leniency applications in conduct other than cartel, provided certain requirements are met.

Clear and simple rules for obtaining a marker and signing the agreement

According to Colombia’s current legal regime, leniency applicants may only obtain a marker after holding a meeting with the Deputy Superintendent for the Protection of Competition and signing a minute in which the applicant recognises the conduct, provides specific information about the alleged agreement and commits to submit evidence in a fixed period of time. Although the first leniency applications were submitted under this rule, they ran into practical problems. On the one hand, the system proved too rigid, as it required the presence of the Deputy Superintendent for Competition to mark the entrance, a public officer who is not always available for meetings. On the other hand, leniency applicants may prefer using a written submission either on paper or by electronic means to guarantee they are the first to come. This is particularly important for leniency applications that arise as a result of a dawn raid, and in which several parties may submit applications at the same time.

The new Decree provides that the leniency applicant may obtain a marker by three different means: a written application in paper, by e-mail or in person, with the public officer appointed to receive such applications. In this last case, the marker will be granted once the agency and the applicant sign the minutes of the meeting and formally file it in the Agency’s system. In all three cases, the applicant will have to recognise its participation in the agreement, submit succinct information about the existence of the agreement, the product involved, the parties involved and its general form of operation.

This new system will provide more legal certainty and broader possibilities for filing an application. Moreover, it will no longer require the presence of a specific public servant (the Deputy Superintendent) in order to obtain a marker. Finally, the new rules make clear that the first undertaking that complies with this rule and afterwards signs the leniency agreement will obtain full immunity.

The Decree also provides that once the marker has been obtained the agreement will be signed provided that – in addition to recognising the conduct – the applicant submits useful evidence or information about the alleged anti-competitive agreement (activities, degree of participation of each alleged cartelist, etc); complies with the instructions imparted by the Agency; and terminates its participation in the agreement as instructed by the SIC.

Reduction of the percentage available for subsequent applicants

In the current leniency system, the second applicant may obtain up to 70 per cent of fine reductions; the third applicant up to 50 per cent; and subsequent applicants up to 30 per cent, provided they submit relevant information and evidence that adds value to the one the Agency already counts with. As the second applicant could obtain an extremely generous reduction (70 per cent), this could act as a disincentive for leniency applications in the first place. For this reason, the new Decree reduces the percentage available for subsequent applicants and provides that the second applicant may obtain between 30 per cent and 50 per cent of fine reductions; and subsequent applicants may obtain up to 25 per cent. The reduction will depend on the real added value of the evidence provided by the subsequent applicant.

Narrowing down the definition of ringleader or instigator

By law, Colombia’s leniency regime is not available for the instigators of anti-competitive conduct. If a company signs a leniency application with the Agency and it is later demonstrated that the applicant was the ringleader, the benefits will be lost.

This provision raises practical problems that both reduce the use of the programme and make it difficult to administer for the following reasons: first, cartels may last for several years, even decades, and leadership within the cartel often changes, a reason there could be several promoters within the same cartel, thereby reducing incentives to come before the agency; second, it is often extremely difficult to identify a ringleader in a cartel, a reason companies may be afraid of coming before the agency and losing their benefits later on in the process; third, sometimes new management comes to the company, discovers the existence of a cartel and it is willing to come before the agency but does not do so because its company is the ringleader. Moreover, by closing the door on the ringleader you are reducing the ‘uncertainty’ that cartelists have about other competitors going before the agency.

Considering this, the new Decree defines ringleader as the undertaking that through ‘coercion’ induces another company to be part of a cartel. In practice, this reduces to the maximum the possible existence of ringleaders and opens the leniency programme to companies that would not come before the SIC with the current leniency regime. This new provision reflects the current practical approach taken by the Agency with regards to leniency applications.

Amnesty Plus

The new Decree introduces a system of Amnesty Plus, according to which an applicant that does not have the first place in certain leniency process – and therefore may only receive up to 50 per cent reduction – may obtain an additional 15 per cent reduction in such process provided that it becomes the first applicant in connection with a different anti-competitive agreement. This provision is designed to promote further leniency applications.

Leniency for anti-competitive conduct different from cartels

The current regime only allows for leniency applications in the case of anti-competitive agreements. This rules out applications for other anti-competitive conduct. The new Decree provides that managers, directors, etc, may apply for leniency when they blow the whistle on the company for which they work or have worked for, not only in the case of cartels, which is currently permitted, but also in cases of conduct different from anti-competitive agreements. In Colombia’s legal regime, directors may be incentivised to apply for leniency as they also face pecuniary sanctions different from the ones the company receives. This will provide the Agency with an additional tool to obtain evidence of conduct different from a cartel from directors who have been directly involved in the illicit practice.

This and other rules included in the new Decree are designed to grant further legal certainty to potential leniency applicants and establish a more practical approach to the country’s leniency regime which, in the end, is the most effective tool to discover cartels and other uncompetitive conduct. This new Decree, as well as other legal reforms that are taking place in Colombia, are expected to increase effective antitrust enforcement in the country.

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