Panama: Authority of Consumer Protection and Competition Defence

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Panama’s Authority of Consumer Protection and Competition Defence (ACODECO) juggles multiple roles; the first is consumer protection; the second, defending free competition. The roles are complementary and seek a common goal, which is the consumer’s best interests.

In 2015, a new administration was set up, whose focus is directed at improvements of very specific issues: transparency, efficiency and commitment, which leads to turning these objectives into viable plans that will provide the market and consumers with the certainty that all players clearly understand the rules of the game, and in turn, those entities will act in accordance with such standards.

From the perspective of free competition, the current Panamanian law provides a definite scheme of practices restricting competition, based on specific situations in which economic agents are found breaking the law, either through a cartel or monopolistic practices. Furthermore, Panamanian law imposes a punitive scheme that implies that ACODECO administratively investigates and subsequently sues before the courts, which are competent to determine the existence of monopolistic practices. Once it leaves the judicial phase, the process returns to the ACODECO to be sanctioned.

One of the actions we are proposing for 2015/16 is to modify the administrative and judicial legal framework, which has led to a backlog of several court cases waiting for sentencing. In some situations these have exceeded seven years for the first-instance ruling, and so are still awaiting the second-instance ruling before the feasibility of an appeal or even additional actions before the Supreme Court can be assessed. In terms of our goal of efficiency, this situation leaves the market in a state of helplessness, since the current applicable remedies are not appropriate or effective and are creating greater incentives to break the law.

Our proposed legislative amendment opts for an exclusively administrative system, to investigate, decide, punish and impose corrective measures in markets that are under investigation. In our opinion, this reform could significantly reduce the response time to market and remedy practices that may be causing serious harm to consumers, since ACODECO investigations have a maximum average duration of one year.

Likewise, we propose a system that gives businesses under investigation a chance to offer commitments and guarantees during the investigation, which could greatly speed up the restoration of damages.

Another issue that this administration aims to improve is the use of the ‘leniency’ programme as a legal tool to combat cartels. Although enshrined in our legislation for more than seven years, this measure has not yet been taken up by businesses, which leads us to assume that either it has not been sufficiently publicised or, as Panama is a very small market, there are few incentives for using it given the proximity in which economic actors coexist and will have to continue coexisting. 

However, in 2015/16 we are firmly resolved to ensure that the leniency program is used, as a strict measure and according to best international practice. We are proposing on the one hand, a more flexible use of the mechanism and, on the other, to increase the amount of sanctions, which is currently very low for some sectors,  and which may also be influencing the low take-up of the leniency programme. It can be daunting for an operator to assume the risk of ‘betraying’ cartelists if at the end of the whole process the amount of the fine is not enough of a deterrent. For this reason, we propose increasing fines up to 10 per cent of annual sales attained by the infringer in the fiscal year prior to the imposition of the fine.

Additionally, along with the World Bank, we  administer technical assistance in the regulation of the ‘leniency’ article contained in our law, in order to develop a guide that, within its design and execution, gathers experience from best international practice, and will shape the approach and strategy for the communication of this guide.

Our goal this year is to devise a communications strategy and technical implementation guides to maximise our advocacy efforts and widely publicise the leniency programme, so that its success does not depend on ACODECO’s management, but on the degree of the programme’s acceptance between economic players, taking into consideration the complexity of our small market as explained above.

Another issue we are working on in parallel with the above is the creation of a forensics lab for our investigators to effectively and efficiently obtain and review copies of key information contained in computers and mobile equipment to determine whether a party has failed to comply with competition law.

From our experience of in-house investigations, gleaned from our research and following the recommendation to adopt best international practice, we concluded that it was necessary to keep up to speed with technological advances and equip ourselves with the tools to acquire electronic evidence in the relevant format, and likewise acquire computer forensics tools, a process that we have decided to initiate by ensuring the necessary funding and training to run the project is in place.

In the current and following year we wish to concentrate our efforts on two highly sensitive issues: developing a programme of collaboration with the Directorate General of Public Procurement to warn of the consequences of collusion and create alert mechanisms about possible collusive acts, and developing, along with the state social security administration, a programme to combat collusion, which will emulate the successful experiences of countries such as Mexico, where recent savings in purchasing pharmaceutical drugs have been really important in the detection and punishment of cartels. 

In terms of competition advocacy, we are encouraging the mechanism of ‘viability consultations’ through agreements with large state purchasers, so that public procurement tenders will boost competition.

The agreements aim to be reciprocally beneficial, not only because they create a way for ACODECO to issue an opinion on the substance of the public procurement tender, but also because other government agencies will be trained by our agency to serve as early detectors of possible collusion in public events. Afterwards, our agency will continue the investigations if necessary.

We will redouble our efforts to strengthen market research, which has been weakened somewhat by the lack of information from the economic players as this is not required by law. We proposed a legislative modification in this regard, so these studies can be a true reflection of the situation in different sectors which will serve as an important tool in the investigation of corrupt behaviour.

In short, we have very ambitious plans that involve radical reforms, ranging from how our investigations are to be conducted, to improving the effectiveness of market research, all of which is simply the reflection of a fully developed agency which has accumulated experience over several years and received valuable training and feedback from consultants. Now this enables us to think wisely about the best practices to be implemented in Panama and how to shorten the paths that we have already travelled.

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