Colombia: Superintendence of Industry and Commerce
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The Superintendence of Industry and Commerce (SIC) is considered nowadays as a leading authority in Latin America in terms of competition protection. One of the principal reasons for this is that in recent years its commitment in the fight against anticompetitive behaviours has become increasingly evident thanks to the relevant cases it has investigated and decided in major economic sectors.
In this regard it should be noted that during the last year the SIC decided cases that involved important markets such as toilet paper and sugar; and opened investigations for alleged anticompetitive practices in sensitive sectors, such as baby nappies, notebooks and private security services. It is worth mentioning that most of these cases have relied on the SIC’s leniency programme, which was introduced in our competition regime in 2009 (Law 1340), began to be implemented in practice in 2014 and showed special results in 2015. The latter represents one of the reasons why this authority’s projections are focused on strengthening and disseminating such tool, in order to let Colombian economic agents become increasingly aware of its benefits and advantages.
The following sections will describe the main cases the SIC has sanctioned recently, the most important investigations that are being conducted nowadays and the principal goals this authority seeks to achieve in the near future. All the contents have a special connection with the leniency programme and the deterrent messages the SIC is trying to send to Colombian citizens by exemplary sanctions, in order to strengthen its preventive functions on competition protection.
Recent decisions on important economic sectors
Baby nappies (price-fixing cartel)
On 28 June 2016, by Resolution No. 43218, the Superintendent of Industry and Commerce imposed a total fine of roughly 209 billion pesos on Tecnoquímicas, Familia, Kimberly (nappy producers) and 16 individuals (high-level employees), for participting in more than a decade (2001–2012) of agreements to fix the prices of baby nappies in Colombia.
The case began in November 2013, when the Deputy Superintendence for the Protection of Competition conducted several dawn raids after receiving information regarding the possible commission of anticompetitive conducts in the market of production, distribution and marketing of disposable baby nappies in Colombia. The collected evidence showed the possible existence of a cartel aimed at increasing baby nappies’ prices artificially and manipulating other conditions of such market.
Subsequently, several companies and their respective directors and employees came to the SIC in order to recognise their participation in the price-fixing cartel and provide evidence to prove its existence and operation. This collaboration led to the subscription of two cooperation agreements under the leniency programme.
On 4 August 2014, by Resolution No. 47965, the Deputy Superintendent issued a statement of objections against Tecnosur – Tecnoquímicas, Familia, Kimberly and Drypers for alleged cartelisation in the production, marketing and distribution market of disposable baby nappies. In addition, he laid charges against 44 individuals (employees of such companies) for collaborating, facilitating, authorising, executing or tolerating anticompetitive conduct. On 16 May 2016, he submitted the corresponding reasons report to the Superintendent with the results of the investigation, confirming the existence of the price-fixing cartel and recommending the imposition of fines on the infringers.
Finally, by Resolution No. 43218 of 28 June 2016, three out of five companies and 16 out of 44 individuals were sanctioned, since their participation in the price-fixing cartel was proved. In the decision, the Superintendent also ordered the closure of the investigation in favour of Tecnosur, since it was found that this company was only a nappy manufacturer who did not participate in the commercialisation and marketing of such products. Besides, he closed Drypers’ investigation because, although it was proved that this company participated in the cartel, its participation ended in 2006, which means that the sanctioning power of the SIC already expired.
Thanks to the leniency programme, Familia, in its condition of second applicant, received a reduction of 50 per cent of the fine imposed, and Kimberly, in its condition of first applicant, received total exoneration (100 per cent) of the fine imposed.
This is the first case in the history of the SIC in which the highest fine provided in competition law was imposed on the sanctioned companies. Another remarkable characteristic of this case is that this was the first time in the history of Colombia that the competition authority signed leniency agreements with companies that decided to reveal the existence of an anticompetitive conduct.
After the decision is notified to the sanctioned parties, they may file reconsideration petitions before the Superintendent of Industry and Commerce.
Toilet paper (price-fixing cartel)
By Resolution No. 31739 of 26 May 2016, the SIC imposed fines on four companies (Kimberly, Familia, Cartones y Papeles de Risaralda and Papeles Nacionales) and 21 individuals (senior managers, including former employees) for incurring, during more than a decade (2000–2013), in concerted, continued and coordinated conducts to artificially set the price of ‘soft papers’ in Colombia. This market is composed of four products: toilet paper (the most representative one), napkins, kitchen towels and tissues for hands and face. The SIC sanctioned the individuals for collaborating, facilitating, authorising, executing or tolerating the conducts that violated free economic competition. The affected parties challenged the sanction decision, and the Superintendent of Industry and Commerce will resolve the corresponding reconsideration petition in the next months.
The investigation began in late 2013, after the SIC conducted dawn raids at the premises of several companies involved in the referred economic sector. Thanks to that, Kimberly, Familia and Cartones y Papeles de Risaralda applied to the leniency programme and confessed their participation in the cartel, recognised their responsibility, and provided evidence of the existence and operation of the cartel. The cartel had its origins with the participation of Kimberly and Familia in 2000, who were not only the precursors of the cartel, but also the most active and leading members of the anticompetitive agreement. Papeles Nacionales joined the cartel in 2001 and Cartones y Papeles de Risaralda did so in 2003.
One of the most remarkable characteristic of this cartel is that it operated using a secret and covered structure, in which the participating companies identified themselves with nicknames or pseudonyms, and used fake email accounts to plan and implement the price fixing agreement. Prices were set directly and indirectly.
The fines that were imposed by the SIC represent a lump sum of, roughly, 185 billion pesos. Such amount does not exceed the 15 per cent of the annual operational income of the sanctioned companies, but still represents an exemplary sanction for the Colombian economic agents.
Another peculiarity of this case is related to the benefits that were granted under the leniency programme. For collaborating effectively with the investigation and fulfilling the commitments made under this programme, the SIC granted Kimberly, in its condition of first applicant, the exoneration of 100 per cent of the fine imposed. Also, it gave Cartones y Papeles de Risaralda, in its condition of third applicant, a reduction of 30 per cent of the fine imposed.
However, it was determined that FAMILIA, who had the condition of second applicant, breached its obligations under the leniency programme and, consequently, was excluded from the benefits that were provisionally agreed – which consisted of an eventual reduction of not less than 50 per cent of the fine to be imposed. The exclusion was made because the SIC confirmed that the company withheld information, lied about relevant aspects of the investigation and did not provide some evidence that was in its possession. Notwithstanding the foregoing, the Superintendent, when defining the amount of the fine, took into account the confession of the anticompetitive behaviour the company made and the public excuses it offered to Colombian consumers, and because of that made a slight reduction to the fine imposed.
Sugar (obstruction cartel)
The SIC, by Resolution No. 103652 of 30 December 2015, confirmed the fines imposed on ASOCAÑA, CIAMSA, DICSA (sugar trade associations), 12 sugar mills and 12 senior executives of the sector, for participating in cartel practices aimed at obstructing and restricting sugar imports to Colombia from Central and South American countries such as Bolivia, Guatemala, El Salvador and Costa Rica.
In the investigation, the SIC found that the said economic agents acted in coordination as a block, eliminating the competition that should exist in the sugar sector. Under their coordinated behaviour, they developed multiple consensus through common organisms (sugar trade associations), which exceeded their rights of association and free enterprise, and allowed the sugar mills to create opportunities to design, discuss and implement strategies related to their competitive performance. In addition, the SIC concluded that the stabilisation fund of sugar prices (FEPA) – a mechanism for state intervention in the economy – was denatured by decisions adopted by its steering committee, which turned the FEPA into an ideal instrument to distribute sugar quotas of production or supply in the Colombian market.
On 7 October 2015, by Resolution No. 80847, the Superintendent imposed a total fine of approximately 324 billion pesos to CIAMSA, DICSA, ASOCAÑA, 12 sugar mills and 14 individuals. The fines were ratified by Resolution No. 103652 of 30 December 2015, with a slight reduction (two individuals were exonerated, four individuals received reductions to their fines, and the amount of ASOCAÑA’s fine was also reduced after reviewing its financial statements, which were provided only when the sanction decision was challenged). The total amount imposed was 260 billion pesos.
The amount represents an exemplary sanction for the Colombian economic agents – it is the highest total fine ever imposed – which helps the SIC to convey a message to the public on how useful and convenient it could be to receive benefits under the leniency programme.
Relevant cases under investigation
Scholar notebooks (price-fixing cartel)
After receiving information about the possible commission of anticompetitive conduct in the market of production, distribution and marketing of scholar notebooks in Colombia, the Deputy Superintendence, in July 2014, conducted dawn raids at the premises of several companies of this economic sector.
The collected evidence revealed the existence of an alleged price-fixing cartel that apparently took place between 2001 and 2014, and involved three notebooks producers. The evidentiary material also showed that such companies held more than 14 meetings in hotels, clubs, restaurants and offices in Colombia and Mexico, where they agreed the terms of the implementation and operation of the alleged cartel.
On 27 February 2015, by Resolution No. 7897, the Deputy Superintendent issued a statement of objections against the said companies and 27 individuals (senior executives or former employees) who apparently collaborated, facilitated, authorised, executed or tolerated the alleged cartel. Two of the three investigated companies applied to the leniency programme, confessed their involvement in the alleged cartel and submitted evidence to prove its existence and operation.
On 8 April 2016, the Deputy Superintendent submitted its reasoned report to the Superintendent of Industry and Commerce. In this document, he recommended the Superintendent to impose fines on the investigated companies (exonerating the beneficiaries of the leniency programme), and on 24 out of 27 people who were involved in the investigation.
The Superintendent of Industry and Commerce will issue the final decision of this case in the next months.
Private security services (bid-rigging cartel)
In 2011, the Colombian Institute for Family Welfare (ICBF) informed the SIC the possible occurrence of anticompetitive practices in the framework of the Public Tender LP–001 2011. The ICBF reported that, in the course of such tender, some companies presented themselves as individual competitors when, in fact, they acted in coordination to allow one of them win the bidding process.
After receiving this complaint, the Deputy Superintendence analysed the behaviour of the said companies in different public procurement processes, and found links of such legal entities with other companies. Because of that, the Deputy Superintendence, between April 2012 and February 2013, conducted dawn raids at the premises of eight private security firms, and found documents and emails with lists and information of public procurement processes conducted by different public entities, which showed potential anticompetitive strategies aimed at the effective awarding of the corresponding contracts.
Subsequently, in December 2014, a former employee of one of the investigated companies applied to the leniency programme, but after a while, retracted the confessions given under this programme. Finally, the Deputy Superintendent issued a statement of objections by Resolution No. 2065 of 28 January 2015, against eight private security services companies.
The alleged anticompetitive cartel apparently sought to achieve the award of at least 252 public contracts, whose value was superior to 320 billion pesos. The alleged anticompetitive behaviour apparently led to the submission of rigged bids on at least 100 tenders, 25 of which were won with a value of approximately 63 billion pesos.
It should be noted that, considering that bid rigging is the only competition behaviour that has criminal consequences in Colombia, the Attorney General’s Office is also conducting an investigation in this regard.
At this time, the investigation is in its evidence-gathering phase.
Normative advances and conclusions
The most recent competition cases the SIC has decided and investigated show the important link that exists between effective detection of anticompetitive behaviours, exemplary fines and leniency programmes.
The SIC has found how effective leniency programmes are in detecting anticompetitive cartels in relevant economic sectors, and because of that, the authority seeks to promote and strengthen this tool in the future, both from its implementation perspective and from its normative basis.
Regarding the implementation of the programme, it should be noted that the SIC has tried to bring this tool closer to people, to let them understand its benefits from the perspective of the economic agents (fine reductions) and from the point of view of the competition authority, more effective actions against anticompetitive behaviour. Along with the current promotion of the programme, the SIC has imposed exemplary fines on infringers and, at the same time, has granted significant reductions to leniency applicants, which intensifies deterrent messages in this regard.
With respect to the normative basis of the leniency programme, it is worth noting that, considering its good results, the National Government issued Decree 15523 of 16 July 2015, which modernised and simplified this tool. The new decree is based on the recommendations of a committee of experts composed of lawyers and academics in competition law and SIC’s senior employees, who also took into account recommendations of the Organisation for Economic Co–operation and Development (OECD). Some of the main virtues of the decree are the following:
(i) maintains total exemption benefits for the first applicant but reduces the benefits of the second and subsequent applicants (to promote prompt aplications);
(ii) includes clear rules about the beginning of the leniency process and gives legal certainty to applicants regarding markers;
(iii) applicants who have determined the existence of the cartel and the permanence of its members under coercion or serious threat (ringleader), cannot receive benefits; and
(iv) additional benefits are granted to applicants who, being the second in the marker position, denounces its participation in another cartel (amnesty plus).
In addition to the above, the government presented a bill before the Congress of the Republic – Colombian parliament – in order to renew the entire competition protection regime, including the leniency programme. The legislative project was recently withdrawn in order to be improved and presented once again in the near future (comments from the academy and the business sector will be taken into account).
Among other goals, the legislative amendment seeks to encourage the denouncement of anticompetitive practices and provide legal security and confidentiality to all people who come to the SIC to confess their participation in anticompetitive illegal behaviour. In this sense, it is proposed to declare confidential by law applicants’ identity and the evidence given under the leniency programme, although investigated parties must have access to all the evidence in order to exercise their right of defence. Another important proposal is that, if a facilitator (who can be, for example, an employee of the company involved) confesses a restrictive practice different from a cartel, he or she would also receive benefits for collaborating (which means that benefits would not be limited to anticompetitive agreements).
As a conclusion, it can be said that the SIC is trying to give and spread three key messages: the leniency programme is working and is allowing the SIC detect new anticompetitive practices in all Colombian markets; the SIC is imposing exemplary fines on competition infringers; and the SIC, at the same time, is providing great benefits to leniency applicants who confess and effectively collaborate with the competition authority. Therefore, the main projects of this entity for the next years are especially focused on the promotion and dissemination of the leniency programme and on the strengthening of its preventive functions as competition authority, in order enhance the surveillance and control over national markets and guarantee the presence of competition conditions therein.