Honduras: Competition Agency

Progress in competition policy in Honduras

Competition policy in Honduras developed from the structural reforms initiated in the 1990s, whose objectives were to liberalise the economy, to deregulate the markets, to privatise the public undertakings and to open the economy to foreign markets. During this period, there were also measures taken for the transition from an economy with state intervention to one where the emphasis is on the private initiative.

In this context, in 2005, Honduras with other countries in the region, signed a free trade agreement with the United States of America, facilitating in this way the approval of the National Congress of the Republic of Decree Number 357-2005, Law for the Defence and Promotion of Competition (LDPC), that was strongly backed by the private sector.

With the approval of the LDPC came the creation of the Commission for the Defence and Promotion of Competition (CDPC) as an autonomous institution with juristic personality and its own patrimony, with functional independence, administratively, technically and financially in its internal regime and independence in carrying out its functions. Its mission is to promote, protect and guarantee free competition with the purpose of endeavouring to get an efficient functioning of the market and to benefit the
consumers.

To Honduras, the approval of the Competition Law represented an important step in this subject, whose success comes from the need to have an effective policy to give guidance to pursue and safeguard the conditions that encourages competition in the markets, as the more adequate way to reach the objectives of efficiency, which will be basically linked to the task of the best utilisation of productive resources to produce products and services in the most favourable terms of prices and quality; to reduce excessive concentrations in the markets and facilitate the opportunity such that the small businessman develops productive activities; to eliminate monopolistic practices that dislodge undertakings in the market; to promote the insertion of undertakings in the international markets; to back up the growth on innovative and efficient undertakings with the greatest potential, among others.

With this, the competition policy represented for Honduras a fundamental tool to increase economic growth and competitiveness, through making markets more efficient, with the existence of a direct relationship between competition policy and efficient markets that at the end will result in the wellbeing of consumers.

It is important to highlight some of the achievements of the CDPC, one of these being to have voluntarily submitted itself to a peer review, which the competition agencies of the world perform, in order to be evaluated with respect to policy execution and law enforcement. The peer review was performed in the Ninth Latin American Competition Forum, held in September 2011, in the city of Bogotá, Colombia. The evaluation generated interesting conclusions and recommendations that have been implemented along the way, for example, the amendment to the LDPC.

In February 2015, the National Congress approved Decree Number 4-2015 with the amendments to the Law for the Defence and Promotion of Competition, adding articles with respect to an administrative leniency programme and the strengthening of the patrimony of the CDPC, by means of imposing a verification valuation for economic concentrations and the income coming from fines, making the Commission and the law stronger.

In terms of promotion of competition, it is important to highlight the analysis of the pharmaceutical products market, specifically about the regulatory measures that distorted the process of free competition, where obstructions were raised to prevent the opening of new pharmacies if these were at a minimum distance of 50 lineal metres from each other.

The results obtained from such analysis concluded that the regulatory measure imposed by the Honduran Pharmacists Association (CQFH), about the location and distance between pharmacies distorted the process of free competition in the country because it was a barrier by itself that fostered the geographical monopolies with harmful effects to potential competitors and to the consumers. After the actions carried out by the CDPC, the CQFH acknowledges the harm to the market and proceeded to abolish the regulatory measure.

For this action, the CDPC participated in the 2015–2016 Competition Advocacy World Contest, organised by the World Bank and the International Competition Network (ICN), and won for the use of effective defence resources as it was able to deregulate a key market in professional services for Honduras, a task that has proven very difficult even for those competition agencies with a longer history.

Since its creation in December 2015, the CDPC has carried out 44 investigations, 15 ex officio and 29 complaints. Of the total of 44 investigations, 37 were rejected for their inappropriateness and seven ended with a resolution in which the economic agent was sanctioned after it was proven that it has carried out anticompetitive practices prohibited by the Competition Law of Honduras. Being the markets sanctioned: cement, sugar from cane, pharmaceutical, telcom and beer.

The pecuniary sanctions imposed, whose amounts go directly to the state of Honduras, added up to US$7.7 million by December 2015, benefiting with this the consumers by an amount estimated in US$44 million.

On the other hand, there have been 24 sectoral studies of the markets in Honduras, which are a tool that allows the CDPC to know more about the structure and functioning of the markets, and also the actual condition of competition inside these economic sectors in the country. From each sectoral study, the CDPC gears towards ordaining and making efficient processes for the markets through the generation of public policy recommendations, addressed to decision makers, with the aim to correct the distortions encountered.

Meanwhile in the area of mergers and acquisitions, up to December 2015, the CDPC has heeded a total of 77 requests in several markets, whose capital assets amount to more than US$11.915 billion. Among the more dynamic economic sectors in Honduras are: the communication sector, the financial sector, the industrial sector, and the commercial sector. On a lower scale is the health sector, the mining sector and the energy sector.

In 10 years, the CDPC has moved ahead by leaps and bounds, however, there is a lot still to be done, but it can be said that the CDPC has been the author of its own agenda and has responded to the context with the support of national and international strategic alliances, that have permitted substantial contributions about competition policy, with three principal aspects that have been emphasised: investigations for violation of the LDPC, control of economic concentrations and the work related to sectoral studies. It is also necessary to emphasise the work on promotion of competition that has been done by the Commission in order to generate scenarios of respect to the principles that promote a market economy.

With the aim of strengthening the CDPC, in 2016 it took the decision to expand and it is for this reason that the second most important city in the country, San Pedro Sula in the Department of Cortés, was chosen for the first regional office of the CDPC. This regional office will have all faculties to attend in a more expeditious way to the economic agents and consumers that may need to be advised in competition matters. The multiple taskforces at hand will allow the CDPC to carry out market analysis and investigations in situ in a more expeditious way.

In addition, the need to create the Competition Advocacy Department was identified, which will give strength to the actions that the CDPC undertakes and will promote competition. The main objective is to make the benefits of competition more widely known, and to foster a state of awareness and the issuance of procompetitive rules as an essential tool and as an organisational principle of a market economy.