Chile: National Economic Prosecutor's Office

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The past 12 months have been busy for the National Economic Prosecutor's Office (FNE). While enforcement continues to be the main focus of the agency's activity, an enormous amount of energy has been put into the implementation of the amendments to the competition law approved in August 2016. Three main areas have been at the centre of the implementation work: mergers, criminalisation of cartels and market studies.

Law reform

The legal reform, approved in August 2016 has had a substantial impact on our competition system and the way the FNE works. The agency was actively involved in the discussions in Congress, assisting to 42 sessions and presenting its views. The main amendments to the current system can be summarised as follows:

  • An obligatory notification system has been introduced for merger review when certain thresholds (which are set by the agency) are surpassed.
  • Increased fines have been established of up to 30 per cent of the annual sales or double the illegal gains obtained.
  • Criminal prosecution of hard-core cartels, including penalties of imprisonment of up to 10 years.
  • Prohibition of interlocking directorates and relevant executives of companies that are competitors.
  • An obligation for companies above certain income thresholds to inform the FNE of any minority interests that exceed 10 per cent of the property of competitors.
  • The reform grants new powers to the FNE to conduct market studies and request information to private undertakings for such effects.
  • Additional new powers, which include some tools that will help in the FNE's functions, such as the possibility to make legislative recommendations; the ability to fine market agents that do not appear before the FNE or do not provide the information required by the FNE, without prior justification; and imprisonment of those that provide false information.

Implementation work

The implementation of the legal reform has represented one of the main challenges faced by the FNE during this past year.

In the field of merger review, the agency has undergone intense work in preparation for the mandatory notification system, which made its debut on 1 June 2017. The work in this area followed two parallel but equally important tracks. One is related to the growth and strengthening of the merger division team. From being a professional team of only eight in 2014, the division has grown to 23, and jointly with this growth, there has been intense work in capacity building for the team with periodic internal seminars.

A second area of vital importance for the implementation of this new system has been the drafting and publishing of various guidelines and notification forms. Specifically, three new guidelines were published, after public consultations in which comments were received from various experts including local law firms, the Chilean Bar Association, the American Bar Association, the International Bar Association, and the Federal Trade Commission. These guidelines, named ‘Remedies Guidelines', ‘Competition Guidelines' and ‘Threshold Guidelines', cover relevant areas of the merger system and are vital public information on how the system will work, giving private entities certainty about how the agency will evaluate mergers. Alongside these guidelines, standardised forms for notifying mergers were also published and opened up for comments from the public. Also, during this time period, the thresholds that trigger the notification system were published in November 2016. These thresholds were published after they were reviewed by five economics professors and going through a public consultation. Finally, an intense agenda to explain this system has been carried out, including various seminars open to the general public in which the system and the guidelines have been explained in detail by lawyers and economists of the mergers division.

The criminal prosecution of cartels established in the legal reform also represents one of the major changes to our system of competition and new challenges for the agency. The reform establishes that an eventual criminal claim should be filed only once the Antitrust Court (TDLC) has issued an award against the defendants, by the National Economic Prosecutor (and not by the Criminal Prosecutor) and in cases that have gravely compromised the markets. For this, the agency has also carried out significant preparations. One of the most visible changes in this area has been the publication of a new version of the leniency guidelines, in Spanish and in English. A draft of the guidelines was also made available for public comment, and comments were received by various law firms and institutions, both national and international.

Following on also from another aspect of the reform, a new market studies division was created in the FNE to use the new powers given to the agency to conduct market studies, which includes the power to obtain private information from private parties in a mandatory manner. The team assembled is, for the time being, small but very well prepared academically, including one lawyer with a PhD in law from Oxford University and one engineer with a PhD from the University of Berkeley. A guideline for conducting market studies was also published and also went through the public consultation process. These guidelines follow very closely OECD recommendations on this area.

Cartel enforcement

Our leniency programme continues on a road to consolidation. The increased frequency with which enterprises comply with the leniency programme confirms that agents, legal counsel and enterprises recognise the quality of the work undertaken by the FNE.

During the past year, the leniency programme was only used once but in the very relevant market of public procurement of injectable prescription drugs. The FNE filed a complaint before the TDLC asking for fines totalling approximately US$17 million for Fresenius Kabi and Sanderson, with no fine requested for the third party in the cartel, Biosano, as it made a leniency application that was accepted. The investigation of this cartel was initiated ex officio in 2012 when the Comptroller General of the Republic and the Health Ministry made a complaint to the FNE regarding this market. This is a good case to highlight how the different powers given to the FNE to prosecute cartels were used to create a strong case. An investigation was started by the FNE in which sufficient evidence was gathered to request permission for the execution of intrusive measures (including dawn raids and the interception of communications) and where one of the cartel members applied for leniency.

Also, a standing case before the Supreme Court was decided in October 2016, where the Court partially confirmed the decision of the Competition Tribunal in the case known as the Asphalt cartel, where four companies were accused by the FNE of having a market sharing agreement in regards to contracts for the provision of asphalt-based products used in the construction, replacement and repairing of public and private roads. One of these companies applied for leniency and was thus exempted from paying a fine, and in total the other companies were punished with a fine equivalent to approximately US$780,000.


In antitrust enforcement, an agreement was reached in regards to one adversial proceeding initiated in 2016 against GD Searle, a company related to Pfizer Inc. The agreement was approved by the TDLC and in it Searle agreed to grant a free licence, non-exclusive, irrevocable and sub-licensable to any current or potential competitor within the territory of the Republic of Chile, for the development, commercialisation, distribution, use, offer for sale, sale or import for these purposes, of products that contain the active ingredient Celecoxib, as well as suspend promotional activities with medical professionals in connection with the pharmaceutical products - so-called ‘second brands' - of Celecoxib, such as Valdyne and Capsure, for a term of two years.

The agency also started an adversarial proceeding in September 2016 against Antofagasta Terminal Internacional (ATI), its shareholders, Punta Rieles Limitada and SAAM Puertos SA for infringing vertical restrictions imposed in decisions made by the previous competition commissions that preceded the TDLC. A confidential agreement was reached in this case by the parties, which was presented for the approval of the TDLC and is still pending.

Very interesting results have also been reached by closing investigations in which parties agreed to change their conduct, which saves resources in litigation both for the agency and private parties. One good example of this type of agreement is in regards to Salmag, a joint venture by the only two companies that can exploit lithium in Chile, Rockwood and SQM Salar, which had the purpose of selling a derivative of lithium. After the investigation, the parties agreed to end the joint venture and, as such, Rockwood acquired SQM Salar's participation in Salmag.


The current regulatory framework is only one month old at the time of writing. As has already been highlighted, the agency prepared with due time, strengthening its team, publishing guidelines and working in capacity building. We have the perception that the market understands and appreciates the effort we have made in this area and that we are well prepared to face the challenges ahead. It is worth mentioning that during this first month, three mergers have been notified.

Notwithstanding the above, for most of last year, the agency worked with the old regime, facing numerous challenges. One particular merger under the old regime is worth discussing, in part because it was the last one in regards to which the FNE gave its opinion and also in part because it introduced novel remedies that could be an indicator of how merger approvals could work in the future under the new regime.

The case involved the acquisition by Hormigones Bicentenario SA (BSA), a cement and concrete company (the fourth largest in the Chilean market), of the controlling interest of HolChile SA (part of the HolcimLafarge group) in Polpaico SA, the largest company in the cement and concrete market in Chile. After various rounds of negotiation, the agency agreed with the parties a series of structural and behavioural measures to approve the merger, which included the divestment of seven concrete plants and such operation has to be managed and monitored by a trustee. The agreement was submitted to the approval of the TDLC, and that decision is still pending.


As regards advocacy actions, the FNE has a new power to issue recommendations to the President to amend or abolish regulation that it considers has anticompetitive effects. The agency has already used this power on various occasions, all in relation to investigations that were closed without filing a complaint but where a competition problem was found.

The first case relates to an investigation opened in the mobile phones market in which telecommunications companies sell the phones at a discount (with a subsidy) to those that have contracts with them. Nevertheless, if a person wishes to change companies and take their phone with them, a fine has to be paid, which in some cases was not proportional to the subsidy given. No competition law infringement was found but the agency made a recommendation that the telecommunications services should be billed separately from the sale of equipment, and that there should not be a sanction for terminating a contract.

A second case relates to the market of lead battery recycling, which in Chile is a de facto monopoly by a company named Recimat. The problem with this market was found to be that a rule prohibits the export of batteries, where more companies are present. As such, the FNE concluded that this rule was protecting Recimat's monopoly and thus a recommendation was made to amend the current regulation to allow the export of batteries.

In a third case, an investigation started on the baby food market found that an old health rule, which established the nutritional content of the food, was creating a virtual monopoly for Nestlé. Most international producers of baby food have set formulas and usually do not adjust them unless the market is significant in size. The nutritional rule established in Chile was very outdated and thus most producers were not complying with it, except for Nestlé, which was the virtual monopolist in Chile with 95 per cent of the market, and was willing to change its international formula for this market. This created a problem in the local market, as prices were high in relation to comparable markets that had more competition. The FNE thus recommended that the referred to rule should be reviewed and changed to allow more competition in the market.

The FNE also started to use its power to carry out market studies. In May, the first study was launched on the annuity market (pensions). Initial research with public information available found distortions in the system, which merited the initiation of an in-depth study. This market is of particular importance because a significant number of retirees opt for annuities instead of withdrawals following a set government schedule, and minor changes in competition in this market can have an enormous impact.


To conclude, I want to highlight that we have worked intensely, and professionally, to adequately prepare for this new era in competition law enforcement, which has started with the reforms approved in August 2016. We have a very capable, engaged and united team, which I am certain will help the agency perform at the highest level.

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