Nicaragua: Competition Authority
This is an Insight article, written by a selected partner as part of GCR's co-published content. Read more on Insight
During the eight years of existence of Procompetencia we have been established as a public law institution in Nicaragua with a very modest budget, the smallest budget of the Central America agencies; however, we have been able to create a team of officials with a high level of competence and a deep dedication to public service. The training of our colleagues has been possible thanks to the various mechanisms of technical support and exchange of experiences between the competition authorities in the Americas, plus a generous contribution from the competition authority of Spain. For the purposes of our work, in this article I want to highlight two aspects that I think are outstanding.
First, since the founding of Procompetencia in 2009, we have authorised 15 economic concentrations, which have related to various markets, including poultry, fuel, cardboard packaging, plastic packaging, dairy markets, distribution markets, hotels, breweries, among others. In Nicaragua the thresholds for mandatory notification in mergers are 25 per cent market share or approximately US$115 million in combined gross income. The size of the economy in Nicaragua does not give space to implement structural remedies, and parallel to the competition law it requires the transfer to consumers of a part of the efficiencies resulting from the merger.
On this point, we have found the difficulty of accurately calculating the amount of these efficiencies and it has not been easy to identify exactly who are the consumers of this market that should receive the benefit of it. We have chosen to apply as a remedy the transfer of resources and capabilities to the markets where the merger has an impact and distribute them among the public sector, universities and SMEs.
An emblematic programme that we have developed has been the training in technical terms for SMEs in the poultry market, shrimping market, dental health programmes and personal hygiene programmes that have been taught in public schools. There have also been transfers of resources for the purchase of laboratory equipment for food in the public sector. In addition, we have established credit programmes in the distribution market for local stores (retail sector). We have also included three educational campaigns with social relevance, a campaign to encourage breastfeeding, another aimed at increasing the consumption of milk, and finally an educational campaign for the responsible consumption of liquor in order to stop it being a cause of violence against women.
These are quite unorthodox remedies, but were made with the aim of transferring to society as a whole some of the benefits resulting from mergers.
A unique aspect of the Competition Act is that Nicaragua has the power to investigate unfair business practices, and investigating allegations of unfair competition has been one of the most important activities for Procompetencia. More than half of the processes we have dealt with refer to unfair competition, which means a vote of confidence of economic agents for Procompetencia as a tribunal that resolves disputes between operators fairly and promptly, and, as we know, the confidence in the courts is the foundation of building the rule of law.
The application of competition policy has a political dimension, since the state must allocate the scarce resources and most of the time the benefits are transferred to those who are generally organised. When it comes to economic policies, state-transferred resources under the name of investment incentives, trade or industry, these stimuli are usually in the form of tariff protection, subsidies and downloads. The beneficiaries of such aid in any form are generally those organised sectors of society, such as interest groups who have more capacity for political lobbying, to build social realities, to justify such aid, and that are more persuasive on different levels of society.
At the other end of the spectrum are the consumers, who are generally not united, who lack information and have no means with which to assert their views. Consumers have a limited ability to influence governments, to disseminate their own information and to create currents of opinion within society.
The generation of competition policies are a result of the balance of power between interest groups seeking protection and public assistance from the state and the interests of consumers; in my assessment therein lies the political dimension of competition policy. This dimension is usually ignored when the applicability of the laws of competition or effectiveness of competition policies is analysed. Generally it is dependent upon the effectiveness of the application of the Competition Act, the efficiency of policies, the institutional structure of the agencies, the type of law that is in place or the model of economic analysis that is used. Without discounting the relevance of those factors, it is essential to consider the political dimension of economic competition as well. Speaking of market power is an understatement - actually it is political power and therefore the ability to prevail in order to consider their own interests.
Most economic agents have repeatedly demonstrated their determination to evade compliance with the Competition Act and to take advantage of all the benefits available in the state.