Colombia has a new competition regime
On Friday, July 24, 2009, President Uribe signed Law 1340/09 which modifies the competition rules in Colombia. The Law will be effective as of its publication in the Official Gazzette, which occurred on that same date.
The Law appoints the Superintendence of Industry and Commerce (SIC) as the Competition Authority in Colombia. Thus, the SIC will be the administrative agency in charge of all procedures related to restrictive trade practices and unfair competition.
The faculties of the SIC include opening investigations for restrictive trade practices, rendering an opinion on concentrations that are to have effects in Colombia and to prosecute and fine infringers of competition laws.
The only exceptions to the exclusive competence of the SIC to issue opinions on concentrations are in the events of mergers between financial entities which are subject to supervision of the Financial Superintendence, and authorizations related to certain civil aeronautic operations between air carriers which will be subject to the approval of the Financial Superintendence and the Colombian civil aeronautics authority (Aerocivil), respectively.
The Law also modified the procedure for pre-merger control. The review period for the SIC regarding future transactions with effects in Colombia, reported after the publication of Law 1340/09, will be much longer than before. In practice, a decision from the SIC under pre-merger control procedures, may now take approximately six months in a regular review.
Implementing in Colombia a transaction that has not been previously authorized by the SIC, may trigger fines against the parties and their representatives and even a reversion order.
The Law also introduces a new feature for pre-merger control, as transactions between parties that have assets or turnover which value meets the legal thresholds, but which combined share of the relevant market is less than 20%, would be subject to an automatic approval upon its notification to the SIC.
Officers of the SIC have given a notice of caution in relation to the interpretation of this provision, in the definition of the relevant market and the calculation of the combined share of the parties involved in the transaction.
The Law grants the SIC authority to perform an ex-post review of such transactions and to impose fines on the parties involved if it considers that the transaction should not have closed (in connection with its effects in Colombia) based on the automatic authorization.
The SIC has suggested that it will be ready to review all notices of concentration made under the 20% rule, and that it will perform a stringent analysis of the applicability of automatic approval provision.
The leniency programs are another novelty that the Law introduces in the Colombian competition regime. However, the recognition of benefits is open to the discretion of the SIC, which may be a problem in implementing an effective cooperation mechanism.
Benefits range from total amnesty to partial exoneration of the fines that could be imposed; benefits will apply if the SIC considers that the information provided by the party was relevant, timely and effective in the investigation. The promoters or leaders of the cartel will not be able to receive any lenient treatment.
Fines for violation of competition rules were notably increased; the maximum amounts will still be adjusted on a yearly basis.
During 2009, the maximum which can be imposed against the parties can be as high as US$ 25.4 million (approximately under current exchange rates) or 150% of the value of the profit obtained by the infringer as a result of the violation, whichever is higher. Individuals responsible for the infringement can also be subject to fines of up to US$ 500,000 (approximately under current exchange rates).
The Law also establishes some guidelines for the participation of interested third parties in cartel investigations and in pre-merger approvals.
Finally, the Law increases the statute of limitations for legal actions related to violation of competition rules from three to five years.