Panoramic view of Bogota, Colombia

On August 4 of 2015, the Ministry of Commerce, Industry and Tourism filed before the Colombian Congress a bill of law “whereby rules and regulations on the protection of competition are enacted and modified“. As of today, there has been no debate regarding the bill and the designation of panelists is still pending. However, below you may find the most important changes that would be introduced by the text of the filed bill.

1.   Competition Advocacy

  • The reform specifies that the Superintendence of Industry and Commerce (hereinafter “SIC“) may render previous concepts regarding any project of decree, resolution or any other administrative act, including those related to subsidies. Furthermore, authorities are obliged to inform the SIC regarding any administrative act project.
  • The reform establishes that provincial and municipal authorities may request the SIC its previous opinion about regulation projects that may affect free competition. Likewise, the SIC may issue opinions regarding regulation projects without request. In any case, such opinions are not binding.

2.   Business Mergers´ Control

  • The bill eliminates as a requirement for being obliged to inform a proposed transaction that the undertakings participate in the same economic activity or in the same chain of value.
  • The bill would allow the SIC to establish a minimum threshold of operating revenues or total assets for each participant as a requisite for being obliged to inform a proposed transaction.
  • The bill eliminates the provision according to which, in case the undertaking companies had conjunctly a market share below 20%, the operation would be deemed as cleared only by the notification of it.
  • Regarding the opinion that the Superintendence of Finance has to request from the SIC in mergers between entities surveyed by it, the bill makes said opinion binding to the Superintendence of Finance.
  • The bill adds a provision according to which the Civil Aeronautic Authority would have competence over the mergers between air carrier companies. In such cases, it must request the SIC its opinion, and said opinion would be binding.
  • With the norm in force, operations between companies that demonstrate a situation of control in the terms of article 28 of Law 222 of 1995 are exempted from informing the SIC about the proposed transaction. However, with the bill, integrations in which the companies are in a subordination schemes in the terms of articles 260 and 261 of the Code of Commerce would be the ones exempted.
  • With the bill, a fee payable to the SIC would be introduced. This fee would cover the costs of analyzing the proposed transactions and will be established by the SIC taking into account the operational revenues and total assets of the companies involved, and shall not exceed zero point one percent (0.1%) of the total assets of the parties involved.

3.    Administrative Procedure on Business Mergers

  • With the bill, the SIC shall certify the date on which the parties submitted all of the information regarding the merger.

4.    Benefits for collaborating with the authority

  • Currently, the benefits for participating in a leniency program may be granted to all the persons that participated in a conduct that violated the Competition Regime. With the proposed bill, the benefits may be given exclusively to those who participate in an agreement that is restrictive of competition.
  • The prohibition regarding the granting of this type of benefits to the instigator or promotor of the conduct is eliminated.
  • With the bill, the person that obtains the total exoneration due to its participation in the leniency program would be liable only in the proportion of its participation regarding damages to third parties derived from the anticompetitive conduct.
  • With the bill, the facilitator that denounces a conduct different from an anticompetitive agreement may receive benefits for its collaboration. Additionally, the Deputy may decide not to charge the informer when it is the first person informing about the anticompetitive conduct and given that it is an individual.

5.   Functions of the Superintendent of Industry and Commerce

  • With the proposed bill, the SIC would be able to order, as an injunction, the exclusion of one or more bidders from a public procurement process when there is evidence that those bidders are incurring in the conduct of collusion.
  • The proposed bill would allow, without prejudice of other provisions, the Deputy Superintendents and Directors, within the course of administrative investigations regarding consumer protection, technical regulations or legal metrology, and protection of personal data, to order the issuance of injunctive measures.
  • With the law in force, the maximum fine that may be imposed for violations of any of the provisions on protection of competition is 100.000 current legal minimum monthly wages (hereinafter “clmmw“)), or in case it is greater, 150% of the utility obtained from the conduct. With the proposed bill, for determining the maximum fine, the SIC shall apply the highest of the following criterion:
    1. At most, the 10% of the total turnover made in the preceding fiscal year.
    2. At most, the 10% of the net worth of the market agent in the preceding fiscal year.
    3. At most, 30% of the sales of the market agent related to the products and/or services affected by the anticompetitive conduct.
    4. A value set in clmmw, case in which the fine shall not surpass 100.000 clmmw.
    5. At most, the 30% of the value of the public contract in cases of anticompetitive conducts that affect a public procurement process.
    6. When possible to calculate the profits perceived by the undertaking from the anticompetitive conduct, the SIC may impose a fine equivalent to 300% of those profits if the value resulted is higher than the limits enshrined in provisions a, b and c.
    7. Any market agent that is sanctioned for violations of the protection and competition regime within the context of a public procurement process, shall not be able to participate as contractor of any State agency for a period between two (2) months and 5 years.
  • The criteria used for graduating the fine would be modified by the proposed bill. The new criteria for doing so would be:
      • The suitability of the conduct in affecting the market or its actual impact on the market
      • The nature of the goods and/or services affected by the conduct
      • The degree of participation on the conduct by the defendant
      • The period of time in which the conduct has been executed
      • The defendant´s market share
  • Additionally, with the intended bill, the aggravating circumstances shall be:
      • Being the instigator or leader of the unlawful conduct
      • Persisting in the violation once the investigation is opened
      • Recidivism, including preceding cases of violation to the protection of competition regime or failure to comply with acquired compromises with the Competition Authority or orders given by it.
      • The conduct of the defendant during the process in order to obstruct or delay the investigation, including actions and petitions that are evidently inadmissible.
  • The project clearly states that for each aggravating circumstance, a raise of a 10% shall be applied over the basic amount determined for the fine. In any event, the acceptance of charges, if it is not under a leniency program, shall be a mitigating circumstance in connection with the sanction to be imposed.
  • Additionally, regarding the facilitator, the bill states that the following criteria should be taken into account when graduating the fine:
      • The degree of participation by the facilitator in the conduct executed by the market agent;
      • Recidivism, including preceding cases of violation to the protection of competition regime or failure to comply with acquired compromises with the Competition Authority or orders given by it.
      • The net worth of the facilitator.
  • Finally, the aggravating circumstances would be:
      • The continuing in facilitating the violation, once the investigation is opened.
      • Recidivism, including preceding cases of violation to the protection of competition regime or failure to comply with acquired compromises with the Competition Authority or orders given by it.
      • The conduct of the facilitator during the process in order to obstruct or delay the investigation, including actions and petitions that are evidently inadmissible.
      • For each aggravating circumstance, an increase of 10% over the fine would apply. . In any event, the acceptance of charges, if it is not under a leniency program, shall be a mitigating circumstance in connection with the sanction to be imposed.
      • It is also expressly stated that facilitators would be sanctioned once the market participant is found liable for violations to the Colombian Competition Regime.

6.     Confidentiality of documents

  • It is stated that not only the intervening parties may request the confidentiality of the documents submitted by them, but also the third parties.
  • The investigated parties may have access to the reserved file when said documents are the basis to issue an statement of objections or imposing a sanction for violations of the provisions on protection of competition. Regarding merger control, the intervening parties may have access to said documents when they are used as a basis for objecting or conditioning the merger. In no case third parties may have access to the confidential documents.

7.   Third Parties Interventions

  • The process for acquiring recognition as a third party is changed in the bill. According to it, after the publication of the opening of an investigation on the web page of the SIC, anyone has fifteen business days to show a direct and individual interest in the investigation, and therefore be recognized as an interested third party. After this, the third party may supply and request evidence, within the following five days.

8.   Follow up contributions

  • With the bill, the contribution for follow-up activities carried by the competent authority shall be liquidated not with the current values of the assets, but with the total assets.

9.    Criminal Prosecution by the Superintendence of Industry and Commerce

  • With the reform,, the SIC would be competent to prosecute crimes related to the violation of competition protection laws referred to in article 410A of Law 599 of 2000. However this competence is notwithstanding the criminal competition that the Attorney General has in this matter.

10.  Jurisdictional functions by administrative authorities

  • The reform would also allow the SIC to carry jurisdictional functions in actions related to the recovery of damages, including the events on effectiveness of the warrantee. In this process, the authority may review and decide a request for summon third parties that may be liable, such as producers, providers or sellers.
  • The reform would also allow the SIC to carry jurisdictional functions in actions related to the recovery of damages in class and individual actions regarding violations to the provisions on protection of competition.
  • Finally, the reform would allow the SIC to review evidence not obtained in the process that the parties want the authority to consider.

11.   Procedure

  • The bill states specifically that, when an investigation is ordered, the person under investigation will be notified so that it request or file, within the following 20 business days, the evidence it seeks to establish.
  • With this reform, the Superintendence, the investigated parties and the recognized third parties shall be able to interrogate during party interrogations.
  • With the reform, three hearings would take place. On one hand, the Superintendent Delegate for Competition Protection will call to a hearing where the investigated parties and third parties will orally submit the arguments that they seek to assert regarding the investigation. Once this hearing is concluded, the Superintendent Delegate would submit to the Superintendent of Industry and Commerce a reasoned report as to whether there has been an infringement. On the other hand, the Superintendent of Industry and Commerce would summon the Advisory Council. When summoned, the Superintendent would also call the investigated parties and third parties so they can orally submit the arguments they seek to assert regarding the investigation. Finally, a new hearing shall be conducted before the Council, without the investigated parties or third parties, where the Deputy Superintendent or its advisors shall present the arguments of the reasoned report. The decision adopted by the Council is not mandatory but when the Superintendent disagrees with it, reasons supporting this shall be enshrined in its decision.

12.   Violation of competition laws referred to in article 410A of Law 599 of 2000

  • According to the text introduced by the bill, the agreement referred as a restrictive competition agreement in a public procurement procedure is the one that seeks to restrict, limit or eliminated competition.
  • The benefits obtained by the person that has obtained the total exemption of the fine imposed is changed from a reduction of a third part of the prison time, a reduction of the 40% of the fine and a inability of 5 years, to the right of being granted the opportunity principle by the General Attorney´s Office.

13.  Single review by the Council of State

The reform also gives the Council State the power to decide in one single phase and not being subject to review, the nullity actions and nullity and restoration of rights actions against administrative acts issued by the SIC deciding a merger operation review or an investigation for violations of any of the provisions on protection of competition.

14.  Unfair competition

  • Regarding deceptive acts, the reform would add as an unfair conduct one that has the purpose or effect of misleading the public about the activities, commercial services or owned commercial establishments.
  • Regarding imitation acts, the reform would eliminate as requisites that the imitation is exact and detailed for it to be considered unfair when generating confusion about the enterprise source or an undue advantage of someone else´s reputation.
  • Regarding the violation of norms, the reform adds that it would be considered unfair to participate in the market without the correspondent licenses, permissions, legal authorizations, concessions, etc. established by a legal provision that regulates the access to the respective market.
  • The reform would eliminate a provision by which it is considered unfair to include exclusivity clauses in supply agreements when said clauses have as object or effect restricting the access of third parties to the market, or monopolizing the distribution of products or services, except in the liquor industries when said industries are state owned. Instead of this provision, a provision regarding illegal advertising would be included, according to which it is considered unfair to use illegal advertising.

15.  Nullity actions in matters related to violations of Industrial Property Rights

  • The bill adds a provision that states that in the action for industrial property violation, the defendant can file as an exception in the process the nullity of the industrial property right that wants to be protected, which may be declared by the authority that is reviewing the violation action. The eventual nullity declaration regarding the industrial protection right would have effects only in the case.

16.  Rendering of tourism services without the National Registry of Tourism

  • The bill would also grant the SIC competence over investigations against tourism companies that do not comply with their obligations regarding the National Registry of Tourism.

17.   Reconsiderations

  • The bill states that the administrative decision that terminates an administrative proceeding carried by the SIC in matters related to the violation of consumer protection laws, non-compliance with legal metrology, protection of personal data an industrial property may only be appealed.
  • You should bear in mind that the text that was initially presented to the National Congress may vary as the different stages of the legislative process proceed. In this sense, this main changes are based on an assessment of the preliminary text. Furthermore, this changes would take place only when the Congress approves the bill and it becomes a law in force.