07 Jan The SIC will charge a fee for merger control procedures
The recent tax reform, enacted by the President of the Republic of Colombia on 27 December, 2019, will have an important effect for companies that intend to inform transactions through merger control procedures as of this year. Article 152 of Law 2010 of 2019 establishes a “fee for merger control procedures” carried out by the Superintendency of Industry and Commerce (SIC). The taxpayer of this fee will be the one that “promotes/initiates a merger control procedure”.
In addition, the norm provides two criteria that the SIC must consider to fix the amount of this fee: 1) “the kind of proceeding that has to be carried out to reach a final decision” and 2) “the costs associated to the service provided” (free translation). Finally, the norm also provides a limit for the annual fee adjustment, which cannot exceed “the percentage of the consumer price index at the average income level variation, in accordance to what is set by the Statistics National Administrative Department “Departamento Adminsitrativo Nacional de Estadística”, DANE.
The drafting of the norm leaves some doubts on how the collection of this fee will operate in practice. Below we address the following three questions and we analyze the available information:
1. Will the fee only be applicable to pre-assessment requests or will it also include notifications? Considering that the law refers to “merger control”, the fee would only be applicable to pre-assessment requests and not to notifications. The aforementioned, given that according to article 9 of Law 1340 of 2009, when the market shares of the parties to the transaction are below 20%, “the transaction is deemed to be approved”. In other words, the “notification” of a transaction does not trigger a pre-assessment study or merger control per se, and thus, no fees should be charged.
- ï When should the fee be paid? The law does not establish a period in which the fee should be paid. If the amount of the fee is directly associated with the kind of procedure (i.e. phase 1 or phase 2) and to the costs associated to the service, the SIC could mandate for the fee to be paid once a final decision has been issued. However, in other type of proceedings carried out by the SIC (as the request for patents to be granted), the proof of the fee payment is a requirement for the initiation of the proceeding. Therefore, it is possible that the SIC requires the proof of the fee payment for phase 1 prior to carry out such proceeding and, if the assessment of the transaction goes to phase 2, the proof of an additional fee payment for the SIC to continue with such phase. In any circumstance, only a minority of merger control proceedings move on to phase 2.
- ï What would be the value of the fees? The norm does not establish parameters that allow to anticipate the value of the fee that the SIC will fix for these proceedings. For example, for the patentability examination within a request for an invention patent to be granted, the SIC fixed a fee up to COP1,552,500 – approx. USD476 at current exchange rates – for 2020 (to be paid directly and without discounts). However, the assessment of a transaction through merger control can be much more complex than the assessment of an invention patent. Some authorities, on the other hand, currently charge a much higher fee to carry out merger control procedures. For example, as of 2020, the Mexican Competition authority “Comisión Federal de Competencia Económica de México” (COFECE) charges Mex$ 190,020 for the submission, assessment and proceeding of every merger control notification. This fee that was fixed by the COFECE is equivalent to 50 monthly minimum Mexican wages (“nationwide”) and to USD10,060 (at current exchange rates). The SIC must, therefore, be careful when calculating the amount of the fee, in order to avoid imposing an excessive amount. It will be necessary to wait until the relevant resolution is issued to know the amounts that will be charged.
The aforementioned questions will most likely be answered by the SIC when it issues the resolution that fixes amount of the fee. For this purpose, it will most likely consider the report that was published by the International Competition Network (ICN) called “Merger Notification Filing Fees” (2005). This report explains different fee fixation models for merger control procedures. In addition, it is expected that the payment of the fees and the consequent increase of the SIC’s budget is reflected in improvements to proceedings, particularly in relation to the duration of the proceedings.
Text of the norm (free translation):
“Article 152. Creation of a fee for merger control procedures carried out by the Superintendency of Industry and Commerce, according to the provisions contained in articles 9 to 13 of Law 1340 of 2009.
The taxpayer of the fee will be the person that promotes/initiates a merger control procedure.
The Superintendency of Industry and Commerce will fix the value of the fee that is being created through this article. For these purposes, the following criteria must be taken into consideration:
1. The value of the fee shall be charged in proportion to the type of proceeding to be carried out for the final decision to be issued, in accordance with the provisions contained in articles 9 to 10 of Law 1340 of 2009.
2. The overall amount must keep direct correspondence with the costs associated with the provision of the service.
The annual adjustment of the fees set in this article may not exceed the percentage by which the consumer price index at the average income level varies, in accordance to what is set by the Statistics National National Administrative Department “Departamento Administrativo Nacional de Estadística”, DANE.”