12 May Superintendence issues guidelines regarding collaboration agreements among competitors and resumes merger control in the context of the COVID-19 emergency
By Juan David Gutiérrez and Fery Cure
On May 11th of 2020, the Superintendence of Industry and Commerce (SIC) issued Resolutions 20490 and 20476 of 2020 which, respectively, established rules relative to collaboration agreements between competitors related to the COVID-19 emergency, and resumed the terms of the merger control procedures starting the 12th of May of 2020.
The antitrust authority recognized, in the recitals of these resolutions, that collaboration agreements and mergers can be valuable instruments for entrepreneurs to mitigate the economic effects of the pandemic. Furthermore, it considered that the competition regime must be coherent with the economic reality, for the purpose of preserving the goals that it pursues, meaning, the wellbeing of the consumers, economic efficiency and free participation of companies in the market.
Recently, merger control also resumed in other South American jurisdictions (i.e. Ecuador). Moreover, similar measures with respect to competitors’ agreements, directly in relation with the COVID-19 crisis, were also adopted by antitrust authorities in Latin America, North America, Europe and Oceania.
Merger control resumed since the 12th of May 2020
In relation with merger control, the SIC explained that maintaining the suspension of the terms in these procedures limited the options for companies to cope with the pandemic. It’s pertinent to mention that the last order of publication of a merger operation, according to the authority’s website, was dated 26th of February of 2020. Thanks to the decision to resume the reception of merger authorization requests, mandated by Resolution 20476 of 2020, in the next few weeks new transactions will be presented at the SIC.
The cited resolution also establishes that the procedures will be managed through information and communication technologies. In this sense Article 2 of Resolution 20476 of 2020 orders that “involved companies and third parties must file their requests, answers to requirements and, in general, all their proceedings in the email “email@example.com” with copy to the email “firstname.lastname@example.org”.”
Notification of collaboration agreements between competitors
Regarding collaboration agreements among competitors, the SIC considered that the antitrust regime should not be an obstacle for agreements that don’t limit the free participation in the market or that, if they create some restriction of competition, “the benefits derived from their efficiencies may be considered superior to the risk of affecting the competition that creates the collaboration mechanism”. This position of the SIC is aligned with the previous decision of the National Government of allowing the celebration of competitors agreements in the transport sector through an exception to the antitrust regime. The latter, under the condition that the agreements were developed in the context of COVID-19 emergency, such as it was previously reviewed here. It is also pertinent to note that the SIC already had Guidelines for the application of these rules to collaboration agreements between competitors.
Hereafter, we will synthetize the four most relevant points of the notification of collaboration agreements among competitors contained in Resolution 20490 of 2020.
- Four conditions for the collaboration agreements to be deemed legitimate
The recitals of Resolution 20490 of 2020 and its articles 1 and 2 contain four requirements that must be complied concurrently by competitors who aim at entering into agreements that are deemed legitimate by the SIC.
- Efficiency: The agreement produces improvements on efficiency.
- Indispensable: The restrictions of competition are indispensable to reach the goals of efficiency improvements.
- Benefits for consumers: The improvements on efficiency must translate in a sufficient manner to the consumers of the good or service.
- Do not eliminate the competition: The agreement shouldn’t enable the elimination of actual or potential competition from the respective relevant market.
The aforementioned elements should be credited by the parties that request the authorization with the exception of the first element, the production of efficiencies, that is understood as complied with whenever the agreements are “directed to attend the emergency caused by the COVID-19 outbreak or to overcome the affectations that will come for the economic system as a result of this emergency.”
2. Obligation of informing
Article 3 of Resolution 20490 of 2020 imposed an obligation to market agents that enter into collaboration agreements in the context of the emergency that consists on informing the Competition Protection Division of the SIC. The duty requires informing the following aspects of the agreement: general information about the agreement, the parties, the goods or services that may be affected, as well as the purpose, reach and duration of the agreement. The information is meant to enable the SIC to exercise its functions of inspection, vigilance and control over the agreements that are not legitimate, that is, those which don’t comply with the requirements.
The consequence of violating this obligation may cause administrative and judicial responsibilities established by the antitrust regime.
3. Other authorities may analyze the contents of the agreements
The paragraph of Article 2 established that the SIC can request the supervisors of the respective sectors to analyze the content of the agreements and the benefit for consumers. Furthermore, these authorities must inform the SIC about violations or lack of collaboration by the companies they supervise.
4. The competition protection regime is still current
The rules adopted by the SIC do no create a new antitrust exception or that the antitrust laws are not applicable in the context of COVID-19. Due to the latter, the SIC warns that the agreements should comply with all the legal requirements. It must be noted that in accordance with Article 25 of the Law 1340 of 2009, the fines for corporations that infringe antitrust laws can reach up to 100,000 minimum wages (on the basis of 2020’s minimum wage, this is equivalent to more than 87 thousand millions of pesos).