- 1.What is the legislation applicable to merger control and how long has merger control legislation been in force?
Merger control was first introduced in Colombia in 1959. However, merger control enforcement was defficient for a long time and only after the enactment of a new Colombian Constitution in 1991 did it gain importance as a matter of public policy. Then, in 2009 Congress approved Law 1340 of 2009 which updated the entire Colombian antitrust regime and made some significant contributions to merger control and its enforcement
The core of Colombia’s merger control regulation may be found in Law 155 of 1959, Decree 1302 of 1964 and Law 1340 of 2009. The current merger guidelines can be found in a number of resolutions issued by the Superintendence of Industry and Commerce (SIC), which all have been compiled into the Circular Única (the Unified Circular). Subsequent to these pieces of regulation, in late August 2011, SIC released a draft resolution which updates the Circular Única’s merger control provisions. A bold approach to regulation, SIC’s decision to place a draft resolution on the internet forthe public to submit comments was well received. The draft was released for comments and the general consensus is that before the end of the year SIC will officially issue the new guidelines. SIC has proven once again why it is one of the most modern and agile government agencies in Colombia.
- 2.Is there any additional sector- or industry-specific merger regulation legislation?
Law 1340 of 2009 appointed SIC as Colombia’s national antitrust enforcement agency, leaving only a few sectors outside its review powers. Currently, the Financial Superintendence has merger control jurisdiction over transactions involving financial institutions subject to its supervision and control. Also, the National Aeronautical Administration has review powers over code-sharing agreements between airlines.
For merger control purposes, all the other sectors are under the authority of SIC. Nonetheless, Law 1340 of 2009 orders the consultation of industry-specific regulators when SIC is reviewing a merger between firms subject to supervision and control of an industr-specific agency (for instance the Oil and Gas Commission or the Telecommunications Commission). These industry-specific agencies issue regulations that may affect competition and SIC will take them into account while conducting merger reviews.
- 3.Are parties that are required to file notification of a transaction pre-closing obliged to not close their transaction pending regulatory review?
Yes. Parties that have a duty to file for clearance cannot close a transaction before SIC issues its decision. Colombia has two types of filings: a simple notification (when thresholds are met but the parties have a market share below 20 per cent in the relevant market) and the full clearance filing (when thresholds are met and the parties’ market share is above 20 per cent in the relevant market).
When the parties are only required to comply with a notification, they can close immediately after filing the notice before SIC. If the parties are required to request a clearance of the transaction from SIC, then they have to wait for SIC’s decision to be issued before closing. A request for clearance begins with the filing by the parties of some basic information. SIC will decide if the transaction poses a threat to free competition, in which case it will proceed with a full and extensive review of the transaction. If competition is not threatened, the transaction is approved.
The law establishes that, once the parties have provided all the information required by SIC to carry out its analysis of the transaction, the agency has three months to issue a decision. If a decision is not issued within this period the transaction is considered to be authorised as a matter of law. If the parties close before SIC issues its decision or before the term granted by law to do so, then they can be fined and an order to reverse the transactions may be issued.
- 4.Where pre-closing notification and approval is required, can a transaction that has been approved be challenged after closing? Has this ever happened?
Challenge of a previously approved transaction is not contemplated by Colombian law. Nonetheless, SIC can conditionally approve a transaction and establish an ex-post review mechanism to verify that conditions are met after the transactions closes. When ex-post review is incorporated as part of SIC’s conditional approval, it is possible for the parties to be held liable for anticompetitive offences arising out of the previously approved merger.
- 5.Who are the authorities responsible for merger enforcement and how is responsibility for investigation and decision-making allocated between authorities or within an authority?
The Superintendence of Industry and Commerce (SIC) is Colombia’s antitrust authority and, as such, conducts all merger reviews (with the exceptions outlined in question 2). Within the SIC there is a defence of competition division that has a merger review group tasked with investigating and drafting decisions.
Any decision by SIC can be appealed before SIC itself and can thereafter be challenged before the administrative courts. As a matter of procedure, before a party is allowed to file before the administrative courts it must appeal SIC’s decision before the agency itself. A decision issued by an administrative court, reviewing a decision from SIC, is also subject to appeal before administrative tribunals and, in certain cases, it may also be possible to seek review from the State Council (the highest administrative court in Colombia).
- 6.Identify the last three times merger control legislation was used to prohibit a transaction, and for each, provide the ultimate outcome.
In 2010, Phillip Morris’ Colombian subsidiary, Coltabaco, planned an acquisition of its biggest competitor, Protabaco. This was first blocked by SIC and later on, on appeal, conditionally approved. The conditions set forth by SIC included, amongst other remedies, a mandate to divest Protabaco’s leading brand which led to Coltabaco’s decision to withdraw its offer and step away from the transaction.
Between 2005 and 2010 several filings requesting clearance from SIC were withdrawn by the interested parties once it became clear that SIC would be either prohibiting or conditioning the transaction. This practice, which effectively ends up stopping the transaction, has led to a reduced number of transactions blocked by SIC as there are no decisions issued for those cases.
Between 2002 and 2003 four tile manufacturers filed and litigated an authorisation request before SIC which was studied and prohibited by the agency. The request was originally objected by SIC and the parties filed an appeal. SIC confirmed the initial decision. Then parties tried to get SIC to approve the transaction arguing that the benefits of the ‘efficiency exception’ applied. SIC, again, denied the request for merger clearance.
- 7.With respect to notifiable transactions that raise no obvious competitive concerns, what is the expected time frame from notification to approval?
A very short time frame if the parties have a market share above 20 per cent and none of the market share is less than 20 per cent. When a transaction meets the thresholds to file but the parties hold a market share of less than 20 per cent in the market affected by the transaction, the parties need only to file a notice of the transaction before SIC. The notice contains some basic information and, once received by SIC, entitles the parties to proceed with closing without having to wait for any decision from SIC.
If the transaction meets the thresholds and the parties hold a market share in the relevant market above 20 per cent, but the transaction poses no significant anticompetitive concerns, a request for review before SIC needs to be filed. Once the request is filed (with all the required information), if SIC agrees with the assessment that the transaction would not have significant effects on competition, it will issue an authorisation within 30 days of the filing.
- 8.With respect to notifiable transactions that raise obvious competition concerns, what is the expected time frame from notification to a decision?
When a transaction meets the filing thresholds and raises anticompetitive concerns, a request for review must be filed with some preliminary information. After 30 days of the filing, SIC will determine if the transaction raises concerns and, if it does, it will ask for further information from the parties. After the additional information has been filed, SIC has three months to issue a final decision.
- 9.Which types of transactions must be notified?
The concept of transactions which must be informed to the antitrust authority is very ample in Colombia. Any collaborative agreement, not only those related to acquisitions or change of control, which meets the thresholds, is subject to review by SIC as long as the firms involved are part of the same economic chain or are active in the same economic activity.
- 10.Where change in control is part of the test, what is the standard for defining control and changes thereof for pre-merger notification purposes?
Change in control is not part of the test to determine whether a transaction needs to be notified or review by SIC.
- 11.What thresholds apply for determining whether a transaction must be notified?
When the parties meet any of the following two thresholds the transaction has to be reported to SIC:
- when the parties, jointly or separately, had during the preceding tax year operational income above 150,000 times the minimum monthly wage in Colombia (80,34 billion Colombian pesos or approximately US$ 44.5
million); or
- when the parties, jointly or separately, had during the preceding tax year total assets valued at more than 150,000 times the minimum monthly wage in Colombia (80,34 billion Colombian peso or approximately US$ 44.5 million).
Note that the law gives SIC the power to set the value of the thresholds on a yearly basis.
- when the parties, jointly or separately, had during the preceding tax year operational income above 150,000 times the minimum monthly wage in Colombia (80,34 billion Colombian pesos or approximately US$ 44.5
- 12.In what conditions must transactions between foreign companies be notified?
SIC has stated that any transaction affecting the Colombian markets should be reported. Hence, Colombian market presence of the parties is a determining condition on whether an international transaction needs to be cleared by the Colombian authority (imports into the Colombian market are considered enough contact with SIC’s jurisdiction to conclude that a foreign company is present in Colombia.
- 13.Who must file the notification?
Colombian law provides for joint filings. Hence, every party involved in the transaction is expected to join the filing.
- 14.Are there filing fees?
- 15.Is there a standard form? How long does it take to prepare a filing? What type of information is generally required?
The cover letter which should be attached to every filing is a form provided by SIC. All other documents filed are not standardised. SIC does request that the filing be provided in a digital medium and that all spread sheets be presented digitally too.
- 16.When must notification be made? Is there a triggering event that requires a filing to be made within a specified period?
There are no triggering events and the only requirement is that the filing should precede closing.
- 17.When must notification be made with respect to acquisitions of convertible non-voting securities or options?
There are no specific provisions regarding convertible non-voting securities or options. If such a transaction meets the requirements for a filing it should also precede closing as in any other case.
- 18.Where there is an obligation not to close the transaction pending review, is there any alternative available to allow closing before formal clearance?
No, closing before formal clearance exposes the parties to gun jumping fines and could even lead to SIC ordering the reversal of the transaction.
- 19.What is the timeline for review and clearance?
When the parties determine that the transaction meets the thresholds for filing but they have a market share in the relevant market of less than 20 per cent, their duty is only to file a notification before closing.
In cases when clearance is required, the filing is reviewed by SIC using a two-step system. Once the filing is made and SIC determines that the first batch of information required has been provided, it will order the publication of a notice of the transaction within three days in a national newspaper. Third parties have ten days as of the publication of the notice of the transaction to present information relevant for SIC analysis.
Within 30 days as of the filing of all the information required for the analysis, SIC will close the first step of its analysis by clearing the transaction or requesting further information from the parties. Once the second batch of information is provided by the parties, the three month term for SIC to issue a decision begins to run.
- 20.Are there post-clearance obligations imposed on the parties for a clearance decision to remain valid?
As a general rule there are no post-clearance obligations for the parties nor is there a prefixed term for mandatory proceeding with closing. Nonetheless, the law allows SIC, when conditionally approving a transaction, to establish ex-post conditions that have to be met and to set up the necessary scheme to monitor that such ex-post conditions are in fact being complied with.
- 21.Is there a simplified notification procedure with accelerated review periods? What type of transactions qualify?
No, there are no simplified procedures. However, as noted before, when the parties hold less than a 20 per cent market share in the relevant market, the law only requires for the parties to give notice of the transaction to SIC before closing..
- 22.Are there special rules applicable for public takeover bids or for corporate restructuring under bankruptcy procedures?
- 23.Can the authority be consulted on a no-names basis for guidance on notification requirements? Is this practice useful?
Yes, SIC can be consulted for guidance via what is called a right of petition (derecho de petición). No-names consultations are non-binding on the agency and, although possibly useful, will not limit SIC’s autonomy in future decisions.
- 24.What are the risks if the parties do not file, if the transaction is closed before clearance or if notification is untimely? What penalties can be imposed and on whom? What is the highest fine imposed to date for failure to file?
Not filing or the untimely closing of a transaction can lead to the issuance of an order to reverse the transaction and fines to the parties and individuals responsible for the transaction. Under Colombian law, SIC may impose fines on the entities of up to 100,000 times the minimum monthly wage in Colombia (53.56 billion Colombian pesos, approximately US$29.7 million) or 150 per cent the profits secured through the violation of the duty to report. For individuals, SIC is authorised to levy fines of up to 2,000 times the minimum monthly wage in Colombia (1.07 billion Colombian pesos, about US$600,000).
- 25.What are the investigative powers of the authority?
SIC has ample powers to conduct the review. The agency can request any information from the parties that it considers necessary to conduct its analysis. Information is submitted as documents attached to the request for review or filed at a later stage of the process, either by the parties at their own volition or after SIC makes a specific request.
Third parties, a broad term that includes competitors and consumer associations amongst others, are also permitted to submitted information to SIC and to challenge the contentions of the parties. Sector specific regulators are also allowed by law to issue a recommendation for SIC when the parties to the transaction are subject to the control or surveillance of said industry specific agency.
- 26.Are there confidentiality rules to protect sensitive proprietary information provided to the authority and what procedure must be followed for confidentiality to apply?
Yes. Parties can request that SIC treats as confidential any information regarded as such by law and they can request that the publication of the notice of the transaction be waived based on public order grounds. In both cases the parties need to file a confidentiality request and it is up to SIC to decide whether the parties’ request ought to be granted or if it will be denied.
- 27.Is notification and its content publicised?
Yes. Once the parties file for review, SIC will order the publication of a notice in a national newspaper in which the parties are identified, the transaction is outlined and third parties are given notice of their right to intervene.
- 28.Are there agreements in place to exchange information with foreign competition authorities? Must the authority seek a waiver from the transaction parties to disclose confidential information submitted in their filing?
SIC is active in antitrust enforcement agencies forums and maintains a close working relationship with the US Federal Trade Commission (FTC). If a document is afforded confidentiality, SIC will be required to secure a waiver before disclosing it to third parties (unless the law allows for the disclosure or the agency is compelled by a judicial order to disclose the document).
- 29.As a matter of practice, how do the authorities investigate a transaction? Whom do they consult? What weight, based on your experience, does the authority give to the information provided?
The parties are expected to provide SIC with information regarding themselves and the market and they also file their own analysis of the data they are providing. SIC has a merger review group which includes legal and economic experts. Consulting suppliers and customers is allowed by law and their opinions are taken into account. Given SIC’s relationship with the FTC and its recent interest in being part of the inter-agencies forums we find that SIC is at the forefront of enforcement in the region.
The information provided by the parties is an important element for SIC’s analysis and, when properly compiled and presented, the agency will give it the weight it deserves within the review process. When the industry of the parties involved in the transaction is supervised by an industry specific agency, SIC will ask for the industry specific agency’s input (the law allows industry specific agencies to file their comments even if SIC decides not to request it).
- 30.What rights do third parties such as competitors, suppliers or customers have to intervene and participate in the investigation process, including rights to access the investigation file?
By law, third parties can file their own briefs and provide SIC with information regarding a transaction under review. They also have the right to access the investigations’ documents as long as they are not covered by confidentiality.
- 31.Can third parties appeal clearance decisions, and has this ever happened successfully?
No, third parties have no standing to appeal a clearance decision.
- 32.In a transaction that appears to raise competitive concerns, is it recommended to consult the authority prior to filing and, if so, why?
It is a judgement call, but a public officer will be unwilling to state an opinion before an official filing has been made.
- 33.Does the authority and its staff share its concerns about a transaction with transaction parties at each stage of review? How can parties productively participate in the evaluation and decision processes?
Yes. The authority and its staff point out the concerns they may have and request further information from the parties. The best way for the parties to participate in the decision-making process is to engage the agency and provide the information and input when required.
- 34.Are there published guidelines for merger analysis?
Yes. SIC has compiled the merger guidelines and the updates to them in Chapter 2 of Title VII of its Unified Letter (Circular Única).
The guidelines can be found in the following link (scroll down to ‘Titulo VII’ and click on the PDF file icon on the right):
www.sic.gov.co/index.php?idcategoria=4647
- 35.What are the prevailing theories of competitive harm and analysis, and how are they typically applied?
In its latest decisions, SIC has conducted analysis on both the consumer and the supply sides of a transaction and has assessed the expected consequences on both consumers (segmented in accordance to product characteristics, consumer behaviour and substitute products) and suppliers of raw materials.
The analysis have also included inquires on production capacity and barriers to entry for the overlapping product. Review of the market brands and IP rights held by the parties involved in the transaction are often mentioned in SIC’s decisions. With regard to market concentration, HHI analysis has been commonly used.
- 36.Are there safe harbours and what are they?
There are no safe harbours per se. However, when a transaction is conducted between firms from the same business group there is no need to clear it or report it to SIC. To qualify for this exception, the firms involved need to fit the legal definition of a business group which requires control over the subsidiaries and registry in the Mercantile Registry.
- 37.To what extent are economic efficiencies and non-competition issues taken into account in the review process?
When a transaction is found to have anticompetitive effects the law provides that the parties may argue that it produces efficiencies that otherwise would not be possible to achieve. A transaction will only be cleared on efficiency grounds when the parties are able to prove that the efficiencies can be measured and transferred to the consumers. Up until now there are no examples of successfully arguing the so-called efficiency exception.
- 38.Can remedies be negotiated, and, if so, at what stage in the process? How are they enforced?
Yes, the parties can offer to the authority remedies to mitigate any identified anticompetitive issues. The law allows SIC implementing, as part of its decisions, ex-post review mechanisms to supervise that conditions it has set or remedies accepted are being properly implemented. When SIC decides to establish an ex-post review, it can also order the parties to fund the oversight.
- 39.How common are negotiated remedies? Can negotiated remedies be challenged by third parties?
Negotiated remedies are common and they are not challengeable by third parties. As an example of a negotiated remedy, in a recent case, the parties agreed that after an acquisition, the buyer would continue offering the, now consolidated, two leading brands to consumers and to appropriate funds for advertisement of the two brands maintaining current levels of funding for an agreed period of time.
- 40.Is there a vehicle for reconsideration by the authority of its decision? If so, please describe and provide recent examples where reconsideration led to a revised outcome.
Any decision from SIC is subject to reconsideration from the agency when the parties file a request for review. Recently, in the proposed acquisition of Coltabaco by Protabaco, the transaction was originally blocked and only after the parties filed for review did SIC decide to conditionally approve it.
- 41.Can a decision from the regulator be appealed and if so what is the timetable for judicial review to take place?
Decisions from SIC can be reviewed by administrative courts provided that the decision had been challenged before SIC itself. The timetable for an administrative court to review a SIC decision is difficult to estimate but it should be in a range of 1 to 3 years. Furthermore, a decision from an administrative court can be appealed before a tribunal which will take additional time.
- 42.What has been the most important challenged decision in the past five years that has been overruled and how often generally do appeals result in reversal?
In the last five years, there has been no challenge before administrative courts of a merger review decision taken by SIC.
- 43.When reviewing decisions from the competition authority, do courts restrict themselves to procedural aspects, or can they review the substance of the authority’s analysis?
The administrative courts can review both the process and substance of a SIC decision.
- 44.Briefly highlight any notable merger control decisions rendered over the past twelve months.
The aforementioned Protabaco case ended with two decisions issued by SIC. The first one blocked the proposed acquisition by Philip Morris’ Colombian subsidiary of its biggest competitor and the second, on review, allowed the transaction to go forward but under conditions set by SIC which meant the divestment of the leading brand of the target as well as a second divestment of a brand with a specified market share and market growth in one of the segments defined in the analysis. After the second decision was released, Philip Morris withdrew its offer and walked away from the transaction.
A couple of interesting decisions were also rendered dealing with two
publicly-owned telecommunications companies (ETB – Bogota’s company and EMCALI – Cali’s company). In both cases the companies went to SIC for clearance in their quest to sell a controlling interest to Spanish telecommunication giant Telefónica. The analysis by SIC determined that although the proposed transactions would result in high market concentrations, the transactions could be authorised because of regulatory safeguards in the telecommunications industry and the existence of an industry specific supervising agency (the Telecommunications Commission). Both decisions were ultimately rendered mute as external factors resulted in them being dismissed or suspended for the time being.
Also of note in both ETB and EMCALI decisions was that SIC ordered the establishment of an ex-post review to monitor that no anticompetitive effects arise out of the transaction and that consumers would not be harmed.
- 45.Update and trends
Since the enactment of Law 1340 of 2009, SIC has operated with the same merger guidelines it had in place, albeit with some updating – especially to regulate the notification procedure (when the parties hold less than a 20 per cent market share in the relevant market). However, in late August 2011 SIC released a draft proposal of a major update of the merger guidelines which has been released for public discussion.
The new merger guidelines will likely be enacted and operational by 2012. The current draft contains several interesting proposals including the introduction of hearings for the review process.
Contributing Authors
Contributing Editors
Questions
- 1.What is the legislation applicable to merger control and how long has merger control legislation been in force?
- 2.Is there any additional sector- or industry-specific merger regulation legislation?
- 3.Are parties that are required to file notification of a transaction pre-closing obliged to not close their transaction pending regulatory review?
- 4.Where pre-closing notification and approval is required, can a transaction that has been approved be challenged after closing? Has this ever happened?
- 5.Who are the authorities responsible for merger enforcement and how is responsibility for investigation and decision-making allocated between authorities or within an authority?
- 6.Identify the last three times merger control legislation was used to prohibit a transaction, and for each, provide the ultimate outcome.
- 7.With respect to notifiable transactions that raise no obvious competitive concerns, what is the expected time frame from notification to approval?
- 8.With respect to notifiable transactions that raise obvious competition concerns, what is the expected time frame from notification to a decision?
- 9.Which types of transactions must be notified?
- 10.Where change in control is part of the test, what is the standard for defining control and changes thereof for pre-merger notification purposes?
- 11.What thresholds apply for determining whether a transaction must be notified?
- 12.In what conditions must transactions between foreign companies be notified?
- 13.Who must file the notification?
- 14.Are there filing fees?
- 15.Is there a standard form? How long does it take to prepare a filing? What type of information is generally required?
- 16.When must notification be made? Is there a triggering event that requires a filing to be made within a specified period?
- 17.When must notification be made with respect to acquisitions of convertible non-voting securities or options?
- 18.Where there is an obligation not to close the transaction pending review, is there any alternative available to allow closing before formal clearance?
- 19.What is the timeline for review and clearance?
- 20.Are there post-clearance obligations imposed on the parties for a clearance decision to remain valid?
- 21.Is there a simplified notification procedure with accelerated review periods? What type of transactions qualify?
- 22.Are there special rules applicable for public takeover bids or for corporate restructuring under bankruptcy procedures?
- 23.Can the authority be consulted on a no-names basis for guidance on notification requirements? Is this practice useful?
- 24.What are the risks if the parties do not file, if the transaction is closed before clearance or if notification is untimely? What penalties can be imposed and on whom? What is the highest fine imposed to date for failure to file?
- 25.What are the investigative powers of the authority?
- 26.Are there confidentiality rules to protect sensitive proprietary information provided to the authority and what procedure must be followed for confidentiality to apply?
- 27.Is notification and its content publicised?
- 28.Are there agreements in place to exchange information with foreign competition authorities? Must the authority seek a waiver from the transaction parties to disclose confidential information submitted in their filing?
- 29.As a matter of practice, how do the authorities investigate a transaction? Whom do they consult? What weight, based on your experience, does the authority give to the information provided?
- 30.What rights do third parties such as competitors, suppliers or customers have to intervene and participate in the investigation process, including rights to access the investigation file?
- 31.Can third parties appeal clearance decisions, and has this ever happened successfully?
- 32.In a transaction that appears to raise competitive concerns, is it recommended to consult the authority prior to filing and, if so, why?
- 33.Does the authority and its staff share its concerns about a transaction with transaction parties at each stage of review? How can parties productively participate in the evaluation and decision processes?
- 34.Are there published guidelines for merger analysis?
- 35.What are the prevailing theories of competitive harm and analysis, and how are they typically applied?
- 36.Are there safe harbours and what are they?
- 37.To what extent are economic efficiencies and non-competition issues taken into account in the review process?
- 38.Can remedies be negotiated, and, if so, at what stage in the process? How are they enforced?
- 39.How common are negotiated remedies? Can negotiated remedies be challenged by third parties?
- 40.Is there a vehicle for reconsideration by the authority of its decision? If so, please describe and provide recent examples where reconsideration led to a revised outcome.
- 41.Can a decision from the regulator be appealed and if so what is the timetable for judicial review to take place?
- 42.What has been the most important challenged decision in the past five years that has been overruled and how often generally do appeals result in reversal?
- 43.When reviewing decisions from the competition authority, do courts restrict themselves to procedural aspects, or can they review the substance of the authority’s analysis?
- 44.Briefly highlight any notable merger control decisions rendered over the past twelve months.
- 45.Update and trends
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