Author Archives: DevelopingWorldAntitrust

28 December 2015
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Latin America

How Does Competition Policy in Venezuela Look Like?

By Francisco Beneke*

Venezuela is a country with a high level of state intervention in the economy. Comparatively speaking, it has one of the highest yearly average investment rates in Latin America in the period between 1992 and 2012.[1] However, a big portion comes from the public sector, on average around 45 percent.[2]

The high level of government involvement in the economy is latent not only in its high share of investment but also in the widespread use of price controls. Venezuela has a Fair Prices Law that gives The Superintendencia Nacional para la Defensa de los Derechos Socioeconómicos the power to regulate the price of goods and services of any product in any stage of the production chain according to their strategic importance and benefit to the population (Art. 11, number 3).[3] The authority has issued several decrees with maximum prices for a wide array of products in the food, hygiene products, and services markets.[4]

In a country where state intervention is so pervasive the question arises: what is the role of competition policy?

One could think that, under such circumstances, competition policy would certainly take a back seat in the priorities list of policy makers. However, there are some reasons to believe that this is not the case. In November 2014, Venezuela’s president, Nicolás Maduro, issued with delegated powers from the national congress a new antimonopoly law. The statute was envisioned to serve as a tool in the fight against the so-called economic war.[5] For those who follow news about this South American nation, it is not uncommon to hear about empty aisles in supermarkets or how expensive the dollar is in black markets. Venezuela’s government has attributed this current predicament to a concerted action from its opposition and the private sector to destabilize the country and generate discontent in the population. This is what in the rhetoric of the government constitutes the economic war.

How has the new Superintendencia Antimonopolio handled itself in this scenario? To answer the question, a first approximation can be reached by looking into the authority’s enforcement activity and that of its predecessor. The use of the economic war term in Venezuela can be dated as far back as 2010 when Hugo Chávez declared war against the country’s largest corporate group[6] and it is still used today by Nicolás Maduro to accuse the private sector as the culprit of the current economic crisis. From 2010 to this date, there has only been one decision that found a firm guilty of monopolization.[7] There were no decisions punishing cartels and the rest of the cases where there was some finding of liability were regarding unfair business practices. Thus, the Superintendencia Antimonopolio’s (and its predecessor’s) contribution in the economic war has to be found in areas other than its enforcement practice.

To keep track of the Superintendencia Antimonopolio’s activity, one could survey its media and external relations communications. Starting with the authority’s webpage, upon access, a message appears stating that the economy should not be used as a war weapon and lists some countries such as Nicaragua and Chile, apparently for currently sharing or having shared at some point the same situation. This could signal alignment with the central government given the use of the same rhetoric to describe the economic crisis. However, one has to bear in mind that the Superintendencia Antimonopolio was created as an institution designed to fight in this so-called economic war. As a consequence, the use of the term comes as no surprise.

The authority’s twitter account tells a part of the story. After the results of December the 6th’s parliamentary elections evidenced an overwhelming defeat of the ruling party, the authority focused its social media efforts to transmit messages of comfort and encouragement to the revolution (term used to refer to the current government’s political agenda). It tweeted on how Hugo Chavez’s ideals were more alive than ever and that the people should walk with their heads straight. Amidst all these support messages, it was hard to find any communication of the authority’s activities regarding competition advocacy or law enforcement.

To answer the question of how competition policy looks like in Venezuela, at a first glance, it does not appear to be either an independent one from the central government or an active one in law enforcement. This post is a short one and has only aimed to provide a first approximation. Part of the answer also lays in taking a closer look at the 2014 law or simply waiting for more developments since one year of life could be construed as a short period of time in institutional years. With the promise of future posts on the matter, it will be interesting to see how the Superintendencia Antimonopolio works under the new political scenario created by this December’s elections.

*Co-editor, Developing World Antitrust

[1] Data from the World Bank Development Indicators, available at http://data.worldbank.org/indicator/NE.GDI.FTOT.ZS. Table for Latin America available upon request.

[2] Constructed from data on gross fixed capital formation, total and private sector, from the World Bank Development Indicators, available at http://data.worldbank.org/indicator. Disaggregated data for private investment was only available for the years 1997-2010. The tables for Latin America and calculations are available upon request.

[3] Leyes contra la Guerra económica (Laws against the economic war), p. 3, available at http://www.minci.gob.ve/wp-content/uploads/2015/02/Ley-contra-la-guerra-econ%C3%B3mica.pdf

[4] Http://www.superintendenciadepreciosjustos.gob.ve/?q=precios-justos.

[5]Leyes contra la Guerra económica, available at http://www.minci.gob.ve/wp-content/uploads/2015/02/Ley-contra-la-guerra-econ%C3%B3mica.pdf.

[6] ABC (Spain): “Chávez declara la guerra a la «burguesía»” http://www.abc.es/20100603/internacional-iberoamerica/chavez-guerra-burguesia-201006030413.html.

[7] Decision N° SPPLC/0043-2013 of December 23, 2013, available at http://www.procompetencia.gob.ve/images/resoluciones/cotecnica.pdf.

30 November 2015
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What you need to know about the recent air cargo cartel case in India

By Maria Koliasta*

India’s antitrust regulator imposed a fine on Jet Airways (India) Ltd, SpiceJet and IndiGo for fixing fuel surcharges on air cargo.

Jet Airways was fined Rs. 151.69 crores ($22.9m) and IndiGo and SpiceJet were fined Rs. 63.74 crores ($9.6m) and Rs. 42.48 crores ($6.4m ), respectively.

The imposed fines corresponded to 1% of the companies’ average turnover of the last three financial years.

The complaint was raised against Jet Airways, IndiGo, SpiceJet, Air India and GoAir by the Express Industry Council of India, representing 29 parcel transport firms (i.e Blue Dart, FedEx, DHL, First Flight, UPS etc). Nevertheless, no fine was imposed on GoAir and Air India.

According to the Express Industry Council of India, the aforementioned airlines conspired to introduce a fuel surcharge on air cargo. This fuel surcharge was fixed at a uniform rate of Rs.5/ Kg and became effective on May 15, 2008. Essentially, the act of cartelization is reflected in the uniform increase of the FSC rate on the very same date. Vijay Kumar, Chief Operating Officer of the Express Industry Council of India, said ‘What is surprising is that all airlines have chosen to increase the FSC by the same amount more or less at the same time. This has led us to believe that this action has been taken in concert’[1]. This uniform increase is harmful not only to the interests of freight companies but also it detrimentally affects consumers since higher costs are constantly passed on to the ultimate consumers. Vijay Kumar also mentioned that ‘Though designed to mitigate the fuel price volatility, FSC has been used as a pricing tool to harm the interests of express companies, freight forwarders and ultimately the end-user’[2].

The Indian Competition Commission (ICC) concluded that the three aforementioned airlines operated in collusion in fixing the FSC and, thus, violated the provisions of section 3(1) and section 3(3) of the Competition Act. It, essentially, found that the three airlines had fixed a fuel surcharge at a uniform rate on the very same date and they all increased the surcharge at the same time without any analogous rise in fuel prices. The ICC rejected the airlines’ argument that the fuel surcharge was applied to address the high volatility in aviation turbine fuel (ATF). It noted that the arguments presented by the airlines regarding the changes in FSC rates due to the changes in ATF prices were not sufficient. The three airlines claimed that apart from USD rates and ATF prices there were other factors that are usually considered when FSC is calculated, they failed, however, to provide any cost data to strengthen their arguments.

Then, the ICC examined whether the three airlines acted in a concerted manner while fixing the FSC. Section 2(b) of the Act defines agreement as, ‘any arrangement or understanding or action in concert whether or not formal or in writing or intended to be enforceable by legal proceedings’. The ICC was based on the following data[3]:

Untitled

The table above illustrates that whenever the FSC of one airline was increased it was concurrently followed by the other airlines. Hence, it is evident that the airlines exhibited parallel behaviour. Nevertheless, the ICC noted parallel behaviour of competitors can also be the outcome of intelligent market adaptation in an oligopolistic market. The ICC, thus, examined whether airlines’ conduct could be considered as a market adaptation in an oligopolistic market or if collusion was the only rational interpretation of the airlines’ conduct. Shri K. Rammohan, Senior General Manager of Jet Airways stated ‘that the information on revision of FSC though communicated between their own staff, there’s likelihood of transmission of such information to other competitors by agents though it is understood and implied that confidentiality should be maintained. It was also stated that information on competitor’s price revision on FSC is received through multiple sources and through common agents’[4]. Likewise, Mr Raghuraman Venkatraman, Vice President (Cargo) of Spice Jet and Shri Mahesh Kumar Malik, Vice President (Cargo Sales & Services) of Indigo stated ‘that the information on pricing by other airlines including FSC rates are provided by common agents too’[5]. Having considered the above, the ICC noted that such a behaviour significantly diminished any doubt since the concerned company could take into consideration such information before shaping its own behavior. The ICC claimed that the airlines were well informed of the changes in FSC rates.

In view of the foregoing, the ICC concluded that the airlines operated in parallel and in collusion in fixing fuel surcharge rates violating section 3 (3)(a) of the Competition Act.

*Stagiare Attorney at WilmerHale (Brussels)
LLM, University of California, Berkeley, School of Law

Disclaimer: the post reflects the author’s own views and by no means those of Wilmer Cutler Pickering Hale and Dorr LLP.

[1] http://www.thehindubusinessline.com/economy/logistics/domestic-airlines-levying-irrational-fuel-surcharge-on-cargo/article4209642.ece

[2] Ibid.

[3] Competition Commission of India, Case No. 30 of 2013, p.40

[4] Competition Commission of India, Case No. 30 of 2013, p.45

[5] Ibid.

16 October 2015
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Non classé

The close relationship between the sugar industry and antitrust in Latin America – The Colombian Cartel

In light of the recent decision in Colombia regarding an agreement to block imports of sugar from other Latin American countries, we will present to you our first impressions. This post offers our comments on what we consider to be the issues that make the study of this decision so peculiar.

Amine’s comments:

The sugar industry and antitrust cultivate a very close relationship in Central and South America. One of our previous post analyzes the approach of El Salvador’s competition authority in dealing with this market.

Nowadays, the sugar industry is widely talked about in Colombia. The market is very peculiar since, at the center of the sector, there is a mechanism called FEPA. The main goal of the mechanism is to stabilize the prices of sugar, ensure a fair remuneration to producers, regulate the production and stimulate exports. To achieve those goals, FEPA’s committee enjoys some very interventionist powers that have led to the fixing of prices for sugar.

As you can imagine, much of the problems arising in the present case relates to the role of FEPA and to what the entity can or cannot do in the context of that framework.

This actually appears mainly with regards to the question of the information being exchanged between different undertakings. It is true that Superintendencia de Industria y Comercio (hereinafter SIC) was facing a cartel in the very traditional sense of the word as the involved companies exchanged information directly paying very little attention to the consequences of their acts. However, information was also exchanged indirectly through the FEPA mechanism. In fact, the SIC points out that the information exchanged in the context of the FEPA framework was so detailed and in no way relevant or necessary to concretize its goals.

From this, it appears clearly that SIC embarks in a proportionality test over the content of the information exchanged (necessity / suitability). By doing so, it seems to differentiate between the nature of information exchanged and the FEPA being used as a vehicle for that end. Of course, harm to competition stems from the exchange of information. However, the SIC seems to tackle the problem more radically. It ordered FEPA’s steering committee to amend the instrument. The SIC order goes in the direction of ensuring that the price-stabilization mechanism does not deform again in a platform for exchange of sensible information and the agreement of production quotas. The SIC does not advocate for the abolition of the system even though it points out to its weaknesses.

However, addressing the two problems described in the above paragraph is fundamental. It triggers a crucial question relating to the role and powers of competition authorities in the presence of frameworks such as the one at the heart of the present case. In fact, should competition law in developing countries have two essential dimensions? One that focuses on the protection and the preservation of existing competition and another one that relates to the creation and the construction of markets and competition. SIC’s decision exposes greatly this dual dimension through the FEPA framework.

FEPA, according to the SIC, was the platform that induced associations to share strategic information and then adopt an anticompetitive behavior. At the same time, FEPA, as a tool of state intervention, mainly through the fixing of prices, acts as a barrier to competition. In this case, any intervention has nothing to do with the classical procedure that deals with anticompetitive behavior. Some countries such as Mexico have already considered introducing the concept of “lack of effective competition” that we have discussed in the blog to address such situations where, even if there is no liability for abuse of dominance or a cartel, the authority can enjoin companies from certain behavior or order divestitures. Without discussing the merits of such an approach, we can say that the present case shows that fighting against legal barriers, at east trough advocacy, deserves a central position in Latin America’s agenda.

Francisco’s comments:

The decision will definitely have a long-lasting impact on antitrust in Colombia and the rest of the region. Not only because of the magnitude of the fines (a total of 112 million USD) but also because of how it addresses all of the issues that arose in the case. The decision deals with a wide array of problems that range from the harms of the information exchange, legal immunity from antitrust laws, regional non-competition agreements, to the liability of individual executives. I will only comment briefly on the regional aspect of the agreement and the liability of executives.

As Amine said, the sugar industry and antitrust have a close relationship in most Latin American countries. In the case at hand, it is interesting to see that in the record there was evidence that pointed to an international coordination effort to avoid competition from imported product. Some of the emails show that Salvadoran and Costa Rican producers would notify Colombian sugar manufacturers when they received a request from potential Colombian importers. Other communications show a hardball negotiation with Bolivian producers to deter them from sending their product to Colombian territory.

It is important to take this into consideration because, in other countries such as El Salvador, the antitrust authorities advocate for openness of trade to tackle anticompetitive problems in the sugar industry. The abolition of trade barriers will accomplish little if it is not accompanied by a close watch on a likely collusion at the international level.

Regarding the second point, liability of individuals is an issue that deserves more debate when designing a law enforcement policy. The deterrent effect of antitrust law can be different depending on how aligned are the interests of the management and the shareholders of a company.

Under certain conditions, exposure to fines of the firm alone could not act as a dissuasive factor for the executives and in the end the shareholders would end up with the burden of paying the penalties. Liability of individuals can be a form of aligning the interests of management and owners regarding the desirability of forming a cartel or unlawfully monopolizing a market. In the present case, the fines on individuals were between 17,000 and 380,000 USD, which can be regarded as considerable on average.

Some countries, such as Mexico, have the prospect of criminal liability, and others, such as Brazil, can impose both administrative and criminal penalties to individuals. Others, as El Salvador for example, do not have either a criminal or an administrative sanctions regime for firm executives involved in anticompetitive behavior. Even without taking into account enforcement practice, there is little convergence regarding liability systems in Latin America, which makes it an interesting area for future debate and reforms.

——–

Our comments are just a quick brush around only a part of the issues covered by the decision. Nonetheless, we hope they can be useful in providing more information on what is posed to be one of the highest-profile cases in Latin America this year.

7 July 2015
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Latin America

The Adoption of Modern Competition Policies in Latin America – Part II: South America

By Francisco Beneke*

(Last updated on 5 June 2017)

As announced last week, the data for the Latin-South American countries is presented in part II.

The criteria for setting a starting date of modern competition policy is transcribed from the last post: “The starting date is counted from when a competition authority started to exist, who is in charge of enforcing an antitrust law applicable on an economy-wide basis, as opposed to sectoral regulation of competition. Exclusively criminal liability statutes are excluded since experience has shown they were seldom enforced and, therefore, cannot be counted as a policy apt to deter anticompetitive behavior. For the same reasons, in some cases I do not start counting from the year of the country’s first economy-wide competition law if they were either not enforced or done so in procedures without the expectation of a dissuasive penalty. More details will be presented as each country is analyzed.”

  1. Colombia

Colombia has a law that dates back to 1959, but according to the OECD Peer Review of 2009 the regulations that accompanied the law “were insufficient to implement the law effectively, and it was seldom enforced for the purpose of preserving competition” (OECD (2009, p. 12)).[1] The history of the Superintendencia de Industria y Comercio reported on its website confirms this tendency towards favoring price regulation before de 1990s.[2] There are no online sources for case law prior to 2000. Since I do not have the bibliographical resources to confirm a scarce or null application of the 1959 law in its first decades, the date of 1992 in the OECD peer review is presented as the starting date of modern competition policy in Colombia.

  1. Venezuela

Venezuela’s first competition law was enacted towards the end of 1991, came into force in January 1992, and the authority in charge of enforcing it started operations in April 1992.[3] This latter date is taken as the start of modern competition policy in Venezuela

  1. Ecuador

Up until the end of 2011, Ecuador lacked an economy-wide competition law. The Ley Orgánica de Regulación y Control del Poder de Mercado was enacted in September 2011 and came into force the next month. However, the Superintendencia de Control del Poder de Mercado’s president was ratified by congress on September 2012.[4] The first procedure of law enforcement that can be found in the authority’s website has a 2012 reference.[5] Thus, modern competition policy in Ecuador started towards the end of 2012.

  1. Peru

Peru’s first competition law dates back to November 1991.[6] The institution in charge of the law’s enforcement is the Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual, was created in November 1992,[7] and started operations in March 1993 (OECD (2004, p. 13)).[8]

  1. Brazil

Brazil is one of the cases where it is more complicated to find a starting date for modern competition policy. There are some provisions that date back to 1951, aiming to reform the law on economic crimes (CUTS (2006, p. 550)).[9] Nonetheless, the OECD traces back the origin of modern competition policy to the 1994 law (OECD (2010a p. 9))[10]. There appears to be a consensus that the previous 1990 law was largely ineffectual. In the Conselho Administrativo de Defesa Econômica’s (CADE) website there are cases that date back to complaints filed in 1988. However, with very few exceptions that this researcher could find, the vast majority of cases were decided after 1994. This is in accordance to CUTS’s report on Brazil where it is stated that most of CADE’s decisions relate to old procedures, where no violations were found due to lack of information (CUTS (2006, p. 551))[11]. Thus, Brazil’s modern competition policy’s starting year is set as 1994.

  1. Bolivia 

Modern competition policy started in April 2008.[12] In this case, the date is counted from the enactment of the law because the powers to enforce it were conferred to an already existing authority.

  1. Chile

The first competition law was enacted in 1959.[13] However, in the words of the current Fiscal Nacional Económico, it was not until 1973, with the Decreto 211 that a law created a proper competition law system.[14] The FNE has an online record of decisions that date back to 1974. According to the OECD, the period of 1959 to 1973 saw very little activity in competition policy, and the majority of decisions were recommendations to prevent future violations (OECD (2010b, p. 9)).[15] The CUTS report on Chile largely agrees with these, arguing that in the period prior to the 1973 law the main focus was on price controls (CUTS (2006, p. 564))[16]. Therefore, 1973 is set as the starting year of modern competition policy in Chile.

  1. Argentina 

Argentina has a history of outlawing anticompetitive behavior that goes all the way back to the laws of 1923 and 1946. These statutes were of criminal nature and in the period of 1933 to 1980 a total of four cases resulted in sanctions (OECD (2006, p. 8)).[17] According to the OECD, modern competition law in Argentina started with the 1980 law, although it was also seldom enforced until the mid-1990s when the pace quickened (Id., p. 9). According to the Argentinian competition authority itself (Comisión Nacional de Defensa de la Competencia (CNDC)), it had relevant activity only since 1997.[18] The CNDC attributes this to two main reasons: First, before the 1990s the Argentinian economy followed mostly a central planning model; and second, in the 1970s and 1980s the government actively incentivized price-fixing behavior.[19] In light of all this, the starting date of modern competition policy in Argentina is set to 1997.

  1. Paraguay

Paraguay’s first competition law was enacted in 2013, which created the Comisión Nacional de Defensa de la Competencia. All members of the board of directors were appointed in 2015 and the Investigations Director in September of 2016.[20] According to a newspaper article, there are some investigations under way but it is not possible to confirm this because there is no available website for the Comisión. The Asociación Paraguaya de Estudio sobre Defensa de la Competencia has kindly provided information on merger control activity as well as a starting date of operations of the authority––June 2016.

  1. Uruguay

The first competition law was enacted in 2000, but the authority in charge of enforcing it was designated until February 2001 (Bergara (2003, p. 79)).[21] This authority was the pre-existing Dirección General de Comercio. Setting the aforementioned date as the start of modern competition policy in Uruguay is troublesome for one reason. Penalties in this first law appear to not have been dissuasive. According to article 157 of the Law 17.296, the fines for violations ranged from 500 to 20.000 Unidades Reajustables (UR).[22] To have a general idea, in December 2000, this was equivalent to a range between 8.086 USD and 323.451 USD.[23] In contrast, the current law’s ceiling for fines is the highest of either 20.000.000 UR, 10% of annual revenue of the firm, or the equivalent to three times the damages of the conduct when they can be measured.[24] Therefore, the date for Uruguay is set as that when the current competition authority commenced operations, which is March 2009.[25]

As it can be seen, the date from which the start of modern competition policy can be counted is not 100 % clear in many cases. Some judgment calls had to be made according to the criteria presented at the beginning of both posts. Even if there could be some disagreement regarding the dates set here, the sources and argumentation have been made explicit so that they can be a useful input for anyone interested in the subject.

To conclude, the research shows that the time frames in which competition policies were adopted in Latin America are significantly diverse. In the two extremes we have Chile with a modern regime since 1973, and Paraguay, Guatemala, the Dominican Republic, and Haiti as part of the ever-smaller club of countries that still lack an operating competition policy. In between, we have the 1990s’ wave that coincided with a period of economic liberalization in the region and the second wave of adoptions in the first decade of the 21st century.

The table below summarizes the information for the South American countries.

Country Starting date of modern competition policy
Colombia 1992
Venezuela 1992
Ecuador End of 2012
Peru 1993
Brazil 1994
Bolivia 2008
Chile 1973
Argentina 1997
Paraguay 2016
Uruguay 2009

*Co-editor, Developing World Antitrust

[1] Colombia – Peer Review of Competition Law and Policy. OECD, 2009. Available at http://www.oecd.org/daf/competition/44110853.pdf

[2] Http://www.sic.gov.co/drupal/historia.

[3] Http://www.lcuc.cl/documentos_down/mapa/venezuela.pdf.

[4] http://issuu.com/scpm2013/docs/plantilla_enero2?e=7566755/4091848

[5] http://www.scpm.gob.ec/wp-content/uploads/2014/12/Resolu_24ene.pdf

[6] http://www.indecopi.gob.pe/0/modulos/JER/JER_Interna.aspx?ARE=0&PFL=2&JER=88

[7] http://www.indecopi.gob.pe/0/modulos/JER/JER_Interna.aspx?ARE=0&PFL=0&JER=600

[8] Peru – Peer Review of Competition Law and Policy. OECD, 2004. Available at http://www.oecd.org/daf/competition/34728182.pdf

[9] http://competitionregimes.com/pdf/Book/Americas/104-Brazil.pdf

[10] Brazil – Peer Review of Competition Law and Policy. OECD, 2010. Available at http://www.oecd.org/daf/competition/45154362.pdf

[11] http://competitionregimes.com/pdf/Book/Americas/104-Brazil.pdf

[12] Decreto Supremo 29519 of April 16, 2008.

[13] http://www.lcuc.cl/documentos_down/mapa/chile.pdf

[14] http://www.fne.gob.cl/wp-content/uploads/2011/05/OTRO_0001_2010.pdf

[15] Chile – Peer Review Competition Law and Policy. OECD, 2010. Available at http://www.oecd.org/chile/47951548.pdf

[16] http://competitionregimes.com/pdf/Book/Americas/106-Chile.pdf

[17] Argentina – Peer Review of Competition Law and Policy. OECD, 2006. Available at http://www.oecd.org/daf/competition/Argentina-CompetitionLawPolicy.pdf

[18] http://www.cndc.gov.ar/memorias/memoria97/memoria3.htm

[19] Id.

[20] http://www.presidencia.gov.py/archivos/documentos/DECRETO5990_t5q051l7.pdf.

[21]https://books.google.de/books?id=esb5agSJfkkC&pg=PA79&lpg=PA79&dq=Decreto+Reglamentario+86+del+2001+Uruguay&source=bl&ots=01dx9KDZU5&sig=y5Xv-sVqsGv6KwJk0yWhluI6GVA&hl=es&sa=X&ved=0CDIQ6AEwA2oVChMI4YWUo96WxgIVRdksCh0MmQaE#v=onepage&q=Decreto%20Reglamentario%2086%20del%202001%20Uruguay&f=false

[22] http://www.parlamento.gub.uy/leyes/AccesoTextoLey.asp?Ley=17296&Anchor=

[23] UR values can be found here http://www.impo.com.uy/bancodatos/ur.htm and the historic of exchange rates here http://www.cambio.com.uy/index.php?op=Default&Date=200012&blogId=1

[24] Article 17 of the law 18.159. http://www.parlamento.gub.uy/leyes/AccesoTextoLey.asp?Ley=18159&Anchor=

[25] http://competencia.mef.gub.uy/innovaportal/file/1439/1/2010_03_22_memoria_2009.pdf

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29 June 2015
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Latin America

The Adoption of Modern Competition Policies in Latin America – Part I: North and Central America and the Caribbean

By Francisco Beneke*

(Last updated on 12 April 2017)

Competition policy, as we now know it, is a relatively recent phenomenon in some Latin American countries, not so new in others, and non-existent in an ever smaller group. The issue of antiquity is illustrative of the context in which enforcement authorities and the courts interact with each other. It can affect the degree to which they are influenced by older regimes and also tell us something about the path of institutional strengthening that every authority undergoes. In other words, one would expect that long-standing competition authorities face different challenges than their younger counterparts.

Because the post was turning into a lengthy document, I will divide it in two parts. Part I deals with North and Central America and the Caribbean, and part II will present the information corresponding to South America. The latter will be published in one-week time.

The year in which I consider that a modern competition policy began in each Latin American country is presented. The starting date is counted from when a competition authority started to exist, who is in charge of enforcing an antitrust law applicable on an economy-wide basis, as opposed to sectoral regulation of competition. Exclusively criminal liability statutes are excluded since experience has shown they were seldom enforced and, therefore, cannot be counted as a policy apt to deter anticompetitive behavior. For the same reasons, in some cases I do not start counting from the year of the country’s first economy-wide competition law if they were either not enforced or done so in procedures without the expectation of a dissuasive penalty. More details will be presented as each country is analyzed.

  1. Mexico

Mexico’s first competition law entered into force in June 1993, and created the Comisión Federal de Competencia.[1] It is hard to find the exact month when the institution started to operate. According to the first annual report, merger control activity and the prosecution of anticompetitive behavior started during the second half of 1993.[2] Therefore, that year is set as the starting date of modern competition policy in Mexico.

  1. Guatemala

Guatemala is one of two countries in Latin America that still does not have an economy-wide competition law.

  1. El Salvador

El Salvador’s first competition law entered into force in January of 2006, date in which the antitrust authority, Superintendencia de Competencia, started to operate.[3]

  1. Honduras

Honduras’s first competition law entered into force in February 2006 but it was not until December of that year that the Comisión para la Defensa y Promoción de la Competencia started to operate.[4]

  1. Nicaragua 

Nicaragua’s first competition law came into force in June 2007, but it was not until March 2009 that the first authorities were elected and started to hire the authority’s first team of professionals.[5] Therefore, the latter date is set as the beginning of competition policy in Nicaragua.

  1. Costa Rica

According to the OECD peer review of competition policy in Costa Rica, the Comisión para Promover la Competencia started to function in 1996 (OECD (2014, p. 7)).[6] However, the same report states that the first cases decided by the authority date back to 1995 (Id., p. 28 & 34). The authority’s website shows the same information of a cartel and an abuse of dominance case that were resolved in 1995.[7] It appears that the OECD 1996 date may have been a mistake and that the real year in which the antitrust law began to be enforced was 1995.

  1. Panama

Panama’s first competition law was enacted in February of 1996, but according to the OECD peer review, the antitrust authority received its first endowment in 1997 (OECD (2010a, p. 57)).[8] Indeed, 1997 is the first year in which the Comisión de Libre Competencia y Asuntos del Consumidor reports activity.[9]

  1. Dominican Republic

The Dominican Republic’s first law was enacted in 2008 but the authority was only able to start its enforcing tasks in January 2017 because that was the date when its Executive Director was chosen.  [10]

  1. Haiti

Haiti is the other one of the two Latin American countries that does not have a competition law.

The table below presents a summary of the information.

Country Starting date of modern competition policy
Mexico Ca. June, 1993
Guatemala No competition law enacted
El Salvador January, 2006
Honduras December, 2006
Nicaragua March, 2009
Costa Rica Ca. January, 1995
Panama Ca. January, 1997
Dominican Republic January, 2017
Haiti No competition law enacted

To conclude, it is worth noting that Mexico’s policy is the oldest from the countries under analysis. In Central America one can distinguish two waves of adoption of competition policy, with Costa Rica and Panama as the pioneers. The rest of Central America caught up some 11 to 14 years later with the exception of Guatemala, who under the Association Agreement with the European Union has the obligation to pass a competition law by the end of November of 2016. The two sovereign Latin-Caribbean states lack competition policies as well, though the Dominican Republic is just a few steps away.

*Co-editor, Developing World Antitrust

[1] Http://189.206.114.203/index-cfc.php?Itemid=617.

[2]Http://189.206.114.203/images/stories/Publicaciones/Informesanuales/completos/informe9394completo.pdf.

[3] Http://www.sc.gob.sv/pages.php?Id=8&Id_menu=102010.

[4] Https://www.cdpc.hn/sites/default/files/Privado/Memorias/memoria%25202006.pdf.

[5] Http://www.procompetencianic.org/info/2012/InformeEjecutivo2009.pdf.

[6] Http://www.oecd.org/daf/competition/CostaRica-PeerReview2014esp.pdf.

[7] Http://www.coprocom.go.cr/que_hacemos/sanciones.html.

[8] Http://www.oecd.org/daf/competition/46587096.pdf.

[9] Http://www.acodeco.gob.pa/acodeco/view.php?arbol=4&sec=19&pagi=0.

[10] Https://www.diariolibre.com/economia/nueva-directora-ejecutiva-viene-a-darle-validez-a-pro-competencia-CG5932567.

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13 May 2015
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Non classé

Competition Law in the BRICS Countries and the automotive parts industry

By Amine Mansour*

In a paper published in 2013, M. Connor asks if the Auto Parts market is evolving into a supercartel.

Since then, the industry has witnessed several developments (at the global stage). The most important ones occurred in the BRICS. In this regard, the South African Competition Commission has launched investigations in the automotive industry. The investigations are based on the suspicion that automotive component manufactures colluded when bidding for tenders to supply components to original equipments manufacturers (OEMs). Similar investigations are carried out by the Brazilian CADE since last February. These add to a larger group of investigations conducted by the CADE in the automotive component sector (See here and here ). In China, the NDRC already imposed a $200 million combined fine on 10 Japanese auto-part makers for manipulating prices of spare parts. In August 2014, the Indian Competition Commission imposed €350 million on 14 car companies. However the decision seems to sanction car companies’ abusive conduct that forecloses the after-market for supply of spare parts, not collusive behavior of OEMs. Several other antitrust authorities, mainly the Mexican and the South Korean ones, opened investigations targeting the auto parts industry.

Given all these developments, the question raised by M. Connor becomes, two years later, more and more relevant. The auto parts cartel is undoubtedly going to be remembered as one of the largest international cartels. M. Connor reports that the Auto-part cartel “has already surpassed the former champion, Air Cargo, in terms of number of companies accused and convicted”. However, unlike past cases, the BRICS find themselves not only in the heart of international investigations but also have taken the lead of this process.

In fact, the rapid spread of investigations to BRICS countries is more than a sort of a country to country effect. It is true that the South African Competition Commissioner, Tembinkosi Bonakele, states that “The Commission’s investigation into this pervasive collusive conduct joins similar investigations launched in other jurisdictions internationally”.

However, what is being met here underlines that almost every international antitrust case has an impact on the BRICS, either directly or indirectly. This translates into companies’ actions as they enter into a race in order to take advantage of the whistle blower and leniency programs established in these new/major jurisdictions. Given what is at stake, companies’ actions go beyond simple cooperation to incorporate self reporting of practices detected in adjacent markets. At least, this is what reveals the rapid expansion of investigations, which began in Europe, from one component, wire harness, (EU Commission) to over 121 automotive components in the South African case. A large part of cases were not opened as a consequence of the dissemination, through international cooperation, of information needed to open investigations but more as incentives grow to voluntary self disclosure of collusive conducts with the involvement of economically important markets. As competition agencies in these major markets become more and more proficient, there is a strong possibility that they will play a significant role in detection of international cartels mainly through the incentivizing effect of leniency programs.

Such a self-reporting and self-investigation dynamics are probably what explain the non-coordinated interventions of competition authorities in the BRICS. In South Africa, the case seems to me as a transversal case that affects the whole sector (82 automotive component manufacturers have colluded in respect of 121 automotive components) while in Brazil, CADE’s intervention is rather a disparate one (At least 4 different formal investigations). In the latter case, it appears that the CADE received different information at different intervals of time which translates again to this self investigation and self reporting trend by the involved companies.

The case is not only important in showing the growing importance of BRICS’ competition regimes and subsequently the parallel evolution of antitrust-risk management by companies operating in those markets.

It will also reveal how BRICS’ competition authorities are going to deal and prioritize investigations in markets of primary importance. In this case, the importance of that market results mainly from the growing urbanization and the increased need of mobility in emerging countries which most likely makes telecommunication and transport as expenditure items that experience the biggest growth in households’ portfolios. In this regard, it is legitimate to ask whether this may drive BRICS’ competition authorities to adopt a particular strategy in order to reassure consumers that they focus on markets where they direct or wish to direct their spending.

The South African Competition commission has it own answer. According to Tembinkosi Bonakele, the Competition Commissioner, the Commission “will prioritise the investigation of cases that involve automotive components that are in vehicles assembled in and supplied to the South African market”. Besides focusing mainly on the domestic impact of the considered practices or even adopting a tough line, another option in this case would be to open parallel investigations shedding some light on the secondary market (After-sale Market) or at least explain to the wider public that concerns are unjustified. From the perspective of consumers, these concerns are more than legitimate. It is easy to think that nothing prevents component manufacturers from supplying the same part to the same OEM for the sale on the after-market for a price that is no less than the one charged when colluding for tenders.

Waiting for further developments in these cases, one thing is clear: the BRICS countries have become main players in shaping global markets through their competition policies.

*Co-editor, Developing World Antitrust

20 March 2015
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Antitrust and IT Markets

Collaborative economy: a competition (or regulation) issue?

By Ángela María Noguera*

Some weeks ago I attended a conference about collaborative economy in Madrid (http://www.aedc.es/seminario-sobre-economia-colaborativa-y-promocion-de-la-libre-competencia-en-el-mercado/). The main purpose of the conference was to discuss whether this new way of approaching consumers (or better, of consumers approaching offered goods and services) should be analyzed from a competition law and economics perspective. I hadn’t thought about this phenomenon before, so I share some of what was discussed and the arising questions.

Collaborative economy or sharing economy consists basically in offering goods and services that are being sub utilized and which use can be maximized. It is the case, for example, of a spare room or guest room in a house, sharing a car with others to travel from one place to another, using a common backyard to plant vegetables in a neighborhood, sharing a meal, listening to music, etc. (v.gr., Airbnb, Bla Bla Car, Spotify, Deezer, Eatwithme). It is a change in the consumption paradigm as it is transforming from acquisitive consumption (buying goods and services) to consumption of use.

There is no novelty in the principles of the sharing economy if we think that many communities with certain degree of solidarity have been sharing their goods and services forever. And more than one of us has let the cousin of a friend sleep in our sofa or spare bedroom, or has traveled by car with the friend of a friend who is going to the same destination that one is heading to.

Thus, what appears to be the turning point is the organization of the sharing tradition. This well-known and anciently practiced solidarity is now a global phenomenon that is now accessible through virtual platforms. Thus, we may say that a market, in its simplest form, has been created.

A basic definition of market could be that it is a place where forces of supply and demand meet. So now, with this ancient/new paradigm of collaborative economy it is no longer necessary to have any kind of relationship (the cousin of the cousin of a friend) whatsoever to get to use someone’s sofa for a couple of nights. It is as simple as downloading an application on a smartphone or surfing the internet to find what you need. Then, with few clicks you can coordinate the service, set the date, pay and that’s all. That’s how demand and supply meet and that’s how the service is hired.

This organized scheme, the simplicity to acquire the services and the existence of online platforms of suppliers are the ingredients starting to raise some concerns from the authorities. Is offering these services legal? Is it necessary to regulate them?

What is the role of platforms? Services are often offered through legally established companies who are developing legal activities, so there is nothing bad about it. However, platforms do not provide the services they offer and only serve as “marketplace”. What’s their role? Should they be regulated? Can they charge commissions? Are they jointly responsible for service failures or if, for instance, someone has an accident in the property or car of the unknown person? Many questions with one foreseeable answer by authorities: “regulation”.

I’m not particularly fond of such an answer. I’m actually of the opinion that in many cases excessive regulation is more harmful than beneficial, but that is a whole discussion that might go in another post, so I won’t discuss it here.

Specific questions arise from a competition law perspective: are these services competing with traditional services or are they separate markets? For instance, it is worth wondering if Airbnb competes with regulated hotels, hostels and B&B. Or if Bla Bla Car competes with public transportation services. If that were the case, could we be in a discrimination scenario between traditional and non-traditional services? Some panelist in the conference recalled that hotels are obliged to comply with more than 50 specific regulations to be qualified to provide their services (sanitary regulations, noise control, fire and ventilation control, formally hired employees, food…) and the same goes for public transportation companies.

And even if the sharing economy services don’t compete with traditional services, why aren’t they regulated? Should they be? It may seem contradictory to think of regulation when apparently the role of these platforms is to aggregate information of something that has always existed (collaboration between people). However, what happens if the collaborative economy is provided by companies or individuals who buy cars or houses with the exclusive purpose of renting them via these platforms, detouring from the original principle of offering sub utilized goods? How to control such situations, which are evidently arising?

The way I see it, and as it was explained by some of the panelists, is that the current main concern seems to be of regulation policy more than competition policy. Nevertheless, I think we should be open to analyze how the new market dynamics and paradigms can affect the economic system that we currently know (or at least try to decipher). It is an additional challenge for competition policy, which sooner or later shall accommodate to this new reality.

*Associate at Garrigues (Colombian Office)
Majors in both economics and law, Universidad de los Andes (Bogota, Colombia)
LLM in International Business, Tilburg University (Netherlands)

Note from the editors: a spanish version of this post was originally published in Lalibrecompetencia.com. This blog entry comes as part of our collaboration agreement with Lalibrecompetencia.

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9 March 2015
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The Net Neutrality Debate: Which Path Will the Rest of the World Follow?

By Francisco Beneke*

Regulations that ban paid prioritization have been discussed in different countries around the world. Prioritizing Internet content is either allowing certain data to travel faster, to not count it towards an end user’s maximum consumption cap, or any other form of preference that an Internet Service Provider (ISP) can contract with a content provider. The first country that adopted a ban on paid prioritization was Chile in 2010. Regulation of this type was also adopted in Mexico as part of a reform package in 2012 in the telecommunications sector, which included constitutional reforms that make access to the Internet a constitutional right. Other countries that prohibit prioritization include the Netherlands and Ecuador. The last country to issue such a prohibition has been the United States amidst a heated debate. The nascent trend of regulation and the adoption of such a rule by influential countries in their regions and worldwide can be a catalyst for many other countries to discuss and eventually adopt similar regulations. Therefore, it is important to sketch and analyze the main arguments that surround the debate.

In the US, the Open Internet rules adopted by the Federal Communications Commission (FCC) ban paid prioritization by means of classifying broadband Internet suppliers as common carriers under Title II of the Communications Act. The reclassification means that the services provided as a common carrier are excluded from Federal Trade Commission (FTC) jurisdiction. This is a particularity specific to the United States legal system and, therefore, it is not something that must necessarily be an issue in other countries. Having clarified this, we can move on to the substantive arguments of the debate.

Before the FCC adopted on a divided vote (3-2) the Open Internet rules, a group of scholars wrote a letter to the FTC Commissioners requesting them to advocate against the rules. They argued that the ban on paid prioritization amounts to a per se prohibition and that there is not sufficient evidence that supports the main justifications for instituting such a broad-sweeping rule: the high likelihood of significant harm and the low likelihood of both overlooking possible pro-competitive justifications and deterring pro-competitive behavior.

Another group of scholars reacted to the aforementioned letter and wrote to the Commissioners supporting the ban. On their part, they argued that there is enough evidence on the net benefits to competition that a bright-line prohibition on paid prioritization can have. They point to the fact that the United States Court of Appeals for the D.C. Circuit found the FCC’s position as reasonable and grounded in substantial evidence in Verizon v. Federal Communications Commission, 740 F.3d 623 (D.C. Cir. 2014). In that occasion, the court stroke down the FCC’s ban but on the ground that it had relied on an inadequate statutory basis. The classification of broadband services under Title II solves that problem.

The opponents of the Open Internet rules favor a rule-of-reason kind of approach to paid prioritization. They point to an FTC report in 2007, which states that the broadband industry is a dynamic one and that it is moving towards more competition. The report also points out that it is not clear if ISPs have a clear incentive to discriminate against data from non-affiliated content providers. Furthermore, even if such discrimination takes place, the FTC argues that it is not possible to know a priori if the net effect on consumer welfare will be negative. For the academics that oppose the regulations, price discrimination will lower the costs of content providers that do not need to use a fast lane (such as email services) and only firms that rely on greater speeds need to bear a higher price (e.g. Skype).

Supporters of the regulations, on the other hand, believe that the price discrimination schemes will take an anticompetitive turn because of the gatekeeper position of ISPs.

The argument behind the claim that the effects of paid prioritization need not be anticompetitive relies on competition between ISPs as a force that will discipline the market. There are at least two reasons why on this instance the trust in market forces can be misplaced. One of them has to do with information asymmetries. The bargaining power of the ISP can be higher compared to the content provider even if it does not have a dominant market share. The ISP can bargain hard by lowering the download speeds from, for example, Netflix without fearing that its customers are going to divert to other ISPs. The reason is that it will be hard for end users to distinguish who is to blame for the lower quality of the service and, therefore, they will have a weaker incentive to switch to other ISPs. The second point has to do with switching costs. Even if one assumes that customers have perfect information, it is still costly to switch from one ISP to another because of contract commitments and brand loyalty, among other factors. This is why the supporters of the ban talk about a terminating monopoly or gatekeeping position from the part of ISPs.

In addition, the supporters of the ban argue that a rule-of-reason approach cannot be relied on because, at least in the US, the hurdle to prove exclusionary conduct is high, which will discourage many administrative and judicial complaints. Such an approach would also mean higher administrative costs in adjudicating disputes, which would be avoided by a bright-line ban on paid prioritization.

Both sides of the debate are also divided on the effects that the regulations will have on innovation. For the supporters of the Open Internet rules, the ban will promote innovation from content providers. For the opponents, forbidding paid prioritization will chill innovation on the part of ISPs.

The innovation argument of the supporters’ side is built on the idea of a virtuous cycle that flows in the following direction: when new content or apps are developed by edge providers, more people use the internet, which in turn pushes ISPs to innovate and increase their broadband capacity. In the supporters’ letter to the FTC words: “if the next Facebook has to pay for an Internet fast lane, the next Mark Zuckerberg might go into investment banking instead of creating the next big new thing on the Internet”.

The opponents of the ban do not explain in detail why innovation would be hindered by the regulations but implicit in their stance is that the price discrimination mechanism and the increased profits it can bring might act as an incentive to develop faster broadband technology (an argument akin to what patent rights do to innovators).

The issue of the effects on innovation is complex and it is hard to make a good prediction on how the innovation in these markets really works. Regarding the virtuous cycle described by the supporters of the ban, the causality can feasibly run in a different way. It might be that investments in broadband capacity and innovations that increase traffic speeds incentivize innovation on the content providers’ side. This may be true at least for developers of apps and content who  rely ever increasingly on the speed of networks. On this respect, the course of the innovation cycle is ambiguous from a prospective point of view.

Regarding the opponents’ argument on innovation effects, extracting revenue from content providers as an incentive to improve the network will come as a trade-off with innovation from the content side. In other words, paid prioritization could, in theory, promote innovation from ISPs but at the cost of less innovation from edge providers. On this instance, this is an effect that one can predict with higher certainty because paid prioritization will decrease the appropriability of benefits on the side of developers of apps, web pages, and so on.

The argument of the opponents’ side also makes sense only if the content providers’ demand for higher speeds is more inelastic than the end consumers’ demand. That is, if for every dollar less charged to consumers the ISP can charge more than a dollar to edge providers. In this case, the price discrimination scheme will allow ISPs to increase both their revenues and their incentive to innovate. However, the lower elasticity from the side of content providers can be an argument against the desirability of the trade-off between innovation from ISPs and edge providers from a dynamic perspective.

One reason to think that ISPs face a less elastic demand on the content providers side is because of the terminating monopoly that was explained above. Whereas a certain market share would not grant an ISP market power in the end user market, it could do so in the market for paid prioritization. The reason is that if an ISP is of a certain size, the content provider cannot reasonably succeed if it cannot have access to the network’s users, which in turn weakens its bargaining position against the ISP. Therefore, it is not necessary that the latter enjoy what is conventionally believed to be a dominant market share in order to extract supra-competitive rents from edge providers.

One issue that will not be analyzed in depth in this post is the discussion around the narrowness of antitrust law’s objectives and their inadequacy to protect what is at stake in net neutrality. In this respect, the position of dissenters of the ban has been misunderstood. They do not advocate for antitrust laws to solve the issue from a consumer welfare point of view, but rather for an antitrust law-like approach. They propose a rule-of-reason framework in which all relevant policy objectives must be weighed. Therefore, the criticism that consumer welfare is too narrow to justify the benefits and harms of paid prioritization is not applicable.

Finally, another point of dissention is the freedom of ISPs to manage the traffic on their network. Paying for transiting in a high-speed lane can be viewed as a way of increasing efficiency in the market. Why? Because every content provider that develops an attractive app imposes an externality on previous firms by congesting the highway. Therefore, it would only be fair if a new content provider internalizes part of the cost it causes. Nevertheless, the argument has a weak point. Even without being able to charge content providers for a toll, the ISP can still manage traffic on its network in an efficient way without the incentives of charging monopoly fees to edge providers.

To conclude, although both sides have valid arguments, a rule-of-reason approach to solve the problem causes more costs than benefits. The reliance on a case-by-case ex post solution to the problem can be misplaced because it does not account for the difficulty of developing a system that adequately deters harmful conduct. An ex post law enforcement approach would make more sense if there is reason to believe that the market will generally perform well, which is the argument the opponents of the ban make. However, for the reasons stated above, there is stronger evidence that supports the theory of a terminating monopoly held by ISPs. One can also look into other platform markets where there appeared to be competition but in the end the platforms did enjoy market power against one side of the platforms. Specifically, I am referring to the credit card payment market. Visa and MasterCard where successfully prosecuted for anticompetitive conduct against merchants that accept credit cards, followed by another ruling against American Express on similar grounds. The resemblance of the arguments in the credit card cases and on the debate around the Open Internet rules is hard to miss, and the former sets an example that tilts the balance in favor of banning paid prioritization.

*Co-editor, Developing World Antitrust

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6 March 2015
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Latin America

Uber: Competition between platforms, innovation and economic policy in Colombia

By Victor Ayalde Lemos*

The relationship between law and the digital economy has been widely discussed. Low barriers to entry and costs, an important characteristic of the digital economy, enable market participants to offer free or very cheap products. The latter means that competitive differentiation is no longer patent through price differences, but through innovation and other added values that can be offered.

The aforementioned is just a manifestation of the undeniable premise that the digital economy evolves faster than the interpretation and application of the law. This situation generates an incentive for legislators and regulatory authorities to issue new regulations or amend the existing ones in order to include the new business models. Such is the case of one of the most obvious platforms: the Internet.[1]

I consider that the intervention in the economy by legislative and regulatory bodies should be minimal. Indeed, there is evidence that regulation on digital affairs tends to be ineffective (SOPA, PIPA, Ley Lleras, Hadopi, Sinde, among others) given the fact that problems are due to mainly the lack of adaptability of incumbent market suppliers. The answer to these problems has been a mix of enforcement (to a limited extend), but mostly from the acknowledgment of firms that they must adapt to the current trends and compete through innovative competition (Itunes, Netflix, HBOgo and other on demand content services).

In regulated markets, some incumbents use, the old argument, that new businesses infringe upon the current legal framework and thus they should be banned from any economic activity. Some countries have been, willingly or unwillingly, accomplices of this undesirable behavior, which of course can represent the breach of international treaties and principles such as national treatment and most favored nation.

From an economic policy view, it could have harmful effects: discouraging investment and undermine the exercise of consumers’ fundamental right of free choices of quality products. In this context, the Uber case becomes relevant, as it will send a message regarding the path that Colombia has chosen as a business forum in a globalized and digital economy.

Professors Fox and First, from NYU law school, have considered Uber as a technology platform-app, which can have an important impact on this market globally[2]. And is under this premise that I believe that the anticompetitive effects of Uber should be assed. Otherwise, it would mean that Tappsi and Easytaxi are ground transportation companies, and that apps such as Domicilios Bogotá[3] are restaurants, and Metrocuadrado[4] is a real estate company. Consequently, it is clear that, on one side, we have the market of technology platforms and, on the other side, there are transportation services associated with these platforms. The latter is just one end of the platform that uses it as means to provide its services to the clientele that also is deciding on which platform to use to acquire the services.

Bearing the latter in mind, we now shall analyze the antitrust and unfair competition accusation against Uber, summarized as follows: (i) an alleged price fixing arrangement; (ii) excessive pricing; and (iii) unfair competition for violating the general prohibition in which all participants in the market must always respect the principle of good faith in commerce and other regulations. In order to make the right approximation to the matter, I would invite readers to approach inter and intraplatform competition in the same manner as inter and intrabrand competition.

First, lets address the price fixing allegations. In my view, this is an intra-platform problem. Uber price is calculated based on the number of users demanding the service and the suppliers at a given time. The platform price is devised so as to increase and decrease under the free play of supply and demand. Therefore, price surges offer an incentive for drivers to join the platform. All this, of course, adjusted to the traveled distance and time as it occurs in the case of taxis where there is also a fixed factor that is multiplied by the number of traveled meters. In this sense, price is set according to an algorithm vertically determined by Uber which responds to supply and demand criteria, and has the necessary elements that serve to promote competition between platforms.

Besides all of the above, it is important to understand that antitrust law embraces the idea that any vertical restriction is relevant only if it represents an abuse of dominant position. In this case, there is no such position because Uber drivers are free to associate to any platform and offer their services directly by using the commercialization channels described before. Users can freely choose between Uber, Tappsi, Easytaxi or any other transportation mode they deem convenient. Thus, both suppliers and consumers are price-takers and in this way, neither can determine price.

This takes us to the second restriction: excessive pricing. This problem is being generated by the wrong interpretation of the current legislation, blocking Uber´s access to the national market. Determining that Uber is a transportation undertaking and thus unable to render its services without a license, generates a shortage in the market, which affects all the vehicles that want to associate to multiple platforms and the users that have to choose between them.

Additionally, it is important to consider that regulated taxi fares are not protecting users. Instead, they are generating a shortage in the provision of the service and a prejudice to consumers welfare because they can´t simply get around them – this cost is much higher as users who cannot transport themselves have to sacrifice satisfaction of other necessities as well. If we allow various platforms to operate, and taxis develop their own platforms and associate to them, competition between those markets can increase in an exponential way, contently leading to a competitive market price.

Finally, in relation to unfair competition allegations, it is important to understand that these supposed restrictions are the result of the wrong interpretation of the transportation law that rules in Colombia. First they are applying transportation regulation to an app, which is a platform that acts as a meeting point between supply and demand. And also, in regard to Colombian Regulations there is no such violation as Uber associated vehicles are licensed under special transportation services pursuant to Decree 147 of 2001.

It is then clear that the Uber case is a transcendental one. The way this case is handled will set the path that will label Colombia into one of two categories. The first one, as a country ready to be included in the global economy, where the fundamental principles of an economic model are respected without discrimination or undue restrictions on market agents – such us unlawful application of regulations -, which seeks to attract new and innovative business models in support of its economic development policy. Or, a country that is hostile to the above, in which old monopolist business models are allowed to maintain their rights under the abuse of law, generating interpretations that will aim to maintain a status-quo that in my opinion, is absolutely detrimental for both suppliers and consumers.

This is an invitation for legislators and regulatory authorities. We can´t keep regulating industries without necessity, and if we do it, we must follow the proportionality and rationality principles, without forgetting the legal and economic nature of those industries. Likewise it is an invitation to the incumbent economic agents who are confronting competition, to face it with new market strategies – innovation and added value – and not by legal actions, and for consumers, to maintain and raise their voice in order to require their constitutional rights to the freedom of choice and freedom of circulation.

[1] The Federal Communications Commission has long debated weather to include the Internet as a telecommunication service or information service. One or another would enable regulatory agencies to intervene to a greater or lesser extend on this platform.

[2]http://www.slate.com/blogs/moneybox/2015/01/13/uber_competition_can_a_global_taxi_alliance_put_other_ride_apps_on_the_map.html

[3] Online Delivery Directory.

[4] Listing Service similar to Craigslist.

*Associate, Esguerra Barrera Arriaga
LLM in Global Business Law (NYU-NUS)

Note from the editors: a spanish version of this post was originally published in Lalibrecompetencia.com. This blog entry comes as part of our collaboration agreement with Lalibrecompetencia. You can also check out the presentation of this post on the February Monthly Meeting of the Center for Competition Law Studies

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5 March 2015
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Latin America

The Center for Competition Law Studies in Colombia and its 20th year anniversary

Editorial Team, DWA

The Center for Competition Law Studies (CEDEC) in Colombia was founded on March 1995. In its 20 years of activity, it has set an example to the academic community in the region. Its commitment to the development and dissemination of ideas in Latin American competition policy is evident in the wide range of activities in which the center is involved: its monthly meetings serve as a forum for the study of the latest developments in competition law in Colombia and Latin America; it manages an academic journal that publishes on a yearly basis papers on competition policy in the region; and, its members have been actively publishing books and academic articles on the subject and teach in graduate programs in Colombia, among other activities. As one can clearly see, the center makes a point of keeping itself busy.

The activities of the center and others in the region, such as the Centro de Libre Competencia in Chile and the Instituto Brasileiro de Estudos de Concorrência, Consumo e Comércio Internacional in Brazil, make a significant contribution to the study of the specificities of competition policy across countries. This is why in DWA we receive with joy the news of CEDEC’s 20th year anniversary. For more information about the center, check out their website. From our part, we wish CEDEC every success in the years to come.

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