Bill for the organic law on unfair competition

On January 18, 2022, the Superintendency of Market Power Control (“SCPM”) submitted to the National Assembly the Bill for the Organic Law on Unfair Competition (the “BoL”), with the aim of creating legal frameworks different for acts of unfair competition and for restrictive practices of competition, such as the abuse of market power and agreements between competitors. This is an important initiative, which derives from the recommendations made by the OCDE, in the face of the verification of a very high incidence of sanctioning processes for unfair practices compared to those derived from restrictive practices of competition within the SCPM. It seeks to refocus the resources of the competition authority in strengthening the promotion of investigations and studies of restrictive practices of competition, control of economic concentrations and promotion of free competition.
 


Unlike the Organic Law for the Regulation and Control of Market Power, which only prohibited unfair practices when “these prevent, restrict, falsify or distort competition, threaten economic efficiency, or the general welfare or the rights of consumers or users”, the BoL prohibits all unfair practices but limits the competence of the SCPM, to the judgment and sanction of those cases in which the unfair practice due to its seriousness and magnitude, not only affects the particular rights of economic agents of the market, but also the interests of public order and free competition. In these cases, the conduct is classified as an aggravated unfair practice, which contemplates penalties from 8% to 12% of the total income.



 
According to the BoL, cases of unfair practices that are not classified as aggravated will be resolved in the civil jurisdiction, through any of the following acts:

1. Declarative action of disloyalty.
2. Action to cease the unfair conduct or prohibit its future repetition. The prohibition action may be exercised if the conduct has not yet been put into practice.
3. Action to remove the effects produced by the disloyal conduct.
4. Action to rectify misleading, incorrect, or false information.
5. Action for compensation of damages caused by unfair conduct.
6. Preventive measures established in this law.

In cases of aggravated unfair competition, if the affected party chooses to initiate the administrative procedure, he or she may not exercise legal action, with the exception of compensation for damages.
 
Among other behaviors, the following are typified as unfair practices in the BoL:

• Acts of confusion;
• Acts of deception;
• Misleading omissions;
• Aggressive practices;
• Acts of limitation;
• Acts of denigration;
• Acts of comparison;
• Exploitation of the reputation of others;
• Violation of secrets;
• Induction to breach of contract;
• Violation of regulations;
• Abuse of situation of economic dependency;
• Sale at a loss;
• Unfair advertising;
• Sales with pyramid scheme

The BoL also replaces the name of “Superintendency of Market Power Control” with “Superintendency of Economic Competition”. The administrative procedures related to the investigation and sanction of alleged unfair practices that have been initiated before the enactment of this law, the BoL provides that they continue to be substantiated and resolved until their completion, in accordance with the LORCPM.