New methodology for the calculation of fines for infractions to the Organic Law for the Regulation and Control of Market Power

New methodology for the calculation of fines for infractions to the Organic Law for the Regulation and Control of Market Power - CorralRosales - Lawyers Ecuador
The Resolution No. SCPM-DS-2021-19 issued by the Superintendency of Market Power Control (“SCPM”) containing the new methodology for the calculation of fines for committing infractions to the Organic Law for the Regulation and Control of Market Power (the “LORCPM” and the “Fines Calculation Resolution”, as appropriate) was published in the Fourth Supplement to the Official Gazette No. 465, on June 3, 2021.

Along with other modifications introduced in the Regulation for the Application of the Organic Law for the Regulation and Control of Market Power (“RALORCPM”) last December, the power to determine fines was brought back to the SCPM. Up until this reform, the determination of fines was regulated by Resolution No. 012, issued by the Market Power Regulation and Control Board (“Resolution 012”).

Although this new calculation model is based on the same principles as Resolution 012, it provides greater clarity in the application and, therefore, greater predictability – and the possibility of verification – of the fines that may be imposed in the event of an infringement of the LORCPM. The calculation formulas incorporated in the Fines Calculation Resolution continue to have a certain level of complexity, but each term is clearly defined, which will allow the fined operator to verify it.

The Fines Calculation Resolution seeks to transmit a dissuasive effect on economic operators through the application of exponential fines, so that those imposed for the most serious anti-competitive acts are proportional and markedly higher to those applicable to the less serious infractions.

The aforementioned resolution establishes the following criteria for the calculation:

  1. Turnover in the relevant market
  2. Degree of participation in the relevant market
  3. Temporality
  4. Size of the relevant market
  5. Market concentration and state of competition
  6. Geographical determination segmented by province or at the national level.
  7. Effect of the infringement on the rights and legitimate interests of consumers and users or on other operators
  8. Benefits obtained as a result of the infringement.
  9. Proportion
  10. Weighing
  11. Damage to the competition
  12. Subsidiarity
  13. Aggravating and mitigating circumstances that concur in relation to each of the investigated/responsible parties.

And establishes as calibration parameters the severity rating as set forth by the LORPCM (mild, serious, or very serious) as well as specific rules for agreements and restrictive practices by object and for collusion (in bids, auctions, contests, and the like).

Among the novel parameters of the methodology, we highlight the inclusion of a differentiated weighting criterion for each of the provinces affected by the illegal conduct.

Additionally, the Fines Calculation Resolution introduces the regulation of fines applicable to the following circumstances/behaviors, which are determined in article 79 of the LORCPM:

  • Sanctions to legal representatives or members of the governing bodies of the infringing economic operator.
  • Cases of noncompliance with information requests by the Authority, delivery of incomplete information and delivery of incorrect information.
  • Calculation of coercive fines, depending on the delay – in days – to comply with the Authority´s decision.
  • Calculation of fines for obstruction of inspections.
  • Fines for failure to comply with a resolution.

The Fines Calculation Resolution is applicable in sanctioning procedures that begin after its publication in the Official Gazette (June 3, 2021). The determination of fines regarding sanctioning procedures that are in the investigation or sanction stage will be governed by the norm in force at the time of their initiation.

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Amendments to regulations for traceability of medicines and medical devices

Amendments to regulations for traceability of medicines and medical devices - CorralRosales - Lawyers Ecuador
Regulation ARCSA-DE-010-2021-LDSS issued on May 19, 2021, amended Regulation ARCSA-DE-030-2020-MAFG, published in the Official Gazette of November 26, 2020, through which the “Substitute Technical Sanitary Regulation establishes the guidelines for the Control of Traceability of Medicines, Biological Products and Medical Devices” was issued. The main aspects of this reform, which entered into force on the date of its subscription, are the following:

1.It is clarified that the inclusion of the unique traceability code in the packaging of medicines, biological products, and medical devices does not require a modification to their marketing authorization unless changes must be made to the packaging to include said code.

2. The maximum term to implement the traceability of medicines, biological products, and medical devices (hereinafter, the “Products”) is modified, depending on the phase to which they correspond. The national health authority shall determine the Products list for each phase.

3. The members of the National Traceability System (hereinafter, “SNT”) must submit to the National Agency for Sanitary Regulation, Control and Surveillance (hereinafter, “ARCSA”) a gradual plan for the implementation of the traceability of their Products (hereinafter, “Gradual Plan”), according to the regulations issued[1] by ARCSA for this purpose.

4. Until ARCSA has a computer system to control the traceability of the Products, the members of the SNT must record the logistical movements of their Products in the system they have for that purpose.

5. The ARCSA computer system will have a database where all the records generated by the systems of each SNT member will be stored. The characteristics of the ARCSA system shall be indicated in the regulations issued by the said authority for this purpose.

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Income and VAT withholdings regime applicable to payment aggregators and online markets

Income and VAT withholdings regime applicable to payment aggregators and online markets - CorralRosales - Lawyers Ecuador
Regulation NAC-DGERCGC21-00000026 issued by the Tax Authority and published in the Third Supplement to Official Gazette 461 of May 28, 2021, establishes special rules for income tax and value added tax (VAT) withholdings.

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Effects of the derogation of the Regulations for the Application of the Organic Law of Communication in advertisement production

Effects of the derogation of the Regulations for the Application of the Organic Law of Communication in advertisement production - Lawyers Ecuador - CorralRosales
The President, Guillermo Lasso Mendoza, issued the Executive Decree No. 32 on May 24th, 2021, which ordered the derogation of the Regulations for the Application of the Organic Law of Communication.

The Organic Law of Communication (“LOC”) determines, in article 98, the rules of nationality for the production of advertisement to be disseminated through social communication media (“Rules of Nationality of Production”) which establish that advertisements transmitted through the social communication media:

Art. 98. – Production of National Advertising. – Advertising that is disseminated in Ecuadorian territory through the communication media must be produced in Ecuadorian territory by Ecuadorian natural persons or foreigners residing in Ecuador or produced abroad by Ecuadorian persons residing abroad or foreign legal entities whose ownership of the majority of the shares in said entity is held by Ecuadorian persons and whose payroll for its realization and production is made up of at least 80% of people of Ecuadorian nationality.

This payroll percentage will include the hiring of professional services.

The import of advertising pieces produced outside the country by foreign companies is prohibited, with the exception set forth in the first paragraph regarding foreign legal entities with a majority of the share package held by Ecuadorian persons.

For the purposes of this law, advertising production is understood to be television and film commercials, radio sports, photographs for static advertising, or any other audiovisual piece used for advertising purposes.

The advertising of international campaigns designed to promote respect and the exercise of human rights, peace, solidarity and human development is exempt from what is established in this article.

Social communication media are defined in the LOC as: “… public and private entities and community organizations, as well as the concessionaires of radio and television frequencies, who provide the public service of mass communication that utilize print media o radio services, television and audio and video subscription services, whose contents can be generated or replicated by the media through the internet.”

The Regulation for the Application of the LOC, among other aspects, regulated the application of the Rules of Nationality of Production for advertisement through alternative channels other than social communication media; and clarified on its application for each type of advertising piece in the case of advertisements aimed at promoting tourist destinations or events abroad or those in which the images of famous people or animated fictional characters that are the image of the brands are used. The derogatory provided by Executive Decree 32 has the following relevant implications in terms of advertising:

– Advertisement to be disseminated through alternative media such as (i) billboards or photographs located in public space in commercial premises; (ii) catalogs; (iii) flyers is no longer subject to the Rules of Nationality of Production.

– Importing printed advertising materials such as diaries, notebooks and catalogs is allowed.

– There is no prohibition for advertisement photography to be disseminated by social communication media to be taken by a foreign photographer – that is not an Ecuadorian resident – as long as the Rules of Nationality of Production regarding the property of the producer is complied with and the production team is at least made up of 80% Ecuadorians.

– There are no guidelines that regulate the application of Rules of Nationality of Production in the case of advertising intended to promote touristic destinations or events located outside Ecuador, the use of images of famous people or animated characters that are the international image of a brand (the derogated Regulations for the application of the LOC allowed the use of these videos/images for up to 20% of the duration of the video or the composition of the piece).

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Standards of govermental ethical behavior

Standards of govermental ethical behavior - CorralRosales - Lawyers Ecuador
The President Guillermo Lasso Mendoza issued on May 24, 2021 Executive Decree No. 4 regarding the Standards of Governmental Ethical Behavior.

This Executive Decree establishes the standards to which the public servants of the Executive Branch to achieve a transparent and efficient public administration at the service of the citizens.

Below the main standards of the Executive Decree No. 4:

Nepotism: Relatives of the president, vice president, ministers and vice ministers of State, secretaries and undersecretaries of State, managers, and directors of public companies, up to the fourth degree of consanguinity and second degree of affinity or those with whom there is a relationship by common-law relationships, cannot be hired or appointed within the same administrative entities. The relatives of the aforementioned officials, within the stated degrees, cannot contract directly nor indirectly with public entities of the Executive Branch.

The use of public assets and resources shall be exclusively for the performance of specific duties

Conflicts of interest shall be declared, and the public servant is prevented form intervening in matters in which such conflicts exist.

Transparency, which includes:

– The promotion of good corporate practices.

– The entities that are part of the Executive Branch will promote the contracting of national and foreign companies that have adopted codes of good corporate practices, including commitments against corruption, environmental protection, promotion of human rights, labor safety and non-discrimination.

– Companies that have their corporate headquarters in countries where executives of such companies are not sanctioned for corrupt practices incurred abroad will not be contracted. It is prohibited to contract with individuals or legal entities that have outstanding assessments from the Comptroller General’s Office.

– It is prohibited to receive gifts, presents, or any other type of benefit, gift or reward, invitations, payments in restaurants, from national or foreign executives or private persons who do or intend to do business or have any other type of commercial relationship with the State.

– When a public official attends an event due to his/her functions, and the protocol so dictates he/she may give and receive gifts that its value does not exceed USD$200.

Equal opportunity and fair treatment by Executive Branch officials who will not discriminate any person based on race, ethnicity, gender, marital status, nationality, age, political affiliation, religion or sexual orientation. Public servants shall be kind, friendly and polite and shall not get involved in situations, activities or interests incompatible with their functions, refraining from any conduct that may affect their independence of judgement.

The Secretary of State for Public Administration and Cabinet will oversee supervision and compliance.

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Data Protection Law

Data Protection Law - Lawyers Ecuador - CorralRosales
The President approved the new Data Protection Law, without any observation.

This is the first data protection law in Ecuador, which represents a radical change in the processing and security mechanisms of personal data.

The Data Protection Law has 77 articles distributed in 12 chapters. The main elements and obligations are the following:

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Visa requirement prior entering the country

Migratory bulletin - Visa requirement prior entering the country - Lawyers Ecuador - CorralRosales
By Ministerial Agreement No. 0000080 dated May 10, 2021 the Ministry of Foreign Affairs & Human Mobility establishes the visa requirement prior entering the country for nationals of the following countries:

1.    Haiti
2.    Republic of the Congo
3.    Mali
4.    Ivory Coast
5.    Myanmar

Nationals of these countries that carry diplomatic, official or special passports, subject to reciprocal visa exemptions under multilateral and bilateral agreements signed by the Republic of Ecuador, are exempted from this provision.

The above mentioned are added to the nationals of the following countries who also require a visa to enter Ecuador:
Afghanistan, Angola, Bangladesh, Cameroon, North Korea, Cuba, Egypt, Eritrea, Ethiopia, Filipinas, Gambia, Ghana, Guinea, India, Irak, Irán, Kenia, Libya, Nepal, Nigeria, Pakistan, Democratic Republic of Congo, Senegal, Syria, Sri Lanka, Somalia, Venezuela, Vietnam and Yemen.y.

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New deadlines for filing the dividend annex

Tax Bulletin - New deadlines for filing dividend annex - Lawyers Ecuador
Regulation NAC-DGERCGC21-00000024 issued by the General Director of the Internal Revenue Service and published in the Fourth Supplement of the Official Registry 446 of May 6, 2021, established new deadlines for filing the Dividend Annex for the fiscal year 2020, according to the ninth digit of the taxpayer’s ID as follows:.

When the filing date is a national or local holiday, the annex may be filed on the following business day, unless it falls on the following month, in which case this rule will not apply, and the annex must be filed in the previous business day.

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Suspension of deadlines in tax matters

Suspension of deadlines in tax matters
Due to the state of emergency declared by the President of the Republic, through Executive Decree 1291 of April 21, 2021, the Internal Revenue Service through regulation NAC-DGERCGC21-00000021 published in the Fourth Supplement of the Official Registry 440 of April 27, 2021, suspended the terms and deadlines in all administrative processes and the statute of limitations for collecting debts from April 26 until May 20, 2021.

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Regulations for the prevention of money laundering, financing of terrorism and other crimes

Regulations for the prevention of money laundering, financing of terrorism and other crimes - CorralRosales - Lawyer Ecuador
The following is a summary of the main obligations of the parties obliged to report to the Financial and Economic Analysis Unit (UAFE) according to article 5 of the Organic Law for the Prevention, Detection and Eradication of Money Laundering and Financing of Crimes, published in the Second Supplement to the Official Registry 411 of March 16, 2021.

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