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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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.