Regulatory reform to the regulation for the application of the organic law for the regulation and control of market power

The Regulatory Reform of the Regulation for the Application of the Organic Law for the Regulation and Control of Market Power, issued by Executive Decree 1193 by President of the Republic on November 17th, was published in the Suplement to the Official Registry No. 341 on December 1st. (The “RALORCPM” and the “Reform to the RALORCPM”, as applicable).

Through this Reform to the RALORCPM, improvements and corrections are introduced that were necessary for the proper application of the Organic Law of Regulation and Control of Market Power (the “LORCPM”). The most relevant changes refer to the following:

– The restoration of the regulatory authority of the Superintendency of Market Power Control (the “SCPM”) to issue regulations of general application, authority which had been eliminated in 2016, limiting it to the issuance of regulations exclusively of an administrative and internal control field. The Reform to the RALORCPM includes an obligation of the SCPM to issue technical regulations -of general application- to regulate:

  • The calculation and determination of fines for infractions
  • Criteria on the definition of economic group and business relationships
  • The conditions for the exemption from the prohibition of agreements between competitors, when they contribute to improve production or marketing and distribution of goods and services, or to promote technical or economic progress.

– Replacement of the analysis process prior to the authorization of merger operations subject to mandatory notification by a process in two phases:

1. In those cases which the SCPM determines that the operation is harmless, based on the information provided, it will issue its authorization within 25 days in Phase 1.

2. In those cases where further analysis or information is required from the parties or other economic operators to determine the possible implications of an economic concentration operation, or where concerns are raised from a competition point of view, the SCPM will resolve on the authorization in Phase 2, observing the terms established in the LORCPM; that is, within a maximum period of 60 days, the course of which may be suspended in the investigation stage to collect information for up to 45 days, or extended for up to 60 days by motivated reasons.

– Definition of restrictive competition agreements and conducts by object: The provision was improved to clearly determine which of the agreements and restrictive practices determined in article 11 of the LORCPM constitute restrictive practices by object – those that imply serious restrictions on competition, even in the event that they have not achieved the desired effect – and its exclusion from the application of the sanctions exemption regime and the de minimis rule provided for in the LORCPM.

The other reforms constitute improvements that allow a more adequate and clear application / interpretation of the law, in relation to:

  • The publication of sanctioning resolutions by the SCPM: Must be published on the SCPM website as well as the publication of an extract in the press, by the offender, once they are definitive.
  • The expansion of criteria to determine (i) economic groups and (ii) relationships between economic operators
  • Elimination of the expiration of preventive measures issued prior to the initiation of a formal investigation
  • Application of exemptions to the prohibition of agreements between competitors, when they contribute to improve the production or marketing and distribution of goods and services, or to promote technical or economic progress.
  • Definition of the moment in which the conclusion of the agreement that results in an economic concentration operation originates.
  • Improvement of the wording in relation to the procedure of investigations initiated ex officio and at the request of a public administration entity.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. 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 given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.