Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies

Colombia: Report on Developments and Enforcement of Competition Policy and Laws (1992 - 1996) (Continued)

IV. Consultation, Information and Other Initiatives

In 1996, the Superintendent Delegate for Competition Promotion answered 46 inquiries from business people, students and consumers in general, about such varied topics as the application of the rules and regulations on operations of economic concentrations, study of the new law contained in the Business Code on the various types of mergers and splits and on practices that violate the provisions on free competition and on restrictive trade practices, especially on exclusivity agreements, contained in Law 256 of 1996, on unfair competition.

From the provisions of Decree 2153/92 and Law 155 of 1959, it cannot be inferred that exclusivity agreements are flatly prohibited.

Under Article 19 of Law 256, exclusivity agreements would only be considered an unfair trade practice if "their purpose or effect is to keep competition out of the market or monopolize the distribution of products or services".

Such agreements have to be examined on a case-by-case basis for their effects and consequences and for the product and geographic market that could be adversely affected.

As for exclusivity arrangements in distribution contracts, it is important to note that even though by its very nature exclusivity obviously restricts commercial activity and limits competition in some way, it is not prohibited by the laws on competition.

Under Article 19 of Law 256, exclusivity clauses may be an unfair trade practice from the standpoint of purpose or effect, and in either case can follow from one of two alternatives or variables, which need only be a possibility in the case of effect: keeping competitors out of the market, or monopolizing the distribution of products or services, with the exception that the law stipulates for the case of the liquor industries.

The Office of the Superintendent for Industry and Commerce does not have competence to determine whether an exclusivity pact fits the criteria to qualify as an unfair trade practice since Law 256/91 clearly makes this a matter for the business and civil courts to decide.

Finally, Article 2033 of Decree-Law 410 of 1971, also known as the New Business Code, stipulates that new law shall supersede any other laws and decrees containing regulations on the same subjects.

Since in 1971 Title V of Book I of Decree-Law 410 contained all regulations pertaining to unfair trade practices, the original provisions of 1959 Law 155 on the subject of unfair trade practices were tacitly superseded by the new law.

The Office of the Superintendent provides direct assistance to service users since its Competition Promotion Division answers personal inquiries. Also, there are plans to create an on-line system involving audio text to answer questions round the clock.

V. Proceedings Before the Administrative Law Courts

A. The Council of State

A private party filed a complaint alleging the existence of a "Framework Agreement for supply and demand for African palm oil", concluded on September 12, 1994, between the Federación Nacional de Cultivadores de Palma de Aceite - Fedepalma- representing the national growers of African palm, and the Federación Colombiana de Fabricantes de Grasas y Aceites Comestibles - Fecolgrasas - Asociación Nacional de Jaboneros y Productores de Detergentes -Analja-, Grasco S.A. Gracetales S.A. Progral S.A. Detergentes S.A., Jabonería Central S.A., Fagrave S.A., Aceites y Grasas Vegetales S.A. -Acegrasas S.A., Sociedad Industrial de Grasas Industrials - Sigra S.A. and del Llano S.A., representing the oils processing industry, with the backing of the ministers of Agriculture and rural development, economic development, foreign trade and internal revenue and public credit. Its alleged purpose was to ensure an adequate supply and demand of domestically produced African palm oil for industry and growers, respectively, and to guarantee a minimum purchase price for domestically produced unprocessed palm oil, setting the general terms of the periodic agreements for regulation of the domestic market for palm oil and its subsectors. On June 2, 1995, the Superintendent Delegate for Competition Promotion ordered that no administrative investigation be instituted into this complaint and that the case be filed.

The party that filed the complaint alleged that the agreement was in violation of the laws on competition and restraint of trade, contained in Article 47, paragraphs 1 through 5 of Decree 2153/92, since on the one hand it allowed for price fixing, division of markets among the parties to the agreement, conditions prejudicial to third parties, and the allocation, division and limitation of sources of supply and of inputs; also, its effect was to assign production and supply quotas and, under the terms of Article 50, paragraph 2 ibidem, presupposed an abuse of a position of dominance on the market.

When the Constitution, the laws governing Colombia's agricultural sector and the economic intervention laws were examined, especially the terms of Article 1 of Law 155 of 1959, wherein the provisions on restrictive trade practices stipulate that the National Government may authorize agreements or arrangements that, although they limit competition, are intended to protect the stability of a basic sector of the production of goods or services of interest to the overall economy, the finding was that the complaint was unfounded. The petitioner had argued that because Article 333, paragraph 2 of the Constitution states that competition "is everyone's right" it is an absolute right and as such must apply to all sectors of the economy without exception. This argument was dismissed on the grounds that the Constitution is speaking of a collective right, as stipulated also in Article 88 thereof.

After making a thorough analysis, the Office of the Superintendent for Industry and Commerce concluded that the agreement to which the complaint referred was specifically authorized under the terms of paragraph ñ) of Article 4 of the Decree Law or Special Law 1279 of 1994, the paragraph of Article 1 of Law 155 of 1959 and articles 1, 3 and 6 of Law 101 of 1993, called the Agrarian Law, all of which order the State's intervention in the activities of the national economy's agricultural sector and concur with the provisions of Article 2, paragraph 9 of Decree Law 2350 of 1991.

Legal action brought: The complainant turned to the administrative law courts seeking nullification of the decision of June 2, 1995.

The Council of State for administrative law cases, Section One, handed down its ruling on December 16, 1996. It denied the complainant's petition, ruling that the charges were unfounded. It further ruled that an investigation need not necessarily be ordered whenever a complaint is lodged; if the preliminary inquiry finds no legal cause or that the practice is immune from investigation, the Office of the Superintendent could hardly be required to institute such investigation.

This was the very first time a court ruling had been handed down on a case that falls within the competence of the Office of the Superintendent of Industry and Commerce.

B. The Administrative Tribunal of Cundinamarca

Article 13 of Law 155 of 1959 stipulates that "The investigation, which shall be strictly confidential, will be conducted by requiring reports on production, imports, use of domestic and foreign raw materials, distribution and sales systems; by visiting the businesses in question and, in general, by obtaining all essential evidence. The findings will be conveyed within 30 days to the entities against which the allegations were made or that were implicated during the course of the investigation, so that they might make their defense.

Article 21 of Law 57 of 1985 stipulates that "The Government may deny requests to view certain documents or for copies or photocopies thereof only by showing just cause why they are kept confidential, citing the pertinent laws. If the interested party persists in its request, it shall be up to the administrative law court in the jurisdiction where the documents are located to decide whether or not to consent to all or part of the petition.

If the petitioner insists on being allowed to consult the document or that it be issued the requested copy, the official consulted will refer the documentation in question to the Court so that the latter may decide the matter within the next ten (10) working days. This ten-day period will be interrupted if the Tribunal requests a copy or photocopy of the documents whose distribution it is being asked to decide, and will resume as soon as the Court officially receives those documents."

When the petitioner exercised its right to appeal, on two occasions the Office of the Superintendent of Industry and Commerce had to send documents to the Administrative Tribunal of Cundinamarca for it to rule on the question of the confidentiality of the documents. On February 29, 1996, the Tribunal ruled on the first appeal, when the Office of the Superintendent of Industry and Commerce refused to issue the background information of an investigation into Comcel and Celumovil that had already been completed. The Tribunal ruled that the information the petitioner was seeking was confidential under Article 13 of Law 155 of 1959, so that the Office could not oblige the petitioner by providing the latter with the information it was requesting. In the second case, the Administrative Tribunal, First Section, handed down a ruling on June 19, 1997, on an appeal referred to it by the Office of the Superintendent of Industry and Commerce. After examining the rules that the Office invoked as grounds for denying the cement businesses access to the case file, the Tribunal ruled that it was obvious that the investigation was strictly confidential, as it was covered by a special rule and regulated under Article 29 of the Administrative Law Code.

VI. International Matters

A. G-3

Article 16-03 of the G-3 Free Trade Agreement that Mexico, Venezuela and Colombia concluded created the Committee on Competition-related Matters, composed of representatives from each State Party (in the case of Colombia, the representative is the Office of the Superintendent Delegate for Competition Promotion of the Office of the Superintendent of Industry and Commerce), which must present recommendations to the Commission on the correspondences between the laws and policies on competition and trade in the free trade zone.

That Committee has met twice, the first time in Caracas in 1995. There, each of the three countries pledged to provide information on the competition-related policies in their development plans, and to provide the text of all related laws on the subject, the jurisprudence and theory. Colombia prepared a table comparing the laws in force in each country on competition-related issues, which was submitted to the membership of the Committee for their perusal.

At the second meeting the Committee decided to prepare papers with comparisons on the following topics: classification of practices, definition of relevant market, position of dominance, economic combinations. The Committee also decided to focus attention on issues relating to the free trade zone.

B. Andean Group

Plans are to amend Decision 285 of the Commission of the Cartagena Agreement, which contains provisions to prevent or correct distortions in competition. The Office of the Superintendent prepared a draft amendment of the aforementioned decision, which it presented to the Ministry of Foreign Trade for consideration. It is an innovative proposal, since it makes protection of competition the primary objective and rejects the causality relationship that the decision's present wording posits.

C. ALCA

The following are among the documents Colombia has prepared: a table of Colombian legislation on competition law; a questionnaire to identify technical cooperation needs in the area of competition policy; a proposed format for preparing a report on the application of domestic regulations and laws on competition policy in the countries of the hemisphere; inventory of domestic laws and rules concerning competition practices in the Western Hemisphere; and comments on the inventory of laws on free competition in the trade and integration agreements of the Western Hemisphere. A discussion paper was prepared on "Similarities and Differences among Domestic Laws regulating Competition in the Western Hemisphere", as were observations on the preliminary Technical Cooperation proposal put together by UNCTAD.

D. International Cooperation

The Office of the Superintendent of Industry and Commerce has received World Bank assistance for projects to safeguard competition in the country. This was how it financed a project on instruction in the laws to be followed, given the express remission that Decree 2153/92 makes to the Administrative Code.

Also, the Division maintains contacts with the Tribunal for the Protection of Competition, the European Commission's General Directorate of Competition, and various agencies to safeguard competition at the Latin American level, in order to share information relating to the interpretation of the laws on free competition, the jurisprudence and theory.

At the present time, a 12-month project on "Development of Competition and Capacity of the Antitrust Policy" is underway with assistance from the World Bank. It begins in late August 1997 and covers the following:

-Development of institutional know-how in policy and substantive areas, especially the transfer of knowledge in antitrust and industrial organization issues and policies.

-Development of institutional know-how in procedural matters.

-Development of handbooks on trusts and other forms of combination and restraint of trade.

-Development of an infrastructure, such as creation of a library on such topics as free competition, development of the database on restraint of trade, development of sectoral indicators that reveal the structure of markets and modifications thereto for an adequate and up-to-date database on markets, development of a specialized system within the Office of the Superintendent Delegate for Competition Promotion and analysis of mergers and investigations into restrictive trade practices.

VII. Activities to Instill a Competition-Oriented Mindset

To create a competition-oriented mindset within the country, the Office of the Superintendent of Industry and Commerce has engaged in activities that target universities, industrial business sectors and consumers in general. They can be briefly described as follows:

- A compendium of laws on free competition was prepared, which included the provisions contained in Law 155 of 1959 and Decree Law 2153/92 and related concepts.

- The Office of the Superintendent Delegate for Competition Promotion took part in a number of national and international events in 1996 and 1997, as follows:

In 1996

International

- A seminar organized by the Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual INDECOPI, on "Competition Policies and Economic Reform in Latin America", held in Lima, Peru, in August.

- 23rd Annual Conference on International Antitrust Law & Policy, organized by the Fordham Corporate Law Institute and held in New York, New York, October 17 and 18.

- Forum on New Market Economies - Seminar on Policies and Competition, organized by the OECD in cooperation with the World Bank and held in Buenos Aires, Argentina, in October 1996. The Superintendent Delegate for Competition Promotion took part and analyzed the topic "Substantive Provisions of Competition Law".

- II Meeting on Competition Policies in Latin America and the Caribbean, held in Caracas, Venezuela and organized by the Permanent Secretariat of the Latin American Economic System in December. Participating in the meeting were representatives of the antitrust agencies of 27 Latin American countries. Its purpose was to follow up on the matters discussed in the final report adopted at the first meeting. The Superintendent Delegate for Competition Promotion participated in the international workshop on "Consumer Protection" and served as moderator of the Technical Seminar on "The role of antitrust policy in the design of industrial policies."

National

In her job of promoting and disseminating the law and policy on competition and restrictive trade practices, the Superintendent Delegate for Competition Promotion coordinated and participated in a number of national events:

A.-Seminars organized by the Office of the Superintendent of Industry and Commerce.

- National seminar on competition and restrictive trade practices, held at the Universidad del Rosario in Bogota in March. In attendance were lecturers from Spain's Tribunal to Safeguard Competition and the Superintendent Delegate for Competition Promotion. In all, 150 people attended the event.

- Planning and coordination of the seminar on "Competition Policy and Law", given for the deans, professors and students of the schools of law, economics, business administration and marketing from various universities in the country. It was held on November 21, with the idea of creating and developing this academic department.

- National forum on competition, held in Manizales in August 1996.

B. Participation in other events where the rules on competition were discussed.

- A seminar organized by the firm of Arthur Andersen, in Santa Fe de Bogota in May, on the topic "Guidelines for evaluating trusts and other forms of financial combination in Colombia". Attending were 150 entrepreneurs from the most important sectors of the national economy.

- IV International Congress and IX National Marketing Congress held in Paipa in October. Its objective was to successfully integrate students and professionals in the academic discipline, with people in education, government and business. The role of the Office of the Superintendent of Industry and Commerce, through the Superintendent Delegate for Competition Promotion, was to speak on the topic "Entrepreneurs and Competition Law".

-XIII Latin American Congress of Fuel Entrepreneurs, organized by the Federación Nacional de Distribuidores de Derivados de Petróleo (Fendipetroleo) in October. Latin American business leaders in this sector attended. The Superintendent Delegate for Competition Promotion presented a paper titled "Competition and transparency in the fuel market".

- Presentation on Competition Policies and Law, given in the auditorium of the Universidad Central in Bogota in October. Some 150 students from the schools of business administration and economics attended.

- Presentation on "Competition policy and economic liberalization" at the facilities of the Office of the Superintendent of Industry and Commerce, for the Industrial Engineering School of the Universidad Nacional de Colombia, Manizales campus, in November.

- Seminar on the "Application of Competition Provisions", held at the Sincelejo Chamber of Commerce on the occasion of its 60th anniversary and attended by the area's leading entrepreneurs.

- Participation in the Training Course on Antitrust Law and Economics. The Superintendent Delegate for Competition Promotion lectured on the topic "Negotiated Settlements".

- Attendance at the seminar on "Antitrust policy and economic reform", held in Rio de Janeiro. The Delegation of Colombia spoke about the case involving the investigation of Ferrovías.

National Events Organized by the Office of the Superintendent of Industry and Commerce

The Santillana Foundation was the site of a seminar on the "Legal and economic aspects of competition in Colombia", held on June 17 and 18. The speakers included Dr. Radoslav Depolo Razmilic, Professor of Economic Law and of Competition at the Universidad Católica de Valparaiso, Chile; Dr. José Eugenio Soriano, an expert in antitrust law from Spain, and Dr. Marie-Chantal Boutard Labarde, a member of France's Competition Board. Also participating were Dr. Marco Aurelio Zuluaga Giraldo, Superintendent of Industry and Commerce, Margarita Alarcón Carrillo, Superintendent Delegate for Competition Promotion, and other national figures. A total of 150 people attended. A book is being published containing the presentations.

Participation in other events were competition laws were discussed.

- Lecture given at the Universidad Externado de Colombia (Bogota) by Dr. Pedro Luis Escobar Ramírez, Head of the Competition Promotion Division, on the topic "Competition policy: the importance of competition. The interaction between competition policy and other economic policies" (March).

- At the Chamber of Commerce of Florencia (Caquetá), Dr. Pedro Luis Escobar Ramírez, Head of the Competition Promotion Division, gave a lecture on the topic "Competition policy. The importance of competition." Perfect competition and monopoly. Competition in the international scenario. Liberalization model. International agreements (April).

- At the Cali Chamber of Commerce, Dr. Gerald Meyerman, Coordinator of the World Bank's Latin American Competition Area, gave a lecture in April on "The advantages of free competition for industry and the consumer". Also participating were Dr. Marco Aurelio Zuluaga Giraldo, Superintendent of Industry and Commerce, and Dr. Margarita Alarcón Carrillo, Superintendent Delegate for Competition Promotion.

- Participation of the Office of the Superintendent of Industry and Commerce in the General Assembly of Cotelco, in Popayán (Cauca), with a lecture by Dr. Pedro Luís Escobar Ramírez, Head of the Competition Promotion Division, on the subject "Abuse of position of dominance, agreements and actions that are contrary to free competition" (May).

- At the Cartagena Chamber of Commerce (Bolivar), Dr. Gerald Meyerman, Coordinator of the World Bank's Latin American Competition Area, gave a lecture on the subject "The prohibitions that entrepreneurs face in the area of free competition" (June).

- At the Chamber of Commerce of Medellín, Dr. José Eugenio Soriano, Spanish expert on antitrust law in Spain, gave a lecture on the subject "Independence of the antitrust agencies as an essential for economic operators and agents (Spanish law)". Participation of Dr. Marco Aurelio Zuluaga Giraldo, Superintendent of Industry and Commerce, and Dr. Margarita Alarcón Carrillo, Superintendent Delegate for Competition Promotion (June).