Inventory of Domestic Laws and Regulations Relating to
Competition Policy in the Western Hemisphere
Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies
This document compiles the laws on free competition in force in the Western Hemisphere countries, in accordance with the methodology and information agreed on and supplied by the Free Trade Area of the Americas Working Group on Competition Policy at the first meeting held in Lima, Peru, May 16 and 17, 1996.
Competition policy deals with a variety of areas and aspects of a market economy system. However, narrowly defined by the Working Group, it refers to the set of laws and regulations aimed at ensuring that national markets function correctly. To that extent, these laws prohibit commercial practices (i.e., concerted agreements, abuse of dominant positions, monopolization and economic concentration) which limit or restrict competition to the detriment of consumers and efficient allocation of resources in the economy.
The document is divided into thirteen (13) sections: (I) legal framework, (ii) objectives of the laws, (iii) scope of application, (iv) exceptions to scope of application, (v) general prohibitions, (vi) prohibited conduct, including definitions, (vii) exceptions to prohibited conduct, (viii) economic concentrations, (ix) enforcement bodies, (x) functions of enforcement bodies, (xi) administrative and/or judicial procedures, (xii) administrative and/or judicial sanctions, and (xiii) recourse or appeal.
A summary of these elements follows.
I. Regulatory Framework
The protection of competition is guaranteed in most of the countries in the Hemisphere. On a constitutional level, many national Constitutions promote competition with provisions related to freedom of contract, commerce and private economic initiative. Some others prohibit monopolies, except those established in favor of the state or by law, excessive concentration of economic power and abusive manipulation of prices and other market conditions.
On a legal level, twelve (12) countries in the Hemisphere have legislation and institutions on free competition: Argentina (1919, amended in 1946 and 1980, and currently under review), Brazil (1962, amended in 1990 and revised in 1994), Canada (1889, and subsequent legislation and amendments), Colombia (1959, supplemented in 1992), Costa Rica (1994), Chile (1959, amended in 1973 and revised and incorporated in 1979), Jamaica (1993), Mexico (1934, replaced in 1992), Panama (1996), Peru (1991, modified in 1994 and 1996), Venezuela (1991) and United States (1890 and subsequent other legislation and amendments).
Furthermore, Bolivia, Ecuador, Honduras, El Salvador, Guatemala, Nicaragua, Dominican Republic, and Trinidad and Tobago are actively designing and debating respective draft legislation on the issue.
II. Objectives of the Laws
The laws on competition in the Hemisphere can have various overall objectives: promotion and defense of competition, promotion of economic efficiency and consumer welfare, freedom of initiative, opening up of markets, fair and equal participation for small and medium enterprises, deconcentration of economic power, and prevention of monopolies and abuses of dominant position.
III. Scope of Application
In regard to persons, the laws of the Hemisphere apply to all national or foreign, public or private persons, enterprises or corporations. In regard to practices, the laws apply to all conduct, agreements, acts or transactions pertaining to production and marketing of goods and services. In regard to territory, the laws apply to practices carried out inside the countries= national territory. In some countries the laws also apply to practices originating abroad that affect internal or external trade.
On a subregional level, the Andean Community and MERCOSUR countries apply a common regime when practices produce effects that limit competition in the sub-regional market. By the same token in countries with a federal system like the United States, state laws apply parallel to federal ones when anti-competitive practices occur within the market of a state.
IV. Exceptions to Scope of Application
In regard to persons, in Brazil, Colombia, Chile, Jamaica, Mexico, Panama and Peru, it is allowed the existence of State monopolies, sectors reserved for strategic or national security reasons and the exclusive exploitation of intellectual property rights. Nonetheless, it is equally recognized in such countries that these monopolies are subject to the competition laws when they incur in abuses of dominant position or monopolistic practices beyond the nature of the scope provided.
In regard to practices, in Canada, Colombia, Costa Rica, Jamaica, Mexico, United States and Venezuela specific sectors and economic activities like agriculture, professional sports, labor organizations and export activities have been exempted from competition laws. In regard to territory, in the United States, State laws apply parallel to federal ones when anti-competitive practices have effects within the market of a State.
V. General Prohibitions
The laws of the Hemisphere, in general, prohibit all commercial conduct that limits, restricts, or distorts competition.
VI. Prohibited Conduct
The laws of the Hemisphere prohibit certain horizontal practices consisting of any type of collusive agreements between enterprises competing in the same sector, as they do certain vertical practices deriving from agreements between enterprises that perform their activities at different stages of the production process.
Many laws provide a specific list of prohibited conduct which include: (I) fixing prices and other sale conditions, (ii) imposing barriers to market access, (iii) collusive tenders, (iv) limiting production or sale by fixing or distributing quotas, (v) concerted refusal to purchase products, provide services, or admit new participants to the market, (vi) allocation of markets, (vii) discriminatory and predatory agreements, (viii) tied-in acceptance of supplementary services, (ix) exclusive agreements, (x) abuse of dominant position or monopolization, and (xi) boycotts.
Commonality and divergence in this area depend on the law adopted by each country as well as on the case law developed by each national enforcement body. There are absolute, non-authorizable or per se prohibitions and relative, authorizable or rule of reason prohibitions.
VII. Exceptions to Prohibited Conduct
The enforcement bodies, on a case-by-case basis, may examine conduct which might otherwise be prohibited to determine if it could be justified by its pro-competitive and efficiency-enhancing effects.
The practices for which such exception is allowed include, economic concentration, certain vertical agreements on conditions not relating to prices like territorial representation or exclusive agreements, agreements that help improve production, quality, and marketing of goods and services, development of research and technology, and utilization of economies of scale.
In some countries the criteria and procedures are established in regulations or judicial precedents, whereas in other countries these elements are left to the agencies= discretion. In these countries, the concepts and criteria to grant exemptions may vary from country to country.
VIII. Economic Concentrations
The laws of the Hemisphere, with the exception of Argentina, Chile, and Peru (control regime for the electricity sector), contain provisions for controlling economic concentration deriving from joint ventures, mergers, acquisition or incorporation of companies, when their effect is to diminish, harm or impede competition.
To this end Brazil, Canada, Colombia, Costa Rica, Jamaica, Mexico, and Venezuela have merger control regulations based on either mandatory prior notification or voluntary notification in order to assess the degree of concentration and its effects on competition.
IX. Enforcement Bodies
Generally, the laws of the Hemisphere are enforced by independent bodies or agencies in the form of commissions (Argentina, Brazil, Canada, Costa Rica, Chile, Jamaica, Mexico, Peru, and the United States) or superintendencies (Colombia and Venezuela). This autonomy is technical and operational with regard to conducting investigations and procedures and law decision-making and enforcement. The decisions on investigations are reached in a collegiate manner, in the case of Commissions, or by a single person, in the case of Superintendencies. The enforcement bodies are assisted by technical units or secretariats.
In Brazil, Canada, Chile, Peru and the United States the laws empower other agencies with enforcement responsibilities. In Brazil, there are the Secretariat of Economic Law and the Secretariat of Economic Surveillance. In Canada, there is the Attorney General with respect to criminal cases and the Competition Tribunal. In Chile, there is the Economic National Prosecutor. In Peru, there is INDECOPI´s Tribunal of Competition and Intellectual Property.
In all the countries tribunals and courts are charged with reviewing decisions adopted by the administrative bodies that enforce the laws or adjudicate the case themselves. In the case of the United States and Canada, courts and tribunals are charged with resolving cases brought by the Department of Justice and the Bureau of Competition respectively, against anti-competitive conduct.
X. Functions of Enforcement Bodies
In broad terms, the function of enforcement bodies is to ensure fulfillment of provisions relating to competition. For these functions, enforcement bodies in most countries have broad powers to enact preventive measures, and demand testimony, documents or information pertaining to private persons and public bodies. The enforcement bodies may also issue injunctions or seek them in court.
In Brazil, Colombia, Costa Rica, Canada, Chile, Peru, Mexico, the United States and Venezuela the enforcement bodies may provide comments and opinions on regulations, policy and programs which might prove adverse to competition, and recommend their amendment or elimination ("Advocacy of Competition").
XI. Administrative and/or Judicial Procedure
In all countries the procedures for conducting investigations and resolving cases of prohibited conduct are administrative or judicial and may be initiated ex officio by the body or on the petition of an interested party. The laws establish the instances, modalities, evidence, sanctions, and time periods for resolving cases or authorizations.
The laws also resort to judicial procedures established by ordinary law for cases of judicial review of acts and determinations by administrative enforcement organs. In Argentina, Canada, Jamaica, and the United States sanctions for violations of their laws are determined by tribunals and courts, after a finding of the enforcement bodies or their decision to sue.
XII. Administrative and/or Judicial Sanctions
The sanctions stipulated by the laws of the Hemisphere are pecuniary and criminal, as well as administrative and judicial, depending on the body that applies them. Most of the laws authorize enforcement bodies to apply administrative fines to those committing prohibited conduct and imposing forcible binding commitments.
The maximum amounts vary depending on the type of infringement and their effects on the market harmed. They may be pre-determined according to the turnover of the infringing company, or indexed based on the minimum wage, as occurs in Brazil and Mexico.
In Argentina, Canada, Jamaica, Peru and the United States, apart from applying fines they are authorized to hand down prison sentences to those who are in breach of certain prohibited conduct. In these countries, the determination and application of such sanctions falls to the courts and tribunals.
Non-compliance with orders and decisions of the enforcement bodies is sanctioned in all countries with fines.
XIII. Recourse or Appeal
All the countries guarantee, once the administrative proceedings are exhausted, the right to any person, foreign or national, to review acts or decisions by enforcement organs before the courts, including appeals before superior tribunals or the Supreme Court of Justice, as applicable.
In Costa Rica, Colombia, and Mexico those affected by a decision of an enforcement body are granted a process review, either by the same authority that determined there was a violation of the law ("recourse to reconsideration") or by a higher organ ("hierarchical recourse or recourse to review"), in conformity with laws of ordinary administrative procedure.
In Brazil, Chile, and Venezuela decisions are reviewed directly before tribunals. In Chile, those affected may request judicial review on criminally prohibited practices. In Peru, an appellant has the option of seeking recourse to reconsideration before the Competition Commission, which may review the decision, or recourse to appeal before the Tribunal for the Defense of Competition and Intellectual Property. In countries Canada, Jamaica and the United States, the review process takes place in ordinary courts, including appeals.
Finally, all the countries recognize to some extent the right of any interested party affected by an anti-competitive practice to obtain compensation for damages and harm resulting from such action. In most cases the enforcement body must determine the existence of a violation of the law before compensation may be sought by the affected interested party in court.