Circular Letter 10 was issued by the Superintendency of Industry and Trade (the Colombian Competition Authority) on August 6 2001. It relates to companies that are involved in the production, supply, distribution or consumption of certain assets, raw materials, products, merchandise or services. The circular states that there are two situations in which notification of a merger, consolidation, integration or acquisition of control involving such a company is mandatory.
The first situation arises if the companies involved jointly represent more than 20% of the relevant market. In order to determine the market share, the previous year's sales will be taken into consideration. The second is if the companies' combined Colombian assets exceed 50 times the monthly minimum wage (ie, approximately $6.2 million).
The superintendency will issue no objection, and it is thus unnecessary to file a request for approval, if the proposed transaction is to be undertaken by companies that do not meet these criteria.
However, if either of these situations arises government approval must be obtained before the transaction is executed. Circular Letter 10 includes secondary modifications to the information and documents that must be attached to the notification.
The circular states that the superintendency will only object to transactions if they limit free trade in the market. Neither the importance of the companies nor their market share are automatically considered as a limitation to the free market.
Along with these new specifications, the superintendency stated new terms and conditions for the approval of mergers and acquisitions. A draft of the M&A agreement stating the following must now be filed:
- the companies involved;
- the agreement's objective;
- an explanation of the general reasons for the merger or acquisition; and
- whether and how free trade will be limited.
The superintendency will then inform the merging companies what, if any, conditions it will impose on the transaction.
For further information on this topic please contact Mauricio Jaramillo Campuzano at Gómez Pinzon & Asociados by telephone (+57 1 310 7055) or by fax (+57 1 310 6646) or by email ([email protected]).