What is the legal framework in your jurisdiction covering the behaviour of dominant firms?
The primary national law in Colombia addressing dominance is Decree 2153 of 1992. Article 50 of this decree lists the conduct that constitutes an abuse of dominant position in the market and are, therefore, anti-competitive. Predatory pricing, discrimination, tying and bundling, discriminatory sales, regional predatory pricing, and obstruction of competitors to markets and distributing channels, are all considered as an abuse of dominant position.
In addition, there are additional national laws prohibiting anticompetitive conduct in general, as well as sector specific regulation. These laws include:
- the Colombian Constitution [article 333-334], which defines the right to a free market and mandates that the state prohibits abuses of market dominance;
- article 1 of Law 155 of 1959 (general antitrust prohibition), which forbids agreements that as their object restrict competition, limit competition or produce unfair prices and any practice that may limit competition or impose unfair prices in the market;
- Law 1340 of 2009, which consolidated the enforcement in the Superintendency of Industry and Commerce (SIC) and substantially increased the civil penalties associated with competition law violations;
- Law 142 of 1994, which refers to public utilities and applies to services such as aqueduct, sewerage, electric power, distribution of fuel gas, basic public telephony and local telephony in the rural sector;
- Decree 663 of 1993, which regulates specific dominant rules of the financial sector such as a 25 per cent cap to determine if a merged entity holds a dominant position, and the faculty of the Financial Superintendent to object mergers between financial entities;
- Law 1328 of 2009, which regulates the figure of contractual dominant position for financial entities;
- Decree 1663 of 1994, which establishes dominance abusive conducts in the health sector; and
- Law 182 of 1995, which regulates the monopolisation of the electromagnetic spectrum.
In addition to the aforementioned statutes, there are various resolutions and decisions from SIC that form the basis of Colombia’s competition law. The main resolutions and decisions relevant to dominance are discussed in more detail below.
Definition of dominance
How is dominance defined in the legislation and case law? What elements are taken into account when assessing dominance?
Dominance is defined as the possibility of ‘determining, directly or indirectly, the conditions of a market’ in article 45.5 of Decree 2153 of 1992. This definition has been developed by SIC in multiple decisions, to the effect that, today, it is considered that a firm has dominant position when it can act independently of its competitors, clients, and consumers. Thus, a dominant firm may impose conditions in the market unilaterally without the other agents being able to counteract the dominant’s firm actions. It is important to highlight that market share is not the only criterion to determine if a firm has a dominant position in a determined market. For instance, in the SIC’s Resolution 22624 of 2005 it recognises the following criteria: structure of competition in the market, an analysis of concentration levels, the characteristics of demand, competitors, the existence of barriers to entry, as well as other factors that allow the company to act independently in the market must be analysed and, specifically, whether that economic entity has the capacity to establish, unilaterally, the conditions of a market.
Bearing a dominant position in the market is not prohibited by national competition law, only the abuse of this position is considered anticompetitive. This rule’s foundation is article 333 of the National Constitution, which states that the state will prevent the obstruction or restriction of economic freedom and will prevent or control any abuse that persons or companies make of their dominant position in the national market. Of the relevant SIC decisions, Resolutions 485 of 2002, 588 of 2003, 30835 of 2004, 2264 of 2005, and 17806 of 2006 may be consulted.
Purpose of legislation
Is the purpose of the legislation and the underlying dominance standard strictly economic, or does it protect other interests?
According to article 3 of Law 1340 of 2009, there are three main purposes or goals of competition legislation in Colombia: free entrance and exit of companies in the markets; consumer welfare; and economic efficiency.
Sector-specific dominance rules
Are there sector-specific dominance rules, distinct from the generally applicable dominance provisions?
In Colombia, there are five sectors that have specific dominance rules. The rules on these sectors are complementary by virtue of article 6 of Law 1340 of 2009. These sectors are explained below.
The financial sector
Delving into the financial sector, the relevant regulation is Decree 663 of 1993 - Organic Statute of the Financial Sector (OSFS), the basic legal circular of the Financial Superintendency, and Law 1328 of 2009. Article 46 of the Organic Statute of the Financial Sector establishes two principles that govern state intervention, namely to promote free competition; and ‘to structure a legal framework in which each type of institution can compete with others under conditions of equity and equilibrium’.
In addition, article 58 of the Organic Status regulates the Financial Superintendent’s competition to object ex ante mergers between financial entities. One of the regulated causes (article 58(d)) refers to dominant position. However, by express legal provision, it is presumed that transactions that do not exceed a 25 per cent threshold do not generate significant risks for the competition process, which is why they will be considered authorised. In any case, it should be noted that section 2 of article 71 of the OSFS, indicates that the Financial Superintendent must ensure that the public welfare is fostered with the proposed operation.
Finally, financial entities have specific obligations to refrain from incurring an abuse of contractual dominant position since article 7(e) of Law 1328 of 2009 consecrates that obligation.
Gas and energy
Certain levels in the value chain of gas and energy are subject to more stringent regulations, such as transportation and distribution. By way of example, the activity of transporting natural gas is strictly regulated, since transporters cannot refuse to provide the natural gas transport service to users who request it, except for objective reasons defined in the regulation.
The Commission for Regulation of Energy and Gas (CREG) in Law 142 is the competent body to regulate this sector. In fact, according to article 73 of the Law 142 of 1994, it is up to this authority to regulate monopoly markets in the provision of this public utility when competition is not possible. It is for this reason that vertical integration is prohibited in this level of the natural gas’s value chain.
Likewise, the CREG has regulated aspects related to natural gas’s transportation contracts such as price, by establishing the applicable methodology to set the rate. In this sense, Resolution 126 of 2010 consecrates the general criteria for the remuneration of the natural gas transport service and the general scheme of rates within the National Transportation System, based on which the CREG, through a special administrative act, approves the rates that each transporting company can charge during a tariff period of five years.
The CREG’s Resolution 089 of 2013 modifies essential aspects of the natural gas wholesale market for supply and transportation, based on the functions assigned to regulatory commissions by virtue of article 73 of Law 142 of 1994 as well as stipulated in subparagraph a) of article 74.1. Based on these articles, the CREG regulates the exercise of activities of the energy and fuel gas sectors to ensure the availability of an efficient energy supply, foster competition in the mining energy sector, and propose the necessary measures to prevent abuses of dominant position.
Finally, regarding the distribution of functions among different state authorities, the design of the general policies of the industry corresponds to the government through the Ministry of Mines and Energy (MME). For its part, it is the task of the CREG to issue the ex ante regulation applicable to the market agents that attend the sector, by issuing administrative acts of a general and particular nature.
Dominance rules, as well as anticompetitive conducts in the health sector, are regulated through the Decree 1663 of 1994. The first applicable rule is article 3, which establishes a general prohibition to refrain from anticompetitive conducts, stating that all agreements, acts, and covenants, as well as practices and concerted decisions that are intended or have the effect of an abuse of dominant position are prohibited.
The Decree also includes a list of abusive conducts for the health sector in article 9 that uses technical health language. The decree includes predatory pricing, discriminatory conditions, tying and bundling, discriminatory sales to distributors and regional discrimination. Finally, article 10 of the Decree clarifies that the competent authority regarding the protection of competition is the SIC.
Public utilities regime
Dominance rules in the public utilities sector are described in the Law 142 of 1994. Specifically, dominance rules are described in articles 14, 34, 35, and 133. Article 14 defines dominant position combining contractual and market matters. By this provision, it is presumed that public utility companies always have dominant position over the users and subscribers since dominant position is the one that a utility company has with respect to its users. In a different manner, dominant position in the market is presumed only when a public utility company has a market share of at least 25 per cent. Hence, to determine a dominant position in this market it is not necessary to analyse any additional elements such as barriers to entry and concentration of the market.
Article 34 consecrates a general prohibition that public utilities must follow, and that combines unfair competition and competition law subjects. This article also establishes a list of conducts that are considered as anticompetitive. Within the list, there is a prohibition on abuse of dominant position, which refers to article 133 of the Law. For its part, article 133 of Law 142 of 1994 provides a list of contractual clauses that are presumed to be abuses of dominant position in the public utilities sector.
Article 35 of the law imposes a duty to pursue the best objective conditions on companies that have a dominant position in the market and whose main activity is the distribution of goods or services provided by third parties.
Television’s specific dominance rule is contained on article 5(d) of Law 182 of 1995, which refers to the state’s obligation to investigate and punish the monopolisation of the electromagnetic spectrum.
Article 13 of the Law 1507 of 2012 states that the superintendency is the competent body to develop what is stated on article 5(d) of Law 182 of 1995.
Exemptions from the dominance rules
To whom do the dominance rules apply? Are any entities exempt?
The only exemptions that exist under Colombian Competition law, are those contained in article 31 of the Law 1340 of 2009. This article states the following:
The exercise of State intervention mechanisms in the economy, following the mandate provided in Articles 333 and 334 of the Political Constitution, constitutes a restriction of the right to compete in the terms of the intervention.
The State intervention mechanisms that restrict the application of the provisions of this Law are, the Price Stabilization Funds, the Parafiscal Funds for Agricultural Development, the Establishment of minimum guarantee prices, the regulation of the domestic markets for agricultural products. foreseen in Decree 2478 of 1999, the chain agreements in the agricultural sector, the safeguards regime, and the other mechanisms foreseen in Laws 101 of 1993 and 81 of 1988.
These exemptions derive from the sovereign power of the State to regulate the economy. Nevertheless, this is not an exemption for the government when acting as a competitor within the markets. In Resolution 25036, the SIC punished Bogota’s government for abusing its dominant position in the garbage transportation market.
Transition from non-dominant to dominant
Does the legislation only provide for the behaviour of firms that are already dominant?
Colombian competition law does not prohibit dominant positions due to article 333 of the National Constitution that recognises economic activity and private initiative as free, within the limits of the public interest and states that free economic competition is everyone’s right even if it implies responsibilities. In fact, by means of Resolution 53403 of 2013, the SIC recognised that not all activity by an dominant agent is illegal since the law considers dominant position as legal but prohibits the abuse of it. Hence, Colombian legislation on dominance does not cover non-dominant companies attempting to become dominant. These companies will be subject to the rest of the Competition Protection Regime, including anticompetitive acts and agreements.
Is collective dominance covered by the legislation? How is it defined in the legislation and case law?
The notion of collective dominance has never been applied in Colombia and is not defined under Colombian competition law.
Does the legislation apply to dominant purchasers? Are there any differences compared with the application of the law to dominant suppliers?
Dominant purchasers are subject to the same regulation that exists for dominant suppliers. In fact, there is a precedent of the SIC where this subject is addressed. Such is FEDEGAN’s case contained in the Resolution 40912 of 2012, where SIC found that a dominant purchaser (the only purchaser) of the vaccine against the Aftosa fever was abusing its dominant position since the company decided to buy only those vaccines of national origin, even though international origin vaccines were approved by the ICA, which is the government’s agency in charge of controlling and reducing risks related to animal and plant species, such as health, biological, and chemical risks. Ultimately, the SIC sanctioned the dominant purchaser under article 50.2 (discrimination) and article 50.6 (obstruction to distribution channels) of Decree 2153 of 1992.
Market definition and share-based dominance thresholds
How are relevant product and geographic markets defined? Are there market-share at which a company will be presumed to be dominant or not dominant?
Market definition in Colombia derives from an economic analysis in which the competition authority determines the relevant product market as well as the relevant geographical market. Thus, market definition combines the geographical area where the affected firms develop their activities and provide their services, and the products or services that consumers consider as interchangeable or replaceable due to their characteristics. With some exceptions - such as certain agreements - the anticompetitive analysis under our competition laws always requires a market definition and market power analysis.
On the one hand, according to SIC’s Resolution 5694 of 2018, the geographical market corresponds to the place where companies offer their products and in which the plaintiffs are located. In this area, the conditions of competition must be similar or sufficiently homogeneous so that it can be distinguished from other markets. On the other hand, determining the product market has two steps. First, it is necessary to find the substitutability of the demand side and then the substitutability of the offer side (or substitutability of the supply).
The substitutability in the demand is defined in SIC’s Resolution 13815 of 2018, as the group of products that the consumer considers as substitutes. In this sense, the analysis would require the consideration of attributes and products that could be considered as replaceable from the consumer point of view. According to the SIC’s mergers guide, when goods are substitutes, a positive cross-elasticity in the demand exists between the products, meaning that an increment in a price of one good would shift the demand to another product. In the SIC’s Resolution 35006 of 2010, the product market is described as products that are offered in a similar manner, as well as those that belong to the same value chain by the companies involved, and those that can replace the relevant product because of their usage, characteristics, applications and similar prices.
The SIC’s Resolutions 35006 of 2010, 11700 of 2016, and 13815 of 2018 state that finding substitute products may be done applying the ‘small but significant and non-transitory’ (SSNIP) standard (also called the hypothetical monopolist test), which analyses the possible consumer reaction of a small increase in the price of the good. The recommended variation in the price is of 5 or 10 per cent above the actual price of the good. If the variation of the price produces consumers to drift away to other products, those products to which consumers drift away should be included as the substitute goods of the original product defined. This exercise is done until reaching a set of products where an increase of price would not conduct to a sufficient substitution of the supply. It should be noted that when it is found that the product of a firm is irreplaceable, it is more likely that this will result in market dominance.
On the other hand, the SIC’s business concentration guide establishes that the substitutability in the supply side is analysed from the perspective of the possible competitors. In this sense, it is said that a supply (understood as the product that a determined company is selling in the market) is replaceable when potential competitors can access the market without incurring substantial costs of entry or investment (entry barriers).
There is no rigid formula or market share reference that implies that a firm has a dominant position. The analysis must be carried out case by case since the SIC’s Resolutions 4907 of 2013, 5403 of 2013, and 3694 of 2013 resolutions affirm that the analysis of market shares and concentration levels, the characteristic of the demand, competitors, the existence of barriers to entry, among others, are required in order to determine if a company holds a dominant position.
The SIC uses two main tests for this purpose. The STENBACKA test enables regulators to draw inferences about dominance of the leading firm by determining the value from which an undertaking holds a dominant position in a particular market. This threshold is determined by considering the market share of the leading company as well as the market share of the second most important company. In this sense, the STENBACKA index is a single-market measure that determines a level from which there is a risk of dominance in the market.
The second dominance index used by the SIC is called the KWOKA test, which focuses on measuring the symmetry size of firms within a market. It focuses on the distribution pattern of agents’ market shares. When there is a large difference between the size of the companies the index tends to its maximum value of one and when the market shares of the firms converge the value of the index tends towards zero, regardless of the number of companies in the market.
Abuse of dominance
Definition of abuse of dominance
How is abuse of dominance defined and identified? What conduct is subject to a per se prohibition?
There is no legal definition of abuse of dominant position. Nonetheless, a definition can be structured considering the legal framework that applies to dominance. As stated above, dominance is defined in section 5 of the article 45 of the Decree 2153 of 1992 as the possibility of ‘determining, directly or indirectly, the conditions of a market’. Therefore, it is inferred that an abuse of dominant position is a unilateral conduct of a firm that, having the possibility of determining the conditions of the market, incurs on the behaviours listed in article 50 of Decree 2153 of 1992 or limits competition on the terms of article 1 of Law 155 of 1959.
The general antitrust prohibition was sued for unconstitutionality under the argument that it gives arbitrariness to SIC and the Constitutional Court conditioned its application. It stated that the term ‘practice’ must be understood as an agreement, act, or a conduct of abuse of dominant position pursuant to Decree 2153 of 1992. The Court also clarifies that terms processes and systems, which must be interpreted and applied, in relation to the normative subsystem to which they belong - conformed by Law 155 of 1959, Decree 2153 of 1992, and the Law 1340 of 2009.
The SIC has interpreted this decision broadly and considers it has the power of punishing conducts that are not pre-established in the Decree 2153 of 1992. In fact, in recent decisions the SIC has punished conducts under article 1 of Law 155 of 1959 without referring to any preestablished conduct.
Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
According to the SIC, the regime of abusive practices can be classified into exploitative abuses and exclusionary abuses. Both are defined in the SIC’s Resolution 5403 of 2013. In this sense, exploitative abuses are those conducts deployed to appropriate part of the income of its customers, while exclusionary abuses are those conducts that limit the competition by forcing competitors to leave the market. However, article 50 of the Decree 2153 of 1992 does not differentiate between conducts that are exploitative or exclusionary.
Link between dominance and abuse
What link must be shown between dominance and abuse? May conduct by a dominant company also be abusive if it occurs on an adjacent market to the dominated market?
As it was previously stated, in order to study an abuse of dominant position, it is necessary to find first a dominant position by the rules of market definition considering all factors of the market. Hence, there is no possibility of determining that there was an abuse of dominant position if a dominant position is not accredited first. Nevertheless, it is possible that the conduct of a dominant undertaking is considered abusive even if it occurs on an adjacent market. Precisely, sections 2,4, and 6 of article 50 of Decree 2153 of 1992 are intended to protect upstream and downstream markets from abusive conducts made by dominant firms of other levels of the value chain. In the same manner, section 3 ibidem can also be considered as abusive when it occurs in an adjacent market.
Considering aftermarkets, the SIC has recognised that a dominant position in the principal market is enough to consider an abuse of dominance in its related market or aftermarket. For instance, in the SIC Resolution 444 of 2013, the authority ruled that the dominance of Naturgy (formerly Gas Natural Fenosa) in the natural gas distribution service market (100 per cent of the market shares), was enough to investigate an abuse of dominance in its complementary market of periodic review of natural gas networks, even if Naturgy’s presence in the complementary market was not significant. In this sense, any abuse of dominance in a complementary market could be investigated if the firm is dominant in the principal market.
The elements that must concur for an abuse of dominance aimed at reinforcing market power in an aftermarket are: (i) the existence of a market in which the agent has a dominant position; (ii) the existence of a related market or aftermarket that has a direct and consequential relationship with the dominated market; and (iii) that the agent who holds the dominant position uses its power to obtain a competitive advantage or eliminate competition in a market other than the dominated one.
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
There are no exemptions for the application of antitrust regulations in abuse of dominance cases.
However, defences can be structured considering the specific elements required to configure an abuse of dominant position. Hence, article 50.1 (predatory pricing), article 50.4 (discriminatory sales), and article 50.4 (regional predatory pricing) cannot be applied when it is shown that there was no intention to prevent the entry or expansion of competitors, and thus, there is a lack of intent.
Also, the efficiencies produced by a conduct that was considered as abusive, can constitute a defence, since article 3 of the Law 1340 of 2009 establishes that one of the purposes of SIC’s actions is ‘to ensure the efficiency in the market’. By way of example, the SIC has pronounced that exclusive dealing is not per se illegal, since it can produce efficiencies within the market. In Resolution 31434 of 2011, the SIC stated that exclusivity can bring efficiencies such as the reduction of stock costs and risk prevention costs associated with future sales uncertainty, and free riding, for example, when competitors take advantage of sizable investments made by manufacturers to produce their product.
Specific forms of abuse
Types of conduct Types of conduct
Under Colombian Competition law, there is no doctrine of rebate schemes. Therefore, there is no distinction between retroactive and incremental rebate. Nevertheless, under Colombian competition law an analogy could be made with the existing doctrine of discounts.
In this manner, the SIC’s Resolution 4285 of 2002 demonstrated how a company’s discounts policy can fall within the prohibitions contained in article 50.2 and article 50.4 of Decree 2153 of 1992. In that case, the SIC punished SATENA abusing, without justification, its dominant position on certain air routes by charging different prices to a group of passengers. Under this pricing scheme, certain passengers under the same conditions did not received discounts. The SIC held that such a pricing scheme lacked any procompetitive justification and was only intended for the frustration of competition. As a result, the SIC held that the scheme fell within the prohibitions contained in article 50.2 and 50.4 of Decree 2153 of 1992.
Tying and bundling
Abuse of dominant position by tying and bundling is established in article 50.3 of Decree 2153 of 1992. Tied sales are considered an abuse of dominance when the practice has as its object or effect the subordination of the supply of a product to the acceptance of additional obligations that by their own nature do not constitute the object of business. In this case, whoever performs the conduct shall hold a dominant position in the relevant market. The SIC has set forth the following elements to consider a tying case as an infringement to the competition protection regime:
- The company engaged in tying must be in a dominant position in the relevant market of the tying product.
- There must be two separate products; one being the tied product and one being the tying product. Hence differentiated demand and a functional difference should exist between products. In addition, SIC analyses if there are other efficient suppliers to determine if subordination is difficult for other agents within the market.
- Actual tying. Bundling of separate products by a dominant supplier is only prohibited when customers are not allowed to acquire the tied product independently of the tying product.
In Colombia, exclusivity agreements are not considered per se illegal. Exclusivity agreements may, however, be problematic if they obstruct a third party’s access to markets or commercialisation channels (article 50.6 of the Decree 2153 of 1992), and are prohibited in supply contracts under article 19 of Law 256 of 1996, when such clauses intend to, or have the effect of, restricting competitors’ access to the market, or monopolise the distribution of products and services.
In the SIC Resolution No. 33361 of 2011, the SIC held that exclusivity clauses are considered an abuse of a dominant position when they foreclose entry for competitors. Thus, a violation can occur regardless of whether the exclusivity clause is vertical or horizontal; vertical restrictions can enable a supplier’s undertaking to acquire a large portion to lock up necessary distributors and horizontal restrictions can force competitors to both commit to not providing resale options for competing distributors. In both cases, the exclusivity restricts entry by other competitors.
Even if agreeing exclusivities may have the effect of restricting the entry, totally or partially, of a competitor to a point of sale in the market, according to the SIC’s Resolution 33361 of 2011, this fact alone is not a sufficient condition to categorically state that the dominant agent excludes or excludes all its competitors from the market. Instead, a second element is necessary for an exclusivity provision to become a violation of the law: substantial foreclosure.
The SIC addressed the need to identify market foreclosure, potential or real, in order to consider exclusivities as anticompetitive in its Resolution No. 33361 of 2011, stating that it is required that a percentage of dominant agent’s demand is covered by the exclusivity, the absence of alternative supply sources, high entry barriers exist, and that the exclusivity produces low scale economies. According to this resolution, the provider substitutability, the duration of exclusivity agreement, and the specific relation between the parties should also be analysed.
Article 50.1 of the Decree 2153 of 1992 defines predatory pricing as ‘[t]he decrease of prices below costs when there is an intention to eliminate one or several competitors or to prevent their entry or expansion’. In the SIC Resolutions 30835 of 2004 (the Setas Colombianas case) and 22624 of 2005 (Chicles Adams case), the SIC describes the elements of predatory pricing: (i) there must be a company with a dominant position in the market; (ii) this company must implement a pricing scheme that is below company cost levels; and (iii) with the intention to eliminate one or more competitors or prevent their entry or expansion.
As can be seen, no recoupment is required in order to find a predatory pricing scheme, since the law and the SIC’s doctrine are clear in affirming that the intention of a dominant firm to eliminate competition by engaging in predatory pricing is enough.
A reference to the SIC’s interpretation of the connotation of ‘cost levels’ must be made. In the SIC’s Resolution 30835 of 2004, the competition authority stated that ‘company costs amount to the sum of costs of production and commercialisation’. The former is the same as operating costs, such as those incurred in to obtain a finished product, and the latter are those incurred to get the product to the consumer. Also, regarding the intent requirement, the SIC’s doctrine states that it may be demonstrated through the prolonged imposition of below cost pricing. In the SIC Resolution 22624 of 2005, in which Chicle Adams was investigated for predatory pricing regarding launch prices in their new chewing gum product Clarks, the SIC stated that there was no economic reason other than predatory pricing to sustain losses for 12 months.
Price or margin squeezes
Even though there is no reference to margin squeezes in the Colombian Competition Regulation, this conduct could be considered an abuse of dominance applying the general prohibition in article 1 of law 155 of 1955 and article 50 of Decree 2153 of 2009. According to the SIC’s Resolution 444 of 2013, abusive behaviour does not necessarily occur exclusively in the dominated markets. Therefore, a company may abuse its dominant position either by executing the abusive behaviour: (i) in the dominated market; (ii) in a different market that is directly related to the dominated market, so as to strengthen or maintain the dominant position in the dominated market; or (iii) in a different market from the dominated one that is impacted by it, in order to increase the market power in the non-dominated connected market. Accordingly, if a firm uses its privileged and dominant position on the upstream market for an input to obtain a competitive advantage or eliminate competition in a downstream market, this action could be considered abusive for the Colombian competition regime.
Refusals to deal and denied access to essential facilities
In Colombia, there is a specific norm referring to the refusal to deal. Under article 48.3 of the Decree 2153 of 1992, it is considered an action restricting competition (and thus a violation of the antitrust laws) to refuse to sell or provide services to a company as part of a price retaliation policy. There are three elements to the offence: (i) a refusal by Company A to sell a product to Company B; (ii) a refusal by Company B to adjust its prices or adopt a pricing scheme; and (iii) intent by Company A to retaliate against Company B for its refusal to implement the subject pricing.
However, it must be noted that the mere fact that a company refuses to sell or supply its products to another company should not be regarded as an infraction of the antitrust laws, especially when the company has legitimate procompetitive reasons for doing so. An antitrust problem only arises when the decision not to sell or to discriminate is intended as retaliation for a discounted pricing policy. In SIC Resolution 8310 of 2003, the SIC imposed sanctions on GABRICA for their refusal to sell Hill’s dog food to Concentrados del Norte, in response to Concentrados del Norte’s reluctance to increase retail prices. GABRICA and Concentrados del Norte both sold Hill’s dog food and Concentrados del Norte’s selling at a discounted price forced GABRICA to do the same.
Regarding essential facilities, access denial may be considered contrary to the dominance competition regulation as an illicit obstruction to market access according to article 50.6 of Decree 2153 of 1992. As evident in the SIC resolution 25036 of 2014, to constitute an unlawful conduct: (i) the facility must constitute an indispensable productive input to compete effectively in downstream markets; (ii) the facility should not be susceptible to duplication on the factual level, for technical, legal or economic reasons; (iii) the refusal to provide access, or to provide it under discriminatory or unreasonable conditions, must be devoid of any objective justification; and (iv) the negative must imply a detriment in competition in downstream markets.
Predatory product design or a failure to disclose new technology
None of these concepts are expressly included in Colombian competition protection. Nonetheless, as the list of abusive conducts is not exhaustive, these conducts could be considered abusive by the SIC in future investigations if the authority considers there is a limitation to free competition applying the general antitrust prohibition of article 1 of Law 155 of 1959.
Pursuant to article 50.2 and 50.4 of Decree 2153 of 1992 the imposition of discriminatory conditions or the sale to a buyer in different conditions than others constitutes an abuse of a dominant position. This prohibition applies when a dominant firm imposes discriminatory conditions to similarly situated customers (ie, those buying goods of similar quantities and quality). Article 50.2 of Decree 2153 of 1992 requires the discriminatory act to generate a disadvantage for the purchaser and article 50.4 requires intent to eliminate or reduce competition.
For the conduct to be considered abusive, the discrimination must not derive from differing economic objective conditions. In other words, it is permissible in Colombia to offer different pricing for different volumes of goods or to differentiate the pricing of goods that are not of the same quality, since those differences are based in objective economic criteria. For instance, when the SIC investigated COLANTA (a Colombian milk provider) for pricing discrimination in Resolution 588 of 2003, it held that if one milk provider offered a better quality product than the other, it was not discriminatory to differentiate the price offered to the two providers, as these are not equivalent operations. Discounts and rebates to distributors, sellers or consumers must be granted based on objective reasons that economically support the imposition of the discount, such as discounts for larger volume purchases that apply regardless of the identity of the buyer, or discounts based upon the different qualities of the purchased products.
Exploitative prices or terms of supply
A dominant supplier cannot charge excessive prices. Article 1 of Law 155 of 1959 or the ‘general antitrust prohibition clause’, prohibits the imposition of unfair prices (excessive prices). The SIC Resolution 37790 of 2011 (the Vijagual case) and SIC Resolution No. 76724 of 2014 (the San Andrés-CASYP airport concession case) demonstrate the sweeping nature of article 1’s prohibition stating that it generally prohibits all types of practices, procedures or systems tending to maintain or determine unfair prices.
In SIC Resolution 76724, the authority stated that imposing unfair prices consists of actions aimed at determining a price, without consideration of market rules and the free play of supply and demand, all of which shall be determined considering each type of product, service or charge under examination, the market’s legal framework, and the context in which the price has been fixed. According to SIC’s resolution 37790 of 2011, for a practice to be deemed the imposition of an unfair price, two conditions must be met: (i) that, in fact, an unfair price was determined or maintained; and (ii) that the actions were, in fact, suitable to determine or maintain unfair prices. The SIC further clarified this, stating that it is not possible to describe a price as inequitable or excessive, without understanding the intricacies of the market and without determining whether the actions of an enterprise constitute a practical procedure or system tending to fix an artificially high price. Accordingly, the SIC will conduct an economic analysis of the relevant market dynamics and the interaction between competitors and customers to determine whether a price is excessive.
In the Vijagual slaughterhouse case, the SIC did not find excessive prices. The SIC examined the market and determined that a lack of market entry barriers warranted examination of the matter, but that price differences with competitors in other geographical markets answered to differences in product quality and in geographical market conditions (variation of production costs, regulation, taxes, preferences, etc). Therefore, the higher prices of the Vijagual slaughterhouse had an objective economic explanation and could not be considered as excessive.
In the Concesión Aeropuertos San Andrés y Providencia CASYP case, the SIC investigated the application of inequitable prices (article 1 of Law 155 of 1959) and an alleged anticompetitive pricing agreement with Chevron (article 47.1 and 47.3 of Decree 2153 of 1992) regarding the access fee offered to fuel wholesale distributors in the San Andrés Airport. The SIC sanctioned the concessionaire for imposing unfair prices since CASYP did not consider the concession’s commercial or financial situation to set access fees and did not use transparent methods to set access fees; on the contrary, their methods naturally caused an unjustified fee increase. In this sense, a dominant form may not impose excessive prices in a market and this excess will be analysed by the SIC after an exhaustive examination of market conditions, competitors, market barriers, geographical conditions that may influence the specific market, alternative products available for consumers, among other criteria.
Abuse of administrative or government process
In Colombia there has never been a process for exclusionary practices caused by the misuse of patent claims or anti-dumping complaints. Nonetheless, as the list of abusive conducts is not exhaustive, these conducts could be considered abusive by the SIC in future investigations if the authority considers there is a limitation to free competition applying the general antitrust prohibition of article 1 of Law 155 of 1959.
Mergers and acquisitions as exclusionary practices
In Colombia the SIC has never considered a merger as an exclusionary practice that constitutes an abuse of dominance. Nevertheless, mergers and acquisitions are subject to the SIC’s ex ante control. The authority has objected mergers involving dominant actors that would, in the SIC’s view, obstruct competition (ie, SIC Resolution 29937 of 2010 and SIC Resolution 28037 of 2014). Thus, even if mergers as such are not considered exclusionary practices, mergers examined by the authority may be rejected on grounds of easing exclusionary effects or practices in the relevant markets.
The list of conducts considered as abusive is stipulated in article 50 of Decree 2152 of 1992. These include predatory pricing, discriminatory conditions and pricing, tying and bundling, geographical discrimination and market access obstruction. Nonetheless, other conduct apart from this list may be considered an abuse of dominant position in the terms of the general antitrust prohibition of article 1 of Law 155 of 1959 if the authority identifies practices, procedures or systems aiming at restraining competition or imposing unfair prices.
Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?
The Colombian competition authority is the SIC. Internally, the SIC is divided into sections that specialise in issues such as competition law, unfair competition, consumer protection, industrial property and data protection. The main sections associated with competition law are the competition protection section, which manages antitrust practices and merger control and the jurisdictional affairs section, which manages unfair competition suits.
Sanctions and remedies
What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?
As for sanctions, pursuant to article 25 of Law 1340 of 2009, the SIC may impose sanctions on corporations of up to 100,000 monthly minimum legal wages or up to 150 per cent of the profit obtained from the prohibited behaviour, if this profit exceeds 100,000 minimum legal wages. Sanctions can be applied to each offender, and for each violation of the provisions on the protection of competition. In fact, in the Resolution 54303 of 2013, the SIC punished Claro for each of the violations of the provisions on the protection of competition.
To determine the sum of fines to be imposed on companies, the SIC considers the following factors (article 25 of Law 1340 of 2009): (i) the impact of the subject conduct on the relevant market; (ii) the size of the affected market; (iii)the benefits obtained by the offender through the subject conduct; (iv) the company’s degree of involvement (when not the infringing company); (v) the investigated party’s procedural behavior; (vi) the infringing company’s market share, as well as the portion of their assets and/or sales linked to the infringement; and (vii) the offender’s patrimony. For SIC, the following situations are considered aggravating in the imposition of fines: persistence of the abusive behavior; prior infractions of the antitrust laws; breach(es) of commitments or orders imposed by the SIC; and whether the subject company was a ring-leader. On the other hand, collaboration with the SIC is an important factor in reducing the amounts of fines.
The SIC can also impose penalties of up to 2,000 minimum monthly legal wages on natural persons who collaborate, facilitate, authorise, execute or tolerate behaviours that violate the antitrust rules under Law 155 of 1959, Decree 2153 of 1992 and any other regulatory instrument that should complement or modify it. To determine the value of these sanctions, the SIC will consider the following factors; (i) the persistence on the prohibited behavior; (ii) the behavior’s impact on the market; (iii) the reiteration of prohibited conduct; (iv) the person’s degree of involvement; and (v) the investigated party’s procedural behaviour.
The SIC’s power to impose sanctions for violation of antitrust regulation will expire five years after the proscribed behaviour was committed or ceased to occur. Under article 16 of Law 1340 of 2009, the SIC may, in lieu of penalties, accept commitments from the infringing parties. Investigated parties must offer the commitments before the expiration of the term to request or provide evidence to the SIC.
Can the competition enforcers impose sanctions directly or must they petition a court or other authority?
The administrative action for an alleged violation to the antitrust regime may be initiated by a third-party complaint or ex officio by the authority. The SIC may initiate administrative action using information provided by the offenders. This last option was introduced by Law 1340 of 2009, which enables fine benefits to offenders who report and provide information about anticompetitive conduct in which they have participated.
Once the complaint is filed, the SIC conducts an admissibility examination and starts a preliminary investigation. The purpose of this phase is to verify the occurrence of the facts, collect evidence, identify the possible authors of the conduct and to determine a possible violation of the rules on protection of free competition. At this stage, the alleged offenders have not yet been identified and, therefore, there are no investigated parties or any type of debate between parties.
The formal investigation stage starts with the Investigation Opening Resolution. This administrative act contains the facts presented to the authority by a third-party complainant or the facts for which the process initiated ex officio, the allegedly infringed competition norms, the alleged offenders, evidence of each legal element constituting each illicit behaviour, date of occurrence of the events and the investigation period among others.
Once the investigation stage is completed, and evidence is examined, the Deputy for Protection of Competition presents a reasoned report to the Superintendent. The reasoned report contains a narrative of the behaviours for which the investigation was opened, an analysis of the relevant market and market power, a list of collected evidence and an examination of each one, an analysis of the investigated behaviours indicating whether there was an infraction and a recommendation on the decisions to be adopted by the Superintendent. At this point, the file is handed over to the office of the Superintendent of Industry and Commerce, and together with his or her advisory group he or she makes the final decision whether to sanction.
What is the recent enforcement record in your jurisdiction?
The most frequent sanctioned behaviour is the market access and commercialisation channel obstruction for competitors of article 50.6 of Decree 2153 of 992. Nonetheless, rules on abuse of dominance are not frequently enforced in Colombia. As a matter of fact, there are only eight sanctions for dominance abuse in the last 10 years. The average length of these 10 processes starting with the Opening Investigation Resolution and finishing with the sanction is approximately two-and-a-half years, the longest process took five years and the shortest only one year. The preliminary inquiry by the authority, before the formal investigation starts, usually takes an additional year.
The Empresa de Acueducto, Alcantarillado y Aseo de Bogotá - the EAB case, which was the only case sanctioned in 2018, involved the investigation for infringements to the general antitrust prohibition clause and articles 50.4 (sales on discriminatory conditions) and 50.6 (obstruction to market access) of Decree 2153 of 1992 in the water supply market in Bogota and 10 nearby municipalities. The SIC concluded that EAB supplied water to COJARDIN in different conditions than those offered to other buyers and obstructed COJARDIN’s activities for the commercialisation or provision of water as a public service by installing a flow reducing valve and two plates to supply water with lower flow and pressure. The authority concluded that the behaviour was ideal to eliminate COJARDIN from the public water service market and sanctioned the public entity.
Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?
If a clause in a contract involves an infringement to free competition it is considered to have an illicit object according to article 46 of Decree 2153 of 1992, and thus, may be invalidated. Additionally, in arbitration, it is possible to argue that a clause that constitutes an abuse of dominance is not binding for the parties as it has an illicit object and, therefore, must be annulled (EPM v TGI, Cámara de Comercio de Bogotá, 2016,).
To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?
In Colombia, the SIC has exclusive jurisdiction over sanctions for violations of the antitrust laws. Nevertheless, it is possible to sue contractual clauses deemed as abusive for nullity and, if a person or firm is affected by anticompetitive behaviours it may take action for damages, both before the civil jurisdiction. Also, a group of people could file a collective action seeking compensation for damages. One group started a collective action against the companies investigated in Colombia’s diapers cartel, but later withdrew its claim.
Certain disputes regarding anticompetitive behaviour in contracts may be resolved through arbitration, provided that an arbitration clause was included in the subject contract. Lastly, there are special provisions for consumer protection in the financial sector, where pursuant to article 99 of Law 1328 of 2009 (the Financial Consumer Protection Act) financial institutions must implement self-regulation to identify restrictive practices (related to prices and fees) and promote fair trade.
Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?
Antitrust investigations on abuse of dominance by the SIC do not grant damages to harmed companies and exclusively impose fines to the offenders. Nonetheless, the authority may award damages via the unfair competition jurisdiction for norm infringements that cause illicit competitive advantages to agents in the market. The infringed norm may regard abuse of dominance regulation.
Also, as stated in the previous question, it is possible to take action or to file class actions for damages before the civil jurisdiction if affected by anticompetitive behaviours.
To what court may authority decisions finding an abuse be appealed?
Infringers may ask the SIC to review its decision, resorting to a reconsideration remedy but may not formally appeal the decision. Nonetheless, sanctioned firms may suit the SIC decision to before the contentious - administrative tribunals for procedural or substantial defects. In arbitration there is no possibility of appeal.
Unilateral conduct by non-dominant firms
Are there any rules applying to the unilateral conduct of non-dominant firms?
Regarding unilateral conducts by non-dominant firms, the Colombian competition regime stipulates three main prohibitions that might be unilateral and considered as anticompetitive in article 48 of Decree 2152 of 1992; (i) infringement of advertising regulation; (ii) acts of influence; and (iii) sale denial or discrimination. The first conduct refers to the violation of the advertising rules established in the Consumer Protection Statute. Every person who regularly offers, supplies, distributes or commercialises products (notwithstanding if there is a profit motive) is obliged to provide consumers clear, truthful, sufficient, timely, verifiable, understandable, accurate and suitable information about the offered products. Misleading advertising, which is ‘one whose message does not correspond to reality or is insufficient, in a way that induces or may lead to error, deception or confusion’, will be sanctioned.
The second conduct sanctions the influence of one company to another with one of the following purposes: (i) to increase their prices or (ii) desist from their intention to lower them. To constitute an act of influence, there must be some degree of constraint or pressure by the infringer in order to achieve the desired result. Also, the infringer is required to have the ability to influence the other company due to factors such as the participation of the company in the market, its size or its relationship with distribution the channels, which enables the firm to whom the influence is directed to orient its conduct in accordance with the act of influence. Even if the firm does not follow the act of influence, it may be sanctioned, as the action of influence may be completed with a mere suggestion.
Lastly, article 48.3 of D. 2153 includes two different behaviours: first, the refusal to sell to another company when this is a retaliation to its price policy, and second, to discriminate against a company, with identical retaliatory mobiles. It should be noted that both conducts must be executed as retaliation to the pricing policy of the agent, either because it does not agree with the price charged by the latter (because it is too high or too low), or because it disagrees with the discounts applied, and in general, any component of the pricing policy. To constitute the illicit conduct, the retaliation must not obey valid and justifiable reasons in the light of the business and cost structure of the firm, since only in this case would there be undue barriers to free and fair competition.