Legislation and jurisdictionRelevant legislation and regulators
What is the relevant legislation and who enforces it?
The primary law regulating the control of economic concentrations in Ecuador is the Organic Law for Market Power Control (Antitrust Law), which was enacted on 13 October 2011. The main secondary laws are:
- the Regulation of the Antitrust Law, published on 7 May 2012;
- Resolution No. 002 by the Antitrust Regulation Entity, with respect to Turnover Thresholds for Concentration Operations, published on 22 October 2013;
- the oversight entity in antitrust matters is the Superintendency for Market Power Control (SCPM), which is the antitrust entity, while the regulatory entity is the Antitrust Regulation Entity; and
- the investigation entity of the SCPM is the Economic Concentrations Investigation and Control Intendancy and the resolution entities are the First-Instance Resolution Committee and the SCPM (Second Instance at the Administrative Stage).
The Economic Concentrations Investigation and Control Intendancy is the entity in charge of investigating and processing economic concentrations’ control procedures and the First-Instance Resolution Committee is in charge of approving, rejecting or subordinating approval to compliance with behavioural or structural conditions.Scope of legislation
What kinds of mergers are caught?
The kinds of mergers caught include:
- transfers of an entire business;
- acquisitions of rights representing capital, shares or equity interests;
- relationships stemming from common administration; and
- any other agreement for transferring assets from one economic operator to another or granting the decisive control or influence in making decisions.
Premised on Ecuadorian antitrust legislation, economic concentration is defined basically by a change of control of one or more economic operators through the acts mentioned in question 1.
To be considered an economic concentration under Ecuadorian antitrust legislation, the concentration must be between local economic operators or, if between foreign companies, must produce effects in Ecuador. The Antitrust Law establishes two thresholds that economic concentration operations must meet to determine whether the operation requires the prior approval of the SCPM. Both of these thresholds need not be met, but rather only one needs to be fulfilled for the operation to be subjected to analysis and approval by the Oversight Authority.
One threshold concerns the market share of the economic operators participating in the operation, while the other involves business turnover.
With respect to which party is obligated to notify the economic concentration operation, notification to the SCPM must be provided by the party acquiring control of the company and that wishes to carry out the economic concentration, or the acquirer, depending on each case.
What types of joint ventures are caught?
Joint ventures that produce effects in Ecuador, surpass the thresholds established in the Antitrust Law and cause a change in the control in one of the economic operations by decisively influencing the decisions of the other are obligated to notify the SCPM. The scope of application of the Antitrust Law includes state-owned enterprises. Therefore, joint ventures involving this kind of economic operation are also subject to prior control by the SCPM.
Is there a definition of ‘control’ and are minority and other interests less than control caught?
Article 12 of the Regulation of the Antitrust Law defines control as ‘the result of contracts, acts or any other means which, taking factual and legal circumstances into account, confer the possibility of asserting substantial or decisive influence over a company or economic operator. Control may be joint or exclusive’. The position of the SCPM is that control implies the power resulting from the economic concentration that the acquirer has to decisively influence the decisions of the economic operator emerging from the transaction. There are no minority and other interests less than control caught under the Ecuadorian Merger Control Regulation.Thresholds, triggers and approvals
What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?
The Antitrust Law stipulates that if an economic concentration operation complies with one of the following conditions, the operation must be subjected to analysis and the prior approval of the SCPM:
- the turnover in Ecuador of all participants in the economic concentration in the preceding fiscal year exceeds the amount expressed in Unified Basic Salaries (RBU) (US$394 for 2019) established by the Antitrust Regulation Entity; and
- in case the economic concentration involves economic operators engaged in the same economic activity and, as a consequence thereof, the acquired or increased share in the relevant market is equal to or surpasses 30 per cent.
By way of Resolution 009, the Antitrust Regulation Entity set the thresholds in terms of the amount of the turnover in Ecuador of all participants in the economic concentration operation, over which prior notification to the SCPM is mandatory:
- when the turnover of all participants in the economic concentration in the fiscal year preceding the transaction is more than 3.2 million RBUs (US$1.2352 billion) for economic concentrations involving the domestic financial system and securities market;
- 214,000 RBUs (US$82.604 million) for concentrations involving insurance and reinsurance companies; and
- 200,000 RBUs (US$78.8 million) for economic operations not falling under either of the above.
To calculate the turnover of economic operators participating in the economic concentration, the turnover of the following economic operators must be added together:
(i) the economic operator in question;
(ii) economic operators in which the economic operator in question directly or indirectly has:
- more than half of subscribed and paid-in capital;
- the power of exercising more than half of voting rights;
- the power of designating more than half of the members on administration bodies; or
- the right to direct the economic operator’s business;
(iii) companies or economic operators with the rights and powers listed in (ii) with regard to a company or economic operator involved;
(iv) economic operators in which an economic operator listed in (iii) has the rights listed in (ii); and
(v) economic operators in question in which various economic operators listed in (i) to (iv) jointly have the rights listed in (ii).
The Antitrust Law requires presenting the economic concentration notification within eight calendar days of the date of execution of the agreement, irrespective of the method of the economic concentration. The notification must be made in writing.
Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?
The economic concentration notification is mandatory when the concentration produces effects in Ecuador, so long as it exceeds the thresholds set by the antitrust regulation entity. Although the law stipulates that, in case the concentration does not surpass the thresholds, no prior authorisation from the SCPM will be required, the SCPM may, directly or upon the petition of a party, request that the economic operators involved in the concentration notify the concentration for informative purposes. In the case that the SCPM requests notification for informative purposes, then notification must be submitted within 15 days of the date that the SCPM serves notice of such request.
The Antitrust Law also establishes that when an economic concentration exceeds the thresholds but involves the acquisition of shares, bonds, obligations or other convertible bonds without voting rights, as well as acquisitions of economic operators liquidated or that have not reported any activities in the country in the last three years, it is exempt from the mandatory notification to the SCPM.
Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?
Provided that the foreign-to-foreign mergers produce effects in Ecuador, the operation must be notified to the SCPM and the prior authorisation of the SCPM must be requested. It should be noted that the thresholds established in the Law for determining whether an economic operation is subject to notification are calculated based on economic figures in Ecuador.
Are there also rules on foreign investment, special sectors or other relevant approvals?
In Ecuador, there is no special rule or law that exclusively governs economic concentrations for foreign investment. The regulation for all kinds of economic concentrations (including economic concentrations outside Ecuador that produce effects in the country) is found in the Antitrust Law, and the entity that analyses and resolves in that regard is the SCPM.
Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
Concentration operations requiring prior approval have to be notified to the SCPM within a period of eight days from the execution of the agreement. The Antitrust Law states that executing an economic operation before notifying the Antitrust Law will be regarded as a serious offence punishable by law with a fine of up to 10 per cent of the breaching economic operator’s total turnover in the fiscal year preceding that of the fine. All offences listed in the Antitrust Law are, in practice, sanctioned by the SCPM.
Which parties are responsible for filing and are filing fees required?
In the case of a merger, the party responsible for notifying the SCPM is the acquiring economic operator; for transfers of the assets of a business, the economic operator that is the recipient of the transfer; for the acquisition of rights representing capital, shares, or equity interests, the acquiring economic operator; for relationships because of common administration, the economic operator whose members on the administrative board become part of the administrative boards of the other economic operator; and, for the transfer of assets from one economic operator to another, the economic operator acquiring such assets.
When there are various economic operators involved in the acquisition of control of another or other economic operators, the notification must be made collectively, for which a common attorney must be appointed.
For the notification of economic concentrations, the economic operator providing notification must pay filing fees to the SCPM in a sum equal to the higher outcome of the following: 0.25 per cent of income tax, 0.005 per cent of sales volume, 0.01 per cent of assets, or 0.05 per cent of equity. These sums are calculated taking the economic operators with presence in Ecuador into account. The fee payment voucher must be attached to the notification.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
In accordance with the Antitrust Law, the SCPM has to issue its decision with respect to the economic operation within a term of 60 working days from the date the SCPM acknowledges receipt of the submitted notification. The SCPM may suspend the term for up to 60 calendar days. In addition, the initial term of 60 working days may, on an exceptional basis, be extended for up to 60 working days. The SCPM usually takes about three months between the date of the notification of the economic operation and the date of the resolution. The economic concentration operation can neither be closed nor perfected until authorisation from the SCPM is secured.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
The Antitrust Law stipulates that executing an economic concentration operation that must be notified but has not been authorised by the SCPM is a serious offence. This kind of offence, pursuant to the Law cited above, is sanctioned with a fine of up to 10 per cent of the breaching economic operator’s total turnover in the fiscal year preceding that of the fine. To date, no economic operators that have closed the transaction before securing SCPM approval have been sanctioned; nonetheless, the SCPM has the power to start administrative procedures to sanction.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
The sanctions described in question 12 also apply to foreign-to-foreign economic concentrations that produce effects in Ecuador. The SCPM has signed cooperation agreements with other antitrust authorities for collaborating in this type of case.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
Premised on its legal power to subject the approval of an economic concentration to compliance with structural conditions, and as part of the conditions for approving an economic concentration in which the disinvestment of an asset package to be transferred to a third party had been ordered, in 2016 the SCPM resolved that the economic operators involved in an economic concentration had to sign a hold-separate arrangement until the ordered disinvestment was made. The reason was that the parties forming part of the economic concentration in Ecuador had to maintain their independence and competition at the market to avoid a monopoly. This took place in a stock purchase in the parent company between two subsidiaries that held the entire market share in Ecuador.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
There is only one economic concentration system in Ecuador, and there are no special rules or systems for public takeover bids. In other words, if as a consequence of a public takeover bid the thresholds and conditions set by the Antitrust Law are met, then it would have to be notified to the SCPM. Nonetheless, there are no secondary competition rules in Ecuador governing the execution of or compliance with a structural condition ordered by the SCPM that have to be observed for a public takeover bid.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
There is a form pre-established by the authority for notifying an economic concentration that was approved by way of an SCPM resolution. The form requests information related to the economic sector in which the economic operators involved in the concentration do business, a summary of the terms and conditions under which the operation will be carried out, the total value of the economic concentration, information regarding the goods or services offered, the chain of distribution, list of the providers of the economic agents involved in the concentration, general data of all operators forming part of the concentration operation, the relevant market, the total turnover of the participants, their market shares, the level at which the operation applies (national, regional, international), competitors at each one of the markets and the existence of barriers to entry. Together with the form, copies of the financial statements, draft of the legal document or agreement concerning the economic concentration, sworn statement that the information furnished is true, market analysis supporting the information supplied and confidentiality request must be submitted in the Spanish language.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
Once the economic concentration notification is filed, it will be investigated by the Concentrations Control Intendancy, which will follow the process and request information from the notifying economic operator, as well as from its competitors, providers and clients. Once the analysis stage is completed, it will submit a report to the First-Instance Resolution Committee. That committee will either approve, reject or subject the request to compliance with a behavioural or structural condition.
What is the statutory timetable for clearance? Can it be speeded up?
In accordance with the Antitrust Law, an economic concentration must be resolved within a term of 60 working days upon notification by the SCPM that it has received the filing. The SCPM, however, may suspend that term up to 60 calendar days and may also request an extension of up to 60 working days. No other time periods apply. The time it takes the authority to complete the administrative procedure for analysing the concentration will depend on the magnitude thereof.
Substantive assessmentSubstantive test
What is the substantive test for clearance?
Normally, the SCPM performs an analysis of the defined relevant market structure, concentration indexes, barriers to entry, efficiencies, supply and demand structure of the relevant market, benefits for or detriment to consumers as a result of the concentration, and competitive pressures.
In its analyses of economic concentration operations, the SCPM has used economic concentration indexes of the relevant market as its tool for calculating. For this purpose, it uses the Stenbacka threshold calculation and the Herfindahl-Hirschman Index.
Is there a special substantive test for joint ventures?
There is no specific test in Ecuador for joint ventures. All concentration tests are conducted pursuant to the same system explained above.Theories of harm
What are the ‘theories of harm’ that the authorities will investigate?
The SCPM analyses and investigates all economic concentration indexes of the defined relevant market, the degree of market power of the operators doing business in that market, tendency to abuse such market power, unilateral effects, coordinated effects and so on.Non-competition issues
To what extent are non-competition issues relevant in the review process?
When analysing and deciding on economic concentration interests, the SCPM always looks at the public interest or general interest of consumers and users. This is because the purpose of the Antitrust Law is precisely to procure the general wellbeing of consumers and users.Economic efficiencies
To what extent does the authority take into account economic efficiencies in the review process?
When analysing economic concentration operations, the SCPM examines the effects that the operation will bear on the relevant market and, among those effects, its analysis considers efficiency in supply that could entail minor costs, productive efficiency, dynamic efficiency and so forth. After reviewing SCPM resolutions within this ambit, it may be noted that the authority has considered that a large part of concentrations generate efficiencies and, therefore, most cases have been approved.
Remedies and ancillary restraintsRegulatory powers
What powers do the authorities have to prohibit or otherwise interfere with a transaction?
The SCPM has the power to either approve, reject or subject the approval of an economic concentration to compliance with the conditions that it orders. In that context, based on an analysis of a case in question, the authority has the power to reject a concentration operation should it find it detrimental to the market. Obviously, if the SCPM denies an economic concentration, the concentration may not be perfected in Ecuador.
In the case that the SCPM subjects approval of the economic concentration to compliance with conditions, such conditions will be either behavioural or structural.
With these conditions, the SCPM looks to maintain the competitive pressures existing at the relevant market prior to the concentration.Remedies and conditions
Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?
Yes, it is possible. In fact, the Antitrust Law confers upon the resolution entity the power to implement structural and behavioural remedies to stop an economic concentration from causing distortions at the market in question as a consequence. This power is broad, and the Antitrust Law does not specifically describe the type of conditions that the SCPM could order.
With respect to structural remedies, the SCPM has ordered the sale of industrial plants, assets for product distribution, transfer of intellectual property rights, intellectual property licences and so on. In turn, with regard to behavioural remedies, the SCPM has banned the implementation of exclusivity clauses and agreements with clauses conditioning the obligation of clients to acquire a minimum percentage of monthly purchases or clauses aimed at giving benefits to the concentrated economic operator to the detriment of its competitors, suppliers or clients.
What are the basic conditions and timing issues applicable to a divestment or other remedy?
The conditions are clearly described in detail in the SCPM resolution subjecting approval of an economic concentration to compliance with such conditions. The resolution grants the notifying economic operator a term of 90 days to sign and submit a commitment to the SCPM that must specifically describe how each condition will be met and executed. During that term, the notifying party has to write up the commitment and send it to the SCPM for its review. Nonetheless, approval by the SCPM must be given within a maximum term of 90 days from the date of issuance of the resolution. There must be a time period for implementing and complying with each condition.
What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?
To date, the SCPM has not had a case in which all parties in an economic concentration operation were foreign companies without any assets in Ecuador. The economic concentration of foreign companies with subsidiaries or assets in Ecuador have, in certain cases, been subject to the conditions explained above.Ancillary restrictions
In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?
To date, the SCPM has not had an economic concentration case where it had to analyse ancillary restrictions.
Involvement of other parties or authoritiesThird-party involvement and rights
Are customers and competitors involved in the review process and what rights do complainants have?
In its analysis, the SCPM reviews the information provided by the notifying party with regard to its competitors and providers, as well as the supply and demand structure at the market in question. Furthermore, when analysing an economic concentration, the SCPM will repeatedly require information from the competitors of the economic operators involved. The clients or competitors with a legitimate interest are entitled to file a special review appeal against the economic concentration resolution issued by the SCPM.Publicity and confidentiality
What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?
With the economic concentration notified to the SCPM, the notifying economic operator will then have to submit a confidentiality request concerning all the information furnished or that part thereof that it deems pertinent. The SCPM keeps confidential the sensitive information with which it is furnished, and only the parties involved in the process have access to the information not declared by the SCPM as confidential. The SCPM publishes on a webpage an extract of the resolutions available to the public in general. Such resolutions do not contain information that the SCPM has declared confidential, which is the sensitive information of economic operators.Cross-border regulatory cooperation
Do the authorities cooperate with antitrust authorities in other jurisdictions?
Presently, the SCPM has cooperation agreements signed with the antitrust authorities of Argentina, Austria, Brazil, Chile, the Dominican Republic, El Salvador, France, Greece, Honduras, Italy, Mexico, Paraguay, Russia, Spain, Tunisia and Uruguay. The SCPM frequently holds meetings with sister authorities to exchange opinions and benefit from the experience of other countries in antitrust matters. The SCPM may sign agreements with sister authorities to share information that could be of benefit to both parties.
Judicial reviewAvailable avenues
What are the opportunities for appeal or judicial review?
The Antitrust Law offers three appeal remedies at the administrative level:
- reconsideration motion filed with the First-Instance Resolution Committee;
- appeal review filed with the SCPM; and
- special appeal review filed with the SCPM.
Resolutions may also be appealed at the judicial level before the Administrative Litigation Jurisdiction.
All remedies, whether at the administrative or judicial level, bear devolutive but not suspensive effects.Time frame
What is the usual time frame for appeal or judicial review?
Reconsideration motions and review appeals must be filed within 20 working days of the date the resolution is served. Special review appeals may be filed within three years of the date the resolution becomes final. This means when a resolution was not the subject of an appeal, the parties were served notice thereof within 20 days thereafter.
The term for filing a subjective appeal at the judicial level before the Administrative Litigation Jurisdiction is 90 days from the date the resolution is notified, while the period for filing an objective or nullity appeal at the judicial level before the Administrative Litigation Jurisdiction is three years from the time the resolution comes into effect.
Enforcement practice and future developmentsEnforcement record
What is the recent enforcement record and what are the current enforcement concerns of the authorities?
In view of the seven years the Antitrust Law has been in effect and the six years of operation of the SCPM, we may conclude that the majority of economic concentration notifications in Ecuador have been approved by the authority; however, some have been denied, while others were the subject of significant structural or behavioural conditions.
Considering that the SCPM has been operating a little under seven years, the economic concentration system in Ecuador faces many challenges, particularly with regard to educating economic operators about the rules governing this area of the law and the prior concentration notification processes. In this regard, the SCPM has focused on training and has also published a technical guide for analysing economic concentration operations. The guide is a public document containing a clear explanation about how concentrations are examined, the thresholds for notification, definition of relevant market, turnover calculations, offences, sanctions and so on.
The treatment given to foreign-to-foreign mergers is the same as that of a local merger, as explained above.
Especially in terms of concentration indexes, the SCPM has ongoing analyses being performed in the following economic sectors: food, biotechnology, clothing, footwear, energy, pharmaceutical, metal mechanic, transportation, construction, forest timber products, environmental services, technology, automobile and petrochemical.Reform proposals
Are there current proposals to change the legislation?
In 2016, the Antitrust Law was amended by eliminating the possibility of the SCPM ordering the sale of a stock percentage in companies involved in a concentration operation to their workers as part of a structural condition. Currently, one concern about the Antitrust Law is the eight-day term that starts to run from the agreement execution date, as required by said law, to notify the concentration, as it is usually too short. There is also some ambiguity regarding the Spanish term conclusión del acuerdo, translated herein as ‘agreement execution’.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year?
There have been no material changes in the law. The same principles still apply.