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What is the legal framework in your jurisdiction covering the behaviour of dominant firms?
Dominant firms in Colombia are subject to the general competition regime of the country, that is, Law 155 of 1959, Decree 1302 of 1964, Decree 2153 of 1992 and Law 1340 of 2009. There are also specific regulations for certain sectors, such as public utilities, health, television, transportation and banking. The general regime also applies to each sector, specific regulations notwithstanding.
Definition of dominance
How is dominance defined in the legislation and case law? What elements are taken into account when assessing dominance?
It is defined as the possibility to directly or indirectly determine the conditions of a given market. In determining the existence and magnitude of dominance, the antitrust regulator usually uses a test that includes an assessment of market share of the company, market concentration and barriers to entry.
Purpose of legislation
Is the purpose of the legislation and the underlying dominance standard strictly economic, or does it protect other interests?
Colombian law establishes that the antitrust authority must protect the free participation of enterprises in the market, consumer welfare and economic efficiency. However, there are a few exceptions, such as Law 590 of 2000, which protects small and medium-sized business by banning illegal interference with a competitor’s entry to a market. It can also be argued that the prohibition against price discrimination protects small companies in certain instances.
Sector-specific dominance rules
Are there sector-specific dominance rules, distinct from the generally applicable dominance provisions?
Yes, the following sectors have additional specific provisions: public utilities, financial sector, health sector, television, telecommunications and transportation. Even though the general provisions concerning illegal conduct for dominant firms apply in all sectors, these additional rules contain specific regulations related to sector-specific behaviour, that derive from broader competition rules that are established in the general competition regime. There also exists a notion of dominance in the contractual context and in consumer protection law, which relates to the inability of a party to a contract to defend itself from certain unfair clauses. This notion does not play a role in the antitrust scenario.
Exemptions from the dominance rules
To whom do the dominance rules apply? Are any entities exempt?
They apply to every market participant, including governmental entities that participate in the market.
Transition from non-dominant to dominant
Does the legislation only provide for the behaviour of firms that are already dominant?
Colombian antitrust regulation of a firm’s unilateral conduct (as opposed to agreements with other parties) is generally directed at firms who already possess a dominant position in the market and abuse such position. Generally speaking, companies that lack a dominant position in the market may legally engage in conduct that would be sanctioned as illegal if performed by firms possessing a dominant position. Certain specific conducts that are aimed at acquiring dominance may be sanctioned, such as market foreclosing exclusive dealing agreements.
Is collective dominance covered by the legislation? How is it defined in the legislation and case law?
Collective dominance is not addressed directly by the antitrust laws.
Does the legislation apply to dominant purchasers? Are there any differences compared with the application of the law to dominant suppliers?
There is no specific regulation of dominant purchasers in Colombian law and the Superintendency of Industry and Commerce (SIC), the general antitrust authority in Colombia, has never, to our knowledge, prosecuted a dominant purchaser for abuse of dominant position. However, general rules against abuse of dominance also apply to purchasing power.
Market definition and share-based dominance thresholds
How are relevant product and geographic markets defined? Are there market-share thresholds at which a company will be presumed to be dominant or not dominant?
Relevant product and geographic markets are defined under the same provisions established for merger control regulation. In this sense, in order to define the relevant product, it is necessary to identify all products or services with demand-side and supply-side substitutability, and for the geographic market, the area in which such products or services compete with one another.
There is no market share threshold to establish dominance in the general competition regime. The public utility law establishes a threshold of 25 per cent, above which a company will be understood to be dominant.
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?
Abuse is not defined in the law, which makes a general prohibition of abusing dominant position difficult to enforce. Effects-based analysis exists mainly in vertical restrictions and merger control. Abuse of dominance is not necessarily effects-based. There are four specific types of conduct in the general competition regime that constitute abuse of dominant position, which are price discrimination, tying agreements, predatory pricing and interfering with a third party’s attempt to enter a market (market foreclosure).
Exploitative and exclusionary practices
Does the concept of abuse cover both exploitative and exclusionary practices?
Yes. Even though the law seems designed specifically for exclusionary practices, the antitrust authority has made reference to exploitative practices as well.
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?
Colombian law, generally, simply establishes that certain types of conduct constitute abuse of dominant position when performed by firms who, in fact, possess a dominant position in the market. In this regard, there must be a causal link between the conduct that constitutes abuse of the dominant position and the effective dominance position held in the market by the subject that performs such conduct.
The SIC will be willing to carry out an investigation for the abuse of dominance position only if the market dominance position of the alleged infringer is proved. To reinforce this assumption, in 2012, the SIC sanctioned an important Colombian airline for abusing its dominant position. The investigation was limited to certain flight routes on which this airline held a dominant position. The remaining flight routes were left outside the investigation.
What defences may be raised to allegations of abuse of dominance? When exclusionary intent is shown, are defences an option?
Defences may be addressed to prove that the company does not hold a dominant position in the market or that it did not concur in the conduct that is specifically prohibited in the law. Failing these two defences, the offence is generally punishable. Abuse of dominant position offences in Colombia establish requirements such that situations that are generally used as defences in other jurisdictions, such as meeting competition or market entry, make the conduct not punishable because it fails to meet the requirements for illegality. Efficiency gains are, generally, not a proper line of defence in dominance cases. Intent is very seldom considered in antitrust investigations, as it is sufficient, but not necessary, to establish an antitrust offence.
Specific forms of abuse
Types of conduct Types of conduct
Indicate to what extent the following types of conduct (questions 14–25) are considered abusive. Mention briefly any leading precedents on, and the relevant tests for, assessing the categories of conduct: Rebate schemes
Colombian competition law does not specifically address rebate schemes.
Tying and bundling
Tying and leveraging, in the general regime of competition, are considered as an abuse of dominant position when the dominant firm subordinates the supply of a product to the acceptance of additional obligations, which, by their nature, are not related to the object of the principal sale. It should be noted that the SIC identifies certain efficiencies arising from tying that should be observed throughout the characteristics of the relevant market, for each case. In Resolution 40912 of 2012, the SIC identified different forms of efficiencies such as:
- quality control of the tying product;
- safety assurance of the tying product;
- decrease in both the transactions and the searching costs for customers; and
- the advance of the product performance or convenience, which would not constitute an abuse of dominance, if proved.
Exclusive dealing and single branding arrangements are illegal when they foreclose the market and, thus, become an entry barrier. One exclusive-dealing arrangement precedent is Resolution 23890 of 2011, in which the SIC determined the existence of a vertical restraint between the only company that carries out studies of television audience measurement, two television channels and an association of advertising agencies and media centres. In this case, the SIC established that an exclusive-dealing arrangement between the aforementioned parties regarding audience measurement studies - which is basic information for the TV advertising market in Colombia - created the following restrictions on competition: an entry barrier to participation in the market for advertising agencies and media centres that were not party to the agreement; and limiting or eliminating competition from any other agent in the advertising market.
In a related development in 2015, by way of Resolution 26129, the SIC held that exclusive-dealing arrangements could be anticompetitive when their sole intent was to limit the access of potential competitors into the market, and therefore, did not have the purpose of achieving certain legitimate efficiencies within it. Through this resolution, the SIC filed a statement of objections against an automobile manufacturer that prevented its dealers as well as its dealers’ shareholders and investors from incorporating companies or opening retail establishments through which other manufacturers could sell their cars to final consumers. In this case, the SIC limited the illegality charge to the agreement’s purpose and did not study its impact in the market.
Predatory pricing is considered an abuse of dominant position when a dominant firm lowers prices below costs with the intention of eliminating one or several competitors, or preventing their entry or expansion. In one case the SIC sanctioned a bubble gum producer and distributor because it determined that being a dominant firm, the manufacturer had lowered the price of one of its products below the average total costs during 2002 and 2003 with the intention of eliminating or reducing the market share of one of its direct competitors. Recoupment has never been deemed to be a necessary element of the offence.
Price or margin squeezes
There is no specific regulation or precedent for price squeezes under Colombian law. However, a recent decision concerning resale price maintenance described one of the perils of the conduct as being the possibility that upstream market power might be transferred to lower levels of the chain. Under this rule, the SIC could very well hold price squeezes to be illegal.
Refusals to deal and denied access to essential facilities
Refusals to deal are banned in a very limited way, when they constitute retaliation for pricing policies. There is no general prohibition against refusing to deal, although in cases of high market power or near monopolies they could be covered by the general prohibition of restricting competition.
In industries where there exists an essential facilities doctrine, such as public utilities and telecommunications, owners of essential facilities, mainly networks, have a duty to deal with competitors and third parties, allowing them access to the networks.
Predatory product design or a failure to disclose new technology
In Colombia, there are no rules regarding predatory product design or failure to disclose new technology.
In Colombian antitrust law, price discrimination is solely an event of abuse of dominance. During the past few years, the SIC has issued several rulings in which some firms have been penalised for price discrimination. One of the most relevant cases occurred in 2012, when the SIC penalised a water supply company, arguing that its conduct was against free competition because there was no justifiable reason to apply a different price for the sale of water to some firms that were competing with the company in the market of commercialisation of water.
Exploitative prices or terms of supply
On a few occasions the Colombian antitrust authority has interpreted the general prohibition to restrict competition as containing a prohibition against exploitative prices. In a recent decision, the SIC determined that exploitative or excessive prices are those that do not hold a reasonable relationship with the ‘economic value that inspires them’ which, to the SIC, means that the reasonableness of a price must be measured in the light of costs or with the objective of the specific revenue. The SIC wandering into this territory, lacking any regulation on the matter, seems to represent a slippery slope of unpredictable consequences and certainly blurs the lines between antitrust enforcement and price regulation.
Abuse of administrative or government process
There are no rules in Colombia regarding abuse of administrative or government process.
Mergers and acquisitions as exclusionary practices
With the aim of avoiding any exclusionary practice that results from a merger or an acquisition, Colombian law demands that any operation where two companies or business units are to be integrated, regardless of the legal form of the integration (merger, stock acquisition, certain joint ventures, franchise agreements, asset acquisition or others), must be previously authorised or ‘cleared’ by the SIC, in the following circumstances: when the companies or business units participate in the same economic activity (horizontal operations); or when the business units participate in the same ‘value chain’ (vertical operations).
In this sense, operations that are reviewed by the antitrust authority may be approved, rejected or conditioned on the adoption of either structural or behavioural remedies, depending on the market impact that may result from them. Thus, horizontal integrations are judged in the light of their capacity to increase market power or facilitate its exercise, which is determined from various elements, such as their effect on market concentration, entry barriers, possible coordinated effects, the presence or absence of supply side substitution, price elasticity of demand of the products or services involved.
On the other hand, vertical operations are judged based on their ability to foreclose the market, making entry more difficult or more expensive for competitors or raising costs for competitors in one part of the chain.
It must be borne in mind that, in order to determine the obligation to obtain clearance or the impact of the operation, the SIC will take into account not only those companies or businesses over which direct control is exercised, but also those where any kind of influence over the business decisions may be exercised, such as minority holdings in a company that allows power of veto over decisions that may affect the market.
Colombian statute and case law have not entered into additional forms of abuse, although the general prohibition to restrict competition could eventually be used by the antitrust authority to develop a doctrine for limiting or outright banning conduct such as strategic capacity construction or underinvestment in capacity, predatory advertising, excessive product differentiation and others.
Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?
The general antitrust authority in Colombia is the SIC. There are two exceptions to its universal jurisdiction for antitrust matters in the country: the Financial Superintendency has the power to clear mergers between financial institutions when they are all under the surveillance of the Superintendency, and the Civil Aeronautics authority has the power to authorise certain agreements among airlines.
Sanctions and remedies
What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?
The SIC may impose, for each violation and to each legal entity that commits the conduct, fines of up to 100,000 minimum wages (approximately US$27,547,320), or up to 150 per cent of the profits derived from the restrictive conduct. The SIC may also order the conduct to cease.
Additionally, the SIC may impose, on individuals who collaborate, facilitate, authorise or condone the commission of the types of conduct described in the general competition regime, fines up to 2,000 minimum wages (approximately US$550,946).
No structural remedies are established by the law.
The highest fine ever imposed for abuse of dominance in Colombia was 91,450 minimum wages (approximately US$22,399,780). This fine was imposed through Resolution 53403 of 2013, in which the SIC determined that the dominant firm in the communications sector violated the general prohibition of the competition regime and obstructed access to marketing channels.
Can the competition enforcers impose sanctions directly or must they petition a court or other authority?
The SIC can impose sanctions directly to entities and individuals, after a full investigation for abuse of dominance position.
What is the recent enforcement record in your jurisdiction?
Notwithstanding the fact that Colombian authorities are active enforcers of legislation concerning abuse of dominant position, illegal horizontal agreements and merger control generate the majority of antitrust enforcement activity in the country.
Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?
When a dominant company acts as a party in an agreement that included a clause that is inconsistent with the competition legislation, the invalidity of such clause can only be determined by a judge. Courts have no obligation to consult or to follow the antitrust regulator’s ruling concerning similar or even the same specific conduct.
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?
Private enforcement is possible in the sense that any person may submit a request for investigation of an antitrust violation and the SIC is obligated to prosecute the offence if, after a preliminary investigation, it finds evidence that prosecution is warranted. Non-parties to the agreement may request injunction-like measures, although these have not been adopted in antitrust investigations in Colombia to date. The remedy against antitrust violations consists of a fine of up to approximately US$25 million (the sum varies with applicable exchange rates) and the order to cease the conduct. There is no established legal regime for claiming damages arising out of antitrust offences. Experts have suggested that the ordinary tort regime or the Unfair Trade Practices Law could be used for this purpose, but this has yet to be attempted in Colombia.
Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?
As stated in the previous question, there is no established legal regime for claiming damages arising out of antitrust offences. Experts have suggested that the ordinary tort regime or the Unfair Trade Practices Law could be used for this purpose, but this has yet to be attempted in Colombia.
To what court may authority decisions finding an abuse be appealed?
The decisions in which the SIC determined an abuse of dominant position may be challenged before an administrative court but will produce their full effects only when voided by such court. The process could last years.
Unilateral conduct by non-dominant firms
Are there any rules applying to the unilateral conduct of non-dominant firms?
There are rules that apply to the unilateral conduct of non-dominant firms, namely, restrictive practices that do not require market power by the firm committing the infraction, as follows:
- violating the rules on advertising contained in the consumer protection statute;
- influencing a company to increase the prices of its products or services or to refrain from cutting prices; and
- refusing to sell or provide services to a company, or discriminate against it, when it is understood as retaliation for their pricing.