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Trends and climate

Trends

How would you describe the current merger control climate, including any trends in particular industry sectors?

Law 20.495 which modifies the Competition Act (Decree-Law 211) – published on August 30 2016 – changed the Chilean merger control regime and is due to come into effect on June 1 2017. However, there is still uncertainty as to how the new regime will be implemented. 

Reform

Are there are any proposals to reform or amend the existing merger control regime?

Due to recent reforms introduced to the Competition Act, there are no new proposals to further reform or amend the merger control regime. 

Legislation, triggers and thresholds

Legislation and authority

What legislation applies to the control of mergers?

The main applicable legislation is Decree-Law 211/1973, which sets out the Competition Statute.

Other applicable pieces of legislations include:

  • the General Banking Act (Decree-Law 3/1997);
  • the Freedom of Opinion and Information Act (19.733/2001);
  • the Utility Companies Act (Decree-Law 382/1988);
  • the Public Ports Act (19.542);
  • the Auto Acordado on Procedures (5/2004);
  • the Auto Acordado on Electronic Back-Ups (7/2006);
  • the Auto Acordado on Relevant Information for Ex Ante Control of Concentration Operations (12/2009); and
  • the Auto Acordado on Confidentiality (15/2012).

An auto acordado is an internal ruling issued by the Competition Court (Tribunal de Defensa de la Libre Competencia).

What is the relevant authority?

The relevant authorities are the national economic prosecutor, the Competition Court and the Supreme Court – which only hears appeals. 

Transactions caught and thresholds

Under what circumstances is a transaction caught by the legislation?

The current regime – which is applicable until May 31 2017 – provides for voluntary notifications, so that as a general rule the parties must self-assess whether to notify.

Law 20.495 – published on August 30 2016 – provides for ex ante mandatory filing for concentrations (merger controls) and a post-closing filing for minority shareholdings. The merger control system comes into force on June 1 2017, while the minority shareholding notification is already in force. This establishes a transitory period until February 26 2017 for the notification of past transactions. 

The new merger control system will apply to any fact, act or convention, or combination thereof, which results in two or more economic agents which are not part of the same business group and which were previously independent from one another, ceasing to be independent in any scope of their activities in one or more of the following ways:

  • by merging – regardless of the legal structure of the merging entities or the resulting entity;
  • by the acquisition of one or more economic agent, whether directly or indirectly, of rights that allow them, individually or jointly, to decisively influence decisions by the other economic agent;
  • by their association, under any structure, to create an independent and different economic agent which conducts its business in a permanent manner; and
  • by acquiring control over the assets of the other by any title, regardless of the quantity.

The Competition Act establishes that the parties must notify the national economic prosecutor before executing any concentration transaction that will have an impact in Chile and which meets or surpasses the sales thresholds set by the prosecutor.

It also introduces a new provision setting out an obligation to inform the prosecutor of “the acquisition, by one company or an entity belonging to its company group, of an interest, whether direct or indirect, representing more than 10% of the equity of a competing company, considering both stakes held in its own name and those held by third parties in their benefit” – this will allow it to decide whether to open an investigation. The obligation to inform shall be triggered only where the acquiring company – or its company group – and the company in which interest is being acquired each had annual revenues for sales, services and other operational revenues of over UF (Unidades de Fomento or adjustable units) 100,000 (approximately $4 million) in the last calendar year.

Moreover, the act qualifies direct interlocking between the competitors as per se ‘anti-competitive conduct’, which it defines as the “simultaneous participation of a person in relevant executive positions or as a director in two or more competing companies”, provided that:

  • each of the competitor’s company group has annual revenues for sales, services and other operational activities of over UF100,000; and
  • the simultaneous participation in the abovementioned positions lasted for 90 continuous days since the end of the calendar year in which the relevant companies exceeded the referred threshold.

Do thresholds apply to determine when a transaction is caught by the legislation?

Yes. Resolution 667 – issued by the national economic prosecutor – established that a transaction must be notified when the two following conditions are met:

  • The sum of sales in Chile of the agents subject to a concentration operation are equal to or exceed UF1.8 million (approximately $70 million), during the last fiscal year (calendar year) in which the notification is verified.
  • The sales in Chile of at least two of the agents subject to a concentration operation are, separately, equal to or exceed UF290,000 (approximately $11 million), during their last fiscal year in which the notification is verified.

Informed guidance

Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?

Yes. The system is not yet in force, but it is expected to provide for pre-notification meetings with the national economic prosecutor to discuss jurisdictional and procedural issues. 

Foreign-to-foreign

Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?

Concentration transactions which have an impact in Chile and which meet or exceed the sales thresholds set by the national economic prosecutor shall fall under the regime.

Joint ventures

What types of joint venture are caught by the legislation?

The law expressly applies the merger control system to joint ventures. It defines ‘concentration operations’ as:

“any fact, act or convention, or combination thereof, which results in two or more economic agents that are not part of the same business group and that are previously independent from each other, cease such independence in any scope of its activities by one or more of the following ways: (…) By their association, under any structure, to create an independent and different economic agent, that conducts its business in a permanent manner.”

Notification

Process and timing

Is the notification process voluntary or mandatory?

Until May 31 2017, notification is voluntary for concentration operations and mandatory for minority shareholdings. From June 1 2017, notifications will be mandatory when concentration transactions have an impact in Chile and meet or exceed the sales thresholds established by the national economic prosecutor.

Parties to a concentration transaction which does not meet or exceed these thresholds may also voluntarily notify the national economic prosecutor. Such voluntary notifications shall be subject to the same rules applicable to mandatory ones, provided that the transaction has not been implemented before the filing.

If a concentration transaction which does not meet or exceed the relevant thresholds is not voluntarily notified, the national economic prosecutor has one year from its execution to open an investigation into it. 

What timing requirements apply when filing a notification?

Minority shareholdings must be notified within 60 working days of the acquisition. For past transactions (ie acquisitions that took place before the publication of Law 20.945), the national economic prosecutor must be notified of the minority stakes within 180 days following publication in the Official Gazette, that is, until February 26 2017.

Concentration operations that meet or exceed certain thresholds must be approved by the prosecutor before execution. The new mandatory merger control system consists of two phases.

Phase I Once the transaction is notified, the prosecutor has 10 working days to determine whether the filing is complete. If the answer is yes, it shall initiate an investigation, communicating its decision to the parties and to the public (safeguarding any confidential information). During the course of the investigation, the prosecutor may request cooperation from staff at public offices or services, and information from private individuals and companies, and request a declaration from individuals which may have information regarding the transaction.

Within 30 days of the investigation’s initiation, the prosecutor shall:

  • approve the transaction unconditionally if it concludes that it will not substantially damage competition;
  • approve the transaction on certain conditions, if the prosecutor concludes that – subject to these measures – the transaction will not substantially damage competition; or
  • extend the investigation by up to 90 additional days if it considers that the transaction could substantially damage competition if it is executed unconditionally or even approved subject to certain conditions – in such event, the proceeding moves to Phase II.

Phase II The national economic prosecutor shall inform all agencies and authorities directly concerned, as well as any economic agents likely to be affected by the extension. Recipients of this communication – as well as any third party interested in the transaction, including suppliers, competitors, clients or consumers – may submit information to the investigation within 20 days following the extension’s publication on the prosecutor’s website.

Upon the expiration of the 90-day period, the prosecutor shall:

  • approve the transaction unconditionally if it concludes that it will not substantially damage competition;
  • approve the transaction on certain conditions, if the prosecutor concludes that – subject to these measures – the transaction will not substantially damage competition; or
  • prohibit the transaction, if it concludes that it might substantially damage competition. 

The law contemplates a special revision appeal only if the prosecutor prohibits the transaction altogether. This must be filed before the Competition Court within 10 days of notice of the prosecutor’s decision. The court shall schedule a public hearing to be held within 60 days following receipt of the investigation’s docket. The public hearing may be attended by the parties, the prosecutor and all those who submitted information during the investigation. Within 60 days of the hearing, the court shall issue a decision confirming or overturning the prosecutor’s decision.

If the court’s decision overturns the prosecutor’s decision and approves the transaction subject to fresh conditions, both the parties and the prosecutor may file an appeal with the Supreme Court.

Banking  For transactions in the banking sector, the General Banking Act provides that the Superintendency of Banks and Financial Institutions (SBIF) must deny or approve the transaction within 60 days of being notified of it. This notification is in addition to the merger control filing.

Media Pursuant to Article 38 of the Act on Freedom of Opinion and Information a change in control of a media company must be notified within 30 calendar days of its completion. If social media is subject to the concession system granted by the state, the transaction must be cleared by the national economic prosecutor before being implemented.

What form should the notification take? What content is required?

Only the parties to the concentration operation are obliged jointly to notify the national economic prosecutor of the transaction. Third parties which are not part of the concentration operation cannot notify the transaction.

The Competition Statute establishes that the notification must include:

  • all information necessary to identify the concentration operation and its parties (including subsidiaries or other companies that are part of the same business group);
  • all information necessary to conduct a preliminary evaluation of the potential risks which the concentration operation might have on competition;
  • an affidavit of the parties declaring that they are executing the concentration transaction in good faith; and
  • sufficient information to fulfil other requirements to be established by a regulation issued by the Ministry for the Economy.

Additionally, the prosecutor must be informed of any new fact, act or convention which might alter any of the information, conclusions or estimates set out above as soon as the parties become aware of them. If the changes are relevant, the prosecutor shall issue a resolution declaring that the changes are significant – this will be considered a new notification for the purpose of deadlines.

In relation to the forthcoming regulation from the Ministry for the Economy, this includes a lengthy list of information that the parties must submit in merger control procedures. The documents listed related to financial information, corporate structure before and after the operation, relevant market definition, market data and potentially affected markets.

Is there a pre-notification process before formal notification, and if so, what does this involve?

There is no pre-notification process before the formal notification contemplated in this statute – although it is expected that there will be contact with the national economic prosecutor pre-notification. 

Pre-clearance implementation

Can a merger be implemented before clearance is obtained?

No, under the new regime the parties must notify the national economic prosecutor before the execution of a merger where the concentration transactions will have an impact in Chile and meet or exceed the thresholds established by the prosecutor. A notified concentration transaction will be suspended until the prosecutor issues a decision on it.

Guidance from authorities

What guidance is available from the authorities?

The Ministry of the Economy has launched a public consultation on the regulation which establishes what background information must be included in the filing of a mandatory or voluntary concentration operation before the national economic prosecutor. The document also regulates a simplified filing mechanism for certain concentration operations described therein. The regulation is not currently in force and a final decision from the authority is expected by March 1 2017.

Also, in October 2012 the prosecutor issued non-binding guidance to assess concentration operations. However, despite this it may issue new guidance on concentration operations by virtue of the new merger control regimen.

With respect to minority shareholdings, the prosecutor issued a form for notifying the acquisition of more than 10% of the equity of a competing company. The form indicates what information should be shared with the prosecutor and how the notification must be submitted. 

Moreover, jurisdictional decisions about concentration operations may also be reviewed in order to seek guidance.

Fees

What fees are payable to the authority for filing a notification?

There are no fees involved in filing a notification. 

Publicity and confidentiality

What provisions apply regarding publicity and confidentiality?

Once an application is filed, the national economic prosecutor’s resolution ordering the opening of an investigation must be published (probably on its website – although this is not specified by the law). The prosecutor is responsible for protecting any confidential information provided by the parties.

In addition, the prosecutor may decide, ex officio or at the request of one of the parties, to keep confidential some parts of the file in order to protect strategic formulas, commercial secrets or any other element the revelation of which might significantly lessen the competitive potential of its owner or the investigation’s efficacy.

The Competition Court publishes all supporting documents, any other submissions made by the parties and its final decision in its website. The confidentiality of information during these procedures is established by the Auto Acordado on Confidentiality (15/2012).

According to this, the parties can request confidential treatment for documents – although it is up to the court’s discretion whether to grant this. In practice, the request should be submitted along with persuasive arguments.

Also, jointly with the request, the party must attach a public version of the document redacting the confidential information and disclosing the remainder. The auto acordado establishes that certain information will be confidential when the Competition Court considers that its disclosure may harm a person, a company or free competition.

Notwithstanding this, the prosecutor will always have access to confidential documentation. 

Penalties

Are there any penalties for failing to notify a merger?

Failure to notify will allow the Competition Court to take the following measures, as established by Article 26 of the Competition Statute:

  • modify or terminate the acts, conventions, agreements or systems (ie, through divestiture or behavioural measures);
  • order the modification or dissolution of the companies, corporations and legal entities which have carried out the acts, contracts, conventions, systems or agreements referred to above;
  • apply fines of up to 30% of the sales of the offender corresponding to the line of products or services associated with the infringement, during the term of the infringement or up to double the economic benefit gained by the infringement. If this amount cannot be determined then a fine of up to UTA (unidad tributaria anual or annual tax units) 60,000 (approximately $50 million)
  • a fine of up to UTA20 (approximately $16,000) for each day of delay, starting from the execution of the concentration transaction.

For a fine to be imposed, the transaction must contravene the Competition Statute (ie, give rise to anti-competitive effects), with the exception of point four above, which requires only failure to notify.

While there are no specific provisions for transactions in the banking sector, the General Banking Act provides that when there is no special sanction, the SBIF can level fines of approximately $199,000. In the event of repeat offences, this may rise to approximately $995,000. In addition, the SBIF can fine directors, managers and other responsible officers up to $39,800.

Procedure and test

Procedure and timetable

What procedures are followed by the authority? What is the timetable for the merger investigation?

The new mandatory merger control system before the national economic prosecutor consists of two phases

Phase I Once the prosecutor is notified of the transaction, it has 10 working days to determine whether the filing is complete. If the prosecutor decides in the affirmative, it shall initiate an investigation, communicating its decision to the parties and to the public (keeping confidential any privileged information as necessary). Over the course of the investigation, the prosecutor may request the cooperation of staff at public offices or services, request information from private individuals and companies and request declarations from individuals which may have information about the transaction.

Within 30 days following the launch of the investigation, the prosecutor shall:

  • approve the transaction simply and unconditionally, if it concludes that the transaction will not substantially damage competition;
  • approve the transaction after the fulfilment of certain conditions if it concludes that the transaction will not substantially damage competition under these conditions; or
  • extend the investigation by up to 90 days if it considers that the transaction could substantially damage competition if it is executed unconditionally or even approved subject to certain conditions – in such event, the proceeding moves to Phase II.

Phase II The national economic prosecutor shall inform all agencies and authorities directly concerned, as well as any economic agents likely to be affected by the extension. Recipients of this communication – as well as any third party interested in the transaction, including suppliers, competitors, clients or consumers – may submit information to the investigation within 20 days following the extension’s publication on the prosecutor’s website.

Upon the expiration of the 90-day period, the prosecutor shall:

  • approve the transaction unconditionally if it concludes that it will not substantially damage competition;
  • approve the transaction on certain conditions, if the prosecutor concludes that – subject to these measures – the transaction will not substantially damage competition; or
  • prohibit the transaction, if it concludes that it might substantially damage competition. 

The law contemplates a special revision appeal only if the prosecutor prohibits the transaction altogether. This must be filed before the Competition Court within 10 days following notice of the prosecutor’s decision. The court shall schedule a public hearing to be held within 60 days following receipt of the investigation’s docket. The public hearing may be attended by the parties, the prosecutor and all those who submitted information during the investigation. Within 60 days following the hearing, the court shall issue a decision confirming or repealing the prosecutor’s decision.

If the court’s decision overrules the prosecutor’s decision and approves the transaction subject to fresh conditions, both the parties and the prosecutor may file an appeal with the Supreme Court.

Banking  For transactions in the banking sector, the General Banking Act provides that the Superintendency of Banks and Financial Institutions must deny or approve the transaction within 60 days of being notified of it. This notification is in addition to the merger control filing.

Media Pursuant to Article 38 of the Act on Freedom of Opinion and Information a change in control of a media company must be notified within 30 calendar days of its completion. If social media is subject to the concession system granted by the state, the transaction must be cleared by the national economic prosecutor before being implemented.

What obligations are imposed on the parties during the process?

Parties must:

  • provide all documents necessary for a complete filing;
  • cooperate with the national economic prosecutor, if so requested;
  • inform the prosecutor of any new fact, act or convention which could modify the information delivered as soon they become aware of this; and
  • wait until the a decision on the merger procedure is finalised before executing the transaction. 

What role can third parties play in the process?

Third parties which are not involved in the transaction cannot file a notification with the national economic prosecutor. However, if the prosecutor decides to extend the investigation to Phase II, interested third parties – including suppliers, competitors, clients or consumers – may submit information to the investigation within 20 days following the publication of the Phase II decision.

Substantive test

What is the substantive test applied by the authority?

The test applied by the authority is the substantial lessening of competition test.

Carve-outs

Does the legislation allow carve-out agreements in order to avoid delaying the global closing?

Under the new mandatory merger control system, companies that wish to effect a concentration operation which will have an impact in Chile and which would meet or surpass the thresholds defined by the national economic prosecutor, cannot execute this without the prosecutor’s approval. This is an absolute prohibition. Concentration operations that do not meet or surpass the thresholds may be voluntarily notified to the prosecutor under the same procedure as mandatory notifications.

Test for joint ventures

Is a special substantive test applied for joint ventures?

There is no special substantive test applied to joint ventures.

Remedies

Potential outcomes

What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.

The notifying parties have the right to propose conditions that they believe might mitigate any potential risks of the transaction to the national economic prosecutor, at any stage of the proceedings.

In order to determine whether such measures would be effective, the prosecutor may share them with third parties interested in the transaction (ie, market test them). The prosecutor tends to favour structural remedies but there is no closed menu of potential remedies – both structural and behavioural remedies have been applied in Chile.

Appeals

Right of appeal

Is there a right of appeal?

Under the existing regime, the Competition Court’s decisions can be appealed before the Supreme Court. The new regime, contemplates a special revision appeal to be handled by the Competition Court where the national economic prosecutor prohibits a transaction. Such an appeal must be filed within 10 days of notice of the prosecutor’s decision.  

If the court then overturns the prosecutor’s decision, and approves the transaction subject to fresh conditions, both the parties and the prosecutor may file an appeal with the Supreme Court.

Do third parties have a right of appeal?

Third parties have no right of appeal. 

Time limit

What is the time limit for any appeal?

The revision appeal must be filed within 10 days of notice of the national economic prosecutor’s decision.

An appeal before the Supreme Court must be filed within 10 days of notice of the Competition Court’s decision.