On November 19, 2019, the new merger control regime was published in the Peruvian Official Gazette by means of an Urgency Decree. It mostly includes the same provisions set forth in the legislative text (Bill) that was approved by the Congress earlier on May 2, 2019, but that was finally not published. The new text holds some variations regarding the threshold and the date of effectiveness.
Concentration acts that are subject to the approval procedure
The Urgency Decree (a decree that constitutes an exceptional decree issued by the Executive Branch, with the character of a law and of a temporary nature) now refers to economic operations as business concentrations. This is merely a formal change from the term included in the Bill since the underlying definition remains the same – the acts that subject to the merger control are those that entail a permanent change of control. For instance, the merger or acquisition of two or more companies, the creation of a joint venture or the acquisition of operative or productive assets.
The threshold of joint gross sales of at least two companies has dropped from 25,000 UIT that was included in the Bill to 18,000 UIT. In that sense, the merger notice must previously be filed before INDECOPI if, in the fiscal year prior to the concentration, the following two thresholds are met:
- The combined gross sales of the companies involved in the concentration is equal to or greater than 118,000 UIT* (approximately US 150 million).
- The gross sales of at least two companies involved in the concentration is equal to or greater than 18,000 UIT* (approximately US 23 million).
*A UIT is equal to S/ 4,200.
The premerger notification is a mandatory request for prior authorization filed before INDECOPI for transactions that surpass the aforementioned thresholds and that have effects in Peru. Carrying out the transaction without prior notification, or without waiting for the competent authority’s decision, can generate the invalidity of the transaction and a fine of up to 12% of the income received by the involved companies in the previous fiscal year.
Phases of the procedure
The Decree has maintained the same procedural stages as those proposed in the Bill:
- The procedure begins with the admission of the premerger notification. This first stage concludes in 30 business days if the transaction does not create significant concerns to competition.
- If the INDECOPI determines that the operation implies a significant concern to competition, the second stage will begin within 30 business days (after the first stage ends). The second stage may not exceed from 90 business days, extendable for an additional 30 business days.
Banking and Insurance Superintendence (“SBS”) and Market and Securities Superintendence (SMV) participation
Operations that involve agents within the scope of the regulation and supervision of the SBS, will need to file a pre-merger notice before the INDECOPI and the SBS, in accordance with the scope of their competences. Operations involving companies of the financial system that capture deposits from the public or insurance companies, will only need the approval of the SBS in case they hold relevant and imminent risks that compromise their strength, stability or that of the system they integrate.
On the other hand, economic agents who have been authorized by the SMV must file a merger notice before the INDECOPI and the SMV prior to the concentration operation. Each entity will resolve within the scope of their competences.
Date of effectiveness
The Decree will come into effect 9 months from November 20, 2019, and will be in effect during a period of 5 years. In that sense, this Decree will come into effect on August 20, 2020 until August 20, 2025.
The Ministry of Economy has a 6 month term to draft and publish the Law’s Regulation, which expires on May 19, 2020.