Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

The relevant legislation is Law 1340 of 2009, with additional regulation set forth in Resolution No. 76544 of 2019 and Resolution No. 2751 of 2021 (which modified Resolution 10930 of 2015), issued by the national competition authority, the Superintendency of Industry and Commerce (SIC).

In Colombia, SIC acts as the main enforcer of merger control rules; however, there are two exceptions: the Superintendency of Finance regarding mergers between financial institutions or other entities subject to its surveillance and the Civil Aviation Authority for mergers between aircraft operators. Whenever a merger is under review by the Superintendency of Finance, it must request a non-binding opinion from SIC; this request is not mandatory in the case of the Civil Aviation Authority, but it is still a common practice.

Besides antitrust merger control, SIC has powers in the following matters:

  • investigation of anticompetitive conducts;
  • unfair competition;
  • consumer protection (judicial and administrative powers);
  • intellectual property (judicial and administrative powers regarding trademarks and patents);
  • legal metrology (administrative powers); and
  • data privacy (administrative powers).
Scope of legislation

What kinds of mergers are caught?

Mergers are subject to merger control by SIC if the following criteria are met (these criteria differ for the finance and aviation sectors):

  • market overlap: the companies involved in the transaction develop the same business activity (horizontal merger) or carry out activities within the same value chain (vertical merger). In Colombia, conglomerate mergers are not caught by merger control;
  • economic threshold: during the fiscal year preceding the merger, the parties to the transaction and all the companies that are controlled or have control over the parties and perform the same business activity or carry out activities within the same value chain, had, individually or in the aggregate, operating income or total assets amounting to an equivalent of 60,000 Colombian minimum legal wages (approximately US$16.4 million as at 2021). As a general rule, SIC only takes into account income and assets from undertakings in Colombia; however, if either one of the parties participate in the Colombian market only through exports and does not have any corporate vehicles in Colombia, global assets and operating income should be considered; and 
  • acquisition of competitive control: one of the parties in the transaction acquires competitive control over the economic activity of the target (including acquisition of competitive control over essential assets).

What types of joint ventures are caught?

According to SIC’s case law and guidelines, joint ventures are deemed as business mergers if they meet the full-functionality test, as per the following conditions:

  • merger of a business line: the joint venture must have the effect of merging a business line or market, instead of specific operations;
  • full-functionality: the joint venture must be autonomous or at least have the potential to develop its activity as a business separate from its parents; and
  • lasting basis: elimination of competition between the parties to the transaction should take place on a lasting basis.

 

If the aforementioned conditions are not met, joint ventures would not be caught under merger control, and the transaction would be deemed as cooperation agreement between competitors.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

For antitrust purposes, ‘control’ is understood as the de facto possibility of influencing strategic decisions, regarding: corporate policy (including prices, investments, indebtedness or similar); initiation, variation or termination of business activity; and management of goods or rights that are essential for the performance of the company’s economic activity. Therefore, contractual arrangements, management representation or even holding veto rights over certain strategic decisions could constitute competitive control, which should be assessed case by case.

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 two relevant thresholds for merger control purposes are the following:

  • economic threshold: during the fiscal year preceding the merger, the parties to the transaction and all the companies that are controlled or have control over the parties to the transaction and develop the same business activity or carry out activities within the same value chain, had, individually or in the aggregate, operating incomes or total assets amounting to an equivalent of 60,000 Colombian minimum legal wages (approximately US$16,4 million as at 2021). As a general rule, SIC only takes into account operating incomes and assets in Colombia, unless the parties participate in the Colombian market only through exports and do not have a corporate vehicle in Colombia, in which case, assets and income are calculated on a global basis; and
  • market shares threshold: if the parties’ joint market share is 20 per cent or higher in any of the relevant markets, the transaction requires prior approval from SIC (prior approval). Otherwise, the transaction is deemed as authorised by law, and only a notification to SIC is required, providing the evidence that the transaction does not meet the market threshold.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

The filing system for merger control is mandatory.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

Pursuant to the effects doctrine (article 2 of Law 1340 of 2009), if the undertakings concerned are engaged in economic activities with effects in Colombia, they are considered as market participants, regardless of whether they are domiciled outside Colombia.

Consequently, foreign-to-foreign mergers may be subject to merger control whenever the parties:

  • have corporate vehicles in Colombia;
  • conduct business in Colombia through subsidiaries;
  • sell products in Colombia;
  • own goods or assets in Colombia; or
  • perform business operations that have effects in Colombia.

Are there also rules on foreign investment, special sectors or other relevant approvals?

Regarding foreign investments, no specific rules apply for merger control. However, Colombian regulations prohibit some forms of foreign investment in certain industries, such as national security or environmental.

In the context of prior approval proceedings that take place in regulated or sensitive sectors, SIC is required to request non-binding opinions from relevant public agencies.

Law stated date

Correct on

Give the date on which the information above is accurate.

15 May 2020