Introduction Mandatory M&A review Mandatory cross-ownership notification Interlocking ban Introduction

On August 30 2016 a new law was enacted introducing numerous changes to Decree-Law 211, which establishes Chile's antitrust regulation (Law 20,945). The reform was introduced while the country attempts to reform its institutions in order to prevent and punish effectively anti-competitive practices. In addition to the crackdown on cartels and an increase in financial penalties, the new legislation introduces several changes, including:

  • a mandatory M&A review by the National Economic Prosecutor's Office (FNE);
  • a ban on interlocking directorates; and
  • mandatory notification of cross-ownership between rival firms.

These changes will have a significant impact on firms in the short term. The new administrative duties that the act imposes are preventive in character and align Chile's antitrust regulations with international practice.

Mandatory M&A review

Previously, Chile had no specific procedure to handle M&A transactions. Instead, it applied the general procedural rules applicable to antitrust violations. The result was a semi-voluntary review of concentrations, which could be reviewed by the Competition Court through consultation or an adversarial mechanism (ie, an FNE complaint or a lawsuit submitted by a private party).

The previous review system was subject to frequent criticism due to its defective structure. The regulator's inability to detect operations which could pose competition risks in relevant markets was a major issue. Further, there were no clear incentives or guarantees provided to parties that voluntarily agreed to a review. This institutional vacuum resulted in a sub-optimal review of concentrations and a lack of certainty for agents managing a merger.

The new rules establish a preventive and mandatory M&A review which will come into force in May 2017 and closely reflect the recommendations in the Organisation for Economic Cooperation and Development's report (the Assessment of Merger Control in Chile).

Further, the new rules establish an administrative procedure whereby firms must notify the FNE. This procedure will be mandatory for firms that meet the recently identified conditions in Resolution 664 (November 24 2016):

  • Firms in the Chilean market that have made approximately $70 million during the period before notification.
  • At least two of the firms involved in the operation have separately made sales equal to or above approximately $11 million in the Chilean market during the period before notification.

The new review covers mergers, acquisitions, the purchase of assets and any transaction that enables the acquisition of decisive managerial influence, even when firms are not direct competitors.

All transactions must be notified before their conclusion and cannot be executed before FNE approval. The firms involved must suspend the transaction, which will be unable to continue until there is a final judgment from the regulator putting an end to the procedure.

Any breach of these obligations will be punished by a daily fine and may also be subject to penalties. Non-compliance with these provisions may result in:

  • fines of up to 30% of relevant sales or a sum equivalent to twice the benefit obtained;
  • a fine of up to approximately $49 million for failure to determine the previous point;
  • the modification or termination of acts and contracts relating to the transaction; and
  • the modification or termination of the corporations and legal persons involved.

Under the new law, the FNE has six weeks to approve an operation or extend its investigation up to an additional 18 weeks. In the latter case, the procedure allows the participation of interested parties, consumers and competitors. The FNE will decide whether to approve the operation with the mitigation measures suggested by the parties or any other interested person or to reject the operation when it considers that the transaction may substantially reduce competition. The standard is identical to the criteria in EU competition law.

If the transaction is rejected, the parties can submit a petition for review before the Competition Tribunal within 10 days of notification of the regulator's resolution.

Mandatory cross-ownership notification

A new obligation has been introduced to inform the FNE of the acquisition of direct or indirect participation in 10% of a competitor firm's capital within 60 days from the conclusion of a transaction. This sum includes participation held by the firm and through third-party accounts.

The duty to inform applies when the buying firm or its conglomerate and the acquired firm have separately earned annual revenue exceeding approximately $4 million in the previous year.

As the new rules offer no concise definition of 'economic competitors', the FNE must determine this criteria on a case-by-case basis using the economic criteria generally applied to antitrust analysis. Any breach of these obligations is punishable by the relevant penalties.

Interlocking ban

Under the new law, the simultaneous participation of a board member or any relevant executive member of two or more competitors is subject to the general penalties under Decree-Law 211. This means that, for the first time, antitrust legislation will expressly forbid interlocking.

The interlocking ban applies to directors and executives of rival firms who belong to conglomerates with an annual revenue of approximately $4 million or over in the previous year. This provision is breached if 90 days after the end of the previous year, the person maintains his or her positions in both firms.

For further information on this topic please contact Francisco Gonzalez at González & Rioseco Abogados by telephone (+56 228 400 400) or email ( The González & Rioseco Abogados website can be accessed at

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.