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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.
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.
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.
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."
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