Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

For merger control, the relevant legislation is set forth primarily in Law 1340 of 2009, with additional regulations in Resolution No. 10930 of 2015 and Resolution No. 93503 of 2018, 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 has to request a non-binding opinion from SIC; this request is not mandatory in the case of the Civil Aviation Authority, but it is nonetheless a common practice.

Besides antitrust merger control, SIC has powers in matters such as:

  • investigation of anticompetitive conducts (administrative powers);
  • unfair competition (judicial and administrative powers);
  • consumer protection (judicial and administrative powers);
  • IP (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 conditions 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$17 million for 2019). 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). For further information on the concept of ‘competitive control’, see question 4.

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, with the following conditions:

  • merger of a business line: the joint venture must have the effect of merging a business line or market, instead of just specific operations of the parent companies’ economic activities;
  • full-functionality: the joint venture must be autonomous or at least have the potential to develop its activity independently in the market, 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 a cooperation agreement among competitors, subject to ex post control by SIC.

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

For antitrust purposes, ‘control’ is understood as the mere 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 considered essential for the development of the company’s economic activity. Therefore, even holding veto rights over certain strategic decisions or appointing members in the board of directors could constitute competitive control (negative control), which should be assessed on a case-by-case basis.

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 to be considered 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$17 million for 2019). 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 threshold: if the parties’ aggregated relevant market share is 20 per cent or higher in any of the overlapping markets, the transaction requires prior approval from SIC (Prior Approval). On the contrary, if joint market shares fall below 20 per cent in all of the overlapping markets, the transaction is deemed as authorised by law, and only an authorisation to SIC is required.

Taking all the aforementioned into consideration, it is very important for the parties to conduct the correct market assessment to avoid investigations and sanctions, and to be certain of the accuracy of their joint participation in the relevant markets.

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

Filings are mandatory whenever the conditions specified in answer to question 2 are met.

Transactions between entities belonging to the same corporate group or under the same orbit of corporate control are exempted from merger control rules.

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

The local effects doctrine (article 2 of Law 1340 of 2009) applies in Colombia; consequently, if the undertakings concerned are engaged in economic or commercial activities that have effects in Colombian markets, such undertakings are considered as market participants, regardless of whether the undertakings concerned are domiciled outside of Colombia.

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

  • have corporate vehicles in Colombia;
  • have permanent investments in corporations incorporated under Colombian Law; or
  • conduct business in Colombia through subsidiaries;
  • make imports into or exports to Colombia;
  • own goods or assets in Colombia; and
  • perform business operations that have effects in the Colombian market.

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

Regarding foreign investments, no specific rules for merger control exist. However, Colombian regulations prohibit foreign investment in national security activities and for the processing or disposal of toxic, dangerous or radioactive waste.

Specific sectors are excluded from SIC’s jurisdiction as described in question 1. Furthermore, Prior Approval proceedings that take place in regulated or sensitive sectors require non-binding legal opinions from the relevant agency bodies, even in sectors where SIC brings forward merger control.

Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There is no specific deadline for filing; however, submission has to be made before closing. The breach of this duty is regarded as a violation of Colombian Competition Law, which may result in investigations against the parties and the responsible individuals (see question 12). In practice, gun-jumping is the most usual kind of antitrust infringement sanctioned by SIC.

Which parties are responsible for filing and are filing fees required?

All the undertakings taking part in the transaction are responsible for filing. Notwithstanding the latter, the filing could be made by just one of the parties, as long as this party manages to submit all the required information before SIC.

There are no filing fees in Colombia.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

Colombia has a suspensory system, on behalf of which clearance is required prior to closing. However, for Notifications (when the parties have joint market shares below 20 per cent in all of the relevant markets), parties can close immediately after filing, with the risk that SIC orders a Prior Approval proceeding within 10 business days.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

Closing the proposed transaction and any kinds of pre-merger coordination before clearance are a violation of Colombian Competition Law and the following sanctions may apply:

  • fines against the parties: up to 100,000 monthly minimum legal wages (approximately US$25 million for 2019), or 150 per cent of the revenue or profit obtained from the infraction;
  • fines against individuals: up to 2,000 monthly minimum legal wages (approximately US$600,000 for 2019); or
  • reversion of the transaction: SIC could order the reversion of the transaction if it is determined that it produced an undue restriction on competition (there are no legal precedents).

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

For all mergers that have effects in Colombia, regardless of the parties’ domicile, the breach of the obligation to file before the transaction becomes effective is a violation of Competition Law. Therefore, penalties are theoretically applicable in cases involving foreign-to-foreign mergers.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Closing before clearance in a foreign-to-foreign merger is possible when the parties to the transaction have previously executed a carve-out, aiming to avoid the acquisition of competitive control in Colombia.

In the framework of a Prior Approval proceeding, parties can either file a formal carve-out proposal to SIC, to obtain its approval within five business days, informally notify SIC about the carve-out remedies to be implemented, or apply private remedies without informing SIC, facing higher risks of gun jumping sanctions. For successful carve-outs, it is essential for the parties to guarantee that no transfer of control or exchange of sensitive information will occur in respect to the business in Colombia on a lasting basis.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

For public takeover bids, SIC can, on behalf of the interested party, request the target to submit the relevant information for the merger control proceeding (or otherwise subject to sanctions). It is important to clarify that these provisions apply to any kind of transaction and not only to public takeover bids.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The level of detail depends on many factors and should be evaluated on a case-by-case basis. In general terms, Resolution No. 10930 of 2015 establishes the minimum required information to start the proceeding. For Prior Approvals, the filing must include detailed information regarding the proposed transaction, the parties, relevant markets, competitors, customers and distribution channels. For Notifications, it is necessary to provide the financial statements of the parties to the transaction, a description of the transaction, relevant market definition and market shares of the parties to the transaction and their competitors.

Providing incomplete information may delay SIC’s decision, as decision timings do not start until all information has been filed before SIC. On the other hand, providing false information may lead to sanctions and even criminal prosecutions.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

For Notifications, SIC has 10 business days to issue an acknowledgement of receipt or to order a Prior Approval, in case it does not agree with the methodology used by the parties to define relevant markets, or to calculate their market shares therein.

Prior approvals are organised in phases, during which information burdens and the level of assessment gradually increases. During the initial stage or Phase I, SIC may bring forward a preliminary assessment of the transaction within 30 business days (Phase I). SIC can thereafter decide to perform an in-depth analysis of the transaction by requiring additional statutory information (Phase II), as a result of which it has three additional months to take a decision from the time Phase II information has been provided in full form. In exceptional circumstances, SIC can make a single request for supplementary information to the parties, extending the time it has to make a decision for an additional three-month period (formally, this second request is also part of Phase II; however, for understanding purposes, we prefer to consider this situation as an additional phase or Phase III). If SIC fails to issue a decision within three months from the date the parties submit the information for Phase II or Phase III, it is understood that the transaction has been authorised by Law.

What is the statutory timetable for clearance? Can it be speeded up?

While a decision can be issued at any time during a Prior Approval proceeding, the following is a timetable summarising each phase:

Phase I

  • Phase I information provided by the parties.
  • Public announcement: the filing goes public for third parties to comment.
  • Preliminary assessment: 30 business days - duration defined by law and cannot be modified.

Phase II

  • Phase II information provided by the parties.
  • Comments by other regulatory authorities (when applicable).
  • In-depth study (remedies proposal).

Three months from the time all Phase II information request has been provided.

Phase III

  • Additional information request, which resets the three-month period once only.
  • Final decision.

(Three months)

Substantive assessment

Substantive test

What is the substantive test for clearance?

Law 1340 of 2009 requires the transaction not to produce an ‘undue restriction on competition’ as the substantive test for antitrust analysis. This test has to be assessed in accordance with the objectives form Colombian Competition Law, set forth in article 3 of Law 1340 of 2009 (ie, to protect free participation of businesses in the market, consumer welfare and economic efficiency).

Is there a special substantive test for joint ventures?

No.

Theories of harm

What are the ‘theories of harm’ that the authorities will investigate?

The substantive test and goals of Colombian Competition Law have led to considering unilateral effects, coordinated effects, vertical effects and, occasionally, portfolio effects, as plausible theories of harm to competition.

Non-competition issues

To what extent are non-competition issues relevant in the review process?

There are no cases that have been decided based on explicit non-competition arguments.

Economic efficiencies

To what extent does the authority take into account economic efficiencies in the review process?

Economic efficiency is a possible defence for a transaction. However, the burden of proof lies with the interested parties. Therefore, the parties must demonstrate within the process that the transaction is indispensable to produce positive or pro-competitive effects that benefit consumers, which outweigh any anticompetitive impact that the transaction may have on the market.

Remedies and ancillary restraints

Regulatory powers

What powers do the authorities have to prohibit or otherwise interfere with a transaction?

SIC has the power to impose remedies or to prohibit a transaction, by means of a reasoned resolution. The parties may file internal administrative appeals (reconsideration petitions) against such decisions, which will be decided by SIC.

SIC’s decisions could be subject to judicial review, but in practice it is not a commonly used alternative, taking into account that judicial decisions take a long time, and the judicial review process is usually non-suspensory of the decision.

Remedies and conditions

Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?

Yes. Structural, behavioural and hybrid remedies may be offered by the parties or directly imposed by SIC.

If market conditions change over time, the parties can ask SIC to remove the remedies imposed, given that they no longer fulfil the purpose for which they were initially imposed.

What are the basic conditions and timing issues applicable to a divestment or other remedy?

There are no specific conditions or timing issues stated by the law. It depends on the criteria adopted by SIC on a case-by-case basis.

In most cases, remedies could be satisfied upon closing, but SIC has required compliance with certain remedies as a prior condition for the parties to close the transaction.

Besides remedies, SIC also imposes obligations to monitor compliance. Usually external audits, insurance contracts and periodical reports are ordered for these purposes. Surveillance efforts are to be paid by the parties through a yearly contribution, which rates are fixed depending on the complexity of the remedies to be verified; however, they cannot exceed one per thousand of the current assets of each company.

What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?

There are no records of remedies imposed on strictly foreign-to-foreign mergers with no corporate vehicles or assets in Colombia; however, it is common to see remedies imposed on foreign companies with locally incorporated companies.

Ancillary restrictions

In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?

In general practice, clearance is only issued in relation to the market effect of the merger (in Colombia, contracts are not required by the authority). It is still a matter of debate whether ancillary restraints could be cleared as part of the process or are instead always subject to ex post control by SIC.

Involvement of other parties or authorities

Third-party involvement and rights

Are customers and competitors involved in the review process and what rights do complainants have?

Yes. Third parties can, by providing information and comments regarding the proposed transaction, within 10 business days after the transaction is made public. Likewise, SIC may request information from third parties. These market enquiries may include consultations with competitors, suppliers, customers, industry and consumer associations, government agencies, among others.

Publicity and confidentiality

What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?

Prior Approval proceedings require general details from the proposed transaction to be published in a newspaper or, more commonly, on SIC’s website (www.sic.gov.co). Nevertheless, the parties can ask SIC to refrain from making the transaction public only for reasons of public economic order.

Additionally, the information submitted by the parties may be kept confidential, but it is necessary to make an explicit request justifying the legal grounds on which confidentiality must be granted. In that event, the parties have also to submit an executive summary of the confidential information for it to be incorporated into a public file.

Cross-border regulatory cooperation

Do the authorities cooperate with antitrust authorities in other jurisdictions?

Colombia is part of several international antitrust cooperation agreements. Most of these agreements were established through free trade agreements (FTAs) subscribed by the country. Some of these FTAs have a competition chapter that includes cooperation provisions. Additionally, there are several agreements with antitrust authorities, including the authorities of Brazil, Chile, Ecuador, Mexico, Panama, Peru, Spain, South Africa and the United States, and, in general, authorities of countries that are members of the International Competition Network (ICN) and the Organisation for Economic Co-operation and Development.

Most of these agreements make reference to technical assistance programmes where officials from SIC receive training from other antitrust agencies.

Nonetheless, information exchange between authorities is limited. For instance, SIC is not entitled to exchange the parties’ information, unless they expressly provide waivers over such information.

On 2018, Colombia became a member of the OECD. The Competition Committee from this organisation provides a framework for international cooperation among competition agencies.

In addition, the 2019 ICN Annual Conference was held in Cartagena, Colombia.

Judicial review

Available avenues

What are the opportunities for appeal or judicial review?

Against SIC’s decision, a reconsideration petition can be presented, which is resolved by the same authority.

If the parties do not agree with the outcome, they can request judicial courts to review the decision, but in the meantime the decision comes into effect.

It is important to point out that, in practice, challenging a decision before the courts is not common owing to the fact that, in most cases, judicial decisions take a long time.

Time frame

What is the usual time frame for appeal or judicial review?

The parties have 10 business days to file reconsideration petitions before the Superintendent of Industry and Commerce, once the decision has been notified. The term during which the Superintendent is expected to reach a decision is two months.

Judicial review may take years; therefore, parties are not always keen to request a court to review the decision.

Enforcement practice and future developments

Enforcement record

What is the recent enforcement record and what are the current enforcement concerns of the authorities?

SIC has been applying ICN’s remedies and best practice standards in its decisions. In addition, SIC has started to use remedies as a tool to correct markets rather than to counteract the anticompetitive effects related to the theory of harm linked to the merger at hand.

Reform proposals

Are there current proposals to change the legislation?

The draft Bill of the 2018-2022 National Plan considers a new system of fines for violations to Competition Law, including gun-jumping, of up to 10 per cent of the operating income or assets of the offender, whichever is higher.

Update and trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Within the past year, SIC has issued decisions with innovative market definitions. This authority has also re-assessed third-party engagement in the prior approval proceeding.

In Energizer/Spectrum Brands, SIC assessed supply-substitutability when it defined the relevant market for batteries in Colombia. In Quimpac/Mexichem, SIC denied Brinsa’s request to be considered as an interested party for the transaction, arguing that, in merger control proceedings, competitors may only provide information and comments regarding the proposed transaction, and cannot directly engage in the Prior Approval proceeding.