Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

The Act for the Promotion of Competition and Consumer Protection and its Regulations are the main legislation. The Commission for the Promotion of Competition (Coprocom) is the authority that enforces Competition Law in Costa Rica.

Scope of legislation

What kinds of mergers are caught?

The legislation uses a very broad definition of a ‘concentration’, defining it in very general terms as any transaction that results in an acquisition of control of one entity over another, or the formation of a new economic agent under joint control. As such, almost all mergers may be caught under that definition, as long as they meet the thresholds set forth by the law.

What types of joint ventures are caught?

Any joint venture that results in a change of control or joint control, and reach the thresholds, may be caught by the law.

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

There is a definition of control in the Guidelines for the Analysis of Concentrations. Economic control is defined as the possibility, de facto or de jure, to execute a decisive influence over an economic agent or its assets, understood as the power to adopt or block a decision related to the entity’s strategic commercial behaviour.

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?

There are two thresholds: assets and turnover.

Assets

The sum of all productive assets of all involved economic agents exceeds 30,000 minimum wages (approximately US$15.4 million).

Turnover

Turnover generated in Costa Rica during the previous fiscal period by the involved economic agents exceeds 30,000 minimum wages (approximately US$15.4 million).

Transactions that fall below this threshold are not subject to notification.

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

The filing is mandatory. If the obligation to notify is triggered, there are no exceptions.

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

Foreign-to-foreign mergers have to be notified if the merger has an effect in the local market.

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

There are no special rules on foreign investment. There are special sectors on which the merger authorisation process is either conducted by a different superintendence than Coprocom, or that the specific superintendence has to issue its opinion regarding the concentration. These sectors are: banking and finance, telecommunications, insurance, pensions and securities.

Notification and clearance timetable

Filing formalities

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

The deadline is five days after closing. There are sanctions for not filing. The sanction consists of a fine, which may be up to 410 minimum wages (approximately US$211,000).

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

All parties are responsible for filing. There are no filing fees.

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

The transaction is not suspended prior to clearance. The waiting period is 30 days after all the required information has been submitted. However, this period may be extended up to 60 additional days, in cases of special complexity.

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?

One possible sanction is a fine of up to 410 minimum wages (approximately US$210,000). Also, the Commission may order the reversion of the merger.

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

Cases may be closed before clearance as long as the merger notification is submitted no longer than five days after closing.

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

The Costa Rican legislation allows closing before clearance.

Public takeovers

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

There are no applicable special rules for 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?

If the filing is incomplete, Coprocom will issue a request for information. However, if the filing contains wrong or false information, there is a risk of a fine.

Investigation phases and timetable

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

The different phases are as follows:

  • filing;
  • Coprocom has 10 calendar days to determine whether the submitted information is complete or, on the other hand, issue a request for information;
  • once the information is complete, Coprocom has 30 days to resolve or extend that term in cases of special complexity; and
  • Coprocom issues final resolution, which may approve, reject or request the submission of conditions to counteract the potential anticompetitive effects of the transaction.

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

The statutory timetable is 30 calendar days after the information is complete. This term may be extended only once, for up to an additional 60 calendar days in cases of special complexity (although extensions can be for shorter terms). Extensions are relatively common and also additional requests of information are common. On average, the term to obtain a favourable ruling is around 45 days after the application is submitted.

Substantive assessment

Substantive test

What is the substantive test for clearance?

The substantive test for clearance consists of an analysis of the anticompetitive effects and the procompetitive effects of the transaction. If the transaction does not generate significant anticompetitive effects, or if the procompetitive effects offset those anticompetitive effects, the transaction is approved. Coprocom may also impose additional conditions to mitigate the anticompetitive effects.

The failing firm defence may be used as an argument to obtain authorisation of a concentration that may have anticompetitive effects.

Is there a special substantive test for joint ventures?

There is no special substantive test for joint ventures.

Theories of harm

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

There is no definite list set forth by the law that states the theories of harm that Coprocom will investigate. However, its precedents have shown that Coprocom analyses market dominance, unilateral effects (over prices, negotiation mechanisms, capacity, innovation and expansion possibilities of competitors), coordinated effects, vertical foreclosure and conglomerate effects.

Non-competition issues

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

In theory, non-competition issues should not be relevant in the review process. However, the Competition Authority is part of the Ministry of Economy and, as such, there have been some situations in which the industrial policy or the Ministry’s goals do merge into the Competition Authority’s acts (not strictly limited to merger authorisations but to other actions executed by Coprocom). This is something that was reviewed by the OECD and it recommended a legal amendment. Currently, that amendment is being discussed at Congress.

Economic efficiencies

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

Economic efficiencies are considered whenever the transaction may result in an anticompetitive effect. If the transaction does not generate anticompetitive effects, there is no need for Coprocom to analyse economic efficiencies.

An example of how economic efficiencies are reviewed would be a transaction that generates economies of scale that enable a company to reduce its costs and lower its final prices.

Remedies and ancillary restraints

Regulatory powers

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

Coprocom has the powers to reject the transaction. To execute this, it may impose fines upon the companies. If the companies do not observe the resolutions or orders of Coprocom, they run the risk of being processed for disobedience, which is a criminal felony.

Remedies and conditions

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

It is possible to remedy competition issues. The law establishes the following potential remedies; however, the parties or Coprocom may suggest a remedy that is not expressly stated:

  • divestment of undertakings or sale of assets;
  • restrictions or limitations related to the sale of services or goods;
  • obligation to supply certain goods or services to specific customers or competitors; and
  • introduction of specific clauses in agreements signed with clients or suppliers.

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

The conditions and timing are determined on a case-by-case basis.

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

The authority has required remedies in some transactions. However, none of those transactions have been foreign-to-foreign mergers.

Ancillary restrictions

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

There is no legal framework that establishes this beforehand. It would be determined by Coprocom on a case-by-case basis.

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?

The concentration authorisation process requires that a notice is published in a national newspaper, with the purpose of allowing any third party to appear before the authority and express its arguments in relation to the concentration. Their right is to manifest their position. They may provide proof against the transaction, as well as their arguments as to the reasons why the concentration should be admitted or rejected.

Publicity and confidentiality

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

Coprocom creates two case files: one confidential casefile that may be accessed only by the authority and the notifying parties; and another non-confidential, which is accessible to the public.

Cross-border regulatory cooperation

Do the authorities cooperate with antitrust authorities in other jurisdictions?

There are internal agreements between authorities to exchange information and also to seek advice related to similar cases that other authorities may have reviewed. However, whenever such cooperation occurs, it is rarely something that is disclosed.

Judicial review

Available avenues

What are the opportunities for appeal or judicial review?

The ruling by Coprocom is subject to an administrative appeal before Coprocom, and then it is subject to judicial review. There have not been appeals on rulings related to concentration authorisation processes.

Time frame

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

An appeal is generally resolved within five business days. The judicial review does not have a clear time frame, and it may take between six months and two years.

Enforcement practice and future developments

Enforcement record

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

There does not seem to be a specific focus on a certain industry or sector.

In the last five years there was one transaction rejected, and there have been other transactions that were accepted under certain conditions. However, over 95 per cent of the reported concentrations have been admitted without any conditions.

Reform proposals

Are there current proposals to change the legislation?

There is a draft bill under discussion. This bill has been promoted in observance of some recommendations made by the OECD, which aim to have a more independent competition authority.

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?

Last year marked the first significant merger that was rejected by Coprocom. This merger involved Walmart and another local supermarket chain. The Commission considered that Walmart’s already dominant position would be reinforced to an extent that generated anticompetitive effects, and those effects were not considered to be offset by the efficiencies mentioned by the parties.

Regarding legal reforms, the bill for the new Competition Act is still in discussion at Congress. This bill introduces some changes mostly in relation to the independence of the Competition Commission. However, there are some modifications also being discussed in connection to the merger authorisation process. One of those possible amendments is moving from the current process, which enables companies to close before clearance, to a process that would not enable closing before clearance.