All questions

Merger review

Law 1340 states that a business integration occurs whenever there is an acquisition of shares or assets, a merger, spin-off, a joint creation of a company or a joint venture agreement between competitors, or any other type of legal agreement, in which, before the closing of the transaction, competition existed in at least one relevant market and, after the transaction, the parties involved act as a single unit in the relevant market and cease to compete.

Business integrations can take one of the following forms:

  1. horizontal integration: when an integration takes place between companies that perform the same or similar economic activities (such as whenever integration occurs between competitors); or
  2. vertical integration: when an integration takes place between companies that participate in the same economic process but at different stages of the value chain (such as when integration occurs between a manufacturer and its suppliers of raw materials or its distributors).

The relevant market is composed of the product market and the geographic market. The product market is composed of the products that directly compete and the substitute products that are considered by consumers as close-competing products. The geographic market is the smallest geographic area in which the parties involved, if acting as a single unit, may influence in a profitable manner the price, quality, variety, service, publicity, innovation and other conditions of competition of the market. The geographic market can be local, regional or national and shall include national and imported products.

Transactions that constitute a business integration must be notified ex ante to the SIC if they meet at least one of the following subjective thresholds and one of the following objective thresholds:

  1. subjective threshold: the companies involved in the transaction are engaged in the same economic activity (horizontal transactions) or are part of the same value chain (vertical transactions); and
  2. objective threshold: the combined annual operating income of the companies involved or their total combined assets exceed an amount equivalent to 1,578,781.18 tax value units.

After consideration of the above criteria, the following may occur:

  1. If none of the above-mentioned subjective and objective thresholds are met, the business integration does not need to be reported to the SIC.
  2. If the business combination meets any of the above subjective and objective thresholds, and the combined market share of the companies involved is less than 20 per cent of the relevant market, the transaction shall be deemed authorised by simply giving prior notice to the SIC regarding the transaction. In this case, the information to be furnished to the SIC is basically the parties involved, the legal form of the transaction (merger, acquisition of control, acquisition of shares or assets, etc.), the relevant market (product market and geographic market), the share participation in the relevant market and the methodology to calculate them.
  3. If the business combination meets any of the above subjective and objective thresholds, and the combined market share of the companies involved equals or exceeds 20 per cent of the relevant market, prior authorisation must be requested from the SIC, subject to the following rules:
    • pre-evaluation filing: the parties interested in obtaining antitrust clearance must file a summary of the business integration and a pre-evaluation request with the SIC;
    • review of the pre-evaluation filing: the SIC has 30 business days to determine whether the business combination is approved, without further information requirements, or whether a full review must be carried out; and
    • full evaluation filing (in-depth review): if the SIC decides that a full review must be carried out, the parties concerned must file all the information required for a complete study. After the complete filing is made, the SIC has three months to decide whether it approves or rejects the combination, or imposes conditions for its clearance. If the SIC does not issue an antitrust clearance within three months, the transaction is deemed to be unconditionally authorised.

In a merger review, the SIC may raise objections; raise no objections but impose certain conditions on the merger (either structural or behavioural); or raise no objections and no conditions.

The fines that the SIC may impose in the case of a violation of antitrust provisions (cartel conduct, restrictive agreements, abuse of dominance, or breach of merger review regulations) are as follows:

  1. for companies, fines of up to 100,000 current monthly minimum legal wages, or a fine equivalent to 150 per cent of the profit derived from the conduct, whichever is higher; and
  2. for individuals who facilitate, authorise, execute or tolerate anticompetitive conduct, fines of up to 2,000 current monthly minimum legal wages, in which case, the company is expressly prohibited from paying or guaranteeing the fine imposed on the individual.

Additionally, in the case of merger review, and without prejudice to the imposition of the above-mentioned fines, the SIC may order the reversal of a transaction for failure to properly report it, or for gun jumping, provided that it unduly restricts competition. Reversal of the transaction is also applicable in cases in which the transaction is concluded after being blocked by the SIC or when the conditions under which the operation was approved have not been fulfilled.

i Significant cases

In 2013, the government began an auction process for its 57.5 per cent share in Isagen, an energy generation and retail public utilities company that also participates in the commercialisation of natural gas in the Colombian market. Grupo Argos, a potential bidder, participates in the same markets as Isagen. Empresa de Energía de Bogotá (EEB), another potential bidder, participates indirectly in the same market through its shareholding in Emgesa and Codensa. The energy market is regulated by the Energy and Gas Regulation Commission (CREG), which has established certain restrictions, including a maximum market share of 25 per cent for energy generating and retailing companies, and a maximum power output of 3,402MW for 2012. A merger review process filing was made by both Grupo Argos and EEB. The SIC conditionally approved both acquisitions based on the following:

  1. Grupo Argos: the merger would represent a total 3,459MW of capacity in the energy generation market, which exceeded the CREG limit. Thus, the SIC imposed on Grupo Argos the obligation to divest energy sector-related assets and to neutralise its market power after the merger;17 and
  2. EEB: the merger would represent a 31.31 per cent share of the energy generation market, which exceeded the SIC limit. The SIC imposed conditions, inter alia, that EEB must divest its voting rights in the energy companies Emgesa and Codensa, and divest certain assets, especially in the thermal generation plant Transportadora de Gas Internacional.18
ii Trends, developments and strategies

In 2021, 184 cases were submitted to the SIC for merger review, representing an increase compared with the 166 cases filed in 2019.

In 2021, the SIC issued Resolution 2751, amending the rules for the conduct of merger review proceedings; however, there were no major changes introduced. Also, in December 2019, Congress authorised the SIC to establish and charge a merger review filing fee and, in January 2021, the SIC published the applicable fees.

iii Outlook

Since April 2012, it has been possible for all merger review documents to be submitted online via the SIC's website19 and this is encouraged by the authority to simplify the merger review process.

In 2018, the SIC updated its merger review guidelines following an OECD recommendation and it has subsequently published the revised document. The guidelines provide an insight into the SIC's review process and allow a better understanding of the competition concerns arising out of specific transactions.