Antitrust

Antitrust: Ecuador

Diego Pérez-Ordóñez and Mario Navarrete-Serrano

Pérez Bustamante & Ponce

Competition law enforcement

1. What is the relevant legislation and which authority is responsible for competition law enforcement?

Ecuador

The Organic Law on Market Power Control (the Law), which was enacted in 2011, and the Regulations to the Law.

The Law created two institutions: one tasked with enforcement – the Superintendency of Market Power Control – and the other one in charge of enacting secondary legislation. The Superintendency oversees all enforcement actions related to competition law in Ecuador: state aid, abuse of dominance, abuse of superior bargaining position, merger control, restrictive practices and cartels, as well as unfair competition with market dimension. The Superintendency is organised in specialised intendancies that carry out investigations into specific conducts and bring their findings to the Resolution Commission, the first instance decision-making authority.

The Superintendent may review ex officio or upon request of an interested party any decisions of the Commission or decisions of the intendancies to dismiss a case before finalising the investigative period. The resolutions of the Superintendency are subject to review before the judiciary.

Currently, the National Assembly’s Commission on Economic Regime is debating a reform to the Consumer Protection Act, which proposes that the Superintendency’s competences include not only competition matters but consumer law as well. The reform has not yet been approved.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

Merger control

2. Which types of transactions must be notified? Is change of control a requirement?

Ecuador

All mergers that result in a change of control where at least one of two thresholds are met must be compulsorily notified to the Superintendency. ‘Control’ is defined by the Regulations to the Law as a decisive influence over any contract or act (bearing in mind de facto and de jure circumstances) that confers the possibility of determining – or blocking – strategic commercial decisions over an undertaking that was previously independent on a relatively permanent basis.

 According to the Regulations, an undertaking may exert control over another when it directly or indirectly has:

  • more than one half of the subscribed and paid-in capital;
  • the power to exercise more than one-half of voting rights;
  • the power to designate more than one-half of the members of administrative bodies, monitoring bodies or legal representatives of the company or undertaking; and
  • the right to conduct the activities of the company or undertaking.

The acquisition of minority, non-controlling stakes in any company with operations in Ecuador will not be subject to the merger control regime and will not require authorisation from the regulator, except for cases where a minority and non-controlling stake allows the acquirer to block any strategic commercial decisions, thus granting it a negative control. 

The concept of control is broad and includes both positive and negative control, full-functioning joint ventures and any form of non-covert horizontal collaboration allowing a formerly independent undertaking to influence the strategic decisions of another.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

3. What thresholds apply for determining whether a transaction must be notified?

Ecuador

Article 16 of the Law states that a concentration must be notified if one of the two following thresholds is met:

  • The turnover of the resulting entity is over an amount to be set by the Regulatory Board — this is currently set at a joint turnover (in Ecuador) of 200,000 Unified Basic Salaries (RBUs), which is US$80 million (for insurance companies the threshold is 214,000 RBUs, which is US$85.6 million, and for mergers that involve institutions in the national financial system the threshold is 3.2 million RBUs, which is US$1,280 million); or
  • As a result of the transaction, the company reaches or increases a market share of 30 per cent or more of the relevant market in which the company operates.

Note – The financial thresholds are based on the 2020 value of an RBU, which is US$400.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

4. Who must file the notification and when? Are there filing fees?

Ecuador

Notification must be filed by the acquiring undertaking or, if joint control is being acquired, by both entities through a joint representative. In all cases, for acquisition of joint control, the acquiring party is responsible and liable for failure to file.

The filing fee is calculated as the greater amount of the following:

  • 0.25 per cent of the income tax paid in the previous fiscal year in Ecuador;
  • 0.005 per cent of sales obtained in the previous fiscal year from activities in Ecuador;
  • 0.01 per cent of the assets in Ecuador; or
  • 0.05 per cent of book equity in Ecuador.

Although the Regulations do not specify which of the parties’ results apply for purposes of calculating the filing fee, it is the Superintendency’s practice to apply these figures to the combined entities in the case of mergers and to the target in the case of acquisitions. As already mentioned, the acquirer is responsible for the filing fee. 

There is a specific form that must be used, which can be downloaded from the regulator’s website.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

5. Is there an obligation not to close the transaction pending review? If so, is there any alternative available to allow closing before formal clearance?

Ecuador

When the thresholds are met, notification is mandatory and closing must be suspended pending clearance, without exceptions. It is a violation of the Law to execute or to close a transaction before obtaining clearance from the regulator.

However, it is possible to execute carve-out agreements that allow the parties to close the deal internationally while the Ecuadorian agency continues with its analysis. The Ecuadorian regulator has been flexible on this point and has accepted several carve-outs.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

6. Are local effects part of the test? In what conditions must transactions between foreign companies be notified?

Ecuador

If a foreign-to-foreign transaction has effects within an Ecuadorian market, it must be notified with no exceptions. The Ecuadorian regulator has only scarcely mentioned the local effects doctrine, and it is unclear how ‘substantive’ the link to the Ecuadorian economy must be to trigger the obligation to file a pre-merger notification. Considering this, we would advise approaching this issue conservatively. In a few recent decisions, the regulator interpreted that the effect must materialise as a direct or indirect local turnover of at least one of the parties of the transaction. However, it is unclear how this precedent may be applied to different circumstances.

Unfortunately, there is no de minimis doctrine for merger control.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

7. What is the timeline for review and clearance?

Ecuador

Unfortunately, investigations can take a very long time in Ecuador. In the past, the regulator has taken between six and 12 months to clear even simple and straightforward transactions. Nevertheless, on 20 April 2020, the Superintendency implemented a fast-track merger review proceeding, whose minimum duration is expected to be of 35 working days from the date of filing, which equates the 25 working days duration of the EU’s Phase I (see answer 8).

There is no pre-notification requirement or custom in Ecuador. The parties file the merger form along with its annexes, and the clock starts ticking once the agency certifies the notification as complete, which may take up to 15 business days (and several requests for information). However, during the review process the technical staff is open to formal and informal discussions regarding its concerns.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

8. Is there a simplified notification procedure with accelerated review periods? What types of transactions qualify?

Ecuador

There is no accelerated or simplified review procedure in Ecuador.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

9. What are the risks if the parties do not file, if the transaction is closed before clearance or if notification is untimely? What type of behaviour can be considered gun-jumping?

Ecuador

Fines increase in consideration of how far a notifiable transaction has moved along before the regulator begins a gun-jumping investigation. The Ecuadorian Market Power Control Law is very stringent on the penalties that may be imposed if a company does not notify a transaction. Article 18 of the Law, in agreement with articles 78 and 79, establishes that late notification is a mild breach sanctioned with a fine of up to 8 per cent of the turnover – noting that it is applicable to the turnover of the acquiring undertaking as being the party with the obligation to notify the transaction.

Closing without approval is an intermediate breach with a sanction of up to 10 per cent of the turnover. Finally, when a newly merged undertaking conducts business operations within the market (after merging but without authorisation), it is considered a severe breach fined with up to 12 per cent of the turnover. In addition, the Superintendency can order the operation to be unwound to restore competition.

There are no public precedents regarding gun-jumping investigations. However, we anticipate that fines will be significant in cases where the effects in the Ecuadorian market are pronounced.

Even in the event that the authority does not detect an executed transaction that meets the thresholds that was not notified, the statute of limitations for the Superintendency’s power to initiate proceeds to impose sanctions expires after four years from the time the offence has ‘come to be known’, which has been broadly interpreted by the regulator, meaning a substantial risk of prosecution even if detected after several years.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

10. Are there special rules applicable for public takeover bids, private equity transactions, corporate restructuring under bankruptcy procedures or acquisitions of convertible non-voting securities or options?

Ecuador

The following operations are exempted from the obligation to notify:

  • acquisitions of shares without voting rights, bonds, securities or any other rights convertible into shares without voting rights;
  • acquisitions of undertakings or economic operators that have been liquidated, or that have not had any economic activity in the country in the past three years;
  • acquisition of shares with the intent of reselling them within a year (any holding of more than a year must be authorised by the regulator); and
  • acquisition of undertakings in the course of judicial or administrative proceedings such as seizure. 

The failing firm scenario has been addressed on answer 8.

These exceptions have served as safe harbour for recent global transactions where the acquiring entity alone exceeded the mandatory thresholds, but the acquired entity did not have any economic activity in the past three years. Besides these, there are no other exceptions or exemptions under Ecuadorian law.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

11. Is notification and its content publicised?

Ecuador

The regulator is under legal obligation to publish all decisions that have not been administratively challenged. Under this provision, the Superintendency publishes the final decision of the Commission, relying heavily on the preliminary report prepared by the merger intendancy, but does not publish the report itself, where all sensitive or confidential information is specified. 

The Ecuadorian agency tends to overzealously protect information, declaring confidential almost all documents and reports ‘that may allow competitive advantage to a third party’. This standard has been broadly interpreted and has resulted in publication of decisions that do not account for the most basic analysis performed by the intendancies or the Commission.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

12. What are the investigative powers of the authority?

Ecuador

The authority is vested with ample investigative powers. Statutorily, it may summon any undertaking or individual for interviews and declarations, request any document except for those legally privileged, inquire and order questionnaires to be completed, perform dawn-raids, and ask for the assistance of other public agencies. It most commonly asks for interviews and specific documents. 

Since there is no abbreviated procedure in Ecuador, the regulator is under a legal obligation of defining a relevant market for all notified transactions, which unnecessarily overburdens the agency. The intendencies tend to give a relatively important weight to reports provided by the parties if they are deemed sufficiently meticulous and technically apt; otherwise the regulator will just produce its own reports without consideration to the parties’ studies.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

13. Are parties required to disclose internal documents during the review?

Ecuador

The parties to a transaction are under legal obligation to assist the agency throughout the review and decision process. Even though this obligation is drafted broadly, the regulator tends to ask only for basic documents regarding the transaction, the relevant market and activities that may affect the local economy. We are not familiar with any case where the regulator asked for documents prepared for the board or strategy papers during negotiations of the deal. If the regulator formally requests documents, the parties may seek to informally negotiate the scope of the production of documents; however, the regulator is not bound by such informal negotiations.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

14. What rights do third parties such as competitors, suppliers or customers have to intervene and participate in the investigation process, including rights to access the investigation file?

Ecuador

All third parties may intervene during the review period, ask for meetings, and file documents to oppose the transaction. Since there is no statutory procedure, the agency allows interventions on a case-by-case basis after analysing third parties’ claims. However, regardless of the extent of the intervention, the merging parties are formally notified and are given copies of all documents filed, along with sufficient time to respond to any claims.

Once the Commission renders its public decision, all third parties holding a legitimate interest may appeal through administrative or judicial proceedings, or both.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

15. What are the prevailing theories of competitive harm and analysis, and how are they typically applied?

Ecuador

The Ecuadorian merger control regime is relatively new, and the regulator is striving to articulate its theories of harm, as well as the standard for substantial assessment of mergers. Currently, it seems clear that the regulator is willing to condition or to deny transactions even if the risk of anticompetitive harm falls short of substantial lessening of competition (ie, the Ecuadorian regulator does not require a finding of dominance). Moreover, the regulator has even intervened in cases where the risk for competition was marginal, setting the bar for substantive assessment even lower than Europe’s Significant Impediment of Effective Competition.

The agency is striving to produce coherent decisions that account for traditional goals of competition law (eg, lower prices, consumer’s benefit, efficiency, etc) with the social and democratic goals enshrined both in the Ecuadorian Constitution and in Competition Act, such as redistribution of wealth, benefiting labourers and workers, protecting small and medium-size enterprises, etc. This is by no means a simple task, and the regulator has struggled to coherently and predictably apply both sets of goals in its decisions. 

The regulator, for example, imposed conditions to the Bayer/Monsanto deal, even when there was no evidence of market power, dominance or any other potential form of harm to consumers or the market. In the ABInBev/SABMiller case, even in the face of substantial evidence of possible competitive harm, the regulator preferred behavioural conditions that allowed workers to purchase stock instead of focusing more poignantly on structural conditions. Similarly, in a confidential decision, the regulator imposed a condition prohibiting the merged parties – a new market leader with a high market share – to lower prices but allowing it to raise prices.

Statutorily, the regulator must consider the following circumstances when analysing a transaction:

  • the state of competition in the relevant market;
  • the degree of market power of the economic operator in question, as well as of its main competitors;
  • the need to develop or maintain free competition of economic operators in the market, considering its structure and actual or potential competitors;
  • whether the concentration generates or strengthens market power or produces a clearly foreseeable or proven decrease, distortion or hindrance of free competition of economic operators and/or competition; and
  • the contribution that concentration may provide to improvement of production, encouragement of technological or economic advance, the competitiveness of the domestic industry in international markets, the well-being of national consumers, and the diversification of capital stock and workers' participation.

However, the regulator has not explained how these objectives materialise into a substantive standard and if they should be analysed according to some hierarchy. As mentioned above, decisions are contradictory and do not represent a coherent theory of harm.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

16. Are there safe harbours and what are they?

Ecuador

There are no safe harbours. The regulator has imposed contradictory conditions, sometimes privileging consumers, workers, and other national champions. All of these have been applied without regard to a clear or coherent substantive standard of intervention.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

17. To what extent are economic efficiencies and non-competition issues taken into account in the review process?

Ecuador

The agency considers non-competition issues when assessing mergers but does so without stating its guiding principles or describing how or when these issues trump efficiency or consumer welfare considerations. This is a consequence of the progressive brand of the Law, which includes a wide range of objectives and public policy priorities. As an example, the Law accounts for consumer welfare only as a means to produce a socially just and environmentally friendly market. Similarly, the competition policy must statutorily consider objectives such as redistribution of land and guaranteeing access to drinking water. 

These objectives are, at best, completely new for competition law, and conflicting at worst. 

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

18. Can remedies be negotiated and, if so, at what stage in the process? How are they enforced? Can they be challenged by third parties?

Ecuador

Yes. Even though there is no specific mechanism to negotiate remedies, the agency allows for a period of negotiation. This period is not formal, so the parties must ask for the opportunity to meet with the intendancy and to address any concerns. 

The regulator has preferred behavioural remedies and has only exceptionally imposed structural remedies, having imposed structural remedies only exceptionally (most of which, as in the ABInBev/SABMiller case, were later annulled by the ordinary courts). Even in these rare instances of structural remedies, the regulator only partially addresses overlaps between the merging parties. However, when the regulator has imposed structural remedies, it has requested the parties to hire an approved monitoring trustee.

In the ABInBev case, the structural conditions were not originally part of the remedies; they were only mandated after Heineken and local craft beer brands filed a motion of reconsideration followed by an appeal.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

19. Can a decision from the regulator be appealed and, if so, what is the timetable for review to take place?

Ecuador

All decisions can be both administratively and judicially appealed. Before the ordinary courts, an action may be brought against a final decision rendered by the agency. The courts with jurisdiction over these claims are administrative courts which, unfortunately, have failed to properly assess complex competition law cases. The courts may analyse both substantive and procedural issues and have mostly overruled. Unfortunately, the agency does not publish its decisions regularly and, therefore, it is difficult to gather data on trends.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

Cartel Enforcement

20. What interactions between competitors rise to the level of a competition law infringement in your jurisdiction?

Ecuador

The Ecuadorian authority closely follows the text of the Spanish Competition Act which forbids four manifestations of restrictions: agreements, concerted practices stemming from information exchanges, decisions of associations of undertakings, and conscious parallelisms. There are several contradictory decisions regarding what constitutes an infringement, as well as the specific evidence required for each.

In a fairly simple settlement, Adolcit and Tubos Rival were fined for exchanging sensitive information about future public procurement procedures, but there is no further guidance about what type of information exchange could lead to a finding of an infringement.

On the other hand, in a widely criticised decision regarding bid rigging, the regulator argued that the fact that several companies sent their offers from the same computer (detected trough IP identification) and that all these companies belonged to members of one family was not enough to prove an agreement, since there was no documental evidence proving the companies shared data. This has been interpreted as a more stringent burden of proof for cartels than the European ‘meeting of minds’ standard.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

21. Are cartel violations infringements by object or effect?

Ecuador

Cartel violations are infringements by object. Article 8 of the Regulation specifies all cases of by object infringements, which include a list of horizontal restrictions (meaning that under Ecuadorian law no vertical restriction can be prosecuted as an infringement by object). Unfortunately, the few cartel investigations in Ecuador paint a bleak picture for cartel deterrence and detection.

The National Court of Justice in its infamous RECAPT decision stated that (i) under Ecuadorian law, the regulator must prove that the intention of the parties to a cartel is to restrict competition, (ii) that the agency must demonstrate specific harm to consumers or the competitive process regardless if the infringement is one by object, and (iii) that the Superintendency must always define a relevant market. Furthermore, in other administrative proceedings the regulator concluded that an undertaking who receives information as part of an ongoing cartel but does not act on it is not liable, and that a cartel requires specific evidence of the information that was shared amongst the cartellists for it to constitute an infringement.

These conclusions have several commentators worried and arguing that cartel detection will be all but impossible in Ecuador, and that no undertaking will have an incentive to blow the whistle.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

22. What powers do authorities have to investigate cartel infringements or other types of competitor contacts? How are these types of infringements usually uncovered? What is the applicable limitation period?

Ecuador

Since both the regulator and the National Court of Justice have built unattainable standards of proof for cartels, there is little incentive for undertakings to participate in the local leniency regime. Since the enactment of the Law, the agency has reported only two leniency applications, one of which is being judicially disputed on procedural grounds. Besides leniency applications, the regulator begins investigations ex officio, relying on information provided by other public bodies or following leads produced by other undertakings.

 The investigative powers of the regulator are vast. They include the power to conduct dawn raids both on corporate premises or private residences, seize physical and electronic documents – except for personal agendas – issue mandatory requests for information, including requests for affidavits which, as it has been argued, may violate the due process protection against self-incrimination.

One point of interest under Ecuadorian law is the production of documents and professional secrecy. There is only one instance (file number SCPM-IIPD-2016-055) where a party resisted a request for information arguing that deliberations with external counsel are protected by legal privilege. In a controversial decision, the agency stated that legal privilege can only be claimed when an external legal adviser has been formally retained by an undertaking, thus all previous correspondence may be part of an investigation. This conclusion was not formally protested because the case was dismissed after the agency did not find evidence of any infringement. 

On the other hand, the regulator has stated that an undertaking may not oppose the seizure of any document during a dawn raid, not even legally privileged or personal documents. If the undertaking wishes to exclude a document, it must flag it and file a brief explaining the reasons behind its argument. Then, the regulator reviews the arguments and decides whether to accept or deny it. If a document is excluded, the regulator turns it to the undertaking without keeping any copies.

The statute of limitations expires after four years from the time the offence has ‘come to be known’, without detailing whom or how the infringement should be known. This vagueness has been interpreted by the regulator to mean that the four years begin once the agency has detected an infringement. However, this interpretation has been disputed since it would mean that, effectively, there is no statute of limitations.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

23. What sanctions apply to the participants in cartel conduct?

Ecuador

The fines for cartels are severe. Cartels are considered very serious offences and are subject to (i) a 12 per cent fine corresponding to the annual turnover of each cartel member, or up to the total economic benefit obtained by each cartelist, whichever is higher; (ii) a fine of up to US$197,000 for each individual director or legal representative involved in the cartel; and exceptionally (iii) order divestments if the agency deems it is the only recourse to re-establish competition. There are no criminal consequences for cartels in Ecuador. 

Parent companies may be liable for the conduct of its subsidiary if the agency can prove that the conduct of the subsidiary was substantially influenced by the parent company. Recently, the Ecuadorian agency tried to argue that the parent company of Kimberly Clark Ecuador was liable for a cartel but failed to produce enough evidence.

Affected parties may sue for follow-on damages before civil courts and use the administrative decision in their favour to prove the existence of an anticompetitive infringement. There are no class actions in Ecuador, and there have been no follow-on civil actions to date.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

24. Can individuals be liable for cartel infringements or other contacts with competitors?

Ecuador

Individuals may be liable for cartel infringements both as undertakings or as directors or legal representatives of undertakings. If an individual is found responsible, then the general 12 per cent fine is applied. If an individual is responsible as director of an undertaking, he may be fined with up to US$197,000, depending on his involvement in the cartel. There are no criminal sanctions for cartels in Ecuador.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

25. Is there an immunity or leniency programme for the investigated parties to cooperate with the authority? What are the criteria to apply? What are the fine reductions granted?

Ecuador

Yes. In September 2019, the Superintendency issued a new cartel leniency programme.

Leniency is dependent on the order of arrival:

  • 1st applicant: exemption;
  • 2nd: 30% to 50% reduction;
  • 3rd: 20 % to 30% reduction; and
  • others: up to 20% reduction.

To apply for the programme, an undertaking must:

  • cooperate fully and diligently with the regulator;
  • end its participation in the cartel, unless its continuous participation is required for investigative purposes;
  • preserve all documents and evidence that prove the existence of the cartel and its members;
  • not reveal to anyone about the leniency application;
  • not be the instigator or creator or the cartel; and
  • confess to participating in the infringement.

Following the toilet paper cartel experience, the new leniency programme has strengthened the authority’s confidentiality duties.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

26. Is there an immunity plus or amnesty plus option? Or other opportunities to reduce fines?

Ecuador

There are no additional immunity or amnesty options besides the basic leniency regime.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

27. Is there a settlement procedure? What are the corresponding requirements and benefits? Is settlement a possibility in addition to immunity or leniency?

Ecuador

Yes, there is a settlement procedure available for ongoing infringements. The settlement procedure requires confession on behalf of the undertaking, ceasing immediately the infringement, paying a reduced fine, and working with the regulator on a competition advocacy programme. It is a different and mutually exclusive procedure from the leniency regime. 

The settlement procedure is broad, and has been used in abuse of dominance cases, unfair competition and, in a widely criticised decision, cartels. The settlement procedure used for the cartel case did not include a confession on behalf of all the participants, as the European procedures allow, but only a unilateral commitment of ceasing participation in the cartel without having to provide evidence of further wrongdoing.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

28. What are the procedural steps and timeline followed by authorities when investigating cartels?

Ecuador

Cartel investigations follow the same timeline as investigations of unfair competition, mergers, and abuse of dominance. The agency may begin its proceedings ex officio or after a complaint is filed either by a private party or another public agency. The procedure begins with a general market survey of 30 days, then an informal investigation is launched for up to 180 calendar days followed by a formal investigation of up to 360 business days. If there is enough evidence of an infringement, a final report is produced and presented before the Commission, which has up to 90 calendar days to produce a decision which is subject both to administrative and judicial appeals.

The investigated parties can only appear and present any excuses beginning on the formal investigative stage. If the regulator is accusing the parties of restriction by object, the parties carry with the burden of proof starting on the formal investigative stage.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

29. Is any information about the investigation made public? Can third parties cooperate with the investigation and access the authority’s files?

Ecuador

Unfortunately, there is no mechanism for third party participation during cartel investigations. The only possibility is the regulator asking other undertakings for specific information, without revealing what or who is being investigated. Third parties do not have the right to access the authority’s file.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

30. Is a decision finding a cartel infringement subject to appeal? What is the timetable for review to take place?

Ecuador

Yes. All the Commission’s decisions may be challenged either administratively or judicially. Administratively, all interested parties may file either a reconsideration petition before the Commission, or an appeal before the Superintendent. Judicially, all undertakings with a legitimate interest may challenge the administrative decision before the administrative courts. 

Administrative challenges must be resolved within 90 days of filing, while judicial challenges may take up to three years before a first instance decision is reached.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

31. Can third parties claim damages for losses suffered as a result of a cartel infringement? Please describe the relevant procedure.

Ecuador

Yes, the law specifically provides for this possibility, however, no cases have been filed to date. A follow-on damages action before civil courts would have to prove: (i) a real and actual damage stemming from the cartel, no indirect or speculative damages are awarded under Ecuadorean law; and, (ii) a direct link between the infringement and the alleged damage. Private parties do not have to prove once again the commitment of the infringement; the administrative decision will suffice.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

32. Can third parties have access to documents submitted in the context of a leniency application or settlement for private enforcement purposes?

Ecuador

No. Third parties cannot have access to documents pertaining to a leniency program application. The regulator has been overzealous in the way it protects confidential information, and we expect it to deny all requests that may be used for a follow-on damages action. 

There have been no follow-on damages action and, consequently, no challenge to the prohibition to access confidential documents.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

Abuse of dominance/unilateral conduct

33. How is dominance determined?

Ecuador

The law uses the widely criticised ‘legal’ standard to determine the existence of dominance: the possibility of an undertaking to act independently from its customers, competitors and providers. Several cases have debated that the ‘economic’ approach is better (the possibility of profitably raising prices to supra-competitive levels); however, the agency has stuck to the statutory definition.

The agency has suggested that market shares larger than 50 per cent may be indicative of dominance.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

34. How is an abuse of dominance identified?

Ecuador

An abuse is identified, regardless of the intention of the dominant undertaking, as the exclusion of competitors or the exploitation of consumers that produces or may produce an anticompetitive effect on the market. The regulator has repeatedly stated that dominance is a prerequisite of an abuse, and that only abuses that come about as a manifestation of dominance qualify as infringements.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

35. What types of conduct can be considered as an abuse of dominance? Can there be a per se infringement? Does the law prohibit both exclusionary and exploitative practices?

Ecuador

There are no per se infringements under Ecuadorian law. The regulator has stated that both exclusionary and exploitative practices may constitute infringements if they are a consequence or a manifestation of dominance of an undertaking. The prohibitions detailed in the law are: unfair prices, unjustified discrimination, tying and bundling, rebates and other forms of exclusivity, refusal to deal, predatory pricing and margin squeeze.

This is not, however, a comprehensive list of all possible abuses. Any other form of abuse, even if it is not detailed in the law, may constitute an infringement depending on the circumstances.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

36. What broad criteria should a dominant company observe to grant discounts or rebates that comply with competition law?

Ecuador

As a general recommendation, rebates should (i) not be below cost or loss-making, and (ii) not induce to any sort of exclusivity with exclusionary effects in highly concentrated markets. Depending on the circumstances, loyalty or exclusivity-inducing rebates by dominant companies may be considered illegal.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

37. What powers do authorities have to investigate abuse of dominance? What is the applicable limitation period?

Ecuador

The powers are the same as for merger review and cartels. The Law provides that the regulator has the same broad powers in the course of any investigation.

The statute of limitations expires after four years from the time the offence has ‘come to be known’, without detailing whom or how the infringement should be known. This vagueness has been interpreted by the regulator to mean that the four years begin once the agency has detected an infringement. However, this interpretation has been disputed since it would mean that, in fact, there is no statute of limitations.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

38. What sanctions apply to abuse of dominance?

Ecuador

Minor offences are subject to a fine amounting to 8 per cent of the annual turnover in Ecuador of the combined entities in the year preceding the imposition of the fine; serious and very serious offences are subject to 10 per cent and 12 per cent fines corresponding to the annual turnover, respectively. Abuses of dominance may, depending on the circumstances, qualify as serious or very serious offences. 

In the case of very serious offences, the directors and legal representatives of the offending undertaking may also be fined, depending on their involvement in the infringement. 

As in cartels, parent companies may be liable for the conduct of its subsidiary if the agency can prove that the conduct of the subsidiary was substantially influenced by the parent company.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

39. What are the procedural steps and timeline followed by authorities when investigating abuse of dominance?

Ecuador

Abuse of dominance investigations follow the same timeline as investigations of unfair competition, mergers, and cartels. The agency may begin its proceedings ex officio or after a complaint is filed either by a private party or other public agency. The procedure begins with a general market survey of 30 days, then an informal investigation is launched for up to 180 calendar days followed by a formal investigation of up to 360 business days. If there is enough evidence of an infringement, a final report is produced and presented before the Commission, which has up to 90 calendar days to produce a decision, which is subject to both administrative and judicial appeals.

The investigated parties can only appear and present any excuses beginning on the formal investigative stage. Since there are no per se infringements, the burden of proof always lies on the agency.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

40. Can efficiencies be used as defence arguments to justify an abuse of dominance? Are there any exemptions from abuse of dominance rules?

Ecuador

There are no statutory exemptions for abuse of dominance under Ecuadorian law; however, it is possible to argue that the efficiencies produced by a conduct outweigh any drawbacks and, at least theoretically, this defence should be admitted. Unfortunately, there are no public cases that set forth how or under what circumstances an efficiency defence may be used.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

41. Is it possible to cooperate with the relevant authorities to obtain a fine reduction?

Ecuador

Yes, there is a settlement procedure available for ongoing infringements. The settlement procedure requires a confession on behalf of the undertaking, the immediate ceasing of the infringement, the payment of a reduced fine, and working with the regulator on a competition advocacy programme.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

42. Is any information about the investigation made public? Can third parties cooperate with the investigation and access the authority’s files?

Ecuador

No. Third parties cannot access documents pertaining to an abuse of dominance investigation. The regulator has been overzealous in the way it protects confidential information, and we expect it to deny all requests from any parties without a legitimate interest.

Since the regulator does not announce any new investigations and only firm resolutions are made public, it is almost impossible for third parties to participate or file additional information. However, this remains a theoretical possibility.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

43. Is an abuse of dominance finding subject to appeal? What is the timetable for review to take place?

Ecuador

Yes. All the Commission’s decisions may be challenged either administratively or judicially. Administratively, all interested parties may file either a reconsideration petition before the Commission, or an appeal before the Superintendent. Judicially, all undertakings with a legitimate interest may challenge the administrative decision before the administrative courts.

Administrative challenges must be resolved within 90 days of filing, while judicial challenges may take up to three years before a first instance decision is reached.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

44. Can third parties claim damages for losses suffered as a result of an abuse of dominance infringement? Describe the procedure.

Ecuador

Yes, the law specifically provides for this possibility; however, no cases have been filed to date. A follow-on damages action before the civil courts would have to prove: (i) real and effective damage stemming from the cartel, no indirect or speculative damages are awarded under Ecuadorian law; and, (ii) a direct link between the infringement and the alleged damage. Private parties do not have to prove once again the commitment of the infringement; the administrative decision will suffice.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

Cooperation with other authorities

45. Are there agreements in place to exchange information with foreign competition authorities?

Ecuador

Several. The most recent were executed with the Peruvian and the Colombian authority. A list of all cooperation agreements entered by the Ecuadorian agency are available at the Superintendency’s website.

However, if the regulator wishes to disclose information to other agencies, it will have to follow a declassification proceeding, justifying the importance of doing so and listening to the arguments of the affected parties. This declassification proceeding must be followed in all instances: abuse of dominance, merger control, cartels and other restrictions and unfair competition with market dimension.

Answer contributed by Diego Pérez-Ordóñez and Mario Navarrete-Serrano

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