Published on Wednesday 4th January 2017
What is the legislation applicable to merger control and how long has merger control legislation been in force?
The Venezuelan competition rules on mergers are contained in:
Is there any additional sector- or industry-specific merger regulation legislation?
The National Telecommunications Commission (Comisión Nacional de Telecomunicaciones, Conatel), Venezuela’s telecom regulatory authority, must approve any transaction between telecom operators that involves a change of control. Pursuant to the Telecom Law, the transaction will only be effective after authorisation by Conatel is obtained. Therefore, closing of the transaction can only take place after such authorisation is issued. Conatel should decide on the approval of the transaction within four months, which may be extended for two additional months. There are no effective remedies in case of delays in issuing the approval by Conatel. Before granting its approval, Conatel must request an opinion from the Venezuelan antitrust authority, the Superintendency, on the competition issues arising from the transaction. Conatel may only approve a transaction if the opinion of the Superintendency is favourable. The Superintendency must issue its opinion within 45 business days after receiving Conatel’s request. However, there are no penalties applicable to Conatel or the Superintendency for exceeding such terms. The Superintendency must determine whether the transaction may affect competition in the relevant market. The Superintendency considers both the post-transaction market concentration and the increase in concentration resulting from the transaction. The Superintendency also analyses barriers to entry, the dynamic of competition and efficiencies created out of the transaction. In its opinion the Superintendency may recommend Conatel to impose certain conditions to approve the transaction. Only if the parties agree to comply with the recommendations may the transaction be completed. Otherwise, the approval is considered denied.
Are parties that are required to file notification of a transaction pre-closing obliged not to close their transaction pending regulatory review?
Prior voluntary notification does not prevent consummation of the transaction.
Where pre-closing notification and approval is required, can a transaction that has been approved be challenged after closing? Has this ever happened?
Under the Venezuelan Competition Law, filing is not mandatory. Therefore, the lack of notification would not constitute a violation of the Venezuelan Competition Law and there are no penalties for not filing. It is always up to the parties to decide whether to file a voluntary notification. If a transaction is not notified, the Superintendency may open an investigation after the closing if it deems that such transaction may affect competition in Venezuela. In this case, the Superintendency must notify the parties, which have 15 business days (which may be extended for 15 additional days) to present evidence and arguments. Once the evidence period is expired, the Superintendency should decide within 30 business days, which may be extended for two months. The transaction by which The Coca-Cola Company acquired the former Pepsi bottlers in Venezuela in 1996 was not notified and afterwards was challenged by Pepsi before the Superintendency (Resolution No. 34/96 dated 9 December 1996). In its decision, the Superintendency confirmed the transaction but imposed certain obligations on Coca-Cola.
Who are the authorities responsible for merger enforcement and how is responsibility for investigation and decision-making allocated between authorities or within an authority?
The authority in charge of merger control in Venezuela is the Antimonopoly Superintendency. Although an independent administrative agency, the Superintendency depends on the Ministry of Commerce. As explained above, in Venezuela filing is voluntary. The Superintendency is in charge of evaluating and deciding whether mergers voluntarily notified may have restrictive effects on competition. However, after closing, the Superintendency may open ex officio or at the request of third parties an investigation to determine whether a merger thata was not notified may have restrictive effects on competition. The Superintendency has the power to take appropriate measures for the purpose of restoring effective competition if affected by a merger. Such measures include dissolution of the transaction, divestiture, or the imposition of fines of up to 20 per cent of the gross sales of the offending party for the previous year.
Identify the last three times merger control legislation was used to prohibit a transaction, and for each, provide the ultimate outcome.
Recently (during the past five years) the Superintendency has only prohibited one transaction: the proposed acquisition of the Venezuelan chocolate producer Chocolates El Rey by Nestlé Venezuela (Resolution No. 08/09 dated 14 September 2009). Although there was no increase in the market concentration in any of the relevant markets defined in the decision, the Superintendency considered that the transaction could exclude other competitors, given Nestlé’s purchasing power in the cocoa market. The decision was not appealed by the parties.
With respect to notifiable transactions that do not raise obvious competition concerns, what is the expected time frame from notification to a decision?
With respect to notifiable transactions that raise obvious competition concerns, what is the expected time frame from notification to a decision?
The investigation of a transaction that raises competition concerns may last between six months and one year. For example, in the proposed transaction between Nestlé Venezuela and El Rey (described above) the decision was taken within six months of filing.
Which type of transactions must be notified?
Under the Competition Law filing with the Superintendency is voluntary. There is no requirement to file or notify a transaction, even if the threshold set out below is met. However, if the threshold is met, the Superintendency may open a proceeding to investigate the impact of any transaction on competition in the Venezuelan market within five years of the closing of the transaction. The lack of notification would not constitute by itself a violation of the Competition Law and there are no penalties for not filing. Transactions that are subject to merger control include any:
The Competition Law defines control as decisive influence over the activities of a company. The Merger Regulation establishes that any economic concentration meeting the threshold established by the Superintendency may be subject to review by it. Conversely, any operation that does not meet the threshold may not be subject to review by the Superintendency. Neither the Competition Law nor the Merger Regulations contain special rules regarding particular sectors. However, there are special rules applying to banking and insurance which include requirements unrelated to antitrust issues.
Where change in control is part of the test, what is the standard for defining control and changes thereof for pre-merger notification purposes?
The Competition Law defines ‘control’ as decisive influence over the activities of a company, either de facto or legal control. Transactions that do not imply gaining control over another entity are not subject to the Merger Regulation.
What thresholds apply for determining whether a transaction must be notified? May the authority require the parties to notify a transaction that does not meet the thresholds?
Under Resolution No. 14/96, transactions may be reviewed by the Superintendency if the aggregate amount of the sales exceeds the equivalent of 120,000 tax units (approximately US$1.6 million). The amount is calculated by adding the sales revenues for the last financial year of the parties of the merger, before deducting sales, discounts, value added tax and other taxes directly related to the business. For purposes of calculating the thresholds, the authority takes into account the revenues of all companies belonging to the same economic group of the parties in Venezuela. The economic group would be comprised of companies controlled by the parties in Venezuela or companies in Venezuela that exercise control over the parties. Specific rules apply to the calculation of turnover in the cases of partial acquisitions, companies with joint subsidiaries and mergers of insurance companies. Regardless of the circumstances, the threshold is relatively low and there is no existing jurisprudence concerning cases in which the Superintendency has initiated a review of transactions that fall below the threshold. There are no de minimis requirements for filing. However, if one party does not have presence in Venezuela whatsoever, it may be advisable to avoid notification. Transactions below the threshold are not subject to the regulation.
In what conditions must transactions between foreign companies be notified?
Mergers or acquisitions concluded by foreign entities outside Venezuela that may have an impact on competition in the Venezuelan market may be reviewed by the Superintendency. There must be a local nexus, such as presence (as a branch office or subsidiary) or assets in Venezuela for the merger control regime to apply. There have been no cases of foreign-to-foreign mergers being opposed by the Superintendency. The Superintendency has approved all foreign-to-foreign mergers that have been voluntarily notified. However, there is no official information about the number of cases. If local issues arise from a foreign-to-foreign merger, a solution may be to submit the transaction to the Superintendency for prior review to determine whether the transaction can be considered anti-competitive. If the transaction breaches the competition rules, the Superintendency may order the divestiture or the selling of part of the assets and even the dissolution of the merger. The parties are bound by the Superintendency's decision.
Who must file the notification?
All parties to a transaction must file the notification separately.
Are there filing fees?
Is there a standard form? How long does it take to prepare a filing? What type of information is generally required?
Instructive No. 3 sets out the information that must be included in the filing for the evaluation of the transaction. Such information includes identification of the parties and its subsidiaries and affiliates, identification of directors and managers of such entities, details of the transaction (including financial and economic aspects), details of the markets in which the parties are competitors and market access, information about the products and industrial processes involved (prices, raw materials), information on market shares, barriers to entry and form of competition. The parties may also present information on efficiencies arising from the transaction and any information regarding the failing firm argument if applicable. Internal company documents, such as documents prepared for the board and reports and strategy papers prepared during the negotiation of the deal, are rarely requested and must only be disclosed upon request by the authority.
When must notification be made? Is there a triggering event that requires a filing to be made within a specified period?
Since filing is voluntary, there is no triggering event to file the notification.
Is there a pre-notification requirement or custom whereby a draft notification is submitted first to the authority for comments and questions to be addressed before formal notification is made? How does that work in practice and what are the risks of submitting a formal notification without this step?
When must notification be made with respect to acquisitions of convertible non-voting securities or options?
Where there is an obligation not to close the transaction pending review, is there any alternative available to allow closing before formal clearance? Is there any guidance from the authority as to how the parties should conduct business between signing and closing?
Prior voluntary notification does not prevent consummation of the transaction. The authority does not require any particular behaviour between signing and closing. There are no precedents on carve-out arrangements.
What is the timeline for review and clearance?
Voluntary notifications should be evaluated within four months of the date of filing, although the period may be extended for two more months. However, prior notification does not prevent consummation of the transaction. If no filing is made, the Superintendency may open an investigation on the transaction within five years following consummation. If during the investigation the Superintendency finds that there is evidence of possible restrictive effects on competition arising from the transaction, the Superintendency may open a formal process. In this case, the Superintendency must notify the parties, which have 15 business days (that may be extended for 15 additional days) to present evidence and arguments. Once the evidence period is expired, the Superintendency should decide within 30 business days, which may be extended for two months. Pre-notifications meetings are not common.
Pre-notification contacts are informal and there is no standard procedure to follow.
Are there post-clearance obligations imposed on the parties for a clearance decision to remain valid?
Is there a simplified notification procedure with accelerated review periods? What type of transactions qualify?
Are there special rules applicable for public takeover bids, private equity transactions or for corporate restructuring under bankruptcy procedures?
The Venezuelan Capital Markets Law provides that any person intending to commence a tender offer of a listed company shall notify its intention to the Venezuelan Securities Authority. With the notification, the person intending to commence the tender offer must inform the Securities Commission of the effects of the transaction on competition, according to the Competition Law. If the person intending to commence the tender offer directly or indirectly competes with the target, it must inform whether the transaction has obtained clearance by the Superintendency or, if the transaction was not notified, the reasons for the lack of notification.
Can the authority be consulted on a no-names basis for guidance on notification requirements? Is this practice useful?
It is possible to file a request for guidance on notifications requirements to the legal department of the Superintendency. The request must be signed by an attorney.
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? What sanctions can be imposed and on whom? What is the highest fine imposed to date for failure to file or gun-jumping?
If a transaction is not notified and then an investigation is opened, the Superintendency may impose certain obligations on the parties (including remedies and divestitures) and fines of up to 20 per cent of gross sales. Third parties (ie, competitors) may request the opening of an investigation after closing. There is a statute of limitations of one year after the closing for the Superintendency or interested third parties to oppose a transaction. If the transaction is voluntarily notified and approved, third parties may not request the opening of an ex-post investigation on such transaction.
What are the investigative powers of the authority?
The Superintendency has wide powers to produce and request evidence and may require the parties and third parties to provide all information, either through questionnaires or interviews, request of documents, etc. Normally, the Superintendency sends questionnaires to companies active in the market in which the merger is taking place (competitors, suppliers and clients) to gain an understanding of the working of that market. The Superintendency generally meets some of the parties seeking to merge to clarify certain issues relating to the market and the filing. Market testing is not commonly used.
Are there confidentiality rules to protect sensitive proprietary information provided to the authority and what procedure must be followed for confidentiality to apply?
All information filed by the parties to the Superintendency is in principle confidential. However, third parties admitted as parties to a merger proceeding may review and copy such information. Although interested parties may request confidentiality to certain information applicable to other parties of the proceeding, such confidentiality is rarely granted.
Is notification and its content publicised?
The notification and its contents are normally not publicised. However, after the decision is rendered, the Superintendency publishes a public version on its website, even while a judicial review of the decision is pending.
Are there agreements in place to exchange information with foreign competition authorities? Must the authority seek a waiver from the transaction parties to disclose confidential information submitted in their filing?
As a matter of practice, how do the authorities investigate a transaction? Whom do they consult? What weight, based on your experience, does the authority give to the information provided?
Normally the authority requests information from the parties, competitors, suppliers and customers. Also, requests of information are sent to government authorities that may have authority over aspects of the markets affected by the transaction. Normally the opinions and information from government authorities are crucial for the evaluation.
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? Is the content of their participation publicised?
In the case of voluntary filing, third parties may become parties in the proceedings and may oppose the transaction. In the case of transactions which are not notified to the Superintendency, third parties may request that the Superintendency open an investigation to evaluate the transaction only after it is completed. In any case the Superintendency may request information from third parties. Participation of third parties is known to the parties.
Can third parties appeal clearance decisions, and has this ever happened successfully?
Yes, third parties may appeal a decision on a merger (whether approving or denying the transaction). However, they must demonstrate that they have legitimate interest in such review.
In a transaction that appears to raise competitive concerns, is it recommended to consult the authority prior to filing and, if so, why?
Do the authority and its staff share their concerns about a transaction with transaction parties at each stage of review? How can parties productively participate in the evaluation and decision processes?
No. Normally the authority is not open about its concerns over a transaction until a final decision is issued.
Are there published guidelines for merger analysis?
The Merger Guidelines dated 1 November 1999, published by the Superintendency, are available on the Superintendency’s webpage: www.procompetencia.gob.ve.
What are the prevailing theories of competitive harm and analysis, and how are they typically applied?
According to the Merger Guidelines, there are several aspects to consider in determining whether a transaction is anti-competitive. Some of the most important are:
The Superintendency defines the relevant market affected by the transaction and the levels of concentration. However, the main focus of the test has been on barriers to entry. The Superintendency evaluates the existence of entry barriers, giving importance to any increase in market share, and vice versa if it considers that the entry barriers for importing and new competitors are low and also considers the effects of a merger on the suppliers and the customers of the companies wishing to merge. In case of a vertical merger, it will evaluate the effects on each market.
Are there safe harbours and what are they?
Any transaction may be reviewed by the Superintendency, even conglomerate transactions. In one specific case, the Superintendency prohibited a transaction without horizontal or vertical overlaps, and no dominant position was created (however, it was a particular case and the precedent has not been used in other cases). However, only when there is a horizontal overlap might there be an interest by the authority to proceed with an investigation. Collective dominance is not analysed in merger cases.
To what extent are economic efficiencies and non-competition issues taken into account in the review process?
The review and decisions should be based on competition grounds alone. However, under the Competition Law, if a merger or acquisition is likely to save one of the parties from bankruptcy, the transaction may be authorised even though it may have an adverse effect on competition. Economic efficiencies are also taken into consideration by the Superintendency. Nevertheless, the Superintendency does not consider economic efficiency a sufficient reason to approve a merger, if the concentration level increases significantly and the entry barriers are high. There are no recent precedents on efficiencies by the Superintendency.
Can remedies be negotiated, and, if so, at what stage in the process? How are they enforced?
No, remedies are not negotiated.
How common are negotiated remedies? Can negotiated remedies be challenged by third parties?
Is there a vehicle for reconsideration by the authority of its decision? If so, please describe and provide recent examples where reconsideration led to a revised outcome.
No. The decisions may only be appealed before the courts.
Can a decision from the regulator be appealed and if so what is the timetable for judicial review to take place?
Any affected party may appeal against a decision before the administrative courts within 45 days from the rendering of such a decision. Administrative court decisions can be appealed to the political and administrative chamber of the Supreme Tribunal of Justice.
What has been the most important challenged decision in the past five years that has been overruled and how often generally do appeals result in reversal?
No decision on merger control has been appealed or overruled by the courts during the past five years.
When reviewing decisions from the competition authority, do courts restrict themselves to procedural aspects, or can they review the substance of the authority’s analysis?
Courts may review the substance of the merger analysis, including whether a rejection of remedies offered by the parties was correct.
Briefly highlight any notable merger control decisions rendered over the past 12 months.
There has not been any decision on merger control in the past 12 months.
Update and trends