ECUADOR: An Introduction to Competition/Antitrust
The current year has the potential to bring important developments in the Ecuadorian competition regulation regime. The term in office of the incumbent head of the Economic Competition Superintendence (Superintendencia de Competencia Económica– SCE), the Ecuadorian competition authority, expired in November 2023. In 2024, it will be up to the newly elected President of the Republic, Mr Daniel Noboa, to submit a three-name shortlist of candidates to lead the competition agency, before the Council of Popular Participation and Social Oversight (Consejo de Participación Ciudadana y Control Social), the institution that must officially designate the new Superintendent.
On the side of legislative developments, in May 2023, the National Assembly (the national parliament) passed a law designed to protect small businesses and undertakings belonging to the so-called Popular Economy (a constitutionally recognised sector of the national economy). This legislation deals with the formal requisites of supply agreements between small businesses and large retailers, termination of such supply agreements, and return of small suppliers’ defective goods, as well as other minor innovations.
Since its inception in 2011, the Ecuadorian Competition Law (Ley Orgánica de Regulación y Control del Poder de Mercado– LORCPM) aimed to encompass antitrust, merger control and unfair competition regulation. A proposed bill seeks to further align the country with most other jurisdictions in the world and separate unfair competition from the traditional core of administratively enforced competition rules (antitrust and merger control). The idea, which will materialise in the event that the bill is passed, is to return the field of unfair competition (ie, false advertising, business or economic torts, trade secret misappropriation) to its natural home in the civil courts. This is an important initiative that will free up financial and manpower resources and will allow the Superintendence to prioritise cartel detection, abuse of dominance and high-profile mergers.
The Ecuadorian Competition Law must be interpreted in the light of Article 1 LORCPM, which refers to the “establishment of a social, solidary and sustainable economic system”, along with the goals of “efficiency” and “general and consumer welfare”. Furthermore, Article 4 LORCPM contains the guiding principles that ought to be followed in the enforcement of the LORCPM. Among others, it refers to the “pursuit of deconcentration”, the “right to economic freedom”, “equitable distribution of the benefits of development” and “efficiency”.
It is doubtful whether a recent reform of secondary legislation (the Regulation or Reglamento of the LORCPM), which purports to establish a hierarchy of goals within Ecuadorian competition law, whereby “consumer welfare” would be the preferred standard of evaluation for allegedly anti-competitive behaviour, is compatible with Articles 1 and 4 LORCPM. In other words, the preference of “consumer welfare” over “deconcentration” (ie, structural concerns) and “economic freedom” seems unjustified and may be incompatible with the normative structure of the LORCPM, only time will tell.
The current administration at the Superintendence, which took office in November 2018, has approached competition law enforcement from a more technical point of view, when compared to previous ones, and opened the SCE to constructive criticism from home and abroad. It was in this context that the Ecuadorian competition system subjected itself to international scrutiny and both the Inter-American Development Bank and the Organization for Economic Cooperation and Development conducted a peer-review examination of the legal system. An international team of competition law experts designated by these institutions, in close collaboration with the SCE, published a report containing the findings of the exam and a series of recommendations for reform.
Perhaps the most important recommendation is related to enforcement priorities, whereby the peer-review report suggests that cartel-busting and merger-control ought to be given much more attention. Another very relevant recommendation addresses an issue that has plagued the SCE from its beginnings, and has to do with the disproportionate number of resources destined for the prosecution of unfair competition complaints.
The Superintendence is composed of various sub-dependencies or administrative units: Intendency of Promotion of Competition (it does not hear or investigate substantive cases, but mainly conducts market-wide surveys and inquiries); Intendency of Abuse of Dominance and Restrictive Agreements; Intendency of Merger Control; Intendency of Unfair Competition; Regional Intendency (it mainly serves the purpose of co-ordinating regional abuse, agreements, merger and unfair competition cases with the Superintendence officials in Quito); National Legal Intendency (it represents the Superintendence in judicial review cases before contentious-administrative courts); and First Instance Commission (a first instance administrative tribunal whose decisions, in cases brought by the Intendencies, may be appealed before the Superintendent).
According to statistics recently published (in January 2024) by the SCE in relation to the past five years, between 2019 and 2023, a total of 1414 dossiers were opened. In relation to the more substantive cases, the Intendency of Promotion of Competition opened 135 investigations, the Abuse and Agreements Intendency opened 194 investigations, the Merger Control Intendency opened 202 investigations, and the Unfair Competition Intendency opened 235 investigations. The Regional Intendency was responsible for 99 investigations. The First Instance Commission delivered decisions in 380 cases, and the National Legal Intendency represented the SCE in 169 judicial review proceedings.
In relation to merger control, it is important to note that the length of the proceedings at the SCE has been reduced by 40% in the past five years. Also, 72% of all transactions notified to the Merger Control Intendency were authorised, 4% were subject to specific remedies and conditions, 1% were outright blocked, and 7% are still under scrutiny. In 6% of cases, during the same period, the parties to the notified transactions desisted from pursuing approval proceedings.