This country-specific Q&A provides an overview to merger control laws and regulations that may occur in Chile.
It will cover jurisdictional thresholds, the substantive test, process, remedies, penalties, appeals as well as the author’s view on planned future reforms of the merger control regime.
This Q&A is part of the global guide to Merger Control. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/merger-control-3rd-edition
As of June 1st, 2017, a new merger control regime entered into force in Chile. The main aspects of the new regime, set forth in a new Section IV of the Chilean Competition Act (Decree Law No. 211, “DL 211” or the “Competition Act”), are the following:
(i) a mandatory notification regime prior to the materialization of the envisaged operation with the National Economic Prosecutor’s Office (Fiscalía Nacional Económica, “FNE”) for concentration operations that meet certain turnover thresholds;
(ii) a suspension period until the final decision is rendered;
(iii) a two-stage investigation process: 30 working days for phase I once the notification is declared complete, and an additional 90 working days for phase II. These terms can be suspended upon mutual agreement between the notifying parties and the FNE;
(iv) the possibility to offer remedies in both phase I and phase II;
(v) the possibility, in case of a decision prohibiting the operation envisaged, to appeal such decision before the Competition Tribunal (Tribunal de Defensa de la Libre Competencia, “TDLC”). Such decision is not subject to further judicial review, unless the TDLC approves the operation with conditions –different than the ones previously offered by the notifying parties–. Such decision is open to appeal before the Supreme Court for both the notifying parties and the FNE; and
(vi) a ‘substantial lessening of competition’ test.
The FNE has issued guidelines (available on the FNE’s website: www.fne.cl) which provide guidance related to the FNE’s jurisdiction, the calculation of turnover in relation to the applicable thresholds, the applicable notification forms, and remedies.
Section IV of DL 211 provides moreover that parties can notify voluntarily an operation of concentration that doesn’t meet the thresholds (case in which the procedure and obligations of the mandatory notification system are applicable), and that the FNE is competent to review such operation –if not notified voluntarily– within a year after its materialization.
In addition, DL 211 provides for the obligation to inform the FNE ex-post of the direct or indirect acquisition of a non-controlling interest of 10% or more in a competitor. This obligation applies to companies that meet certain thresholds, indicated in answer number 6 below. This obligation is in force since August 30th, 2016.
Is mandatory notification compulsory or voluntary?
Operations of concentration that will have effects in Chile must be notified to the FNE prior to materialization when the turnover thresholds indicated in answer number 6 are met.
There is also an obligation to inform ex-post on acquisitions of a non-controlling interest of 10% or more in a competitor where the turnover thresholds indicated in answer number 6 are met.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Operations of concentrations that are notified to the FNE, either mandatory or voluntarily, cannot be implemented prior to the final clearance decision or until the timeframes established for the FNE’s analysis have lapsed without the FNE rendering a decision.
The Competition Act doesn’t provide that the obligatory suspension can be lifted by the FNE. Moreover, in a recent multinational transaction, the FNE indicated that the materialization of a concentration operation is determined by the possibility of exercising decisive influence on a previously independent economic agent, situation that concurs even in the case of a ‘local carve out’.
What types of transaction are notifiable or reviewable and what is the test for control?
As indicated above, the operations of concentration that will have effects in Chile and meet certain turnover thresholds indicated in answer number 6 below must be notified to the FNE.
DL 211 defines operations of concentration as facts, acts or agreements, or a combination thereof, that have as effect that two or more economic agents that are not part of the same group of companies and that are previously independent from each other, lose such independency in any scope of their activities by either:
(i) a merger, irrespective the corporate form of the merging entities or the entity resulting thereof;
(ii) an acquisition by one or more economic agents, directly or indirectly, of the rights to exercise, individually or jointly, decisive influence in the management of a third party;
(iii) an association, irrespective of the form, to establish an independent economic agent, distinct from them, that exercises their functions permanently; or
(iv) an acquisition by one or more economic agents of the control over the assets of another economic agent, irrespective of the legal title.
DL 211 doesn’t define ‘control’ or establishes explicitly a ‘control test’. The FNE’s Guidelines on Jurisdiction provide further guidance on the concept of control. The Guidelines indicate thereby that: (i) ‘control’ and ‘decisive influence’ are synonymous concepts; and (ii) both terms relate to the possibility, de jure or de facto, to determine – or veto – decisions regarding the strategy and competitive behavior of an economic agent. Control, therefore, include both positive and negative control, individual and joint control, and de jure or de facto control.
According to the Guidelines, positive control is verified when the controlling economic agent has the possibility to determine decisions about the strategy and competitive behavior of the controlled economic agent. For example, when the majority of votes can be assured at a shareholders’ or members’ meeting and appoint the majority of directors, administrators or legal representatives, depending on the type of company; or when are hold preferred shares with exclusive prerogatives allowing them to execute any of said actions. On the other hand, negative control is verified when it has the ability to veto or block decisions on the strategy and competitive behavior of the controlled economic agent. For example, blocking decisions related to the entrance to new markets, the business plan, the approval of the budget, the appointment of managers and main executives and the authorization of certain investments; or when are hold preferred shares with exclusive prerogatives allowing to veto any of these decisions. Agreements and acts that do not qualify as an operation of concentration, like nonstructural joint ventures and the acquisition of non-controlling minority shareholdings, fall under the general provision of Article 3, paragraph I, of the Competition Act, which prohibits facts, acts or agreements that prevents, restrains or impedes free competition, or that tends to produce such effects.
In which circumstances is an acquisition of a minority interest notifiable or reviewable?
DL 211 provides for the obligation to inform the FNE ex-post of the direct or indirect acquisition of a non-controlling stake in excess of 10% in a competitor, within 60 working days after materialization of the acquisition, in case the thresholds indicated in answer number 6 below are met.
After the notification, the FNE may open an investigation in order to verify whether the transaction violates the general provision prohibiting anticompetitive facts, acts or agreements.
The FNE’s Guidelines on Jurisdiction state that where a minority interest constitutes an operation of concentration, i.e. where the minority interest allows the acquirer to exercise decisive influence or control over the competitor, an ex-ante notification is required. This is the case because the interpretation of ‘control’ and ‘decisive influence’ is qualitative and is not limited to the mere determination of the percentage of shares held.
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
Ex- ante notification:
An operation of concentration must be notified to the FNE prior to its materialization where:
(i) the combined turnover in Chile of the parties to the operation in the financial year preceding the transaction is at least 1,800,000 Unidades de Fomento (“UF”, approximately EUR $65.6 million and USD $74.3 million); and
(ii) the turnover in Chile of each of at least two of the parties to the operation in the financial year preceding the transaction is at least 290,000 UF (approximately EUR $10.6 million and USD $12 million).
It is irrelevant whether the parties to the concentration have a presence in Chile since the jurisdiction of the FNE is established by the sales in Chile. Consequently, foreign-to-foreign transactions are subject to review where the turnover thresholds are met.
The obligation to inform the FNE ex-post on acquisitions of a non-controlling interest of more than 10% in a competitor applies where both the turnover of the acquiring company (including its corporate group) and the target company in Chile in the financial year preceding the transaction is at least 100,000 UF (approximately EUR $3.4 million and USD $4 million).
This obligation applies only to acquisitions of such non-controlling interest in Chilean companies.
These thresholds are applicable to all sectors.
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The sales that must be considered for the purposes of jurisdictional thresholds are the ones corresponding to the financial year preceding the operation.
When calculating the parties’ turnovers in Chile, the turnover in Chile of their entire group companies should be taken into account. This is different in case of an acquisition. In such cases the relevant turnover is the turnover of the company acquired and its subsidiaries or the assets acquired, as the case may be. The turnover of the seller is therefore not relevant.
DL 211 and the FNE’s Guidelines regarding the application of the thresholds state that the following items shall be excluded from the calculation of the thresholds indicated above: (i) special taxes (such as VAT, customs tariffs, taxes on alcoholic beverages, tobacco tax, etc.); (ii) discounted amounts from the sale price, such as sales or volume discounts; (iii) turnover generated by internal group sales; and (iv) sales not related to the exploitation of the ordinary business of the economic agents involved in the transaction or of its related persons.
The FNE’s Guidelines regarding the application of the thresholds also establishes the geographical assignation of sales, how group turnover should be established, and special rules for financial institutions, insurance companies, investment funds and public entities.
Regarding the geographical assignation of sales, the FNE’s Guidelines state that, as a general rule, the relevant criterion is the location of the customer at the moment the relevant sales agreement was entered into, regardless of the country where the agreement was concluded. This, as the location of the customer at the moment of the agreement’s celebration usually coincides with the place where the service or the product is finally provided. The Guidelines indicate that there are cases where the geographical allocation may be determined by other factors. For instance, in the case of supply of goods the location of the customer at the time of the subscription of the agreement may be different than the place where the product is delivered. In such case, the final place of delivery prevails over the location of the customer. Similarly, in the case of provision of services, it should prevail the place where the service is provided, regardless of where it is billed or where the client was located at the time of the conclusion of the contract.
Is there a particular exchange rate required to be used to convert turnover and asset values?
The exchange rate to be used to convert sales made in another currency and asset values to CLPs corresponds to the average annual exchange rate published by the Chilean Central Bank for the year preceding the transaction.
The applicable exchange rates for EUR and USD to CLP as of December 29th, 2017, are the following:
(i) 1 EURO = $735.21 CLP
(ii) 1 USD = $615.22 CLP
Turnover thresholds are in UF, which is a unit established by the Chilean Central Bank and changes according to inflation. To convert UFs into CLPs, it shall be considered the value of the UF on December 31st of the financial year preceding the transaction. As of December 31st, 2017, 1 UF was equivalent to $26,798.14 CLP.
In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
The establishment of a new structural joint venture that will perform activities on a permanent basis is qualified in the Competition Act as an operation of concentration, that must be notified to the FNE if it meets the turnover thresholds indicated in answer number 6 above. From the FNE’s Guidelines on Jurisdiction it is moreover clear that non-structural joint ventures are not caught by the provisions of Section IV of DL 211, and may be assessed under the general provision prohibiting anticompetitive facts, acts or agreements of paragraph I, Article 3 of DL 211.
The Guidelines stipulate furthermore that the joint venture doesn’t necessarily require joint control by the parent companies. The important features are that a new entity is established and that has operational autonomy on a structural basis. Therefore, the joint venture shall be analyzed under a “full functionality” criterion. Such functional autonomy has a normative and an economic dimension: (i) normatively in the sense that the joint venture must act as a sovereign legal economic agent; and (ii) economically in the sense that the joint venture has sufficient resources to operate in the market.
In relation to the analysis whether the turnover thresholds are met, the turnover of the parties establishing the joint venture and their respective company group’s turnover are relevant. The acquisitions of control in an existing joint venture or the acquisition of joint control in an existing company are also qualified as a concentration operation. However, for the analysis whether the turnover thresholds are satisfied, the turnover of the party or parties acquiring control (and their respective company group) and that of the target company are to be taken into account.
Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?
As indicated in answer number 4 above, DL 211 defines operation of concentration as facts, acts or agreements, or a combination thereof, which have the effect of terminating the independence of an economic agent with respect to another economic agent. Once the fact, act or agreement, or a combination thereof, qualifies as an operation of concentration and meets the thresholds indicated above, it must be notified to the FNE as a whole.
Moreover, the FNE’s Guidelines on Jurisdiction expressly regulates the situation of interrelated transactions and successive transactions, providing guidelines to determine whether they constitute a single operation of concentration.
Regarding interrelated transactions, the Guidelines establishes that, in certain situations, several transactions individually considered may not qualify as an operation of concentration. However, if they are considered together, they may qualify as a concentration notifiable to the FNE. Such transactions shall be interrelated if there is a link of mutual conditionality between them.
In relation to successive transactions, the FNE indicates in its Guidelines that they will be such, if there are two or more transactions between the same economic agents during a period of two years, whenever it is reasonable to conclude that they tend towards a single operation of concentration when analyzed together.
Therefore, if different transactions should be considered as part of the same operation of concentration, they must be notified and reviewed by the FNE as a single operation, notwithstanding the fact these may represent different stages of an overall transaction.
In relation to “foreign-to-foreign” mergers, do the jurisdictional thresholds vary?
Jurisdictional thresholds do not vary in relation to “foreign-to-foreign” operations of concentration.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
Under the new merger control regime, the substantive test applied is the “substantial lessening of competition” test. Therefore, the FNE shall authorize a concentration in case the operation, purely and simply or subject to remedies, is not suitable to substantially reduce competition.
Neither DL 211 not the FNE’s Guidelines indicate how this test should be applied in practice. However, the FNE’s Guidelines on Jurisdiction expressly states that for horizontal mergers the FNE will use as a reference the substantive criteria set out in the FNE’s Guide on Horizontal Concentration Operations Analysis, dated October 2012. The above, until the issuance of new substantive guidelines by the FNE.
There are no different tests applicable to particular sectors. In certain sectors such as banking and electricity, concentrations require additional regulatory approval by other regulatory or supervisory agencies. These authorities do not consider the effect of the operation on the competitive structure of the markets in question in their assessment.
Are factors unrelated to competition relevant?
Are ancillary restraints covered by the authority’s clearance decision?
Although the Competition Act is silent on this, it can be assumed that a decision clearing an operation of concentration automatically covers ancillary restrictions, without the FNE or TDLC having to assess such restrictions in individual cases. By contrast, for restrictions that cannot be regarded as directly related and necessary for the operation, the general prohibition on restrictive acts and agreements remains potentially applicable. The FNE’s Notification Form also requires the notifying parties to specify whether there are agreements “related” to the operation that may proportionally restrict competition, like non-competition clauses, exclusivity clauses, etc.
There is almost no doctrine or decision practice in Chile regarding ancillary restraints. It is therefore likely that the FNE will seek guidance from especially the practice of the European Commission, as provided for in the Commission’s decisions and its Notice on Ancillary Restraints.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
There is no statutory deadline to notify a transaction, in the understanding that it must be notified before its materialization in case the jurisdictional turnover thresholds are met.
What is the earliest time or stage in the transaction at which a notification can be made?
According to the FNE’s Guidelines on Jurisdiction, the real and serious intention of the parties to materialize the concentration operation is sufficient in order to notify. The way this intention is expressed is not relevant, and may be reflected in a letter of intent, memorandum of understanding, unambiguous draft of the document where the operation is agreed, or public announcements of the intention to carry out the same.
Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
Yes, it is usual to engage in pre-notification discussions with the FNE. The length of these discussions depends mainly on the complexity and/or urgency of the analyzed operation of concentration. On average, this pre-notification process may take one to four weeks before notification is filed.
What is the basic timetable for the authority’s review?
The FNE has to analyze within 10 working days from the date of notification whether the notification submitted contains all the information required. Where the notification is deemed complete, the FNE will issue a notice declaring the notification complete.
In case the notification is declared incomplete, the notifying parties have 10 working days to amend the mistakes or omissions indicated by the FNE. If the notifying parties amend their presentation correctly within that term, such submission shall be considered as a new notification. On the contrary case, the notification shall be considered as not filed.
Once the notice of completion is issued by the FNE, or the 10 working days period has passed without any notice being issued, the FNE initiates phase I, which may take 30 working days, subject to extensions. Within that period, the FNE can: (i) approve the concentration purely and simply; (ii) approve the concentration subject to the commitments offered by the notifying parties; or (iii) initiate phase II, in case the FNE considers that the notified transaction, whether perfected purely and simply or subject to the remedies offered by the notifying parties, has the ability to substantially reduce competition.
Phase II may take an additional 90 working days period, subject to extensions, at the end of which the FNE can: (i) approve the concentration purely and simply; (ii) approve the concentration subject to the commitments offered by the notifying parties; or (iii) prohibit the operation.
If the FNE does not render a decision within the terms granted for phase I or phase II, the operation shall be considered approved in the terms offered by the notifying parties, including eventual remedies proposed by them.
Under what circumstances may the basic timetable be extended, reset or frozen?
The terms granted for phase I and phase II above-mentioned can be extended, upon mutual agreement between the notifying parties and the FNE, with a maximum of 30 working days for phase I and 60 working days for phase II.
Moreover, when the notifying parties offer remedies, these terms are extended with a maximum of 10 working days for phase I and 15 working days for phase II.
Are there any circumstances in which the review timetable can be shortened?
The Competition Act or FNE’s Guidelines do not indicate circumstances in which the review timetable can be shortened. However, the Competition Act sets maximum days and the FNE has the faculty to render its decision in a shorter period of time. In fact, it has done so in several occasions.
Which party is responsible for submitting the filing?
The obligation to notify rests jointly upon the parties taking part of the concentration; i.e. the parties to the agreement or the act constituting an operation of concentration.
What information is required in the filing form?
DL 211 establishes that the notification must be submitted with the necessary background information in order to identify the operation and the economic agents that will take part in it and its business group; the relevant information for the preliminary assessment on possible competition risks that the notified operation may entail; the declaration of the parties indicating that, in good faith, they intend to carry out the notified transaction; and the rest of the information and documents required under the Regulation on Notification of a Concentration Operation, issued by the Ministry of Economy, Promotion and Tourism on March 1st, 2017 (the “Regulation”).
The Regulation requires an extensive set of information, including but not limited to: (i) a brief description of the projected operation and ownership structure post-operation; (ii) descriptions of the economic activities of the notifying parties and of the entity subject to the operation; (iii) definition of the relevant market(s); (iv) certain market data regarding the eventual affected market(s); and (v) a description of the productive and/or dynamic efficiencies expected from the operation.
The Regulation establishes moreover a simplified notification procedure. A simplified notification can be made if:
(i) There is no horizontal or vertical overlap between the parties to the operation or between the entities of their respective business group.
(ii) The market participation of the parties and of the entities belonging to their respective business groups are not capable to substantially reduce competition because of its little significance. Participations of little significance are:
- joint market shares below 20%; and
- individual or joint market share below 30% in a relevant market vertically related to a relevant market in which any other party of the concentration, or any entity of their business group, operates.
(iii) The following requirements are met, except in the case of the establishment of a new joint venture:
- the joint market share of all the parties and the members of their respective business groups is lower than 50%; and
- the increase (“delta”) of the Herfindahl-Hirschman Index resulting from the operation is below 150.
It is relevant to clarify that the simplified notification only means that there is no need to submit certain information. It does not provide for shorter time schedules.
The FNE has published Forms for both the ordinary and simplified notification.
Which supporting documents, if any, must be filed with the authority?
The Regulation requires the following supporting documents to be filed:
(i) Powers of attorney of the notifying parties;
(ii) A certificate signed by the legal representative of each party, identifying the company’s administrators;
(iii) Corporate charts or diagrams of the notifying parties’ business group, prior and post operation;
(iv) Annual report, balance sheet and financial statements of the parties or of the entities of its business group which participate in the affected market(s), for the last three financial years;
(v) Any document related to the operation and/or its effects in Chile, such as: (i) ordinary and extraordinary board meetings minutes and shareholders meetings minutes of the parties or of the equivalent decision-making body held during the last three years; (ii) minutes, presentations and/or internal or external reports that have been prepared for the purpose of evaluating or analyzing the operation; (iii) analysis, studies, presentations and/or internal or external reports prepared for the purpose of evaluating or analyzing the operation, or alternative concentration operations; and (iv) commercial programs and/or general business plans that have been issued, commissioned and/or discussed by the parties or the entities of its business group in the last three years for the affected market(s) in Chile;
(vi) Databases, sources and criteria used by the notifying parties to estimate market shares;
(vii) Copies of studies, reports, analysis, surveys and any comparable document prepared in the last three years to analyze the affected market(s), conditions of competition, actual or potential competitors, consumer preferences, brand strength and potential growth or expansion to new products or geographic areas, among others;
(viii) List and copy of collaboration agreements, whether horizontal, vertical or otherwise, between the parties and/or between them and other players operating in the affected markets;
(ix) Statements of the parties whereby they declare that: (i) their intention is to, in good faith, materialize the notified operation; and (ii) the information provided is true, sufficient and complete, and that they understand the administrative and criminal sanctions that may be applied in case of providing false information or hiding information.
All these documents must be submitted in Spanish. However, the FNE may grant a special authorization to submit certain information in English.
The notification requires a signature, which can be made by an attorney designated by the notifying parties. In such case, a power of attorney must be submitted, which needs to be legalized.
Is there a filing fee?
The Chilean system does not provide for filing fees.
Is there a public announcement that a notification has been filed?
No, there is no public announcement that a notification has been filed. However, the resolution initiating the FNE’s investigation as well as the FNE’s decision is published on its website.
Does the authority seek or invite the views of third parties?
The Competition Act establishes that when the FNE decides to initiate phase II, it shall communicate its decision to the authorities directly concerned and to the economic agents who may have an interest in the operation. Those who receive such communication, as well as any third party interested in the concentration (including suppliers, competitors, customers or consumers), may provide information to the investigation within 20 working days following the publication of the resolution ordering the initiation of phase II.
Anyway, it is common practice that the FNE seeks the view of third parties in phase I as well.
What information may be published by the authority or made available to third parties?
The resolution initiating the FNE’s investigation as well as the FNE’s decision may be published in the FNE’s website, regardless whether the decision has been reached in phase I or phase II.
The investigation file will be publicly accessible only after the publication in the FNE’s website of the decision of initiation of phase II.
The FNE may, on its initiative or upon request of the interested party, treat certain information as reserved or confidential. Justifications are the protection of the identity of those who have made statements or provided information, or in case the information contain formulas, strategies or trade secrets or any other element the disclosure of which may significantly affect the competitive performance of its owner, or safeguard the effectiveness of the investigation. In these cases, public versions of the documents concerned must be submitted by the parties.
Does the authority cooperate with antitrust authorities in other jurisdictions?
The FNE is increasingly active in international organizations such as the OECD, the ICN and the Red Interamericana de Competencia, and co-operates actively with its peers in other jurisdictions. As such, it has signed various co-operation agreements with other competition agencies (it currently has co-operation agreements with authorities in Brazil, Canada, Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Peru, Spain and the United States). These agreements provide for technical assistance, and most of them also have provisions regarding co-operation and information exchanges for enforcement.
The FNE has liaised with competition authorities in other jurisdictions, and as a result, the shared information has been placed under review. In order to share confidential information with authorities in other jurisdictions, the FNE will request the notifying parties for a waiver. The experience is that the parties generally provide a waiver, although there are no formal sanctions on a denial.
What kind of remedies are acceptable to the authority?
According to the FNE’s Guidelines on Remedies, remedies may be classified depending on whether they imply a divestiture or not.
Remedies that imply a divestment are of two kinds: (i) those that involve the sale of assets to a suitable buyer, and (ii) those that are intended to remove links between competitors. The first group of divestments aims to create a new competitive entity or consolidate the incumbent competitors, while the second seeks to mitigate the coordinated risks that the operation may generate.
Remedies that do not involve a divestiture comprise the wide range of remedies that imply a limitation or modification to the future behavior of the economic agents involved in the concentration. As pointed out in the FNE’s Guidelines, these remedies may be classified into five different groups: (i) quasi-structural measures intended to influence the market structure affected by the operation (such as access and licensing obligations); (ii) behavioral remedies (such as prohibitions on entering into agreements containing exclusivity clauses, arbitrary discriminations, tied sales, bundling, conditional sales, among others); (iii) obligations to limit access to information within certain business groups (“Chinese walls”); (iv) remedies that promote the regulation of market power; and (v) behavioral obligations in relation to the purchaser of the divestiture package.
In the Guidelines on Remedies, the FNE expressly recognizes that, notwithstanding the fact that the remedies used are highly dependent on the specific circumstances of the case and the potential competition risks, in horizontal mergers it will be required, as a general rule, a divestiture to a suitable buyer. The above does not prevent the FNE from the adoption of other complementary remedies.
According to the FNE’s Guidelines, a suitable buyer must, in general terms, be able to restore the competitive rivalry lost as a result of the concentration. In this sense, the FNE will evaluate if the purchaser proposed by the notifying parties has the expertise, experience, assets and sufficient financial resources to operate in the long term in the affected market. In addition, it must be independent from the parties, the acquisition of the assets should not create new competition issues and it should be expected the procurement from the buyer, in a timely manner, of all the regulatory permits necessary to operate in the relevant market. Moreover, the FNE may request a business plan from the potential purchaser and the obligation not to transfer the assets to third parties in a certain period.
The authority may require an up-front buyer when it seems likely that subsequent implementation will compromise the viability of the measure (for example, when there is no clarity about the existence of suitable buyers for the divested package).
In case of risks associated to vertical or conglomerate concentration operations, the FNE will be more willing to consider remedies different to the divestiture to a suitable buyer. However, even in relation to this type of operations, the FNE may prefer to carry out divestitures when they are proportional to the risks identified.
What procedure applies in the event that remedies are required in order to secure clearance?
Only the parties can propose remedies, which can be done at any stage of the investigation before the expiration of phase II. However, the remedies offered in phase I may only be accepted if the risks are easily identifiable and the remedies are sufficiently comprehensive and adequately address all the possible competition issues the operation may raise.
The offer must be made in writing, detailing the remedies offered, the way in which they are intended to be implemented and the deadlines for doing so. If necessary, it shall also identify and describe the functions of the compliance supervisor and/or trustee.
Once the offer is submitted to the FNE, the terms of phase I and phase II will be automatically suspended up to 10 and 15 working days, respectively.
The FNE may request from third parties their opinion on the suitability of the remedies offered to revert the risks to competition caused by the concentration, and on the potential problems that the implementation of remedies could imply.
The FNE will evaluate the remedies offered during the term of the investigation. Once such evaluation is made, the FNE will approve or prohibit the notified transaction, depending on whether it considers that the remedies offered are sufficient to mitigate the risks observed.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
The Competition Act establishes that the general sanctions for infringement to DL 211, as well as those preventive, corrective or prohibitive measures that may be necessary, may be applied to those who:
(i) violate the obligation to notify;
(ii) implement an operation that has been notified to the FNE and whose materialization is suspended;
(iii) fail to comply with the remedies under which an operation has been approved;
(iv) implement an operation against the resolution or judgment that has prohibited the same; and,
(v) notify a concentration providing false information.
General sanctions for infringement to Competition Law, which may be applied by the TDLC, are the following:
(i) Modify or terminate acts, contracts, covenants systems or agreements contrary to the provisions of DL 211.
(ii) Order the modification or dissolution of partnerships, corporations and other legal entities that could have intervened in the acts, contracts, covenants, systems or agreements referred to in the previous letter.
(iii) Fines of up to 30% of the sales of the offender corresponding to the line of products or services associated with the infringement, during the term of the infringement or up to the double of the economic benefit gained by the infringement. If this amount cannot be determined, a fine of up to 60,000 Unidades Tributarias Anuales is the maximum (“UTA”, which is equivalent to CLP $575,040 as of September, 2018. Therefore, it is approximately equivalent to EUR $45 million and USD $52 million).
Moreover, the Competition Act establishes that failure to notify can be sanctioned with a daily fine up to 20 UTA (approximately USD $17,000 and EUR $15,000) for each day of delay, starting from the materialization of the transaction.
It is uncertain whether or not the daily fine for failure to notify is complementary to the general sanctions described above.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
In addition to the sanctions previously mentioned to those who notify a concentration providing false information, the following administrative and criminal sanctions may be applied:
(i) A penalty of minor imprisonment in its minimum to medium degree (this is, from 61 days to 3 years of imprisonment) to those who, in order to hinder, divert or avoid the exercise of the powers of the FNE, hide information requested or provide false information; and
(ii) a fine up to 2 UTA (equivalent to approximately USD $1,700 and EUR $1,500) per day of delay for those who do not respond or only partially respond, without justification, to a formal request for information of the FNE.
Can the authority’s decision be appealed to a court?
Appeal is only open to a prohibition decision and can only be filed by the notifying parties. An appeal has to be made within 10 working days after the decision is issued by the FNE.
The TDLC will request the FNE to submit the investigation file and must schedule a hearing within 60 judicial days; i.e. working days including Saturdays, after receiving the FNE’s file. At the public hearing may participate the appellant party, the FNE and those who have provided information in phase II, if applicable. A decision must be rendered by the TDLC within 60 judicial days following the oral hearing.
The TDLC’s decision is not subject to further judicial review, unless the TDLC approves the operation imposing new remedies, different than the ones previously offered by the notifying parties. In such case, both the parties to the operation and the FNE may file an appeal before the Supreme Court.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment?
As the new mandatory merger control regime has been in force for just over a year, there are no specific trends that could be mentioned in this regard.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
As the new the merger control regime entered into force as of June 1st, 2017, there are no future developments or reforms planned.