In September, the Law for the Strengthening of Competition Authorities was approved in Costa Rica, which will aims to strengthen and improve the implementation of competition laws and policies by the Commission to Promote Competition (Coprocom) and the Superintendency of Telecommunications (SUTEL). The regulated competition will generate benefits for citizens, as it leads to lower prices, variety and choice options in terms of products, according to OECD authorities.
Its main objective is the modernization of the functioning of the Commission for the Promotion of Competition (COPROCOM), which will have legal, administrative, technical and budgetary independence. This initiative originated in the framework of a series of recommendations made by the Organization for Economic Cooperation and Development (OECD) to Costa Rica as part of the admission process.
The law contains higher penalties at the business level, such as companies that incur in monopolistic practices, the legislation establishes penalties such as the prohibition of the economic agent and his legal representatives to participate in all types of administrative contracting with any public entity (two-ten years). In the event that public officials or individuals are part of this type of practice, a fine will be imposed in the same way, equivalent to a base salary and up to 680 base salaries.
The law establishes a categorization of penalties according to the type of infraction, which could be:
- Slight: A fine of 0.1% up to 3% of the total turnover of the economic agent in the fiscal year immediately prior to the imposition of the sanction.
- Serious: A fine of 0.1% and up to 5% of the total turnover of the economic agent in the fiscal year
- Very Serious: A fine of 0.1% and up to 10% of the total turnover of the economic agent in the fiscal year
COPROCOM will ensure the market behavior of private, public, informal or formal companies with regard to equal conditions. In case of doubt about any abuse in prices of products or services, a study and investigation can be requested from COPROCOM to determine if there is a violation of certain norms that are in the original law.
Competition is expected to reduce inequality and make companies more efficient, reduce costs, process efficiency, increasing creativity, diversifying products and giving more forms of consumer satisfaction, as part of their advantages. The State obtains its benefit by having a more dynamic, competitive, productive economy, greater economic development and allows more tax revenues to be collected without increasing tax rates.
With this law, Costa Rica seeks to modernize public institutions and have legislation that allows more effectively to protect markets from practices contrary to fair trade, as well as to promote competition and free competition.
The implementation of this law, together with other measures to be taken by the competition authorities, are vital to achieve the approval of the OECD Competition Committee and be closer to meeting the country’s goal of being part of this organization in 2020.
Benefits of the law
The main objective is to strengthen the figure of the authorities in charge of ensuring competition: Telecommunications Superintendence (SUTEL) and the Commission for the Promotion of Competition (COPROCOM).
In addition, an agile and transparent procedure is introduced for its election, typifies effective practices and sanctions to deter illegal behaviors and establishes innovative instruments such as the clemency program and the improvement of investigation and sanction procedures.
It will bring benefits to consumers and companies. The consumers may have robust inspection authorities, with powers to effectively ensure that there is competition in the different areas of economic activity, which will be translated into better prices and increased supply, in terms of the variety and quality of products that can be acquired. The business sector will be strengthened with more spaces to offer its production of goods or services, since greater competition promotes innovation and greater competitiveness by the companies.
Summary
– Merger Controls: Substantial reform of the pre-merger reviews and approvals. The main novelty is the creation of a two-stage procedure, which accelerates the approval of transactions, concentrating the efforts of the authority only on those that generate risks for competition.
It eliminates the possibility of notifying the transactions post-closing, and establishes the obligation to suspend the execution of the deal until approval is obtained.
– Penalties: Enlargement of infractions and increase of fines up to 10% of the company’s income. Those who promote or facilitate the performance of anti-competitive practices will also be sanctioned, even if they do not participate in them. The fine is also increased for individuals who participate in prohibited practices.
– Voluntary compliance programs: Voluntary compliance programs that meet certain requirements will be considered an attenuator when assessing the sanctions to be imposed by the authority.
– Immunity and reduction of fines: Those who acknowledge committing an infraction and collaborate in their investigation may receive full or partial immunity from the sanctions.
– New investigation procedure: The procedure to investigate prohibited practices is replaced by one with shorter terms and greater protection of due process and the right of defense.
– COPROCOM: Legal, administrative, technical and budgetary independence.
– Competition Law: The powers to eliminate or modify regulations that create barriers for competition in the market are strengthened, as well as to review and promote reforms to the monopolies created by law.
Tomás Quirós
Partner
CENTRAL LAW
Costa Rica
