By Dario Cadena – Lloreda Camacho y Co.
Antitrust enforcement in Colombia has been strengthened by recent laws (Law 1340 of 2009 and its subsequent developments which include a document non-officially enacted, but heavily relied upon, containing the guidelines for the applications of the antitrust laws to trade associations) and a steep increase in the activity of the Superintendence of Industry and Commerce (hereinafter “SIC”), the governmental agency tasked with overseeing competition in the Colombian markets.
The increased importance of antitrust enforcement has meant that longstanding practices by local and foreign firms with a Colombian presence may have to be reviewed and amended to reduce the risks of facing a SIC investigation. In particular, local management and sales forces may need some guidance as to what information can be shared or disclosed when meeting competitors within the framework of trade associations or informal meetings. The purpose of this top ten is to serve as a checklist of issues you may want to bring up to management and other employees, to fresh up their understanding of the antitrust regulations and avoid costly mistakes.
1. Understanding the roles and limits of trade associations
According to SIC, trade associations have two distinctive roles: (i) they can act as market participants when they acquire or render consulting services; and (ii) they serve as the representatives of their industries’ interests.
When serving as industry representatives, trade associations may require information from members which are otherwise competitors, and they can issue guidelines or rules for their members. This activities are nor unlawful per se from an antitrust perspective, but they are subjected to limits which often are blurry and which will be addressed in this document.
2. Sharing information is not prohibited per se
Whenever SIC announces new investigations or sanctions involving competitors sharing information, such as recent cases like the one against the healthcare insurance companies and trade association, or the one against disposable diapers producers, a common knee jerk reaction is to order everyone within the company to stop any and all exchange of information. However, sharing information is not per se illegal. Trade associations can require information from its members with legitimate and pro-competitive objectives such as to promote efficiency in the market and represent the interest of its members in different forums.
According to Decree 2153 of 1992, sharing information becomes an antitrust offence, when it allows the articulation of an agreement between competitors which enables them to:
• fix prices,
• establish discriminatory dealing conditions,
• allocate markets,
• establish production quotas or production levels,
• arrange for the tying of additional products or services as a condition to deal,
• allocate raw materials,
• impede technical developments,
• foreclose the access to markets or commercialization channels to third parties, or
• standardize proposals to be submitted in public biddings.
3. Reviewing the information disseminated by the trade association
Information acquired and disseminated by the trade association may be viewed by SIC as the tool by which competitors coordinate their actions in the market. Accordingly, it is important to review the information being circulated and insist on the following:
• The trade association should only distribute historic data as opposed to present and future information,
• The trade association should only distribute data in an aggregate form and avoid identifying individual transactions or customers, and
• The information disclosed should be made available to non-members of the trade association when reasonably required.
Overall, the information disseminated should be reasonably related to the trade association´s purpose and objectives.
4. Remind your workforce that in Colombia agreements deemed as anticompetitive are subject to prosecution even if they render no effects
SIC has reaffirmed in recent decisions that it will prosecute competitors who enter into agreements, based on evidence that they entered into them for anticompetitive purposes, even if the markets experience no harm. In other words, the sole existence of a purpose or anticompetitive objective when competitors share information exposes the company to prosecution and potential sanctions.
5. The place does not matter
SIC´s has jurisdiction over any conducts which affect or target Colombian markets. Employees have to be aware that sharing information through informal forums or in meetings held outside Colombia can expose the company to antitrust liabilities which, as stated above, can arise even if Colombian markets experience no harm.
Accordingly, when in doubt, personnel making presentations or attending trade meetings should clear the information they will share, or the presentations they will make, with their supervisor, the in-house counsel or the company local counsel. SIC has suggested that the agenda of upcoming trade associations meetings should also be available to the public.
6. Suggested prices
Recently SIC has tackled the issue of suggested prices and the role of trade and professional associations´ issuing guidelines to that effect. SIC has said that trade associations cannot act as forums for competitors to jointly establish suggested pricing schemes for members to adhere to. Hence, employees should be instructed to never engage in talks with competitors or during trade association sponsored encounters, in which establishing a pricing policy is discussed. If the subject is brought up, they should understand the importance of clearly voicing their opposition to establishing any such measure.
Be mindful, however, that SIC has stated in Resolution 40598 of 2014 and in other decisions, that suggesting prices is allowed in certain vertical relationships. In particular, independent distributors or agents may receive non-mandatory price suggestions as long as the producer cannot enforce the price suggestion. Conversely, when price policy is addressed to a party subordinated to the one setting it, such as a franchisee – franchisor relationship, there is no antitrust violation and compliance may be enforced.
7. SIC can find the existence of price fixing agreements which are not obvious to management
Trade associations may, in good faith, issue guidelines for its members which can seem perfectly common to your company´s management. For instance, in the name of fair competition, the trade association may instruct its members to keep their discounts or promotion in line with its agreed guidelines.
All these types of arrangements have been found by SIC to be tantamount to price fixing and, therefore prohibited under Colombian law, in recent decisions regarding a local association of fuel and other oil products retailers (Resolution 10713 of 2002), and an association of private security firms (Resolution 25420 of 2002).
8. Monitor information requested by trade associations.
Establish a policy and make sure management and employees understand that answering requests from trade associations in which information sensitive to the company, such as the one germane to cost structures or distribution arrangements, will be shared, require a sign-off from the legal department.
9. Cooperating with competitors to enable standard settings may be seen by SIC as an agreement to offer uniform products.
Although it has not dealt directly with the issue of standard setting agreements, SIC has implied that it understands that these sort of agreements between competitors are not only economically sound, but also benefit consumers by allowing for technological convergence when new products enter the market. Nonetheless, SIC has also stated that, from an antitrust perspective, it finds troubling that competitors use trade associations to establish uniform conditions for products offered to consumers.
Therefore, you should review any proposal involving standard setting for products which are not considered new technologies and inquire about the rational for the agreement: if there is no compelling argument such as addressing security concerns, or there are no other clear benefits for consumers, avoid entering into the agreement or participating in the trade association initiative as they may be seen as efforts to establish entry barriers to the market.
10. Keeping a record of what is discussed in trade association meetings
In recent decisions SIC has relied in documentary evidence (mostly emails) and testimony, to establish what was said and discussed in trade association meetings. To ensure a proper institutional memory, it is advisable that the company´s representative in the trade association keeps minutes of the meetings attended and circulates them to the legal department. If the trade association keeps its own record, the company should insist on receiving a copy for its own files.
Given the repercussions and importance of the issues discussed, a final recommendation is for companies with operations in Colombia to institute training programs, focusing on the members of their team must likely to deal with trade associations and competitors: management and sales personnel.