Months after the declaration of the State of Economic, Social and Ecological Emergency, and several measures implemented by the National Government in order to contain the spread of COVID-19, economic forecasts throughout the year have shown critical projections for the economy. Colombian. The World Bank even projected a contraction of 3% of the country’s GDP, also estimating a contraction for Latin America and the Caribbean will be up to 4%. On the other hand, the National Association of Financial Institutions estimated a growth in the unemployment rate that could reach 11% at the national level and up to 13% in urban areas in the most critical scenario, as well as an inflation rate of up to 3.7% by the end of the year.
The measures implemented by the National Government will continue to be necessary to contain the virus. Three months after the first confirmed case in the country, the certainty is growing that the economic impact will last even longer than the health crisis. For this reason, it is up to the National Government to implement reforms that, as well as in the short and medium term seek to mitigate the effects of the spread of the virus, in the long term provide tools to face an economic crisis.
The State is in charge of the general direction of the economy. For this reason, it is also responsible for the design of public policies that guarantee conditions for the economic growth of companies, and the well-being of market agents. One of its great intervention mechanisms for this purpose is the free economic competition regime. Through it, it can create greater efficiency conditions for markets and promote greater consumer welfare.
The extensive regulatory production of the National Government in recent months has left us with a series of regulations that, to a greater or lesser extent, are related to the current free competition regime. Thus, Decree 482 of March 26, 2020 has drawn attention, by which they sought to implement control parameters of collaboration agreements between transporters through the Logistics and Transportation Center during the period of economic, social and ecological emergency. For its part, Decree 507 of April 1, 2020, contains a series of temporary measures for monitoring the prices of essential goods. Subsequently, Decree 575 of April 15, 2020 temporarily classified non-compliance with payments to suppliers by public works contractors as a restrictive competition practice. Added to this, through Resolution 20490 of May 11, 2020, the Superintendency of Industry and Commerce established certain guidelines regarding collaboration agreements aimed at addressing the health emergency, and whose interpretation is still a source of debate.
Times of crisis must also be seen as times of opportunity for change. Although there are currently figures of the regime that could serve as alternatives for market agents when facing a crisis of longer duration, many are mechanisms that still lack an elaborate regulatory framework, which allows guaranteeing a greater degree of legal certainty for those who come to them, and whose application, many would argue, still belongs to a gray area of law.
Through permanent changes, such as in the business integration control system, a first step could be taken. A specific figure draws attention that has the potential to become a very attractive alternative for the most affected economic sectors: the exception of the company in crisis.
The figure is known in other jurisdictions as “ failing firm defense “. This allows authorizing a business integration operation that, despite representing a potential anti-competitive impact, and which would be challenged under normal conditions, implies the only alternative to avoid the imminent exit from the market of a company in a situation of financial crisis.
In Colombia, the figure has been admitted on very few occasions. Eventually, the integration operation between Bavaria, Cervecería Leona and other companies in 2000 could be cited, despite the fact that in this case the SIC does not expressly mention the figure. [1] In the integration operation between Aviacom and Terpel in 2015 and the integration operation between several companies of Grupo Argos, Cementos Andino and Concrecem in 2006, express mention is made of the figure and set more specific criteria for their origin. [2] In these, based on the treatment that has been given to the appears in other jurisdictions, the SIC established three conditions by which the argument of the company in difficulty can be applied: (i) The company must be condemned to leave the market in the near future as a consequence of its economic problems; (ii) should not exist a less anti-competitive achievable alternative and; (iii) the damage that the operation would generate in the competition is comparable to that caused by the exit from the market of the company in difficulty.
Despite the scant legal development that the figure currently has in Colombia, the competition authority has been highly demanding when verifying the assumptions that could lead to it being affected.
This alternative could be very useful for companies that are in some of the most affected sectors, such as the aeronautical sector and the tourism sector. However, as can be seen, it has only been implemented in specific cases for specific industries, and there is no rule within the general free competition regime that includes a regulated procedure for said exception. The criteria used by the SIC, for the moment, are based on precedents in the United States and Europe, [3] and there is no real guarantee so that, in any case, having the aforementioned requirements and arguing the exception, the operation is authorized by this entity. This lack of legal certainty could lead several agents in critical conditions to be reluctant to resort to this figure and eventually be forced to leave the market. It is because of the above that the current situation represents an opportunity to introduce new regulation that encourages large companies that are most affected to resort to the exception, not seeking to abuse the control of integrations that currently exists, but achieving that companies have clear mechanisms that can be accessed with greater agility and that avoid irreparable damage to the market and consumers.
The foregoing may be a first step in promoting changes in the general free competition regime to contribute to the well-being of different economic agents that could be strongly affected by the crisis. Let us not forget that, under our constitutional model, it is the responsibility of the State to adopt public policies for these purposes.
By Santiago Blanco Angulo , Associate of the Practice Group Intellectual Property & amp; Competition.
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[1] Official letter with file No. 00038295-23 dated July 18, 2000 of the SIC.
[2] Resolutions 90622 of 2015 and 13544 of 2006 of the SIC.
[3] The criteria adopted in Resolution 13544 of 2006 of the SIC come from the integration control guidelines adopted by United States and Europe. See Pg. 38.