Pre-merger clearance will now be mandatory. In addition criminal sanctions are being re-introduced whilst administrative penalties are substantially increased and leniency is extended in scope. Collusion becomes a per se infringement. Interlocking is prohibited and class actions are strengthened.
Felipe Cousiño Prieto
Santiago, August 2016. Chilean Congress approved last July 2016 a new competition bill- Bill No. 9950-03 (the Bill) which contains several regulatory changes related with merger control, replacing the voluntary filing system currently in force, with a system which makes it mandatory to notify any concentration transaction which exceeds certain thresholds and allows the antitrust prosecutor (FNE) to investigate the transactions that are not notified. A significant fine will be imposed on those who fail to notify prior to completion of the merger: approx. US$16,000 per day of delay.
The system consists of two phases, both before the FNE, which must approve the transaction if the latter is not capable of substantially reducing competition, where Phase I will last 30 days and Phase II up to 90 days, with limited room for extensions. In addition, under the Bill, the possibility of judicial review of FNE resolutions relating to merger control will be reduced; the conditions for approval of mergers may only be those formally proposed by the applicant for merger clearance; and significant restrictions are being introduced to third party intervention in the application process.
This should provide greater levels of legal certainty to M&A transactions. This greater certainty is not coming without cost given it is has meant significantly reducing the role of the antitrust court (TDLC) within the merger control system.
Once the Bill is promulgated and published as law, the FNE will have 90 days to issue a resolution fixing the thresholds that will trigger the obligation to notify and file for clearance. There is, however, one threshold that is cast in the Bill. It applies when an undertaking (or the group to which it belongs) acquires more than 10% of the interest in a competing undertaking: when each competitor has a turnover of over UF 100,000 (approx. US$ 3.8 million). In such a case notification to the FNE is also mandatory.
Criminal penalties have been re-introduced for cases of collusion, with effective jail terms of at least one year; fines for collusion have been increased from UTA 30,000 (approx. US$ 24 million) to up to 30% of the turnover or up to twice the economic benefit of the infringing conduct. Otherwise, if the turnover or economic benefit cannot be determined the TDLC may impose a fine of up to UTA 60,000 (approx. US$ 48 million). The guilty party may also be precluded for up to five years from contracting with the government.
The carrot is that leniency also covers criminal liability for the first whistleblower past the post. However, leniency does not extend to claims for damages.
In addition, the definition of collusion was reshaped to strengthen its per se character. This has raised fears that certain benign forms of association, such as joint ventures for R&D, consortiums for public works tender offers, or bank lending syndicates may be prohibited notwithstanding that they may have obvious beneficial effects for consumer welfare.
The Bill also specifically prohibits interlocking (that a person simultaneously hold management or board positions in two competing undertakings) when the competitors each have turnovers in excess of UF 100,000 (approx. US$ 3.8 million).
As to class actions, it will now be permitted to file them directly with the TDLC.
There is no doubt that the Bill has revolutionized the antitrust system in Chile.