CONTENT

ECUADOR FACING THE NEW RULES OF COMPETITION: EXPERIENCE IN COMPLIANCE,

CHALLENGES AND GOALS

Santiago Reyes Mena [email protected]

Quito - Ecuador

CONTENT

1. Overview of Antitrust Law

2. Compliance Programs: Experiences

3. Cultural challenges and legal challenges

OVERVIEW OF ANTITRUST LAW

OVERVIEW OF ANTITRUST LAW Ecuador signed the Cartagena Agreement (today

Andean Community - CAN) on 26.05.1969.

The Andean Community adopted Decision 608 entitled "Standards for the protection and promotion of free competition in the Andean Community", on 29.03. 2005.

Considered restrictive behaviors for competition agreements which have the purpose or the effect of: Price fixing, conditions Allocate markets, Restrict the supply or demand; Prevent or hinder access or permanence of current or

potential competitors; Coordinate positions in public tenders.


The President of the Republic signed a Executive Decree No. 1614 27.03.2009 whereby:

Establishes rules for the implementation of 608 Decision of the Andean Community of Nations

Creates an agency named as Subsecretaría de la Competencia y Defensa del Consumidor as part of the Ministry of industries and productivity.


• INVESTIGATIONS

Air TransportMobile

PharmacistSupermarkets

Soft DrinksSugarFlour

* A company was fined

According to the National Institute of statistics and Census, Ecuador is a concentrated economy.

Several driven competition law bills, one was approved in 2002 by the National Congress buy vetoed by the Vice-President.

Ecuador's Constitution of 2008 enshrined in several articles with constitutional precepts of competition.


RULES OF COMPETITION(COMPETITION LAW) Ley Orgánica

de regulación y Control del Poder de Mercado / 13.10.2011

First internal Competition law which abolish Executive Decree No. 1614.

One of its objectives is the prevention, prohibition and punishment of collusive agreements.

Provides the creation of Superintendencia de Control de Poder de Mercado (Agency).

The designation of the Superintendent and the creation of the Agency are still in process.

The Agency will have broad powers to investigate and punish cartels in Ecuador.

(COMPETITION LAW) Ley Orgánica de regulación y Control del Poder de Mercado / 13.10.2011

Civil liability Action for compesation for damages must be exercised

before a civil judge.

Criminal responsibility The Agency may notify the Attorney General of the State. Criminalize cartel was considered on a few Bills of the Law

Corrective action. If it fails or they have delayed, partially or flawed, the

Agency may, for collusive agreements designate a temporary auditor of the economic operator, in order to oversee the implementation of the corrective measures.

RULES OF COMPETITION


Infringements.

Minor offenses with fines up to 8% of the total turnover of the company.

Serious offenses with fines up to 10% of the total turnover of the company.

Very serious offenses with fines up to 12% of the total turnover of the company.



Cartel or any type of collusive behaviour

There is a Leniency Programm

There are serious and very serious offences

Will be judged regardless if it constitutes a conduct typified and penalized under the Penal law.

Very serious offences, they may impose a fine up to 500 SAU to the legal representatives or persons involved in the agreement or decision.



Cartel or any type of collusive behaviour

Recidivism is considered an aggravating circumstance and the penalties will not be lower than the previous.

The Agency may impose fines in successive and unlimited way in case of recidivism.

If the benefit obtained as a result of a contrary conduct are exceeding the thresholds of infringements, the Agency will penalized the offender with an amount identical of such benefits, without prejudice to punish recidivism.


COMPLIANCE PROGRAMS: EXPERIENCES


1. Multinational undertakings continue running their Compliance Programs

More relevance of the Compliance Officer

Act facing uncertainty and adoption of conduct with a competitor or a trade association.

Train to avoid the risk of possible agreements with competitors. Promote behavior of the code of conduct. Coordinate reforms to the internal work regulations.

2. Local undertakings demonstrate two types of reaction

Local undertakings with positive reaction :

Undertakings willing to change of business behavior and attitude of their representatives.

Diagnosis of their commercial behavior in their sector and professional support

Promotion of a culture of respecting the rules of competition

Implementation of Compliance Programs and creation of codes of conduct

Limit what is allowed and what it is not allowed to deal with competition.


Local undertakings with negative reaction:

Rejection and/or disregard of the rules of competition

Continuation of modus operandi with the competition

Belief of a negative impact on sales

NO professional support

NOT promoting a culture of respecting the rules of competition

Rejection and/or ignorance over the implementation of codes of conduct and Compliance programs.


3. Trade Associations.

Development of activities to report on the Competition Law and its enforcement.

Incorporation of precepts of competition in their Code of Ethics.

Creating guides behavior for its members.


CULTURAL AND LEGAL CHALLENGES


Change in business attitude in every generation of the company's management

Create a culture that rejects cartels

Promote the concept of transparent business

Creation and acceptance of Compliance program

Promotion of a culture of competition and guides behavior in trade associations

Ethics of competition.

Once the Agency is created it must:

Strive to be a technical entity and maintain an institutional reputation.

Train their staff in the fight against cartels.

Agreed models of cooperation with other competition authorities in order to fight against cartels.

Promote and guide through practical guides and normative techniques on the behaviour of economic operators in:

Public procurement, Integrity Pacts and cartels Exchange of information between competitors


Labor Law

Public employees of the Agency must establish a secure political, social and economic environment.

Ecuadorian rules lays down the right to audit the employees e-mails.

Undertakings do not provide disciplinary measures when their employees are involved in cartels.


Attorney-Client Privilege

The laws of Ecuador do not establish specifically the confidentiality of relations between client and attorney or between companies and their in-house counsel.


Documents

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