New rules to encourage denunciation: Decree 1523 2015

By Felipe Gómez Córdoba

1. Free competition.

The new rules of betrayal occur within the context of free competition, understood as the set of efforts to develop the economic agents, acting independently, rival seeking effective participation of goods and services in a given market.

In Colombia, the Constitution establishes the principle of free competition as a law-based head of all citizens involved responsibilities and is subject to the limits established by law.

Hence then the importance of Competition Law, which deals mainly with the protection of the interests of consumers and the protection of free market competition by prohibiting acts that impede fair competition and promoting and advocacy of a competitive environment.

Colombia has a social market economy, with the spine free economic competition. Recalling that free economic competition is a collective right, by violating this law is affecting not unique to a single employer or plural consumer but an entire community.

The right to compete freely in the market should be in line with rules of the game, these rules are set by the competition law, such as restrictive practices, the impossibility of abusing a position or control and punishment of cartels business.

Referring to this specific area, that of agreements restricting competition, it can now be considered as one of the aspects that draws attention to the authorities in the world. Cartelization is precisely one of the most reprehensible to an entrepreneur in the stage of free competition behavior.

Currently Colombia has sought tools and instruments through public policies to detect, punish and eradicate this phenomenon.

2.About the regime to promote competition and restrictive trade practices.
The system of promotion of competition and restrictive business practices in the Colombian legal system is contained mainly in the Law 155 of 1959, Decree 2153 of 1992 and Law 1340 of 2009.

These rules prohibit all conduct involving restrictions or limitations on the part of market participants to the constitutional right to free competition also contemplating the procedures to determine the commission of offenses and penalties.

3.La of Industry and Trade as the competent authority.
Law 1340 of 2009 designated the Superintendency of Industry and Commerce as the national competition authority to meet exclusively administrative investigations, impose fines and other administrative decisions taken by violation of the provisions on the protection of competition. This rule also empowered the agency to perform the administrative enforcement of the provisions on unfair competition.

4. The Decree 1523 of 2015
1.Introduction:

The new decree is based on the recommendations of a Committee of Experts composed of lawyers and teachers in competition law and senior officials of the Superindustria. Also, the new regulation takes into account the recommendations of the Organisation for Economic Cooperation and Development (OECD) and other multilateral agencies.

The new rules provide greater legal certainty to companies and individuals engaged in business telltale signs that act as facilitating its entry into the Partnership Benefits Program.

Denunciation programs, collaboration clemency or benefits are the most effective tool in the business world to detect cartels and safeguard consumers, the economy and the smooth functioning of markets.

Through this decree the government issued a new regime of benefits for collaboration (informer) for the detection, investigation and punishment of cartels business figure which has become an effective tool in the fight of the authorities against infringements of free competition . Hence the key to meet the new rules to encourage informers in the fight against corporate cartels.

4.2. Objectives of Decree 1523 of 2015.

There are 4 main objectives:

• Lower the appeal of the formation of business signs.

• A resistimiento to the existence of cartels.

• Improve detection levels posters.

• penalize companies that are part of these.

4.3.Generalidades of Decree 1523 of 2015:

Overall these are the main points of the legal concept, which seeks to prevent cartelization:

Decree 1523 states that the accusations can be made by email, filed in writing or orally to the official designated for this purpose and from that time, be deemed to have priority over other informers.

To be admitted to the program of benefits for collaboration, the informer (company or individual), you must recognize and confess their participation in the cartel, getting of information about the existence of anti-competitive agreement, its operation, product or service involved and other or participating companies involved in the cartel.

With these actions the process of negotiating benefits with the Superintendency of Industry and Commerce, and the collection and evaluation of evidence begins, the authority to determine whether or not sign an agreement with the company or natural person informer.

The subsequent signing of an agreement that exempts the informer of the fine to be imposed for illegal conduct, or in which it is reduced it- shall be subject to the informer Allegue useful evidence on the operation of anti-competitive agreement, comply with the instructions issued by the SIC, and end your participation in the cartel in the terms established.

Informer you have determined the existence of the cartel and the business of its members remain under serious threat or coercion can not receive benefits:

The new decree also opens the possibility for anyone who has been, at first, the determiner or promoter of the agreement, but no coerced or threatened involving other members of the anti-competitive agreement may also receive benefits for collaboration.

This means that if an instigator or determiner cartel company exerted coercion or threats that led others to have to participate in the settlement, and such threats or coercion were maintained throughout the period of existence of the anti-competitive practice, not the determiner You can access the benefits of betrayal.

If, however, coercion or threats stopped at some point in the existence of the cartel business, or if they did not exist, the informer itself may be admitted into the Partnership Benefits Program.

5. Informer opportunity for the request to be admitted into the Partnership Benefits Program:

The new regulation provides for a reduction in the procedural opportunity to reveal the existence of a cartel and admission to the Partnership Benefits Program.

Previously, the opportunity expired with the detailed opinion of the Minister for the Protection of Competition to the Superintendent of Industry and Commerce, which generated delays in the investigation decision to collaborate or not.

Now the opportunity to betray preclude the presentation of releases, rule that it is intended that at an early stage of the investigation the authority notice if it is going to be whether or not the alleged collaboration of poster artists, creating the possibility of One of the apparent colusores was investigated further by another in order to obtain benefits accusation.

 6. Reform Advisory Commission for Collaboration Benefits Scheme.

Decree 1523 of 2015 was the result of the work of a Commission of Reform Benefits Scheme Collaboration Violations of Antitrust composed of ten experts in the field, five of the national government and five private sector and academia.

The issuance of Decree also took into account the recommendations and comments from the Organization for Economic Cooperation and Development (OECD).

It is hoped that the new system of cooperation benefits the number of accusations related to corporate cartels, collusion or anti-competitive agreements to increase prices, allocate production quotas, customers or geographical areas (or customers) will increase in the market, among other anti-competitive behavior.

Basics of betrayal:

This regime is framed within the competition law. In Colombia we are in a social market economy, with the spine free economic competition. Recalling that free economic competition is a collective right. In free competition it is not affecting singular to a single employer, but consumer plural affect an entire community.

In this vein the right to compete freely in the market should be in line under some rules, these rules are set by the competition law, such as restrictive practices, the impossibility of abusing a position or control and sanction business cartels.

Referring to this specific area of ​​free competition, the agreements restricting competition, may be regarded as one of the aspects that draws attention to the authorities in the world. Cartelization is precisely one of the most reprehensible to an entrepreneur in the stage of free competition behavior.

Currently in Colombia and the world they have sought tools and public policy instruments to detect, punish and eradicate this phenomenon.

Key definitions:

The system of benefits for collaboration (accusation) seeks to grant benefits to natural and legal persons who cooperate in the detection and prosecution of cartels and restrictive business agreements affecting free competition, where their participation was in condition of market players or facilitator . Here are some key definitions for understanding the scheme:

Instigator or promoter: A person who by serious threat or coercion to induce another or others to initiate an agreement restricting competition. This coercion or serious threat must be present during the execution of the agreement and a decisive factor in the behavior of companies.

Market participant: Any person engaged in economic activity and affects or may affect the development, regardless of its form or legal nature, whatever the activity or economic sector.

Facilitator: Any person who collaborates, facilitates, authorizes or tolerates conduct constituting restrictive business practices, under the terms set out in Article 2 of Act 1340 of 2009 and the rules that complement or modify

Applicant: The person who signed a collaboration agreement with Benefits competent performance.

Informer: It’s the person who has signed an agreement Benefits collaboration with the competent official.

Competent official: The Deputy Superintendent for the Protection of Competition.

Denunciation regimes in the world are designed to generate agreements in Colombia opened space for the employer who believe they have been incurring a unilateral conduct may qualify for the scheme of benefits for collaboration.

What do you look free competition with this decree?

Essentially collective benefits and promote respect. The first is the consumer and through this healthy competition, consumers will have better goods, better deal, better quality, more innovation, more technology, better customer service and better price for the end consumer.

It also seeks to ensure the proper functioning of markets because being a competitive market there is an incentive to innovate, also guarantees economic efficiency. The Government has made vigorous statements with respect to the defense of free competition, as did President Santos in his statements in his recent meeting with President Dilma Rousseff of Brazil, which sought to reach the signing of trade agreements in agriculture and scientific research.

Perfect recipe for protecting free competition:

1. Strong Institutions: Based on two aspects:

a) A good budget and sufficient financial resources.

b) The qualified staff in the institutions to apply the rules of free competition.

2. impose penalties.

3. A good system of informing.

4. Independence.

5. Solidarity of the country against anti-competitive practices.

6. Promotion of competition.

A regime of betrayal is not effective but are three ingredients:

Economic incentivito the poster.
Detecting cartels.
Ability to impose sanctions.

 How it was conceived the system of betrayal?

To access the collaboration benefits program you must:

Confess that becomes part of a cartel.
Provide evidence involving the informer.
Provide evidence involving other business entrepreneurs the alleged cartel.
14. How can I confess?

The informer can confess the cartel filed written medium, which is rare in practice, or email. In person or through a verbal-face interview with the Deputy Superintendent way.

After the confession, the superintendent will decide on the request for access to program benefits for collaboration. If accepted the agreement will be signed and the proof shall be requested to verify the existence of the cartel.

Decree 1523 of 2015 clarifies that grant benefits to collaboration is presumed that the applicant is not the instigator and promoter of anti-competitive agreement.

15. Benefits and order of priority:

The order of priority for the percentages of benefits for collaboration is as follows:

Informer Primer: 100% immunity:
Whoever is the first to reveal to the SIC the existence of a business sign and provide evidence and sufficient information about its operation mode, constituent companies and individuals involved, you get 100% reduction of the fine to be imposed (exemption ).

Second informer, benefit from 30% to 50%:
If you comply with the obligation to provide information and attach proof that the authority does not have, and has not provided the first informer.

Third informer on, 25% profit.
These benefits are obtained according to the quality of the information and evidence provided by the informer. There is a debate precisely the difference between the percentage of the first and second informer, who previously had a benefit of reduced fine of up to 70%, which to be high and close to the first informer, could be discouraging the arrival of a first informer, that it always be the most important and timely.

With the new decree profit is up 50%. This substantial difference was a reason to stimulate the complaint sooner.

In short the benefit for the first informer is maintained and profit for the second informer is reduced

16. Who can give away?

You can give away any market. The opportunity to betray will be until the expiration of the term for rendering disclaimers.

Requirements to mark the entry point for Collaboration Program:

Recognize participation in anti-competitive agreement.
Provide brief information on the existence of the (operation, product, participants)
17. The time of entry to the program of benefits for collaboration:

The 1523 decree states that the chronological order of priority for benefits shall be established from the moment they produce the appropriate certification by the competent official is generated.

Thus, the competent official must inform the applicant if the request does not meet the requirements at the latest within five (5) days of your receipt. If the first telltale not arrive to sign the respective Partnership Benefits Convention, other applicants or informers who are in turn have the right to move up in the respective order of priority.

The opportunity to submit an application for benefits Collaboration:

They may be submitted until the expiration of twenty (20) days to lift the transfer of the statement of objections and request or provide evidence in the investigation for the alleged restrictive practices of competition.

18. Requirements for signing the Agreement for Cooperation Benefits.

When the informer:

Acknowledge their participation in the agreement contrary to free competition.
Provide useful information or evidence regarding the existence of the agreement and its mode of operation, including aspects such as: objectives, main activities, performance, participants name, degree of participation, address, product or service, geographic area affected and estimated duration of the agreement or agreements restricting competition that complaint.
Address requirements and instructions that have given the Superintendent of Industry and Trade in the course of negotiating the Partnership Benefits Convention.
End your participation in the anti-competitive agreement on the terms established by competent official.
19. Grounds for loss of benefits

When the informer:

Controvert research (you can climb the ladder, before signing the agreement, after this you can not climb the ladder) admissions made in the negotiation of benefits.
Not cooperating with the investigation.
Disregards the requirements of the authority.
Destroys, alters or impedes access to information or evidence.

20. Additional benefits (amnesty plus).

Among the additional benefits, it allows those who do not have first place (second informer) in a Benefits Program Collaboration (cartel), but is the first to reveal a poster in another product or service (Poster B) uncovered and betrayed by the cartel (poster), get an additional 15% reduction of the fine in that first poster (poster), while for the total forgiveness of the fine that would have been imposed for participating in the second betrayed poster (Poster B).

It is worth mentioning that if you have participated in other agreements the added benefit will be 55% .Also coordinated action with other entities, such as the prosecution seeks to which the beneficiary has the opportunity principle.

There is currently a bill that seeks to alter the system of protection of competition and some features of the Superintendency of Industry and Commerce. With respect to the latter issue Article 14 of the bill amends section 410-A of Law 599 of 2000, as follows:

«Article 410 A. Agreements restrictive of competition in public procurement processes. Which in a process of public procurement procures another in order to restrict, limit or eliminate competition, be liable to imprisonment of six (6) to twelve (12) years and a fine of two hundred (200) to one thousand (1,000) monthly statutory minimum wages and inability to contract with government entities for eight (8) years.

Paragraph. The Attorney General’s Office granted the opportunity principle who within the advanced administrative investigation by the Superintendency of Industry and Commerce has obtained full exemption from the fine to be imposed by order firm, under the underwriting agreement benefits for collaboration, subject to compliance with the provisions in paragraphs 5 or 6 of Article 324 of Law 906 of 2004 «.

21. How much are the fines that may be imposed by the Superintendency of Industry and Commerce for this type of behavior?

For every violation and every violator, fines imposed on companies for the Superintendency of Industry and Commerce for the amount of one hundred thousand (100,000) Monthly Legal Minimum Wages or whether it be higher, up to 150% the utility derived from the conduct by the offender.

A natural persons to assist, facilitate, authorize, execute or tolerate behavior that violates the rules on protection of competition will be imposed fines on behalf of the Company up to two thousand (2,000) Minimum Monthly Legal Wages at the time of imposition of the sanction.

22. Case study of cartelization:

«Not a grain of sugar to Colombia» ASOCAÑA case.

A concrete, recent and famous business cartelization case is ASOCAÑA, a Colombian sugar mill that held agreements to obstruct imports of sugar made Colombia. Indeed its objective was to prevent and control the surpluses of other countries and ensure that these were not exported «Not a grain of sugar to Colombia».

The Superintendency of Industry and Trade sanctioned ASOCAÑA, CIAMSA, DICSA and twelve (12) SUGAR MILLS by corporate cartels have incurred for several years in a concerted, sustained and coordinated conduct to obstruct imports of sugar from other countries to Colombia, namely Bolivia , Guatemala, El Salvador and Costa Rica.

That was how the SIC passed to fourteen (14) senior managers in the sugar sector for collaborating facilitated, authorized, executed or tolerated anti-competitive conduct adopted in the form of business cartels.

The sanctions imposed by the Superindustria amount, in total, a sum of over $ 320 billion pesos. The fines imposed on the mills do not exceed seven percent (7%) of their annual income operations or seven percent (7%) of its assets.

For the imposition of sanctions, we took into account as an aggravating some of the mills fined and sanctioned individuals had been held liable in 2010 for cartelization in the purchase prices of sugar cane growers.

With this case demonstrated that the position of those investigated was to prevent or at least hinder the direct purchase of foreign sugar mills by industrial and Colombian businessmen.

23. Final thoughts:

The objectives of the application of the competition rules referred to in the Act 1340 of 2009, indicate that the SIC should aim to fulfill the purposes to allow freedom exists in Colombia income markets, variety of offers, economic license, etc. But by no means the sanction and impose fines must be the primary objective.

Another consideration should be around process efficiency of betrayal, because as long as a business cartel is working and this yields outweigh the panic that produces no penalty sufficient stimulus for a person to enter betrayal.

To this, many cases of betrayal in Colombia occur when yields or usefulness of that business cartel are not sufficient to offset the panic that produces it is discovered and punished. This would be a disastrous outcome for competition policy, which means that the State will be devoted to investigate the cartels that are no longer working or those posters are in Turn wilting.

Reflecting on the case ASOCAÑA and in general about the competition in Colombia suggests that there should be better guarantees for good social market economy, sound and transparent, and not just a regulation in which his sole purpose is to punish hence the importance of good public policy from now.

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21 octubre, 2015