Peruvian competition agency's 2020 policy agenda includes fostering competition, new pre-merger notification system

15 January 2020 00:00 by Ana Paula Candil

The Peruvian competition authority plans to help draw up an antitrust policy aimed at reducing barriers to entry, business bureaucracy and price-fixing, as well as to implement a pre-merger notification system.

Ivo Gagliuffi, the president of the National Institute for the Defense of Competition and Protection of Intellectual Property, or Indecopi, told MLex in a recent interview that his agency will undergo structural changes this year to be equipped for the changes expected, particularly the increase in Indecopi's caseload after the pre-merger system comes into force.

"We have an ambitious year ahead. Indecopi is working with the Prime Minister and international organizations such as the World Bank on the possibility that Peru has its first national competition policy," Gagliuffi said. "But this hasn't been approved yet. We are still trying to convince them."

Gagliuffi said the competition policy, which would come in the form of a decree, would offer more clarity about when state intervention in the market is necessary and would establish standards for companies willing to do business in Peru. "We are talking about eliminating barriers to entry, bureaucratic barriers that hinder investments and barriers imposed by public companies," Gagliuffi said. "We want to make it very clear that the state should not intervene in the economy, and that the state doesn't compete with the private sector."

Gagliuffi also said that the new policy would address price control. "We need a national policy that also explains how bad price control is for the market," the Indecopi president said.

Pre-merger system

Indecopi is preparing for an increase in its caseload this year, when companies will start notifying the agency of deals that meet its merger notification threshold. Peru had never had a pre-merger notification system, except for deals involving the electricity sector.

According to new legislation approved in Congress in May and that will come into force on Aug. 20, companies must notify Indecopi of their deals when they have combined revenues of $150 million, or when at least two of the companies involved in a deal have revenues of $23 million each.

Gagliuffi said that with an approved budget increase of almost $5 million this year, he will create a merger control division in his agency, which will be composed of around 50 new employees responsible for analyzing all deals that reach the agency. He also said that Indecopi will also undergo other structural changes — he will create divisions for advocacy, cartel investigations and leniency agreements, "just like CADE," he said, referring to Brazil's competition authority.

Gagliuffi said that he expects that 12 to 15 mergers will be notified to Indecopi each year. "We don't want to analyze a lot of mergers, but only those that really affect competition," he said.

"Our threshold is very straight-forward, specific and mathematical," he said. "We want to avoid discussions."

Gagliuffi also said that Indecopi is working on a draft regulation and two sets of guidelines, one focused on merger notification and other on merger remedies. The three are expected to be submitted for public comments in March and officially issued on May 20.

"We are asking the support of our international peers, including US' FTC, Brazil's CADE, Mexico's Cofece, Chile's FNE and the European Commission for this. They are our main partners in this plan," he said.

Additionally, Gagliuffi said his agency is working on a final version of a draft bill that would unify Indecopi's first- and second-instance decision-makers, saving the agency's resources for more important tasks. He plans to submit the final version to Congress for a vote in August.

Indecopi's first-instance decision-makers, such as the Free Competition Commission and the Commission on Unfair Competition, issue decisions that can later be appealed to Indecopi's second-instance decision-maker, the Tribunal for the Defense of Competition and Intellectual Property. But Gagliuffi said that system isn't very effective.

"Ninety-two percent of the cases ruled in the first instance end up being confirmed by the second instance. Why do we have two instances if most of the time they issue the same decision?" Gagliuffi said. "We proposed a change and I'm afraid to say that we've received a lot of criticism. ... This would be a historical change in Peru, and defendants would still have the courts to appeal."

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