Two Recent Antitrust Decisions: The Beer Manufacturers Case and the Airlines Case - Anti-trust/ Competition Law - Mondaq Colombia - Mondaq Business Briefing - Books and Journals - VLEX 29346301

Two Recent Antitrust Decisions: The Beer Manufacturers Case and the Airlines Case

Profession:Parra Rodríguez & Cavelier

By Ernesto Cavelier and José Elías Del Hierro

This article will review the antitrust and restrictive practices regulations in view of two recent decisions issued by the Superintendence of Industry and Commerce. Both cases serve to illustrate the conditions that require a filing and the powers enjoyed by the antitrust authority in Colombia, and provide an excellent outline of the type of decision likely to be issued in other cases. Moreover, the cases illustrate the wide range of discretion enjoyed by the antitrust authority, particularly since the decisions reached seemed to be contradictory. The first case approved a merger between the two largest brewers in the country. While the approval was granted, a good number of conditions were imposed on the parties to the transaction. The second case objected to the proposed merger of the two largest airlines in Colombia, on the basis of forceful but debatable arguments. The study of both cases will give the reader substantial information to understand the regulations that apply to a proposed merger and the likelihood of an approval.

In a recent newspaper article, the former Superintendent of Industry and Commerce explained his decisions saying that while they might have seemed contradictory, in both cases he was trying to benefit the public and the consumers. In the first case (the Beer Manufacturers Case) the approval was granted in view of the fact that one of the beer manufacturers would not survive without the integration; if that were the case, a monopoly would emerge, and there would be no easy legal recourse to break it afterwards. Therefore, the decision was to allow the two companies to integrate, while at the same time certain stringent conditions were put in place so as to allow other competitors to enter the market at a later time, whether they would be national or foreign companies.

In the Airlines Case, the Superintendent reached a decision using the same rationale, that is, what would be the best way to advance and serve the interests of the public and of the country in general. The common good was defined as the preservation of the competition for the benefit of the consumers, allowing the investors and their companies to continue in operation, carrying out their normal activities in the most effective manner. The former Superintendent notes that one of the airlines proposing the integration claimed to be in poor financial shape, having consistently lost market share, while the other was in much better shape, financial and otherwise, and had gained market share in the last years of operations. Therefore, the Superintendent concluded that the interests of the country and of the consumers would be better served by objecting to the integration, since in the event of failure of the least efficient airline, there would be several other airlines that would take its place, thus providing more efficiently and effectively the transportation service the country needs. On the contrary, if the decision had been to approve the integration, the Superintendent argued, a quasi-monopoly would have been created, generating the possibility of abuses of dominant position, and of the imposition of practices contrary to the interests of the consumers.1

The regulating authority for the cases commented in this note, (hereinafter the Superintendency or the authority), is the Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio); it is the main authority in charge of ensuring competition among commercial organisations in the country. It is also in charge of approving or objecting to any form of integration that may create unlawful restrictions to competition.

Other entities that have some functions related to mergers and acquisitions are the Superintendence of Banks (Superintendencia Bancaria), The Superintendence of Securities (Superintendencia de Valores), the Superintendence of Residential Public Services (Superintendencia de Servicios Públicos Domiciliarios), the Superintendence of the Social Economy (Superintendencia de la Economía Solidaria), The Air Authority Aeronáutica Civil, the Communications Regulatory Commission (Comisión de Regulación de Telecomunicaciones), the Television Regulatory Commission (Comisión de Regulación de Televisión), and the Energy and Gas Regulatory Commission (Comisión de Regulación de Energía y Gas).

The regulations applicable to filings and the administrative process they will follow will be shown in the footnotes.

The Beer Manufacturers Case

The beer industry in Colombia is highly concentrated. In fact, until a few years ago, it was all (with one notable exception) in the hands of one of the five or six powerful conglomerates that control most of the industrial production in the country. The main producer (identified here as Bavaria) was challenged by a company established by the largest manufacturer of soft drinks (Leona), that built a beer plant with the purpose of serving the national market. At around the same time, Bavaria started competing with Leona's Group in the soft drinks market, including fruit juices (whether natural or artificial). Leona's beer manufacturing operation did not reach the desired profitability levels and it offered the business for sale. Bavaria made a bid for part of the company, which was accepted. Subsequently, both parties requested the approval from the authorities in pursuance of the regulations. Those rules require the prior filing for approval, that is, no agreements or unconditional commitments should be entered by the parties to the transaction before filing.2

Transactions whereby two or more organizations intend to merge, consolidate, or integrate, as well as acquisitions, must be reported to the Superintendence of Industry and Commerce prior to the transaction. The reporting requirement applies to transactions involving commercial, industrial and services legal entities whose joint market share will be more than 25 per cent of the relevant market or when the joint value of the assets involved is higher than 50.000 Colombian monthly minimum salaries (about US$6 million). Given this low threshold, most of the transactions involving mergers or acquisitions must be reported.

The reporting requirement applies to all organizations involved in the production, supply, distribution or consumption of similar goods, raw materials, products or services. The integration of the organizations subject to the reporting requirement may take any legal for, whether it is an acquisition, integration, merger, or other type of integration.

In pursuance to those rules, and in accordance with the application filed, the beer manufacturers were served with a decision, granting the approval to the integration of the beer manufacturers. The main purpose of such decision was meant to generate the economic and competitive environment required for the establishment of other beer manufacturers at any time within the term of effectiveness of the rules. The approval was granted making the approval subject to...

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