Competition Law and Policy in El Salvador: main recommendations from the OECD

Written by:

Fidel Márquez

 

The “competition policy” can be defined as the regulatory discipline of law and economy that settles the mechanisms that the State uses to promote, protect and guarantee competition in order to increase the economic efficiency and to protect the consumers’ welfare as a main objective.

 

In El Salvador, this protection is pursued mainly through two ways: 1) The prevention and elimination of anti-competitive practices among competitors and; 2) the control of economic concentrations among economic agents. Both concepts are the backbone of our Competition Law (hereinafter the “Law”) with the purpose to fulfill the competition policy’s goals, which approximately have been developed during the last 15 years since the law took effect. Nevertheless, it is a fact that since a few years ago, they have identified the need to introduce reforms to update the law and its regulation to current reality and amend aspects that have become increasingly aware in the practice.

To that extent, for effects of this analysis it is interesting to enhance the recent inform released by the Organization for Economic Co-operation and Development (OECD) after El Salvador submitted to a peer review about “Competition Law and Policy” in 2019.

 

Peer reviews are a core element of OECD work. The OECD uses various mechanisms of evaluation that, in general terms, are based upon the willingness of a country to submit their laws and policies to a questioning by its reviewers. This process provides valuable information and performs in-depth analysis of the ways a country deals with competition issues and regulation, the strength of their laws and the structure and effectiveness of their institutions.

 

What do peer reviews provide? Peer reviews include recommendations of changes to government policies. For El Salvador the OCDE provided 13 recommendations intended to strengthen competition institutional framework and improve the application of the law and its regulation.

 

A general reference about the content the recommendations are focused are listed below:

  1. Enhance the Superintendence’s independence and autonomy and ensure clear and transparent rules that set out the conditions of appointment and dismissal of the Board following a public selection procedure, and that is made by bodies that ensure wide-political acceptance and remove the perception of political bias.
  2.  Clearly separate investigative from decision-making roles because actually the Superintendence’s investigative and decision- making roles are not sufficiently differentiated since the Superintendent supervises the preparation of cases and is also one of three voting members of the Board.
  3.    Ensure that Superintendence is entitled to prioritize its investigations in order to optimize deployment of its resources and direct the use of these resources to areas where its action will have the greater impact.
  4.  Implement an effective strategy to combat cartels and consider redirecting resources towards investigating abuses by cartels, without ignoring the latter, using the available legal tools.
  5.   Focus on fighting collusion in public tenders, which can be successful and is likely to increase the prominence and reputation of a competition authority before both the public opinion and other public authorities.
  6.   Impose deterrent fines and ensure that penalties are swiftly collected, clarifying that anti-competitive practices are equivalent to severe offences, and impose higher fines on the basis of the relevant turnover.
  7.  Reform the leniency regime to bring it line with international standards with the aim to offer incentives so that companies can request leniency, meaning that guarantees of full immunity are required for companies to be sufficiently incentivized to come forward.
  8.  Adopt market definition, market power and anticompetitive analysis tools in line with international practices.
  9.   Remove the requirement of dominant position for antitrust enforcement against vertical arrangements, and clarify the legal framework for abusive practices since the dominant position imposes a very high threshold that prevents effective enforcement.
  10.   Adopt measures to make judicial review swifter for judicial reviews of infringement decisions.
  11. Amend merger control thresholds to adapt them to the reality of El Salvador’s economy. In fact, a recent assessment of merger control thresholds by the Superintendence concluded that the relatively small size of the national economy meant that most transactions with the potential to impact competition in El Salvador market fall below the current notification thresholds.
  12. Ensure that it is possible for private enforcement to occur before the courts. It can be used to narrow the enforcement gap and entitle victims to be compensated.
  13.  Consider imposing a duty on public bodies to justify the decision not to follow a recommendation by the Superintendence.

 

Ultimately, this is a valuable opportunity to fulfill three major objectives. First, the Superintendence enhances its actions and implements the use of available legal tools. Second, to promote reforms to the law according to the recommendations of the report, to the extent considered convenient. Third, due to the recent entry into force of the Law of Administrative Procedures (Ley de Procedimientos Administrativos), to make a unified effort to adapt the law as it seeks to match and harmonizes with that normative. With all that, El Salvador would improve its competition law and policy and eventually, improve the economic efficiency and consumer welfare.

 

For more information about the inform released by the OECD, you can access the following link:

http://www.oecd.org/daf/competition/El-Salvador-Peer-Reviews-of-Competition-Law-and-Policy-2020-ESP.pdf

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