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ECUADOR FACING THE NEW RULES OF COMPETITION: EXPERIENCE IN COMPLIANCE, CHALLENGES AND GOALS Santiago Reyes Mena santiago.reyes@dll-lawoffice.com Quito - Ecuador. CONTENT. Overview of Antitrust Law Compliance Programs : Experiences Cultural challenges and legal challenges.

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  1. ECUADOR FACING THE NEW RULES OF COMPETITION: EXPERIENCE IN COMPLIANCE, CHALLENGES AND GOALSSantiago Reyes Mena santiago.reyes@dll-lawoffice.com Quito - Ecuador

  2. CONTENT • Overview of AntitrustLaw • CompliancePrograms: Experiences • Cultural challenges and legal challenges

  3. OVERVIEW OF ANTITRUST LAW

  4. 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.

  5. OVERVIEW OF ANTITRUST LAW • 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.

  6. OVERVIEW OF ANTITRUST LAW • INVESTIGATIONS • Air TransportMobilePharmacistSupermarketsSoft DrinksSugarFlour* A company was fined

  7. OVERVIEW OF ANTITRUST LAW • 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.

  8. 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.

  9. RULES OF COMPETITION (COMPETITION LAW) Ley Orgánica de regulación y Control del Poder de Mercado / 13.10.2011 • Civil liability • Actionforcompesationfordamagesmustbeexercisedbefore a civil judge. • Criminal responsibility • TheAgencymaynotifytheAttorney General of theState. • Criminalize cartel wasconsideredon a fewBills of the Law • Correctiveaction. • 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.

  10. RULES OF COMPETITION (COMPETITION LAW) Ley Orgánica de regulación y Control del Poder de Mercado / 13.10.2011 • 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.

  11. RULES OF COMPETITION (COMPETITION LAW) Ley Orgánica de regulación y Control del Poder de Mercado / 13.10.2011 • Cartel or any type of collusive behaviour • Thereis a LeniencyProgramm • There are serious and veryseriousoffences • 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.

  12. RULES OF COMPETITION (COMPETITION LAW) Ley Orgánica de regulación y Control del Poder de Mercado / 13.10.2011 • 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.

  13. COMPLIANCE PROGRAMS: EXPERIENCES

  14. COMPLIANCE PROGRAMS: EXPERIENCES 1. Multinationalundertakingscontinuerunningtheir 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.

  15. COMPLIANCE PROGRAMS: EXPERIENCES 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.

  16. COMPLIANCE PROGRAMS: EXPERIENCES • Local undertakings with negative reaction: • Rejection and/or disregard of the rules of competition • Continuation of modus operandi withthecompetition • Belief of a negative impact on sales • NO professionalsupport • NOT promoting a culture of respecting the rules of competition • Rejection and/or ignorance over the implementation of codes of conduct and Compliance programs.

  17. COMPLIANCE PROGRAMS: EXPERIENCES • TradeAssociations. • 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.

  18. CULTURAL AND LEGAL CHALLENGES

  19. 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.

  20. CULTURAL AND LEGAL CHALLENGES • 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

  21. CULTURAL AND LEGAL CHALLENGES • 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.

  22. CULTURAL AND LEGAL CHALLENGES • Attorney-ClientPrivilege • The laws of Ecuador do not establish specifically the confidentiality of relations between client and attorney or between companies and their in-house counsel.

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