Ecuadorean Merger Control Regulation

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Diego Perez-Ordonez, Luis Marin Tobar, Jul 24, 2015

As of October 2011, Ecuador became a jurisdiction where merger control review and prior authorization is required prior to a change in control. The Organic Law for the Regulation and Control of Market Power (“the Law”) was enacted in October 2011, implementing the first domestic competition regime in the country. The Law also created the Superintendency of Market Power Control (“Superintendency” or “Authority”) as its governing administrative authority in charge of the application of the Law, and a separate regulatory body, the Regulation Board, in charge of issuing governing regulations, sector-wide recommendations, and economic thresholds for mergers, among other powers.

Merger notifications are made with the Intendency for Concentration Control (“Intendancy”), an investigative authority who must issue a recommendation report for resolution by the First Instance Resolution Commission (“Commission”). The Merger Control Intendancy is solely vested with the powers of investigating notified and non-notified transactions, and for issuing its recommendation report to the Commission. This report contains an economic analysis of both the competitive landscape as well as the transaction’s potential impact on the competitive structure, and a final recommendation as to whether to clear the transaction, issue a conditional clearance subject to conditions, or deny the transaction. The First Instance Resolution Commission, a 3-person resolution panel, must then evaluate this recommendation report and issue its final decision. Although empowered to issue an independent decision, the majority of cases have been issued in line with the recommendation report.

The Intendancy is also authorized to act ex officio in the case of non-notified transactions that come to its attention. The Intendancy has been one of the busiest groups in the past year within the administrative structure of the Superintendency, with a large number of clearances and investigations.

The basic principles of the merger control regime are set forth in Chapter II, Section 4 of the Law, making any act deemed a “concentration operation,” subject to the merger control. Although exemplary acts are broadly defined, any act granting control or substantial influence in another party, exceeding either of two alternative thresholds, may be subject to mandatory merger control notification and prior approval before its execution in Ecuador. Among others, mergers and acquisitions, joint-venture and administration agreements, assignments of the effects of a trader, and other acts that lead to a change in control, or substantial influence, are defined as “concentration operations.”

The broad scope of the law may determine that other forms of agreements could be subject to notification in this jurisdiction and may therefore merit further legal analysis with local counsel when the economic or market share thresholds are met. It is worthy to note that even if the parties do not have a direct business presence in Ecuador, merger control regulation may be mandatory, considering the effects-based approachinstated by the Law.

 

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Ecuadorean Merger Control Regulation

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