Co-authored by Jaime Barahona Urzúa and Tomás Kubick Orrego from Guerrero Olivos
I – OVERVIEW OF ANTITRUST LAW
a. Applicable law and regulations
Decree Law no. 211 of 1973 and its subsequent amendments ("DL 211") establish the main legal framework for antitrust matters in Chile.
Additionally, there are several other –more or less relevant in terms of competition laws and regulations– DL 211-related regulations, such as Law no. 20,169 of 2007 (unfair competition), DFL no. 323 of 1931 (gas services), DFL no. 1,122 of 1981(water code), Law no. 18,168 of 1982 (telecommunications), DFL no. 70 of 1988 and DFL no. 382 of 1989 (both sanitary services), Law no. 18,840 of 1989 (Chilean Central Bank), Law no. 19,039 of 1991 (industrial property), Law no. 19,342 of 1994 (new plant variety protection), DS no. 900 of 1996 (public works concessions), Law no. 19,496 of (consumer protection), Law no. 19,518 of 1997 (training and employment), Law no. 19,542 of 1997 and DS no. 104 of 1998 (both state port sector), Law no. 19,545 of 1998 (exports), Law no. 19,733 of 2011 (freedom of opinion), DLF no. 1 of 2003 (labor code) and DLF no. 4 of 2007 (electrical services).
b. Theories of harm present in the law
Article 3 of DL 211 states, generically, that whoever carries out or enters into, individually or collectively, any conduct, act or agreement that "impedes, restricts or hinders free competition or that tends to produce such effects", will be sanctioned with the measures contemplated therein.
In that sense, any conduct with horizontal or vertical effects, both unilateral and coordinated, that lessen free competition may be sanctioned. There is no definition of free competition in DL 211.
c. Authority in charge of enforcement of antitrust law and regulations
The Antitrust Court (Tribunal de Defensa de la Libre Competencia, "TDLC") and the National Economic Prosecutor's Office (Fiscalía Nacional Económica, "FNE") are responsible for enforcing Chilean antitrust laws within their own scope of authorities.
On one hand, the TDLC is a special and independent court of law, composed of 3 lawyers and 2 economists, and subject to the supervision of the Supreme Court. Its role is to prevent, correct and sanction anti-competitive conducts, to decide all cases the FNE or private persons may submit to its consideration. The TDLC is also in charge of issuing general guidelines for the enforcement of competition law.
On the other, the FNE is an independent administrative entity in charge of investigating conducts that may constitute antitrust infringements, representing the public interest before the TDLC and seeking enforcement of resolutions, decisions and instructions issued and passed by such Court.
d. Nature of antitrust enforcement
Chilean antitrust enforcement has a hybrid nature. In terms of the nature of the Prosecutor (i.e. the FNE) and of the sanctions we could say that Chilean antitrust enforcement is administrative. However, it is worth noticing that the sanctions are subject to the decision of a court of law (i.e. the TDLC and eventually the Supreme Court).
Since the amendment of 2003, which created the TDLC, criminal sanctions were eliminated to focus on administrative ones. They include:
- the modification or termination of the acts or agreements against free competition;
- order the modification or dissolution of the companies involved in the violations;
- fines up to approximately USD 15 million or USD 22 million in cartel cases; and
- other preventive, corrective or prohibitive measures the TDLC may find relevant.
However, after the pharmacies case initiated in 2008, the Criminal Prosecutor opened a criminal investigation arguing that cartel behaviour affecting prices may qualify as a criminal offence as well pursuant to Article 285 of the Criminal Code, which contemplated imprisonment from 61 days to three years for "fraudulent natural price adulteration". Nevertheless, in December, 2015 the Court of Appeals upheld the Criminal Court's ruling that acquitted the accused executives, weakening this criminal enforcement attempt. In this regard, one of the most important topics of the currently ongoing antitrust bill of law (Bulletin no. 9950-03, the "Bill") is the establishment of hardcore cartels as a criminal offense. The conduct would be punishable by imprisonment between 5 years and one day and 10 years.
Finally, there is also a civil scope in the antitrust enforcement (see letter l.).
e. Investigational powers of authority
The FNE may request collaboration and information necessary to its investigation from any officer of public services or entities, municipalities, and the companies in which the government –and its companies, entities or municipalities– have representation or participation. In addition, the FNE may request private persons and companies –investigated or third parties– to provide any information and records that it may consider necessary for the ongoing investigation. However, individuals and representatives of legal entities from whom the FNE requests information that may damage their own interests may request the TDLC to annul or amend such request. The FNE may also summon private persons –investigated or third parties– to intervene.
Finally, the 2009 amendment of the DL 211 granted new powers to the FNE in order to strengthen anti cartel enforcement. Pursuant to article 39 (n), the FNE assisted by the police may:
- access to private or public premises and, if necessary, unlock or break in;
- register and seize any kind of objects or documents that may be useful to prove the existence of an infringement;
- intercept any kind of communications; and
- order to any company that renders communication services to give access to copies or registers of transmitted or received communications. Such measures shall be authorized by a Judge from the Court of Appeals, based on a well-founded request pre-approved by the TDLC. The authorization, only to be given in serious and qualified cases in regard to cartel investigations, shall precisely mention the measures allowed, the term and the individuals that may be affected.
f. Attorney-client privilege
Pursuant to Article 220 of the Criminal Procedure Code, applicable to DL 211, the following information, which could be considered as "privileged", cannot be seized:
- communications between the accused and individuals that are not obliged to declare as witnesses, considering its family relationship or their duty of secrecy (e.g. external legal counsels);
- notes taken by the people previously mentioned in relation to said communications; and
- any other objects or documents to which the non-declaration faculty naturally extends to.
Such Article states that the prohibition shall rule only in regard to the communications, notes, objects and/or documents that are under the control of the individuals that are entitled to this non-declaration guaranty (i.e. the attorney). A contrario sensu, when said information is under the control of the client, although arguably, we believe it could be taken away since the client, as such, does not have such non-declaration guaranty. Nevertheless, the affected party would be able to request such evidence not be used in trial. We acknowledge that the law is not clear on this respect and this matter may be subject to debate in the future.
In addition, both the Criminal Procedure Code and DL 211 state that communications between the investigated party and its attorney cannot be wire tapped.
g. Interactions with other regulators
As stated in letter e., the FNE may ask for collaboration and information necessary to its investigation from any officer of public services or entities. In such case, the officers are obliged to comply with the request.
The FNE may also enter into agreements with public bodies for mutual collaboration and in order to agree on electronic transfer of information. In this regard, the FNE has signed with the National Consumer Service (SERNAC), the Criminal Prosecutor, the General Comptroller Office, the Ministry of Public Works, the Ministry of Agriculture, the Department of Public Procurement (ChileCompra), the National Institute of Industrial Property (INAPI), the Administrative Corporation of the Judicial Power (CAPJ), the Internal Revenue Service (SII), the Production Development Corporation (CORFO), the National Commission of Energy (CNE) and the National Public Health Procurement Office (CENABAST).
h. Treaties in place
Several treaties signed by Chile contain antitrust provisions. For instance, Free Trade Agreements with Canada, Central America (Costa Rica, El Salvador, Honduras, Nicaragua and Guatemala), the United States of America, Mexico, Peru, EFTA (Iceland, Liechtenstein, Norway and Switzerland), Republic of Korea and Australia; the Economic Complementation Agreement with Mercosur (Argentina, Brazil, Paraguay and Uruguay); the Economic Partnership Agreements with the European Union and Japan; and the Trans-Pacific Partnership Agreement P4 with New Zealand, Brunei and Singapore.
i. Standards of evidence
DL 211 provides a rather open frame in regard to the admissible evidence and its assessment by the TDLC. Apart from the ones applicable to civil procedures –documents, parties and third parties depositions, court's own inspection and assumptions– shall be admissible "all evidence or information which is, as per the TDLC, suitable to establish the relevant facts". The TDLC may also, at any time and when essential to clarify still obscure facts, decree evidentiary procedures it deems convenient. The TDLC shall assess the evidence according to the rules of "reasoned opinion" ("sana crítica").
Notwithstanding the above, the standard of evidence is not established in the DL 211. However, there would be a common understanding that the antitrust standard should be situated in between the "preponderance of the evidence" (civil matters) and "beyond all reasonable doubt" (criminal matters) standards. To which one is closer have changed depending on the unlawful conduct, the origin of the ruling (issued by the TDLC or the Supreme Court) and the year it was issued. Nowadays, taking into account the difficulty to gather direct evidence (even with the FNE's intrusive investigative powers), the standard tends to be more flexible.
j. Methods of engagement with authority
DL 211 procedures impose a formal engagement through briefs which become part of the public record of the procedure.
On the contrary, the investigation procedures before the FNE tend to be flexible (more or less, depending on the kind of investigation and the quality of the party). Although formal engagements are the main ones –offices and request of meetings and depositions– phone calls or emails would be permitted if necessary.
k. Judicial review of decisions
The TDLC's final judgment is subject to a remedy of complaint before the Supreme Court. Such remedy has to be well-founded and may be filed by any of the parties before the TDLC, within 10 days of the respective service.
The filing of the remedy does not suspend the enforcement of the judgment issued by the TDLC except for payment of the fines. However, at the request of a party, and upon a well-founded resolution, the Supreme Court may suspend the effects of the judgment in whole or in part.
l. Private litigation
Along with the FNE, privates are also entitled to directly file a claim before the TDLC. However, contrary to the FNE, which represents the "general interest of the collective economic order", the TDLC has stated that a private party requires being an "immediate passive subject" of a conduct that may violate DL 211 in order to file a claim. Furthermore, the TDLC has understood that for an agent to be considered as a direct victim of a free competition violation, it must currently or potentially participate in the market which is directly affected by the alleged anticompetitive activity or in other related markets that can reasonably be indirectly affected by the alleged unlawful activity.
Currently, private actions for civil damages caused by cartels may also be brought before the competent civil court in a summary proceeding once the TDLC has declared the existence of antitrust violation and has imposed sanctions. The only subject that may be analyzed after an administrative cartel decision is if there is a direct relation (cause-effect) between the antitrust infringement and the damage. Also, the amount and nature of the damages require to be proved.
Originally published by IBRAC – Brazilian Institute of Studies on Competition, Consumer Affairs and International Trade
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.