Press Release
C. 18-12 th
El Salvador, August 27 , 2013.
CS rendered accounts to citizens The Competition Superintendence rendered accounts regarding its work, difficulties, and achievements from June 2012 until May 2013. The decision to deny the authorization requested by CLARO to purchase DIGICEL, the results of the competition study on the market of the air transport services for passengers, and the preliminary investigation initiated with respect to ALBA PETROLEOS were some of the topics that generate most interest amongst the public opinion. “With the same resources, the CS has increased its work load, thanks to its institutional efficiency. If compared 2012 with 2013, from January until August, the institution has executed 78% more activities in its various areas of action”, asserted Francisco Diaz Rodriguez, Competition Superintendent.
The Competition Superintendence (CS) rendered accounts in the event ResultadoSC 2013, explaining to the public its main activities against anticompetitive practices, review of mergers and/or acquisitions, competition studies of various markets, opinions issued, fines imposed, and the current status of the sanctioned cases, amongst others. The CS also informed about its management and finances, the difficulties faced, and its planning for the future. In addition to the public in general, university students and representatives of 10 institutions and movements that defend transparency and accountability were present during the aforementioned event, who had been invited by the Superintendence to enrich the discussion. These non-governmental organizations were: CREO, MedioLleno, Iniciativa Social para la Democracia (ISD), Fundación Nacional para el Desarrollo (FUNDE), Asociación Salvadoreña Derecho y Desarrollo (ADESA), Centro de Estudios Jurídicos, Aliados por la Democracia, Grupo Promotor, and Jóvenes Acción Política. The most relevant activities carried out of the Competition Superintendence from June 2012 until May 2013, were: Detecting and sanctioning anticompetitive practices
The Competition Superintendence began 9 sanctioning procedures. Two of the more relevant were investigations of alleged horizontal agreements: the first initiated against 4 hotels and the second against 3 insurance companies. Three preliminary investigations were started in the liquid petroleum gas and flour markets and in public procurement processes carried out by the National Administration of Aqueducts and Sewage System (ANDA, its acronym in El Salvador). In this last investigation, the bid rigging was proven and sanctioned. In another procedure, the CS fined an economic agent for not supplying the cooperation requested in the competition study on the market of the air transport services for passengers. Generally, in order to evade the sanctions imposed by the Competition Superintendence, the economic agents sue said agency before the Administrative Contentious Tribunal (ACT) of the Justice Supreme Court (JSC). The CS must, thus, defend the legality and constitutionality of its rulings. Currently, the CS is currently defending 15 cases in the above cited Tribunal. Moreover during the reported period, said Tribunal has issued two sentences in favor of the Superintendence and one against it. In addition, the CS filed a lawsuit against the Administrative Contentious Tribunal before the Constitutional Tribunal due to transgressions of constitutional principles
committed by the ACT by declaring illegal the resolution issued by the CS imposing sanctions to MOLSA for the commission of the anticompetitive practice, horizontal agreements. In this constitutional process, the Competition Superintendence is the plaintiff. Since the CS began its operations in January 2006 until May 2013, the authority had imposed US$8,516,142.51 in fines. From this amount, US$2,147,781.56 have been voluntarily paid by the sanctioned economic agents or through the Republic´s General Attorney (RGA) intervention; US$4,035,655.50 are pending payment due to precautionary measures issued by the ACT; and, US$2,332,705.45 are pending collection by the RGA. During the reported period, the Competition Superintendence has carried out various actions to speed up the pending cases in the ACT for final ruling and in the RDA for collection. Mergers and acquisitions The Competition Superintendence received 13 merger or acquisition authorization requests. The two most relevant for the public opinion were CLARO´s request to purchase DIGICEL and SURAMERICANA´s request to buy ASESUISA. The first one was denied authorization and the second one was authorized. The acquisition of DIGICEL by CLARO was denied considering the proposed operation presented high probabilities of generating adverse effects on competition conditions and consumer welfare in the mobile and land telephony markets. Furthermore, the CS carried out a preliminary investigation to determine if the company Alba Petróleos S.E.M de C.V. had executed mergers and/or acquisitions without having requested prior authorization to the Competition Superintendence. Said investigation resulted in a sanctioning procedure currently in process. Amendments to the Competition Law In order to strengthen its proceedings, the Competition Superintendence presented to the Legislative Assembly a draft of 26 amendments to the Competition Law (hereinafter, the “CL”). The amendments aim, amongst others, to generate a clearer legal framework without its existing loopholes, to adapt it better to the Salvadoran economic reality, and to give the CS the tools to strengthen its attributions. The aforementioned has been considered in order to attain more efficient investigations and achieve an ample impact as to increase economic efficiency and consumer welfare. Sector studies on competition conditions The Superintendence updated its study on the competition conditions of the rice agro-industry in El Salvador carried out in 2009. Said update identified potential competition problems caused by entry barriers to new competitors and privileges to certain economic agents which jeopardize the market and consumer welfare. The aforementioned distortion is a consequence of the legal framework that currently in force for the rice agroindustry. Ergo, the Competition Superintendence recommended to impulse urgent amendments to said legal framework, as it has previously done in other markets like in the sugar agro-industry, The CS is currently executing a study on air transport services for passengers in El Salvador, (for final ruling); production and distribution of edible oils and lards; maritime port services; and on the agro-industries of beans and white corn. This last one is being carried out jointly with the Consumer Protection Authority. Moreover, activities to execute the study on the competition conditions on the retail distribution of periodical consumption goods in homes in El Salvador were begun. Opinions In its competition advocacy activities through the issuance of opinions and recommendations with respect to legal framework and public procurement procedures, the Competition Superintendence issued 10 opinions regarding legal framework and 6 on public procurement procedures. The opinion on the Transactions Unit (TU) of the electricity market was one of the most relevant opinions issued during this period. Considering that the current legal framework represents a risk for the possible apparition of restrictive effects for the economy and for
consumers, the CS recommended, amongst others, to eliminate the control in hands of the market´s participants on the TU and on the decisions that affect the management of the electricity wholesale market. Competition advocacy The public event for rendering accounts to the citizens, Competition Superintendence explained its activities to promote competition and build relationships with the main audiences of the institution. Amongst these activities, the following were explained: continuous training; active participation in the Consumer Protection National System; activities with public procurement officers to detect and prevent bid rigging; activities carried out with consumer associations and other competition authorities; as well as the subscription and follow up of cooperation and coordination agreements. The CS reported its actions in the enforcement of the Public Information Access Law, as well as the various activities executed to come closer to the general population through massive participation events and free services offered to the public. Furthermore, the promotion of a competition culture through the CS´ web site, social networks, and media has become especially important. Administration and finances The CS has 40 employees; only 21 of them are professionals dedicated to competition promotion and protection. In addition, the CS made public that it is the seventh public institution in the country with the lowest budget. The Competition Superintendence´s June 2012 / May 2013 budget totaled US$1,909,325: US$1,202,278 belong to the 2012 budget, while $707,047 to 2013. The CS has requested the Ministry of Finance an increment in its 2014 budget to allow the Superintendence to hire three more professionals. Public procurement totaled US$397,783.77. Thirty one percent of the total public purchases were adjudicated to small and medium size enterprises. Difficulties and projections th
The CS´ most relevant and totally unpredictable difficulty was the fire occurred on October 29 , 2012, which consumed its data center and 5 working stations. This event forced half of its staff (the entire technical personnel) to be located in a rented building. Notwithstanding the aforementioned, services to the public were suspended only for 5 days. The losses and damages caused by the fire amounted US$91,075.24. Another of the difficulties the Competition Superintendence has had to face since the beginning of its operations in 2006 is the low budget and scarce personnel. The non-compliance with the resolutions issued by the CS and the fact that most of the sanctioned economic agents sue the authority before the ACT of the JSC to impugn the Superintendence´s decisions impedes competition conditions, which have been flawed by anticompetitive practices, to be reestablished, jeopardizing consumer welfare. The delay in concluding these judicial processes worsens said situation. In the future the Competition Superintendence plans, amongst others, to impulse and promote the incorporation of competition principles in the design and implementation of public policies; execute education programs and activities to sensitize the public on the importance and benefits of competition; strengthen the efficiency of its institutional procedures; and impulse the creation of a regional competition legal framework and institutionalism.