Amendments to the Law on the Defense of Competition in relation to regulated sectors

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We inform you that on October 26, 2021, Parliament approved the Accountability and Budget Execution Balance corresponding to the year 2020 (hereinafter, the “Law”)which, together with other issues, introduced relevant modifications to articles 10 and 27 of Law No. 18,159 on the promotion and defense of competition (hereinafter,  the “LPDC“) which we summarize below.

Until now, Article 27 of the LPDC provided that, in those sectors that were subject to the control or superintendence of specialized regulatory bodies such as the Central Bank of Uruguay (hereinafter, the “BCU“), the Regulatory Unit of Energy and Water Services (hereinafter, the “URSEA“) and the Regulatory Unit of Communications Services (hereinafter,  the “URSEC“), the protection and promotion of competition would be in charge of these bodies.

Therefore, in any other sector not subject to the control of specialized regulatory bodies, the protection and promotion of competition – by default – corresponded to the Commission for the Promotion and Defence of Competition (hereinafter, the “Commission“).

However, the wording of this article gave rise to certain interpretative doubts, in particular by the expression “such as“; since it was clear whether the Commission was only inhibited from acting in those sectors or there were other regulated sectors in which it could intervene since the expression “such as” was enunciative and not exhaustive.

By means of the Law, the wording of the aforementioned article is modified, eliminating the expression “such as“and establishing an express text that the BCU, the URSEA and the URSEC will keep:

  1. Its “regulatory competences in matters of promotion and defense of competition“,and;
  2. The powers to confer authorisations – with or without prior non-binding consultation with the Commission – for those concentration acts referred to in Articles 7 to 9 of the LPDC and which have as their object (a) entities regulated and supervised by it; or, (b) shares, social quotas or other equity securities in an entity regulated by it. In such cases, no period will apply, nor will any tacit authorization in accordance with the provisions of article 9 of the LPDC.

In another order with regard to the investigation, analysis and punishment of prohibited practices, the Law also modifies Article 10 of the LPDC and grants competence without exceptions to the Commission, which may act ex officio or by complaint.

In these cases, the Commission must merely inform the BCU, the URSEA or the URSEC when the practices relate to the market whose regulation and control is expressly assigned to them. This second change will enter into force after a period of six months has elapsed since the approval of this law, that is, in April 2022.

These legislative changes eliminate, as we said, one of the main uncertainties regarding the Commission’s competence in the matter: since the wording of Article 27 of the LPDC referred to specialized regulators “such as“the BCU, the URSEC and the URSEA, until now there was the question of whether this list was exhaustive or merely enunciative,  opening the possibility that other specialized regulators from other sectors could dispute competition with the Commission.

Therefore, it can be said that with the enactment of the Law, the Commission will have jurisdiction over all matters in the matter, with the exception of the authorization of economic concentrations in sectors regulated by the BCU, the URSEA and the URSEC and their capacities as regulatory entities of these markets.

Notwithstanding the foregoing, the new wording is not without possible difficulties.

The first is that it will be necessary to determine the exact scope of the expression “regulatory competences in matters of promotion and defense of competition“retained by the BCU, the URSEA and the URSEC.

Second, although there will be very obvious cases, it will not always be easy to determine whether the subject in a given concentration is a regulated subject or not, and may lead to conflicts of competence between the Commission and the regulators.

Finally, the elimination of the deadlines provided by the LPDC to authorize economic concentrations may not be positive since these processes usually require clear schedules.

To access the text of the Law, click here.

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