When discussing Competition Law, it is commonly associated with the regime of unfair competition, without noticing the very important regime of free competition. Let's see their differences.
To begin with, it is necessary to clarify that both legal regimes start from different premises, as they aim to protect different rights. On the one hand, unfair competition, through Law 256 of 1996 and Andean Decision 486 of 2000, initially seeks, through a general prohibition, that those natural or legal persons who enter the market to compete through the goods or services that each one produces or distributes, do so in strict observance of commercial good faith, sound commercial practices, and honest usages in industrial or commercial matters.
Commercial good faith can be understood as "the conviction, predicated of those who intervene in the market, of acting honestly, with integrity and loyalty in the development and fulfillment of business, or as the practice that conforms to the mandates of honesty, trust, honorability, loyalty, and sincerity that governs merchants in their actions, which allows them to act with the conscience of not harming another person or defrauding the Law, and implies fully adjusting conduct to the guidelines of the legal system"[1]
Unfair competition, then, protects subjective rights of an individual nature, in the understanding that the subject who is a victim of such conduct, despite having entered the market to compete with their products, has been harmed by a competitor in a dishonest manner and without observing sound commercial practices and commercial good faith.
To determine whether conduct constitutes unfair competition or not, it must be assumed that it must be aimed at promoting or ensuring the dissemination in the market of one's own or others' goods or services and, in any case, to achieve that end, the general postulates just described must be contradicted.
Based on the general prohibition, the norm develops specific unfair competition conducts such as acts of customer diversion, disorganization, confusion, deception, discredit, comparison, imitation, exploitation of another's reputation, violation of secrets, and inducement to breach contract, among others. Each of the aforementioned conducts has different elements for its configuration, although they can always be covered under the general assumption. The doctrine of the Superintendency of Industry and Commerce has determined that the general prohibition will only be applicable insofar as the challenged conduct cannot be adapted to one of the specific enumerated conducts.
When such conducts occur, the victim must file an action against the perpetrator, to be heard before the Superintendency of Industry and Commerce in its jurisdictional functions, but the impetus of the process, in any case, will always be a burden on the interested party, who will be a true plaintiff. The plaintiff, then, may request that the conduct cease and be desisted, in addition to compensation for possible economic damages caused, provided they can be proven.
On the other hand, there is the regime of conducts contrary to free competition, which seeks to protect different superior values of a collective nature. In this case, it is not that there are conducts of subjects who go to the market to compete, and in doing so deviate from the postulates of commercial good faith and sound commercial practices; it is quite the opposite, there are subjects who deploy conducts that, in general, tend to limit or suppress free competition, a right classified as constitutional by the national Constitution, which, of course, grants rights and guarantees, but also imposes responsibilities.
In this sense, free competition will be the faculty of any entrepreneur to direct their efforts and resources to conquer a specific market, within a framework of equal conditions. Thus, the right comprises three dimensions: effectively entering the market, being able to offer the commercial conditions and advantages deemed appropriate, and the possibility of contracting with any consumer or user. This right also stands as a guarantee from which consumers benefit, who go to the market to obtain the best conditions in terms of price and quality of goods and services, a condition that is ensured only if there is a plurality of suppliers.[2]
The general regime of free competition is contained in different norms. First, a general clause contained in Article 1 of Law 155 of 1959, which prescribes the general prohibition to develop agreements in any modality, as well as practices, procedures, or systems aimed at limiting the production or distribution of raw materials, products, or services, and also seeking to establish inequitable prices. If the investigated conduct cannot be channeled into any of these two assumptions, the first article also generally prohibits any conduct, developed unilaterally or bilaterally, that seeks to limit or suppress free competition in general terms.
Continuing with the general regime, we find Decree 2153 of 1992, initially issued to establish the structure of the Superintendency of Industry and Commerce, but which incorporated 3 modalities of conducts that, once their existence is proven, will constitute conducts contrary to free competition. We refer to three modalities of conducts, namely: acts and agreements contrary to free competition, in addition to the well-known abuse of dominant position.
Agreements contrary to free competition are enumerated in Article 47 of the aforementioned norm, and however, this enumeration does not aim to exhaust all possible agreements that may occur in practice. The enumeration is merely illustrative, that is, agreements not expressly contained in the norm may be identified and yet be contrary to free competition. Among others, there may be illegal agreements that seek or have the effect of price fixing (the most undesirable of anticompetitive agreements if done horizontally), market sharing among producers or distributors, subordinating the supply of a product to the acceptance of additional obligations that were not initially part of the proposed business (so-called tied sales), and those that prevent third parties from accessing markets or distribution channels.
As can be seen, these agreements do not need to be carried out by their participants to be subject to sanction, since the norm decrees that the conduct will be unlawful by object or by effect. In other words, it will be sufficient that the participants agree on the terms of the illegal agreement without it being necessary for it to begin to be executed, much less to have effects on the market.
On the other hand, when speaking of anticompetitive acts, these can be found in Article 48 of Decree 2153. These acts, unlike agreements, will be limited to those enumerated in the norm, namely: infringing the advertising rules contained in the consumer protection statute, influencing a company to increase the prices of its products or services or to desist from its intention to lower prices, and refusing to sell or provide services to a company or discriminating against it when this can be understood as retaliation for its pricing policy.
As can be observed, acts have a unilateral nature, they are carried out by a single subject who enters the market. Regarding the act related to the infringement of advertising rules, the Superintendency has held, not without controversy, that for the conduct to be configured, an anticompetitive effect on the market must also be proven, requiring the act to be suitable to produce results in the market contrary to free competition.[3] Similar reflection has been made by the authority regarding the second act mentioned.
The other anticompetitive act, abuse of dominant position, will have a different nature from the two conducts just outlined. Indeed, dominant position is not unlawful in Colombia, as it can only imply that a subject has deployed efforts and resources in such a way that it has consolidated a strategic position in a given market, which, within a social market economy, cannot be discouraged outright, as it would be detrimental to economic efficiencies that would not otherwise be achieved.
In this understanding, the dominant position may be held by a company or business organization and will be understood to occur when it "has economic power or force that allows it individually to effectively determine market conditions, in relation to prices, quantities, ancillary benefits, etc., without regard to the action of other entrepreneurs or consumers of the same good or service. This economic power has the potential to significantly influence the behavior and decisions of other companies, and eventually, to resolve their participation or exclusion in a given market".[4]
It is palpable that, although the dominant position is not unlawful in Colombia, it does impose a greater burden of responsibility regarding the acts executed in the market by companies that hold this important quality. Thus, conducts constituting abuse of dominant position may be subdivided into exploitation or exclusion conducts; the former, directed against the consumer, will be understood to materialize when the investigated subject appropriates part of the income of its clients, that is, deploying conducts to increase prices disproportionately and unjustifiably, reduce the quality or variety of products or services, or discriminate against clients without objective justifications.
Furthermore, the second type, conducts directed against other competitors, will be understood to be consummated when competition from third parties is limited by forcing them to leave the market, preventing or obstructing their access, or forcing them to exercise weak competition or not to expand.[5]
Unlike what has been described, in the case of unfair competition, for the case of restrictive competition acts, the Superintendency of Industry and Commerce, in administrative functions, will have the responsibility to initiate and drive investigations regarding the conducts just analyzed. In this case, it will not be a lawsuit that initiates the corresponding procedure, but the authority may proceed ex officio to investigate when it deems it pertinent.
Thus, competition, that is, the power to hear investigations for anticompetitive conducts, will be almost exclusively of the Superintendency of Industry and Commerce, a power granted almost exclusively by Law 1340 of 2009.
The purpose of this administrative procedure will be, once the existence of the anticompetitive conduct is proven, to impose pecuniary sanctions that may amount to significant sums. On the occasion of the issuance of Law 2195 of 2022, the sanctions will correspond to the greater of the values between the operating income or the assets of the infringer in the immediately preceding fiscal year, in which case the fine will not exceed 20% of that value; or, otherwise, if higher, an amount equivalent to 100,000 current legal monthly minimum wages. The authority applies different criteria contained in the norm for the purpose of graduating the fine.
The investigation may be carried out against natural and legal persons, since the only guiding criterion will be that they are a market agent, that is, that they carry out an economic activity and affect or may affect that development. In this sense, the definitions contained in Decree 253 of 2022 are extremely useful, hence they allow distinguishing between instigator or promoter, which will be the one who through coercion or serious threat induces another or others to initiate or be part of an anticompetitive conduct, and also the facilitator, which will be the person who collaborates, authorizes, promotes, drives, executes, or tolerates conducts contrary to free competition.
[1] Superintendency of Industry and Commerce. Judgments No. 4 and 20 of 2009 and No. 1 and 14 of 2010.
[2] Judgment C-909 of 2012, M.P. Nilson Pinilla Pinilla
[3] Superintendency of Industry and Commerce. Resolution No. 4839 of 2013.
[4] Constitutional Court, Judgment C-616 of 2001.
[5] Superintendency of Industry and Commerce. Resolution No. 53403 of 2013.
Andrés Ogonaga. – CONSULTING ATTORNEY AZC