Main Developments in Competition Law and Policy for 2024 – Peru

Compared to the year before, 2024 was a relatively quiet period for Peruvian law on competition, but there were still some important developments. 2024, dubbed the “year of the elections” by many, brought about changes at the Peruvian Competition Agency (the National Institute for the Defense of Competition and the Protection of Intellectual Property or INDECOPI after its Spanish acronym). Karin Caceres resigned from her position as the institution’s President in 2023. She was originally appointed to succeed Julian Palacin. Alberto Villanueva, Eslava was appointed in her place. He is a former member and President of the INDECOPI Court’s Specialized Chamber for Bankruptcy Proceedings. Villanueva has a more technical profile and more extensive knowledge of the institution, and his appointment was welcomed by several specialists.

Prior to Villanueva’s appointment, an institutional crisis at INDECOPI had become apparent in March, as more than 49 appointments of commissioners and members to INDECOPI’s decision-making bodies were still pending. This backlog caused delays or prevented important decisions in pending matters. Caceres appointed 12 officials before her departure. Many of the new appointees for the Commission for the Defense of Free Competition (“Commission”) did not have substantial backgrounds in antitrust law or as academics. Moreover, INDECOPI has faced budgetary restrictions that have prevented both the Commission and the National Directorate of Investigation and Promotion of Free Competition (the “Directorate,” which acts as prosecutor in anticompetitive-behavior cases and also provides general support to the Commission) from being proactive in prosecuting anticompetitive conduct.

A noteworthy development was that the government in July officially launched the process of formulating the National Multisectoral Competition Policy. The policy is broader than antitrust laws and aims to eliminate regulatory barriers that prevent competition and bar new entry into various markets. The deals were the acquisition by China Southern Power Grid International Co. (CSGI HK) of Enel’s distribution assets and the acquisition by Agroaurora SAC of Agricola del Chira S.A. (Grupo Grazia). Enel Distribucion must now only purchase energy from its affiliated companies through public-bidding procedures, which are supervised by Osinergmin, the energy regulator, or through transparent and competitive tenders. In both scenarios, the call for bids, the bases, and the results must be published, and notified to INDECOPI to ensure transparency and free-market competition. It is important to note, that despite the pressure from various sectors to stop the acquisition because of geopolitical issues

, the agency acted according to its mandate – that is, prioritizing consumer welfare and competition protection over geopolitical considerations. We do not dismiss these concerns. Some geopolitical concerns are reasonable, although they should be addressed, if or when necessary, through specific foreign investment or national security regulation.

The Commission’s primary concern was that the acquisition could lead to excessive market-power concentration in Peru’s electricity sector, potentially resulting in higher electricity prices, degraded quality, and decreased investment in infrastructure. China Southern Power Grid International, by acquiring Enel Distribucion could gain the ability to create barriers for new competitors and limit consumer choice. To mitigate these risks, the agency approved the acquisition with the aforementioned conditions.

Conversely, the second acquisition was blocked

in July, as it was deemed to “significantly reduce competition in the sugar cane acquisition market in Peru.” The Commission found that the solutions proposed by Grupo Gloria were inadequate to alleviate the identified competition concerns. The Commission said that the deal would lead a concentration of the sugar-cane market, especially in the Lambayeque area, where the company will hold a market share greater than 80%. The homogeneity of the product and the limited competition in areas such as Piura also increased the risk of horizontal anticompetitive practices such as price-fixing in the wholesale sugar market. In another important decision in September, the Commission authorized with conditions a joint venture between Kohlberg Kravis Roberts, Telefonica, Entel, to operate on the wholesale market of fiber-optic network. The Commission was concerned that the level of concentration in the fiber-optic network market could reduce competition and increase wholesale prices for other operators. This could, in turn limit the options available to consumers and make it harder for new competitors on the market. To reduce these risks, the Commission required that the non-compete and exclusivity clauses of the agreement be shortened. Likewise, if the parties sign new wholesale-service contracts with exclusivity conditions, these must be promptly submitted to the Commission.This agreement would have been important for a telecommunications industry under considerable financial stress. But despite obtaining INDECOPI’s approval, the joint venture was ultimately abandoned, apparently due to a breach of contract related to a parallel transaction between KKR and Telefonica

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Prosecuting Anti-Competitive Conduct: Cartels and Abuse of Dominant positions

The past year was relatively slow when it came to prosecuting anti-competitive conduct, particularly regarding cartels –historically, a priority for the Directorate. Only one case ended with an indictment. In January, the Commission imposed a fine of $

on a group of Puerto Maldonado companies and individuals for fixing the price of water bottles. This anti-competitive practice, carried out between April and October 2021, consisted of a secret agreement between competitors to set artificially high prices for 20-liter containers.The Directorate did, however, open a big case. A group of fifteen pharmaceutical companies and five executives were accused

of bid-rigging in public-procurement processes for the acquisitions of medicines. The case alleges these laboratories coordinated their bids (and abstentions in 23 selection processes), thereby affecting the competition and distorting the market conditions. The scheme involved distributing products amongst the members of the agreement and announcing the winners of the bid tenders ahead of time to avoid actual competition. The Directorate also released the final version for its Guidelines for Joint Ventures. The guidelines’ purpose is to provide guidance to both bidders and government-procurement bodies in order to protect competition in public tenders, without affecting the potential pro-consumer effects of joint bids.

In what constituted a severe setback in the prosecution of cartels, pursuant to a Supreme Court order, INDECOPI’s Competition Tribunal–which oversees antitrust cases as a second administrative instance–revoked

Resolution 052-2012/CLC-INDECOPI. The resolution held two labor unions, and their representatives, liable for a cartel boycott in the Port of Salaverry cargo-handling market. The original resolution correctly interpreted unions’ practices as horizontal collusive acts under the Antitrust Act. A subsequent court order, however, determined that the acts died not fall within the subjective or objective scope of this regulation, due to “the very nature of unions.” It was therefore judged to be a labor dispute in which “competition rules are not applicable.”The Supreme Court decision, alas, took a very formalistic approach to collusive boycotts, assuming that labor unions “do not compete” and therefore are not subject to antitrust laws. The Supreme Court’s decision, however, took a very formalistic approach to collusive boycotts. It assumed that labor unions “do not compete” and therefore are not subject to antitrust laws. The decision allows unions to get out of jail for conduct that goes beyond what is authorized by labor regulations. In the case in question, this meant not only fixing the prices and allocating the work time, but also physically preventing third parties from entering port infrastructure. I have written with more detail about the case (in Spanish) here.

INDECOPI also addressed issues of abuse of dominant position. In March 2024 the Court for the Defense of Competition and the Protection of Intellectual Property (Court for the Defense of Competition and the Protection of Intellectual Property) confirmed the ruling in the Electro Dunas Case, where an electricity distributor was accused of abusing its dominant position for selectively granting the exemption from the notice period of one year to regulated users that migrated to the free user status. According to the Commission and Tribunal, this discriminatory act affected the competition on the market by benefiting at least 56 users who chose to stay with Electro Dunas while those who chose competitors were required to adhere to the notice period. This conduct resulted in an illicit benefit, which was punished with a fine of S/748.054.83 (151.12UIT). The resolution mentioned that the regulations do not distinguish between users who migrate to free status with the same distributor or with another, and that the exemption from the notice period was a key factor in attracting customers, thus constituting an anti-competitive infringement.

Market ReportsIn July 2024, INDECOPI conducted a market study

on the Valuables Transportation Service in Peru, which revealed a highly concentrated market, dominated by a few companies that have established significant barriers to entry for new competitors. According to the study this lack of competition created an environment where dominant companies could set higher prices, provide lower-quality service, and limit innovation. In December, INDECOPI reported that the Commission will evaluate the competition in the port service to be provided by the recently inaugurated Port of Chancay. This is one of the largest infrastructure projects inaugurated in Peru over the past few years. The results of the evaluation will determine if the sector regulator can apply price regulation to the aforementioned service. Both the Directorate and Commission have a reputation in this regard. The number of mergers will likely decline due to the slow economic growth, and the fact that the year 2026 is an electoral year, with all the uncertainty this brings. However, merger activity should be active in the first half of 2025 because some mergers weren’t closed in 2024, and some private equity firms are looking to liquidate their investments. We can look forward to some interesting merger control cases in 2025.

Story originally seen here