Bulletin No. 17 - Free Competition

BULLETIN






FREE COMPETITION

PANAMA







Edition Nº 17
August, 2018





Our Contributors 2

Transiting towards a System of Compulsory

Notification of Ex Ante Mergers






Present 3

Complaint against Televisors for Absolute and

Relative Monopolistic Practice



In Numbers 9

Analysis of the Duration of Judicial Proceedings

for Monopolistic Practices Interposed before the

Courts of Justice












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BULLETIN
FREE COMPETITION
PANAMA
Transiting towards a System of Compulsory Notification of Ex Ante Mergers



By: Jovany Morales
Head of the Analysis and Market Studies Department



In Panama, the control of mergers by the Authority of Consumer The economic agents who merge and exceeds the established
Protection and Competition Defense (ACODECO), it is carried income threshold without notifying ACODECO, will be
out through a system of voluntary prior verification. The system sanctioned with fines of up to fifty thousand dollars (USD. 50,
implies less use of resources for economic agents interested in 000.00), without prejudice to the corrective measures that
carrying out an merger and for ACODECO, which in relation to ACODECO may adopt as a result of the investigation.
an ex ante mandatory notification system, which devotes
enormous resources to verify and previously authorize an In Panama, mobile communication is composed of cellular
important number of mergers that do not represent an affectation communications services (service 107) and personal
to future competition in the markets of which they are a part. communications services (service 106 or PCS). The
telecommunications regulation in Panama includes services that
Despite being a voluntary system, the Law that regulates are provided under temporary exclusivity or under limited
competition issues has a regulation (Article 25) that generates a competition are classified as type A services, while Services 106
certain degree of legal certainty for the economic agents to and 107 are provided under limited competition.
merge, by empowering ACODECO to issue a favorable concept
to the merger, protecting it from being challenged by ACODECO Before the Law 36 of June 5, 2018, which regulates mergers in
within three years from the date on which the operation was the mobile market, the current telecommunications regulations
perfected. The aforementioned Law also has a regulation (article did not allow mergers between service 106 concessionaires,
24) that establishes that mergers subject to prior verification, between service 107 concessionaires, nor between service
which have received a favorable concept from ACODECO, concessionaires 106 and 107.
operate validly and cannot be challenged subsequently for the
reason of the verified information, except that the aforesaid With the Law 36 of 2018, mergers in any form between two
favorable concept has been obtained based on false or mobile telecommunications service providers, are required to
incomplete information provided by the interested economic have the favorable concept of ACODECO, in accordance with
agent. the provisions of the Law that regulates issues of free
competition (Law 45 of 2007).
ACODECO considers that the incentives in the current system
are not sufficient to allow ACODECO identify mergers with future ACODECO may recommend the adoption of corrective
anticompetitive effects before they materialize and to be able to measures, with the purpose that the merger complies with the
deal with them in a timely and efficient manner, due to the Law 45 of 2007, if the favorable concept is denied, the merger
hardships of undoing the operation totally or partially after it has shall not be carried out.
been executed.
It is worth noting that, in the event that a merger is authorized
Within the proposals for amendments to the Law that regulates between mobile telephony concessionaires, the market will be
issues of free competition in Panama, within the scope of consolidated in three concessions for the exploitation of these
mergers control, the proposal contains a change towards a services.
mixed system of compulsory ex ante notification. Meaning that
before the merger comes into effect, all operations of the parties
involved in the merger, whose gross income exceeds the fifty
million dollars (USD. 50,000,000.00), on the fiscal year previous
to the merger will be required to notify the merger to ACODECO.






2 OUR CONTRIBUTORS

BULLETIN
FREE COMPETITION
PANAMA
Complaint against Televisors for Absolute Likewise, the defendants agreed to make an initial collection
and Relative Monopolistic Practice proposal for the right to retransmission of the open television
channels that these economic agents broadcast to MEDIA
VISIÓN DE PANAMÁ, SA (SKY).


The lawsuit was filed in the Eighth Court through Order No. 118
of 30 January 2018 Judge admitted the lawsuit.
ACODECO presented on January 25, 2018 in the Circuit Court
of First Judicial Circuit of Panama, Civil branch in matters of free Finally, the Eighth Court on July 27, 2008 set a preliminary
competition, lawsuit against Corporación Medcom Panamá, hearing date for September 12, 2018.
S.A., Televisora Nacional, S.A. and Telecomunicaciones
Nacionales, S.A. for the alleged absolute and relative
monopolistic practice commission.

KLM and AIRFRANCE are denounced for the
The alleged absolute monopolistic practice violation is
established on the first numeral of article 13 of Law 45, consists Elimination of commissions.
of the act, combination, arrangement or agreement for the
purpose of arranging, agreeing or exchanging information
tending to establish in a coordinated manner conditions for the
commercialization of signals of open television to establish a
single table that governs the pay TV market, as well as
coordinated to suspend simultaneously from July 1, 2015, the
open television signal they provide to CLARO Panamá.


In addition, the violation of the defendants by the alleged
monopolistic practice commission to act in a coordinated
manner using their collective substantial power in the relevant
market of the open television to obtain additional income, ACODECO, received a complaint on December 20, 2017, from
behavior defined in numeral 9 of article 16 of the Law 45 obliging APAVIT (Panamanian Association of Travel Agencies and
CLARO and MEDIA VISION DE PANAMÁ, SA to act in a certain Tourism), by means of which it informs that the airlines KLM and
way, as well as applying retaliation in a coordinated manner, AIR FRANCE, have reduced, unilaterally, the amount of
cutting the signal they provide, by not CLARO access to their commissions to be paid to the travel agencies from 1% to 0%
requests, behavior defined in numeral 6 of the Article 16 of Law and they explain the damages that this action has generated.
45.
In the preliminary investigation, it was explained that a reduction
in commissions to travel agents, is an act consistent and rational
in the economic interest of each airline, in this case KLM and Air
France. In this regard, this behavior has been observed in the
airline industry, based on the practice of restructuring the
operating costs of airlines and the use of viable alternatives for
their operation, which has been used in the last 15 years, in the
This is due to the fact that ACODECO has proof that the United States, Latin America and Europe, through the
defendants made a collection proposal for the broadcasting elimination or restructuring of routes and destinations,
rights of the open television channels that these economic innovations and formulas to optimize the use of fleets (models of
entities broadcast to CLARO, given that CLARO did not show aircraft with greater density in seats, reduction in fuel
acceptance to the defendants they coordinated to suspend consumption, less waiting time in airports and optimize the
simultaneously the open television signal they provide. permanence of airplanes in the air), cuts in additional




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services, the use of strategic alliances between airlines and Complaint in the Market of Provision of
alternative distribution channels (internet) that minimize the use Garbage Collection Service
1
of intermediaries as operators or travel agencies .
With respect to a possible violation of Article 16 of Law 45,
ACODECO clarifies that the aforementioned prohibition
requires that the economic agent who carries it out, Air France
or KLM have substantial power in the passenger transport
market and use said power to exclude or prevent competition in On May 10, 2018 ACODECO received a report in which we
the market for the sale of air tickets for passenger transport by were informed of several alleged anomalies in the district of
travel agencies. In the routes in which Air France or KLM Colon, as a result of the monopoly and breach of the
operate from Panama, there are options (airlines, competing administrative concession contract for the provision of
collection, treatment, and final disposal of solid waste, held
economic agents, IBERIA, Luftansa), which is unlikely to have
substantial power in the routes in which they operate from between the Municipality of Colon and the Company
Panama to Europe. AGUASEO, SA

In addition, ACODECO considered it opportune to analyze if In the complaint filed, it was indicated that the concessionary
company of the cleaning service, in the district of Colon in the
said conduct is the result of a coordination between competing
economic agents, that is, we analyze the possibility that the province of Colon, has been promulgating a supposed
exclusivity or monopoly in the rendering of the garbage
economic agents have agreed to carry out in a concerted collection service in said district. It also alleges that the act
manner the reduction of the commissions and not of denounced is a clear disadvantage and prejudice to other
independently and individually. providers or competitors of the cleaning service concessionaire,

As a result, ACODECO clarifies that, in May 2004, Air which has allowed it to occupy a dominant position towards its
France-KLM, holding company, was created under French law, users and customers.
as a result of the economic concentration of Air France and The complainant alleged that the dominant position of a single
KLM, which resulted in the largest group of European airlines. economic operator, has as a result a execrable garbage

Each airline has retained its individual identity, commercial collection service and abusive prices.
name and brand as a result of such economic concentration. In the preliminary investigation carried out by ACODECO, it is
stated that the monopoly position to which reference is made,
Therefore, in the event that the act denounced is exclusive of was acquired through the so-called: "Administrative concession
the Air France and KLM airlines, it eliminates the possibility that
we are dealing with an absolute anti-competitive practice, given contract for the provision of collection, treatment and final
that both airlines are part of the same economic group and are disposal of waste solid (garbage) between the district of Colon
and the company AGUASEO, S.A." held on April 9, 2002.
not competing with each other. In accordance with article 9 of
Law 45, a single economic agent is considered to be the set of Therefore, the monopoly position acquired by the company
legal persons under Private Law that are controlled by the same AGUASEO, was not obtained through the commission of
economic group. practices prohibited by the Law 45. Consequently, we are facing
a legal monopoly, in other words, legalized through a municipal
concession contract by the municipality of Colon.

Regarding the disadvantage or detriment to other suppliers or
competitors of AGUASEO, we consider that the municipality of
Colon, upon contracting through a municipal concession,
contracted AGUASEO, in 2002, to provide the garbage
collection service for a space of 25 years, which ends in 2027.


Lewton, T. C. (2017). Strategic Management in Aviation:
1 At the discretion of ACODECO, this clause implies a too long
Critical Essays. Routledge. period of time for the provision of the service, being necessary
to make a new evaluation of said contract since the term is


4 PRESENT

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PANAMA


excessive. It limits the dispute over the market and the entry of of numeral 9, Article 16 of the Law 45, which states, "In general,
other companies, since over the years. New and better any act that unreasonably damages or impedes the process of
standards are required for the provision of this type of service. free economic competition and free competition in the
production, processing, distribution, supply or marketing of
From the analysis carried out, it is concluded that the goods or services" .
denounced act does not meet the requirements of the Law 45
for the commission of an illicit monopolistic practice. According The National Authority of Public Services (hereinafter ASEP,
to what is established in article 11 of Law 45, which establishes acronym in Spanish) through Resolution AN No. 1630-Telco of
that monopolies are only considered licit in those cases where April 21, 2008, by which special measures are adopted related
the monopoly position was not acquired through practices to the right of users to access public telecommunications
prohibited by Law 45. services to all concessionaires of public telecommunications
services who refrain from entering into agreements, contracts
or agreements with building promoters, owners of commercial
premises and boards of directors and / or assemblies of owners
Investigation for presumed Relative of horizontal properties or with any natural or juridical person
who have purpose the granting of exclusive rights for the
Monopolistic Practice provision of such services or grant the administration of the
telecommunications infrastructure of the buildings with powers
that allow limiting the access of other concessionaires to said
facilities.


The National Directorate of Free Competition (hereinafter With regard to the relevant market, this is defined as "the
DNLC) of ACODECO, initiated an investigation under file service of access to the set of telecommunications networks
number PM-010-16 of December 6, 2016, by complaint of the and the elements of the civil work that support them, in each of
legal representative of the company INTERFAST PANAMA, an the buildings PH Oceania Business Plaza, Tower 1000 and
telecommunication service concessionaire. 2000, PH Revolution Tower, PH Bicsa, PH Plaza Street Mall " .

The preliminary investigation against CABLE & WIRELESS Taking into consideration that the set of telecommunication
PANAMÁ, SA (CWP), for the alleged commission of absolute networks and the elements of the civil work that support them,
and relative monopolistic practices, contained in Law 45 of installed in buildings, commercial premises, and / or horizontal
October 31, 2007 (hereinafter Law 45), to the detriment of properties, constitute common telecommunications
INTERFAST and its clients, was based on the documentation infrastructure, declared as an essential facility by the Resolution
provided and the preliminary analysis of the complaint filed. AN No. 1630-Telco of April 21, 2008, and that this essential
facility was the one that could be subject to some type of
The DNLC considered that there were indications of a relative restrictions.
monopolistic practice by CWP and the economic agents PH
OCEANÍA BUSINESS PLAZA, Torre 1,000 y 2,000, PH F & F In the investigation, it was determined that what has limited the
Tower (Revolution Tower), PH BICSA FINANCIAL CENTER entry of INTERFAST into the relevant market, is the refusal of
and WORLAND INVESTMENT, SA, (PH Street Mall), through the latter to enter into a commercial agreement with CWP, and
an exclusivity agreement that would unreasonably prevent not because CWP is prohibiting the entry, in other words, it is
access to an essential facility to potential competitors to the the refusal of INTERFAST to sign a commercial agreement in
market. which it has to pay a fee for accessing the essential facility in
the PH, which has prevented its entry, and not properly that
The DNLC by Resolution No. DNLC HCE-008-17 of 3 April CWP is denying it.
2017, decided to order the official opening of an administrative
investigation into the alleged commission of relative
monopolistic practice against the economic agents, in violation



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Regarding the collection for access to facilities in buildings provisions of Law 45 are regulated" and Resolution No. A -31-09
defined in Resolution AN No. 1630-Telco of April 21, 2008, the of July 16, 2009, which develops the Guide for the Control of
ASEP has clearly stated that the guidelines of said resolution do Economic Concentrations.
not establish that access to the facilities must be given free of
charge, or can not be charged for access to telecommunications The operation of the merger among the economic agents
infrastructure, for which the economic agents investigated are mentioned above was subject to the issuance of a concept by
legally entitled to establish trade agreements that include prices ACODECO, by which a favorable conditioning concept was
for allowing access to their infrastructure, reason why which, granted, since the merger did not increase the probability of the
cannot be classified as a limitation to the entry of competitors, individual exercising market power by the economic agent
the establishment of prices for access to essential facilities. surviving the merger, it facilitated the commission of possible
collusive conduct, a situation that could not be offset in the short
When for some reason the parties cannot reach an term despite the fact that the merger does not create entry
understanding that allows access to essential facilities, barriers to the market: Therefore, the National Directorate of
Resolution AN No. 1630-Telco of April 21, 2008, establishes that Free Competition determined the need to enact corrective
the direct intervention of the Regulatory Authority is the only measures, including the performance of competition audits.
alternative for promote competition for the benefit or interest of
the user. Its clear that before a conflict, the parties can go to the Resolution No. DNLC-DVF-03-16 of March 8, 2016 establishes
ASEP to mediate or allow an understanding between the the favorable conditioning concept regarding the merger
parties. between Harinas Panama and Gold Mills, being the latter the
surviving firm. This Resolution authorizes the measure of
For the reasons stated, the DNLC through Resolution No. competition audit for a period of two (2) years.
DNLC-HCE-027-18 of August 10, 2018 orders the closure and
the file of the administrative file for the presumed monopolistic After the competition audit was carried out, the National Director
practice commission against Cable & Wireless Panama, SA, PH of Free Competition, by means of Resolution No. DNLC-HCE-
OCEANIA BUSINESS PLAZA, Tower 1,000 and 2,000, PH F & 025-18 of July 20, 2018, orders that the audit carried out to the
F Tower, PH BICSA FINANCIAL CENTER and WORLDLAND firm Gold Mills de Panamá, SA be terminated, since there were
INVESTMENT, S.A. for not having elements that prove the no findings that denote the existence of anti-competitive
violation of numeral 9 of article 16 of Law 45. practices.






Gold Mills y Harinas Panamá Merger Seminar of the World Trade
Organization (WTO)



The WTO held in Geneva, Switzerland, the " Thematic Seminar
on competition policy, trade and development; examine the
practical experience with the existing WTO Agreements”, giving
the opportunity to Mrs. Mitzila Rodriguez to participate on behalf
of the Authority Consumer Protection and Competition Defense
On September 23, 2015, ACODECO received a request for a (ACODECO, acronym in spanish).
merger verification through which Gold Mills de Panamá, SA
and Harinas Panamá, S.A. merged. Therefore, the procedures The seminar was held from June 12 to 14 2018 in the WTO for
required for a prior merger verification was initiated, in the purpose allowing participants to become aware of the role of
accordance with Law 45, and Executive Decree No. 8-A of competition policy in trade and development, to familiarize parti-
January 22, 2009 "by which Title I (Monopoly) and other cipants with the elements of competition policy in existing WTO



6 PRESENT

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FREE COMPETITION
PANAMA

legislation, as well as the possible modifications to this legal
regulation.



















agreements and experiences at national and international
levels. In addition, facilitate dialogue on problems in competition
policy among WTO members.


The following topics were developed:
In that sense, an explanation was given on how the cases of
• The importance of competition policy for trade and free competition operate, those that under our jurisdiction are
development: Past, present and future. mixed, that consist of a first phase of administrative
• Public procurement, the principles of competition and investigation in our headquarters, and later of a judicial phase in
development: the role of the WTO Agreement on the specialized courts in matters of free competition.
Government Procurement (ACP, acronym in Spanish ).
• International cooperation in the area of competition Among the topics of discussion, the length of decisions in the
policy. judicial phase, is in an average over five (5) years, as well as
the increase in sanctions for monopolistic practices were the
In addition, participants discussed the obstacles facing their most debated issues.
competition agencies to combat practices that restrict
competition and support organizations international. Another important aspect considered was the establishment of
mandatory notifications of mergers before the Authority, through
thresholds, given that these operations are currently presented
on a voluntary basis, with the only current exception of the
telecommunications market, which is mandatory by law. It
Discussion of the Law 45 of 2007 - requires the favorable concept of ACODECO for the transaction
International Chamber of Commerce to be carried out.
(ICC) - Chapter of Panama Carlos Ernesto González of the law firm Morgan & Morgan,

Dayra Vial of the law firm Vial & Vial, Jorge Federico Lee of the
On August 9, a discussion was held about the Law 45 of 2007 law firm Alemán, Cordero, Galindo & Lee and Christina Thayer
organized by the International Chamber of Commerce, chapter of the law firm Galindo, Arias & López formed the main table
of Panama, which included the participation of experts in and they made their evaluations of the current work and
matters of free competition, as well as lawyers and functions of ACODECO and of the possible modifications
professionals interested in this subject. required by Law 45 of 2007.


The keynote address was given by Oscar García Cardoze,
Administrator of ACODECO, who made an institutional
diagnosis of the current application of the competition

PRESENT 7

BULLETIN
FREE COMPETITION
PANAMA
Participation in the first "Diploma in Workshop of the Panama Online

Natural Gas", held in Panama City. Program


The National Authority for Government Innovation, through
ACODECO participated from April 12 to June 23, 2018, at the moderators of the firm KPMG, held in the City of Panama, the
first “Diploma in Natural Gas”, held at the Technological 3rd Change Management Workshop, in which officials of the
University of Panama, certified by the University Externship of National Directorate of Free Competition of ACODECO
Colombia, with speakers from Colombia and Spain. The event participated.
was sponsored by the International Development Bank (IDB)
and the National Secretariat of Energy of Panama (SNE, The workshop's main objective was the adoption of alternative
acronym in Spanish). channels of services to citizens using online procedures.


The goal of this course was to carry out a descriptive analytical The topics covered in the day were the following:
approach, on the most relevant international standards and • Change Management and Emotions.
regulatory frameworks applicable to the gas industry and the • Benefits of a new digital channel.
different links in the chain. • Adopting electronic attention channels.
• Customer service promoting a digital channel.
The course consisted of six modules, developed as follows:


Module 1, known as "Policy Geopolitics and Gas Policy."
Module 2, "Onshore and Offshore Production of Natural Gas
and Gas Regasification and Storage",
Module 3, "Regulation of Gas Transportation", explained the
importance and complexity factors in the construction of gas
pipelines, which can be generated in a gas project
Module 4, "Part I Distribution Regulation",
Module 5, "Part II Distribution Regulation",
Module 6, "Gas Negotiation Mechanisms".


This issue is of utmost importance since the participation of
ACODECO is immersed in the investigation, verification and / or
sanction of possible monopolistic, anticompetitive or
discriminatory practices by companies or entities that provide
public services.



















The Diploma was taken by Héctor Aguila,
Economist of Market Analysis and Studies Department
of ACODECO

8 PRESENT

BULLETIN
FREE COMPETITION
PANAMA

Analysis of the Duration of Judicial Proceedings for

Monopolistic Practices Interposed before the Courts of Justice





The purpose of conducting the analysis of the duration of the judicial proceedings for monopolistic practices before the courts of
justice, was for the purpose of knowing the speed in the final decision of the cases. In addition, it refers to the duration of judicial
transactions made by defendant companies and ACODECO, its advantages and disadvantages to the defense of competition in
Panama.




























































Note: bars in red cases of longer duration.









IN NUMBERS 9

BULLETIN
FREE COMPETITION
PANAMA

The Analysis of the Duration of the Judicial Proceedings for thousand dollars (USD. 2,000,000.00) for relative monopolistic
monopolistic practices filed at the Courts of Justice by practices. We consider that the cases of defense of the
ACODECO, has shown us a complete panorama of the times competition seen only by the Authority, modified Law 45, would
currently consumed by the processes. Undoubtedly we see that watch quickly and effectively by free competition and free
the judicial processes are long, which is to the detriment of the competition and sanction the guilty parties for affecting the
defense of competition; because in the course of the years the market with these practices that affect the economy of the
defendant companies continue to affect the market and do not country and therefore directly to the consumer.
have a short-term punishment for their acts violating the
competition rules. On the other hand, we can see how the figure This study can be found in its full version at the following link:
of the judicial transaction has collaborated so that the economic
agents in a not very long period cease the restrictive conducts http://www.acodeco.gob.pa/acodeco/uploads/pdf/nuestra_labo
of competition and contribute to the national treasury monetarily r/IT_DuracionProcesosJudiciales_Jul2018.pdf
for said actions. In that sense, the amounts of the transactions
are of lesser amounts to the penalties for infractions to Law 45
once they have been condemned by the courts. Those
sanctions can be up to one million dollars (USD. 1,000,000.00)
for absolute monopolistic practices and two hundred and fifty

























































8 IN NUMBERS

Panama Free Competition Bulletin reaches its edition No. 17






















The National Directorate of Free Competition of the ACODECO releases every three months from September
2015 to date through the National Free Competition Bulletin of Panama, the achievements, recent goals,

investigations, presented demands, competition law, seminars between many other management activities.


The objective of this newsletter has been to promote and publicize both national and international actions in
defense of competition in Panama, as highlighted in its slogan, "Defending your Freedom to Compete".


On the other hand, an important aspect to highlight is that the editing and writing team of the articles published
in this bulletin are lawyers and economists who are actively working day by day within the Directorate.


We thank you in advance to be part of our readers.