One of the benefits that the regulation of mergers and concentrations would bring the country is the reduction of poverty. This is based on a study carried out last year by the Organization for Economic Cooperation and Development (OECD) and the World Bank, said Tania Zúñiga, lawyer and professor at Pontificia Universidad Católica del Perú (PUCP), during her participation in the Forum ¿El Estado debe controlar las fusiones y adquisiciones? (Should the State control mergers and acquisitions?) organized by Universidad del Pacífico Law School. Therefore, she pointed out that we need a law on concentrations that seeks to be an instrument, not a punishment, but a design of prevention for which the intervention of the State needs to be defined.
"It is neither a tyrannical instrument nor an instrument to punish companies with concentrations. We welcome business concentrations that can produce consumer welfare and, in general, share with competitors in the market a series of concerns of an effective competitive nature. It is not a sanctioning instrument but a preventive one", she said. In this regard, she explained that it is expected that the bill that regulates business mergers and acquisitions will be presented to Congress this week after last Thursday the Pro Investment and Employment Generation group presented the final report on the initiative to the Economic Commission. She specified that one of the recommendations in the said final report is that the threshold for operations and sales be consistent with the Peruvian type of economy.
On the other hand, Andrés Calderón, lawyer and professor at Universidad del Pacífico, said that the threshold has to be reasonably high so that the State does not review operations of little importance in addition to the various institutional changes that Indecopi must have, among which is included the fact that members are not to be reported for this type of cases and also that they are elected by public tendering for a certain period and are not removed unless there is a ground. "Until they show me that the system is efficient and they control all the costs, I would not risk working on the text of the law before seeing how we would guarantee the budget and independence of these authorities. What should be done is not to support a bill on the control of concentrations if they have not previously guaranteed that the whole institutional issue will work", he said.
He added that there is evidence of failures in the control of mergers in various countries that are opting to review the effects of such decisions. "Competition authorities are noticing that they are making mistakes; that is why they are becoming aware of the fact that this tool is fallible. The concentration control system may have a corrective effect of negative impact. Is it worth taking all the risks it has? Are we ready for this to work in Peru?", he reflected during his presentation at the Forum.
Alejandra Cruz, Web coordinator of the Economy and Business section of El Comercio newspaper and
Andrés Calderón, professor of Law at UP
In this regard, José Tavara, economist and professor at PUCP, said that behind the refusal to regulate concentrations and mergers in the country is the fear of reasoning, but those affected are consumers and small businesses. "A free market economy creates opportunities and disappears when there are monopolies. The possibilities of cartel formation increase when a market is concentrated. Go to Cuba and you will see that it is the only country that does not have merger control, so Peru is now at the level of that country. All have adopted competition laws that disappear while the market is monopolized. Primax recently merged with Pecsa. If there was a control regime, consumers would not be affected when they found both gas stations on a single highway, "he said.
Távara states that all consumers are affected while the law that controls concentrations and mergers is delayed. On the other hand, Enzo Defilippi, economist and professor at Pacific Business School, said that it is necessary to understand how markets work because blocking mergers prevents cost reduction. He considers that there is no evidence that allows to segregate mergers that should or should not be blocked, therefore it is necessary for the State to support its decision when prohibiting an operation.
"When this type of regulation is introduced in other countries, the effects must be shown, but a text without support is being discussed. How many mergers were analyzed to see if they posed the problems that are pointed out? We are not discussing the need for control and effectiveness. It entails much more. We have been discussing this topic for 20 years", he said.
Enzo Defilippi, professor at Pacific Business School, recommended a State control with support for each case.
An additional S/5 million annual budget is required
The president of the National Institute for the Defense of Competition and the Protection of Intellectual Property (INDECOPI), Ivo Gagliuffi, clarified that if a law on prior control of corporate concentrations and mergers is passed, it will be necessary to assign an additional S/ 5 million annual budget for the recruitment and training of staff, which would take at least 6 months. He explained that Indecopi's position is that if Congress passes the aforementioned bill, it will be necessary to take into account minimum conditions with certain standards in order to provide security to investors who submit to this type of control. Among these conditions is a reasonable threshold because the State cannot invest resources in mergers that have no impact. In this regard, he stated that the threshold should not be set by Congress because it would be subject to a political debate, but by the Executive hand in hand with Indecopi and the Ministry of Economy and Finance (MEF).
Another condition is that those mergers that at first sight would not have a great impact should be treated with a fast procedure (fast tack), while those that could have an impact should go through an ordinary procedure that would take between 90 to 120 days. "No longer than that period because investments are conditioned and if we do that, we will scare them away. So the idea is to take over, but quickly. Another important issue is the institutional design. There will be a lot of pressure on the commissioners or members to resolve the issue of mergers, which means criminal complaints or threats of a civil suit. That is why legal shielding is needed so that they are not reported for approving a merger or not, they are not brought under political control and if a merger is denied or approved with conditions, it is done through a fast judicial procedure that does not take long because the investment would be lost", he said. Finally, he made it clear that a retroactive bill on prior merger control should not be passed because it is not acceptable since it is unconstitutional and would generate an economic impact.