TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS bottlenecks in current judicial enforcement of commercial laws, including insolvency laws. A draft law of garantías reales mobiliarias is circulating in congressional counsels’ circles <strong>and</strong> could soon come forward for consideration, but this needs to be carefully vetted to make sure that it conforms with the principles of the OAS Model <strong>Law</strong> on Secured Transactions. ♦ An overhaul of Honduran courts, beginning with the selection of judges in such a way that ensures that capable jurists can make a career in the judiciary. Only then can any meaningful training take place, making it possible to build judicial competence in applying insolvency laws <strong>and</strong> other commercial laws. VIII-15
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS IX. COMPETITION LAW AND POLICY A. INTRODUCTION Recognizing the benefits of a competition law <strong>and</strong> policy, the Government of <strong>Honduras</strong> has engaged in significant efforts to adopt a competition law. 150 Substantial initial efforts began in 2001, with renewed interest <strong>and</strong> activity in 2003. Since the end of 2003, momentum has increased significantly. The well-publicized anticompetitive practices in the cement sector during the past year, combined with pressures created by CAFTA preparations <strong>and</strong> related internal <strong>and</strong> external concern about the lack of a competition law, have all driven forward the process of adopting a competition law. In September 2004, a draft competition law was “officiated” <strong>and</strong> submitted to the <strong>Economic</strong>s Committee of the Legislative Assembly. It is anticipated that this draft law will be voted on before the end of 2004. B. LEGAL FRAMEWORK No competition law exists in <strong>Honduras</strong>; however, certain laws have competition-related provisions, many of which are comprehensive. Article 339 of the Honduran constitution prohibits monopolies <strong>and</strong> oligopolies. Articles 4 <strong>and</strong> 5 of the <strong>Commercial</strong> Code address unfair competition, described as competition undertaken by merchants wherein a merchant unduly attracts the clientele of a competitor. The Consumer Protection <strong>Law</strong> (<strong>and</strong> the accompanying implementing regulation of July 25, 1989) has numerous competition-related provisions. Article 5 provides the basis for a competition law, stating that all goods <strong>and</strong> services offered in the national territory must comply with conditions of just retribution with respect to quality, quantity, <strong>and</strong> efficiency in the prices paid by the consumer. In Article 29B of the Consumer Protection <strong>Law</strong>, the executive branch is empowered not only to adopt any measures necessary for preventing or combating unfair competition but also to stop any activities that unfairly restrict or limit the delivery of products or services or affect price. Specific examples within this law include Article 7, which states that a producer cannot condition the sale of one product on the acquisition of another product. In the implementing regulation of the consumer protection law, Article 41 authorizes the executive branch to issue any other measures necessary for controlling 150 Competition law provides a regulatory framework for maintaining <strong>and</strong> improving efficiency in markets, promoting competitive pricing practices, <strong>and</strong> restraining price rises in markets where competition is affected by anticompetitive business practices (including horizontal <strong>and</strong> vertical restraints [e.g., collusive price-fixing, input/output allocation, bid rigging], abuse of dominant position [e.g., exclusion, discrimination, predation], <strong>and</strong> certain mergers <strong>and</strong> acquisitions). Competition law alone does not create competition, but when effectively applied can counteract the dangers of private anticompetitive behavior. For example, cartels may deliberately create artificial shortages, resulting in some consumers’ being able to obtain the product but others’ paying an inflated, or monopoly, price. Dominant firms may abuse their market power by, for example, tying two products without a legitimate business purpose. Firms with market power that erect protectionist barriers may block entry to new participants. In addition to private conduct, competition law can be used to counteract inefficient government regulation <strong>and</strong> promote efficiency within the public sector. Competition authorities can use the competition law to perform a comprehensive review of existing <strong>and</strong> proposed laws <strong>and</strong> regulations, providing suggestions <strong>and</strong> advice on government policies <strong>and</strong> measures that promote anticompetitive practices or inefficiencies. Activities often include the review of possible sources of public restraints on competition in trade policies (tariff <strong>and</strong> non-tariff barriers, antidumping duties <strong>and</strong> discriminatory export practices), investment policies (exclusionary lists, ownership restrictions, licensing requirements), <strong>and</strong> sectoral regulation (power, transportation, telecommunications, natural monopolies). IX-1
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