Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS and prohibiting restrictive practices that impede the free circulation of goods and services. Finally, the consumer protection law allows for the creation of a technical advisory body within the executive branch of government. None of these competition-related provisions appears to have been enforced; instead, there has been widespread interest in the adoption of a competition law. The first significant effort was to draft and adopt a competition law in 2001, but the law failed to pass. The 2001 draft has been described as one either written or revised in congress to reflect the protection of certain businesses of powerful companies and lobbyists. A new draft, prepared in 2004, incorporates many international norms and practices. A limited number of provisions, however, might benefit from further reflection, as described in the following sections. 151 Agreements The law includes prohibitions of certain types of “restrictive practices” in Articles 8–13. 152 This section is generally sound. In particular, the law differentiates between those practices that are subject to a per se legal standard (Article 8) (e.g., price fixing, bid-rigging) and those that are not. The per se standard, however, is usually reserved for cartels, the types of agreements among competitors that are intended solely to eliminate competition among companies and have no redeeming social or economic benefit. 153 Article 8(e) opens the provision for application to any agreement between competitors. The inclusion of Article 8(e) would broaden the scope of per se activities beyond what is considered appropriate. Non-per se agreements, including certain types of horizontal agreements, vertical agreements, and abuses of dominant position, are set forth in Articles 9–13. The law establishes a 40-percent market share test as a prerequisite to finding harm. Because market shares depend on market definition—a subject about which reasonable minds can and often do disagree—it is unlikely that the 40-percent test would provide a functional definition that could be easily applied. It can be expected that there will be many arguments over market definition that will go to the 151 Although there is no one “right” model of competition law, in recent years agreement has emerged as to principles and scope. In the case of Honduras, the government might want to carefully consider promoting regional convergence, if not harmonization, in Central America. Trade and investment would benefit if all countries in the region strove to adopt consistent standards. For guidance, the Government of Honduras could examine the competition law of Panama, which is similar to the Mexican competition law. 152 The term restrictive practices (“practices restrictivas”) might be more appropriately replaced by “anticompetitive practices” because an agreement can be “restrictive” and yet efficiency-enhancing and procompetitive. For example, if a trademark holder gives an exclusive license to a licensee to exploit the mark, this would be “restrictive” in that no one else would get the license, but the exclusivity would be necessary to give the licensee the incentive to exploit the mark through marketing, etc. The definition also refers to agreements with the “objective or effect” of restricting competition; consideration should be given to referring only to the “effect” of restricting competition, so that subjective intent (which is difficult to prove) does not enter the picture. The concern should be the harmful effect of the agreement, not the intent of the parties; agreements might restrain competition although this was not their principal objective. 153 The OECD recommendation defines a cartel as follows: a “hard core cartel” is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. IX-2
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS difference between a 39-percent and 41-percent market share, consuming time and resources. In the end, this will only divert attention from whether the agreement in question in fact affected competition. An alternative approach would be to require, as to those sections, proof of injury to competition instead of proof of market shares. One solution would be to use the same threshold Mexico uses, “substantial market power in the relevant market.” 154 Finally, an additional improvement could be made in the list of practices set forth in Article 13. This list appears both under- and over-inclusive, particularly if the 40-percent market share test remains. A preferable list would be one similar to the list of relative monopolistic practices found in the Mexican competition law. 155 Merger Control The draft law proposes a voluntary merger notification regime. Adoption of a voluntary regime is an important way to limit the burdens of merger review for new competition authorities. Although these provisions are generally sound, two improvements could be made. First, the definition of concentrations (in Article 15) is overly broad. 156 Second, although it is important that the Instituto para la Promoción de la Competencia proposed under the law (i.e., the Institute) review the notification within a specified time period, given the complexity of merger review, 30 days might be insufficient for complicated transactions. It is useful to examine the Recommended Practices for merger notifications established by the International Competition Network (ICN). 157 Regarding the timing for review, Recommended Practice IV(D) provides “[i]n non-suspensive jurisdictions, initial merger reviews should be completed within a specified period following notification and any extended reviews should be completed within a determinable time frame.” The comment to the practice explains “[n]on-suspensive jurisdictions should likewise seek convergence of their review periods with time frames typically used by competition agencies internationally to facilitate coordinated reviews and clearances. Thus, initial reviews in non-suspensive jurisdictions should be completed in 6 weeks or fewer, and extended or ‘Phase II’ reviews should be completed or capable of completion within 6 months or 154 Mexican Federal Competition Law, Chapter II, Article 13. 155 Mexican Federal Competition Law, Chapter II, Article 10. 156 Consideration may be given to a common definition that has worked well in a number of countries: Se considera que existe concentración cuando: ♦ Dos o más agentes económicos se fusionen o cuando por medio de cualquier acto dos o más agentes económicos que han sido independientes entre sí, consoliden, integren o combinen sus negocios en todo o en parte; ♦ Cuando uno o más agentes económicos que ya controlan por lo menos otro agente económico adquieran por cualquier medio, el control directo o indirecto de todo o de parte de más agentes económicos. Para los efectos de esta Ley, se entenderá por control, la capacidad de influenciar substancialmente a un agente económico a través de: ♦ La propiedad o el derecho de usar todo o parte de los activos del agente económico; ♦ Los acuerdos que confieren influencia substancial en la composición, votación, o decisiones de los entes directivos y administrativos del agente económico. 157 The International Competition Network is a voluntary organization of virtually all of the world’s competition agencies. IX-3
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