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

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS less following the submission of the initial notification(s).” With a view to convergence with this Recommended Practice, review periods should be extended. 1. Implementing Institutions The draft law proposes creation of the Instituto para la Promoción de la Competencia, a body [desconcentrado] of the President of the Republic, with technical, administrative, and financial autonomy in its internal affairs and independence in the exercise of its functions. A threemember directorate would head the Institute for a 4-year period, with each director appointed by the President of the Republic. 158 The Institute would have exclusive power to initiate and investigate cases and would have authority to impose a variety of remedies and sanctions. Investigation and Prosecution Experience has shown that private complaints are an important information source for competition agencies in initiating investigations, but it appears that, under the draft law, private complaints to the Institute are precluded (Article 50). The draft law would benefit from revision in this respect, allowing private complaints, as well as including provisions that ensure that the Institute can decline to take action in cases in which there is no injury to the competitive process or in response to the Institute’s enforcement priorities. In conducting investigations, experience also makes clear the importance of creating, by statute, investigational powers that enable the Institute to obtain information essential to identifying violations of the law. The information gathering articles in the draft law (Articles 48–49) should be rewritten to provide the Institute with the power to compel the information it needs for completing its investigations, including the right to compel the production of documents, interview witnesses and conduct hearings, and inspect corporate records. It is important, if other provisions of law do not so provide, for these provisions to have sufficient force to create incentives to comply with the law. Experience in other countries has shown that if the only sanction for violating such provisions is the payment of small fines, it might be worthwhile to simply pay the fine as a cost of conducting business rather than to provide the information needed. Consideration might be given to imposing heavy fines and other penalties on firms refusing to comply with legitimate requests for information or destroying records to frustrate a pending investigation. During the investigation of cases, the Institute will handle a vast amount of confidential information (e.g., business plans and financial information). The way in which confidential information is protected is a difficult subject in every competition law. The challenge is to make the necessary information available to decision-makers and to allow parties to fairly contest a case without compromising the secrecy of confidential business information. The confidentiality provisions in Article 34 are vague and apply only to public functionaries. This article should be 158 The nomination of the directors should be done in staggered terms, and this should be explicitly stated in the law. For example, the draft Nicaraguan competition law provides: “Para el primer periodo de funcionamiento de La Comisión, se conformará de la siguiente manera: dos comisionados serán nombrados por un periodo de seis anos; el otro por un periodo de tres anos. Posterior al cumplimiento de este primer período, la renovación de los comisionados se hará parcialmente cada tres anos es decir, se nombraran dos y un comisionados sucesivamente.” IX-4
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS made more precise, notably by including protections to keep the confidential information of one competitor from reaching the eyes of others. Transparency Transparency is important for achieving consistency, predictability, and ultimately fairness in applying a competition law, thereby enhancing the credibility and effectiveness of law enforcement. Transparency also enables the private sector to better understand and predict the likely response to their business conduct. It might be advisable to rewrite Article 57 in a way that puts more responsibility on the Institute to publish regulations, advisory opinions, and decisions. Penalties The penalties for unlawful conduct are clear, designed to correct the competitive injury caused by the offense, and crafted in such a way that they do not appear to deter pro-competitive conduct. The principal weakness is that the fines may not be sufficiently stringent to deter future violations of the law. Experience across countries has shown that deterrence is one of the most important benefits of a competition law. The size of fines should reflect that amount needed to deter firms from engaging in violation of the law. If a fine is too low, it will be considered only as the cost of conducting business. The draft law would benefit from an increase in the maximum allowable fines and the allowance of larger fines for submission of false information and for repeat offenders. Competition Advocacy Competition advocacy is the ability of the competition agency to provide advice, influence, and participate in government economic and regulatory policies to promote more competitive industry structure, firm behavior, and market performance. All the competition agencies in Latin America have some role for competition advocacy within the government, and several (e.g., Mexico) can overrule decisions by other government agencies. International best practices suggest that advocacy should be a priority for new agencies; therefore, consideration should be given to making the advocacy provisions more robust. 159 For example, the provisions could allow for compulsory review of new legislation or explicitly give the Commission the power to deliver opinions ex officio. The ICN has prepared a compilation of advocacy provisions that are available on the Internet at: http://www.cfc.gob.mx/icn_infocenter/files/Model_advocacy_provisions.DOC. Consideration should be given in particular to the advocacy provisions in the Mexican law or the draft Nicaraguan law. 159 For more information on advocacy, including its importance for new agencies, see http://www.cfc.gob.mx/icn_infocenter/. IX-5
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