Peru: Indecopi publishes the draft Guidelines to calculate the notification thresholds for concentration operations

The draft Guidelines for the calculation of notification thresholds (the “Draft Guidelines”) has been prepared by the Technical Secretariat of the Antitrust Commission (TS) to specify the calculation factors (sales, gross income, assets) and the methodology that will be used to calculate whether, based on them, the legal thresholds that determine that the notification of the concentration operation is mandatory for its prior control (see here). The TS will receive comments from all interested parties until next Monday, March 22. 

Once the guidelines are approved, they will become softlaw, complementary to Law 31112 (Peruvian merger control law) and its Regulations and, consequently, will be applied by the Antitrust Commission and the TS in the merger control procedures. 

Below we highlight the most relevant points of the Guidelines:

• Calculation factors: The Draft Guidelines specified that the factors for the calculation of thresholds are two: (i) gross sales or income and (ii) value of assets.  The Draft Guidelines consider sales and gross income as synonyms.

In addition, the sales/income and asset value factors should be calculated, independently and their results should not be added together to see if the legal thresholds are reached.

• Calculation rules for each type of concentration operation: The calculation rules of Law 31112 specified by the Regulations are confirmed and graphic examples are included, namely:
  
  1. Calculation Rule N° 1 - applicable for merger operations and creation of new companies through associative contracts (joint ventures): it will take into account the sales or gross income or asset value in Peru of the economic agents participating in the operation and their respective economic groups;
  2. Calculation Rule N° 2 - applicable for operations for the acquisition of rights or shares that grant control of another economic agent: in these operations, the sales or gross income or asset value in Peru of the acquiring company and its economic group will be considered, as well as the acquired company and the economic agents over which it exercises control (but not its economic group); and,
  3. Calculation Rule N° 3 - applicable for acquisitions of operating productive assets: sales or gross income or asset value in Peru of the acquiring company and its economic group will be considered, as well as the sales or gross income generated by the acquired assets or their book value.
• Sales or gross income calculation parameters: The following calculation parameters are required for sales or gross income: only those related to the “ordinary course of business” are taken into account. Returns, offers or discounts are not excluded. Taxes related to sales or income where the company acts as an intermediary for withholding the tax (VAT, Selective Consumer Tax), as well as income from sales within the same economic group, are excluded. 

Likewise, the Draft Guidelines specifies which are the sales or gross income in the country (geographical link) that will be taken into account for the calculation of the thresholds. The general rule is that in the case of product sales it will be the "place where the customer is located"; while in the contracting of services it will be the "place where the service is rendered "; and, therefore, if the place where the product is sold or the place where the service is provided is located within Peru, then they are considered in the calculation of the legal thresholds.

Finally, some particular assumptions are required to calculate sales or gross income in the country, applying “location rules”, namely:

• Assets value calculation parameters: The Draft Guidelines specifies that both tangible assets (physical or material goods, such as manufacturing plants, inventory, equipment, etc.) and intangibles (intangible resources, accounts receivable, financial assets, distinctive signs, etc.) that are on the balance sheet of the company will be counted. The Draft Guidelines reiterates that the assets are calculated based on the "book value" of the previous fiscal year. Likewise, the Draft Guidelines establish that in the case of economic agents incorporated in Peru, the assets consigned in the financial statements will be considered (except tangible assets that were not in the country the previous year); while, in the case of economic agents not incorporated in Peru, only tangible assets located in the country, intangible assets derived from contracts signed with economic agents incorporated in Peru, as well as intangible assets registered in any public registry in Peru, will be considered. 
• Special provisions for specific business sectors or activities:   
  
  1. Financial entities (banks, savings and credit cooperatives, etc.): the benefits generated by raising or placing money will be considered in the calculation (interests, charges, returns, commissions and alike);     
  2. Insurance companies: the value of net premiums from the previous year, investments income and other financial income will be considered;
  3. AFPs (Pension Fund Administrators): sales from the collection of commissions, including profit from legal reserves, are considered in the calculation;      
  4. Investment funds: the commissions associated with the fund and the sales, income or assets value of the companies controlled by the investment fund administrator will be considered;
  5. Publicly owned companies: the sales or gross income or assets value of all companies that belong to the same “independent decision-making center” will be calculated, which in Peru would be FONAFE (Spanish acronym for the “National Fund for the Financing of State Business Activity”).
• Origin of the sales data, gross income and assets value: The Draft Guidelines specifies that the data must be based on audited financial statements from the year prior to the notification of the operation. If there are no audited financial statements, then “unaudited” would be accepted as long as there is “reasonable justification” for it (e.g., it is the first or second month of the year in which the audited financial statements from the previous year are not yet available). 
• Tax Unit (TU): The Peruvian TU in force from the year prior to the notification of the operation will be used in the calculations. 
• Exchange rate: The Draft Guidelines specifies that if amounts other than the Peruvian currency (Sol) are used in financial statements or other financial documents, then the average exchange rate of the last 12 months prior to notification will be applied, as published by the Central Reserve Bank of Peru.