Sanctions for anti-competitive practices in comparative law: the experience of Latin America, the European Union, the United States and Australia

The above jurisdictions have been chosen for the following reasons: (i) the first four are established and noteworthy jurisdictions in Latin America, (ii) the next two have been recognized as the leading jurisdictions in this field and (iii) the last one, Australia, has certain specific features that distinguish it from the others and that are worth mentioning.

Maximum basic amounts of fines

Determining the amount of any fine commences with the calculation of its basic amount. Here, two elements are taken into account: (i) an initial measurement that tries to reflect the impact of the illegal profits expected from the infringement and (ii) an additional percentage according to a sliding scale that is applicable to the initial measure.

It is important to point out that, as a tool for the application of competition law, financial sanctions are very important, since they seek to foster effective compliance with the rules. Nevertheless, they are not always effective, since, for example, in certain cases fines are risible compared to the size of the profit that large companies obtain as a result of the infringement. Yet if these fines are increased to a very high level, many companies may face financial difficulties, which would destabilize competition in the market. Balancing deterrence with the goal of preserving competition, while maintaining effective sanctions, is a major challenge faced by different jurisdictions around the world, particularly since digital markets arrived.

In the case of Latin America, countries like Colombia, Chile, Mexico and Peru impose fines for infringements of the competition rules on both legal and natural persons, in order to avoid recidivism as much as possible, and to prevent others from engaging in such conduct; in short, to act as a deterrent. This contrasts with the United States, for example, one of whose main policy aims through the imposition of fines is restitution. In addition, in some cases when various enterprises are involved in the infringement, group actions with significant fines are often used, as a result of which various similar cases are resolved in a single decision. This benefits the victims who could never have brought an action on their own.

In Colombia, the companies that infringe the competition rules may be fined up to 100,000 SMLMV (USD 26,558,027). Whichever of the following three options produces the highest amount will be applied: 20% of the infringer’s operating revenue in the preceding tax year, 20% of its assets in the preceding tax year, or up to 300% of the profit made by it as a result of the conduct, when this is quantifiable.

In Chile, the fine imposed could be up to twice the profit obtained by the infringing parties or up to 30% of the annual turnover of the companies in question with respect to the goods or services to which the infringement refers during the relevant period. As a default option, they may be up to 20,000 tax units (USD 800,278).

In Mexico, according to the Federal Competition Act (Ley Federal de Competencia Económica (2014)), individuals that infringe the competition rules will be sanctioned up to 200,000 times the minimum general salary of the Federal District of Mexico (USD 1,706,515) and companies by up to 8% of the annual turnover for each relative monopolistic practice and up to 10% for each absolute monopolistic practice.

Finally, in Peru, fines are based on the seriousness of the infringement, with conduct defined as very serious being fined more than 1000 tax units (USD 121,693,122), subject to a maximum of 12% of gross turnover or income received by the infringer in the preceding year.

As regards the USA, legal entities can be fined up to 100 million dollars, or up to twice the profit made as a result of the illegal conduct or twice the financial loss caused to victims. In turn, the fine may be up to 20% of the value of the trade attributable to the infringer in the goods or services in question. With respect to natural persons, they can be fined up to 1 million dollars or twice the gross profit that they have obtained through the offence or twice the financial loss caused to the victims.

In the European Union, the basic amount of the fine will be 30% of the turnover of the product in question according to the seriousness of the conduct, except for horizontal cartels, to which an increase of 15 to 20% of the turnover will be applied. Moreover, in those cases in which the party involved has a considerable amount of the business apart from the product in question and the amount of the extra income as a result of the infringement is known, the fine may be increased and the maximum amount may not exceed 10% of the total turnover of the sanctioned company in the previous tax year.

Finally, in Australia, natural persons may be fined up to 500,000 Australian dollars (USD 373,134), whereas for legal entities, the maximum fine will be 10 million Australian dollars (USD 7,462,687), three times the profit arising from unlawful conduct, or up to 10% of the annual turnover in the relevant market. This shows that Australia is one of the countries with the lowest fines, which is explained by its method of applying sanctions, based on the case-by-case approach of the federal courts.

The following graph provides a comparative overview of the basic amounts of fines: 

Maximum basic amount of fine according to jurisdiction

 

Criteria and valuation methodology

Despite the fact that there is common international practice, each jurisdiction takes into account its own criteria and methodology when establishing fines, which are defined by the local challenges faced in the application of competition law in each country.

In Latin America, with respect to legal entities, Colombia assesses whether the conduct is capable of affecting the market, the nature of the goods or services in question, the degree of participation, the duration of the conduct and the relevant market share. However, for natural persons, the degree of involvement of the person facilitating the conduct is analyzed, as is the recidivism as regards the same conduct or past antitrust infringements or breaches of orders, as well as the assets of the person in question.

For its part, Chile looks at the economic benefit obtained as a result of the infringement, the seriousness of the conduct and any recidivism of the infringing party. Similarly, Mexico bases its approach on the harm caused, evidence of any intentionality, participation of the infringing party in the markets, the size of the market affected, the duration of the practice or concentration, the economic capacity of the practice and, where appropriate, whether or not the conduct in question is subject to the exercise of the powers attributed to the Federal Competition Commission. Finally, Peru, in addition to the criteria mentioned above, takes into account the effect of the restriction of competition on effective or potential competitors, other parties involved in the economic process and on consumers and users.

As regards the United States, fines are determined by a non-specialist court which judges cases of anti-competitive practices, as well as by the guidelines laid down by the Sentencing Commission. These guidelines establish the following methodology for the determination of pecuniary sanctions: (i) calculation of a basic amount of fine and (ii) adjustment based on the degree of culpability. The latter takes into account the following criteria, as well as the aggravating and mitigating circumstances that are mentioned below: the need to indemnify the victims of the offence, the volume of trade attributable to an individual participant in an antitrust infringement, and its duration.

By contrast, in the European Union the courts do not have the legal obligation to take into account specific guidelines and are more focused on the background of the case, or they might even opt or an ex novo decision. However, the amount of the fines imposed by the courts appears to be in line with those decided in the relevant administrative decisions and, therefore, with the guidelines on the imposition of fines. A three-stage approach is laid down in the fine-setting guidelines: (i) a basic amount is set for each infringer based on the value of its sales arising from the infringement; (ii) adjustments of the basic amount are made in order to reflect the specific circumstances of the case; and (iii) final adjustments are made to reflect the need for deterrence and compliance with the statutory maximum. However, the main criteria taken into account are the value of the sales of the product, the seriousness of the conduct expressed as a percentage and the duration of the infringement at the time of defining the basic amount of the fine.

In the case of Australia, the following are taken into account: the nature and scope of the act or omission, any loss or damage suffered as a result, the circumstances in which it arose, whether the person has been declared liable previously by the court in a similar case, the size of the infringing undertaking or its market power, based on its market share, and the ease of entering the market, among other factors.

Aggravating and mitigating factors

Given the above, it is important to point out that in all jurisdictions, the following steps are generally taken: (i) determination of the basic amount of the fine; (ii) adjustments (including taking into account aggravating and mitigating factors); and (iii) adjustment of the amount so that it does not exceed the statutory maximum amount.

Aggravating factors

Aggravating factors include coercive measures or reprisals used to guarantee the continuation of the infringement, duration, type of infringement, intentional conduct, involvement of senior management, degree of involvement of the infringer in the conduct, obstruction of the investigation, recidivism, size of the firm, tolerance of the unlawful activity and breach of a court order. Each factor is defined and approached differently in each jurisdiction.

In Latin America, Colombia, Chile, Mexico and Peru have in common the fact that they consider being the party who encouraged the conduct and recidivism to be aggravating factors. In Colombia, as well as these two circumstances, other aggravating factors are where the infringer engages in conduct designed to obstruct or delay the proceedings, as well as continuing the conduct once the investigation has started. Each aggravating circumstance will increase the fine by 10%. In turn, the party who has acted as a facilitator, whether a natural or legal person, will be fined up to 2,000 SMLMV (USD 531,161).

As regards Chile, special attention is paid to the non-payment of the fine, leading to additional fines being imposed on the infringer and in some cases prison sentences of up to fifteen days, whereas in Mexico and Peru the recidivism gives rise to fines of up to twice those initially imposed.

In the European Union special attention is also paid to recidivism (the difference being that this must relate to the same conduct that has been previously sanctioned) and whether the undertaking in question has been the ringleader or instigator of the infringing conduct, the basic amount of the fine being increased by up to 100% and 50%, respectively. Other aggravating factors are the refusal to cooperate and obstruction of the investigation.

In the United States, aggravating factors are not only recidivism, the past conduct of the organization, whether the commission of the offense involved the breach of a court order, and the obstruction of justice but also whether senior management was involved. In some of these cases, the basic amount of the fine may be increased by up to 16%. The same occurs in Australia, where recidivism, the role of ringleader or instigator as regards the conduct and the involvement of senior management are all taken into account as aggravating factors.

Increase in % of fines due to aggravating factors

Mitigating Factors

Mitigating factors also exist and, like aggravating factors, vary from jurisdiction to jurisdiction. They include the acceptance of responsibility, compensation of the injured parties, cooperation in the investigation, effective compliance programs, infringements that are authorized/encouraged by the legislation/public authorities, infringements committed as a result of negligence, having a minor role in the infringement, non-application, participation under duress, self-reporting, the size of the firm, the cessation of the infringement and the uncertainty regarding the unlawfulness of the conduct in question.

In Colombia, the law specifically recognizes as a mitigating factor the acceptance of charges brought in those cases in which the party under investigation has not been recognized as the whistleblower. Equally, in Chile cooperation in the investigation and the detection of cartels in antimonopoly procedures are considered to be mitigating factors.

In Mexico, proof of the infringer’s commitment to suspend, stop or rectify the practice or concentration in question in order to restore free competition is a mitigating factor. In addition, the fact that the measures proposed are legally and economically viable and appropriate to avoid carrying out or, where applicable, to leave without effect, the monopoly practice with respect to the unlawful concentration that is the subject matter of the investigation, stating the periods and terms for its verification, is also a mitigating factor. This results in the grant of immunity or a reduction as regards payment of the fine as well as measures to restore free competition.

In Peru there are benefits with respect to the size of the fine, since this can be reduced by 25% when the infringer pays before the period expires to challenge the decision of the INDECOPI and 15% if the companies investigated recognize the infringement.

In the United States, in addition to having compliance programs, a fine can be reduced when the imposition thereof prejudices the capacity of the firm in question to compensate the victims. In turn, other mitigating factors include the following: the firm in question significantly assists the authorities in the investigation, the corporation reports the offense to the competent authority, the recognition and acceptance of responsibility by the enterprise with respect to the infringing conduct. Finally, if the infringer is a minor member of the cartel, the degree of culpability will be reduced.

In the European Union, unlike the other jurisdictions mentioned, having compliance programs in place is not considered to be a mitigating factor. Instead, the factors taken into account include whether the undertaking in question has effectively cooperated in a manner that goes beyond its legal obligation to do so. Other mitigating factors are whether the firm shows that its participation in the infringement is substantially limited and that during the period in which it was a party to the anti-competitive conduct it avoided applying it and actually acted in a competitive manner in the market, the fact that it has produced evidence showing the cessation of the commission of the infringement at the start of the investigation (not applicable to cartels) and when the infringement has been encouraged by a Member State of the European Union.

In Australia, the following mitigating factors are taken into account: the infringing firm has a corporate culture that favors compliance with the law; it has shown that it is prepared to cooperate with the competent authorities; and its role in the infringement was minor.

Compliance program with mitigation of liability

Compliance programs have become more popular in the last five years. Some competition authorities in fact give benefits to those companies that apply them, and also consider them to be mitigating factors when calculating the basic amount of the fine. However, despite the fact that the debate exists and in some jurisdictions it has been deemed to be a mitigating factor, in fact it is not applied expressly. This is because the competition authorities have focused more on the publication of guidelines that explain to businesses who wish to use such programs how to prepare and implement them. This is the case of Colombia, Chile and Peru, amongst other jurisdictions. However, a compliance program must be viewed as a tool that seeks to prevent anticompetitive conduct and to promote cooperation with the authorities in their task of protecting free and fair competition, not as a replacement of the authority itself.

In the case of Colombia, article 9 of Act 2195 of 2022 obliges legal entities to put in place transparency and business ethics programs, the competition authority (la Superintendencia de Industria y Comercio) being entrusted with issuing the guidelines that should be followed when they are drawn up and implemented. Although the Act does not expressly state that having such programs in place will be considered to be a mitigating factor, article 5 indicates that it will be a mitigating factor to take measures which, in the opinion of the administrative authority, make it possible to prevent future acts of corruption. It can therefore be deduced that, since the introduction of the new Act, such programs may be viewed as mitigating factors.

In the United States, compliance programs have been recognized as a mitigating factor since 1991. However, they must be effective to be taken into account.

By contrast, the European Union takes the opposite approach, since the European Commission is probably the most important jurisdiction that does not take into account compliance programs, whether pre-existing or future, when it imposes a fine. Yet although it does not recognize the need or importance of compliance programs, or the existence or establishment of such programs following an investigation, they will be used as mitigating circumstances.

Colombia: going forward or backward after Act 2195?

In Colombia, Act 2195 of 2022 made amendments to the rules on free competition with respect to benefits for cooperating with the authorities and fines. If we look at these changes from the perspective of comparative law, Colombia now has one of the toughest systems as regards sanctions, with fines of up to USD 26,558,027 and/or 300% (when it is possible to quantify this figure) of the profit made by the infringing party as a result of the conduct. It is surpassed by Peru in this regard, which has fines of up to USD 121,693,122, but is ahead of Mexico, which has fines of up to USD 1,706,515.

Moreover, one of the changes made includes calculating fines according to the infringer’s turnover and its assets in the preceding tax year. If this is not regulated in the best way possible, the stability of the business will be endangered, since very high fines may not only destabilize the infringing firms but also the market as such.

The following table summarizes the changes in the quantitative parameters as a result of the new legislation:

Source: Prepared on the basis of the table presented by Anna Merino and Miguel de Quinto. Asocompetencia. (April 21, 2022). "Cuantificación de sanciones por prácticas anticompetitivas: la experiencia en Europa y España” [Video]. YouTube. https://www.youtube.com/watch?v=LbUlWL3H0-w

In addition, the new legislation requires companies to have transparency and ethics programs, the content of which will be determined by the competition authorities; in other words, to have compliance programs. This is positive in the sense that the firm is required to be more responsible and to participate in the fight against corruption and the protection of competition. Nevertheless, these programs must be used as tools, not to replace the competition authorities, and the latter must define them clearly so that they are genuinely effective and practical.

In turn, Colombia has aggravating circumstances that do not exist in any other jurisdiction or stand out because they have unique features. This is the case of article 67, which indicates that recidivism or the existence of past competition infringements will be deemed to be an aggravating factor, which is different, for example, from the European Union, where an aggravating factor is only considered to exist if the same conduct is repeated. The same article states that the infringing party’s conduct that tends to obstruct or delay the proceedings will be treated as an aggravating factor. This is not specific to Colombian law; instead, it is a new feature of the latter, since it did not exist in the previous legislation. Lastly with respect to aggravating factors, another new feature is the extent to which the basic amount of the fine may be increased: up to 10% for each aggravating circumstance of the infringing party, without exceeding the statutory limits. These changes or new features of Act 1340 of 2009 are described in the following table:

In conclusion, the entry into force of Act 2195 of 2022 has given rise to some controversy. The fact is that a large part of the responsibility for maintaining fair and lawful competition will no longer be solely the task of the competition authority but also enterprises themselves. Finally, following the good practices applied in jurisdictions such as the European Union, in Colombia it is possible to classify the seriousness of the infringement according to a scale and guidelines for setting fines can be applied, among other mechanisms that allow a fine to be imposed in the best possible manner in a given case. This makes it possible to maintain the deterrent effect of the system which it was sought to maintain while, in turn, not damaging the stability of competition in the market. 

These changes or new features compared of Act 1340 of 2009 can be seen more specifically in the following table:

Source: Prepared on the basis of the table presented by Anna Merino and Miguel de Quinto. Asocompetencia. (April 21, 2022). "Cuantificación de sanciones por prácticas anticompetitivas: la experiencia en Europa y España” [Video]. YouTube. https://www.youtube.com/watch?v=LbUlWL3H0-w

References

Colombian Congress. (January 18, 2022). [Act 2195 of 2022]. https://www.funcionpublica.gov.co/eva/gestornormativo/norma_pdf.php?i=175606

Mexican Congress. (May 23, 2014). Federal Competition Act. https://www.diputados.gob.mx/LeyesBiblio/pdf/LFCE_200521.pdf

Gutiérrez., J. (Entrevistado). (2022). Podcast: Antitrust and Law Practice in Latin America. [Podcast]. Spotify. Recuperado de https://lalibrecompetencia.com/2022/03/14/podcast-antitrust-law-and-practice-in-latin-america/

Krauskopf, P., Crucelegui. & J. Gokce, E.  UNCTAD. Class Actions in Competition Law. https://unctad.org/es/node/104

Chilean Ministry of Economic Affairs. (July 4, 2019). [Act 20169 of 2007]. https://www.bcn.cl/leychile/navegar?idNorma=258377

OECD (2016) Sanctions in Antitrust Cases. https://one.oecd.org/document/DAF/COMP/GF(2016)6/en/pdf

OECD (2018) Pecuniary Penalties for Competition Law Infringements in Australia www.oecd.org/daf/competition/pecuniary-penalties-competition-law-infringements australia2018.htm

OECD (2019) Latin America and Caribbean Competition Forum - Session I: Fining Methodologies for Competition Law Infringements. https://one.oecd.org/document/DAF/COMP/LACF(2019)5/en/pdf

OECD (2021), Programas de Cumplimiento con el Derecho de la Competencia, Documento de debate del Comité de Competencia de la OCDE, http://oe.cd/ccp

United States Sentencing Commission (2018), Guidelines Manual, https://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2018/GLMFull.pdf.