Superintendency of Market Power Control resumes some M&A authorization procedures and creates an abbreviated notification procedure

On April 20, 2020, the Superintendency of Market Power Control (“Competition Agency”) issued two resolutions[1] that mainly:

1. lift the suspension of time periods in merger notification procedures;
2. create an abbreviated procedure for mandatory prior merger notification. One of the criteria to access the new procedure is that of “failing firm” (where there is a risk of bankruptcy); and
3. modify certain aspects of the mandatory merger notification procedure.

Due to their relevance, this newsletter will address 1 and 2 above.

1. Lifting the suspension of time periods:

1.1 Ongoing operations: 

• The suspension of time periods ordered on March 16, 2020 is lifted[2], but only for merger notification procedures in respect of which the Competition Agency has already been provided with the information required to issue a resolution.
• To this effect, by April 23, 2020 the National Merger Control Office (“Merger Control Office”) will have given notice thereof to the companies to which this applies.
• Procedural time periods will be resumed when the Merger Control Office gives such notice to the parties (not on April 20, 2020).

1.2 Operations that have not yet been notified:

• The suspension of time periods is also lifted for new operations that are subject to mandatory notification, provided that they meet any one of the following two requirements:
  • The Competition Agency has adequate and up-to-date information on the affected markets for 2018 and/or 2019.
    In other words, new operations must be notified during the emergency within the usual time period of 8 days, but the remaining procedural periods will start only if so ordered by the Competition Agency if it believes it has adequate information.  Otherwise, the assessment of notified operations will begin after the emergency is over; or
  • The operation may be processed through the newly created abbreviated prior authorization procedure (see below).

For all other M&A operations (and for other types of administrative procedures), the suspension of time periods remains in place.

2. Creation of an abbreviated procedure for mandatory prior merger notification:

The Competition Agency issued a resolution to modify its Instructions on Administrative Procedural Management and to create an “abbreviated procedure for mandatory prior merger notification”  ̶  an expedited procedure for approval of business operations that “do not involve a risk of harmful impact on free competition.”

To use the new procedure, companies must meet any one of the following requirements:

a) The operator taking control does not directly or indirectly conduct business in Ecuador.

b)The parties’ joint share in each of the relevant markets (both for horizontal and vertical mergers) is less than 30%.

c) For horizontal mergers, in each relevant market the pre-merger Herfindahl-Hirschman Index (HHI) is less than 2000 points and the post-merger variation is less than 250 points.

d) For vertical mergers, in each relevant market the pre-merger Herfindahl-Hirschman Index (HHI) is less than 2000 points.

e) The operation involves economic operators that are in risk of bankruptcy, i.e.:

• The target company is unable to meet financial obligations in the near future;
• There are no alternatives that are less restrictive of competition;
• If the merger does not occur, the target company will cease to participate in the market.

It will take about at least 37 business days counted from the filing of the notification to complete the new procedure.

Contact us:

• Diego Pérez-Ordóñez | Partner
• Mario Navarrete-Serrano | Senior Associate

[1] Resolution No. SCPM-DS-2020-018 and Resolution No. SCPM-DS-2020-019.

[2] See Resolution No. SCPM-DS-2020-14.