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ECUADOR

Javier Robalino
Managing Partner

jrobalino@robalinolaw.com

Tel: +(593 2) 381 0950

Daniel Robalino
Partner

drobalino@robalinolaw.com

Tel: +(593 2) 381 0950

Myriam Illescas
Associate

millescas@robalinolaw.com

Tel: +(593 2) 381 0950

Pallares Sevilla
Partner

mpallares@robalinolaw.com

Tel: +(593 2) 381 0950

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.

Confirmed up-to-date: 21/09/2022

(Content available free of charge at Mergerfilers.com - sponsored by Robalino)

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. Merger control regulation was introduced with the Organic Law of Regulation and Market Power Control (Ecuadorian Competition Law), its Regulations (the Regulations) and the Instructions issued by the Competition Authority (Superintendency of Market Power Control).

2) Which authorities enforce the merger control regulation?

The National Intendency of Investigation and Merger Control enforces the Ecuadorian Competition Law. They are responsible for the investigation phase which finishes with a report recommending the merger approval or recommending to subject it to the fulfillment of certain conditions.

After this, the First Instance Resolution Committee will decide on the report, accepting it or implementing the conditions it deems necessary.

3) Relevant regulations and guidelines with links:

The merger regulation is contained in Chapter 2, section 4 of the Ecuadorian Competition Law. More detailed rules may be found in its Regulations. Links to the relevant legislation, guidelines and forms are listed here:

Original Spanish version Unofficial English translation

Ley Orgánica de Regulación y Control de Poder de Mercado

Ecuadorian Competition Law

(Not available in English

Reglamento a la Ley Orgánica de Regulación y Control de Poder de Mercado

(There is not an updated link for this regulation.)

Ecuadorian Competition Law Regulation

(Not available in English)

Formulario para la Notificación de Operaciones de Concentración Economica

Filing Form (Not available in English)

Resolución No. 009 de la Junta de Regulación de la Ley Orgánica de Regulación y Control de Poder de Mercado

Resolution No. 009 issued by the Board of Regulation of the Ecuadorian Competition Law.

(Not available in English)

Instructivo para el Pago de la Tasa por Análisis y Estudio de las Operaciones de Concencentración Económica.

Guidelines for fee payment for analysis of the merger.

(Not available in English)

4) Does general competition regulation apply to mergers or ancillary restrictions?

A merger as such cannot be prohibited if the thresholds for merger control are not exceeded.

Ancillary restrictions have to be analyzed during the merger notification process.

5) May an authority order a split-up of a business irrespective of a merger?

No.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Yes. Certain economic sectors are regulated by the State via agencies of control which may require specific filings and prior clearance in case of merger.

The regulated sectors include:

  • energy in all its forms,
  • telecommunications,
  • non-renewable natural resources,
  • transport, hydrocarbons,
  • biodiversity,
  • genetic patrimony,
  • radioelectric spectrum and
  • water.

Foreign investment control

There are no special rules for foreign investment.

7) Are any parts of the territory exempted or covered by particular regulation?

No, the Ecuadorian Competition Law, is applicable in all Ecuadorian territory.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided the thresholds are met. 

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

The following transactions etc. may be subject to merger control:

Economic concentrations involving a change in or takeover of control on a lasting basis, with an impact on the structure of the market, in one or several economic operators through the following acts:

  • mergers;
  • assignment of assets of a trader;
  • direct or indirect acquisition of shares, equity or debt certificates if they grant influence over the other operators’ decisions, thereby giving the acquirer control or substantial influence in the other operator;
  • joint venture and administration agreements; or

any other act or agreement transferring the assets of an economic operator, or granting control or determinant influence on an economic operator’s adoption of regular or extraordinary administration decisions.

10) Is "change of control" of a business required?

Yes, generally a merger will only be considered to take place if the transaction results in a change of control over a business.

However, transactions that result in the establishment of a new business (a joint venture) controlled by two or more businesses or persons already controlling one or more businesses will also constitute a merger.

11) How is “control” defined?

The Regulation states that control may result from contracts, acts or any other means that, taking into account the circumstances of fact and law, confer the possibility of exerting a substantial or determining influence on a company or undertaking. Control may be joint or exclusive.

12) Acquisition of a minority interest

Acquisition of a minority interest that does not result in anyone gaining control over a business is not subject to merger control.

However, if acquisition of a minority interest confers someone with de facto control of a business, the transaction will be subject to merger control. This is, for instance, the case if the buyer is provided with veto rights regarding decisions that are essential for the strategic behavior of the business or if the remaining shares are spread over a large number of shareholders and the acquired shares de facto confer the buyer with a decisive influence on general meetings.

13) Joint ventures/joint control – which transactions constitute mergers?

The creation of a new joint venture is notifiable if the parents contribute existing businesses with sufficient market share or turnover to meet the thresholds.

There is no requirement that a joint venture must be “full function” or similar in order to be notifiable.

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

A merger notification must be filed if the combined annual turnover of the undertakings in Ecuador in the year preceding the transaction exceeds an amount fixed by the Regulation Board. The turnover threshold is currently as follows:

Type of merger

Basic Remunerations

Value (USD)

Concentrations involving financial institutions and entities that participate in the stock exchange

3.2 million

1.28 billion

Concentrations involving insurance and reinsurance companies

214,000

85.6 million

Concentrations involving undertakings not contemplated in (a) and (b)

200,000

80 million

Note: The unified basic remuneration in Ecuador for 2021 is US$400

b) Market share thresholds

A transaction must be notified if one of the parties holds a market share equal to or exceeding 30 % in a relevant market in Ecuador, regardless whether the transaction reinforces this market share.

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

N/A

15) Special thresholds for particular businesses

There are special thresholds for financial institutions and entities that participate in the stock exchange as well as insurance and reinsurance companies - see the turnover thresholds in topic 14. 

16) Rules on calculation and geographical allocation of turnover

The turnover thresholds are based on turnover in Ecuador.

To calculate the total turnover of each of the participating undertakings, the business volumes of the following companies or economic operators must be added:

a) The participating undertaking.

b) Companies or economic operators in which the undertaking has, directly or indirectly:

  1. Of more than half of the subscribed and paid capital.
  2. The power to exercise more than half of the voting rights.
  3. The power to appoint more than half of the members of the administrative bodies, surveillance or legal representation of the company or economic operator; or,
  4. Of the right to direct the activities of the undertaking.

c) Those companies or economic operators that have the rights or powers listed in literal b) with respect to the acquire undertaking.

d) Those companies or economic operators in which a company or economic operator of those contemplated in literal c) have the rights or powers listed in literal b).

e) The companies or economic operators in question in which several companies or operators of those contemplated in paragraphs a) to d) jointly dispose of the rights or powers listed in literal b).

There is no guidance on the geographic allocation of turnover in the Competition Law or the Regulations. However, the SCPM accepts turnover allocated on the basis of customer location or delivery location.

In cases where turnover allocation may not be clear, the SCPM will provide guidance upon consultation.

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?

No.

17) Special rules on calculation of turnover for particular businesses

N/A

18) Series of transactions that must be treated as one transaction

There are no provisions for treating separate transactions together. However, the thresholds can all be met by one party alone, so it is not possible to break up a transaction to avoid a notification obligation.

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

Merger filing is only required if there is a change of control on a lasting basis.

20) Special industries, owners or types of transactions

N/A

21) Transactions involving only foreign businesses (foreign-to-foreign)

There is no exemption for foreign-to-foreign transactions. All transactions that meet the thresholds are subject to merger control regardless of where the undertakings concerned are registered, operate or own assets.

22) No overlap of activities of the parties

There is no exemption for transactions with no overlap of activities.

23) Other exemptions from notification duty even if thresholds ARE met?

The following transactions are exempted from notification:

  1. Acquisitions of shares without voting rights, or of bonds, obligations or any other title convertible into non-voting shares.
  2. Acquisitions of a business from a liquidated economic operator or other business that have not registered activity in the country in the last three years.
Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

Yes, the parties may file a notification for informative purposes. However, this will not allow the First Instance Resolution Committee to prohibit the merger or impose remedies, unless its evidenced during the investigation that it was required to be notified and that certain remedies are applicable. 

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No.

Referral to and from other authorities

26) Referral within the jurisdiction

There is no other authority in Ecuador that deals with issues related to mergers and acquisitions.

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

The Ecuadorian Competition Authority has signed international cooperation agreements with 12 jurisdictions. However, these are not focused on referring cases, but rather serve for the exchange of information in relevant proceedings. Depending on the complexity of the case, information may be exchanged more than once to obtain clarification.

29) May the merging parties request or oppose a referral decision?

N/A

Filing requirements and fees

30) Stage of transaction when notification must be filed

Notification must be made within eight calendar days from the date of the ‘conclusion of the agreement’. Generally, conclusion of the agreement will take place on the date when the general terms and conditions of a transaction are accepted by the parties through their governing bodies or the appointment of local administrators.

31) Pre-notification consultations

In case of doubt as to whether a transaction is notifiable or not. A prior consultation with the Competition Authority may be carried out.

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

No.

33) Forms available for completing a notification

There is one form available (see link under topic 3).

34) Languages that may be applied in notifications and communication

Spanish. 

35) Documents that must be supplied with notification

The following documents should always be supplied with a merger notification:

  1. Copy of the documents related to the legal act that gave rise to the merger;
  2. Financial statements each of the economic operators involved in the merger, for the year preceding the transaction.
  3. Analysis, reports and studies that are considered relevant.
  4. Confidentiality request regarding the information provided.
  5. Affidavit that the information provided in the notification and its attached documents are true and that the opinions, calculations and estimates have been made in good faith.
  6. The notification and its attached documents must be submitted in two physical copies and digital copy.
  7. Translations for documents written in other language.

36) Filing fees

TOTAL TURNOVER OF THE PARTICIPATING UNDERTAKINGS (USD)

FILING FEE

Less than 5,000,000

Half of the base rate

From 5,000,000 to 106,000,000

Base Rate

More than 106,000,000

Double Base Rate

Note: Base rate for 2021: USD. 23.024.56

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes. The merging businesses must be run separately and independently until the merger has been approved. Implementing it before having clearance is considered a serious offence under the Ecuadorian Competition Law subject to fines corresponding to 12 % of the preceding annual turnover.

38) May the parties get permission to implement before approval?

No.

39) Due diligence and other preparatory steps

Due diligence can be conducted in a way that prevents sensitive market information from being used for purposes other than assessing the viability of the merger.

40) Veto rights before closing and "Ordinary course of business" clauses

An "ordinary course of business" clause that prevents the target company from taking decisions outside the course of its ordinary business until the closing date is generally considered acceptable.

41) Implementation outside the jurisdiction before approval – "Carve out"

The SCPM has accepted carve-outs of the Ecuadorian business in order to allow closing to proceed outside of Ecuador.

42) Consequences of implementing without approval/permission

The Law is very severe in its application of fines for lack of, or late notification of, transactions subject to merger control. The amount of the fines will depend on the state of execution of the transaction once the regulator initiates its investigation.

Late notification (that is, notification outside the eight-day term since the administrative bodies of the parties have accepted the merger) is considered a minor offence under the Law, whereas completion of the transaction prior to notification, or prior to approval, is considered a serious offence under the Law. Minor offences are subject to a fine amounting to 8 % of the annual turnover in Ecuador of the combined entities in the year preceding the imposition of the fine.

Serious and very serious offences such as completion of the transaction prior to notification are subject to fines corresponding to up to 12 % of the annual turnover.

Fines are regulated by Regulation No. 012, which states that the fines should be calculated only taking into account turnover in the relevant market, along with other aggravating or mitigating factors.

The process – phases and deadlines

43) Phases and deadlines

 Phase

Duration

Pre-Notification Meetings

Before the notification is submitted, undertakings involved may request meetings with the Intendency for guidance on document submission.

No set duration or deadline

Document Submission

Upon document reception, the Secretariat will review the notification and submit it to the General Technical Intendency which will, in turn, submit it to the National Intendency of Merger Control and Investigation, for it to acknowledge receipt in no more than three business days.

The National Intendency of Merger Control and Investigation must acknowledge receipt of notification within 3 business days.

Verification/completeness

The National Intendency of Merger Control will review whether the notification is complete in no more than 5 business days, during this time they may:

  • If information is complete, acknowledge the notification, open a file and begin investigation.
  • If information is not complete, request the undertaking for additional information to be completed in no more than 10 business days.

The National Intendency of Merger Control must verify completeness of the notification within 5 business days.

Investigation

The investigation is devided in phase I and II which will have a total duration of up to 60 business days plus possible suspension and/or extension.

Phase I

Investigation: SCPM will resolve whether a transaction requires a broader analysis. In case the merger is deemed harmless, the Intendency will submit a technical report stating this to the Commission. (15 days)

If the transaction requires further analysis, the Intendency shall notify the beginning of Phase II, which will start at day 16.  

Resolution: If a report is submitted to the Commission stating that the merger is harmless, the Commission will have 10 business days to resolve. (total 25 days for phase 1)

Phase II

Investigation: In phase II, the investigation begins on day 16 and it may last until day 55.

Resolution: Once the investigation is completed, a report is submitted to the Commission. On this basis, the Commission shall have the number of business days remaining to complete 60 business days to issue a decision.

60 business days.

Possibility for suspension for 45 calendar days.

Extension for additional 60 business days.

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

It is assessed whether the merger will significantly impede effective competition – in particular due to the creation or strengthening of a dominant position.

It is also assessed whether changes derived from the transaction in the structure of the affected markets lead to concerns from an antitrust point of view - a strengthening of market power that could lead to unilateral prohibited conducts.

A range of factors may be taken into consideration, including efficiencies that may be gained from the merger (efficiency defense) and whether one of the parties is likely to fail as an independent business (failing firm defense).

45) May any non-competition issues be considered?

No.

46) Special tests or criteria applicable for joint ventures

The assessment for joint ventures is the same as for other mergers.

47) Decisions and remedies/commitments available

A merger may be approved, approved with conditions/commitments or prohibited.

Commitments may take any form and they can be either structural or behavioral and with or without time limitations.

If a merger has been implemented without approval, the authority may order the divestment of the business as well as imposing fines.

Publicity and access to the file

48) How and when will details about the merger be published?

The Ecuadorian Competition Authority will generally make a public announcement when a decision has been taken regarding a merger notification. The latter announcement will include a non-confidential version of the decision. The level of detail of decisions varies considerably.

Time and content of announcements will be coordinated with the parties. To protect business secrets, the parties are requested to provide a non-confidential description of the transaction with the notification and to identify any confidential information in the notification and the final decision.

49) Access to the file for the merging parties and third parties

The merging parties:

Pursuant to the provisions of Competition Law, the pre-notification procedures and investigation procedure, are confidential, except for the parties directly involved; who may have access to the file with the exception of the information duly classified as confidential.

Third parties:

Third parties do not have access to the file, but the Competition Authority may decide to provide third parties with a non-confidential version of the notification.

Judicial review

50) Who can appeal and what may be appealed?

Resolutions issued by the Competition Authority, may be appealed before the Superintendent for the Control of Market Power, within 20 days from their issuance.

Third parties may not appeal any decisions under the merger control regulations.


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