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PARAGUAY

Rodolfo G. Vouga Z.
Partner

rgvouga@vouga.com.py

Tel: +595 21 202 049

Rodrigo Fernández
Partner

rfernandez@vouga.com.py

Tel: +595 21 202 049

Luis Marcio Torales
Associate

lmtorales@vouga.com.py

Tel: +595 21 202 049

Cecilia Vera
Associate

cvera@vouga.com.py

Tel: +595 21 202 049

New regulation proposed

Draft Guidelines for the treatment of Confidential Information have been issued.

Confirmed up-to-date: 07/11/2021

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

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. Merger control regulation is set forth in Chapter 4 of Competition Law No. 4956/2013 (the “Paraguayan Competition Law”) and Chapter 3 of Presidential Decree No. 1490/2014 (the “Regulatory Decree”).

2) Which authorities enforce the merger control regulation?

The National Competition Commission (“Paraguayan Competition Commission”) enforces the Paraguayan Competition Law and the Regulatory Decree including the merger regulations contained therein.

Decisions of the Paraguayan Competition Commission may be appealed before the Judiciary (Tribunal of Administrative Rulings in first instance, then Supreme Court of Justice in second instance).

3) Relevant regulations and guidelines with links:

Only official versions in Spanish are available of the following regulations:

Original Spanish version

Unofficial English translation

Ley de Defensa de la Competencia

Paraguayan Competition Law. (English translation not available)

Decreto que reglamenta la Ley de Defensa de la Competencia y su decreto modificatorio de 2020

The Regulatory Decree, as amended in 2020. (English translation not available)

Instructivo para la Notificación de Operación de Concentración                           

Guidelines for the Notification of Mergers. (English translation not available)

Lineamiento para la definición del mercado relevante.

Guidelines for the definition of the relevant market. (English translation not available)

Instructivo para la Declaración de Confidencialidad de los documentos presentados ante la CONACOM

Guidelines for the treatment of Confidential Information (English translation not available)

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

For the revision of a merger filing, the notifying party must provide a description of the transaction, including any non-compete obligations assumed by the merging parties. However, there is no specific provision as to the treatment of this information, nor has CONACOM issued any guidelines or opinion on this matter.

Mergers can only be challenged if the thresholds are met.  

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.)

Other authorities cannot require merger filing in the terms set forth in the Paraguayan Competition Law.

Telecommunication’s regulator (Conatel) must approve any transfer of shares or participation in a regulated entity even if control is not acquired. There is no threshold requirement nor fixed procedure for this matter.

The Paraguayan Central Bank (BCP) must approve any transfer or acquisition of 5% or more of the voting capital of a supervised entity. The proof of origin of the funds allocated to the transaction must be submitted with the request for approval. The BCP has 30 calendar days to approve the transaction, otherwise the transaction is considered approved.

Foreign investment control

There are no FDI rules applicable.

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

No.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory, provided that at least one of the thresholds set forth in the Paraguayan Competition Law is met (see topic 14).

Types of transactions to file – what constitutes a merger

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

Yes, according to the Paraguayan Competition Law a merger subject to merger control is defined as a transaction whereby:

  1. two or more previously independent undertakings amalgamate into one undertaking;
  2. one or more persons who already control at least one undertaking, or one or more undertakings – by an agreement to purchase shares or assets or by any other means – acquire direct or indirect control of the entirety of or parts of one or more other undertakings; or
  3. a joint venture that will perform on a permanent basis all the functions of an independent business entity is established.

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

Yes, 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 on a permanent basis (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 Paraguayan Competition Law states that “control” of an undertaking is obtained through rights or agreements or in other ways that will, either separately or in combination, make it possible to exert decisive influence on the operations of the undertaking. In particular, property or usage rights over the total or part of an undertaking’s asset, and rights allowing to make decisions over the undertaking’s main controlling bodies. 

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 behaviour 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?

A joint venture would be caught under the merger control system, provided that it will perform on a permanent basis all the functions of an independent business entity.

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

The combined total annual turnover during the previous fiscal year in Paraguay of all undertakings involved is at least the equivalent of 100,000 monthly minimum salaries, which up to date is PYG 228.932.400.000.

The threshold may be met based only on turnover of one of the parties.

b) Market share thresholds

A merger notification must be filed if as a result of the merger, a market share of at least 45% is obtained or an existing market share of at least 45% is increased in a relevant market in Paraguay.

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

N/A

15) Special thresholds for particular businesses

N/A

16) Rules on calculation and geographical allocation of turnover

The Paraguayan Competition Law provides that the turnover includes the amounts resulting from the sale of goods and from the provision of services performed by the undertakings involved during the last fiscal year that corresponds to their ordinary business activities, after deduction of any discounts, value added tax (VAT), selective consumption tax and other taxes directly related to business volume.

There are no provisions applicable to the calculation of the geographical turnover. Foreign firms domiciled abroad can be subject to local merger control, provided the turnover relates to sales to customers situated  in Paraguay.

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

The Paraguayan Competition Law provides that the turnover threshold is calculated based on the combined turnover of the undertakings involved. Further, the guidelines for merger notification states that the turnover of the economic group of the undertakings involved should be considered to calculate the thresholds. Usually, only the turnover of the acquirer and the target is taking into account to calculate the threshold. It is unclear whether seller's turnover may be taken into account in a standard acquisition of sole control.

17) Special rules on calculation of turnover for particular businesses

N/A

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

Transactions that take place within a period of 2 years between the same undertakings must be treated as one.

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

The Paraguayan Competition Law specifies that there is no obligation to file a merger notification in the following situations:

  1. When credit institutions or other financial institutions or insurance companies whose normal activity includes the transaction and negotiation of securities on their own account or on behalf of third parties, temporarily hold shares that they have acquired in a legal entity with the purpose of reselling them, as long as they do not exercise voting rights inherent to said participations, or if they only exercise said right to vote in order to prepare the realization of all or part of said legal entity or its assets, and said realization is carried out within a period of 1 year from the date of acquisition (extendable per justified request); and
  2. When control is acquired by a person by virtue of a mandate conferred by a public authority in relation to liquidation, bankruptcy, insolvency, suspension of payments, bankruptcy or other similar procedure.

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

If the thresholds are met, the merger must be notified, regardless of where the participating undertakings are registered and located.

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?

N/A

Merger control even if thresholds are NOT met

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

No, the Paraguay Competition Commission will only handle a merger notification if the thresholds are met.

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

N/A

27) Referral from another jurisdiction

N/A

28) Referral to another jurisdiction

N/A

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

A merger notification must be filed within 10 business days after a binding agreement has been concluded, a takeover bid has been published or a controlling interest has been acquired, whichever takes place first, according to the interpretation of the Paraguayan Competition Authority.

31) Pre-notification consultations

The Regulatory Decree allows pre-notification consultations, which should be conducted in the form of interviews with the members of the Board of Directors of the Paraguayan Competition Commission.

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

There are no special rules on timing of notifications for public takeover bids or acquisitions on stock exchanges. 

33) Forms available for completing a notification

There are no available forms for the notification of a merger. The only available guideline provides a list of information that a merger filing should include, along with other formal requirements (see topic 35).

34) Languages that may be applied in notifications and communication

Spanish. Note that all documents issued in a foreign language must be translated into Spanish by a local sworn translator. 

35) Documents that must be supplied with notification

The following documents must be supplied with a merger notification:

  1. Original or certified copies of the Power of Attorney granted by the notifying party.
  2. Group chart/overview for each of the parties to the merger.
  3. The annual financial statements of the parties to the merger for the previous fiscal year.
  4. Copy of the executed version of final agreement.
  5. List and description of goods and services manufactured or offered by the undertakings involved.
  6. Optional for the notifying party, any document, analysis, report, serving to demonstrate that the merger is compatible with the provisions of the Paraguayan Competition Law.
  7. Documentation of payment of the applicable filing fee.

Further, the following information must be included in the merger notification:

  1. Identification of the undertakings involved.
  2. Name, address, phone, email and position of the responsible party for the notification that will act as an intermediary before the Paraguayan Competition Commission.
  3. Description of the merger and the type of transaction and any applicable non-compete clauses.
  4. Information on whether any of the undertakings involved in the transaction have a direct or indirect participation in the social capital, management or activities of other undertakings (not involved in the transaction) manufacturing or trading goods or services similar to those of said undertakings involved in the transaction.
  5. Value of the transaction.
  6. Market Share of the undertakings involved and their competitors.
  7. Location of the undertakings involved and their main distribution centres.
  8. Information regarding foreign approvals.

36) Filing fees

The filing fee for a merger notification is set at 0.005% to 0.1% of the value of the transaction, depending on the amount – the higher the amount, the lower the fee rate. Fees are paid upon filing the merger and the Paraguayan Competition Commission is entitled to review the settlement of the filling fees.

Transaction value (monthly minimum salaries)

Filing fee (percentage of transaction value):

Less or equal to 30.000 monthly minimum salaries.

0.1 %

30.001 to 100.000 monthly minimum salaries.

0,04%

100.001 to 200.000 monthly minimum salaries.

0,02%

200.001 to 255.000 monthly minimum salaries.

0,01%

255.001 to 300.000 monthly minimum salaries.

0,009%

300.001 to 400.000 monthly minimum salaries.

0,008%

More than 400.001 monthly minimum salaries.

0,005%

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

37) Is implementation of the merger before approval prohibited?

The Paraguayan Competition Law does not expressly prohibit the implementation of a merger before its approval by the Paraguayan Competition Commission. There is no suspensory provision for parties undergoing a merger filing review. Parties are allowed to request a previous approval of a merger before closing, for which the procedure set forth in the Paraguayan Competition Law and the Regulatory Decree for the revision of merger filings, would apply.

Nonetheless, the Board of Directors of the Paraguayan Competition Commission holds that mergers must be approved by the authority before implementation, based on the fact that the merger filing is mandatory, and prior approval is therefore required. This criterion was stated in case law and in a response to a non-binding consultation.

Consequently, it is encouraged to obtain merger clearance prior closing, particularly when rejection or the impositions of conditions are possible scenarios.

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

There is no express provision applicable to permissions prior to implementation. See topic 37.

39) Due diligence and other preparatory steps

There are no provisions or guidelines regarding this matter. If parties agree that the implementation of the merger is subject to the Paraguayan Competition Commission’s prior approval, the parties should abstain from exchanging sensitive information or any other act that could lead to possible assumption of coordinated conducts.

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

There are no provisions regarding this particular matter. If parties agree that the implementation of the merger is subject to the Paraguayan Competition Commission’s approval, the parties are expected to act independently until final clearance is granted.

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

There are no specific rules on “carve out” of the Paraguayan part of a transaction to avoid delaying implementation in the rest of the world pending approval in Paraguay.

42) Consequences of implementing without approval/permission

There are no specific sanctions set forth for implementing a merger before obtaining approval from the Paraguayan Competition Commission.

Nevertheless, note that if a merger notification is filed post-closing and it is then rejected by the Paraguayan Competition Commission, such merger would have to be undone. If conditions are imposed, parties must comply with such conditions.

Further, the Paraguayan Competition Commission considers that a rejected or conditioned merger that was implemented before clearance could be considered as anticompetitive behaviour by the parties to the merger, and thus could lead to the initiation of an investigation for the imposition of sanctions. In view of this, it is advisable to request prior approval of problematic mergers and to evaluate possible unwanted outcomes resulting from this.

The process – phases and deadlines

43) Phases and deadlines

Phase Duration/deadline

Pre-notification phase:

There are no formal rules on pre-notification consultations. They would be conducted as interviews with the Board of Directors of the Paraguayan Competition Commission.

No set duration or deadline

Assessment of completeness of notification:

When the merger notification has been formally submitted, the authority must assess whether the notification is complete within 5 working days. If the notification is complete, Phase I will begin. If the notification is deemed incomplete, the authority must declare this within the 5 working days’ deadline and state which information is missing.

5 working days.

Extension:
If notification is declared incomplete, the authority will have another 5 working days to assess completeness after supplementary information has been submitted.

Phase I:

The merger notification can be: declared inadmissible if it does not fall under the scope of merger control regime; approved (with commitments if relevant); or, if a deeper analysis is required, sent to Phase II.

In practice the Paraguayan Competition Commission issues a request for additional information during this phase. The parties have 15 working days to respond to any request for additional information, extendable once for the same period of time.

Merger notifications are usually sent to Phase II, even if they are not complex or problematic.

30 working days from the date when Phase I was declared open.

Extension:
15 working days for the parties to respond to any request for additional information, extendable once for the same period of time, i.e. up to 30 days extra in total.

Phase II:

The merger is approved, approved with conditions/commitments or prohibited.

If no decision is issued after 60 working days counting as from the initiation of Phase II, a tacit approval takes place.

Normally, the Paraguayan Competition Commission issues a request for additional information during this phase as well.

Conditions or commitments would be discussed, if necessary. 

60 working days from the date when the Phase II investigation was initiated.

Extension:
15 working days for the parties to respond to any request for additional information, extendable once for the same period of time, i.e. up to 30 days extra in total.

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

It is assessed whether the merger significantly impedes effective competition due to the creation or strengthening of a dominant position.

A range of factors may be taken into consideration, including the structure of the market, the need to preserve and develop an effective competition within such market; the competitors’ position in the relevant market, the competitors’ economic capacity, the possibility of choosing suppliers, barriers to entry or exit; as well as efficiencies that may be gained from the merger (productive efficiencies or dynamic efficiencies), which must be proven by the notifying party.

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. No further criterion on this matter has been developed so far.

47) Decisions and remedies/commitments available

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

If the Paraguayan Competition Commission expresses serious concerns about the merger, it is important that the parties enter into negotiations on possible commitments well before the expiry of the deadlines. Commitments may take any form and they can be either structural or behavioural, and with or without time limitations.

The authority will establish a compliance program for the conditions, whereby the extent of the conditions, the schedule of the activities, and the implementation mechanism will be established. The conditions may be amended if external circumstances arise which make complying with the program difficult.

Failing to comply with the conditions imposed by the Paraguayan Competition Commission could lead to the initiation of an administrative procedure for imposition of sanctions.

Publicity and access to the file

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

The Paraguayan Competition Commission publishes a non-confidential version of the merger notifications received, excluding any documents provided with the notification. The final decision issued is also published.

To protect business secrets, parties are allowed to request the Paraguayan Competition Commission to safeguard confidential information, provided they justify the reason for that request in accordance with the provision of the Paraguayan Competition Law.

There are no terms set forth for the Paraguayan Competition Commission to publish their decision or any notice about the merger notifications.

The Paraguayan Competition Commission has issued draft Guidelines for the treatment of Confidential Information where the rules applicable to this matter are included. 

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

The merging parties:

The merging parties have a right to access to the file, which includes correspondence with third parties that the Paraguayan Competition Commission may have had, including market survey questionnaires as well as an overview of all documents/correspondence in the file.

However, the authority may redact third parties’ confidential information, often including the identity of such third parties. There is no right of access to the authority’s internal documents and correspondence.

Third parties:

The Paraguayan Competition Law and the Regulatory Decree only grant the parties access to the files, though it is unclear whether third parties may have access to non-confidential information of the files.

Judicial review

50) Who can appeal and what may be appealed?

The Paraguayan Competition Commission’s decisions can be appealed by the notifying party before the Judiciary (Tribunal of Administrative Rulings). At option for the parties, a motion to reverse could be filed before the Paraguayan Competition Commission prior to initiating judicial actions.

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


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