Mercado, empresas y consumidores, Defensa de la competencia Parte 2

With regard to unfair competition

within the framework of competition,

the law that you need to be studying

is Law 18.159. The purpose of this law, while on the

one hand it is to legitimize the

defense of competition, which we will

see shortly, the other purpose of this

law is precisely to

sanction the competitor who

uses illicit means to compete in

the market, harming the competition

and

producing a deviation from the competition

by using unfair means that are

classified as illicit.

In this sense, we are going to see what

those elements are that must be

configured simultaneously to understand

that competition is taking place.

One particularity before getting into

this point is that our law

promotes competition

because competition comes

from the constitution as something

that is good to generate in the

market because it is efficient. The issue is

when there is

illicit means and

harm is being generated, that is what this law

intends to prevent. So, what

are these

elements that constitute unfair competition? Competition

is real; there must be

concurrence. Unfair competition is impossible

if the activities

carried out by the agents are not

competitive with each other. For example, a

butcher shop is not competitive with a

shoe store because there is no way for the

shoe store to attract the

butcher shop's customers. Therefore, there must be a

certain similarity of products that

generates the possibility for both

businesses to compete with each other for

customers. If there is no

shared clientele, there is no possibility of

diversion.

The second element is that there must not only

be concurrence but also an

illicit means. For example, under

our legal system, based

precisely on what I

mentioned earlier, which is the principle of

Article 36 of the Constitution, that

each person has freedom of choice

of profession or industry, while

competition is legal, this does not preclude the

use of unfair means

when this competition also employs

unfair means. What the legislator

intends is to regulate and prevent this from

happening, and it is also required that

a risk be generated. Diversion of customers from one

competitor to another,

from risk or diversion of customers from

one competitor to another, that is, the result

is that this illicit means of competing

must translate into the actual diversion

of customers or the risk of a certain

actual diversion of customers.

At the level of doctrine,

the

following acts of confusion have been considered unfair means of competition. For

acts of confusion to occur,

for example, there is a businessperson

who has a reputation in the sector of

that activity and who wants to be taken

advantage of by another businessperson who is

in the same sector of activity but

whose product has less prestige

than the other. So this second

businessperson who has less prestige

makes the presentation of the product, the

packaging, the brand very similar to that of the

first businessperson who has even

greater prestige and what he seeks

unfairly is to confuse customers,

attracting them to buy his own

product and not the other one, the one that has

greater prestige

in the sector. In the exercises that we marked, there was

one that I shared with you, which was to

inject with two boxes of chocolates for an

hour per Ferré roll, and another from another

company that would be precisely This

second businessman, who doesn't have as much

prestige, and if it can be understood as a

dairy confusion, the one where the packaging

was identical, I

think even the sizes and the material

of the boxes, what tends to be good is that

I only get a customer thinking it's Ferro de

Roger, but I'm buying from this

second businessman who has less

prestige. This would be an act of

confusion. Another act is

migration, when the competitor spreads

false information and perspective about their

competitor. It has to have both

characteristics: it has to be false and it must be

negative. That is, when the businessman

tries to denigrate a competitor so that

the first one's clientele

is diverted to the second. Where have you

seen this? In some advertising, for example,

there is an advertisement, I don't know if you

remember it, I think it

was for Pepsi and it used

Coca-Cola kittens to climb onto the

Pepsi machines and make the Pepsi rule. It is the type

of advertising where two

direct competitors, one tries to denigrate and give

false information about the other. It is also

a behavior that is understood as a

means of competition. Also, for

example, I don't remember well, but there have been

advertisements with Soap brands,

and previously the brand of another, a

direct competitor, was displayed, which was

precisely about giving false information and

perspective.

Another means is

disorganization, which implies that, through

improper means, disruptions are generated in the

organization of the

competitor's company. For example, through

improper means, a businessperson learns

industrial or commercial secrets of a

competitor and reveals them. Obviously,

this revelation of secrets can lead

to a loss of clientele, and it

is clearly a means of real competition that

is covered by this law. So what is

done is legal protection against

acts of unfair competition. The first

norm that regulates and precisely sanctions

real competition is the

Paris Convention for the Protection of Industrial Property,

dated March 20, 1883, and its Article

10 bis defines what is understood

as real competition.

Our legal system

has ratified the Paris Convention, and therefore it

constitutes domestic law and

is not applicable. What it establishes and defines

as fair competition is that which is

contrary to honest practices in

industrial or commercial matters, and it adds

that, in particular,

acts likely to create confusion

regarding the Establishing the

products or the industrial or

commercial activity of a competitor, or

false claims in the exercise of

commerce capable of discrediting the

establishment, the products, or the

industrial or commercial activity of a

competitor, or statements that

could mislead the public

about the nature, method of

manufacture, characteristics,

suitability for use, or quantity of

products—as can be seen, the

main means that the doctrine

recognizes as suitable for generating

unfair competition, that is,

acts of emigration, means of

disorganization, and acts of construction,

are precisely regulated by this

norm. That is to say, in

our Uruguayan law,

these acts of unfair competition

constitute unlawful acts whose commission

generates the obligation to repair the

damages caused,

and other foundations in national law

that can be applied to

justly compensate for the damages caused by

real competition can be

found in the general principles

of the civil code, the subject matter of

liability for unlawful acts,

article 319: every unlawful act of

man generates the obligation to

indemnify, and to the extent that the

unlawfulness is already typified by the

Paris Convention, the

obligation to repair the damages is generated. And

damages caused.

Well, now finally, we're going to get into what is

competition law.

This is the same law we've been developing, Law

18.159, and its purpose is precisely to

protect the normal development of

economic equity and

free competition, avoiding

competitive distortions. Free

competition in the market aims to achieve the

greatest economic efficiency and, ultimately,

the best well-being for the population.

Regarding the regulation and limits of

competition law, the objective

is to preserve the general welfare

and economic efficiency.

And as we just saw, regarding

unfair competition, the objective is to

prevent unlawful harm to a

consumer caused by it.

So, we're going to get into

competition law. The model, for example, if

we look at the history of the US, was and

still is

the limitation of

construction operations or business concentration,

and even within its regulations,

they admit anti-competitive conduct. That is to

say, these

conducts themselves, beyond their objective, the

results will be classified as

anti-competitive.

In the example of the American model, the

most typical

anti-competitive measure is

price fixing. Minimum or maximum

supply levels for a good or service

are behaviors that tend to decrease

consumer surplus.

On the other hand, European regulations

are designed to favor the

European Union by preventing the creation of barriers

to entry for national businesses against

competition from ventures

beyond the geographical borders of each

member state. In this case, what characterizes

the provisions of the European model

are related to the performance of

individual or

collective anti-competitive acts or agreements, and also to

the abuse of a

dominant market position.

Therefore, in all cases,

the rule of reason must be followed, which

implies that it does not admit any hypothesis

of anti-competitive acts. This

is a major difference with the

US model, which does have a clear direction, meaning it

regulates certain

anti-competitive behaviors. Regarding

the regime in

our country, it is fundamentally the

European model in this matter.

Therefore, it prohibits acts that may have the

object or effect of distorting

competition in the market, and it also

prohibits the abuse of a

dominant position. But it has the rule

of reason, meaning that it does

not regulate

anti-competitive conduct. It seems appropriate to

establish that Article 1 of

Law 18.159 stipulates that it is a regulation

of public order. This means,

like consumer protection law,

that it cannot be disregarded by the

will of the parties; it is therefore non-derogable and

of public order. The

objective of this law is to

promote the well-being of current and

future consumers. The guiding principle

is free competition, which, as we

saw, comes from Article 36 of the

Constitution.

Therefore, all markets are

governed by the principles of free

competition, except for the exceptions provided by

law. Article 3 of

this law establishes that all

markets are subject to the

competition law, and so are

all persons, whether public or

private, always within the

national territory. Article 2

regulates the prohibition of

abuse of dominant position, as well as prohibiting

all anti-competitive practices and

conduct that have the

object or effect of limiting, distorting, or

restricting competition in the market,

whether current or future. This

is also provided for in Article 2.

The advantage of a better positioning

in the competitive

market, or rather, the positioning of an economic agent as a consequence of its own

commercial or business success, does not

constitute anti-competitive conduct. Nor does it occur

when the

law grants a special benefit or privilege

to a specific individual. This

situation does not only involve receiving the

powers of activities

developed in a monopolistic manner as a

consequence of regulations that conferred

legal monopolies for their exploitation. It

must be borne in mind, then, that

our law does not foresee

anti-competitive conduct.

To understand, or rather, to be able to

comprehend and develop this area, the

legislator is the one who regulates what constitutes the

relevant market,

and this will allow us to analyze whether

or not a certain conduct exists in

the market.

It is necessary to know the sector of

activity and its geographical scope. It is

understood that the broader

the relevant market is in terms of

substitute goods and

geographical scope, the less likely there is that

anti-competitive conduct will develop because there are many more

substitutes in a larger

geographical area. The law contains a

definition of relevant market that

allows us to analyze the

economic terms. To determine the existence of

anticompetitive conduct, it is

necessary to analyze

the existence of substitute products or services,

as well as the geographical scope of

the market.

The regulated conduct controlled by the law

is

established in Article 4, which outlines

prohibited practices. This list is not

exhaustive but rather illustrative,

meaning it serves as an example;

more practices may be considered

prohibited.

Among them, I

recommend a detailed reading

of the article. You will find, for example, the

application of prices or quantities to be

sold in the market; that is, the situation

in which these businesses

agree among themselves on how much

each will sell, in which

geographical market, and at what price.

These are known as

collusive practices. One factor that

facilitates this is the presence of few

producers or suppliers who

know each other and where

conditions exist for reaching an

agreement.

Another example that also constitutes

prohibited conduct established in

Article 4 is collusive agreements

between construction companies, which

are relatively scarce in our country, and

which suppliers... Public tenders for

infrastructure projects

are known to each other, so trusting

them beforehand—

who will submit a bid, what price they will

bid, and why the tenders are divided up in the

market—is

another way of colluding. The

literal "ife" (i.e., article 4) also

establishes preventing competitors' access

to infrastructure

essential for production,

distribution, or marketing. For

example, if

a competitor asks

you to use your

electrical power cable infrastructure to sell electricity, and

you refuse, this would be a prime example of

conduct

described in the literal "ife."

So let's go a step further and see what

abuse of a dominant position is,

which is regulated in article 6.

When there is a dominant position in the

market, the situation arises when

an economic agent can unilaterally change

essential variables in this

sector of activity without considering any other agent. Fundamentally, they

can change the quantity or prices

without taking into account what their

competitors or buyers might do. The

typical example of a dominant position The dominant position is that

of a monopolist, who

is clearly the sole supplier of a

particular good or service in the

market.

It is clarified that a dominant

market position is not

anti-competitive conduct. This is because

a dominant position is a

factual reality in the market; that is,

monopolies exist, they are not

prohibited. The law, in Article

6, prohibits the abuse of a

dominant position, which is defined by law as

a situation in which the agent or agents in a

dominant position act improperly

to obtain a profit that does not

correspond to the rules of competition

or to harm third parties.

It is necessary to define, then, on a case-by-case basis, when

conduct becomes

abusive. The classification of these

conducts will generally be carried out

by the law's enforcement agency,

which is the Commission for the Promotion and

Defense of Competition,

dependent on the Ministry of Economy and

Finance, and whose purpose is

precisely to determine whether

or not conduct should be classified as

anti-competitive.

The third type of conduct regulated

by the law is that of concentrations, which it

refers to in Articles... 7 and 9.

Firstly, there is a

notification obligation regulated by

Article 7, which establishes the obligation to

report certain operations that

have the effect of concentrating a sector

of economic activity. It is necessary to

notify the Commission for the Promotion and

Defense of Competition of all

operations that have the effect of

generating greater concentration in any

sector of the company, provided that

one of two circumstances is present. These circumstances must

not necessarily occur; that is, if

one of these circumstances occurs,

this reporting obligation arises. On the

one hand, when it comes

to ventures that

result in the acquisition of,

for example, a 50

percent share of the considered market sector.

Let's give an

example: if I own a

chain of pharmacies that

represents 10% of the market in Uruguay,

and on the other

hand, there is another owner who owns a

chain that has 40 percent, the owner of the

10 percent will acquire the

40 percent. The sum of the two shares means that

50

percent of the chain is acquired. Market participation of

a pharmaceutical company, that is, of pharmacies,

then when this

type of operation is going to be completed, it is necessary to notify the

enforcement body, which is precisely

the Commission for the Promotion and Defense of

Competition.

So this first obligation to

communicate, in this case, another

circumstance that also applies is

the second measurement parameter that gives

rise to this obligation: when there is

a turnover volume of the

participants in the same,

if in any of these in the last

three fiscal years there is one or the group

of participants in the operation that invoices

at least 750 million, the

operation must also be notified to the

commission. Going back to the example we

saw of stopping this, of generating that

purchase of shares, the one that buys the 10 that

buys the 40, you will have 50. If instead of

buying 10,

the 10 that buys the one that has the 40,

buys one that has the 20, with the two you

would have 30, you would not have the obligation

to notify, but if that 30 implies that

in the last three fiscal years there is

a turnover that I know of of at

least 750 million, this obligation arises.

The important thing to note is that the notification does not

imply that the commission must approve,

authorize, or issue

any ruling regarding the

transaction subject to notification. This

circumstance is expressly foreseen

for

monopolistic concentration operations, which we will now

examine. The law also does not establish

the purpose of this notification, nor does it

impose on the commission the

obligation to keep the information

obtained confidential.

Similarly, the

confidentiality of the obligation is covered

by the

administrative regulatory authority, specifically Article

8. This article addresses four cases of the

notification obligation established by

Article 7. We saw, for example,

situations where the operation aims to

acquire debt securities without

voting rights, or when the operation

involves a business venture or is in a

situation of economic and financial crisis.

As I just mentioned, Article 9

regulates prior authorization; here, it is not

a notification but rather an

authorization to concentrate.

Monopolistic actions, that is, those by virtue

of which a

de facto monopoly is generated,

require communication that is indispensable for

carrying out the operation

and thus require a

pronouncement from the Commission for the

Promotion and Defense of Competition,

authorizing or not.

We see that the communications

in Article 7 do not aim to

obtain consent

from the implementing body, that is, the

Commission for the Promotion and Defense of

Competition, whereas those in

Article 9, regarding de facto monopolies, do. A de facto

monopoly is a

factual market situation in a certain

sector of activity characterized by the

existence of a single supplier of a

good or service who does not possess

any prerogative or

real right that prevents any

third party from entering the same sector and

competing.

The difference between a

de facto monopoly and a de jure monopoly,

which constitutes the establishment of

rights by provision of

law, is that it attributes to a supplier

the exclusive right to offer a

certain good or service.

Therefore, for de facto monopolies

that require this pronouncement from

the Commission, it is understood that the lack of a

pronouncement... The Commission for the

Promotion and Defense of Competition's decision

within 90 days of

notification implies

tacit authorization for the operation in

question. In other words, if 90

days have passed and the opinion is not expressly issued, it is

understood as approval to carry out the

operation. Therefore, we return to the fact that

the law

regulates and establishes all these

particular

activities of the Commission for the

Promotion and Defense of Competition,

which is a decentralized body of the

Ministry of Economy and Finance.

Starting with Article 21, you can

see all this regulation, how it is structured,

and what its specific duties are. I

refer you to the reading from

Article 21 onwards regarding the entity

and the procedure. From

Article 11 of the law, the

procedure for investigating

prohibited conduct or practices is established. This

procedure is the responsibility of

the Commission for the Promotion and Defense of

Competition, and what is established is the

possibility of adopting

preparatory measures, such as requesting

information, before initiating an

investigation. Evidentiary

measures can also be requested judicially.

The law regulates the

investigation itself, whether... Whether

initiated ex officio or by complaint,

the enforcement agency is also authorized to

request

precautionary measures through the courts, including

the preventive cessation of the

conduct.

A particular feature is that

all economic agents and all

persons are obligated to collaborate with the

enforcement agency by providing all information

about themselves or their sector of

activity. The only exception

to this obligation is when

that information is protected by

industrial or commercial secrets. At the

end of the procedure, if the

enforcement agency concludes that the

analyzed conduct is prohibited, it

may sanction the agents

who carry it out. These possible sanctions

are outlined in Article 17, as

amended by Law 19.300,

Article 205, and range from

warnings to

very high fines. Furthermore,

Article 19 stipulates that these fines can be applied not only

to the economic agent but

also to directors, administrators, or

representatives who actively

participated in the

anticompetitive conduct, or to the

controlling company of the offender. The

sanctions apply not

only to the individual who committed the

act but can also be extended to

members of the

governing bodies or representatives who

actively participated. This

procedure is established in

Law 18.159. I hope I've been clear,

but it covers all the topics

developed in the slides and goes into

greater depth so you

can access this material.

What I reiterate is important is

reading Law 17.250 on

Consumer Protection and Law 18.159

on Competition. You need to

read these

articles we just reviewed in detail to

understand these topics. I also

reiterate that they are also covered

in this book, as we saw from

pages 46 and 47 onwards, the section on companies, and from

page 259

onwards, you have everything

related to competition,

unfair competition, and the regulatory framework for

consumers. If you have any questions, please feel free to contact me at my email address, and

the slides will be available. I

wish you much

success. Goodbye.