Merger Control Comparative Guide

• Law Firm: ROBALINO
• Subject Matter: Antitrust/Competition Law, Antitrust, EU Competition , Trade Regulation & Practices
• Author: Mr Daniel Robalino and Jorge Duque
• Published date: 12 January 2023

1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?

• The Organic Law for the Regulation and Control of Market Power ('Competition Law'); and
• The Regulations on the Competition Law.

1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?

No. The merger control provisions of the Competition Law are applicable to all economic sectors.

1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?

The Market Power Control Superintendency.

2 Definitions and scope of application

2.1 What types of transactions are subject to the merger control regime?

The merger control provisions of the Competition Law apply broadly and capture:

• mergers;
• acquisitions;
• asset transfers;
• share transfers;
• management agreements; and
• any other action or agreement that results in a change of control of one or more undertakings.

In relation to conglomerate mergers, according to the latest decisions of the Market Power Control Superintendency (SCPM), such transactions are not subject to pre-merger control. Nevertheless, given that the relevant market definition can be challenging and that its final determination falls to the SCPM, in case of doubt, it is advisable to file a consultation before the regulator or to file a pre-merger notification.

Intra-group reorganisations are not notifiable.

2.2 How is 'control' defined in the applicable laws and regulations?

Under Article 12 of the Regulations on the Competition Law, 'control' is defined as the possibility of exerting a substantial or decisive influence over an undertaking.

2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?

Yes. The Ecuadorian merger control regime captures any change of control, notwithstanding its proportion. For instance, a minority interest that entails negative control over an undertaking is a notifiable event under the Competition Law.

2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?

There is no legal requirement for a joint venture to be 'fully functional' or similar in order to be notifiable. However, this parameter has been considered by the SCPM in its substantive analysis of a joint venture.

The establishment of a new legal entity as a preparatory step for a new joint venture is not notifiable, but clearance may be required before assets or personnel are transferred by the parent companies.

2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?

Yes. The Ecuadorian merger control regime captures any change of control that affects the Ecuadorian market. For example, insofar a transaction executed between companies headquartered outside of Ecuador affects domestic subsidiaries or related undertakings, it is subject to merger control in Ecuador.

2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?

The Competition Law provides for two alternative thresholds that can be met:

• Turnover: The parties' combined turnover in Ecuador in the year prior to the transaction was $85 million (in 2022; rising to $90 million for 2023); or
• Market share: This is calculated based on the parties' combined participation in a given relevant product market, which will be met by the acquisition or increase of market share equal to at least 30% of the relevant product market.

However, the SCPM may also require notification for transactions that do not meet the above thresholds for information purposes.

The thresholds and fines under the Competition Law are set in multiples of the unified basic salary (UBS), which is reviewed annually. The UBS is set in US dollars, which is the official currency of Ecuador. The UBS for 2022 was $425 and for 2023 it is $450.

2.7 Are any types of transactions exempt from the merger control regime?

Yes. The Regulations on the Competition Law identify three types of transactions that do not require pre-merger notification:

• the acquisition of preferred shares, bonds or fiduciary rights without voting rights;
• the acquisition of a failing firm that is undergoing liquidation or that has not operated in the last three years and
• control acquired as part of a seizure or other administrative process in accordance with relevant legislation.

Moreover, purely internal reorganisations (ie, within the same control group) are not notifiable.

The establishment of a new legal entity as a preparatory step for a new joint venture is not notifiable, but notification and clearance may be required before the parent companies transfer assets or personnel to it.

3 Notification

3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?

Notification is mandatory pre-closing where either of the thresholds set out in question 2.6 is met.

The Market Power Control Superintendency (SCPM) may also require notification of a transaction that does not meet these thresholds for information purposes.

...