Local antitrust lawyers believe the Chilean National
Economic Prosecutor (fiscalia nacional
económica) has overstepped the
Law for the Defense of Free Competition, raising
concerns of higher costs and longer closing periods.
Film theater operators Chile Films and Inversiones acquired
a chain of cinemas from competitor Hoyts through a share
purchase agreement last year. The FNE petitioned
the merger to the Competition Tribunal (TDLC) on June 27.
Although this is normal practice for the FNE, it then requested
the TDLC to impose a fine of 1,000
Unidades Tributarias Annualise (
UTA) upon each of the buyers.
Chilean law does not require merging companies to notify the
TDLC prior to closing, but pre-closing competition review can
be requested by the consolidating companies or an interested
third party, as was the case with last month's
LATAM Airlines exchange offer. No party had requested
a TDLC review in this instance.
"It is difficult to imagine that the TDLC will impose a fine
when no law has been breached and a previous antitrust
clearance is only optional for the parties," Ricardo Riesco,
partner at Philippi Yrarrázaval Pulido & Brunner
Abogados, told IFLR.
Riesco thinks the FNE could have been making a statement
that Chilean antitrust law should require pre-merger review if
certain consolidation thresholds are met. He said legislation
is being discussed in Chile that would require such
Merging companies might want to request prior approval from
the TDLC as a result of the FNE’s decision, to
avoid possible fines. This is notwithstanding the fact that
they are not required to do so under the competition law.
Pedro Pellegrini, a partner with Guerrero Olivos Novoa y
Errázuriz, has advised corporate attorneys to seriously
evaluate consultation with the TDLC when they are working on a
merger with high levels of market concentration.
"Unfortunately, this is an important change in the criteria
for our prosecutor because this agency is factually creating a
formality that is not in the law," Pellegrini said.
He thinks some deals might not close because of increased
transaction costs and longer closing periods arising from
pre-notification by more conservative parties not wanting to
receive an FNE fine.
The FNE proposed new horizontal draft
merger guidelines on June 28. The guidelines do not mention
a policy of imposing fines upon companies that have not
notified the TDLC of their consolidation.
"Until this case is closed or until our Chilean antitrust
provisions are changed, it is a matter of how much risk the
parties are willing to take," said Riesco.