Good Practices in the Operation of Companies Within the Framework of Antitrust Regulations

Tracy Varela and Gabriel Garita from Costa Rica, experts in Antirust, share this article about legislation related to practices that hinder or limit free competition to avoid monopolistic practices. Our experts explain how the relationship with your company’s competitors should be like and provide recommendations to avoid engaging in such practices.

The growth of many companies that offer goods and services in Costa Rica has led them to acquire more and more presence in the economic market. This expansion, whether consciously or unconsciously, can cause companies to engage in practices prohibited by antitrust regulations in our country.

In this context, it is important to review those behaviors that Law 7427: Law for the Promotion of Competition and Effective Consumer Defense (the "Law”) classifies as monopolistic practices that prevent or limit free competition to some extent.

The Law establishes two types of monopolistic practices: i) absolute and ii) relative. Absolute practices, also known as horizontal, involve agreeing, combining, manipulating or arranging the market/commercial conditions in some way with the competitor (current or potential).

In this regard, the question arises: How should your company’s relationship with competitors be like? To avoid engaging in these types of practices, consider the following recommendations:

• Avoid participating in conversations about sensitive issues in relation to commercial matters, such as margins, cost, prices, etc.
• Maintain a solid and legitimate business interest when communicating with competitors.
• Ensure that all written communications have legal purposes.
• Never make agreements on prices, production, sales, volumes, territories or any type of confidential information.
• Do not make public statements that could be interpreted as an invitation to coordinate conduct directed at competitors.
• Never discuss pricing or discount policies.

For their part, practices of a relative nature, also known as vertical practices, correspond to those acts, contracts or agreements aimed at limiting access to the market or excluding agents from it.

Under this concept, the relationships between companies and their suppliers and/or clients must be analyzed. It is necessary to understand how these relationships should develop to avoid incurring any fault.

Regarding customer relations, it is recommended:

• Apply price policies in a general and non-discriminatory manner, directed towards all customers.
• Avoid discount, loyalty or advertising programs that may be considered discriminatory or that give an illegitimate advantage to some agents over others.
• Do not impose resale prices.
• Do not condition the purchase of a product in any way to the contracting of a service or purchase of another product.
• Do not impose any territorial restrictions.

For the purposes of relationships with suppliers, some aspects to consider are the following:

• If exclusivity clauses are applied, they must be for a reasonable period and have an economic justification.
• Do not limit the freedom to buy and sell products or services from other companies.

Having delved into the particular recommendations, it is important to clarify that if there is any doubt or uncertainty about whether a conduct can be considered anti-competitive or not, legal advice should be sought to avoid any type of non-compliance.

In order to comply with the provisions of the Law, the Commission to Promote Competition is responsible for exercising market control. The Commission may act ex-officio, or in response to complaints from economic agents; therefore, it is recommended to appeal to this route if there is knowledge of monopolistic practices.

Although there are other considerations or scenarios where a company might engage in some type of anticompetitive practice, it is prudent to carry out an internal analysis of each company’s policies to ensure compliance with the Law and that no type of regulation of this nature is being breached.

At ARIAS we can assist in any compliance process from a competition perspective and support our clients in reducing or eliminating contingencies that may arise in this regard.

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.