Antitrust Litigation 2023 Comparisons

Ecuador enacted the Organic Law for Regulation and Control of Market Power in 2011 (“Ecuadorian Competition Law”). The agency, currently named the Superintendency of Economic Competition, was created in 2013. Thus, this year marks ten years of antitrust enforcement with a law that suffered several amendments and with an agency that has had three different chairpersons.

Within this first ten years, antitrust litigation has faced several hurdles in Ecuador due to:

• the embryonic experience of the local authority; and;
• the complexities of the Ecuadorian economy that is populated with oligopolist markets, protectionism policies, and sector-specific regulation.

Much of the litigation in this area involves complaints between competitors for alleged unfair competition practices, which captures a large part of the authority’s time and resources. This is because the Ecuadorian Competition Law comprises antitrust and unfair competition matters. However, the cost of investigation of unfair competition practices is reduced since it is not necessary to address relevant market definition or complex econometric tests. Many litigations began with claims presented by consumers.

In matters strictly related to economic competition, there are several ongoing litigations involving horizontal and vertical agreements, abuses of dominance, and gun jumping. Also, every day it is ever more common to see litigation for preventive measures and actions to block mergers. Actions to block mergers are not specifically provided for in the Ecuadorian Competition Law but are addressed under general administrative law principles.

Robalino represents several clients in these proceedings and has been able to appreciate first-hand the way in which these proceedings are bogged down by the authority’s inexperience, as well as a lack of resources to achieve comprehensive economic analysis.

To mitigate such complexities, the local authority, the Superintendency of Economic Competition, has issued a series of guidelines aimed at generating greater certainty with respect to its actions, as well as a better understanding of the authority’s approach to the analysis of anti-competitive conduct.

There have been several attempts to separate unfair competition regulation from economic competition, through two separate laws. This will provide focus for the Superintendency of Economic Competition’s efforts regarding economic competition matters exclusively.

The last amendment to the Ecuadorian Competition Law was published in the official gazette in May 2023. However, the published text has inconsistencies with a presidential veto that required proof of consumer damage in cases of abuse of market power, among other relevant and sensitive reforms that were not published. This triggers constitutional concerns in relation to the lawfulness of the published amendment.

The rationale behind these legislative attempts is underpinned in unfair competition, which almost exclusively orbits around private interests’ protection, rather than competition, consumer welfare, or economic efficiency.

However, the Superintendency of Economic Competition has opted to propose a sort of hybrid system, whereby acts of unfair competition that affect consumers’ rights (in general) or somehow distort competition, remain under their control.

In relation to gun-jumping litigation, there are several developments of recent case law issue by the competition agency. For instance, conglomerate mergers are no longer subject to control and thus pre-merger filing is not needed.

In relation to abuse of market power, horizontal and vertical restraints, and cartels, there are very few investigations. Some of them have concluded with fines against the undertakings. However, most of the fines imposed by the Ecuadorian Competition Agency have been overturned by the administrative tribunals of the constitutional courts as a result of due process matters or because of inadequate application of the law.

The future of this discussion remains uncertain, considering that only in November 2023, Ecuador will have a new congress to review these bills. Also, the office term of the current chief of the Superintendency of Economic Competition will terminate in November 2023, and thus a new authority will likely be nominated by the coming government.

Ecuadorian Competition Law is administrative law and thus is enforced by an administrative agency rather than courts. The fines imposed by the Ecuadorian competition agency are collected – exclusively – by the agency in benefit of the national treasurer. Hence, claimants are not able to recover any damage from the administrative fines.

Nonetheless, Ecuadorian Competition Law, in Article 71, provided the legal basis for a claim for damages for breach of competition law. Article 71 of the Ecuadorian Competition Law provides for follow-on damage claims and therefore standalone damage claims are not available in Ecuador.

This has been confirmed by the courts in Seitur v Carlson Wagonlit Travel (CWT). In this case the claimant intended a standalone action for alleged unfair competition practices regulated in the Ecuadorian Competition Law and in the earlier Intellectual Property Law.

On this matter, there is an ongoing academic discussion that argues that Ecuadorian civil law would allow standalone damage claims, since many anti-competitive conducts tantamount to civil offences that generate tort liability. The final resolution in Seitur v CWT, to be granted by the Supreme Court, may settle the debate on the matter.

There are no specialised competition courts and/or judges, although necessary. However, since competition law is administrative law (derecho administrativo sancionador), the Administrative Tribunals are competent to review final decisions issued by the Superintendency of Economic Competition, as well as from other control agencies. Follow-on damage claims shall be filed before civil courts through expedited processes.

In relation to the administrative investigation that is held in the Superintendency of Economic Competition, the investigation is brought by the prosecution team of the agency before an administrative tribunal named the First Instance Commission. This Commission is comprised by competition lawyers and economists with previous experience within the agency.

Additionally, several cases enforced by the Ecuadorian competition agency (Superintendency of Economic Competition) have been challenged before the constitutional courts through constitutional protection actions, considering contraventions of due process by the enforcement agency. The Superintendency of Economic Competition has a proven track-record in committing due process contraventions or inadequate application of the law and this is a major concern for follow-on damage actions. Without a definitive decision in relation to antitrust litigation it is not feasible to pursue damages through follow-on actions.

The Ecuadorian Superintendency of Economic Competition is an administrative authority, whose acts can be challenged before local courts, specifically before administrative tribunals. Although, all of the Superintendency of Economic Competition’s decisions are binding until overturned by administrative tribunals, or their effects are suspended by constitutional courts.

Regarding damages, Ecuadorian competition law does not provide for the participation of the Superintendency of Economic Competition as a party to follow-on damage claims. However, there is no provision in the Ecuadorian legislation that prevents the Superintendency of Economic Competition from being summoned to follow-on damage claims to provide support in technical terms, given that local courts have no expertise in competition matters.

Finally, it is relevant to consider that Ecuador is a part to the Andean community. Thus, the decisions issued by the General Secretariat and the Andean Tribunal are binding to the local courts.

Pursuant to Article 48 of the Ecuadorian Competition Law, the competition agency bears the burden of proof within the administrative process (investigation of anti-competitive or unfair competition practices), unless overturned due to evidence tempering or obstruction of the process.

The standard of proof is based on the verification of the following elements:

• existence of anti-competitive conduct; and
• actual or potential effects on competition, economic efficiency, or general welfare.

The presidential veto in the May 2023 reform to the Ecuadorian Competition Law modified the standard of proof in litigation related to abuse of market power providing demonstration of consumer damages. This veto was not published in the official gazette and thus there are constitutional concerns of the lawfulness of the law.

The defendant has the burden of proof in passing-on defence under procedural rules. However, there is no relevant case-law developed to settle academic discussions around pass-on defence and applicable standard.

Pursuant to Article 71 of the Ecuadorian Competition Law, any person (or company) affected by anti-competitive conduct may file a follow-on claim for damages before civil courts and through expedited proceedings (vía verbal sumaria).

Indirect purchasers or consumers, on their own or through an association of consumers, are entitled to file the follow-on actions as long as they can prove:

• the existence of damage; and
• a link between the damage and the anti-competitive conduct executed by the defendant.

However, to successfully bring a follow-on action before civil courts it is necessary to have a previous enforcement and final decision from the Superintendency of Economic Competition against the defendant.

Investigation of antitrust practices, in the administrative stage before the Superintendency of Economic Competition, can take approximately 18 months divided in three stages:

• preliminary investigation;
• formal investigation; and
• administrative trial before the First Instance Commission.

The resolution issued by the First Instance Commission can be appealed before the chairperson of the agency (Superintendent) adding approximately two additional months before resolution. If the final administrative resolution is not challenged before the administrative tribunal by the defendant, then the claimant may bring follow-on actions to claim damages.

Since damage claims must be brought before civil courts, the typical duration of proceedings from the issuance of a claim through to trial can take up to two years in the first instance and are subject to horizontal and vertical recourses, including appeal and cassation before higher courts.

Given that damage claims have a follow-on nature under the Ecuadorian Competition Law, stay proceedings orders are not applicable. Considering timing and costs of follow-on actions, as well as a lack of predictability of the resolution, usually consumers don’t have incentives for pursuing follow-on actions.

Ecuadorian regulations do not provide for specific mechanisms to implement class actions in Ecuador.

Ecuadorian Competition Law does not provide anything on class or collective actions, therefore opt-in and opt-out rules do not apply. However, under Article 51 of the General Code of Procedure (COGEP), two or more persons can pursue a joint action when their claims are related by cause or object.

Additionally, as per Consumer Law provisions, it can be concluded that a sort of joint action can be presented on an opt-in basis, where a common proxy represents an association of consumers (see 3.2 Procedure).

If claimants can demonstrate:

• the existence of damage;
• a causal link between the alleged damage and the anti-competitive conduct; and
• foreseeability of the damage,

joint actions can be brought by direct and indirect purchasers.

Ecuadorian regulations do not provide for specific mechanisms to implement class actions in Ecuador. However, under Article 51 of the COGEP, two or more persons can pursue a joint action when their claims are related by cause of object.

Nonetheless, under Article 62 of the Consumer Defence Law, consumer associations can act as proxy of associated members. A certification is needed for its legal capacity to be recognised and each consumer must opt in. Additionally, every consumer association must be registered before the corresponding ministry.

There is a limited judicial oversight in the settlement of judicial actions. Thus, any settlement presented in the context of consumer association, or a joint consumer’s action, must be approved by the court to be valid. Approval of the settlement ends the judicial process with effects.

Follow-on actions for damages are deemed in summary judgment (vía verbal sumaria) as provided in Article 71 of the Ecuadorian Competition Law in connection with Article 333 of the COGEP applicable to civil procedures.

The aforesaid provision orders a summary proceeding regarding all damages claims on competition matters and thus the civil judge is not able to discuss the merits of competition law, but only the link between the anti-competitive practice with the alleged damage.

Summary judgment in follow-on actions is subject to horizontal and vertical recourses, including appeal before higher courts. In the first ten years of enforcement of Ecuadorian Competition Law, no precedent of follow-on actions is available.

In competition matters, the Superintendency of Economic Competition is the only controlling entity with jurisdiction over economic competition and unfair competition practices, thus is the only entity to define the existence of an infringement to the Ecuadorian Competition Law and therefore to sanction anti-competitive conducts carried out by any undertaking whose economic activities affect or may affect the Ecuadorian market. The Superintendency of Economic Competition forum jurisdiction applies within the national territory.

Regarding follow-on actions pursued by third parties, civil courts have forum jurisdiction as per Article 71 of the Ecuadorian Competition Law and civil procedure regulation. Thus, the competent judge will be the civil judge of the residency of the parties (personal jurisdiction). In case of conflict of personal jurisdiction, general procedural law provisions apply.

The Statute of Limitations applies both in administrative investigations before the Ecuadorian Superintendency of Economic Competition and in damages follow-on actions before civil courts.

The Superintendency of Economic Competition has four years to investigate and sanction infringements to the Ecuadorian Competition Law. The limitation counts from the day that the agency obtains knowledge of the contravention (non-continued practices) and in cases of continued practices (such as long-term cartels), the Statute of Limitations counts from the day of termination of the anti-competitive conduct.

On the other hand, the Statute of Limitations for follow-on damages actions is five years from the issuance of the final decision of the Superintendency of Economic Competition establishing the contravention to the Ecuadorian Competition Law.

In administrative proceedings, disclosure is mandatory as per Article 48 of the Ecuadorian Competition Law. To this end, the Superintendency of Economic Competition must guard the confidentiality of the disclosed information, in line with its internal regulations for classification of confidential information.

In the context of judicial proceedings, while there is no discovery as such, judges must order the production of public and private documents and/or any other evidence presented or requested by the parties to prove their allegations. General rules of civil procedure apply for follow-on actions.

Documents can be withheld from disclosure in administrative proceedings carried out by the Superintendency of Economic Competition, in the following scenarios.

• When the document and/or information is considered privileged under the ethical guidelines of the Ecuadorian Bar (Resolución 100A-2018 del Consejo Nacional de la Judicatura). However, If the document was voluntarily submitted by the client, the privileged information is terminated and cannot be alleged.
• Other documents can be declared confidential within the administrative proceedings before the Superintendency of Economic Competition upon applicable guidelines, except for the defendant who will be granted access.

In judicial proceedings, it is not feasible to withhold information since all proceedings are public, except those related to national security and certain criminal offences.

Leniency and settlement agreements with the Superintendency of Economic Competition are protected from disclosure.

Pursuant to the Leniency Regulation enacted by the Superintendency of Economic Competition in 2019, settlement agreements and any other document in the file of leniency applications are protected from disclosure. Therefore, disclosure of any document must be previously approved by the applicant.

It is worth noting that leniency agreements apply to horizontal and vertical agreements and are mainly designed as a method for cartel detection. However, for unilateral conducts the Ecuadorian Competition Law provides for cease-and-desist agreements. When cease-and-desist agreements are granted, a non-confidential summary is published in the official gazette of the Ecuadorian Superintendency of Economic Competition explaining the reparatory actions to be carried out by the defendant in order to avoid payment of the applicable fines.

Witnesses of fact are relied on in both administrative proceedings before the Superintendency of Economic Competitions as well as before the civil courts in follow-on damage claims.

One of the powers of the Superintendency of Economic Competition is to request witness statements regarding the facts under investigation. These statements can be provided in writing and orally. However, the cross-examination of witnesses is not expressly provided in the context of administrative proceedings before the Superintendency of Economic Competition and in fact cross-examination is not a common practice within the administrative proceedings before the Superintendency of Economic Competition. If required by the investigation team, witnesses can also be compelled to give evidence of their assertions.

Conversely, in the context of damages claims before civil judges, cross-examination of witnesses is possible. In this proceeding, witnesses can be also compelled to give evidence of their assertions upon request of the court or by the defendant.

It is a common practice to rely on expert witnesses within the administrative proceeding carried out before the Ecuadorian Superintendency of Economic Competition. Econometric expert witnesses are relied on in cartels, abuse of dominance, and merger control proceedings.

Expert witnesses do not need permission from the Superintendency of Economic Competition to act, but their report must adduce expert advice. The reports are not binding for the agency, but rather offer persuasive evidence. In the past year, several expert witnesses have filed reports in local litigation, including foreign experts in order to clarify interpretation of soft law cited by the agency.

Typically, in the context of administrative proceedings, evidence given by expert witnesses is presented by written statements. Rebuttal of this and any other evidence is done by written means and oral arguments presented by parties’ representatives.

Conversely, in the context of damages claims before civil judges, evidence given by expert witnesses is presented by written statements and is subject to cross-examination. In cases of judicial proceedings, expert witnesses shall bear a registration and accreditation before the judiciary bench.

The concept of the “hot tub” – experts testifying concurrently – is not a common practice in Ecuador but there is no provision forbidding such a method during a hearing. It is also not a common practice to see joint statements by expert witnesses indicating the areas in which they agree/disagree in advance of a trial.

Under Ecuadorian law, only compensatory damages, actual damages, and loss of profit are available in follow-on claims for anti-competitive practices. Punitive or exemplary damages are not available under Ecuadorian civil law.

However, it is necessary to explain that in the administrative proceeding before the Superintendency, the agency has power to impose the following fines:

• fines up to 12% of the gross sales to the undertakings; and
• fines to the executives that can amount to 200,000 times the basic salary.

Thus, the administrative fines can be considered exemplary to dissuade others in the commission of similar infringements. It is common for the Ecuadorian Superintendency of Economic Competition to aim for higher maximum fines when enforcing antitrust law, especially in cartels and gun-jumping investigations. Fines under Ecuadorian Competition Law can amount up to 12% of the defendant’s gross turnover.

Pass-on defence is not expressly provided by Ecuadorian law, however, it is not forbidden and thus is available in follow-on claims per the defendant’s litigation strategy. However, there is no relevant case law developed in relation to this defence and thus academic discussion is not settled.

In relation to pass-on defence, the burden of proof is likely to become a major issue since, in Ecuadorian civil procedure, each party shall demonstrate its allegations and the defendant may not have enough evidence to support its position. Although, the defendant may require reasonable disclosure from the claimant per the general rules of civil procedure.

Given the nature of the proceedings for the compensation of damages before civil judges, no interest can be awarded since judges’ decisions will only conclude whether or not a plaintiff is entitled to compensation for damages and in what amount. Once the indemnity for damages is awarded, non-payment will generate interest that may be collected through an enforcement process.

Liability is on a joint and several basis upon Ecuadorian Competition Law. Thus, Immunity provided through leniency settlements only covers administrative fines and sanctions within the administrative process without limitation to follow-on claims pursued by their direct purchasers.

Pursuant to Ecuadorian case law, one of the elements that must converge for damage compensation is a causal link between the damage and, in this case, a breach of Ecuadorian Competition Law. Therefore, there is no limitation on liability of immunity applicants towards their purchasers.

Ecuadorian legislation does not provide for a procedure for bringing contribution proceedings against a third party. However, under general civil procedure rules, the defendant can bring a new action against the third party to “repeat” damages that were effectively paid on a joint or several basis (acción de repetición). There is no case law available in relation to antitrust or unfair competition infringements.

Injunctive relief is available in both antitrust administrative investigations and in follow-on damages actions before civil courts.

In administrative proceedings the Superintendency of Economic Competition may grant injunctive relief if the coexistence of two requisites is verified:

• periculum in mora or risk of procedural delay; and
• fumus boni iuris or likelihood of the merits of the case.

These precautionary measures are intended to prevent the effects of anti-competitive conduct from continuing. There is neither a need for prior notice to the defendant, nor is there a duty of full and frank disclosure.

Conversely, given the nature of the proceedings for the compensation of damages before civil judges, injunctive relief can be granted only to assure payment (ie, prohibition to sell or dispose assets). In this case, injunctive relief can be granted without prior notice to the defendant.

There are no methods of alternative dispute resolution available in relation to infringements to the Ecuadorian Competition Law. Thus, control of antitrust infringements shall be deemed to be administrative proceedings before the Superintendency of Economic Competition exclusively, since the Ecuadorian Competition Law is administrative law and its enforcement is through public actions exclusively. There is no antitrust private enforcement available in Ecuador.

However, follow-on actions between private actors for damages (ie, consumers and undertakings) may resort to mediation and/or arbitration, upon written agreement and in complying with Mediation and Arbitration Law requirements.

Given that Ecuadorian legislation does not provide for a litigation funding prohibition, it is entirely possible, and it is available for arbitration and commercial litigation.

In practice, third-party funding is very limited, and mostly non-existent, for antitrust litigation due to the lack of precedents that may allow a certain degree of predictability of antitrust litigation vis-à-vis the decision of the Superintendency of Economic Competition.

Costs can be awarded in follow-on claims. Costs are not awarded as a rule, but only when the court finds that a party has litigated in an abusive, malicious, reckless, or disloyal manner. Thus, such party can be condemned to pay the cost incurred by its counterparty and the state. Courts do not grant costs on a regular basis.

Horizontal and vertical recourses, including appeals to challenge decisions, are available in both administrative and civil proceedings under the constitutional mandate.

First-instance resolutions of the competition agency are subject to administrative appeal before the chair of the agency. Resolutions issued by the chair of the agency are subject to recourse before the administrative tribunals.

In relation to follow-on damage claims filed before civil courts, judgments may be given by the provincial court. This court can review merits and procedure. Judgments rendered by the provincial court are subject to cassation before the National Court of Justice. However, in this last instance, only merits of law may be reviewed. At the same time, in order to safeguard constitutional rights that can be breached in the context of these proceedings, any decision of authority may be challenged before constitutional judges.