On November 20, 2024, Guatemala’s Congress passed Decree 32-2024, the Competition Law. You can download the approved version here. While the text still requires presidential approval and publication in the Official Gazette to officially become law, it is expected that the President will proceed with the sanctioning process, allowing the law to take effect shortly thereafter.
This document does not reflect a personal opinion but aims to provide a practical and general overview of the key elements of this new legislation.
This legislation represents Guatemala’s first comprehensive competition law, as the country previously operated without a dedicated legal framework to regulate competition or antitrust matters.
What Does the Law Regulate?
Competition laws are designed to protect the competitive process in markets. They do not aim to ban monopolies outright or shield small or weak businesses. Instead, their purpose is to prevent and penalize monopolistic or anti-competitive practices.
Guatemala’s Competition Law seeks to ensure that markets operate under “rules” that “benefit consumers.” This includes preventing practices such as price-fixing agreements, abuse of dominant market positions, or mergers that stifle competition. In essence, the law aims to balance the market to foster competitive prices, innovation, and a broader variety of goods and services.
What Practices Are Prohibited Under the Law?
Absolute Practices (per se rule)
Article 5 of the law defines “absolute practices” (per se rule) as agreements between competitors that are inherently harmful to competition. These practices are generally considered illegal and subject to automatic penalties without requiring proof of economic harm. However, Article 10 allows for limited defenses in exceptional cases where such practices can be shown to generate efficiencies that directly benefit consumers.
Examples of absolute practices include:
- Price Fixing: Agreements to set prices, discounts, or rates, whether directly or indirectly.
Hypothetical Example: Two supermarket chains agree to sell a product, such as rice, at the same high price, eliminating competitive options that would otherwise benefit consumers. - Market Segmentation: Dividing markets by territory, customer type, products, or any other criteria that restricts competition.
Hypothetical Example: Two transportation companies agree to divide the city’s routes between them, leaving consumers with fewer options. - Restricting Production or Demand: Limiting the quantity or frequency of production or commercialization.
Hypothetical Example: Chocolate manufacturers agree to reduce production to artificially inflate prices. - Collusion in Public bidding: Coordinating bids in tenders or auctions.
Example: Construction companies vying for a public road contract agree in advance which company will win the tender.
Note: These examples are for illustrative purposes and do not constitute legal advice.
A landmark U.S. case exemplifies such practices: United States v. Socony-Vacuum Oil Co. (1940). In that case, the Supreme Court held that any agreement to fix prices is illegal, regardless of its reasonableness or intent. In Guatemala, while the law permits limited defenses based on efficiency, the exceptions for absolute practices (per se rule) are far more restrictive than those applicable to relative practices (rule of reason).
Permitted Defenses in Guatemalan Antitrust Law
Article 10 introduces an efficiency defense, allowing economic agents to justify certain practices if they meet the following conditions:
- Improve the production or distribution of goods.
- Promote technical or economic progress.
- Provide measurable benefits to consumers.
Additionally, these practices must not eliminate competition in a significant portion of the market.
Understanding Rule-of-Reason Practices (práctica relativas)
Unlike absolute practices, rule-of-reason practices (regulated under Article 7) are not automatically illegal. These involve agreements, contracts, arrangements, or behaviors by economic agents with a dominant position in a relevant market. For such practices to be deemed anti-competitive, specific conditions must be met.
According to Article 8, these conditions include:
- Market Power: The practice must be carried out by one or more agents with significant market power.
- Relevant Market: The conduct must affect goods or services within a defined market.
- Anti-Competitive Effects: It must be demonstrated that the practice unfairly displaces competitors, significantly hinders their market access, or establishes unjustified exclusive advantages.
Examples of relative practices as detailed in Article 7 include:
- Imposing resale prices or margins that must be observed by buyers, distributors, or suppliers (Article 7.1).
- Conditioning sales on refraining from acquiring, marketing, or distributing third-party products (Article 7.2).
- Selling below average variable cost with the intent to recover losses through future price increases (recoupment) (Article 7.3).
- Raising competitors’ costs or obstructing their production processes (Article 7.4).
- Denying access to essential inputs or imposing discriminatory restrictions (Article 7.6).
These practices are only considered violations if the administrative authority proves they harm market efficiency, negatively impact competition, and reduce consumer welfare (Article 8).
Real and Hypothetical Examples
A notable case is NCAA v. Board of Regents (1984), where the U.S. Supreme Court evaluated whether restrictions on television broadcasts imposed by the NCAA provided benefits or unjustifiably limited competition.
Hypothetical Example: A chocolate factory in Cobán imposes contracts that prohibit distributors from selling competing brands. If such restrictions displace competitors without offering significant benefits, they could be deemed anti-competitive.
Proving Rule-of-Reason Practices
Proving rule-of-reason practices is more complex than proving per se violations. In addition to demonstrating the existence of the conduct, it is necessary to show:
- Harm to competition.
- Impact on the relevant market.
- Negative effects on efficiency or consumer welfare.
These elements must also be weighed against potential pro-competitive justifications or efficiency defenses presented by the accused parties.
The Consumer Welfare Standard
The law adopts a consumer welfare standard to assess whether a practice harms consumers through higher prices, lower quality, or restricted access to goods and services. Not all business behavior is anti-competitive; this standard recognizes that certain practices may enhance competition. Only conduct that significantly disrupts the market structure will be penalized.
Mergers and Acquisitions: Economic Concentrations and Their Regulation Under the Guatemalan Competition Law
Guatemala’s Competition Law sets forth detailed rules governing economic concentrations resulting from mergers and acquisitions. Below is an outline of the key regulatory aspects:
1. What Is an Economic Concentration? (Art. 14)
An economic concentration occurs when two or more previously independent economic agents:
- Combine through acts, contracts, or agreements.
- Transfer control from one agent to another or create a new agent under joint or individual control.
2. What Constitutes Economic Control? (Art. 15)
Economic control refers to the ability of one agent to exert decisive influence over another, achieved through:
- Shareholding rights or agreements that affect strategic decisions.
- The use, enjoyment, or benefit derived from the other agent’s assets.
3. Pre-Authorization Requirement (Art. 16)
Economic agents must request authorization from the Superintendency of Competition for concentrations that meet the following thresholds:
- Asset Combination: If the combined assets exceed 7 million times the daily non-agricultural minimum wage (US$100.6 million).
- Total Annual Revenue: If the total revenue exceeds 9 million times the daily non-agricultural minimum wage (US$ 129.4 million).
Authorization must be requested prior to:
- Finalizing the legal act.
- Acquiring or exercising control.
- Completing a foreign transaction with effects in Guatemala.
4. Exceptions to Concentration Notification (Art. 16)
Notification is not required in the following cases:
- Corporate Restructuring: Within the same economic group.
- Increased Shareholding: When control has already been established.
- Investment Entities: When no significant influence is acquired.
- Stock Market Purchases: If participation does not exceed 10%.
- Investment Funds: When their objective is capital gains and they do not operate in the same relevant market.
- Disputed Markets: When the transaction does not directly alter market structure.
5. Criteria for Evaluating Concentrations (Art. 17)
The Superintendency must consider:
- The relevant market.
- The market power of the parties involved.
- Potential effects on competitors and consumers.
- Cross-ownership between related economic agents.
- Efficiencies that benefit consumers.
6. Denials and Conditional Authorizations (Arts. 18-19)
- Grounds for Denial:
- Creation or enhancement of a dominant position that hinders competition.
- Barriers to market entry or displacement of competitors.
- Facilitation of anti-competitive practices.
- Conditional Authorizations: The Superintendency may impose conditions, such as:
- Divesting assets or shares.
- Modifying the terms of agreements.
- Providing competitors access to the market.
7. Formalization, Registration, and Administrative Silence (Arts. 20-21)
- Concentrations cannot be formalized or registered without prior authorization.
- If the Superintendency fails to issue a decision within 30 days, the transaction is presumed unobjectionable, and agents may proceed.
8. Irregular Concentrations and Sanctions (Arts. 22-23)
Concentrations are considered irregular if they:
- Exceed the thresholds without prior authorization.
- Are authorized based on false information.
- Fail to comply with imposed conditions.
Efficiency Defense: Economic agents may argue that their concentration provides consumer benefits and improves economic efficiency.
Organizational Structure of the Guatemalan Competition Supervisory Body (Superintendencia)
To ensure effective enforcement of this new legislation, the Competition Law establishes the Guatemala’s Office of Competition (Superintendencia) as the authority responsible for protecting and promoting free competition in Guatemala. The organizational structure is detailed in Title II of the law and includes the following components:
The Guatemalan Competition Authority (Superintendencia) is an autonomous, decentralized state entity with its own legal personality, tasked with defending and promoting free competition across the national territory (Article 27). Its primary responsibilities include:
- Investigating anti-competitive practices.
- Imposing administrative sanctions.
- Coordinating with other regulatory and supervisory bodies.
Governing Authorities
The Guatemalan Competition Authority operates through two main governing bodies (Article 28):
- The Board of Directors (Directorio), which serves as the decision-making and sanctioning collegiate body.
- The Commissioner (Superintendente), who acts as the highest-ranking administrative and executive authority.
The Board of Directors
The Board of Directors is composed of three principal directors (directores titulares) and their respective alternates (suplentes), appointed through a public and transparent process by various entities (Article 30). The appointments are as follows:
- One director designated by the President in consultation with the Council of Ministers.
- One director designated by Congress, proposed by the Economic Commission.
- One director designated by the Monetary Board.
Directors and their alternates serve a six-year term, with the possibility of reappointment for one additional term (Article 32).
Key Responsibilities of the Board of Directors:
- Approving policies to promote competition.
- Authorizing, conditioning, or denying economic concentrations.
- Imposing fines and sanctions.
- Proposing legal reforms and measures to eliminate market barriers (Article 39).
The Commissioner (Superintendente)
The Commissioner is the highest-ranking executive officer responsible for the overall administration of the Guatemalan Competition Authority (Superintendencia) and its legal representation (Article 50).
Key Responsibilities of the Commissioner (Superintendente):
- Investigating anti-competitive practices, either ex officio or based on complaints.
- Managing resources and executing contracts.
- Proposing internal regulations and policies.
- Coordinating with other public institutions on competition-related matters (Article 55).
The Commissioner serves a six-year term, with no possibility of reelection (Article 51), and must meet the same qualifications and requirements as the directors (Article 54).
Violations, Penalties, and Remedies Under the Competition Law
This section outlines the provisions regarding violations, penalties, and remedies under Guatemala’s Competition Law. It highlights the behaviors classified as violations, the penalties imposed, and the corrective measures designed to restore competitive order.
1. Defined Violations (Art. 95)
The law identifies a broad range of violations that disrupt the functioning of competitive markets, including:
- Anti-competitive practices.
- Unauthorized concentrations exceeding established thresholds.
- Non-compliance with conditions attached to concentration approvals.
- Refusal to cooperate in investigations or failure to comply with enforcement decisions.
2. Applicable Penalties (Art. 96)
The law provides two primary types of penalties:
- Monetary penalties, calculated based on the severity of the violation (Art. 97). For example, per se violations may result in fines of up to 200,000 times the daily non-agricultural minimum wage ($2,875,000 USD).
- Public disclosure of enforcement actions, requiring that sanctions be published to deter future violations.
Fines are assessed based on factors such as the offender’s financial capacity and the market impact, ensuring penalties do not undermine competition (Art. 97).
3. Temporary and Permanent Remedies (Arts. 98-99)
- Temporary Remedies: In cases of non-cooperation, the Guatemalan Competition Authority(Superintendencia) may request judicial orders compelling the provision of information (Art. 98).
- Permanent Remedies: The Board of Directors may petition a court to halt anti-competitive practices or require the divestiture of assets in irregular operations. Such remedies must be implemented within reasonable timeframes to minimize disruption to businesses and consumers (Art. 99).
4. Parties Subject to Penalties and Assessment Criteria (Arts. 100-101)
Penalties apply to economic agents that engage in, induce, or facilitate anti-competitive practices. The severity of the penalty is determined by:
- The harm caused and its effects on third parties.
- The size of the affected market and the offender’s share.
- Whether the conduct was intentional or a repeat offense (Art. 101).
5. Repeat Offenses (Art. 102)
A repeat offense is defined as committing a similar violation within four years of a prior sanction becoming final.
6. Payment of Fines and Interest (Arts. 103-106)
- Deadlines: Fines must be paid within 10 business days of the final ruling (Art. 103).
- Interest: Late payments accrue interest under the Tax Code (Art. 104).
- Installment Plans: Payment plans of up to 18 months are available if sufficient guarantees are provided (Art. 106).
7. Distribution of Collected Fines (Art. 105)
Revenue from fines and interest is classified as non-tax income and deposited into a government-designated fund for public use, known as the Common Fund-National Unified Account.
A Balanced Framework
This framework balances enforcement with corrective and preventive measures, ensuring a positive impact on free competition and consumer welfare.
Entry into Force and Transitional Provisions
1. Upon Publication in the Official Gazette
Immediately after publication, the following provisions take effect:
- Creation of the Commission (Superintendencia)
Articles related to its establishment, structure, and competencies (Arts. 27–59), including the appointment of authorities, internal organization, and operational foundations. - Final and Transitional Provisions
Guidelines for the gradual implementation of the law (Arts. 134–144).
2. Effective January 1, 2025
From this date, the following provisions apply:
- Chapter I: General Provisions (Arts. 1–4)
Basic principles of the law, such as key definitions and general objectives (e.g., anticompetitive practices, “relevant market”). - Chapter IV: Promotion of Free Competition (Arts. 17–20)
Provisions aimed at fostering competitive market conditions, including educational campaigns and general rules for promotion. - Title V: Reforms and Repeals (Arts. 126–133)
Amendments to related laws for normative consistency. - Title VI: Final and Transitional Provisions (Arts. 134–144)
Details on the law’s implementation and transitional management.
3. Two Years After Publication (Approx. 2026)
Key provisions on investigation, sanctions, and control of anticompetitive practices come into effect:
- Chapter II: Defense of Free Competition (Arts. 5–10)
Rules against absolute and relative practices, such as price-fixing agreements or abuse of dominant positions. - Chapter III: Economic Concentrations (Arts. 11–16)
Framework for reviewing and authorizing mergers or acquisitions affecting competition. - Title III: Administrative Process (Arts. 60–85)
Procedures for investigating, sanctioning, and resolving competition-related disputes. - Title IV: Infractions and Sanctions (Arts. 86–125)
Guidelines for imposing fines, corrective measures, and other penalties.
4. Transitional Period
During the staggered implementation, transitional measures will apply (Arts. 134–144), such as:
- The operational launch of the Commission (Superintendencia), expected before 2026.
- Educational campaigns to inform businesses and consumers of their rights and obligations.
- Issuance of regulations on economic concentrations and other practices.
If you have questions about Guatemala’s Competition Law or need assistance navigating its implications for your business, feel free to reach out: edgar.ortizromero@fulbrightmail.org
