Basics of the Competition Law

The Competition Law is a set of statutes that seek to promote the right climate so that suppliers can compete freely and thus sell their products based on the merits. Its purpose is to verify that the state works to promote free competition and define criticisms of behaviors that go against this purpose.

According to the Ministry of Economy, a draft of the Competition Law has been evaluated in Guatemala since 1997 but is not approved yet. As this institution has seen in other countries, one of the reasons why there is a delay in analyzing this type of laws is the misperception that this law will be created to eradicate monopolies, when its real purpose is promoting that any company, whether it is a monopoly or not, doesn’t abuse of its domain in a specific sector of the economy.

The main proposals of this initiative in Guatemala are the following:

• The creation of the Superintendence of Competition, as an autonomous entity that guarantees competition in the country is possible.

• The existence of three types of prohibitions for suppliers:

1. Abuse of its influence in the market

2. Make agreements between competitors about the price they will offer to the consumer (collusion).

3. Any action that limits competition.

This Law is based mainly on two points of the Political Constitution of the Republic of Guatemala: Article 43, which recognizes the freedom of industry, commerce and labor, and Article 119, which says that the State must stimulate the initiatives in agricultural, livestock, industrial, tourism and other activities to promote the economic development of Guatemala.

Objectives of Competition Law

Among the objectives considered by the competition law are the following:

1. Create the authorities that will be responsible for protecting free competition in the market.

2. Control or eliminate restrictive agreements between companies.

3. Eliminate agreements that have detrimental effects on national or international trade or economic development.

4. Define, prosecute and punish behaviors that are considered as anticompetitive.

5. Establish investigation, sanction and compensation request procedures.

Law Promoters

This law was promoted by the Ministry of Economy since 2016, however the slow pace with which it has been analyzed by Congress has avoided its approval.One of the main promoters of this law is the deputy Carlos Barreda, who has previously stated that the law would provide the country with an improvement in economic efficiency.The head of the customer service department (DIACO), Alejandro Pereira, is another of the faithful promoters of the law since he says he would allow the country to create a fair free market.

Currently, the purchasing law is still not approved in the congress. This represents a major delay in the country's economy.

International Competition Law

The competition law does not change much internationally, as it has the same objective: to ensure the economic development of a country. This law allows a large number of competitors and bidders within a market and this causes that none of the actors have the power to set the price of the products. In turn, all this forces companies to innovate and differentiate themselves from the competition to capture greater market share.

The purpose of this policy is to guarantee the well-being of the consumer, since the more variety of products and services on the market, he consumes the one with the best price and the one that meets his needs.

According to a study by the Asociación de Investigación y Estudios Sociales (ASIES) "In the 1990s, Latin American countries began to implement economic policies aimed at promoting efficiency and development through trade openness."

Among the behaviors pursued by the Competition Law are:

• Collusion: agreements between competitors on price and / or quantity to be sold.

• Refusal to sell: refuse to sell in order to limit competition

• Dominant position abuse: companies that abuse their position to restrict competition

• Concentration operations: which put competition at risk.

Competition Law in Central America

Central America has experimented economic and political changes during the 80’s decade. These changes contributed for the implementation of the Competition Law.

El Salvador counts with the best competition laws in Central America. The application of these laws has had some significant results in the market. Honduras instead has taken a long adaptation process with the competition law. In 2015, Honduras make the first reforms with the purpose to strengthen competition authority.

Costa Rica became the first country in Central America to implement the Competition Law. This whole process still has some pending reforms that will allow Costa Rica to be part of the OECD.

Nicaragua has had difficulties after the approval of the Competition Law. It has not had the progress they were expecting. Most of these it is due to the lack of autonomy in the institution.

The case of Guatemala is more complicated than the countries that were mentioned before. In Guatemala there has not been approved a Competition Law. These is necessary to start creating in the market a competition authority. In 2016, the Economy Minister presented a draft of the Competition Law in the Congress of Guatemala. The process of analysis and discussion has continued since then. It is important to base on an institutional model related with the characteristics of competition in the market from other countries. And this law has to apply equally to all.