Safeguarding Fair Play: Navigating Ecuador's Antitrust and Competition Landscape for Growing Businesses

As your business flourishes in Ecuador, expanding its reach and influence, you must operate within the country's robust legal framework designed to ensure a fair and competitive marketplace. For any enterprise of significant scale, understanding and adhering to Ecuador's antitrust and competition laws is not merely a matter of compliance; it is a strategic imperative to foster sustainable growth, avoid crippling penalties, and maintain market integrity. This guide demystifies these vital regulations, offering clear, actionable insights grounded in Ecuadorian jurisprudence.

The cornerstone of Ecuador's competition framework is the Organic Law for the Regulation and Control of Market Power (Ley Orgánica de Regulación y Control del Poder de Mercado - LORCPM). This law establishes the Superintendence for the Control of Market Power (Superintendencia de Control del Poder de Mercado - SCPM) as the primary regulatory and enforcement body. The LORCPM's objective is to prohibit and sanction practices that restrict, harm, or may restrict competition, thereby safeguarding economic efficiency, consumer welfare, and equitable market access.

Core Concepts: Market Power and Restrictive Practices

At the heart of competition law lies the concept of "market power" (poder de mercado). An economic operator possesses market power if it can materially influence market variables—such as price, quality, or supply—without its competitors, clients, or suppliers being able to effectively counteract that influence. The LORCPM scrutinizes business conduct through this lens.

Restrictive practices are broadly categorized into two main areas:

1. Abuse of Dominant Position (Abuso de Poder de Mercado)

This occurs when a business with a dominant market position—meaning it operates without significant competitive constraints—exploits that position to the detriment of the market. Prohibited actions include predatory pricing, imposing unfair trading conditions, unjustified refusal to deal, or tying sales (forcing a customer to buy an unrelated product to access another).

Legal Authority: Article 9 of the LORCPM explicitly lists prohibited abuses. While the law does not set a rigid market share threshold for dominance, the SCPM often considers a share exceeding 40-50% as a strong indicator, alongside other qualitative factors like barriers to entry.

2. Anticompetitive Agreements and Practices (Acuerdos y Prácticas Restrictivas)

These are agreements or concerted practices between two or more independent economic operators that have the object or effect of restricting competition. The most egregious examples are "hardcore cartels"—secret agreements for price-fixing, market allocation, or bid-rigging—which are considered absolute violations.

Legal Authority: Article 11 of the LORCPM prohibits these agreements.
Expert Insight: A critical, but often overlooked, mechanism is the Leniency Program (Programa de Clemencia) under Article 41 of the LORCPM. The first member of a cartel to self-report and provide evidence to the SCPM can receive full immunity from fines, creating a powerful incentive to break ranks.

Merger Control: When Growth Requires Government Approval

For expanding businesses, mergers, acquisitions, and joint ventures are key strategic tools. However, if these transactions—termed "Economic Concentrations" (Operaciones de Concentración Económica)—meet specific thresholds, they require mandatory pre-merger notification and approval from the SCPM.

When is notification to the SCPM mandatory?

Under Article 14 of the LORCPM and its implementing regulations, notification is required when a transaction meets both of the following thresholds in the fiscal year prior to the operation:

The combined total turnover in Ecuador (volumen de negocios total en el Ecuador) of all participating entities exceeds a specific amount set by the SCPM. For 2024, this is approximately $92,000,000 USD.
The individual total turnover in Ecuador of at least two of the participating entities exceeds approximately $5,520,000 USD.

Common Mistake: A frequent and costly error is misinterpreting the turnover calculation. This figure includes the turnover of the entire economic group (parent companies, subsidiaries, etc.), not just the single entity directly involved in the transaction.

The Notification Process:

Pre-notification Consultation (Highly Recommended): Before a formal filing, it is practically essential to request a consultation with the SCPM's National Intendancy for the Control of Economic Concentrations (Intendencia Nacional de Control de Concentraciones Económicas). This allows for an informal review of the transaction and helps align the formal submission with the authority's expectations.
Submission of the Notification Form: The parties must submit the official "Formulario de Notificación de Operación de Concentración Económica," as defined in Resolución No. SCPM-DS-2021-020. This is an exhaustive document requiring detailed information on the parties, the transaction structure, financial statements, and a rigorous analysis of the relevant market (mercado relevante).
- Expert Insight: Defining the relevant market is the most contentious part of a notification. Businesses often define it too broadly (e.g., "the national snack food market"), while the SCPM may analyze it with extreme granularity (e.g., "the market for salted potato chips sold in supermarkets in Quito and Guayaquil"). An incorrect market definition can invalidate the entire competitive analysis and lead to rejection or significant delays.
Payment of the Analysis Fee: Upon acceptance of the notification, a non-refundable analysis fee is due. The fee is calculated as 0.5 per thousand of the total turnover of the participating entities in Ecuador, capped at approximately $80,000 USD.
SCPM Review:
- Phase I: The SCPM has up to 25 business days to issue a decision. It can clear the transaction, move to Phase II, or request additional information (which stops the clock).
- Phase II (In-depth Investigation): If potential competition concerns are identified, the investigation can extend for an additional 60 business days. The SCPM may impose conditions (remedies) to approve the merger, such as the divestiture of a business line.
Decision: The SCPM can authorize the transaction, authorize it with conditions, or prohibit it. Implementing a notifiable transaction without SCPM approval ("gun-jumping") can result in severe fines.

Enforcement and Sanctions

The SCPM has broad investigative powers. Violations of the LORCPM carry significant penalties:

Fines:
- For hardcore cartel agreements: Up to 10% of the company's total turnover in the year prior to the fine.
- For abuse of dominant position: Up to 8% of total turnover.
- For other restrictive practices: Up to 5% of total turnover.
Individual Liability: Fines of up to $230,000 USD (500 SBU for 2024) can be imposed on directors, legal representatives, and other individuals who participated in the illicit conduct.
Structural Remedies: In merger cases, the SCPM can order the divestiture of assets. In conduct cases, it can order the cessation of the illegal practice.

Antitrust Compliance Checklist for Businesses in Ecuador

Know Your Market Position: Regularly assess your market share and that of your competitors in narrowly defined relevant markets. If you approach a dominant position, your legal obligations increase dramatically.
Audit All Agreements: Scrutinize contracts with distributors, suppliers, and especially competitors. Clauses related to resale price maintenance, exclusivity, or information exchange can trigger SCPM scrutiny.
Train Your Commercial Team: Sales and marketing staff must be trained to avoid discussions with competitors about prices, customers, territories, or bids. An informal chat at a trade show can be construed as a concerted practice.
Evaluate All M&A Activity: Before initiating any merger, acquisition, or joint venture, perform a threshold analysis to determine if notification is mandatory. Assume nothing.
Develop an Internal Compliance Protocol: Create and enforce a clear antitrust compliance policy and provide regular training to key personnel.

⚠️ Legal Alert: When to Immediately Consult an Attorney

Before any communication with a competitor regarding pricing, production levels, market territories, or bids. This is a red line.
Before finalizing any merger, acquisition, or joint venture. The threshold analysis and notification process are complex and require specialized expertise.
If you receive any formal request for information (requerimiento de información) from the SCPM. Your response is legally binding and has significant implications.
If a competitor accuses your business of unfair practices, or if you believe you are the victim of anticompetitive conduct.
When establishing a distribution or franchising network, to ensure agreements do not contain illegal vertical restraints.

Navigating Ecuador’s competition laws requires diligence and specialized legal knowledge. By proactively embedding these principles into your business strategy, you can ensure your growth is not only successful but also sustainable and legally sound.