RESTRICTED
WORLD TRADE WT/WGTCP/W/36
7November 1997
ORGANIZATION(97-4872)
Original: Spanish Working Group ontheInteraction between
Trade andCompetition Policy
COMMUNICATION FROM PERU
Thefollowing communication hasbeenreceived from thePermanent Mission ofPeruwith
therequest thatitbecirculated toMembers.
_______________
THE NEW COMPETITION AND TRADE FRAMEWORK INPERU
Introduction
1. Background tothecompetition andtrade regime
1.1 Theprocess ofeconomic stabilization from 1990
1.2 Theprocess ofstructural reform
1.3 Trade reform
1.4 Thenewcompetition framework
2. Interrelationship between trade andcompetition policies
2.1 Negative effects ofdiscrepancies between competition policies andmultilateral trade
rules
2.2 Anti-competitive practices involving enterprises intwoormore countries
3. Thegeneral framework ofcompetition andtrade policies
3.1 Thenewcompetition framework
3.1.1 Theframework ofLegislative Decree No.701
A. Abuse ofdominant position
B. Practices restricting freecompetition
3.1.2 Economic concentration
3.2 Thenewtrade policy framework
4. Implications fordiscussion oftheissue ofcompetition within theWorld Trade Organization
4.1 Need foranintegrated approach tothetreatment oftrade andcompetition issues in
thecaseofdeveloping countriesWT/WGTCP/W/36
Page2
4.2 Theparticular experience ofdeveloping countries intheareasoftradeandcompetition
4.3 Review ofintegration experiences inthediscussion ofthese issues
Annex 1
Table 1
Introduction
Thepurpose ofthispaper istopresent thenewPeruvian regulatory framework inthefield
ofcompetition andtrade and,atthesame time, toputforward some important ideas fortheanalysis
ofcompetition anditsrelationship withtrade policies. Thefirstsection provides background onthe
mainfeaturesofthecompetitionpolicyimplementedinPeruinrecentyears.Thesecondsectionexplains
theinterrelationship between tradepolicies andcompetition, while thethirdsection describes thecurrent
competition andtrade environment inPeru. Finally, reference ismade tosome oftheimplications
ofthisissue fordiscussions within theWorld Trade Organization (WTO).
1. Background information onthecompetition andexternal trade regime
1.1 Thestabilization process from 1990
Atthebeginning ofthisdecade, thePeruvian Government undertook astrict programme of
economic stabilization directed atreducing inflation, recovering control ofthemoney supply andrestore
fiscal balance. Onthebasisofaconservative fiscal andmonetary policy, theGovernment hassucceeded
overthelastsixyears inreducing inflation from 7,600 percentto9percentin1996. Thebudget
deficit dropped from 6.5percentofGDP in1990 to1.1percentin1996, thanks toasignificant
improvement intaxcollection andadisciplined expenditure policy. Itisimportant topoint outthat,
inthisarea,thecriteria laiddown intheframework oftheprogramme withtheInternational Monetary
Fund (IMF), between 1991 and1996, havebeenfullycomplied with.
1.2 Theprocess ofstructural reform
Sidebysidewiththestabilization programme, theGovernment initiated abroad programme
ofstructural reform, withtheaimoflaying thefoundations ofamarket economy. Thus, theearly
1990s, sawaradical transformation oftheregulatory andinstitutional framework foreconomic activity
inPeru, witharedefinition oftherelationship between thepublic andprivate sectors, andarevaluation
ofthemarket andcompetition asessential elements fortheefficient allocation ofresources within the
economy.
Inthecontext ofthereform process, changes weremade totheoverall framework ofeconomic
activity. Inparticular, anewlawonprivate investment wasadopted, changes were made inthe
regulatory framework forforeign investment andrules forprotecting themarket were introduced.
Atthesame time, theState'sroleintheeconomy wasredefined, andafar-reaching programme of
privatization ofpublic enterprises wasinitiated, providing private sector access totheprovision ofpublic
services which untilthenhadbeenthepreserve oftheState.
Lastly, thereform process covered aseries ofspecific areas, suchasforeign trade, thefinancial
market, thelabour market, productive sectors (agriculture, fisheries, mining andhydrocarbons) and
public services andinfrastructure. Asregards trade1,tariff andpara-tariff reforms werecarried out,
1Thereform process isanalysed ingreater detail inthefollowing section.WT/WGTCP/W/36
Page3
simultaneously withanoverhaul ofthecustoms regime. Asfarasthefinancial market isconcerned,
theregime governing theoperations offinancial andinsurance institutions wasliberalized, interest
ratecontrols were scrapped, theState development banks were wound upandthelawonthestock
market wasoverhauled. Withregard tothelabour market, therulesonlabour stability andparticipation
were made more flexible, acompensation system based ontimeinservice wasintroduced, andthe
social security system wasreformed. Withrespect totheprovisions governing production sectors and
specific services, ownership rulesweremade more flexible, affording access andequality oftreatment
forprivate andforeign investors, andarange ofbureaucratic regulations andredtapewhich hadlimited
theirefficiency were eliminated.
1.3 Trade reform
Trade reform isoneofthepillars ofthestructural reform process onwhich Perubases itsmodel
ofeconomic growth anddevelopment. Theaimwastoputanendtoprotectionist policies implemented
duringpastdecades,whileatthesametimeintroducingadevelopmentmodelbasedonamarketeconomy
andtheexploitation ofthecountry 'scompetitive advantages.
Thereform wasdivided intothreeparts: tariffreform, non-tariff tradederegulation andreform
ofthecustoms regime.
(i) Tariff reform
UptoJuly1990, thetariffregime wasmade upof39advalorem rates(between 15and
84percent)and14surcharges (between zeroand24percent), resulting inatotalof
56rates(between 15and108percent). InOctober 1990, theGovernment established
three advalorem tariff rates: 15,25and50percent, together withatemporary
surcharge of10percentonimports subject tothetwohighest rates. Subsequently,
inMarch 1991, thetariff regime wasamended andthenumber ofadvalorem rates
wasreduced totwo:15and25percent. Thehigher rateisapplied mainly toconsumer
goods, thelower onetoinputs andcapital equipment, accounting for97percentof
imports.
In1997, thetariff average waslowered to13.6percent, maintaining astructure of
tworates: 12percentand20percent. Afewagricultural products (roughly 20)are
subject toa5percentsurcharge.
Itisimportant tomention that,sidebysidewiththisprocess ofunilateral tariff
liberalization, Peruhasundertaken aseries oftariffcommitments within theframework
ofthebilateral andregional agreements towhich itisaparty. These aspects willbe
discussed below.
(ii) Non-tariff trade deregulation
Numerous restrictions created obstacles toforeign tradeduring pastdecades. Arange
ofcertificates, authorizations andother forms ofcontrol served inpractice toimpede
orrestrict access tothePeruvian market forcertain products. Some ofthese barriers
were lifted during thesecond halfof1990, when allquantitative barriers were
eliminated. Theprocess culminated inMarch 1991, when successive rulesdiscontinued
oreased specific restrictions which hadremained inforce.
TheLawonForeign Trade (DL668), which provides forasetofguarantees andgeneral
principles toguide economic activity towards anopenmarket economy, consolidatedWT/WGTCP/W/36
Page4
theelimination ofallnon-tariff measures andestablished amechanism tocontrol the
issuance ofnewregulations which impair freedom oftrade.
(iii) Reorganization ofthecustoms regime
Within theprocess oftradereform, anewcustoms lawwasadopted, areorganization
ofthecustoms wasinitiated, with theestablishment oftheNational Customs
Administration (Aduanas), andtheimport inspection system wasintroduced (DL659).
(iv) Anti-dumping andcountervailing dutyrules
With theaimofprotecting domestic producers from unfair practices which distort
competition ininternational trade, theGovernment established protection mechanisms
against dumping andexport subsidies bysetting uptheDumping andSubsidies
Commission. Itshould bepointed outthatthenational rulesaimed atpreventing or
forestalling dumping orexport subsidies onthePeruvian market areinkeeping with
WTO requirements.
1.4 Thenewcompetition framework
Thenewconception oftheState'sroleinrespect oftheeconomy andmarkets hascalled for
thecreation ofinstitutions andmechanisms topromote theirefficient operation. Forexample, aset
ofbodies hasbeenestablished forthepurpose ofpromoting market efficiency andprotecting consumer
rights, including thefollowing inparticular:
(i) TheNational Institute fortheDefence ofCompetition andtheProtection ofIntellectual
Property(INDECOPI),abodysetupin1992forthepurposeofestablishingcompetition
regulations andprotecting intellectual property rights.
(ii) ThePrivate Concessions Commission (Promcepri). There havebeentwodistinct stages
intheprocess ofredefinition oftheState'sroleintheeconomy. During thefirststage,
asmentioned above, awide-ranging programme ofprivatization wasinitiated. Inthe
second stage, priority hasbeen given topromoting private investment inthe
construction andoperation ofpublic infrastructure works andpublic services. Itwas
forthispurposethatPromcepriwasestablished,abodyentrustedwithpromotingprivate
sectorconcessionsforpublicinfrastructureworksandpublicservicesthatarefinancially
viable, thusenabling theState toconcentrate itsresources ontheimplementation of
public works andinfrastructure projects which produce alower financial return but
aresocially necessary andhaveagreater impact onthelow-income sectors. Onthe
basis ofthesystem ofconcessions, Promcepri, through asetofspecial committees,
promotes private sector participation intheimplementation and/or administration of
these projects.
(iii) Other. Theneedforbodies capable ofguaranteeing theefficient allocation ofresources
insectorshavingthecharacteristicsofanaturalmonopolyorrequiringhighlyspecialized
regulation justified theestablishment ofanumber ofsectoral regulatory entities in
additiontoINDECOPI.ThiswasthecaseforOsinerg(SupervisoryBodyforInvestment
inEnergy), Sunass (National Sanitation Services Administration) andOsiptel
(Supervisory Body forInvestment inTelecommunications).WT/WGTCP/W/36
Page5
2. Theinterrelationship between competition policies andmultilateral trade rules
Theworld tradeagenda includes measures tolower tariffandnon-tariff tradebarriers, together
withmeasures toliberalize investment flows among countries. Themain riskinthisprocess isthat
thedistortions caused bygovernment policies maybereplaced bydistortions duetothebehaviour of
private firms withadominant market position. Inthisconnection, itisimportant toconsider thedegree
ofcomplementarity thatisrequired between trade andcompetition policies intheprocesses oftrade
liberalization andintegration.
2.1 Negative effects ofdiscrepancies between competition policies andmultilateral trade rules
Thecurrent divergence orlackofnational competition policies among countries, orthelack
ofamultilateral agreement onthesubject, combined withtheprevalence ofmultilateral rules on
international trade, gives risetoarange ofcontradictory situations, especially asregards thetreatment
ofcompetition issues inthetradeable sectors oftheeconomy. Table 1shows howcompanies may
besubject todifferent types ofregulation inrespect ofcompetition policies (CPs) andmultilateral trade
rules(MTRs), depending onthenature oftheirinputs andendproducts. Differences inthetreatment
ofcompetition issues atthelevel ofinternational trade andindomestic markets (forbothtradeable
andnon-tradeable goods) mayhave distorting effects, inasmuch asMTRs remain substantially
incompatible withCPs. Forexample, incountries where thecompetition framework isweak ornon-
existent butMTRs areobserved, predatory ordiscriminatory practices bydomestic companies will
notbepenalized, while those ofcompanies exporting tothatmarket willbe.Similarly, thedecision
byafirmtosource inputs fromthedomestic ortheworld market maybeinfluenced bydiscrepancies
between national CPsandMTRs. Suchcontradictions notonlyentail discriminatory treatment between
companies competing inthesame market, butalsoprovide incentives forfirms totakedecisions or
adopt forms ofconduct thatareundesirable from thesocial welfare standpoint.
Asisshown byTable 1,thistypeofproblem arises when partofacompany 'soutput orsome
ofitsinputs aretradeable goods. Therelevant market forsuchgoods isbydefinition theworld market,
although thewayinwhich thecompetition issueishandled differs according towhether thecompanies
concerned import orexport endproducts orinputs.
Theadvantage ofplacing greater emphasis ontheanalytical components ofcompetition inthis
context isthatitprovides amore complete overview ofthemarket inwhich thepractices under
investigation arecarried out. Concepts suchastherelevant market, interms oftheproduct and
geographical factors, make iteasier todefine theelements ofsupply anddemand andtheconsumer
interests atstake inthemarket, thereby complementing theanalysis ofMTRs. Accordingly, thetype
oftransaction involved (foreign ordomestic trade) orthegeographic location oftheproducer orapplicant
company islessreliable thancompetition analysis asameans ofstudying thebehaviour concerned,
inaccordance withtheparticular characteristics ofthemarkets forgoods orproducts.
Attention should bedrawn tothefactthat,from theconsumer 'spoint ofview, theexisting
discrepancies haveserious repercussions. Indeed, thegreater those discrepancies, thehigher therisk
ofanti-competitive practices, losses interms ofsocial efficiency andreduction ofconsumer surplus.
Divergencies between CPsandMTRs raiseprices andlower thelevels ofproduction.
2.2 Anti-competitive practices involving enterprises intwoormore countries
Astheflowoftrade among countries increases, thequestion arises astohowtodealwiththe
development ofanti-competitive practices involving enterprises from twoormore countries. Inthis
connection, competition policies normally relate tonational spheres ofactivity anddonotaffect private
anti-competitive practices, suchasmergers orexport cartels, which haveanimpact onother tradingWT/WGTCP/W/36
Page6
partners. Insuchcases, itisadvisable tolookintothepossibility ofcooperation schemes among
countries inrespect ofinformation exchange orcoordination mechanisms, inorder tofacilitate the
efficient application ofCPsandMTRs when business practices taking place inmore thantwocountries
become anissue. Other possible alternatives tobeconsidered, according tothetypeofcommercial
integration scheme concerned, aredispute settlement mechanisms, harmonization ofrulesorprocedures,
ordefinitions ofjudicial responsibilities.
3. Thegeneral framework ofcompetition andtrade policies inPeru
Thissection willsetoutthemain features ofPeru'scompetition andforeign trade policies.
3.1 Thenewcompetition framework
TheNational Institute fortheDefence ofCompetition andtheProtection ofIntellectual Property
(Indecopi) wassetupinNovember 1992 under Decree Law25868. Thisentity wasgranted awide
range ofpowers, albeit foracommon purpose, namely thatofsupervising competition inthevarious
markets. Themain tasks ofIndecopi arethefollowing:
- Topromote andfoster freecompetition;
- topromote adequate participation bytheeconomic agents inthemarket place;
- toencourage fairandhonest competition between suppliers ofgoods andservices;
- toensure respect forfreedom ofcompetition ininternational trade;
- tolower thecosts ofentering andexiting themarket;
- toapprove technical andmetrological standards;
- toprotect andregister allforms ofintellectual property: distinctive signs (marks),
copyright andpatents.
3.1.1 Theframework ofLegislative Decree No.701
TheLawontheElimination ofMonopolistic, Regulatory andRestrictive Practices inrespect
ofFreeCompetition (DL701)isdesigned toeliminate monopolistic practices, controls andrestrictions
onfreecompetition intheproduction andmarketing ofgoods andtheprovision ofservices, enabling
freeprivate enterprise todevelop forthegreater benefit ofusers andconsumers. Itsscope extends
toalltransactions relating togoods andservices within thenational territory, regardless ofwhether
thesource ofanti-competitive conduct iswithin oroutside thecountry. Italsoextends toallpublic
orprivate-law natural orlegalpersons whoengage ineconomic activity, including persons responsible
forrepresenting andmanaging firms, totheextent thattheyparticipate inthedecision toengage in
prohibited acts.
LegislativeDecreeNo.701prohibitsallpracticeswhichlimit,restrictordistortfreecompetition
orwhich involve abuse ofmarket dominance. Atthesame time, thePolitical Constitution of1993
callsfortheState tocombat anypractice which restricts freedom ofcompetition orinvolves abuse
ofadominant position.WT/WGTCP/W/36
Page7
A. Abuse ofdominant position
"Dominant position" means asituation where oneormore firms mayactindependently,
disregarding theircompetitors, buyers, clients orsuppliers, owing tofactors suchassignificant market
share, supply anddemand characteristics, thetechnological development orservices involved, access
ofcompetitors tofinance, etc.(Article 4ofLegislative Decree No.701).
Theforms ofabuse expressly envisaged arethefollowing:
(a) Unjustified refusal tosatisfy requests tobuyoracquire, oroffers tosellorprovide
products orservices;
(b) theapplication ofunequal conditions forequivalent commercial services, placing some
competitors atadisadvantage vis-à-vis others;
(c) making theconclusion ofcontracts conditional upon acceptance ofsupplementary
services which, bytheirnature orbyvirtue oftrade custom, bearnorelation tothe
purpose ofsuchcontracts;
(d) measures ofequivalent effect.
There isnoprovision forspecific exceptions atthepresent time. Itis,however, acknowledged
thatcases ofabuse ofdominant position should beconsidered inthelightofthe"rule ofreason" as
wellascertain forms ofrestrictive practices.
B. Practices restricting freecompetition
Practices restricting freecompetition, themodalities ofwhich aresetoutinArticle 6of
Legislative Decree No.701,taketheformofagreements, decisions, recommendations, parallel actions
orconcerted practices among firms which produce ormight produce theeffect ofrestricting, hampering
ordistorting freetrade.
Theexpress criteria arethefollowing:
(a) Concerted fixing ofprices orother conditions oftrade orservice between direct or
indirect competitors;
(b) market sharing orsharing ofsources ofsupply;
(c) sharing ofproduction quotas;
(d) coordinationofproductquality,wherethelatterdoesnotsatisfynationalorinternational
technical standards andhasanegative impact ontheconsumer;
(e) theapplication ofunequal conditions forequivalent commercial services, which place
some competitors atadisadvantage inrelation toothers;
(f) making theconclusion ofcontracts conditional upon acceptance ofsupplementary
services which, bytheirnature orbyvirtue oftrade custom, bearnorelation tothe
purpose ofsuchcontracts;WT/WGTCP/W/36
Page8
(g) Theconcerted andunjustified refusal tosatisfy requests tobuyoracquire, oroffers
tosellorprovide, products orservices;
(h) theconcerted limitation orcontrol ofproduction, technical development orinvestment;
(i) theestablishment, harmonization orcoordination ofoffers orrefusal topresent offers
inpublic tendering procedures, competitions orpublic auctions;
(j) actions ofequivalent effect.
SeeAnnex Ionprocedures, penalty systems andremedies.
3.1.2 Economic concentration
Asisclear from areading ofLegislative Decree No.701,itisnotdominance initself that
ispunishable inPerubuttheabuse ofadominant position. Thisentails, among other things, theex
postfactoregulation andpenalization ofpractices involving abuse ofadominant position orrestricting
freecompetition. Inthissense, thecompetition policy applicable inPeruregulates andpenalizes certain
market practices andnotmarket structures.
Thisapproach isbased onthefollowing main considerations:
(i) Contestability ofmarkets .Theideathattheconfiguration ofamarket depends toa
crucial extent onbarriers toentry andexit. Inparticular, theelimination of"sunk
costs" andofbarriers toaccess maypromote competition more efficiently thanthe
control ofmergers.
(ii) Smaller economies ofscale insmall markets .Inthecaseofnon-tradeable products
intended forrelatively small markets, thecontrol ofmergers mayinhibit thebestuse
ofmore far-reaching economies ofscaleandlimitpossible efficiency gains fromsuch
mergers.
Consequently, economic concentrations arenotregulated inPeru, except intheelectric power
sector. Moreover, aswasmentioned earlier, thepublic service andtelecommunication sectors have
specialized regulatory bodies.
3.2 Thenewtrade policy framework
Uptotheendofthe1980s, trade policy objectives formed partoftheframework ofan
inward-looking growth model. Asfrom1990, theGovernment undertook asweeping reform oftrade
policy, liberalizing trade through thesimplification, reduction andelimination ofinternal measures
which hampered theefficient allocation ofresources. Within thisnewcontext, national trade policy
isgeared tointernational economic reintegration andmaking thebestuseoftheadvantages of
specialization inacompetitive environment.
Inordertoensuretheachievementoftheseobjectives,itwasproposedtoeliminatetheanti-export
biasoftariff policy while applying measures topromote themobility offactors ofproduction and
encourage foreign investment.
Peruvian trade policy aimstoachieve thehighest possible degree ofneutrality withregard to
thedifferent sectors, leaving market forces todetermine howeconomic activities develop. Apart from
theextraprotectiongiventocertainagriculturalproducts,therearenoincentivestoproductioninspecific
sectors.WT/WGTCP/W/36
Page9
ThePeruvian Government considers itspolicy ofcommercial andfinancial integration tobe
akeypartoftheprocess ofinternational reintegration ofthePeruvian economy. Accordingly, Peru
hasbeentaking anactive partinthework ofmultilateral andregional trade bodies.
Multilateral trading system
Peruacceded totheGATT in1951andhasbeenanactive participant inthatforum eversince.
DuringtheUruguayRoundnegotiationsitsubmittedvariousspecificproposalsinthedifferentnegotiating
groups, either individually orjointly withother Latin American anddeveloping countries. Peru'soffer
inthesphere ofmarket access includes thebinding ofitsentire tariff atamaximum levelof30per
cent, except inthecaseofcertain agricultural products which havebeenbound atahigher level.
PeruisafounderMemberoftheWTOandfullyappliesthecommitmentsandprovisionsadopted
within thismultilateral trading system.
Other trade agreements
Peruisalsoaparty tovarious regional trade agreements. Inthefirstplace, Peruisamember
oftheLatin American Integration Association (LAIA), established in1980bytheTreaty ofMontevideo,
andsincethenhassigned aseries ofbilateral partial-scope andeconomic complementarity agreements
within theframework ofthatTreaty. Secondly, Peruisasignatory totheCartagena Agreement, under
which theAndean Group -nowknown astheAndean Community -wassetup.Atthepresent time,
Peruisactively participating inthetradeliberalization programme andcomplies withtherulesinforce
under theabove-mentioned Agreement. Finally, Peruisinvolved inthetradenegotiations being pursued
within theframework oftheFreeTrade Area fortheAmericas (FTAA) andisparticipating inthe
negotiations within eachofthelatter'srespective working groups.
4. Implications fordiscussion ofthecompetition issue within theWTO
Apreliminary review ofPeru'sexperience oftheharmonization oftradeandcompetition policy
objectives brings outanumber ofaspects thatclearly needtobetaken intoaccount inthediscussion
ofcompetition within theWTO. These issues relate totheneedforacomprehensive approach tothe
treatment ofbothtradeandcompetition, theparticular experience ofdeveloping countries andtheneed
toreview integration experiences which havealready covered thisground. These considerations should
bebased onanydiscussion ofthepossibility ofcoordinating tradeandcompetition policies inaglobal
framework, which aimsatpromoting amore competitive global environment.
4.1 Need foranintegrated approach tothetreatment oftrade andcompetition issues inthecase
ofdeveloping countries
Theprogress ofliberalization inthedeveloping countries hassharpened competition intheir
economies buthasalsomade themmore vulnerable tounfair oranti-competitive practices inthefield
ofinternational trade ingoods andservices.
Inthese circumstances, focusing ontheimplementation ofcompetition policies maybethe
mostefficient lineofapproach, serving toreduce thecostsofaccess tothemeans ofprotection provided
bylaw.Themarket-based approach ofcompetition policies makes itpossible totakeaccount ofdifferent
issues relating totradepractices (dumping orpredatory pricing onaninternational scale, establishment
ofpara-tariff barriers, sanitary orphytosanitary regulations, etc.), andtoseekasolution which protects
theinterests ofconsumers andthevalidity ofmarket principles.WT/WGTCP/W/36
Page10
Hence theimportance offurthering discussion ofthese topics andseeking toidentify ways
toreduce thecostsofaccess toprotection frominternational anti-competitive practices andtoprotect
conditions ofmarket competition inthedeveloping economies.
4.2 Theparticular experience ofdeveloping countries intheareas oftrade andcompetition
Thenewcompetition patterns thatareemerging indeveloping countries follow thePeruvian
model inmostcases. Aneffort isbeing made inthese countries toentrust thenewinstitutions with
responsibilities which inmore developed economies arehandled byavariety ofinstitutions applying
different approaches andmethodologies, which arenotnecessarily compatible withtheoverall aim
ofpromotingconditionsofcompetitioninthemarket-place.Inthisconnection,itissufficienttocompare
thetradition ofinstitutions forconsumer protection orstandards andquality certification systems with
themore flexible andlesscostly schemes thatarebeing putinplace inlessdeveloped countries.
Itistherefore notenough toreview theapproaches proposed inthemore developed economies.
Theexperience ofdeveloping countries maybemore instructive inthisregard andprovide new
perspectives ontopics thathave been thesubject ofwide-ranging discussion inmore developed
economies.
4.3 Review ofintegration experiences inthediscussion ofthese issues
Thecomplexity ofthedebate ontheissues ofmultilateral trade andcompetition mayhamper
thesearch forlinesofapproach tofuture negotiations, particularly withregard totheresults obtained
during theUruguay Round, which areintheprocess ofimplementation. Aninteresting perspective
onthissubject canbeobtained byconsidering theregional integration programmes which havetaken
these issues intoaccount andproposed solutions based onconsensus between countries. Inthis
connection, theexperience oftheEuropean Community should becompared withregional integration
programmes likethatofMERCOSUR, theAndean Community andtheGroup ofThree, andwith
hemispheric proposals liketheonerelating totheFreeTrade AreafortheAmericas (FTAA). Hence
theimportance ofconsidering regional experiences inthediscussion oftrade andcompetition atthe
multilateral level.
12September 1997WT/WGTCP/W/36
Page11
ANNEX 1
Proceedings, Penalty System andMeans ofAppeal Under
thePeruvian Competition Regime
1. Proceedings
Proceedings maybeinitiated exofficio bytheTechnical Secretariat orattherequest ofaparty.
Actions concerning infringements ofLegislative Decree No.701shallbesubject toprescription five(5)
years aftersuchinfringements havebeencommitted.
TheSecretariat shallnotify thealleged offender oftheconduct under investigation, setting out
theactsofwhich heisaccused, ifitconsiders thatreasonable evidence exists ofaviolation ofLegislative
Decree No.701. Thetime-limit fordisputing thecharges is15working days, andwhatever evidence
isconsidered necessary maybeputforward; during thisperiod, other parties withalegitimate interest
mayappear intheproceedings.
Within thetime-limit forpresenting achallenge, theparty orparties complained against may
offeranundertaking forthecessation ormodification oftheactions under investigation. Thisproposal
shallbeevaluated bytheSecretariat and,ifitdeems appropriate, presented totheCommission with
suggestions astoappropriate measures toensure fulfilment oftheundertaking. TheCommission on
FreeCompetition shallapprove orreject theproposal.
Theperiod forthepresentation ofevidence shallstarttorun,foraperiod of30working days,
following expiry ofthetime-limit forchallenging thecomplaint. Upon completion oftheperiod for
thepresentation ofevidence, theTechnical Secretariat shallissueareport onallpoints ofthecomplaint,
withsuggestions astomeasures andpenalties tobeadopted, ifappropriate.
TheCommission onFreeCompetition shallhavefiveworking daystogiveadecision once
ithasreceived thereport from theSecretariat. Commission decisions shall beappealable tothe
Competition Protection Division oftheCourt fortheDefence ofCompetition andIntellectual Property.
Rulings issued bytheabove court maybechallenged byjudicial process (administrative
proceedings) intheCivil Division oftheSupreme Court ofJustice. Decisions bythisDivision shall
inturnbeappealable totheConstitutional andSocial LawDivision oftheSupreme Court.
2. System ofpenalties
Legislative Decree No.701expressly regulates onlythefinancial penalties thatmaybeimposed
bytheCommissiononFreeCompetition,butthisdoesnotmeanthatthesearetheonlypenaltiespossible.
Theamount offinesisdetermined inthelightof:
- Thepattern andscope oftheprohibited conduct;
- thesizeofthemarket affected;
- themarket share ofthepenalized enterprise;
- theeffect oftheprohibited conduct onactual orpotential competitors, onother parties
intheeconomic process, andonconsumers orusers;WT/WGTCP/W/36
Page12
- theduration oftherestriction oncompetition;
- repetition oftheprohibited conduct.
Supreme Decree No.13-94-ITINCI (19July1994) laysdown thescaleoffinesforviolations
ofLegislative Decree No.701,which aredivided intotwocategories: serious andveryserious. The
maximum finewasequivalent to50fiscal taxunits (Unidades Impositivas Tributarias -UIT).2
Legislative Decree No.807adjusted thescale offines, introducing ahigher maximum level
equivalent to1,000 UIT, provided thatitdoesnotexceed 10percentofthesales orgross income
oftheoffender during theprevious financial year, inthecaseofminor orserious offences. Ifthe
offence isveryserious, thefineimposed maybehigher than1,000 UIT,provided thatitdoesnotexceed
10percentofthesalesorgross income received bytheoffender intheprevious financial year. Fines
forrepeat offences maybedoubled bytheCommission onFreeCompetition andincreased onsuccessive
occasions without limit.
TheCommission mayalsoimpose afineofnolessthantenandnomore than100UITinthe
event offailure tocomply withtheprudential measures ordered intheproceedings. Intheevent of
persistent non-compliance, theCommission mayimpose anewfinewhich maybedoubled successively
andwithout limituntilcompliance withtheprudential measure ordered issecured.
TheCommission mayalsoimpose afineofnolessthanoneandnomorethan50UITonanyone
whoprovides falseinformation, conceals, destroys oralters anybook, register ordocument thathas
beenrequired, oranyone whowithout justification failstoprovide required information, refuses to
appear orusesviolent means orthreats toimpede orobstruct theperformance oftheCommission 's
duties. Thefinemaybedoubled successively intheevent ofrepetition.
TheCommission onFreeCompetition maysentence anyone whohasrequested aninvestigation
wilfully oronnovalid grounds topaypersonal costs generated bytheproceedings.
Moreover, anyone whohasbeeninjured bytheagreements, contracts orpractices prohibited
byLegislative Decree No.701maysuefordamages incivilproceedings. Thesame action maybe
taken byanyone whohasbeenfalsely accused.
3. Remedies
Theremedies available against decisions oftheCommission onFreeCompetition arethose
setoutinthesingle amended textoftheLawonGeneral Rules Governing Administrative Procedures,
namely thefollowing:
(a) Anapplication forreconsideration, which shallbesubmitted totheCommission on
FreeCompetition forthelatter toreconsider itsowndecision. Thecostofsubmitting
suchapplication shallbetheequivalent of0.05UIT.
(b) Anappeal,whichshallbesubmittedtotheCommissiononFreeCompetitionforreferral
totheCompetition Protection Division oftheCourt fortheDefence ofCompetition
andIntellectual Property, which maymodify allorpartoftheCommission 'sdecision.
Thecostofsubmitting suchappeal shallbetheequivalent of0.1UIT.
2Thefiscal taxunit(Unidad Impositiva Tributaria -UIT) isareference amount fixed bytheMinistry ofthe
Economy andFinance tostandardize andfacilitate theapplication oftaxratesandfines. Itiscurrently alsoused
bytheadministration asareference amount. Thecurrent rateissetatS/.2,200 (twothousand twohundred nuevos
soles). Selling exchange rateat13June 1996: S/.2.455 =US$1.00.WT/WGTCP/W/36
Page 13TABLE 1
Rules Governing Markets inTradeable andNon-Tradeable Products
Product
Tradeable
Products traded
internationallyProducts nottraded internationally
which aresubstitutes forthose
thatareNon-tradeable
Inputs Tradeable Products traded internationally MTR MTR/CP MTR/CP
Products nottraded internationally
which aresubstitutes forthose that
areCP/MTR CP CP
Non-tradeable CP/MTR CP CP
CP: Competition Policies
MTR: Multilateral Trade Rules