On June 21, 2013 law No. 4956 establishing a new regime concerning competition in Paraguay was enacted. With the new competition law (the "Competition Law") Paraguay modernizes its relevant legislation in line with the main legal systems in the world and with its neighbors in the region.

Until now, and despite the fact that competition is a constitutional principle, competition was only regulated by a series of articles in isolated laws such as the Merchant Law, Trademark Law and a MERCOSUR Protocol, among others.

Competition laws (or "antitrust") emerged in the late nineteenth century in Canada and the United States as a public response over the political and economic power of large corporations ("trusts"). Today, there is a consensus, as recognized by Article 1 of the Competition Law, that competition law aims to defend and promote free competition in the markets.

In this regard, the Competition Law provides three mechanisms: (i) the promotion and defense of competition, (ii) encouragement of economic efficiency and (iii) the freedom and equality of conditions of access to market for companies and products. The basic idea is that greater competition and open markets leads companies to produce more efficiently. Consumers benefit from competition, since they are able to obtain more and better products and services.

While the ultimate goal of any competition law is consumer protection, in many cases the ones who are directly benefited from competition are the competitors who will be able to deal with clearer rules. Thus, the Competition Act is a legal tool for any economic agent, regardless of their size or market positioning.

The Competition Law will become enforceable 180 days after its publication with the exception of Chapter IV concerning concentrations that will enter into force one year after publication. The decree regulating the Competition Law must be issued within 120 days from the enactment.

Below are the main features of the Competition Law:

Greater clarity. Antitrust law is very complex as it combines economic and law. The Competition Law has the virtue of including definitions and concepts that make it more accessible to the interpreter. This does not mean, of course, that there will be no doubts regarding the interpretation of certain points.

Prohibited practices. The abuse of dominant position, as well as all the practices, behaviors or recommendations, individual or concerted that are aimed to or may produce restriction, limitation, obstruction, distortion as or any other practice that may prevent actual or future competition in the relevant market are prohibited. The Competition Law also provides an exemplary list of prohibited conducts. The most traditional conducts are price-fixing between competitors, market allocations, tie-in arrangements of products or services, unjustified exclusive dealings and refusal to deal.

Liability of officers, directors and representatives of legal entities and holding companies. In addition to the penalties imposed to legal entities engaged in prohibited conducts defined by the Competition Law, directors or managers of such entities "actively" contributing to such practices may also be subject to fines. Controlling legal entities and its representatives may also be liable for such practices.

The rule of reason. In accordance with the Competition Law, companies accused of anti-competitive conducts can demonstrate the "pro-competitive" effects of their conducts and that such effects are greater than the potential damages. In this regard, a company may always argue that their behavior generates economic efficiency gains (e.g. that they produce or commercialize at a lower cost), that these efficiency gains cannot be obtained by other means and that the consumer benefits from such gains.

The State is also under the scope of the Competition Act. Economic activities of government -and non-state public entities- are subject to the competition law regulations. The State can no longer argue the public nature of its services in order to evade the provisions of the Competition Law.

Previous control over economic concentration. The Competition Law introduces for the first time a system of prior control on mergers and acquisitions limiting concentration of market power. When as a result of a transaction, the company reaches 45% or more of the relevant market, or when the gross annual income of all the parties to the transaction in Paraguay exceeds US$ $ 41 million (approximately) parties shall give notice to the competent agency. The competent agency will notify whether it approves, subordinates the approval to certain compliance conditions, or if it deny the operation within 90 days of receipt of notification.

Government enforcement. The Competition Law creates the "National Competition Commission" which shall be the agency on competition issues, working as a decentralized agency and in contact with the Executive Power throughout the Ministry of Industry and Trade.

Procedure for the investigation and sanctioning of prohibited practices. The Competition Act gives the competent agency broad powers to investigate and severely punish companies or state-entities engaged in anti-competitive practices.

For more information you may contact Néstor Loizaga (nloizaga@ferrere.com) or Carlos Vasconsellos (cvasconsellos@ferrere.com)