Antitrust News of the Year: Peru's National Multisectoral Competition Policy is Coming

On July 9, 2024, through Ministerial Resolution No. 193-2024-PCM, the Peruvian government formally initiated the process of establishing the National Multisectoral Competition Policy (NMCP). The creation of a temporary Multisectoral Working Group was also established, tasked with designing the policy framework. This marks the approval by the Presidency of the Council of Ministers and the National Center for Strategic Planning (CEPLAN) to move forward with the project. The overarching goal of the NMCP is to integrate a culture of competition across all areas of public administration. While a draft of the policy is yet to be developed, the formal initiation of the process is a significant milestone, especially considering the long approval process that took place within CEPLAN. The National Institute for the Defense of Competition and Protection of Intellectual Property (“INDECOPI”), through Technical Report No. 000054-2023-DLC/INDECOPI, ^[1] carried out the relevance analysis necessary for the development of the NMCP. With technical support from the World Bank, INDECOPI addressed observations raised by CEPLAN, ensuring the policy framework is well-aligned with national strategic planning.

According to the INDECOPI’s Technical Report, the objective of this policy is to “address competition barriers in key sectors in a comprehensive and coordinated manner, promoting a fairer and more dynamic environment for all parties involved.” The policy's ultimate goal is to enhance economic efficiency, promote innovation, and safeguard consumer welfare by eliminating competition barriers and ensuring fairer market conditions for both businesses and consumers in sectors such as telecommunications, pharmaceuticals, and food products, among others. 

Taking into account the new developments in competition in Peru, last month, the event "Antitrust News of the Year: Peru’s National Multisectoral Competition Policy is Coming" brought together experts from various fields to discuss the anticipated policy and its implications for the Peruvian economy.  Hosted at the Universidad del Pacífico and organized by both, the Faculty of Law of Universidad del Pacífico and the GWU Competition & Innovation Lab, the panel featured distinguished speakers such as Ivo Gagliuffi from Garrigues Perú, Tanja Goodwin from the World Bank, and Mario Zúñiga from the International Center for Law & Economics.  The event highlighted the significance of the policy and provided a platform for stakeholders to discuss the challenges and opportunities associated with its implementation.  The discussions emphasized the need for a well-designed policy that balances the interests of various stakeholders while ensuring that the market remains competitive and inclusive.

Mariana Camacho, moderator of the panel and the leader of the Hispanic America Initiative of the GW Competition and Innovation Lab, opened the discussion by asking about the background and the reasons behind the World Bank's support for this project.  Tanja Goodwin provided a comprehensive response, tracing the roots back to a 2015 World Bank interview titled “Peru Needs Competition as a State Policy.” Since then, the World Bank has remained committed to supporting the Government in the idea of a National Multisectoral Competition Policy in Peru. At the time, discussions centered around the technical foundations that could support a competition policy, as well as the World Bank's analytical activities that emphasized the project's necessity.  This interview highlighted the critical need for dialogue among the various stakeholders involved in ensuring free competition in the markets and those responsible for creating the corresponding regulations. Goodwin emphasized that the World Bank has consistently supported this initiative, pointing out how inefficient resource allocation and low productivity, key issues identified by the World Bank’s analytical activities, underscored the need for such a policy.

Goodwin also noted that the implementation of merger control in Peru was a significant milestone, emphasizing the importance of sustained dialogue with various actors to reach consensus on the objectives of this tool​. She further elaborated on the technical groundwork laid by the World Bank, which included examining sectoral regulations, such as in the payment systems where opportunities to strengthen competition was evident. Despite these efforts, Peru still lags behind OECD countries, highlighting the necessity for a solid analytical framework, which eventually contributed to the policy's pertinence analysis. 

Tanja Goodwin added that strengthening INDECOPI institutionally is vital. She highlighted the need to protect INDECOPI from political influences and to empower it with the capacity to act proactively. Goodwin also called for more and more comprehensive market studies, covering both, public and private actors, to inform the policy's implementation. Furthermore, Goodwin pointed out that the World Bank’s analysis emphasizes the importance of equipping the team responsible for the policy's formulation and implementation with adequate resources and institutional protections, given INDECOPI's current operational constraints​. It will be important to derive a concrete Implementation Plan from the National Competition Policy in a timely manner.

Addressing the pertinence analysis, Ivo Gagliuffi discussed the three criteria that justify the need for a new national policy: identifying whether the issue poses a problem of public relevance, determining if it is of national priority, and confirming that it is not already addressed by another national policy or regulatory instrument.  Gagliuffi noted that the idea of a national competition policy had been considered as early as 2015 but gained momentum in 2016-2017 through discussions involving the World Bank and other entities.  The INDECOPI, with support of the World Bank, presented a report to the Presidency of the Council of Ministers (“PCM”), initially facing resistance based on the argument that existing policies, like the national competitiveness policy, were sufficient.   However, it was later clarified that while the competitiveness policy focuses on infrastructure and attracting investment, the competition policy would address economic agents' competitive behavior in the markets.

The panelists provided valuable insights into the essential elements that should guide the design and implementation of the National Multisectoral Competition Policy.  Mario Zúñiga stressed the importance of aligning political incentives, ensuring that the policy garners support from high-level actors such as the Presidency, the Council of Ministers, and Congress.  He argued that a solid political backing would enable the successful implementation of the policy​.

Zúñiga also emphasized the need for adequate budgetary resources for the competition authority, including salaries for officials and consulting support.  He pointed out that enhancing the human capital of the competition authority is crucial for its institutional consolidation. Furthermore, he advocated for institutional independence and autonomy of regulatory bodies, which might require discussions and potential reforms in the processes for appointing leaders to these institutions​.  Institutional independence is crucial for the creation of an effective competition policy in Peru, as it ensures that the enforcement of competition laws is impartial, transparent, and free from political or external influences.  This neutrality guarantees that all businesses, regardless of size or influence, are subject to the same rules and that anti-competitive practices are addressed fairly.  Similarly, it builds trust in the competition policy framework. If the authority is perceived as being biased or influenced by powerful economic players, public and business trust in the system would erode.^[2]  This trust is essential for encouraging compliance and cooperation with competition laws.^[3]  Independence helps protect the integrity of market dynamics, ensuring that competition policies promote innovation, efficiency, and consumer welfare, rather than serving narrow or short-term political interests.^[4]

 Another crucial point raised was the need for evidence-based policy design. He warned against the risks of implementing policies that are not grounded in solid economic theory or empirical data, citing the example of the U.S. where overly aggressive antitrust policies under the Biden administration had unintended negative consequences on American businesses.^[5]  This example serves as a cautionary tale, highlighting the importance of a balanced and well-informed approach to competition policy​.  One of the key reasons for adopting evidence-based policy design in competition law is the need for accurate problem identification.  Without reliable evidence, regulators may misinterpret market dynamics and incorrectly diagnose the presence of anti-competitive practices.^[6]  Additionally, it enables competition authorities to craft interventions that are more precisely targeted to address specific issues.  Instead of applying broad, sweeping regulations that might have unintended side effects, evidence allows for more nuanced and tailored approaches.

Further elaborating on the need for a strong institutional framework, Ivo Gagliuffi highlighted that the task to lead the development of a policy of national consequence requires to strengthen INDECOPI’s autonomy, thus demanding it to be elevated to the status of a Constitutionally Autonomous Organism (“OCA”).  The emergence of OCAs can be traced to these  primary objectives: decentralization of power, promoting accountability and transparency, and ensuring enough resources for the agency to adequately fulfil its duties. 

He mentioned, “[T]his status would provide INDECOPI with greater independence from political interference and more control over its budget, allowing it to effectively lead the implementation of the national competition policy.”  He also underscored the importance of promoting a culture of competition, until it is ingrained in both the public and private sectors​.

The National Multisectoral Competition Policy marks a significant step forward in Peru's efforts to foster a competitive, dynamic, and fair market environment.  This policy, driven by INDECOPI with the support of various national and international stakeholders, addresses the pressing need to eliminate market inefficiencies and promote economic growth.  By bringing together experts from different sectors and ensuring strong political backing, the policy aims to create a robust framework that can effectively regulate competition, protect consumers, and support businesses.  The policy's success will depend on its careful design, grounded in solid evidence, and the strengthened autonomy and resources of INDECOPI.  Ultimately, this initiative has the potential to transform Peru's market landscape, ensuring that competition serves as a cornerstone of the nation's economic development.