SUBSIDIES AND FREE COMPETITION POLICY IN CHILE

Transcription

1 SUBSIDIES AND FREE COMPETITION POLICY IN CHILE Contribution by CHILE Submitted to UNCTAD's Seventh Session of the Intergovernmental Group of Experts on Competition Law and Policy, Geneva, 30 October to 2 November

2 Chile - Presentation: Subsidies and Free Competition Policy in Chile Subsidies that are applied to the supply side of the market are the ones that could affect the outcomes of competitive markets directly. Chile has not formulated any supply side subsidies policy in its general economic framework. However, Chile has established protection mechanisms that benefit certain national industries; for example, applying price bands for wheat, wheat flour and sugar. These price bands are designed to protect the local producers against imports of these specific products. Chile does not apply direct subsidies to specific private firms. Nevertheless, occasionally, the competition authorities have received reports of state enterprises receiving more favourable treatment than the private enterprises that compete with them. Likewise, lawsuits between privates have been filed, concerning State awarded benefits that may affect the results of competition in the market. Firstly, it is worth stating that, in Chile, the Competition Law -the Decree Law N 211 (DL 211)- does not consider exceptions or exclusions with regard to its application. This law can be applied to the State, its entites and its enterprises. In the following paragraphs, a series of cases are discussed, in which direct or indirect subsidies have been applied to either State owned or private owned enterprises. I.- Transport of passengers from Navy Precincts. A bus operators association filed claim against a welfare service of the Navy, because it commercially operated a fleet of buses that departed from certain naval precincts; also held that this situation configured a monopoly because other bus operators do not have access to those precincts. The claim stated that the drivers 2

3 were State personnel, and that it was frequent for them to pick up passengers outside the premises. The naval authorities claimed military security reasons to justify the access restrictions imposed to other private bus operators, and that the service does not have any privileges over its competitors, given that it incurs in the same costs and expenses of any other firm in the market. As an example, they held that the drivers were not State employees and received a salary as private personnel. The Comisión Preventiva (Competition Authority of the time) rejected the claim, declaring that, even thought an indirect subsidy is being applied in this case, it does not alter free competition. II.- Claim against the State petrol enterprise (ENAP, Empresa Nacional del Petróleo). A gasoline distributor (Shell) filed a claim against ENAP, because the latter rented terrains to install the facilities needed to fill gasoline transport trucks to certain firms, and it also granted access to gasoline storage facilities, supposedly in privileged conditions. Shell stated that, given the characteristics of the state owned enterprise, the reported activity would make ENAP the marginal supplier, giving it the ability to fix prices independently of the market outcome. Shell also stated that this activity would be one of the reasons for the fall of the margins it obtained in the gasoline distribution business. ENAP stated that the reported activity was offered through public tenders, it gave access to the market to new distribution enterprises, and that if it transferred its economies of scale (this was not proven), the said benefits would be favourable for free competition. 3

4 The Comisión Preventiva rejected the file, because it considered that the services offered by ENAP were not discriminatory, and they did not qualify as subsidies for their clients; thus, there was no infraction of the DL 211. Likewise, a study that was presented in the case, which was used as basis for the decision, concluded that the fees that ENAP charged were a reflection of the alternative cost of the user (cost of construction and operation of a storage facility). III.- Naviera Natales vs. Navimag. Naviera Natales accused Navimag of predatory behaviour; the latter was receiving a subsidy for transporting cargo by barges in the south of Chile. This subsidy was awarded via public tender by the State every five years. The Comisión compared the fees that Navimag charged with its average variable costs, concluding that these were always under the fees. The claim was rejected, and the decision stated that Navimag did not subsidize incidental losses by transferring the benefits achieved in other markets. It also stated that there were no barriers to entry in this market, and that, given that the subsidy given by the State was publicly tendered, whoever was interested in receiving it could apply for it. ** After analysing different decisions of the Chilean competition authorities in this matter, the following conclusions emerge: 1.- The competition authorities have resolved claims against privates, as well as against State owned enterprises or State entities that compete with private firms in different markets. The basis for these lawsuits is a direct or an indirect subsidy or privilege that could eventually alter the general competition conditions of a particular market. 4

5 2.- The defense of the State has stated, on the one hand, arguments that are common in competition cases: price above costs and low market shares. On the other hand, it also has used public interest arguments that collide with competition policy: national security reasons, social ends and national sovereignty reasons. 3.- The competition authority has considered the following arguments when ruling: The nature of the subsidy The presence or absence of tax exemptions The cost structure of the State owned enterprise Market share, and the ability to influence the market outcome. 4.- As a final statement, most of the competition authorities decisions have declared that any subsidies granted, cannot constitute an infraction to competition, in the sense of obstructing or limiting it. TDLC, October