, Mergers and Concentrations in Nicaragua

Mergers and Concentrations in Nicaragua

Recently, the European Commission authorized the merger between British brewer SABMiller and the Belgian-Brazilian brewer AB InBev, after arduous negotiations among the parties involved. Certain requirements were established in order to give the authorization to the merger by the European Commission, mainly the release of certain brands of beers from countries such as Hungary, Czech Republic, Poland, among others.

The main concern of the European Commission is to protect the interests of consumers, considering that this mega company could easily turn up the price from the beers, harming the consumers.

It is noteworthy that this merger is between the first and the second largest brewer in the world, and between the two companies stand brands of beers such like Corona, Stella Artois, Budweiser, Miller, among many others.

The mega-merger value is estimated at an amount of US $139.000 billion, one of the five largest mergers in history. The mega company will be called Newco and will be responsible for one of every three beers produced worldwide.

The Directorate General for Antitrust of the European Commission is the one who looks after the interests of consumers in Europe. Meanwhile in Nicaragua, the entity that takes that role on mergers and antitrust is the National Institute for the Promotion of Competition (“PROCOMPETENCIA”), an entity created by the Law No. 601 Law on Promotion of Competition, published in The Gazette, Official Journal No. 206 of 24 October, 2006 (“the Law”).

According to the Nicaraguan Antitrust Law, when certain concentrations are to be produced, prior to materialize it, they must be authorized by PROCOMPETENCIA. This does not extend to all mergers but for those concentrations that meet the elements of art. 25 of the Law, which are:

1. Those that as an effect from the concentration, acquires or increases a share equal to or greater to 25% of the relevant market; or

2. Those economic agents to concentrate have a combined gross income above an average of 642.857 minimum wages (more than one hundred ten million dollars).

The types of concentrations in Nicaragua are as follows:

1. When economic agents that have been independent from each other realize one of the followings: acts, contracts, agreements, which are designed to the merger, acquisition, consolidation, integration or combination of their businesses in whole or in part, ceasing to be independent;

2. Where one or more economic agent who already control at least other economic agents acquires by any means the direct or indirect control of all or part of most economic agents; and

3. Any other agreement or act that tacitly or legally transfer to an economic agent the assets of a company or grant decisive influence on the decision-making of ordinary or extraordinary administration of a company.

And the classification of concentrations is as follows:

– Vertical: When economic agents involved are part of the different stages of the production process from manufacturing of raw materials, processing, distribution and marketing. In these cases, commonly the absorbed or controlled agent is a customer or supplier from the other. These concentrations can occur in the areas of goods and/or services.

– Horizontal: When economic agents to concentrate are located at the same level of production or commercialization. It is the acquisition of a competitor that binds to compete more intensely in the market involved, from which can originate both positive and negative effects on competition;

– Concentrations cluster: When economic agents that are intended to unite, participate in unrelated markets between them, in order to expand its scope.

We must emphasize that concentrations and monopolies themselves are not a bad thing, but are way of expansion to be carried out subjecting to certain rules, in order to protect the interests of consumers and to promote best competitive practices.

Due to the recent “youth” of the Law, only 11 concentrations have been authorized by PROCOMPETENCIA to date, the main sectors involved are poultry, oil, cardboard, flexible plastic, infant milk formulas, among others. Despite the low number of authorized concentrations, it is expected that due to the economic growth that has been experiencing Nicaragua, more concentrations will come to light..