What You Need to Know About Economic Concentrations in Ecuador

Mergers, acquisitions, and other transactions involving a change of control are common tools for business growth. However, when a transaction may significantly affect the structure of a market, it becomes relevant not only from a financial or corporate perspective but also from a Competition Law standpoint.

The Organic Law for the Regulation and Control of Market Power (LORCPM) establishes a framework for the control of economic concentrations. This regime covers, among other transactions, certain mergers, acquisitions, and transactions involving the direct or indirect acquisition of control or substantial influence over another economic operator.

When must a concentration be notified?

Not every transaction must be notified. Prior notification depends on whether the requirements established by law are met and whether the applicable notification thresholds are exceeded.

• One of these criteria is based on turnover. For economic operators subject to the general regime, notification is required when the total turnover in Ecuador of the parties involved exceeds 200,000 Unified Basic Salaries (RBU), without prejudice to the specific thresholds applicable to certain regulated sectors.
• The second criterion relates to market share. When the parties operate in the same economic activity, notification is required when, as a result of the transaction, a market share equal to or greater than 30% of the relevant market is acquired or increased, whether at the national level or within a defined geographic market in Ecuador.

What can the authority decide?

The Superintendence of Economic Competition (SCE) assesses the potential effects of the transaction on competition, considering factors such as the relevant market, market shares, barriers to entry, competitors, and potential effects on consumers and users.

The transaction may be:

• authorized,
• authorized subject to conditions,
• or prohibited.

Depending on the results of the analysis and its potential effects on competition.

Therefore, before closing an acquisition, companies should assess whether notification is required, verify the applicable thresholds, define the relevant market, and anticipate potential regulatory risks.

In an acquisition, the question is not only how much the target company is worth, but also what will happen to the market after the transaction.