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Antitrust Consideration of Mergers or Acquisitions in Panama

A. Introduction

Panama enacted for the first time its antitrust legislation in 1996, by means of Law No.29 of February 1, 1996, "whereby antitrust provisions and other measures are taken" (hereinafter "the Antitrust Law"). The Antitrust Law, which also includes consumer protection and litigation provisions, among others, has been regulated by means of Executive Decree No.31 of September 3, 1998 ("the Regulation").

B. General objectives of the Antitrust Law

The objective of the Antitrust Law is to protect and ensure the free economic competition process in order to eliminate monopolistic practices and other restrictions in the efficient functioning of the markets of goods and services, to preserve the higher interest of the consumer (article 1 of the Antitrust Law).

C. Scope of Application of the Antitrust Law

The Antitrust Law is applicable to all economic agents, either natural or legal persons; private, governmental or municipal entities; industrials, businessmen or professionals; profitable or non-profitable enterprises; or to any others that, under any title, participate as active entities in economic activities (article 2 of the Antitrust Law).

D. General Prohibition of Monopolistic Practices

Under article 5 of the Antitrust Law, any act, contract or practice that restrains, diminishes, harms, impedes or that in any other way damages free economic competition and the free concurrence in the manufacturing, processing, distribution, supply or commercialization of goods or services is prohibited.

E. The Concept of Economic Concentrations

This concept is defined as the merger, acquisition of control or any other act whereby corporations, associations, trusts, businesses or assets in general are grouped, which is carried out among suppliers, clients or other economic agents competitors among them.

The economic concentrations, whose effects are or may be to diminish, restrict, damage or impede, in an unreasonable manner, free economic competition and free concurrence with respect to the same goods or services, or to those similar or substantially related, is prohibited.

Joint ventures that are formed for a definite period to develop a specific project are not considered economic concentrations (article 19 of the Antitrust Law).

F. Previous Verification of Economic Concentrations

Before entering into effect, the interested economic agent may notify the concentration to CLICAC, which will verify its effects on free competition (article 20 of the Antitrust Law).

In connection with the effects of the verification, under article 21 of the Antitrust Law, the concentrations that have been verified and have been granted a favorable concept by CLICAC, may operate validly and may not be subsequently challenged for reason of the elements verified; unless the favorable concept granted was based on false or incomplete information provided by the interested agent.

CLICAC may deny its favorable concept to the concentration that is subject to verification, when it is prohibited under article 19 of the Antitrust Law. Any person may challenge a concentration through a summary proceeding (article 23).

G. Presumptions

In connection with the verification to be undertaken by CLICAC, it shall be presumed that the concentration has an objective or effect prohibited by the Antitrust Law, if the act or attempt:

a) grants or may grant to the merging entity, the acquirer or the economic agent that results from the concentration, the power to fix prices unilaterally or to substantially restrict the supply in the pertinent market, without the possibility that the competitors may effectively or potentially neutralize such power.
b) has or may have as an objective to shift or displace other existing or potential competitors or to impede their access to the pertinent market.
c) has or may have as an objective to substantially facilitate to the participants in such act or attempt, the carrying out of prohibited monopolistic practices.

Providing evidence to this effect may lessen the merits of these presumptions (article 24)

H. Elements for challenging the concentration

CLICAC may take into consideration the following elements to determine if the concentration must be challenged or sanctioned:

a) the pertinent market as defined by the Antitrust Law.
b) the identification of the economic agents that supply the pertinent market, the analysis of their power in such market (concept of substantial control) and the degree of concentration in such market.
c) other criteria established by means of Executive Decree.

I. Corrective measures

If as a result of the investigation by CLICAC of the concentration subject to verification or not previously verified, the existence of one prohibited element is established, CLICAC may:

a) subject the undertaking of the transaction to the fulfillment of the necessary conditions to be in
compliance with the Antitrust Law; and/or,
b) order a partial or total deconcentration, the termination of control or the suppression of the acts, as applicable.

The above corrective measures shall be taken without prejudice of the sanctions that CLICAC or the judicial courts may impose, or of the criminal responsibility that may arise (article 26).

J. Other provisions contained in the Regulation regarding concentrations

In addition to the foregoing considerations contained in the Antitrust Law, the Regulation provides that the notification of a previous verification does not obligate the economic agents involved to suspend the formalization of the concentration, without prejudice of what CLICAC may decide.

If the concentration is not subject to voluntary verification, CLICAC may initiate an investigation during a period of three years and may require information from the economic agents involved. The investigation must conclude in this three-year period.

To determine if the economic concentration is compatible with the Antitrust Law, CLICAC undertakes an economic analysis to consider the following criteria, among others:

(a) the market quota of the economic agents that participate in the pertinent market and its effects with respect to the other competitors and buyers of the product or service, as well as with respect to other directly-related markets and economic agents.

(b) the possibility that the concentration facilitates the implementation of conducts, practices or agreements that restrain or limit free competition or the imposition of barriers to the entry of new economic agents.

(c) the possibility that the concentration facilitates the unilateral rising of prices, without the possibility that the other economic agents may, actually or potentially, counteract or block such power.

(d) the conditions of opportune entry and sufficient amount of economic agents to avoid that a price increase above the level prior to the concentration is sustained.

(e) the necessity of the concentration as the only option to avoid the exit from the market of productive assets of one of the economic agents that participate in the concentration; or

(f) the improvement of manufacturing, processing, distribution, supply, commercialization or consumption conditions of the products or services that may derive from the concentration.

The concentrations that generate increases in economic efficiency are compatible with the Antitrust Law.

The improvements in the manufacturing, processing, distribution, supply, commercialization or consumption conditions may consist of, among others:

(a) a reduction of prices to lower levels to those existing before the concentration.
(b) an increase in the quality of the product or service without a corresponding price increase.
(c) a reduction in distribution, transaction and search costs.
(d) an increase of information on the products and services available; or 
(e) an offer of new products and services.

The party that alleges or invokes increases in economic efficiency as a result of the concentration must prove such efficiency.

K. CLICAC 's decision on the effects of the concentration

The resolution adopted by CLICAC as a result of the investigation or verification of an economic concentration may prohibit, order the partial or total deconcentration, or grant a favorable concept to such concentration.

CLICAC may also condition its decision on the concentration in order to subject the realization of the act to the one or more corrective measures, such as: (i) to abstain from undertaking a determined conduct; (ii) to transfer or grant to third parties rights on certain assets, shares or intangible assets; (iii) to modify or eliminate clauses from acts or contracts. These measures, nonetheless, must be proportionate with the correction sought.

The Regulation also contains rules regarding the power of CLICAC to suspend provisionally any act or practice the illegally restrains competition.

Finally, you might find of interest that CLICAC issued in March, 1999 a document titled "Guidelines for the Analysis of Economic Concentrations", which provides sufficient elements to determine whether or not a proposed transaction may breach the Antitrust Law. (The document is about 24 pages in Spanish and may be provided to you at your request).


  1. The Antitrust Law does not require a mandatory filing of a proposed merger.
  2. The parties may submit a voluntary notification to CLICAC in order that this entity undertakes an investigation of the effects of the merger on free economic competition.
  3. CLICAC also has the power to order an investigation ex-officio for a period of three years after the merger has entered into effect.


1. Free economic competition is defined in article 7 of the Antitrust Law as the participation of different economic agents in the same pertinent market, acting without illegal restrictions in the process of manufacturing, purchasing, selling, price-fixing and other conditions inherent to its economic activity
2. Free concurrence is defined in article 8 of the Antitrust Law as the possibility of new competitors to access to the same pertinent market.
3. The concept of economic efficiency pertains to improvements in the manufacturing, processing, distribution, supply, commercialization or consumption conditions of products or services, provided that it is proven that such improvements, cumulatively: (i) may not obtained otherwise; (ii) are persistent in the long-term; and (iii) compensate the possible negative effect in the free competition and free concurrence process.

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