1) Is a merger control regulation in force?

Yes, Costa Rica has merger control regulations in force. Merger control regulation was introduced in 2012 with the Competition Promotion Act. The Competition Authorities Strengthening Act was passed in 2019 to amend the merger control regulations. 

2) Which authorities enforce the merger control regulation?

The Commission to Promote Competition (COPROCOM) is the national authority responsible for the defense and promotion of free competition.

The Superintendency of Telecommunications (SUTEL) is the sectoral authority responsible for the defense and promotion of free competition in the telecommunications and networks sector.

3) Relevant regulations and guidelines with links:

4) Does general competition regulation apply to mergers or ancillary restrictions?

Yes, general competition regulation applies to mergers or ancillary restrictions. 

5) May an authority order a split-up of a business irrespective of a merger?

No, an authority cannot order a split-up of an existing business unrelated to a merger control process.

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

Telecommunication services.

The Superintendency of Telecommunications (SUTEL) is the sectoral authority responsible for the defense and promotion of free competition in the telecommunications and networks sector in Costa Rica. SUTEL is in charge of reviewing and deciding on transactions involving entities authorized to provide telecommunication services in Costa Rica. During the course of these merger control processes, COPROCOM only issues a non-binding criterion.

Financial sector.

According to the provisions of Law No. 7472, COPROCOM is responsible for authorizing, conditioning or denying concentrations involving one or more entities regulated or supervised by the superintendencies of the financial system. Therefore, regulated or supervised entities must notify concentrations to COPROCOM. The National Council for the Supervision of the Financial System (CONASSIF) will send a reasoned opinion to COPROCOM indicating whether it is up to that body to process and resolve the matter, based on prudential grounds. Mergers involving regulated or supervised entities that are subject to an intervention process or a resolution process will be exempt from the obligation to notify COPROCOM.

Foreign investment control

Costa Rica does not have a specific foreign investment law. 

7) Are any parts of the territory exempted or covered by particular regulation?

No.

8) Is merger filing mandatory or voluntary?

Merger filing is mandatory in Costa Rica when the transaction meets the legal requirements (see topic 14). 

9) Is there a general definition of transactions subject to merger control?

According to the Competition Act, a merger is understood as: a merger, acquisition, sale of the commercial establishment, strategic alliance or any other act or contract that result in the lasting acquisition of economic control by one business over the another, or in the formation of a new economic agent under the joint control of two or more economic agents, as well as any transaction through which any natural or legal person, public or private, acquires control of two or more independent economic agents.

Transactions subject to merger control are those that:

1. result in the lasting acquisition of economic control by one economic agent over another or others, or
2. in the formation of a new economic agent under the joint control of two or more economic agents, or
3. any transaction by which any agent acquires control of two or more economic agents independent of each other, and
4. fulfill the minimum thresholds established by law (see topic 14).

10) Is "change of control" of a business required?

Yes, a transaction will be subject to merger control when it results in a change of control over a business entity or assets. Furthermore, transactions that result in the establishment of a new business under the joint control of independent economic agents will also be considered a “change of control”. 

11) How is “control” defined?

Control is defined as the possibility to exercise a decisive influence de facto or de jure, over an economic agent or its assets, understood as the power to take or block decisions that will determine the commercial strategic behavior. For a transaction to be considered as a merger for the purposes of the Competition Law, it is required that said act or transaction involves a change in the economic control over an economic agent. 

12) Acquisition of a minority interest

Acquisition of a minority interest is subject to merger control only when the acquisition of a minority interest confers someone with de facto control of a business. 

13) Joint ventures/joint control – which transactions constitute mergers?

The following transactions may be subject to merger control:

1. Establishment of a full-function joint venture;
2. Establishment of a non-full-function joint venture, if the transaction qualifies as a merger (see topic 9);
3. Change from joint to sole control or vice versa;
4. Dissolution – provided (part of) the business of the joint venture is transferred to one or more of the businesses controlling the joint venture or a third party;
5. Change in or extension of the activities of a joint venture – provided that further assets, contracts, know-how, rights, etc. are transferred from parent companies to the joint venture (e.g. if one of the parent companies transfers a "substantial part of an undertaking" into the joint venture);
6. Change in participants/owners – for instance if one of the controlling businesses sells its share in a joint venture to another business, or if one of the controlling businesses is acquired by another business.

A joint venture is considered "full-function" if it performs all the functions of an autonomous economic entity on a lasting basis. Whether a joint venture is considered "full function" or non-full-function depends on the level of the joint venture's dependence on its parents and to what extent the joint venture has an independent presence in the market.

14) Which thresholds decide whether a merger notification must be filed?
(Unless explicitly stated otherwise, the thresholds described under one threshold category are not cumulative with those described under another category. Thus for instance if there is a market share threshold and a turnover threshold, it is sufficient to meet one of these, unless stated otherwise.)

a) Turnover thresholds

Transactions must meet all the following combined and individual turnover thresholds (all three must be met concurrently):

1. That at least two of the parties to the merger (one of which may be the seller) carry out or have carried out activities with an impact in Costa Rica at any time during the two fiscal periods prior to the transaction. 
2. That either the combined gross sales or the combined value of the productive assets in Costa Rica of all parties involved in the merger (including the seller) have reached, during the previous fiscal period, amounts equal to or greater than 30,000 base salaries (approx. USD 27 million.).
3. That individually, at least two of the parties to the merger (one of which may be the seller), have generated gross sales or have productive assets in Costa Rica during the previous fiscal year, for amounts equal to or greater than 1,500 base salaries (approx. USD 1.3 million).

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

See turnover threshold above.

e) Other

N/A 

15) Special thresholds for particular businesses

Telecommunications.

Transactions involving at least two parties authorized to provide telecommunications services in Costa Rica must are subject to the SUTEL merger control process regardless of thresholds listed in topic 14. 

16) Rules on calculation and geographical allocation of turnover

The Competition Act requires the use of gross sales or the sum of the productive assets to assess the jurisdictional thresholds.

Regulations to the Competition Act provides that the calculation of the gross income should include the total gross sales generated by the economic agents during their last fiscal year, and that correspond to their ordinary activities with an impact in Costa Rica.

For the calculation of the combined and individual sales thresholds, in accordance with the local incidence criterion, only sales in Costa Rica will be taken into account. In general terms, the geographic allocation of sales of goods or services will coincide with the place where the product is delivered or the service is provided, regardless of where the seller is located or where the contract is made or invoiced.

Both direct and indirect sales (through third parties such as independent distributors) will also be considered to have been made in Costa Rica.

Is the seller/seller's group turnover relevant in a standard acquisition of sole control?: 

Yes, the merger control regime takes into account seller group's revenues and/or seller group's value of assets when assessing jurisdictional thresholds. The Competition Act defines an economic agent as any natural person, de facto or de jure entity, public or private, participating in any form of economic activity, as a buyer, seller, offeror or demander of goods or services, on their own behalf or on behalf of another, regardless of whether they are imported or national, or whether they have been produced or provided by it or by a third party. 

For merger control purposes, the economic agents involved in a transaction are the buying company, the selling company, and the target company, as well as all the companies that belong to the same economic group (according to the Regulations to the Competition Act an economic group is defined as a group of individuals, legal entities or economic production units, on a permanent basis, under a single power or control that regulates or conditions an activity), and that carry out commercial activities, or that have effects in Costa Rica. For purposes of economic agents, Costa Rican law doesn’t differentiate between minority or majority shareholders. So, seller, buyer and target’s participation in the market will be taken into account when assessing jurisdictional thresholds.

17) Special rules on calculation of turnover for particular businesses

N/A

18) Series of transactions that must be treated as one transaction

Successive transactions carried out between the same economic agents in a period of two years, which allows them to be integrated in stages, must be treated as a single transaction.

19) Temporary change of control

Purchases of assets, shares or participations carried out on a temporary basis and for the purpose of reselling them are exempted from merger control, provided that:

1. the resale is carried out within one year from their acquisition,
2. that the buyer does not participate in decision-making related to the commercial strategies of the acquired economic agent and
3. that, prior to their resale, the assets, shares or participations are not the subject of a new concentration that must be notified in accordance with the Competition Act.

20) Special industries, owners or types of transactions

N/A

21) Transactions involving only foreign businesses (foreign-to-foreign)

Foreign-to-foreign transactions are not exempted from the merger control process. Whenever relevant thresholds are met, the merger control regime applies.

22) No overlap of activities of the parties

There are no exemptions for transactions with no overlap of activities. The overlap or the impact on competition are only relevant for the analysis by the competition authorities during the merger control process.

23) Other exemptions from notification duty even if thresholds ARE met?

No.

24) May a merging party file voluntarily even if the thresholds are not exceeded?

No. COPROCOM will only analyze and rule over the transactions which meet the legal requirements, including the thresholds in topic 14.  

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

No. However, this does not prevent COPROCOM from requesting information to confirm the transaction was not subject to the merger control process and/or open an investigation if the information provided to the relevant authority is determined to be false.  

26) Referral within the jurisdiction

See topic 6. 

27) Referral from another jurisdiction

Merger control is not referred to the Costa Rican competition authorities from other jurisdictions. However, COPROCOM and SUTEL are legally authorized to enter into agreements and coordinate processes with other antitrust agencies. 

28) Referral to another jurisdiction

Merger control cannot be referred to competition authorities in other jurisdictions. However, COPROCOM and SUTEL are legally authorized to enter into agreements and coordinate processes with other antitrust agencies.

29) May the merging parties request or oppose a referral decision?

No, since referrals are not applicable. The parties cannot oppose to actions coordinated by COPROCOM/SUTEL with other agencies. 

30) Stage of transaction when notification must be filed

The notification can be filed at any time prior to closing or material implementation of the transaction in Costa Rica.  

The notification must be made at any time after there is an act or agreement tending to concretize the merger and prior to closing or material implementation of the transaction in Costa Rica.

31) Pre-notification consultations

The parties may consult on a non-binding basis before the formal filing.  

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

No, there are no special rules of exemptions to the merger control process for these transactions. Also see topic 38 about permission to implement before approval.

33) Forms available for completing a notification

COPROCOM does not have a notification form for completing a notification filing, however, SUTEL does. In both cases the merger notification must be submitted in writing and in Spanish, and must contain at least the following information:

1. Detailed description of the merger.
2. Identification of the economic agents involved in the transaction.
3. Share capital structure.
4. Activities of the economic agents involved in the transaction.
5. Relevant markets.
6. Information on why notification thresholds are met, i.e. indication of the individual volume of gross sales or productive assets of the parties, as appropriate.
7. Effects of the transaction.
8. Any additional information that the applicants consider relevant to the assessment of the application.

34) Languages that may be applied in notifications and communication

The notifications and communications must be in writing and in Spanish.

35) Documents that must be supplied with notification

There is no list of documents that must be supplied with the notification, but COPROCOM/SUTEL may request: Background documents that prove the applicant's identification and legal representation, Powers of Attorney, copy of the Acquisition Agreement or similar, financial statements.

36) Filing fees

The Competition Act establishes a filing fee; however, the charge is suspended. Currently no filing fees apply, but this can change at any time. 

37) Is implementation of the merger before approval prohibited?

Yes, implementation of the merger before approval is prohibited and COMPROCOM may require the parties to dissolve the merger, so that the situation prior to the execution of the transaction is reestablished. 

38) May the parties get permission to implement before approval?

Yes, the Competition Act provides that, in some exceptional cases, the parties can request a waiver from COPROCOM. If granted, the transaction can close prior to antitrust clearance.

When reviewing the waiver request, the relevant authority must take into consideration: a) the effects that the suspensory regime would cause to the parties to transaction and to the transaction itself; and b) the effects that the waiver would cause to local competition.    

39) Due diligence and other preparatory steps

Due diligence and other preparatory steps are legal, and parties can proceed freely, provided confidentiality and good faith are observed.

40) Veto rights before closing and "Ordinary course of business" clauses

Acceptable veto rights typically cover fundamental corporate changes, such as asset disposals or significant financial commitments. However, veto rights extending to routine business operations or competitive strategies may be considered 'gun jumping' and could lead to regulatory scrutiny.

"Ordinary course of business" clauses are generally accepted.

41) Implementation outside the jurisdiction before approval – "Carve out"

Yes, the merger may be implemented outside Costa Rica pending approval, provided that this will not have effects on the local market.

42) Consequences of implementing without approval/permission

In accordance with the Competition Act, it will be considered a serious infraction not to notify a merger when such notification is required by law or to carry out acts of execution of it without authorization from the Antitrust Authority. Serious infractions will be sanctioned by means of a fine equivalent to an amount between 0.1% and 5% of the total turnover of the economic agent during the last fiscal year.

If the merger has anti-competitive effects in the market, the fine for implementing a merger prior to approval may be up to 10% of the total turnover of the economic agent during the last fiscal year.

Since all parties to a transaction are legally bound to notify the transaction to the relevant Authority, the fine can be imposed on all parties. 

43) Phases and deadlines

44) Tests or criteria applied when a merger is assessed

The assessment of a merger involves:

1. Analysis of the type of merger: horizontal, vertical or conglomerate.
2. Determination of the relevant market: focus on competitive restrictions. a) Demand substitution, b) Supply substitution, c) Dimensions of the relevant market: i. relevant product market, ii. relevant geographic market; d) Conceptual criteria for determining relevant markets: the hypothetical monopolist test or SSNIP test, e) definition of the relevant market in specific situations: i) variety of sales channels, ii) time dimension, iii) two- or multi-sided markets, iv) after-markets, v) self-supply / self-provision; f) Quantitative methods: i) analysis of critical losses, ii) the price correlation test, iii) econometric methods: elasticity estimates, stationarity and cointegration tests; g) identification of firms participating in relevant markets.
3. Measurement of market shares and level of concentration and preliminary assessment of substantial power: a) market shares; b) concentration indicators: Herfindahl-Hirschman index; c) preliminary assessment of substantial market power; d) assessment of harm theories of horizontal mergers, vertical mergers and conglomerate mergers.
4. Market contestability: a) barriers to entry; b) compensation of anticompetitive effects: efficiencies, failed firm, countervailing power on demand.

45) May any non-competition issues be considered?

No. COPROCOM may only consider effects to the local markets/competition and end consumers. 

46) Special tests or criteria applicable for joint ventures

There are no special criteria applicable for joint ventures. 

47) Decisions and remedies/commitments available

The transactions can be authorized subject to remedies. The parties can propose remedies together with the initial filing, if possible anticompetitive effects have been identified by them, or when COPROCOM requests it.

The remedies proposal usually involves review and negotiation sessions with COPROCOM. Once formally submitted, the authority may: a) approve the proposal in full, b) partially approve the proposal, and/or c) request additional remedies. 

Possible remedies include both behavioral and structural remedies (i.e. different management/decision making bodies, sale of assets or business units, sale of IP, maintenance of commercial conditions, limitation to provided services or sold goods, amendment of ancillary restrictions, supply agreements, etc.). 

48) How and when will details about the merger be published?

Once the parties file all required information to conduct the merger control analysis, COPROCOM will publish a summary of the transaction on their website and on their social networks. This summary will include a description of the transaction, the relevant markets and the involved parties. This information is published so third parties can file the information they consider relevant for the analysis within 10 business days.

49) Access to the file for the merging parties and third parties

The merging parties:

The merging parties can access the file, except information declared confidential by other parties.  

Third parties:

Final decisions from COPROCOM are available to third parties immediately after issuance of notice.  

50) Who can appeal and what may be appealed?

The final decisions of COPROCOM can be appealed by filing an ordinary lawsuit in the Administrative Court. The term to file the appeal is one year after the issuance of the final decision. The legal or natural persons affected by the final decision will have standing for the judicial process.