Extraterritorial reach of the Chilean antitrust law

In the Resolución No. 37/2011, stil subject to appeals, the Chilean Tribunal de Defensa de la Libre Competencia imposed several restrictions on the envisaged merger between the Chilean LAN and the Brazilian TAM. The merger will create LATAM, one of the largest airlines in the world and definitively the largest one in Latin America.

I will not analyse the merits of the decision. However, there is one particular restriction imposed which raises interesting issues about its extraterritorial reach and its policy repercussion. LATAM will have to transfer 4 slots in São Paulo’s international airport to potential entrants in the Santiago – São Paulo in order to clear the transaction – as it is known to everyone flying to São Paulo, its airport is operating above the maximum capacity and there is little room for entrants to start operations, since the slots for the airplanes to take over and off are limited. To make the case even more complex, the regulations to distribute slots privilege the existing companies rather than the entrants. In this regard, see the economic opinion issued by the Secretariat of Economic Surveillance (SEAE) about the regulations – for the full content of the opinion in Portuguese, click here.

The Chilean decision will put a lot of pressure both on the Administrative Council of Economic Defense (CADE) and the Civil Aeronautics Commission (ANAC). The CADE has always been reluctant to face the high concentration on the slots in the busiest Brazilian airports, while the ANAC’s regulation on slots has never pleased the Brazilian Antitrust Authorities.

For the full content of the Chilean decision, click here.

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