- There are relevant changes in the rules referring to economic freedom in the text approved by the Constitutional Convention.
- It also addresses aspects related to competition that have been criticized by experts in the field and have caused great uncertainty, as well as changes related to the right of association.
How was economic freedom dealt with in the constitutional proposal?
The draft new Constitution deals with the freedom to undertake and develop economic activities. This right is limited by the rights enshrined in the Constitution itself and the protection of nature.
Further content and limits are left to laws, which “must promote the development of smaller companies” and “ensure the protection of consumers”.
In addition, the constitutional proposal includes the right of workers to “participate in company decisions”, which could restrict the exercise of this right.
In the Constitution currently in force, the right to carry out any economic activity has other limits, which correspond to morality, public order, national security, and the legal norms that regulate it.
• Comments:
The current Constitution prohibits laws regulating constitutional rights from affecting their essence. However, there is no equivalent rule in the draft of the new Constitution, so that laws regulating this right – like any other right – could contain restrictions that would directly affect its essence or prevent its free exercise.
Competition
• General rules
Unlike the current constitution, which does not address competition, the draft contains some rules that refer to the subject, even though it does not use the term “competition” directly. It states that “practices of collusion between companies”, “abuses of monopolistic position” and “business concentrations” that affect the “efficient, fair and just” functioning of markets will be understood as conduct contrary to the “social interest”, and that the law will establish sanctions for those responsible.
• Comments
The description of prohibited conducts is more restricted than what is currently sanctioned in DL 211, but it does not necessarily contradict each other. This is the case with respect to collusion, as with regard to “abuses of monopoly position”, since today abuses by those who do not have a monopoly position, but do have a dominant position, are punishable.
In terms of mergers, the international standard, which is also used in current legislation, is to avoid transactions that are likely to substantially reduce competition. The draft innovates and uses terms that have no jurisprudential or doctrinal basis in Chile or other advanced jurisdictions that have served as a guide for Chile, prohibiting “business concentrations that affect the efficient, fair and just functioning of markets“. This new standard generates uncertainty and can lead to arbitrariness.
The draft of the New Constitution broadens the scope of state action in the economy, and in certain cases establishes state monopolies in areas where competition currently exists, such as pensions and health contributions. The question arises as to whether this provision will be applied to sanction these new monopolies if they abuse their position.
• Criminal action in cases of collusion
Currently, article 64 of DL 211 only allows criminal investigations for collusion to be initiated by means of a complaint filed by the National Economic Prosecutor’s Office (FNE), and once it has been accredited by an enforceable final judgment of the Competition Court (TDLC).
In the draft of the new Constitution, one of the norms regulating the Public Prosecutor’s Office grants it the power to exercise public criminal prosecution even when this is exclusive to other state organisms according to the law, when the crimes are against probity, public property, or harm collective legal interests.
• Comments
This rule affects the leniency, because the leniency is confirmed by the TDLC or the Supreme Court at the end of the process, but if a prosecutor can start a criminal action in parallel to the FNE investigation or the case before the TDLC, the whistleblower will have no guarantee that the Public Ministry will not prosecute. This could end the effectiveness of leniency, which is the most effective mechanism for detecting, sanctioning, and deterring collusion.
In view of the above, the FNE asked the Convention’s Transitory Norms Commission to submit to the Plenary the possibility of issuing a transitory norm to leave to the FNE the definitive granting of the benefit of leniency until DL 211 is brought into line with the New Constitution.
• The Competition Court (TDLC)
The draft new Constitution states that jurisdiction “is exercised exclusively by the courts of law and the authorities of indigenous peoples“. The rules on courts of justice recognize special courts, such as the TDLC, as a court of instance, subject to review by the Court of Appeals and eventually the Supreme Court. “Civil, criminal, penalty enforcement, family, labor, administrative, environmental, common or mixed jurisdiction, neighborhood and other courts established by law” will be “Courts of Instance“.
• Comments
If the TDLC becomes a Tribunal of Instance, it would end its current composition which includes 2 economists and 3 lawyers, as only lawyers with three years of practice who have passed the Judicial Academy can be judges of courts of instance.
It is worth asking whether the administrative courts that the draft of the new Constitution creates -which will hear cases directed against the State Administration- will oversee hearing free competition cases when the anti-competitive conduct is carried out by an organ of the State administration.
• Concentration and concentration operations
The constitutional proposal stipulates that the state must prevent the concentration of ownership of the media and information, that under no circumstances may a state monopoly be established over them, and that the law will be responsible for safeguarding this precept.
• Comments
It is unclear whether the standard for concentration will be the same as the standard for other industries of “efficient, fair and just functioning of markets” or a different one.
• Branch bargaining and competition
The draft establishes the right to collective bargaining, including branch, sectoral and territorial bargaining, the choice of which will be up to the workers.
• Comments
This right must be made compatible with the prohibition of collusion, because on both sides, workers and employers of companies that may be in competition with each other must sit down together to negotiate.
• The right of association
The article in the constitutional proposal concerning the right of association, as in the current Constitution, states that individuals have the right to associate without prior permission and that, to have legal personality, associations must be constituted in accordance with the law.
However, the draft does not include the current provision that prohibits forcing individuals to belong to an association. The current prohibition of political parties from engaging in activities outside their own activities and from foreign sources of funding is also removed.
The draft states that the law may restrict the right of association with respect to the police and armed forces.
• Non-arbitrary discrimination by the state in economic matters
This right contained in the current Constitution was not included in the constitutional proposal.
• Comments
On the contrary, the draft new Constitution favors certain forms of business performance over others, for example, laws regulating the exercise of the right to develop economic activities should promote the development of smaller companies; the obligation of the state to promote the development of cooperatives, independent miners, farmers and indigenous farmers, small-scale fishing, etc.
In the matter of State, Regional or Municipal companies, the requirements to form them are lowered, and there is no constitutional rule that obliges them to compete on equal terms with private companies.
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