COMPAL I has led to positive outcomes in Costa Rica.

Competition issues

Legal loopholes were identified and analysed which led to a reform proposal of the legal framework. The main achievement of this proposal is to provide the Costa Rican competition authority ("COPROCOM") with the capacity to take binding decisions on anticompetitive behaviour and conducts which affect the transparency of markets.  As part of the advocacy and awareness-building campaign, this proposal was then presented to the civil society and business community for consultation. This proposal has been accepted (2008) by the Minister of Economy and in due time is expected to be presented to the Parliament for discussion.

Positive impacts have also resulted from various capacity-building activities. For example, the internships at the Swiss competition commission (COMCO) for COPROCOM staff. This activity led to an increase in expertise and specialisation of staff. The training activities for judges and government officials have led to a greater understanding of cases presented and the way in which they are handled. Thanks to a COMPAL train for trainers Competition course organized in March 2007, a number of staff from different institutions were trained. Competition issues have been introduced in the academic curricula of six universities. This would allow for a greater number of local experts to be educated on competition matters.

Parallel to the implementation of COMPAL, a Peer Review of Costa Rica took place. The Peer Review was supported by UNCTAD and the results were presented at the Intergovernmental Group of Experts (IGE 2008) on CLP held in Geneva, on 18 July 2008.  Although there is support from the private and public sector to promote CLP, much remains to be done. Efforts to convince Parliament need to be continued in order to enact the reform proposal of the current legislation, which in turn requires logistical and strategic support for lobbying with decision-making bodies. Personnel and resource limitations of local institutions have led to delays in implementation and capacity in dealing with international cooperation as no department is specifically assigned to this task. Further, the need to enhance efficiency of responsible agencies through the preparation and implementation of more flexible management mechanisms has  become evident. This represents a challenge for COMPAL II and similarly may apply to other beneficiary countries.

Costa Rica’s need assessment for COMPAL II involve reinforcing institutional and technical capacities of COPROCOM and promoting a greater development of consumer protection issues through information campaigns for consumers and capacity building of the staff dealing with these issues. In this direction, the UNCTAD voluntary Peer Review of the Costa Rican9 competition law and policy and the work carried out during COMPAL I on the reform of the law in force on competition and consumer protection Nr. 7472, contribute to focusing the axes of intervention around the reinforcement of the legal framework of COPROCOM. The goal is to fully implement the recommendations of the Peer Review, which includes widening preventive and repressive measures of the current regulations to ultimately contribute to the enactment of the reforms carried out on the competition law by the Legislative Assembly. Activities proposed under this objective may include the following:

• The establishment of a notification mechanism and a preventive merger control;
• Develop a communication and persuasion strategy to convince the private sector of
undergoing the process of a preventive merger control on a voluntary basis;
• Design a manual on notification on a voluntary basis and on the merger analysis;
• To give COPROCOM the possibility of reaching compromises with actors investigated;
• To increase the nominative amount of monetary fines;
• Deepen activities of dissemination and communication of competition policies, respect within the government's administration, the judicial power and civil society.

Further recommendations concern the elimination of all kinds of exceptions to competition legislation, as well as undertaking studies and promoting the exchange of opinions. The recommendations also include endowing COPROCOM and its technical unit with support of more investigative tools to concentrate efforts on key sectors of the economy. This goes hand in hand with advocacy activities on competition in all sectors of the economy, including the sectors exempted from the competition law. The discussion further focuses on achieving a greater institutional independence from government administration, as well as from lobbying efforts by economic actors. For all these reasons the first national objective for COMPAL II in Costa Rica is:

"Strengthening the framework and the institutional capacities of COPROCOM so as to ensure
its effective actions. "

 Consumer protection issues

Two major outcomes have been identified as a result of COMPAL I in terms of consumer protection: 1. The creation of the manual of best practices in consumer protection and a system of voluntary compliance by companies which allows companies to express their commitment to general standards thus setting a benchmark for conduct; 2. The standardization of procedures of the consumer protection agency through the manual elaborated under a COMPAL activity (CR.2.2.1.). This provides for greater legal certainty in the management of technical unit. In terms of internal work processes, methodologies and a manual of best practices have been developed.

The Consumer Protection Agency carries out surveys to evaluate satisfaction with these products. Recommendations will be part of the components of COMPAL II Project for Costa Rica. 64. In parallel to the national objective on competition, the promotion and protection of consumer protection by strengthening institutional capacities and the regulatory framework of the present consumer protection authority is envisaged. The success of reinforcing the consumer protection agency under COMPAL I should be deepened by implementing a second national objective, which contains the following:

"Promoting the development of consumer protection through strengthening institutional capacities and the legal framework."

Additional background

Costa Rica has developed its own competition law and enforcement regime. The economy in Costa Rica is characterized by the existence of important public service monopolies that operate in the telecom, energy, oil and gas sectors.

In the telecom sector, for instance, the only permitted operator of telecommunications services is the Costa Rican Energy Institute (ICE). Arguably, this has resulted in a distortion of prices, which are quite high according to international standards. ICE also operates in the electricity sector, where it has a monopoly in the transmission of electric current. Even though ICE can face competition in the generation of current (rivals are allowed to have a total market share of no more than 30% according to a law passed in 1995), competitors must sell their power to ICE's distribution arm. Naturally, the vertically integrated nature of ICE's operation in the energy sector has raised concerns about abuse of market power.

Although COPROCOM is relatively well established (by the standards of the Central American sub-region), it still faces various challenges:

• First, despite its enforcement record, the activities of COPROCOM are not widely known or supported in Costa Rican society. COPROCOM has to enhance its profile and, in particular, its pro-consumer activities among political leaders, the media, and in the universities.
• Second, COPROCOM has no right to review mergers and acquisitions, which is a serious omission to its legal mandate and compromises its ability to fight the exercise of market power.
• Third, to date insufficient resources have forced COPROCOM to be selective in the choice of sectors to investigate, necessarily leaving other sectors unexamined.
• Fourth, conservative judicial rulings that limit the ability of state agencies to influence the terms upon which they affect commercial freedom are a constraint. In addition, promoting enhanced competition in those sectors where publicly owned firms operate is proving to be difficult. It is worth noting that public services, legal monopolies and municipal activities are currently exempt from the national competition law.

Therefore, the national report on Costa Rica on needs and priorities in the area of competition policy (prepared during phase I) identified a number of potential anti-competitive practices associated with certain publicly-owned monopolies. It was argued that difficulties in tackling the latter have also frustrated the spread of a competition culture in Costa Rica.

In recent years. COPROCOM has received support from agencies or ministries in Mexico, Canada and Spain, as well as from ECLAC, in the form of seminars and internships. However, this support has been very sporadic, and COPROCOM still faces the need to develop its capacities to ensure wider implementation of the law.