The 1990s saw the Peruvian Government take significant measures to strengthen competition law and associated disciplines in a wide range of sectors. In 1992 a competition law was adopted that prohibits the abuse of dominant position and cartel-like business practices. However, some sectoral exceptions were allowed, and no general merger review provisions were adopted.
The implementation of this law was reinforced by the creation of the National Institute for the Defence of Competition and Protection of Intellectual Property (INDECOPI). INDECOPI, however, needs to be strengthened through the revision of certain aspects of its regulatory framework, as well as enhancing its activities and role in the field of consumer protection. In particular, INDECOPI has to further develop its collaboration with sectoral regulatory bodies by promoting more awareness on the benefits of introducing more competition in regulated sectors and supporting them in their efforts to do so.
The telecom sector is one of the sectors exempted from Peru's competition law and is regulated by a separate body, namely the Supervisory Institution on Private Investment (OSIPTEL). The latter has competition-related powers and obligations, besides the more traditional mandates of regulating tariffs and promoting quality and efficiency. In principle, OSIPTEL can sanction telecom firms for abusing dominant position. The strategic plan for OSIPTEL during the years 2003 to 2007 made strengthening competition a priority.
The electricity generating and transmission sector faces a different system of competition law-related oversight from that the rest of the economy. In addition to the general prohibition on the abuse of dominant position, Peruvian law gives INDECOPI the right to review merging proposals in the electricity sector. Other regulatory functions in this sector are performed by the Supervisory Institution on Investment in Power (OSINERG).
One important concern relates to the absence of an economy-wide merger review policy. This creates perverse incentives, as a prohibition on cartels (which exists in Peruvian law) may encourage firms to merge instead, potentially creating the very market power that the ban on cartels sought to discourage.
The limited public awareness of the purpose and benefits of competition and consumer protection laws also impedes the effective development of pro-consumer market outcomes. As well as raising the profile of such legislation, INDECOPI sees a greater role for itself in competition advocacy, that is in making the case for further reforms in the regulated sectors and in other areas of government activity. Finally, even though Peru has a well-known consumer organisation (ASPEC), it will be of crucial importance to promote small consumer associations nationwide.
Although the focus here is on competition law and consumer protection policy, it should be borne in mind that barriers to start a business remain a significant problem in Peru. According to international authorized estimates, in 2004 it took an average of 100 working days to complete the procedures to establish a legal business in Lima. It is therefore not surprising that three-fifths of Peruvian national output is thought to be generated in the informal sector (2003). This is a concern, as consumer rights are usually not respected in the informal sector.