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Friday November 5th, 2021

Chile conditionally approves LATAM/Delta joint venture

Chile’s competition tribunal has greenlit a trans-American joint venture between Delta Air Lines and LATAM, conditioned on behavioural measures intended to prevent information exchange and potential price increases.

LATAM and Delta announced their joint venture plans in September 2019, which included the latter’s acquisition of a 20% stake in the Latin American airline. The companies also entered into a code-sharing agreement for non-stop flight routes between North America and Brazil, Chile, Colombia, Paraguay, Uruguay and Peru.

Chile’s Tribunal for Defence of Free Competition (TDLC) said on Thursday that it had approved an out-of-court settlement the parties entered into with the National Economic Prosecutor (FNE) in August, which contains a set of remedies the airlines jointly offered to mitigate certain competition concerns.

The FNE’s investigation into the deal found that Delta could exert pressure on LATAM and Aeroméxico – in which it owns a 36.2% stake – to increase prices and decrease passenger capacity, as well as lower the quality of international air passenger or cargo transportation services on the Santiago to Mexico City route.

The enforcer also raised concerns that Delta’s shareholding in LATAM would give it access to commercially sensitive information on competitive routes that could increase the possibility of coordination between the two airlines.

As part of their remedies package, both companies have committed to appoint independent members to their board of directors. Delta additionally vowed not to intervene, influence or access Aeroméxico’s commercially sensitive information on routes where it competes with LATAM.

Delta must also refrain from accessing or exchanging LATAM’s commercially sensitive information and has agreed not to cast any votes during LATAM’s shareholders’ meetings. LATAM has agreed not to share any sensitive information with Delta and committed to conduct antitrust training for its directors at least once a year.

The TDLC said last week that it is satisfied that the behavioural measures are proportional and suitable to mitigate the anticompetitive risks identified by the FNE.

Delta and LATAM said in a joint statement on Friday that they welcome the tribunal’s decision and noted that the deal is still awaiting regulatory approval from the US Department of Transportation. The joint venture has been unconditionally approved by competition authorities in Colombia, Brazil and Uruguay.

The Chilean tribunal’s approval comes after the country’s Supreme Court in May 2019 overturned its conditional approval of LATAM’s proposed joint ventures with American Airlines and International Airlines Group in 2019.

A five-judge panel unanimously found that the deals would harm competition by creating new barriers to entry and allowing LATAM to acquire monopoly power on certain popular flight routes.

Counsel to Delta

FerradaNehme

Partners Diego Hernández and Nicole Nehme in Santiago, assisted by Raffaela Corte, Beatriz Hidalgo and Bárbara Galetovic

Counsel to LATAM

Claro & Cia

 

The original article can be found on the website of Global Competition Review

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