Competition Law in times of Socialism: The Chilean bank nationalization case (1971-1975) Manuel Abarca Meza
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Competition Law in times of Socialism: The Chilean bank nationalization case
(1971-1975)
Manuel Abarca Meza*
This draft: June 15th, 2021
Paper prepared for ASCOLA’s 16th annual conference
Abstract: This paper analyses the 1971 Chilean Competition Law case of the bank
nationalization plan by the Socialist government lead by President Salvador Allende (1970-1973).
This was the first major Competition case in Chile at the time. It was finally decided in 1975, 2
years after the coup d’état lead by Augusto Pinochet. At first, many legal arguments were
exposed, in context of the application of a new and incipient Competition Law regime from
1959. In this regard, these arguments were much closer to Administrative Law and formal
interpretations of the Competition Act than to a substantive analysis. At the same time, the
political and economic context of the 1959 Competition Act was different of the context at the
time of the final 1975 final ruling, due especially to the new 1973 political regime that included
a new Competition Act. In this sense, the economic context, the situation of Competition Law
and the degree of tolerance to State intervention at the time might explain both reasonings and
conclusions of the different rulings of the process and the differences between both Competition
laws in force in each time.
Keywords: Antitrust, Competition Law, Chile, Unidad Popular, Salvador Allende, Bank
Nationalization.
***
*
Lawyer, University of Chile, associate at Estudio Lewin Abogados, Santiago de Chile and research assistant at
University of Chile’s Law School Centre of Regulation and Competition (RegCom).
The author wants to thank Constanza Jaramillo, Francisco Agüero, Fernando Araya, Fabiola Neira of Corporación
de Fomento de la Producción and Wladimir Rojas of Fiscalía Nacional Económica for their help, comments,
corrections and suggestions to this paper.“Monopolies harm workers and people, because: they
deliberately limit production, fix the kind and quality of
production, prevent that technics should be on service of
the people, use the State for their own interests, evade
taxes, pay better salaries but at cost of prices, increase
prices. Monopolies harm medium and small companies
and merchants (they sell them raw materials at high
prices, buy their products at very low prices, fix the quality
of their products, restrict them credits, etc.).”1
Popular Education Handbook, 1972.
Introduction
Competition Law and Socialism are apparently contradictory words2. On the one hand, price
controls (the traditional socialist economic measure) would be considered as the “antithesis” of
free-market principles3. On the other hand, certain socialist policies would be considered as part
of a “normal” Competition policy4. Nowadays, in the context of recent Competition
developments in communist countries like China5, there is a discussion of the contradiction or
coexistence of a Competition Law based system with a socialist/communist system6. In
particular, the classic liberal claim of suspicion of both public and private concentration7, versus
1 Marta Harnecker and Gabriela Uribe, Monopolio y Miseria: Cuaderno de Educación Popular No 3 (Editorial Quimantú
1972)
accessed 30 July 2020., p. 6.
2 Tibor Varady, ‘The Emergence of Competition Law in (Former) Socialist Countries’ 47 The American Journal of
Comparative Law., p. 232.
3 Alison Jones, Brenda Sufrin and Niamh Dunne, EU Competition Law: Text, Cases and Materials (Seventh Edition,
Oxford University Press 2020)., p. 559.
4 One of the first 40 proposals of the Chilean democratic-elected socialist government lead by President Salvador
Allende government included reducing “drastically the prices of medicines, reducing importation royalties and taxes
of their raw materials”.
See Arturo Fontaine and Miguel González Pino (eds), Los Mil Días de Allende (Centro de Estudios públicos 1997)
accessed 3 August 2020., p. 962.
5 South China Morning Post, ‘After Alibaba probe, antitrust is at the top of 2021 agenda, China’s top market
regulator says’ (2021).
6 Tim Wu, The Curse of Bigness - International Version (Atlantic Books 2020)., p. 142-146.
7 Fernando Araya, ‘El Rule of Law En El Derecho de La Competencia: Un Enfoque Liberal Clásico. Aplicaciones
a Chile.’ (Universidad de Chile 2016)
1the socialist claim that only private concentration should be tackled, by the abolition of private
property8.
In this regard, the Competition case under review took place in the context of the democratic-
elected socialist government led by President Salvador Allende between November 3rd, 1970 and
September 11th, 1973, this is, the Unidad Popular (“UP”), and regards with the attempt to
nationalize banking (“the Case”). This case involved several investigations and rulings, between
1971 and 1975. The Case was finally decided two years after the coup d’état that led to the
Augusto Pinochet brutal dictatorship. The final ruling ordered the criminal prosecution of all
the physical persons involved in the UP plan9. However, this ruling could not ever be concreted.
All the involved people, at the time, were exiled10.
This case was controversial because it involved a Judiciary, Legislative and even Executive
opposition of the plan led by the government, that was part of its agenda. It was also particular
because it involved a different approach of the Competition laws in force at the time, in order
to include State actions. Therefore, the Case was seminal because it was the first case that Chilean
Competition Law was used to sanction State actions11.
This paper has three parts. Part I explains the Competition Law in force during the UP. Part II
explains the Case, including the original UP plan, the subsequent judicial process and its main
findings. Finally, Part III delivers the final remarks.
I. Competition laws during UP
accessed 27
April 2021., p. 182.
8 Ricardo Lagos, La Concentración Del Poder Económico (Del Pacífico 1962)., p. 171.
9 Resolución No 14/1975.
10 Eduardo Novoa Monreal, ¿Vía Legal Hacia El Socialismo?: El Caso de Chile, 1970-1973 (Editorial Jurídica
Venezolana 1978)., p. 31.
11 See Francisco Agüero, ‘¿Podemos juzgar la política monetaria? El Tribunal de Defensa de la Libre Competencia
como contencioso-administrativo del Banco Central’ (2017)
accessed 3 August
2020.
2During UP, the Competition Law was codified on Title V of Law Nº 13.305 of 1959 (“Title V”).
Enacted during the centre-right government of President Jorge Alessandri Rodríguez (1958-
1964), these ‘anti-monopoly’ provisions had been included as part of a miscellaneous regulation
concerning different topics, such as a change of currency and an incipient competition system12.
This competition regime, as seen in infra, was first proposed by the Klein-Saks Mission, a group
of economists hired by the previous government of President Carlos Ibáñez del Campo (1949-
1958), in order to control inflation. The original act proposed by the Mission included a general
prohibition and revoked any kind of monopoly, both public and private. Its wording was taken
mainly from United States Law13. However, this provision was later amended as explained below.
a. Substantive provisions
Regarding substantive provisions, Title V provided for a regime of, apparently, different
tolerance level to certain monopolies, both private and public.
Regarding private monopolies, Article 172 I established explicitly that “no monopoly grant to
the exercise of industrial or commercial activities shall be given to privates”. Regarding specific
conducts, Article 173 prohibited “Any act or contract that tends to prevent competition in the
country”, such as “(1) price fixing; (2) quotas for production, transportation, and distribution;
(3) market zones; (4) limitations on production or its total paralyzation; (5) exclusive
distributorships; and (6) ‘other restraints’"14 that could generate anticompetitive effects. These
conducts were subject to fines and criminal prosecution. Although it is not clear in the literal
text of this Article, an interpretation (used in the Case) could constitute in a general prohibition
of both natural monopolies and conducts-driven monopolies15.
Regarding public monopolies, Article 172 II determined a “monopoly reserve”16, establishing that
only a law could grant a monopoly of certain industrial or commercial activities to public organs.
12 Patricio Bernedo, Historia de la libre competencia en Chile: 1959-2010 (Fiscalía Nacional Económica 2013)., p. 35.
13 Dale B Furnish, ‘Chilean Antitrust Law’ (1971) 19 The American Journal of Comparative Law 26., p. 465.
14 ibid., p. 468.
15 Novoa Monreal (n 11)., p. 30.
16 ibid.
3However, Article 181 kept in force early monopoly-related provisions regarding mining, copper,
saltpetre, iodine, sanitary provisions, alcohol supply, insurance, stock exchanges, transports and,
more important, banking. This provision, as seen in infra, kept in force, in practice, price control
mechanisms by the State, which was one of the main characteristics of the Chilean economy at
the time17.
More important, Article 174 determined a permission of conducts forbidden in Article 173, in
favour of private and public entities, in order to implement protectionist measures. This
permission should be subject to substantive and formal requirements18. First, in case of private
undertakings, these conducts should be “necessary for the stability or the development of
national investments, regarding the existence or foreign investments that are active or could be
active in Chile”. In other words, the existence of foreign companies could lead to the exclusion
of local competitors. In case of public entities, these conducts should consist in those that “a
public undertaking or an undertaking that has a State participation, direct or indirect, is part, and
if there is a national interest involved”. Second, in both cases the President should authorize the
conducts by decree, after a favourable review of the Antimonopoly Commission19.
In sum, the permission of monopolies and anticompetitive conducts by privates, public
companies and companies with State participation were subject to a substantive and formal
requirement (protectionist reasons, a review by the Commission and a presidential decree).
However, the existence of public monopolies was subject only to formal requirements (a law or
situations regulated in Article 181).
A summary of the provisions of Title V is presented below:
Article Entity Content
17 Ricardo Paredes, ‘Jurisprudencia de Las Comisiones Antimonopolios En Chile’ (1995) 58 Estudios Públicos., p.
230.
18 Óscar Illanes, ‘Jurisprudencia de La Comisión Antimonopolios’ (1964) 8–9 Revista de Derecho Económico 27.,
p. 47-48.
19 See Infra.
4172 I Privates Prohibition of monopolies
172 II Public Grant of monopolies only by
law
173 I Privates Specific conducts forbidden
174 Both Grant of conducts
(Presidential decree and
review by the Commission)
181 Both Exemption of certain
economic activities
Table 1: Main provisions of Title V.
b. Procedural measures
Regarding procedural measures, Title V created an Antimonopoly Commission, an incipient
competition authority composed of a member of the Supreme Court, the director of the stock
and exchanges regulator and the director of the banking regulator. The commission did not have
enforcement powers. It only could declare the start of the respective process before courts,
ordering the Consejo de Defensa del Estado (“CDE”), the agency in charge of the judicial
representation of the State, the presentation of complaints. However, the commission had
consultive and regulatory powers. The Commission had its prosecutor (later, the chief of Fiscalía
Nacional Económica (“FNE”), the current Competition authority)20.
II. The Case
a. The bank nationalization plan
20 Francisco Agüero, ‘Chilean Antitrust Policy: Some Lessons Behind Its Success’ (2016) 79 Law and Contemporary
Problems 123., p. 124.
5On December 30th, 1970, President Allende delivered a radio speech, where he presented a bank
nationalization plan21, as part of his “anti-imperialist, anti-oligarchic, anti-monopolist” plan22.
The plan consisted in a public offer of the acquisition of stocks by Banco del Estado (the Chilean
public bank) during a three-week term (from January 11th until January 30th, 1971). The stocks
would be bought at the average price exchanged during the first two quarters of 1970, paid with
2-7 years-term bonds. Originally, President Allende announced the proposal of an expropiatory
law to the Congress for the plan. However, due to the short term and lack of majority in
Congress23, the government ordered CORFO (“Corporación de Fomento de la Producción”, a
public corporation dedicated to the promotion of entrepreneurship and economic growth in
Chile) its implementation by the acquisition of stocks.
On January 11th, 1971, the Executive Vice-President of CORFO and the President and General
Manager of the Central Bank issued a Power of Attorney to Banco del Estado in order to start
the acquisitions, with a line of credit grant by the Central Bank itself. According to CORFO’s
Law, these kinds of acts should be issued by the corporation’s general council. However, a few
days later, on January 18th, 1971, the council ratified the Vice-president action. On January 29th,
1971, the council authorized the Vice-President to extend the term up to 40 days.
The process of acquisition was fast. Shareholders faced a dilemma: they would sell the stocks at
the price offered by the government or face the current devaluation of them at the time24-25. In
case of failed negotiations, the government used to intervene banks, arguing the detection of a
21 See Salvador Allende, ‘Exposición Del Presidente Salvador Allende Sobre La Estatización Del Sistema Bancario’
accessed 2 February 2021.
22 “The program was anti-imperialist because it rescues copper, the main basic wealth source, that was in hands of
the big American worldwide big copper companies (…) The program was anti-oligarchic because land reform tried
to end with the ‘latifundio’ (large state) (…) The program was anti-capitalist because expropriated a reduced number
of big monopolist companies that controlled all local economy segments, in order to create the Social Property
Area, that would be dominant with approximately 200 big monopolist companies plus State companies. At the same
time, a Private Property Area was contemplated, with a bigger number of small and medium business: in 1967, they
were 30.500. Finally, the Mixed Property Area, constituted by national and foreign private companies with State
shareholding”.
Orlando Caputo and Graciela Galarce, ‘Economía y correlación de fuerzas en el gobierno de Allende 1970-1973’ in
Robert Austin Henry, Joana Salém Vasconcelos and Viviana Canibilo Ramírez (eds), La Vía Chilena al Socialismo: 50
años después, vol 1 (CLACSO 2020)., p. 365.
23 Patricio Meller, Un Siglo de Economía Política Chilena (1890-1990) (Editorial Andrés Bello 1996)., p. 148.
24 ibid.
25 Bernedo (n 13)., p. 54.
6pretended financial irregularity or the existence of Labour Law issues26, in order to accelerate the
process. By November 1971, CORFO had acquired approximately 53,2% of private banks
stocks27. By December 1973 (after the coup d’état), only 3 of the 17 national banks were still
owned by privates28.
b. The process
i. A question of formal requirements
During the first months of the plan, opposition by Congress began to arise29. On January 26th,
1971, the Chamber of Deputies determined the creation of a special committee that would
investigate the plan. On February 10th, 1971, the committee invited different incumbents, such
as the Antimonopoly Commission’s Prosecutor, Waldo Ortúzar. In the session, the Prosecutor
held that the acquisition, without law, could constitute an infraction of Articles 172 and 174 of
Title V30. At the same time, the Commission would have powers to enforce this conduct.
In parallel, congressman Mario Penna asked the Chamber to send a request to Contraloría
General de la República (the Chilean government accountability office) to inform if the
ratification of CORFO’s council of the Executive Vice-President actions was legal, from the
perspective of Private Law. On February 26th, 1971, Contraloría held that the actions of the
Executive Vice-President were legal, due to the existence of previous administrative case law
that upheld ratifications of acts by public entities31.
ii. The rise of a formal Competition Law
26 Meller (n 24).
27 Horacio Aránguiz, ‘Notas Para El Estudio de Los Bancos Extranjeros En Chile: 1889-1971’ (1993) 1 Historia
(Pontificia Universidad Católica de Chile)., p. 67.
28 ibid., p. 68.
29 In fact, the only measure taken by the UP that had unanimous acceptance by the Congress was the nationalization
of copper. See Jorge Arrate, Salvador Allende, ¿Sueño o Proyecto? (2a edición, LOM 2008)., p. 64.
30 Bernedo (n 13)., p. 55.
31 Corporación de Fomento de la Producción (ed), La Estatización de La Banca (Corfo 1973)., p. 29-30.
7The Congress special committee sent a request to the Antimonopoly Commission, to inform if
the plan would constitute an infraction to Title V. In concrete, if (1) Title V was applicable to
the State, (2) Article 181 exempted the State and (3) the plan should be made by law (Article 172
II). In parallel, some complaints by congressmen and representatives of banks were submitted
to the Commission.
The Commission requested an opinion from Prosecutor Ortúzar, who held that the plan
constituted and infraction to Title V. First, during the discussion of Title V, it was clear that the
monopoly prohibition included the State, by establishing that only a law could constitute a
monopoly in favour of public institutions or public undertakings, in terms of Article 17232.
Second, the exemptions of Article 181 could not be interpreted as if “all public sector, that all
economic authorities of the country were on the outside of the prohibitions of the
Antimonopoly Law”33, but the maintenance of regulations that could eventually limit free
enterprise34. Third, the authorization of Article 174 would not be applicable to “absolute
monopolies”, because in that case Article 172 II (permission of monopolies only by law) would
be applicable35. Hence, Article 174 would only be applicable to acts that were able to generate
anticompetitive risks or effects. Because the plan consisted in the generation of an absolute
monopoly, there should have been a law authorizing it. Therefore, it could not be found “in
CORFO’s Law or in any other regulation or power of the Corporation to create monopolies,
nor any law that authorizes any authority to establish the banking monopoly”.
In June 1971, the Antimonopoly Commission sent a request to CDE (“Consejo de Defensa del
Estado”, agency in charge of the judicial representation of the State), in order to address the
government’s opinion. The majority vote held a pivotal opinion: Article 172 made a distinction
between the fact that “public entities could have a monopoly-constituted activity”, and if the
State could “keep or defend its monopoly or ask for the exclusivity” of that activity36. In other
words, the difference between the public maintenance of a monopoly, and the actual exploitation
32 ibid., p. 102.
33 ibid., p. 104.
34 ibid., p. 108.
35 ibid., p. 103.
36 ibid., p. 37.
8of that monopoly by the State. In this regard, the sole acquisition of stocks, by itself, was not
forbidden by Article 172, because CORFO’s law would authorize the activity37. However, if
CORFO would achieve to be the exclusive bank actor, it would need a law declaring banking a
public service38 (supposing that President Allende would propose the respective law in the near
future). In sum, the Antimonopoly would not have the power to repeal the plan. At the same
time, CDE held that “the State don’t need a special legislation or an Antimonopoly Commission
to sanction acts by its organs that are anticompetitive, if the maintenance or safeguard are
contained in its economic policy”39.
On August 26th, 1971, the majority vote of the Antimonopoly Commission held that it didn’t
have the power to enforce these kinds of conducts (“the first ruling”). “Government acts” (i.e.,
State activities that are part of the Government’s policy), like the plan, should be subject to local
banking regulation (applying Article 181)40 and not by courts. At the same time, current banking
regulation didn’t constitute a laissez-faire system, but a system of “norms and limitation, where
many of them are originated on unilateral and discretional acts of authority”41.
This ruling was appealed by one of the complainers42 before the Supreme Court. A year later, on
August 30th, 1972, in a short ruling, the Court held that the plan was subject to Article 173 (the
general provision of anticompetitive conducts), and therefore, the Commission had the power
to decide the legality of the plan. According to current literature, this ruling, by holding that the
plan would not constitute a Government Act43, “overruled long case-law that prevented the
prosecution of States’ acts and held that the Commission had the power to enforce adversarial-
administrative issues”44.
37 ibid., p. 41.
38 ibid., p. 42
39 ibid., p. 38.
40 ibid., p. 116.
41 ibid., p. 116.
42 Bernedo (n 13)., p. 57.
43 Agüero (n 12)., p. 18.
44 ibid.
9The Case was received by the Antimonopoly Commission another year later, on June 6th, 1973.
At the day of the coup d’état and the suicide of President Allende (September 11th, 1973), the
Case was still open because of procedural delays45.
iii. The Plan analysed on a dictatorship regime
After the start of the Pinochet dictatorship, the government junta ordered a fast drafting of a
new Competition Law, that would constitute the future (and current) Decree-Law N. 211.
In general, substantive provisions of the new Decree-Law N. 211 were pretty much similar to
the provisions of old Title V. The main differences consisted in the implementation of a new a
more efficient institutional regime46. The new substantive provisions kept the private monopoly
prohibition, and the authorization by law of public monopolies. At the same time, authorized all
kinds of anticompetitive conducts, if the President authorized them by decree, after a favourable
review of the new Resolutive Commission, and ad-hoc administrative tribunal, legal continuer of
the Antimonopoly Commission47, in case where these conducts were “necessary for the stability
or the development of national investments” or conducts where certain public authorities were
involved48. Finally, Article 5 of the new Decree-Law N. 211 included an exemption list, very
similar to Article 181 of old Title V. The exemptions included IP, oil, iodine, copper, banking
(curiously), stock exchanges and others.
At the same time, the junta issued Decree-Law N. 818, that formally repealed the plan,
incentivizing the entry of foreign banks in Chile49. Therefore, the plan was legally repealed and
45 Bernedo (n 13)., p. 57.
46 ibid., p. 68-69.
47 The new procedural provisions created “Central and thirteen Regional Preventive Commissions, which were
mostly consultative bodies, in order to push the heavily regulated economy towards a more liberalized market
economy”. At the same time, the new Resolutive Commission “could start ex officio inquiries or pursue National
Economic Prosecutor’s or private claims. Additionally, it could issue general regulations, propose legal or regulatory
amendments, and request criminal sanctions”.
Agüero (n 21)., p. 126-127.
48 Editorial Jurídica de Chile, Biblioteca del Congreso Nacional and Contraloría General de la República (eds), Delito
Económico y Decreto Ley Antimonopolio: Decretos Leyes No 211 de 1973 y 280 de 1974 (Editorial Jurídica de Chile 1974).,
p. 9-10.
49 See https://www.bcn.cl/leychile/navegar?idNorma=6365&idVersion=1974-12-27 accessed January 22, 2021.
10forbidden in case of future similar actions. However, on January 3rd, 1974, the new Commission
ordered the continuation of the process50.
Finally, on May 28th, 1975, the Commission issued Resolution N. 14 (“the second ruling”). The
Commission held that, first, the only purpose of the plan consisted of “concentrate on his
exclusive power (the State) all the banking economic activity in a definitive way”51. Second, there
were never any law, decree or review of the Antimonopoly Commission that authorized the
plan52. Third, that Article 181 never authorized any public, but determined only that the
regulation regarding the constitution and functioning of the banks remained active53.
Finally, the Commission constated that the recent Decree-Laws N. 211 and 81854 “configured a
legal system designated not only to fix the anticompetitive conducts analysed on this ruling, but
to prevent that they could happen again”55, and therefore, there were no effects derived from
the plan, and no corrective measures should be taken. However, the Commission held that not
all people involved on the plan had “the same motivations in similar conditions”. In fact, the
Commission appointed “some investors” that, “being owners of high financial powers and
owners of big stocks, found on the juridic anarchy (sic) during the Unidad Popular government,
auspicious chance to increment their patrimonies”56. In this regard, the Commission ordered the
criminal prosecution to all people involved. This was the first case where the government was
sanctioned by Chilean Competition Law, establishing this principle for the first time57. At the
same time, it was one of the few cases where a criminal accusation was ordered by the
competition authorities58.
On July 11th, 1975, the Prosecutor issued his criminal complaint before the Court of Appeals of
Santiago. The names that appeared on the accusation were Pedro Vuskovic, minister of economy
50 Bernedo (n 13)., p. 58.
51 Resolución No 14/1975 (n 10)., c. 8º.
52 ibid., c. 12º.
53 ibid., c. 16º.0
54 In parallel, Decree-Law N. 231 of 1973 returned the public-owned Banks to privates. See Aránguiz (n 28)., p. 68.
55 Resolución No 14/1975 (n 10)., c. 21º.
56 ibid., c. 25º.
57 Agüero (n 12)., p. 18.
58 ibid., p. 20.
11during UP, Albán Lataste, president of Banco del Estado, Alfonso Inostroza, president of the
Central Bank, Jaime Barrios, general manager of the Central Bank, Kurt Dreckmann, executive
vice-president of CORFO, José Rodríguez Elizondo, subrogate executive vice-president of
CORFO, Hugo Fazio, vice-president of the Central Bank, and the directors of the Central Bank
Luis Alberto Barría, Fernando Campos, Luis Jerez, Hernán Mansilla, Claudio Troncoso and
Vicente Sota. The prosecutor held, using Criminal Law terminology, that the “monopoly
conduct”, in order to be sanctioned, didn’t require the result expected by the author59.
Actually, all people were already exiled60. For example, former minister Vuskovic was exiled in
Mexico61. Albán Lataste was imprisoned shortly after the coup d’état62. Moreover, Jaime Barrios
was on the Chilean Presidential Palace during the coup d’état, defending President Allende. Since
September 13th, 1973 (two days after the coup), Barrios was considered as detenido desaparecido
(disappeared detainee)63.
The investigation was led by judge Germán Valenzuela Erazo. On December 17h, 1975, it was
announced in the newspaper El Mercurio, that judge Valenzuela sent arresting orders against
Albán Lataste, Jaime Barrios, Alfonso Inostroza, Kurt Dreckmann, José Rodríguez Elizondo
and Hugo Fazio64. At the same time, judge Valenzuela announced extradition orders for those
executives whose residence were unknown at the time, without discarding that some of them
would be in Chile, at the time. Finally, the investigation would include banking stock sellers.
Finally, on April 5th, 1976, judge Valenzuela told El Mercurio that the process would end without
the prosecution of the executives65. At the date, other involved people were included in the
accusation (apart from Vuskovic, Lataste, Dreckmann, Rodríguez, Fazio, Jerez and Sota), like
59 This argument is now part of the Chilean Competition Law. Art. 3 of the current Decree-Law No. 211 sanctions
conducts that generate anticompetitive effects or tend to produce such effects.
Agüero (n 21)., p. 144.
60 Novoa Monreal (n 11)., p. 31.
61 ‘Necrológicas: Pedro Vuskovic, Ministro Chileno En El Gobierno de Salvador Allende’ El País (12 May 1993)
accessed 22 January 2021.
62 Patricio Guzmán, La Batalla de Chile: Historia de Una Película (Catalonia 2020).
63 ‘Jaime Barrios Meza, Detenido Desaparecido’ (Museo de la Memoria y los Derechos Humanos)
accessed 22 January 2021.
64 ‘Órdenes de Detención Contra Ex Jerarcas UP’ El Mercurio (Santiago de Chile, 17 December 1975).
65 ‘Sin Culpables Proceso Por Monopolio Bancario’ El Mercurio (Santiago de Chile, 5 April 1976) 10.
12Hernán del Canto, Oscar Guillermo Garretón, Gonzalo Martner, Hernán Morales, Sergio
Sánchez, Gastón Ormeño, Juan Humberto Diemer, Sergio Ramos and Vladimir Arellano. Judge
Valenzuela argued that new Decree-Law N. 211 of 1973, in its Article 4 Transitory, overruled
Title V in its entirety. Originally, this overruling should be in force since the publication of
Decree-Law N. 211. However, the Junta issued Decree-Law 1386 of 1976, that declared that
conducts that occurred before Decree-Law N. 211, would not be sanctioned. The Case was
finished.
c. Main findings
The Case, due to the early development stage of the Chilean Competition Law at the time,
contained many rudimentary arguments regarding the area, consisting mainly of formal
interpretations of the law, without further substantive analysis or a pronouncement of the
application of Competition Law to this kind of plans (in terms that many other industries were
nationalized in parallel). In this context, three issues can be noted.
i. Legal arguments beyond Competition Law
First, as seen, the process contained an approach much closer to Administrative Law, that had
a long tradition since the end of the XIX Century66, than an incipient Competition Law language.
Indeed, the 1971 ruling of the Antimonopoly Commission used an early administrative
distinction between “Government Acts” (i.e., “acts related to the direction and execution of
certain State policies”, and therefore, not subject to judicial control) and “Administrative acts”
(i.e., acts subject to judicial control)67-68-69. In this regard, an argument in favour of the plan would
66 Alejandro Vergara, ‘Tradición y Cambio En La Doctrina Del Derecho Administrativo Chileno’, XLIV Jornadas
de derecho administrativo público, Facultad de Derecho de la Pontificia Universidad Católica de Chile (Ediciones UC 2019)., p.
589-591.
67 Eduardo Jara, ‘La Nacionalización de La Banca’ (1972) 15 Cuadernos de la Realidad Nacional - Centro de Estudios
de la Realidad Nacional (CEREN), Universidad Católica de Chile., p. 286. Years later, Eduardo Jara would be the
first president of the Chilean Competition Court, between 2004 and 2010.
68 Luis Cordero, Lecciones de Derecho Administrativo (2a edición, Thomson Reuters 2015)., p. 736-737.
69 Agüero (n 12)., p. 15.
13consist in that Title V was never made “as a way to limit or narrow governmental powers to
structure national economy based on new political criteria”70.
Nowadays in Chile, this distinction is still used on Administrative Law71. However, on
Competition Law, the distinction is no longer necessary. Current case law and traditional
literature has held that Competition authorities have enough powers to enforce infractions
committed by public organs72, if they exercise infra-law powers73. In case of potential infractions
or anticompetitive risks of current laws, current Decree-Law N. 211 permits “normative
recommendations” by the FNE or the Competition Tribunal to the Government74, without
prejudice of further constitutional actions.
In a more “accurate” way, the CDE defence made a distinction between the public maintenance
of a monopoly, and the public exploitation of that monopoly, in terms that in the second case,
a law would be required. In the first case, it would not be necessary, do the existence of a previous
law (CORFO’s law). At the time, there was certain expectation of the law or decree that President
Allende would send or sign, respectively. In this context, this argument would be useful, in order
to address the original problem of the lack of majority in Congress (i.e., a definitive law or
presidential decree would be needed in order that the banking would be offered only by the
State). However, historical evidence suggests that, in parallel of the plan, the Central Bank
actually led some economical activities of banks75.
ii. Different economic contexts of Competition laws
Second, the “original spirit” of Title V was, in principle, different from the approach used by the
1975 ruling of the Antimonopoly Commission.
70 Novoa Monreal (n 11)., p. 28.
71 Cordero (n 69)., p. 735-736.
72 See Tribunal de Defensa de la Libre Competencia, Rulings N. 20/2005 (“Municipalidad de Santiago”), 81/2009
(“JAC”) and Supreme Court of Chile, Rulings Rol 13792-2013 (2014) (“Sonda”) and Rol 47555-2016 (2017) (“Correos
de Chile”).
73 Domingo Valdés, Libre Competencia y Monopolio (Editorial Jurídica de Chile 2009)., p. 237.
74 See Article 18.4 of the current Decree-Law N. 211.
75 Banco Central de Chile, Memoria Anual 1971 (Banco Central de Chile 1972)
accessed 21st January 2021. Many
thanks to Francisco Agüero for this reference.
14The first part of the second half of the 20th century in Chile was characterized by “deeply rooted
official practices of using price control mechanisms, direct subsidies to producers, protective
tariffs, negative real interest credit, discriminatory exchange rates favouring importation of
primary materials and capital goods, and cooperation between producers to ‘protect’
themselves”76. The Chilean economy faced, at the time, a strong chronic inflation problem, with
an average rate of 62% between 1953 and 1956, even with a rate of 83,8% in 195577. Back in
1956, the Klein-Saks Mission acknowledged that anti-inflationary proposals would not lead to
less inflation without an effective Antimonopoly Law78. In concrete, the Mission held that “free
access to all industry and commerce sectors by all interested parties would increase competition.
Therefore, the approbation of an Antimonopoly Law should be promoted and then rigorously
enforced”79, reducing unnecessary Government intervention by price controls, leaving it only
for natural monopolies or public utilities80. These proposals were subject to important
opposition by left and right sectors81, and most of the measure proposed were not
implemented82. Consequently, when President Jorge Alessandri Rodríguez proposed Title V, the
new Competition Law, as part of his whole economic plan, would coexist with a strong price
control system. In sum, “the Executive turned to the old interventionist structures to implement
its ad-hoc economic measures, and the Anti-Monopolies Commission and the Supreme Court
wrote Title V almost out of existence as the dirigiste state re-asserted itself”83. This was common
in some Latin American countries with incipient Competition laws. These regimes “were part of
the patchy quilt of economic policies that were in place at the time, and which granted the
government with considerable discretion as to how to address particular issues related with the
economic development”84.
76 Rafael German, ‘Latin American Antitrust’ (1982) 14 University of Miami Inter-American Law Review., p. 14.
77 Felipe Morandé and Carlos Noton, ‘La Conquista de La Inflación En Chile’ (2004) 95 Estudios Públicos., p. 123.
78 Bernedo (n 13)., p. 41.
79 Klein & Saks, ‘Las Ideas de La Misión Klein & Saks Sobre El Futuro Económico de Chile’ in Juan Pablo
Couyoumdjian (ed), Reformas económicas e instituciones políticas: La experiencia de la Misión Klein-Saks en Chile (Facultd de
Gobierno - Universidad del Desarrollo 2011)., p. 273.
80 ibid., p. 274.
81 P. Simunovic, ‘El fracaso de las políticas económicas en Chile: La Misión Kemmerer y la Misión Klein-Saks (1925-
1958) (2018) 1 Estudios Nueva Economía., p. 53.
82 Morandé and Noton (n 78)., p. 123.
83 Furnish (n 14)., p. 486.
84 Andrés Palacios, ‘Competition Law in Latin America: Markets, Politics, Expertise’ (University College London
(UCL) 2016) accessed 27 April 2021., p. 230
15Regarding enforcement levels, the Antimonopoly Commission gradually reduced its activity
between 1959 and 1972. The majority of the approximately 120 rulings that the Commission
issued was concentrated on the first three years of its functioning85. On the following
governments, including the UP, there was minimal intent to apply the law86.
Regarding substantive provisions of old Chapter V, Article 181, by leaving intact the price
control system, “specifically le[ft] most of the dirigiste structures in effect. This in spite of the
fact that the regime of price and other control [was] in many ways basically inimical to the theory
behind antitrust”87. Moreover, the Antimonopoly Commission interpreted this provision by
holding that “in its rulings, the Commission must respect the [Art. 181] provision contained on
those laws and regulations” and that “acts of authority, even when they limit or prevent
competition, cannot be sanctioned under Art. 173 of Law 13.305, in cases where they were result
of the legitimate exercise of legal powers that were kept in force by Art. 181”88. During the first
years of Title V, there were seminal cases where anticompetitive conducts approved by the State
would not be sanctioned. In one case, regarding the existence of a flour distribution company
that had an 80% market share in two major cities89, the Antimonopoly Commission held that
“there is public convenience in that products price are fixed by free competition”90, but at the
same time that price controls were not itself illegal, because “there are obstacles for the
development of competition” 91, and therefore, “price-fixing is not a justification to keep those
obstacles but shows the need for their removal”92. In another case, the Commission absolved
the three main oil companies (Copec, Shell and Esso) for a market-allocation scheme contained
in a written agreement, because “their prices were fixed by the State and the agreement was
approved by the State itself”93-94. In sum, State price-fixing was justified, according to the
Competition authority, on the existence of market failures that competition was unable to
85 Bernedo (n 13)., p. 52.
86 ibid., p. 53.
87 Furnish (n 14)., p. 469.
88 Illanes (n 19)., p. 52.
89 Bernedo (n 13)., p. 49.
90 Resolución No 11/1960., c. 5º.
91 Bernedo (n 13)., p. 49.
92 ibid.
93 Bernedo (n 13)., p. 50.
94 See Resolución No 2/1959.
16prevent95. Consequently, at the time of the UP, Competition Law was practically in hibernation,
without a “state-run competition policy”96.
In parallel, in times of the UP, more than 3.000 prices were fixed by the State97. Contemporary
economic literature held that the increase of price controls intended to stop inflation and permit
income distribution98. In a different interpretation, these measures only constituted a “placebo”
derived from massive salaries increases at the time, that let workers buy more products and
services99.
However, the new economic plan of the dictatorship consisted, in general, of a full price
liberalization policy100, with the exception of basic services and critical economic activities101. At
the same time, State activities would be substantially reduced, practically eliminating its
participation on economic activities102. In this context, three price systems coexisted in Chile
during the first years of the dictatorship: (1) liberalization in more competitive markets, (2)
liberalization but with obligations of information of prices to the authority in less competitive
markets (such as coffee, school uniforms and home appliances), and (3) price control in some
critical areas (such as bread, sugar, milk, beef, cigarettes and basic services)103.
In this context, the 1975 ruling of the Commission, because of Decree-Law N. 211 and the
pivotal economic plan of the dictatorship, appeared to ignore the coexistence of a full price-
control policy and an incipient Competition policy based on price liberalization. This is the 1959
context where Title V was originally inserted. In this sense, the conclusion of 1975 is reasonable:
in context of full liberalization, where, according to a contemporary author, “State Aids” (a
95 Bernedo (n 13)., p. 49.
96 Agüero (n 21)., p. 125.
97 Daniel Wisecarver, ‘Regulación y Derregulación En Chile: Septiembre 1973 a Septiembre 1983’ [1985] Centro de
Estudios Públicos
accessed
24 January 2021., p. 124.
98 Fontaine and González Pino (n 5)., p. 984.
99 Wisecarver (n 97)., p. 124.
100 These measures were established on the Decree-Law N. 522, of October 15th, 1973.
101 El Ladrillo: Bases de La Política Económica Del Gobierno Militar Chileno (Centro de Estudios Públicos 1992)., p. 88.
102 Juan Gabriel Valdés, Los Economistas de Pinochet: La Escuela de Chicago En Chile (Fondo de Cultura Económica
2020)., p. 41-42.
103 Wisecarver (n 97)., p. 125-126.
17different concept than the European provisions) were “probably the most important source of
monopolistic power”104, all the State activity should be subject to Competition Law, and
therefore, any State plan to eliminate free enterprise would be anticompetitive. Moreover, the
conclusion on the relationship between the exemption lists (Article 181 of old Title V and Article
5 of the new Decree-Law N. 211), in this context, is also reasonable: these exemptions were
related to limitations to the start of new economic activities by privates. In other words, both
provisions determined limitations to free enterprise, but not tolerance to anticompetitive
conducts by the State on those markets. Nowadays, current Competition Law forbids the grant
of monopolies by the State, unless it is granted by law (Art. 4 of current Decree-Law N. 211)105.
At the same time, there is consensus both on case law and literature that State actions are subject
to the general prohibition of anticompetitive conducts (Art. 3 of current Decree-Law N. 211)106.
These arguments were valid since 1973, but in 1959, they would be, as they were during the Case,
at least problematic. The relationship between Article 172 II (public monopoly grants) and
Article 181 (exemptions to certain economic activities) showed, at the end of the day, the state
of the Chilean economy at the date, a Dirigiste economic policy with a small and incipient
Competition Law. Just like general price controls, the Competition Law regime, as seen in
previous case law, could tolerate State intervention, despite the generation of anticompetitive
effects. Consequently, when the UP presented the bank nationalization bank, the state of
Competition Law did not see State intervention as a problem by itself, but as part of the system.
Consequently, the questions that the plan raised, as the first ruling of 1971 incipiently attempted
to address, consisted in whether a major State intervention (like the plan) could be subject to
Competition Law controls (Article 172 II, regarding public monopolies) or to the sphere of
discretionary acts by the authority (Article 181). These questions were not addressed by the
second ruling of 1975. The ruling determined a different interpretation of Article 181, from a
broad authorization of discretionary acts by the State to a narrow authorization of only the
104Rodrigo Espinosa, Ley Antimonopolios: Análisis y Estudio Crítico (Editorial Jurídica de Chile 1980)., p. 46.
105Valdés (n 74)., p. 470.
106 Nicole Nehme, ‘Aplicación de Las Normas de Defensa de La Competencia a Los Organismos de La
Administración Del Estado’ in Tribunal de Defensa de la Libre Competencia and Centro de Libre Competencia
UC (eds), La Libre Competencia en el Chile del Bicentenario (Thomson Reuters 2011)., p. 325-329.
18constitution and functioning of the banks. Again, this interpretation could be more suitable in
context of a price liberalization policy with a full prohibition of State intervention.
The reasonings of the second ruling of 1975 appear to be more an application of the new Decree-
Law N. 211 than old Title V, especially because of the final order: impose the major sanctions
against all the executives involved, despite important new laws that extinguished the Plan and
prevented similar ideas for the future and the absence of competitive effects.
iii. Economic context, Competition Law and State intervention
Finally, the main lessons of the Chilean bank nationalization case are related with the
combination of the economic context, the situation of Competition Law and the level of
tolerance of State intervention.
Tibor Varady identifies three ways in which Competition laws were present in Socialist contexts:
(1) competition outside the market (i.e., “competing for more subsidies, privileges within the
plan, access to development funds, permission to charge higher prices, etc.”107), (2) Competition
rules in state of hibernation108 and (3) some Competition policy reforms within Socialism or
quasi-Competition rules (i.e., achieving different purpose than the purposes of Competition
laws)109. The Chilean economic context, due to its strong prices control mechanisms and strong
State presence, should not be characterized as a full free market economy, but rather a Dirigiste
economy. In this context, as seen in supra, Title V constituted mainly a vehicle for fighting
inflation. In this context, the Competition Law regime changed from a quasi-Competition
category, on the first years of Title V, to a practically full hibernation category in times of the
UP. In parallel, as also seen in supra, State intervention was not considered problematic but
inherent to the economic system.
These three characteristics (economic context, situation of Competition Law and the tolerance
of degree of State intervention) can lead to a preliminary answer to the degree of criticism to the
107 Varady (n 3)., p. 230.
108 ibid., p. 231.
109 ibid., p. 233 & 241.
19bank nationalization plan, and ultimately, to the degree of criticism to historic Socialist measures,
in general, from a Competition Law perspective. In the Chilean case, any analysis of the bank
nationalization case should not start from the premise that the plan itself was illegal because any
State intervention would be anticompetitive. The combination of a Dirigiste economy, a
Competition Law in state of hibernation and a general tolerance to State intervention led, as in
the case, to questions regarding the degree of intervention in the case of a great nationalization
plan. Consequently, the later combination of a full price liberalization policy, an Incipient
Competition Law (with the 1975 ruling holding that State activity was subject to the law) and
the minimization of State intervention can lead to an absolute prohibition of State
monopolization acts.
The Chilean bank nationalization case shows that the application of Competition Law was
subject to the economic reality of each historical period, and therefore, the degree of criticism
to Socialist measures were different depending precisely on those contexts.
III. Final Remarks
The Chilean bank nationalization case is a pivotal case on the Chilean Competition Law history.
The government led by President Salvador Allende faced its own Competition case in context
of a Socialist economy. However, due to the incipient development of the law and the original
spirit of the regulation, the discussion consisted of topics beyond traditional Competition
analysis.
In this context, the Chilean bank nationalization case shows that the development of now
considered “traditional” Competition principles, such as the application of Competition laws to
the State were at the time contingent discussions with no clear answers. The economic reality,
the incipient Competition regime between 1959 and 1973 in Chile, and the application of
different Competition Laws before and after the coup d’état, implied different reasonings and
conclusions in different rulings. In concrete, the case occurred in the transition from a Dirigiste
economy with strong State price control to a full price liberalization policy, with Socialist
measures in between. This change can explain the differences between the spirit and the
application of Competition laws in force in each time. At the same time, the combination of the
20economic context, the situation of Competition Laws at the time and the degree of State
intervention can constitute proxies to the analysis of historic Socialist measures that could impact
with traditional Competition Law. This could lead to future avenues of research.
The aim of this paper is to analyse the development of Chilean Competition Law, using an
approach of the categories used at the time. Therefore, its aim is not to judge the merit of the
Case using actual principles. Historic Competition cases, especially on very different political
contexts, should be studied with the categories and analysis present at the time. This approach
permits the recognition of the development of categories and principles used to this day.
***
21Annex - Glossary
In order to facilitate the reading of this paper, a short glossary is presented below.
• Antimonopoly Commission: Chilean Competition authority at the time.
• Banco del Estado: Chilean public bank.
• Title V (Law N. 13.305 of 1959): Chilean Competition law from 1959 to 1973.
• Consejo de Defensa del Estado (CDE): Agency in charge of the judicial
representation of the State.
• Contraloría General de la República (CGR): Chilean government accountability
office.
• Corporación de Fomento de la Producción (CORFO): Chilean public corporation
dedicated to the promotion of entrepreneurship and economic growth in Chile.
• Decree-Law N. 211 of 1973: Chilean Competition law since 1973.
• Fiscal Antimonopolio: Prosecutor of the Antimonopoly Commission.
• National Economic Prosecutor: Director of Fiscalía Nacional Económica, current
Chilean Competition authority.
• Fiscalía Nacional Económica: Current Chilean Competition authority..
• Resolutive Commission: Chilean Competition Authority since 1973, the successor of
the Antimonopoly Commission.
• Unidad Popular (UP): Government led by President Salvador Allende between
November 3rd, 1970 and September 11th, 1973.
***
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