Chile's anti-trust court TDLC has accepted a request by the consumer rights organisation CONADECUS to investigate the competitive impact of the planned merger between LAN and TAM and has ordered to "suspend the process" while it conducts an investigation.
While the Chilean Public Prosecutor for Economic Matters opened immediately after the merger plans were first announced by Chile-based LAN and Brazil's TAM last August a case to investigate, and eventually limit, the deal's impact on the Santiago-Sao Paulo trunk route, the CONADECUS request broadens the investigation to the overall market situation in Chile.
According to CONADECUS, the merger may "generate a severe and negative impact to competition which goes much beyond the Santiago-Sao Paulo route", claiming that the court should take into account not only a single route, but also the general consequences for the travel market.
A CONADECUS spokesman says that "LAN has a history of dominating the market where it operates" and that the TLDC should take into account "the principles of free competition and consumer rights" from a global perspective. He adds that "LAN's historic relations with competitors have frequently been inadequate," suggesting that LAN tries to create de-facto monopolies to raise fares.
The TLDC has accepted the CONADECUS request for investigation and has therefore suspended the LAN-TAM merger process during the information collecting and internal decision period.
According to its official bulletin, it has invited the Chilean Public Prosecutor for Economic Matters, the Ministers of Transport and Economy, the Civil Aviation Authority, the National Tourism Agency, IATA Chile, travel agent associations as well as airlines operating within or to and from Chile to submit their opinions and requests regarding the planned merger within 30 days.
A LAN spokesman says the airline group is "aware of the matter" but declined to comment on it.
LAN executives last week told analysts they hoped to complete the merger transaction in six to nine months. But they warned the deal was still contingent on approval from competition authorities in several countries including Chile, Argentina, Brazil, Germany, Italy and Spain.