On May 6, 2025, the National Assembly of Ecuador approved the Draft Organic Law on Regulation Against Unfair Competition (“Draft Law”). The President partially objected to the text on grounds of unconstitutionality and inconvenience. On August 4, 2025, the Constitutional Court ruled on these objections in Decision 5-25-OP/25 (“Decision”), upholding most of the sanctioning regime and declaring only the provision concerning the allocation of fines unconstitutional. With this, the Draft Law moves forward toward its enactment and aims to establish a new autonomous legal framework to prevent and sanction unfair practices.

This legislation marks a milestone in the evolution of competition law in the country, as it both complements and clearly differs from the current Organic Law on Regulation and Control of Market Power (LORCPM).

1. Decision of the Constitutional Court

a. Affirmation of the constitutionality of the sanctions established in Articles 54 and 56

The Constitutional Court (“Court”) dismissed the President’s objection of unconstitutionality regarding Articles 54 and 56, which regulate:

• the sanction for engaging in aggravated unfair competition practices (a fine of up to 12% of the gross income earned by the offender); and
• the sanctions for non-cooperation or non-compliance (a fine of up to 10% or 1% of the gross income earned by the offender), respectively.

In the President’s view, the monetary sanctions established in Articles 54 and 56 are disproportionate, in violation of Article 76, paragraph 6 of the Constitution; furthermore, the monetary sanction set forth in Article 54 could result in discriminatory treatment among economic operators, in violation of Article 11, paragraph 2 of the Constitution.

In its analysis, the Court concluded that the sanctions meet the requirements to be considered proportionate:

• Constitutionally legitimate aim: the sanctions seek to protect competition, consumer rights, and the economic public order.
• Suitability: the proposed sanctions are appropriate to deter and penalize unfair competition practices and non-cooperation with the authority.
• Necessity: the Draft Law establishes maximum thresholds (12%, 10%, and 1% of the offender’s gross income), as well as criteria for determining the amount of the sanctions. Additionally, the Superintendence of Economic Competition (“SCE”) may define specific criteria and methodologies to adjust the sanctions according to the nature of the infringement. These mechanisms allow for appropriate and flexible scaling, in line with the seriousness of the conduct and the offender’s economic capacity.
• Strict proportionality: the existence of ranges and criteria for the imposition of sanctions, together with the regulated discretion of the administrative authority, helps prevent automatic or excessive penalties and provides predictability for economic operators.

For its part, the Court determined that the Draft Law provides criteria for determining the sanction, including the market share and economic capacity of the offender, which allows for differentiated and justified treatment between small, medium, and large enterprises. In this way, the regulation prevents indirect discrimination and requires the authority to consider the specific circumstances of each operator.

b. Declaration of unconstitutionality of Article 58: prohibition of budgetary pre-allocations

The Constitutional Court declared Article 58 unconstitutional. This provision established that fines imposed would be directly allocated to finance competition promotion activities. According to the Court’s ruling, such a provision constituted a budgetary pre-allocation not permitted by the Constitution, which only allows this type of allocation for specific sectors such as health, education, or science. The Court reiterated that all public revenues, including administrative fines, must be directed to the General State Budget without a specific destination, except in cases expressly provided for by the Constitution..

c. Legal effects and next legislative steps

Following the notification of the ruling, the National Assembly has 30 days to analyze and address two key aspects:

• Amend Article 58 in accordance with the Court’s ruling, specifically regarding the allocation of funds derived from fines. The revised text will be sent to the relevant specialized committee to incorporate the required adjustments.
• Rule on the objections of inconvenience raised by the Executive. The Assembly may fully or partially accept them and amend the text with a majority vote of the members present. Alternatively, it may reject the objections and uphold the original text, which requires an absolute majority vote of all its members.

Since these objections of inconvenience remain pending, it is possible that the final wording will undergo modifications, although the core elements of the sanctioning regime are expected to remain unchanged.

Once the final text is approved, the Draft Law will be sent back to the President for enactment, exclusively with regard to the article amended in accordance with the Court’s ruling. If the President enacts the law or does not raise new objections within 30 days, the law will be enacted and published in the Official Gazette. If the Assembly fails to issue a decision within the legal timeframe, it will be understood that the objections are tacitly accepted, and the President must enact the law.

2. Why is this Draft Law on Unfair Competition relevant for your company?

2.1 Universal scope and cross-cutting effect:The new law applies to all companies and economic actors, regardless of size or sector. Any organization operating in or having an impact on the Ecuadorian market must review its practices in light of this new regulatory framework.

2.2 Acts classified as unfair: Prohibited behaviors include acts of deception, confusion, imitation, denigration, comparison, pyramid selling schemes, below-cost selling, exploitation of another’s reputation, aggressive practices, unlawful advertising, comparative advertising, among others.

2.3 Dual liability regime:The law distinguishes between:

• Simple unfairness: affects competitors or consumers directly. These actions are processed through civil proceedings. By introducing a direct judicial route for simple unfairness claims—without the need to prove harm to competition—the Draft Law is expected to increase the number of lawsuits and open the door to damage claims by competitors and consumers.
• Aggravated unfairness: has a broader impact, affecting economic public order. In such cases, the Superintendence of Economic Competition (SCE) will have full authority to investigate, sanction, and impose corrective measures, as well as significant fines on companies.

3. Types of Sanctioned Unfair Practices

The regulation prohibits a broad range of practices that, by distorting consumer economic behavior or unfairly harming other market participants, are considered unfair. These practices include the following:

• Acts of confusion: the use of signs, packaging, slogans, or presentations that may mislead consumers about the business origin of a product or service. This is considered unfair when there is a risk of association with the activity, goods, or services of another economic operator, even if there is no exact match in the elements used.
• Acts of deception: any conduct that contains false information or that, even if truthful, due to its content or presentation, misleads or may mislead the consumer, affecting their behavior. This includes claims about price, quality, origin, characteristics, quantity, suitability for use, method of distribution, or any other attribute of the product or service.
• Acts of imitation: imitation is permitted unless it infringes intellectual property rights.
• Acts of denigration: the dissemination of inaccurate, false, or inappropriate statements that may harm a competitor’s reputation.
• Acts of exploitation of another’s reputation: the use of distinctive signs, expressions, or references associated with another economic agent in order to benefit from their market fame or prestige. Even when the true origin is clarified, this practice is considered unfair if it seeks to obtain unjust advantages based on another’s recognition.
• Pyramid selling schemes: the promotion or management of schemes in which participants are primarily compensated through the recruitment of new members rather than the actual sale of goods or services. These structures are considered unfair due to their deceptive and fraudulent nature.
• Acts of discrimination: unjustified differential treatment of consumers in terms of price or sales conditions, unless there is a reasonable justification.
• Abuse of economic dependence: the exploitation of a supplier’s or customer’s dependent position when they lack equivalent alternatives in the market.
• Below-cost selling practices: selling below acquisition cost for unfair purposes, such as misleading consumers about market prices, discrediting competing products, or driving competitors out of the market. While price setting is generally free, this practice is deemed unlawful when it causes market distortions.
• Unlawful advertising practices: the dissemination of advertising content that is misleading, aggressive, sexist, discriminatory, covert, or that infringes upon fundamental rights—particularly those of children and adolescents.

The law presumes these behaviors to be unfair and grants the competent authority the power to impose sanctions, order the immediate correction of such practices, and safeguard the rights of consumers and economic operators. The main objective is to ensure a fair and transparent competitive environment, aligned with the principles of good faith, commercial loyalty, and the protection of the general economic interest.

4. Strategic Assessment: A Call for Preventive Action

Although the law has been subject to a partial presidential veto, the essence of the reform remains intact and will shape regulatory expectations for the business environment in the short term. In this context, it is essential for companies to:

• Review their marketing strategies, contracts, and commercial policies.
• Adopt a proactive approach to regulatory compliance, particularly in areas such as advertising, competition, and relationships with competitors.
• Restructure internal protocols to respond to potential requests from the SCE and to mitigate sanction risks.

5. The SCE as a New Enforcement Authority

The Superintendence of Economic Competition (SCE) emerges as the technical authority responsible for enforcing the new regime in aggravated cases. Its powers include the imposition of sanctions, preventive and corrective measures, as well as the conduct of administrative proceedings.

6. What Should Companies Do?

Although the law is not yet in force, its approval already signals a clear regulatory trend. Companies must prepare for a more demanding regulatory environment, making it essential to:

• Review commercial and advertising policies: Identify practices that could be considered unfair.
• Strengthen compliance programs: Adapt internal protocols to align with the new standards.
• Assess reputational and sanction risks: Especially when operating in sensitive markets or using aggressive business practices.

For more information, please contact us at the following email addresses:

Competition Practice:

María Rosa Fabara Vera: mrfabara@bustamantefabara.com

José Rafael Bustamante C.: jrbc@bustamantefabara.com

Diego Ramírez Mesec: dramirez@bustamantefabara.com

Daniel Castelo: dcastelo@bustamantefabara.com

Kirina González: kirinag@bustamantefabara.com

Camila Sánchez: csanchez@bustamantefabara.com

Constitutional Practice:

Xavier Palacios: xpalacios@bustamantefabara.com

Paola Gaibor: pgaibor@bustamantefabara.com