Competition law enforcement in informal markets in Latin America and the Caribbean

4. Advocacy efforts to improve competition assessment involving informal markets

Competition advocacy is another area in which competition authorities can contribute to addressing informality, complementing their competition law enforcement functions. As highlighted in previous OECD work, competition authorities are well placed to undertake market studies that assess the extent to which informality affects market functioning and competition, while also communicating the long-term economic benefits of greater formalisation. For instance, competition authorities can identify regulations that unnecessarily restrict competition and advocate for their reform, thereby creating stronger incentives for firms to enter (and remain in) the formal economy (OECD, 2010[3]). By documenting how regulatory barriers affect entry, expansion and competitive dynamics, competition authorities can also help ensure that policy debates on informality take into account not only tax and labour considerations, but also the effects on market contestability, productivity and consumer welfare.

Competition advocacy can also play an important role in promoting reforms that facilitate firms' transition from the informal to the formal economy. As discussed earlier in this paper, while informality may reduce costs in the short term, it often becomes a barrier to business growth. Informal firms typically face difficulties accessing finance, participating in public procurement, establishing commercial relationships with larger firms, investing in productivity-enhancing technologies, or expanding beyond local markets. In this sense, reducing the costs and administrative burdens associated with formalisation is not only a matter of improving compliance but also of strengthening competition. Firms that are able to formalise more easily are better positioned to grow, innovate and exert competitive pressure on incumbent businesses, thereby contributing to more dynamic and productive markets.

A broad range of government policies can support this objective. These include eliminating unnecessary restrictions to competition, lowering regulatory compliance costs, reviewing labour legislation, simplifying complex tax systems, reducing overly burdensome fees and taxes, streamlining business registration processes, and improving access to credit, public procurement and other opportunities available to formal businesses. Although competition authorities are not generally responsible for implementing these reforms, they can make an important contribution by identifying regulatory obstacles through market studies, assessing their competitive effects, and advocating for proportionate regulatory frameworks that reduce unnecessary barriers to formalisation. Enhanced co-operation with tax authorities, statistical agencies and other institutions responsible for collecting data on informal markets can further strengthen the evidence base for these advocacy efforts and help design reforms that both increase productivity and foster more effective competition.

4.1. Market studies and opinions involving informal markets

Competition authorities have long used market studies to examine a sector and understand how effectively competition is working independently of wrongdoing by a specific firm including in the LAC region (OECD, 2025[37]). In the context of informal markets, market studies can also be useful to better assess market structures affected by informal players – either in markets dominated by informality or those having a mix of formal and informal elements (e.g. partially informal or integrated in a vertical chain with informal players connected to formal firms).

In Argentina, the former CNDC published two market studies that addressed informality issues: one in the market of beef meat and the other in the market of yerba mate, published in 2016 and 2017 respectively. Both market studies revealed the existence of significant shares of informality at different stages of the respective value chains, as well as the challenges related to the collection and the use of reliable data for competition analysis.

Box 5. Markets studies involving informality in Argentina (2016-2017)

Beef meat market

In 2016, the former CNDC published a market study that revealed large levels of informality in the meat production chain, particularly in the upstream market, which generated asymmetries amongst suppliers and competition distortions throughout the production chain. The informality elements contributed to the lack of reliable data on certain stages of the production chain, so the Competition Authority relied on data from the Ministry of Agriculture for estimates of prices and market structures (i.e. prices of beef carcasses after the process of slaughtering).

Yerba mate market

In 2017, the former CNDC identified high levels of informality in the primary stage of green leaf production in the market of mate herb. According to the market study, the price regulation of the green leaf and the surplus production in this sector encouraged informality, allowing green leaf producers to charge prices and agree on payment conditions that were different from those imposed by regulation. This situation created risks for market distortions.

Source: CNDC (2016[38]), Mercado Argentino de la Carne Vacuna; CNDC (2017[39]), Análisis de las condiciones de competencia en el sector yerbatero argentino.

In Chile, FNE issued a market study in the accommodation sector, which analyses the evolution of competition in the country’s accommodation market between 2015 and 2022, with a particular focus on online travel agencies and short-term rentals (e.g. Booking, Expedia, Despegar and Airbnb). A key finding of the report was that the current regulatory framework contributes to informality, for instance with the emergence of short-term rentals via various online platforms. The report notes that informality emerges as a concern for a healthy functioning of markets, with the need of a level-playing field to all players of the sector – including both formal and informal firms (FNE, 2024[40]).

In Paraguay, CONACOM recommended changes to a Bill of Law related to small and medium-sized enterprises (SMEs) intended to strengthen the legal framework for SMEs and promote their formalisation and competitiveness. More specifically, CONACOM’s recommendations focus on reducing unnecessary barriers such as a requirement for registration of SMEs before the Ministry of Industry and Commerce for purposes of certification of SME status, which was adopted in the final legislation enacted in 2025 (i.e. Law No. 7,444/2025). Nowadays, SMEs benefit from both an automatic registration and renewal procedures based on data from tax authorities, without the need for any additional administrative step, following CONACOM’s recommendation, which facilitates the entry and the well-functioning of SMEs. The argument was that both the registration and the renewal processes could exclude (or delay) SMEs from benefiting from the incentives reserved for SMEs, including preference in certain public procurement tenders and simplified access to credit. In this context, promoting the formalisation of small business would strengthen SMEs and improve competition in related markets (CONACOM, 2023[41]).

The experiences in Argentina, Chile and Paraguay indicate that competition authorities can indeed contribute to a better understanding of competition dynamics in markets affected by informality, either through market studies (as done in Argentina and in Chile) or advocacy opinions provided in draft legislative processes (as seen in Paraguay).

4.2. Co-operation with institutions linked to informal markets

Competition authorities can also take actions to create or enhance co-operation with institutions involved with informality issues, sometimes holders of relevant data related to informal markets. These institutions include tax authorities, licensing authorities, statistical offices and trade authorities that have data on imports. These institutional relationships can facilitate competition advocacy work for market studies and legislative opinions, but they are wider in scope and can serve broader objectives, for instance by allowing access to database or technical expertise related to informal markets.

In the Dominican Republic, Pro-Competencia has proposed the creation of the “Observatory of Competition and Informal Economy” to monitor relevant indicators and the evolution of informal markets. It would be managed by the competition authority and serve to consolidate the dispersed information on informal business activities including its effects on competition. The idea is to have the Observatory created through a formal memorandum of understanding between Pro-Competencia and key institutions involved with data related to informal markets, allowing the exchange of information while safeguarding confidentiality issues.

In Guatemala, the recently established Superintendence for Competition is also involved in a government initiative to develop a national competition policy framework, entitled “Strategic Proposal for the Formalisation of Business and Employment” which would include measurable targets such as reducing informality and establishing mechanisms for inter-institutional co-ordination. It is an initiative led by the Ministry of Economy of Guatemala, more specifically the Vice-Ministry for SMEs, in co-ordination with several public and private stakeholders including the competition authority (Guatemala’s Ministry of Economy, 2025[42]).

Worldwide, initiatives have been proposed to promote a better understanding of the informal economy – and competition authorities can be involved in those efforts when appropriate. One concrete example is the IMF when advocated for an international framework to measure the informal economy and better integrate this element in GDP measurements, which should include “the production of informal sector units, production of goods for own final use, production of domestic workers, and production generated by informal employment in formal enterprises” (Quiros-Romero, Alexander and Ribarsky, 2021[43]), hopefully adding elements also for competition analysis.