New Cartel Case in Argentina

Introduction

On July 31, 2017, the Secretary of Trade (the “Secretary”) issued Resolution No 598 whereby it condemned certain medical institutions in the cities of Salta, Metán and Tartagal with a fine that, combined, reached a total value of ARS 22,768,860 (approximately USD 1,300,000 at the current exchange rate), because they had incurred in a price-fixing agreement in violation of Sections 1 and 2, sub-sections a) and g) of the Argentine Antitrust Law, No. 25,156 (the “Antitrust Law”).

The case: the claim

On May 21, 2012, Swiss Medical S.A. (”Swiss Medical” or the “Complainant”) filed a claim with the Province of Salta’s Ministry of Government’s Consumer Protection Secretary, which was subsequently remitted to the Argentine Antitrust Commission (“Antitrust Commission”), against the following medical institutions: Asociación de Clínicas y Sanatorios Privados de la Provincia de Salta (“ACLISASA”), Hospital Privado Santa Clara de Asis S.A, Parque S.A., Cenesa S.A., Hospital Privado Tres Cerritos S.R.L., for an alleged collusive agreement entered with the purpose of agreeing prices between said undertakings, which started in December 2011 (the “Claim”). Moreover, the following institutions were also incorporated ex officio as defendants: Clínica San Rafael S.A., Sanatorio San Roque S.A., Sanatorio Modelo S.A., Maternidad Privada Salta S.A., Clínica Cruz Azul S.A., Clínica Luis Güemes S.A., Clínica del niño S.R.L., Clínica del Neurodiagnóstico, Clínica 9 de Julio S.A., Clínica San Antonio S.A., Clínica de la Merced y Sanatorio del Carmen S.A. (altogether, the “Defendants”). The Defendants were almost all of the medical facilities in the cities in question.

The Complainant asserted that on December 29, 2011, a series of Defendants sent a note by means of which they unilaterally informed the new prices for the assistance coverage, effective as from March 1, 2012. Said note established that, if Swiss Medical failed to accept those values, all the medical services were going to be suspended, which is what finally happened on April 1, 2012. On the other hand, the defenses provided by the Defendants were that the determination of the prices emerged from a negotiation between the health insurance companies and the medical facilities, emphasizing that the health insurance companies were the ones who possessed the real economic power, among other defenses. In this respect, the Defendants expressed that the union of the medical facilities was compensated by the Complainant’s economic power.

The analysis carried out by the Antitrust Commission

In the first place, the Antitrust Commission analyzed the market in question and understood that the medical institutions and sanatoriums provide two main services: outpatient and inpatient services, concluding that sanatoriums are subject to competitive constraints exercised by outpatient medical offices. Nevertheless, for those practices that involve inpatient proceedures, it appeared that no close substitutes existed: therefore, these constitute a market by itself. As regards the relevant geographic market, the Antitrust Commission understood that it was limited to the city of Salta’s metropolitan area (including neighboring urban areas) and to the cities of Tartagal and Metán, all of them belonging to the Province of Salta. Finally, the Antitrust Commission determined that the Defendants held economic power in each of the respective geographical markets.

Secondly, the Antitrust Commission analyzed several facts and evidence that allowed it to determine the existence of the alleged conduct, as follows: the note received by Swiss Medical on September 29, 2011, in which the new values for the medical services of those entities to Swiss Medical’s affiliates and the copy of the Settlement Act with the tariffs’ update signed by the Defendants, copy of the Act No. 67 of  ACLISASA’s Ordinary General Assembly, where the creation of a Costs and Tariffs’ National Commission is mentioned, which consisted of a group of work with other associations in the Country with the purpose of updating a cost matrix appeared. The Antitrust Commission was able to conclude that (i) the medical facilities negotiated their tariffs jointly through ACLISASA, which in turn also performed the collections, and that (ii) those facilities that were not associated to ACLISASA charged the same tariffs.

From an economic point of view, the Antitrust Commission examined whether the market structure made collusion possible. In this respect, the Antitrust Commission expressed that a cartel is more viable and effective in cases in which companies do not face credible threats of new companies entering the market with lower prices. In this regard, the Antitrust Commission understood that even when the obstacle of the rising requirements for the initial investment to construct a medical facility could be circumvented, entry would not be rapid. Following up the analysis, the Antitrust Commission explained that it is easier to carry out an agreement between equals i.e. between firms that possess a similar cost structure, production capacity, product ranges and services, which was verified among all of the Defendants. The Antitrust Commission continues saying that the product’s homogeneity is a fact that favors the concreteness of settlements among competitors, since it is easier to coordinate or fix prices when the products and services have similar features, as had occurred in this case. Lastly, the Antitrust Commission puts forward that the market demand for medical services is inelastic and that said market is highly transparent, which is why it effectively allows a collusive practice.

The Antitrust Commission finished its analysis remarking that the conduct under study directly undermined the general economic interest, since the coordinated action of the Defendants concerning their services’ prices allowed them to create a better and artificial negotiating position when facing health insurances that the one they would have had in absence of the agreement, under a competitive scenario. That allowed the clinics to charge higher prices that those that would have prevailed in the absence of the conduct, which in turn resulted in higher prices for affiliates, harming the general economic interest.

The Antitrust Commission found duly evidenced the existence of a concerted horizontal practice of collusion that had as resulted in an increase of prices in the market of medical services in the period between the month of December 2011 and December 2013. According to the ruling issued by the Antitrust Commission, the Secretary of Trade issued Resolution No. 598 and, in conformity with article 46 section b) of the Antitrust Law, the Defendants were sentenced to pay individual fines.

Finally, Resolution No. 598 orders a market investigation ex officio against the Argentine confederation of clinics, medical facilities and hospitals for the disclosure to its associates of referential prices for medical services, as this could contravene Sections 1 and 2, sub-sections a) and g) of the Antitrust Law.

Conclusion

After an extensive period of time in which the Antitrust Commission has focused mainly on unilateral practices, said authority has once again analyzed a cartel case that involves a horizontal agreement of prices between companies. In particular, the present case is relevant given that it analyzes those conditions that should be met for the existence of a cartel and would evidence the type of revision that the Antitrust Commission will likely carry out in future conducts. Taking into account that the draft amendment to Antitrust Law incorporates a leniency program, it would be reasonable to expect more activity related to investigation of cartels in Argentina.