New Merger Control Guidelines in Argentina

Introduction

On April 11, 2018, the Secretariat of Trade issued the new Guidelines for Merger Control Review in Argentina (the “Guidelines”), after a consultation process that took place over the course of 2017.

The Guidelines seek to complement the new merger control review procedure to be implemented by the upcoming Antitrust Law, which is expected to be passed soon. These new Guidelines provide a much needed reference for practitioners in their day-to-day interactions with the Argentine Antitrust Commission (the “Commission”)

Key takeaways

Product and geographical market definition

The main feature that distinguishes this new version of the Guidelines from the previous one is the fact that it leaves on record that for certain transactions, there is no need to define a relevant market. This would certainly allow for a much faster review of transactions, avoiding the usage of resources to define markets in transactions with negligible effects on competition.

Additionally, the Guidelines now set out that the Commission will not be restrained by the definitions made on a prior transaction, since the analysis will be made on a case-by-case basis, setting out that there could even be two different market definitions on a same economic sector.

In that regard, the Guidelines now make a reference to multi-sided platforms and the fact that the different “aspects” of such economic structures can mean market definitions of their own or that the platform could even be considered a market in its own right.

Finally, the Guidelines have included a reference that the geographical market definition could be larger than Argentina, especially when there is a significant level of parallel imports and exports between two or more countries, which follows the trends of certain recent merger control decisions in which the once Argentina-locked approach was discarded in favor of a more regional analysis.

Market share and concentration analysis for horizontal mergers

First, the Guidelines clearly set out that as a general rule a transaction between two parties with low market shares is unlikely to create competitive concerns. In this sense, the Guidelines now set out that those transactions with a combined market share of less than 20% will be considered as non-relevant. This approach is further complemented with clear rules on the usage of the Herfindhal-Hirschmann Index (“HHI”), which used to be referenced but with no specific rules.

Pursuant to the Guidelines, those transactions that have a post-transaction HHI below 2000 points will be considered as non-relevant. Moreover, the HHI will be also used so as to discard competition problems in those transactions where (i) there is an HHI increase below 150 points and (ii) the joint market shares of the involved companies in a post-transaction scenario is below 50%.

Unlike past practice, this indicates that these transactions will be cleared in a rapid manner and will not be subject to intense review by the Commission.

Vertical mergers

As regards vertical mergers, the Guidelines set out certain factors that may generate harm due to anticompetitive market foreclosure such as: (i) the removal of an independent supplier limiting the access of the competitors to an upstream market, (ii) the elimination of an independent distributor limiting the access of the merging parties’ competitors to a downstream market or (iii) increasing the barriers of entry to new competitors.

Furthermore, the Guidelines mention the possibility that vertical mergers may increase incentives to collude generating coordinated anticompetitive effects.

In relation to the analysis of market shares and concentration indices, the Guidelines establish a similar approach to the one used for horizontal mergers. In accordance with the Guidelines, the following vertical mergers should not generate any type of competitive concerns: (i) if the market shares of both of the merging entities are below 30%, or (ii) the HHI is below 3000 points in the supply and the demand side of the market or (ii) if both conditions combine, i.e. if they have a market share below 30% on the demand side and a HHI below 3000 points both on the supply and demand side of the market, or vice versa.

Conglomerate mergers

The Guidelines now state that, in principle, conglomerate mergers will not be objected and will only be considered potentially harmful in some particular cases which refer to the (i) removal of a potential competitor and (ii) existence of significant portfolio effects.

Therefore, except for the mentioned cases, which are briefly explained in the Guidelines, it may be concluded that most conglomerate mergers should be cleared without further analysis.

Economic analysis

The Guidelines now provide for a more comprehensive approach as regards the techniques used by the Commission. They now incorporate the notion of Upward Pricing Pressure as a method in order to determine possible unilateral actions post-transaction as well as including a specific review on coordinated effects. Other factors that are now included as relevant are the competition from imported products, countervailing buyer power, the creation of a portfolio effect and the failing firm approach to a transaction.

Finally, the Guidelines also provide a commentary on the possible review of ancillary restraints, following the current practice by the new Administration of not setting out specific terms for their duration, but rather to analyze them on a case-by-case basis. Although this approach would seem to be a bit more extensive than the one under the previous Administration, it remains to be seen whether the Commission will include a clear set of rules for parties to appraise the type of review that may eventually be carried out.

Conclusion

Even though some relevant aspects included in the draft guidelines were removed, such as the fast track procedure, the Guidelines now provide updated and clearer rules for parties interested in carrying out a merger control notification in Argentina. This will allow them to fully assess the type of review that they will be subject to as well as giving them a better estimate of the proposed timeline.