Control of Commitments Area: a new challenge for the Antitrust Commission

Introduction

The First Vice-President of the National Commission for the Defense of Competition (the “Commission”), Mr.  Humberto Guardia Mendonça, announced the creation of the Control of Commitments Area (the “Commitments Area”), whose duties will be performed within the frame of the Investigations and Audit Area (Área de Investigaciones y Auditoria) set-up in 2008.

The Commitments Area will be comprised of lawyers, economists and accountants, who will be responsible for monitoring -on an ongoing basis- the increasing number of commitments and divestments ordered by the Commission in cases of economic concentrations. 
Background

The duties of the Commitments Area will be performed within the frame of the Investigations and Audit Area, which was set up in 2008 by Resolution No. 70/2008 (“Resolution”) issued by the Secretary of Domestic Trade on June 6, 2008.

The purpose of the Resolution was to reorganize the internal structure of the Commission, in order to improve the efficiency of said agency as it faced a constantly increasing workload.

The Resolution established the internal reorganization of the Commission in three main areas of work: (a) Technical Area; (b) Administrative Area; and (c) Investigations and Audit Area.

Whereas it was determined that the Technical Area will remain under the supervision of the President of Commission, the Administrative and Investigations and Audit Area will be under the control and supervision of the First and Second Vice-President of the Commission, Humberto Guardia Mendonça and Diego Povolo, respectively.

The most important modification introduced by the Resolution was the creation of the Investigations and Audit Area. The intention was to create a division that could work on a dynamic and efficient basis, performing research and audit activities for specifically selected assignments.
 
Creation and challenges of the Commitments Area

As stated above, the Commitments Area will perform its activities within the Investigations and Audit Area and will be responsible for monitoring -on an ongoing basis- the compliance of commitments and divestments ordered by the Commission in cases of economic concentrations.

Undoubtedly, the decision to create the Commitments Area was influenced by a recent resolution issued by the Commission in the well-known Telefónica/Telecom case. In summary, the transaction implied that Telefónica S.A. (“Telefónica”) acquired an indirect participation in Telecom Italia Spa (“Telecom”). Both, Telefónica and Telecom control several entities in Argentina engaged in the telecommunications industry. In fact, Telefónica and Telecom are the two biggest telecommunications players in Argentina.

After almost two years of investigations, preliminary injunctions, administrative and judicial resolutions, by means of which the legality of the transaction in Argentina was discussed, the parties submitted an exhaustive behavioral commitment in order to guarantee competitive conditions within the telecommunication market, which was accepted by the Commission on October 12, 2010 in order to authorize the transaction.

Within this context, one of the most important and first challenges for the Commitment Area will be to monitor the behavioral commitment assumed by the parties in the above-mentioned case. The commitment implied that Telefónica will not participate or vote on any issue to be discussed in the companies that ultimately control the Telecom subsidiaries acting in the Argentine market.

To such effect, the parties accepted to provide the following documentation on a regular basis and, therefore, the Commission will have to analyze, among others,: (a) the agenda to be discussed at the board of directors’ and shareholders’ meetings of the controllers of the Telecom subsidiaries acting in the Argentine market, prior to their celebration; and (b) the board of directors’ and shareholders’ meeting minutes of those companies shall be submitted before the Commission once said meetings have taken place.

The Commission will also provide training to the directors and managers of the subsidiaries of Telefónica and Telecom in Argentina, regarding the existence and scope of the commitments and the Argentine antitrust regime.

Conclusion

By means of the creation of the Commitments Area, the Commission is clearly aiming to improve the quality of the monitoring task it performs regarding commitments or divestments it orders in cases of economic concentrations.

The creation of the Commitments Area coincides with the decision that the Commission adopted in the Telefónica/Telecom case, by means of which the agency accepted several commitments to authorize the transaction. The monitoring of said commitments will be a challenging task for this newly created area, specially considering the number of commitments offered by the parties and the scope of said commitments.