Merger Control during 2005 in Argentina

1. Background

Among the three transactions that were approved subject to conditions, the most important was the worldwide acquisition of Allied Domecq by Pernod Ricard. The local transaction was subject to a divestment procedure as the combined local company had a strong market power that, according to the Antitrust Commission, could prejudice competition. The parties agreed on a divestment procedure that was approved by the Antitrust Commission. The divestment consisted in (i) sale of local whisky and tequila trademarks to be included in the original framework divestment agreement agreed with the EU authorities; (ii) sale of a whisky trademark to a third party; (iii) sale of liquor, gin and vodka trademarks to third parties; and (iv) a commitment to avoid launching new gin, vodka or liquor trademarks for a period of one year. The important point to stress in this “conditional approval” is the fact that the Antitrust Commission imposed heavier conditions (or expanded them) than those imposed by the European Union authorities when they approved the transaction.

The other two transactions approved subject to conditions were related to non-competition agreements. The Antitrust Commission has stated in the past that the duration of the non-compete agreement can not exceed 2 years unless the transaction involves the transfer of know-how, in which case the maximum term is 5 years. In these two cases the parties will have to renegotiate the term of the non-competition agreement, modify it and file for approval with the Antitrust Commission.

The Antitrust Commission approved material transactions during 2005, which included the acquisition of local giant cement company Loma Negra by the Brazilian cement company Camargo Correa, the sale by Citigroup of its Travelers Business to MetLife and the acquisition of Acindar’s tube business by Siderar. The cement acquisition analysis made by the Antitrust Commission involved a regional market which included Argentina and the South of Brazil.

The acquisition of the Travelers Business by Met-Life included the acquisition by Met-Life of one of the largest local pension fund and life insurance companies (Siembra). The Antitrust Commission modified its previous precedents when it conditioned the approval to an effective notification by the buyer to each subscriber of the acquired pension fund on any change on the terms and conditions of the fund. The MetLife acquisition was approved without imposing an obligation to notify or imposing any other condition.

Although the acquisition by Siderar did not show any anticompetitive effects, the Antitrust Commission decided to monitor the hot and cold laminated steel market as during the analysis of the transaction it discovered that limited competition existed therein. A market investigation is currently undergoing as a consequence of this transaction.

There were no transactions rejected during 2005. Additionally, some pending material transactions are currently being reviewed by the Antitrust Commission, such as the acquisition of Disco Supermarkets by the Chilean Cencosud. This transaction was agreed at the beginning of 2004 but due to judicial challenges, the Antitrust Commission started to analyze the transaction only at the last quarter of 2005.

2. Comment