Antitrust in Argentina: A Decade in Review

1. Introduction

Law No. 25,156 (the “Antitrust Law”) was enacted in September 1999, a little more than 10 years ago. It introduced several modifications to the previous antitrust regime, such as the merger control provisions and it continued sanctioning anticompetitive conducts.

The Antitrust Law created the National Tribunal for the Defense of Competition (the “Antitrust Tribunal”) within the scope of the Ministry of Economy, which would be the ultimate antitrust regulator in Argentina. This Antitrust Tribunal was supposed to be composed of seven members, with a minimum of two attorneys and two accounting professionals on its Board. 

However, ten years later, the Antitrust Tribunal still has not been created. After several diverging precedents, the Argentine Supreme Court ultimately set out a double-tier regulator structure in two cases, leaving no room for doubt regarding the enforcement agencies that will analyze antitrust cases until the Antitrust Tribunal is created[1] This double-tier regulator structure follows the settings of the prior Antitrust Law. Currently, the National Commission for the Defense of Competition is the agency in charge of performing a technical review of mergers and investigations and issuing a recommendation to the Secretary of Domestic Trade of the Ministry of Economy, which is the body that ultimately decides the case. For purposes of this article, this two-tier regulatory structure will be referred to as the “Antitrust Commission”.

2. Merger control

Over the last decade, the Antitrust Commission has increasingly shifted its focus to merger control proceedings. This focus results from the fact that the Antitrust Law provides that if a decision is not issued within forty-five business days of the filing of the application and relevant documents, the transaction shall be considered tacitly approved. However, the Antitrust Commission is currently enforcing a “stop-the-clock” interpretation, by means of which it considers that the first request of information stops this term, which will not start again until the necessary information for the issuance of the final resolution has been obtained.

According to publicly available information, the Antitrust Commission has analyzed more than 500 transactions in the last decade. This is a clear indication that the Antitrust Commission is more focused on merger cases than on infringement cases.

The statistics on delay of the Antitrust Commission regarding merger control cases is also distressing since, over the last few years, there has been a significant increase in the analysis period by the Antitrust Commission caused by budget restraints and severe understaffing. This shows that there is a clear need for implementation of a fast-track procedure in order to alleviate the burden imposed on the parties. Currently, the average period in order to obtain a resolution of the Antitrust Commission on a merger case is approximately 14 months.

Out of the 500 transactions that the Commission has analyzed in the last decade, 94% have been approved without conditions, 5% have been subject to conditions and only 1% has been rejected.

Regarding the setting of conditions, the Antitrust Commission has imposed structural and behavioral remedies. Structural remedies imposed by the Antitrust Commission include the sale of industrial facilities, stock participations in other companies, trademarks, etc. Behavioral remedies include the acceptance of commercial commitments offered by the parties to a transaction (e.g., undertakings to provide market access, provision of special services with cheaper fees, compliance with investment plans).

With respect to the rejected transactions, these have ranged from cases in which there was a specific concern regarding post-deal market share to cases in which political interests derailed the deal.

3. Investigation of cartels

While there have been certain periods in which the Antitrust Commission was active with these types of investigations, the latest and most important cases were both resolved in 2005, namely, the Cement case and the Liquid Oxygen case.

The most renowned case regarding cartels in Argentina is the Cement case,[2] in which six major cement producing companies were accused of having staged a nationwide market allocation framework for almost twenty years. A fine was imposed on July 25, 2005 by the Antitrust Commission and the Secretary of Domestic Trade for a total amount of AR$ 309,729,289 (approximately USD 77 million) and was confirmed by an appellate court on August 26, 2008. Four cement companies and the Cement Association were sanctioned. These proceedings are currently under review by the Supreme Court.

The Liquid Oxygen case[3] was initiated in 2001 by the Antirust Commission following hospital complaints stating that they were unable to acquire liquid oxygen for medical purposes from anyone other than their incumbent suppliers contracted via public bids, because the other competitors in the market always submitted offers with higher prices. On July 8, 2005, the companies involved in the cartel were fined with a total of AR$ 70,300,000 (approximately USD 17.5 million). This case is currently under review by the Court of Appeals.

Since 2005, there have not been any major fines imposed for anticompetitive conduct. This lack of focus on cartel investigations may be attributable to the Antitrust Commission’s diversion of a greater percentage of its resources to merger control proceedings.

In the last ten years the Antitrust Commission has only analyzed approximately 200 cases involving alleged anticompetitive conducts. The conviction rate out of these cases is very low (8.7%) while the majority of the cases have been rejected (85.3%). Additionally, regarding the delay in the analysis of these proceedings, the Antitrust Commission shows an increasing delay over the last years with a current average of almost 5 years to conclude an infringement case.

The lack of resources of the Antitrust Commission on cartel investigations has recently encouraged the agency to unveil a preliminary bill for amendment (the “Bill”), in order to incorporate a leniency program with the purpose of identifying cartels in Argentina.[4] The Bill sets out two different scenarios for infringing parties in cartel cases, namely an exemption and a reduction, both based on a “race-to-the-door” structure.

The leniency program, as it is drafted currently, would only be applicable to sanctions that are set out in the Antitrust Law. Therefore, a requesting party would be granted immunity regarding the sanctions of the Antitrust Law, but could be prosecuted under the settings of the Argentine Criminal Code. Additionally, should a requesting party obtain the enforcement of the leniency program and be granted a total exemption of the applicable fines it would still be liable before any third party that may have been damaged by the anticompetitive conduct.

4. Other anticompetitive conducts

Since the beginning of the 80’s, Antitrust Commission has been investigating different types of abuse of dominant position. However, no significant sanctions were imposed until 1999 when the local petroleum company received a significant sanction for abuse of its dominant position by discriminating prices in the liquid gas market.

The investigation in the YPF case[5] was initiated due to increases in the price of liquid petroleum gas (“LPG”). The Antitrust Commission determined that YPF, a local petroleum company, had a dominant position in all phases of LPG production and supply. It also found out that the market entry barriers were high and that imports were not a constraint on domestic producers.

The conduct assessed by the Antitrust Commission was YPF’s practice of exporting a high amount of LPG at prices that were lower than in Argentina. Further, YPF’s export contracts prohibited the re-importing of LPG to Argentina. The Antitrust Commission concluded that this conduct was harmful to the general economic interest and ordered YPF to cease its price discrimination between the domestic and export markets and to eliminate the prohibition of re-importing LPG. Additionally, it imposed on YPF a fine of AR$ 109,644,000 (USD 29,600,000). The decision was upheld by the Supreme Court of Argentina.[6]

In the Monsanto case,[7] the Federal Court of Appeals for Civil and Commercial Matters (the “Court of Appeals”) revoked a decision from the Antitrust Commission that decided to investigate Monsanto for the potential infringement of the Antitrust Law in Argentina due to the enforcement by Monsanto of certain patent rights outside Argentina. According to the Antitrust Commission, Monsanto abused its dominant position in the soybean market as it owned, outside Argentina, the Round Up Ready patent. On September 30, 2008, the Court of Appeals accepted that Monsanto had a constitutional right to petition before judicial authorities and that said action could not be considered to be an anticompetitive conduct in Argentina.

Another interesting case was the Movicom Bellsouth case in the year 2004.[8] The plaintiff argued that the defendant had launched a program that infringed the Antitrust regulations which consisted of a 50% discount in certain phone calls, only when the clients: (i) owned or were willing to acquire a fix line provided by the defendant, (ii) were subscribed or were willing to subscribe to the long distance call services provided by the defendant, and (iii) owned or were willing to acquire two mobile phone lines of a company controlled by the defendant.

The Antitrust Commission considered that the case involved a practice known as “package of products”. It dismissed the claim as it considered that the practice did not show any predatory pricing practice from the plaintiff, although it held a dominant position in the market.

Although the Antitrust Commission has dealt with a lot of dominance cases in the past, very few resulted in sanctions. As the Antitrust Law allows private parties to file complaints before the Antitrust Commission, the agency is obliged to consider them. Most of the claims filed before the Antitrust Commission alleging abuse of dominance did not evidence a potential harm to the general economic interest as provided in Section 1 of the Antitrust Law and, therefore, were not considered as infringements to the antitrust regime.

5. Private litigation

A recent ruling issued by National Commercial Court No. 14 shows that decisions in private antitrust litigation cases in Argentina are starting to be issued.[9]

After the above-mentioned sanction imposed by the Commission on YPF, which was ultimately confirmed by the Supreme Court of Justice, a new private claim case was initiated by Auto Gas S.A. (“Auto Gas”). Auto Gas claimed that it had been affected by YPF anticompetitive conduct. The claimant requested the sum of AR$ 117,113,962 (approximately USD 29 million). Finally, the Judge ordered YPF to pay AR$ 13,094,457 (approximately USD 3 million) to Auto Gas in damages, plus attorneys’ fees.

6. Conclusion

Over the last ten years, the Antitrust Commission has analyzed a large number of high profile merger proceedings and uncovered several instances of anticompetitive conduct, which have been heavily fined.

Anticompetitive conduct appears to no longer be the focus of the Antitrust Commission, since budget restraints have led to a greater emphasis on merger control proceedings. On the other hand, merger control proceedings have become more cumbersome, time-consuming processes leading to a high degree of uncertainty for the parties.

The track record of the Antitrust Commission shows that the last decade has been an important step towards the creation of an effective antitrust regime in Argentina. It is now time for the government to consolidate the advances made and redouble its efforts at fine-tuning institutional enforcement across the board.