Two-Tier Regulatory Structure

Introduction

On December 7, 2011 the Secretary of Domestic Trade (the “Secretary”) issued a new preventive measure within the terms of Section 35 of the Antitrust Law No. 25,156 (“Antitrust Law”), in order to reestablish competition conditions in the taxi transportation services market (the “Resolution”).

Such Resolution was based on the investigation carried out by the National Commission for the Defense of Competition (the “Antitrust Commission”), upon an antitrust accusation filed on August 2011 by several organizations which group taxi owners and drivers of the City of Buenos Aires.

Background

On August 19, 2011 Cotax Cooperativa Ltda., Asociación de Taxistas de Capital, Unión de Propietarios de Autos Taxi and Sociedad Propietarios de Automóviles con Taxímetro (the “Claimants”) filed with the Secretary an antitrust accusation against the following taxi-meter manufacturers: Ful-Mar S.A., Nivel Electrónica S.R.L., Relojes Ariel S.R.L. and Taximac S.A. (the “Defendants”).

Pursuant to the accusation brief, Claimants have always been engaged in the sale of taxi-meters and related services to taxi owners and drivers of the City of Buenos Aires. However, as from March 2011 they have been unable to carry on with their business because Defendants stopped supplying the taxi-meters and software needed to adjust the taxi-meters’ fares.

The Claimants urged the Antitrust Commission to find a solution to the problem because (i) the Defendants are the only suppliers of these products in Argentina, (ii) new regulations issued within this sector set out the need to replace the already existing taxi-meters in the market and, (iii) upcoming increases in the fares would result in the necessity to adjust the taxi-meters’ fares, for which Claimants would need the relevant software sold by Defendants.

Thus, on September 6, 2011 the Antitrust Commission recommended the Secretary to issue a preventive measure ordering the Defendants to (i) commercialize in adequate market conditions the taxi-meters and the software that is required for said products, (ii) guarantee equal access to the products for all the parties in question and, (iii) take all the necessary measures to carry out the provision of said products.

However, on September 13, 2011 the Secretary informed the Antitrust Commission that there was not enough evidence in the docket, supporting the issuance of this preventive measure. Therefore, on September 22, 2011 the Commission continued with the investigation and requested the Defendants to provide the relevant explanations in accordance with Section 29 of the Antitrust Law. After receiving the Defendants’ explanations, the Antitrust Commission decided to further investigate this matter and opened the investigation proceedings pursuant to Section 30 of the Antitrust Law.

Nonetheless, in order to prevent an actual harm to the general economic interest, the Antitrust Commission requested once again the issuance of a preventive measure pursuant to Section 35 of the Antitrust Law. This section enables the Antitrust Commission to impose the fulfillment of conditions or order the cease or abstention of a certain conduct, when a severe harm to competition could arise as a result of it. For such purpose the Commission may order preventive measures, provided that the requirements of likelihood of the law and danger in the delay are met.

The Antitrust Commission stressed the importance of promoting competition in the downstream market of taxi-meter commercialization, for which supply to all the market players must be guaranteed. Thus, the four companies present in the upstream market (i.e. the taxi-meters manufacturers) must refrain from carrying out discriminatory practices, by means of supplying the relevant products to some companies and not to others. Such conduct would distort competition and harm taxi drivers of the City of Buenos Aires, who are the final consumers of the those products.

The Antitrust Commission also took into account that the Defendants did not offer remedies or undertake to reestablish the sale of the relevant products within the antitrust proceedings. Furthermore, the Antitrust Commission noticed that the explanations filed by three of the Defendants (Relojes Ariel, Nivel Electrónica and Ful-Mar) were quite similar to each other. Such scenario provided the Antitrust Commission with preliminary grounds on the alleged agreement between the Defendants regarding their commercial conduct as regards the downstream market.

In view of the above, the Antitrust Commission decided to once again request from the Secretary a preventive measure by means of which it would order the Defendants to commercialize the taxi-meters and the relevant software in adequate market conditions, and refrain from refusing the sale of the relevant products with no reasonable grounds. Upon this new request, the Secretary issued the Resolution following the Antitrust Commission’s recommendation in that regard.

Conclusion

The Resolution sets out that the two-tier regulatory structure of the Antitrust Law -the Secretary and the Antitrust Commission- is fully executing its enforcement powers in order to safeguard the general economic interest protected by the Antitrust Law. However, this docket sets a precedent as to the evidence that the Antitrust Commission must have in order to support the preventive measures to be requested to the Secretary. Should that standard of evidence not be met, the Secretary could request the Antitrust Commission to further investigate the issue before issuing a preventive measure.

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