Preventive measures in antitrust investigations must be guaranteed

In Marval News # 13 of December 20, 2002, we reported that the National Commission for the Defense of Competition (the "Commission") had granted preventive measures in antitrust investigations. We also stated that the Commission did not follow the rules established in the Argentine Civil and Commercial Procedural Code (the "Procedural Code") for the imposition of preventive measures since the Commission did not require the requesting party to provide a guarantee for potential damages that such measure may cause. This information was based on the cases included by the Commission in its Annual Report for the years 1999, 2000 and 2001 available at http://www.cndc.gov.ar/memorias/memoria00/indice.htm.

In a very recent decision, dated September 25, 2003, the Federal Court of Appeals for Civil and Commercial Matters (the "Court of Appeals") confirmed a decision of the Commission imposing a preventive measure but stated that the Commission must request a sufficient guarantee from the party interested in obtaining the preventive measure.

In this case, a phone card supplier requested the Commission to initiate an antitrust investigation of the practices carried out by one of the two telephone companies (Teléfonica de Argentina S.A.). The plaintiff was a company that sells telephone cards for domestic and international phone calls and the defendant provides telephone communication services. The plaintiff stated in its request to the Commission that, at the end of 2002, the defendant changed the use of certain phone lines to a system whereby each person using plaintiff phone cards with a special service from the defendant called "controlled line" must have a credit balance in its "controlled line" with the defendant to have access to the use of the plaintiff's phone card.

According to the plaintiff's analysis, this new regulation implies a restriction which violates sections 1 and 2 of the Law for the Defense of Competition No 25,156 (the "Antitrust Law"). Sections 1 and 2 of the Antitrust Law prohibit all restrictions to competition that may imply possible harm to the general economic interest.

The plaintiff also requested the Commission to grant a preventive measure in order to prevent the defendant from carrying out the potentially illegal activity during the antitrust investigation. Section 35 of the Antitrust Law states that the Commission may grant a cease-and-desist order.

The decision granting the preventive measure was appealed and the Court of Appeals reviewed the decision of the Commission.

The Court of Appeals stated that "prima-facie" the modification introduced by defendant in its telephone plan implied a potentially illegal conduct as provided in Sections 1 and 2 of the Antitrust Law.

The Court of Appeals stated that the Commission has to require a plaintiff to comply with Section 199 of the Civil and Commercial Proceedings Code which rules that any party requiring a preventive relief must grant a guarantee to cover potential damages if the final decision in the case rejects the claim.

According to the Court of Appeals "the guarantee has the purpose of maintaining the equality of the parties in the proceedings and represents funds that may assure a potential reimbursement of the damages."

Based on this provision, the Court of Appeals upheld the Commission's decision to grant a preventive measure but with the specific obligation on the Commission to fix and require the plaintiff to provide a sufficient guarantee to cover potential damages.

Such decision amends the Commission's rulings since the enactment of the Antitrust Law in September 1999 (the Commission has in the past decided several preventive measures without requiring a guarantee). Therefore the Commission must fix and require a guarantee from each party that asks for preventive relief, other than the Argentine State, the Provinces, the Municipalities or any agency dependant of these public bodies.