New Case on Price Agreements in Argentina

1. Introduction
On November 28, 2013, the Secretary of Domestic Trade (the “Secretary”) issued Resolution No. 139 whereby it condemned certain companies associated with the “Cámara Argentina de Industrias Ópticas y Afines” (“CADIOA”), namely the trade association encompassing certain wholesale ophthalmologic glass manufacturers, to pay a fine because they had incurred in a price agreement in violation of Sections 1, 2 a) and 2 g) of the Argentine Antitrust Law No. 25,156 (the “Antitrust Law”).

2. The case: the claim
On March 23, 2000, and on May 15, 2000, the “Cámara Argentina de Óptica” and the “Federación Argentina de Cámaras y Asociaciones de Óptica” (the “Complainants”), namely the trade associations encompassing the majority of retail ophthalmologic shops, filed a claim before the Argentine Antitrust Commission (the “Commission”) for a presumed infringement to the Antitrust Law. The Complainants alleged that certain companies associated with CADIOA had met between January and March 2000 at its headquarters in order to agree on the prices of the special ophthalmological lenses commonly known as “optical laboratory crystals” modifying them in a sudden, unexpected and coordinated way, thus increasing the wholesale price of those products. In addition, it was claimed that such concerted action was performed concurrently to  a bid for public tender on these products carried out by the “PAMI” (Instituto Nacional de Seguridad Social para Jubilados y Pensionados, namely the National Institute for Social Welfare Payments) on February 7, 2000, in order to affect the offers to be made by the downstream Complainants in said process and in order to dominate their markets.
The accused companies answered the claim providing two explanations. In the first place, they admitted that the agreement had existed, but that it did not have an anticompetitive purpose but on the contrary, a pro-competitive one, destined to “remove certain practices that distort the market” and to adjust prices to reality. In the second place, they argued that the price increase was real, but caused by a raise in the labor force value as in “optical laboratory crystal” products, since they are specially prepared for each client according to the ophthalmologist’s prescription, half of the value comes from human labor (50% of the total cost).

3. Analysis by the Antitrust Commission
To determine the existence of a horizontal concerted practice in this case, the Commission analyzed different facts and evidence that allowed it to determine the performance of the accused conduct, as well as the different stages by means of which it was carried out.
Initially, the Commission concentrated on the manner the price agreement was implemented and therefore analyzed and compared the price lists presented by the companies during the periods 1999 and 2000, that is to say, before and after the alleged conduct. From the data collected (through financial audits), the Commission informed that the prices after the conduct tended to increase and assimilate on an almost equal manner between the different companies analyzed (the difference being in cents).
In relation to the effective application of the price agreement, the Commission found determinant the letters of the imputed companies to their clients by means of which they were informed of the unification of the price lists in all the national territory based on an agreement conducted on January 18, 2000, at CADIOA headquarters. Likewise, and in a coincidental way, all the companies informed their clients that such price variation would particularly affect “optical laboratory crystals” and was scheduled to take effect from March 20, 2000 onwards.
The Commission also carried out an analysis from an economic point of view in order to determine whether there were elements in the market structure that would make collusion possible. While it considered that the market was an oligopolistic one, thus prone to this type of conduct, it also determined that there were incentives for the companies of the cartel to deviate from the agreement for their own benefit. Therefore, the agreement could be difficult to maintain having a  latent risk of breaking itself. As regards this issue, it uncovered that the member companies of CADIOA had devised a mechanism whereby they would verify any steering away from the price agreement. In one of the meetings held at CADIOA’s headquarters an internal commission called “organic and mineral lenses” was created, with the purpose of discussing and/or unifying the criteria for commercialization, which constituted evidence of an important mechanism to sustain the collusive agreement over the time.
Based on this analysis, the Commission found that the performance of a horizontal concerted practice of collusion that resulted in a price increase and a reduction of the commercialized quantities in the provision of special ophthalmological lenses or “optical laboratory crystals” market was sufficiently proven. Based on the Opinion issued by the Commission, the Secretary decided to condemn, pursuant to Section 46 b) of the Antitrust Law, the payment of a fine to the companies that participated in the price agreement and to publish those measures in the Official Gazette and in a national newspaper (Section 44 of the Antitrust Law).

4. Conclusion
After an extended period of time in which it has mainly focused on unilateral practices due to their direct impact on pricing on a retail level in order to contain the rise in inflation, the Commission has once again analyzed a cartel case in which it uncovered a horizontal price fixing agreement between different companies in the ophthalmologic glasses market. Due to the difficulties in the discovery of evidence for these cases, the leniency bill currently under consideration before Congress would prove to be an effective solution and an incentive for the prosecution of more of these types of cases.