Cartel accusation for Government price fixing rejected

Background

The claim was filed last November 30, 2006 by CARBAP, a trade federation formed by 114 trade associations of agricultural producers from the Provinces of Buenos Aires and La Pampa (these two provinces produce practically 60% of all wheat production in Argentina). The accused seed export companies were the companies that acquired the wheat from local producers and sold it in foreign markets.

CARBAP accused the main seed export companies of fixing the buying price of wheat. The alleged illegal conduct was an abuse of a dominant position consisting of the manipulation of the buying price of wheat that damaged the general economic interest.

All the accused seed export companies and their presidents gave explanations rejecting all accusations of anticompetitive practices, but highlighting the fact that the price of wheat in the primary market (producer) was controlled and fixed by Federal Government regulations.

The National Commission for the Defense of Competition (the “Antitrust Commission”) recommended the Secretary of Domestic Trade to dismiss the claim.

According to the Antitrust Commission, the wheat market is a market subject to heavy government intervention due to the economic crisis that Argentina underwent during 2001. The intervention of the Federal Government is effected by various rules and regulations that restrict the commercialization of wheat and are aimed at preventing an increase in the price of flour in the Argentine market. “The intervention in the cost of the wheat production line by the Federal Government was framed within the price stability policies of the Federal Government”, the Antitrust Commission pointed out.

The Antitrust Commission claimed that it could not punish anticompetitive practices that are generated as a consequence of Federal Government regulations that have the specific target of protecting the general economic interest.

Comment

This precedent is important as it clearly states that the competition authority cannot investigate and punish potential anticompetitive conduct that occurs as a consequence of the intervention of the Federal Government in a given market. Many markets in Argentina are subject to intervention and controlled by the Federal Government and such control may cause conduct by market participants that could be considered as anticompetitive and illegal. However, the antitrust authority will not punish nor investigate such conduct if it is a consequence of regulations passed with the intention of avoiding price increases.