The New Supply Law is in Force

Law No. 26,991 (the “New Law”) provides the Government with broad powers to intervene in any economic process linked to goods, facilities and services that directly or indirectly satisfy the basic or essential needs of the population.
The New Law was approved along with other FEB initiatives concerning trade regulation and has raised strong criticism from different political and business sectors.

1. Main provisions of the New Law
The New Law upholds the general mechanism provided in the original text of the previous Supply Law No. 20,680 (the “Previous Law”), whose validity and constitutionality has been repeatedly challenged in recent years. In the following, we refer to the main provisions of this New Law.
a. Enforcement Authority
The New Law provides that the FEB shall designate the enforcement authority (henceforth “Enforcement Authority”) at a federal level.
The Enforcement Authority shall have the authority to issue “complementary regulations” as may be necessary to ensure compliance with the New Law.
The New Law upholds the authority of Provincial Governors and of the Mayor of the City of Buenos Aires to exercise some of the powers provided in the New Law (including the fixing of maximum prices), in their respective jurisdictions and as long as the federal authority does not make use of these powers.
b. Powers of regulation and economic control
The New Law confers broad delegations of powers on its Enforcement Authority.
The New Law provides the Enforcement Authority with, among others, the power to set profit margins, reference prices, maximum and minimum price levels; as well as the power to order private parties to continue the production, manufacturing, marketing, or supply of goods or services.
Furthermore the New Law introduces the power of the Enforcement Authority to (i) require any documentation relating to commercial transactions; and (ii) require the publishing of sales prices and the availability of goods produced or services provided.
It provides that in a situation of shortage or scarcity of goods or services which satisfy basic or essential needs destined to the general welfare of the population, the Enforcement Authority may order their sale, production, distribution and delivery throughout the territory of the Nation.
Among the amendments provided by the New Law, it is established that the exercise of the powers granted to the Enforcement Authority is conditioned by any breach of the New Law. It also provides that compensation will be granted in cases where companies are ordered to keep producing in the red.
The New Law excludes micro, small and medium-sized companies – as defined by Law No. 25,300 – from its scope, as long as these do not hold a dominant market position as considered under the Competition Law No. 25,156.
c. Sanctions
As regards the sanctions applicable for breaching its provisions or the regulations or decisions issued by the Enforcement Authority, the New Law:
•    Raises the amount of the fines to a maximum of ten million pesos ($10,000,000).
•    Upholds closure sanctions for up to ninety (90) days.
•    Upholds the sanction of confiscation of merchandise and products in violation.
•    Raises the maximum period of disqualification from commerce and holding public office to five (5) years.
•    Includes as a sanction the loss of concessions, privileges and special tax or credit regimes.
The New Law eliminates the sanctions of: (i) prison (ii) arrest; (iii) detention; (iv) publishing of convictions; (v) suspension on the use of patents and trademarks; and (vi) definite closure (which was provided for cases of recidivism).
While the New Law generally maintains the guidelines for the fixing of sanctions under the Previous Law, it now provides new parameters to this end: (i) the offender's market position (ii) the profit generated by the conduct in breach and its duration; and (iii) the damage inflected to the market or consumers.
The New Law also clarifies that in cases of offenses committed by legal entities, the fines will also apply to board members, managers and administrators participating with willful misconduct or gross negligence.
d. Procedural Aspects
As regards the procedural provisions, the New Law:
•    The Enforcement Authority upholds the broad inspection powers, but excludes the “raiding” power provided in the Previous Law.
•    Upholds the possibility of ordering temporary closures for up to three (3) days during inspection procedures, with the possibility of extending such closure up to thirty (30) days. But it is provided that this extension will now require prior judicial authorization.
•    Eliminates the “preventive” detention of up to 48 hours.
•    Deadlines to file defenses in enforcement proceedings, including evidence, and to file direct appeals against decisions imposing sanctions are extended, both from five (5) to ten (10) business days.
•    The jurisdiction to review decisions imposing sanctions is transferred from the Criminal Courts of First Instance to the Federal Court of Appeals on Administrative Law Matters or to the corresponding Federal Courts of Appeals of the relevant province, depending on the seat of the intervening administrative authority.
•    To appeal a fine, the New Law establishes a requirement to first deposit the amount, unless this may cause irreparable harm to the plaintiff. Thus the possibility of replacing the deposit of the fine with a security interest or a sufficient lien as authorized by the Previous Law would no longer be available.
•    Administrative Procedure Law No. 19,549 (the “APL”) shall have supplementary application, instead of the Criminal Procedural Code.

2. Final Comments
The New Law undoubtedly provides the Government with more tools to interfere heavily with the economy and trade, and to impose restrictions on property rights and individuals’ freedom of contract.
While the New Law does eliminate some of the more controversial provisions of the Previous Law (in particular, imprisonment sanctions), it simultaneously incorporates changes that may be challenged on a constitutional basis.
In this regard, those provisions of the New Law which reiterate and, in some cases, broaden the powers that the Supply Law gives to administrative authorities –with neither deadlines nor intelligible standard for their exercise– are subject to serious objections.
The same holds regarding the amendments provided by the New Law which –as especially with the prior payment of fines– imply a severe limitation of the right of defense and access to justice. Similarly, the expansion of powers to require information and documents as well as the right to order the sale, production, distribution or supply of goods or services, may curtail other procedural and substantive constitutional guarantees.
Lastly, the displacement of the jurisdiction of the Criminal Courts of First Instance to exercise judicial review on these matters and the supplementary application of the APL in lieu of the Criminal Procedural Code, also constitute changes that may adversely affect the exercise of individuals’ right of defense, to the extent that they are deprived of the guarantees governing criminal procedure.