AmBev / Quilmes case: an injunction challenging the decision on the merger was rejected

The Federal Court of the Province of Salta rejected an injunction filed by Compañía Industrial Cervecera S.A., a subsidiary of CCU Argentina S.A. (both companies defined as “CCU”) requiring the Court to declare the constitutional invalidity of the decisions of the Secretary of Competition, Deregulation and Consumer Defense and of the National Commission for the Defense of Competition (the “Commission”). These decisions approved the merger of AmBev's Argentine subsidiary and Cervecería y Maltería Quilmes S.A. subject to several restrictions (sale of several beer trademarks and a bottling plant to a new player who does not produce beer in Argentina and sale of a malt mill). For further information please see “Marval, O’Farrell & Mairal advises AmBev on acquisition of Quilmes” published in Marval News # 14 of February 28, 2003.

This transaction was notified pursuant to the terms of Section 8 of Law No 25,156 for the Defense of Competition (“Antitrust Law”) which requires that all economic concentrations of parties with a turnover (in Argentina) of over Argentine pesos 200 million (roughly US$ 69 million) must be approved by the Commission.

CCU filed an injunction (amparo proceeding), a summary proceeding that serves to guarantee constitutional rights, requesting the Court to declare that the restriction (obligation to sell certain assets to a beer company with no previous presence in Argentina) was contrary to free trade principles and the pursuit of a legal industry. Both these rights are protected by the Argentine Constitution, therefore CCU was harmed by the Commission’s decision. CCU decided to file an injunction (amparo proceeding) since (a) the Antitrust Law does not provide for an appeal procedure for third parties not involved in the economic concentration approval process and (b) the provisions of Administrative Law No 19,549 could not be applied under the terms of the Antitrust Law.

The Court analyzed whether an amparo proceeding can be used by third parties to challenge decisions of the Commission. Firstly, the Court accepted CCU’s position that there is no other procedure to challenge the Commission’s decision since the Antitrust Law does not grant this right to third parties and excludes the procedure provided in Administrative Law No 19,549. However, the Court mentioned that the amparo proceeding is a quick summary proceeding with limited debate and evidence on the matter under discussion.

To analyze the matter further, the Court pointed out that the Commission’s decision to oblige Quilmes and AmBev to sell certain assets to a beer company with no previous presence in Argentina was taken pursuant to discretionary powers granted to the Commission by the Antitrust Law. Such decision was adopted “within the zone specifically reserved to the agency”. The Court mentioned that the Commission’s legal and economic grounds to take this decision were valid since its intention was to encourage competition by forcing the entry of new potential foreign investors into Argentina. According to the Court, this decision was taken within the powers of the public administration.

The Court said that an evident illegality must be proved in order to accept an amparo proceeding, according to the precedents of the Supreme Court. The Court stated that the role of the Court in an amparo proceeding is to grant an immediate remedy to a clear harm to rights recognized by the Argentine Constitution rather than to evaluate the performance of government officials. In the petition filed by CCU, the Court did not find, in a very clear and manifest manner, that there was an act of damage or threat to the constitutional rights.

This decision represents another defeat to challenges to the AmBev acquisition of 37.5% of Quilmes. Apparently, CCU was interested in acquiring those assets and has been prevented from doing so by the decision of the Commission. According to CCU, such prohibitions affected its constitutional rights to trade and exercise a legal industry. However, the Court did not find CCU’s arguments sufficiently convincing to accept the petition upheld by the amparo proceeding. CCU appealed the Court’s decision in the Federal Court of Appeals of Salta.

The Court’s decision prompts the following conclusions:

(a) the amparo proceeding provided for in Law No 16,986 may be used by third parties affected by a decision of the Commission related to the approval of economic concentrations provided in Section 8 of the Antitrust Law;

(b) the decision must affect constitutional rights;

(c) the decision of the Commission must exceed the power vested in the Commission by the Antitrust Law; and

(d) the illegality of the decision of the Commission must be manifest and evident.