Recent Compromise in the Beer Bottle Market

On May 22, 2013, the Secretary of Domestic Trade (the “Secretary”) issued Resolution N°49 (the “Resolution”), accepting the terms and conditions of a compromise pursuant to Section 36 of the Law 25.156 (the “LDC”).

Said compromise was offered within the framework of a claim filed before the Antitrust Commission (the “Commission”) by “Compañía Industrial Cervecera S.A.” (“CICSA” or the “Complainant”) against “Cerveceria y Maltería Quilmes S.A.I.C.A y G.” (“CMQ”).

Background

On December 2, 2011, CICSA filed a claim before the Commission against CMQ for a presumed infringement to the LDC, alleging that CMQ had decided unilaterally and inopportunely to modify the system of free exchange of 970 cubic centimeters generic returnable packaging by means of the release of a new non- generic packaging, or “owner bottles”, of one liter, with the objective of replacing the generic packaging. At the moment the claim was filed, this new packaging was already sold in some provinces such as Formosa, Corrientes and Chaco.

In order to explain the negative effect of this practice, the Complainant stated that, in the Argentine Republic, beer is commercialized to the public by means of two large sale channels that are usually called “on premise” (bars, pubs and restaurants) and “off premise” (which includes supermarkets, kiosks and warehouses). The commercialization of “off premise” is around 86% of the beer sold in Argentina and the participation of returnable packaging in such channel was of 86.5%. Considering the aforesaid, the Complainant concluded that, in Argentina, the main sale segment of the brewery industry is sold in returnable glass packaging in the “off premise” channel, which is equal to 74.8% of the total amount of beer commercialized in Argentina.

The Complainant also stated that the generic and exchange character of the 970 cubic centimeters returnable bottles have a very important implication in the competition structure of brewery industries, because most beer consumers have a certain amount of empty bottles that, at points of sale, can be exchanged for other bottles that contain the product. This means that, as long as the packaging is generic, the consumer can exchange any bottle in order to obtain beer from any trademark that commercializes said product.

According to the aforesaid, the Complainant understood that competition in this market was going to be affected if the main companies use differentiated returnable packaging of an exclusive use (or owner bottles) that can only be exchanged for bottles of beer of the same company, since the consumer possessing an owner bottle of a certain trademark will have to exchange it for bottles of beer of such trademark, or, alternatively, will have to buy nonreturnable bottles or pay an additional cost to acquire a nonreturnable bottle. Everything that was mentioned before plus the high percentage of market share of CMQ (74% in 2010) founded the claim.

Finally, the Complainant understood that, as a result of the alleged conduct, the following situations may arise i) generation of costs, previously inexistent, arising from the need to intensify control measures, for CICSA and the rest of competitors, tending to avoid that their product is bottled in the new owner bottles of CMQ, ii) generation of costs for the points of sale, previously inexistent, arising from the need of separating generic bottles from the owner bottles, and iii) disincentive to the consumption and commercialization of the products of CICSA and the other competitors, taking into consideration the aforementioned consequences.

Compromise pursuant to Section 36 of the LDC

Within the framework of the claim, on December 26, 2012, CMQ and CICSA offered a compromise pursuant to Section 36 of the LDC, by means of which the presumed anticompetitive conduct would become abstract, and consisted of: i) Until March 31, 2013, CICSA can implement its exclusive bottle in the provinces or locations in which CMQ has already implemented its owner bottles; ii) Until March 31, 2013, CMQ could not implement its owner bottles in any other province or location; iii) As of March 31, 2013, if any party decides to implement its owner bottle in other province or location, it will have to give prior notice to the other party, and, finally the parties iv) committed not to impose cost to the consumers regarding the bottles’ exchange, and to provide training at the points of sale in order to avoid any confusion.

Conclusion

Submitting a compromise within the framework of a claim is a valuable option to take into account in this type of proceedings with the Commission, among other reasons, because it helps to reduce the times of the proceedings. Likewise, the execution of a commitment under any circumstance can be interpreted as recognition of the alleged conduct. That is to say, submitting a compromise is a proceeding that depends on the will of the inquired party. Finally, the presentation of compromises has become, in the practice, a very used tool, and has been accepted on many opportunities by the Commission (Dockets No. S01:0266963/2003, Opinion No. 473; Dockets No. S01:0179868/2002, Opinion No. 447; Dockets No. 064-010050/2001, Opinion No. 372; Dockets No. 064-011479/1999, Opinion No. 417).