Mendoza Court of Appeals requires the independence of the Antitrust Commission

The transaction between Ahold International Holding N.V. and Cencosud S.A. for the latter’s acquisition of Disco and Vea supermarkets in Argentina has given rise to much discussion over the last two years and could be considered as one of the more complicated private antitrust litigation cases in Argentina. In a very recent decision the Federal Court of Appeals of Mendoza added a new chapter to the many challenges to this transaction.

In 2004 a Federal Judge of the City of San Rafael, Province of Mendoza, as a consequence of an amparo proceeding filed by Manuel Belmonte and others, through several injunction hearings suspended the transaction on the construction that, as the Tribunal created by the Antitrust Law No 25,156 (the “Antitrust Law”) has not been formed, there is no legal agency with powers to analyze the antitrust effects of any economic concentration.

Until the Tribunal is set up Section 58 of the Antitrust Law provides that its role should be fulfilled by the Commission. This argument was upheld by the Federal Judge of San Rafael on August 3, 2005 when he rejected the amparo proceeding.

On March 22, 2006 the Federal Court of Appeals of Mendoza upheld the decision but stated that the Commission is vested with all the powers granted by the Antitrust Law to the Tribunal and, until the latter is created, the Commission should be considered as the Tribunal.

This concept differs from the Commission’s construction whereby it would keep on working pursuant to the provisions of the former Antitrust Law No 22,262 although the Antitrust Law enacted in 1999, abrogated the former.

Under the terms of the Antitrust Law the Tribunal is an independent administrative court composed of 7 members appointed by a special jury. The former Antitrust Law No 22,262 set up the Commission as an agency dependent from the Ministry of Economy which issues advisory opinions subject to the resolution of the Secretary of Technical Coordination of the Ministry of Economy (the “Secretary”). The Commission has 5 members appointed by the Ministry of Economy.

The decision of the Federal Court of Appeals states that the Commission should be considered as an independent agency and its decision should be final without subsequent intervention of the Secretary. This interpretation enhances the language and scope of Section 58 of the Antitrust Law. Such construction could be considered as “unusual” and alters the interpretation customarily adopted by the Commission and the Ministry of Economy. The Commission has never issued resolutions on anticompetitive cases, but has only issued advisory opinions and the Secretary has issued the final decision.

The Federal Court of Appeals also stated that the parties to the transaction must file a new F-1 Form requesting the approval of the transaction as the former filings were performed before an agency with an insufficient number of members (only 2 out of 5). This fact adds uncertainty to a transaction which has been under the Commission review for 2 years.

The Federal Court decision challenged the Government’s non-compliance of its obligation to set up the Tribunal. It added two new elements which will postpone the transaction: (i) it is not clear whether the Commission is empowered to approve condition or reject the transaction because, in the past, it has only issued advisory opinions and the resolutions were issued by the Secretary; and (ii) the parties must re-initiate the procedure for clearance by the Commission and will have to disregard all previous filings during the last two years to restart the proceedings.