CNDC: New Guidelines for the Prevention of Anticompetitive Conducts by Business Associations, Chambers and Professional Associations

Introduction

The Argentine Antitrust Commission (the “Commission”) has recently published the “Antitrust Guidelines for Business Associations and Chambers and Professional Associations” (the “Guidelines”), aiming to “clarify the sometimes blurry line between the right to associate and the duty not to pursue any conduct that harms market competition”.

In principle, these types of associations play a valuable role in a modern economy, as they are generally the vehicles to achieve legitimate goals, such as disseminating good industry practices and educating their members regarding compliance with applicable regulations, in general, and antitrust, in particular.

Nonetheless, and given that these kinds of associations bring together people that compete within the same market, they may result in a favorable environments for their members to carry out conducts against Antitrust Law No. 27,442 (the “LDC” after its acronym in Spanish), which prohibits “the agreements between competitors … regarding the production and exchange of goods and services which have as their object or effect to limit, restrict or distort competition or access to the market, or if it constitutes an abuse of a dominant position in the market, in such a manner that may result in prejudice to the general economic interest.”

In order to determine the scope of the term “association” under Antitrust Law No.  27,442 (the “Antitrust Law”) the Guidelines state that it is meant to comprise business chambers and associations, professional associations and self-regulated agencies. These associations will be subject to the Antitrust Law as long as (i) they have a long-term corporative structure, distinguishable from their members and other simple competitors’ ventures and (ii) their activity is related to the production and commercialization of goods and services with effects in the economic activity, regardless of whether they have a profit purpose or whether they are public or private.

The Guidelines also establish that the responsibility of an association can be direct, if it decides or recommends its member to carry out anticompetitive conducts, or indirect, if its actions only facilitate the consummation of one or more anticompetitive practices.

However, an association will not be responsible when it has had no knowledge of, has not had any type of intervention or participation in and has not contributed to the coordination of anticompetitive conducts carried out by its members.

Scope of application and recommendations

In particular, the Guidelines emphasize how associations should act in the following scenarios:

“Measures and recommendations on price fixing, market allocation and other anticompetitive conducts that restrict competition.”

Pursuant to the Guidelines, it is essential for companies that participate in a competitive market to determine their commercial strategy in an autonomous and independent manner and for associations to protect and not to limit that autonomy.

In this sense, to avoid becoming direct participants of an anticompetitive conduct, associations should avoid fixing minimum prices and/or terms and conditions for the commercialization of products offered by its associated members, setting a price cap for the products acquired by its associates, allocating territories for its members to operate, setting a limited number or volume of products or market shares that its associated companies must comply with, defining criteria under which members can participate in public tenders, and other similar constraints.

“Exchange of information between competitors”

In order to reduce the risk of being sanctioned pursuant to the Antitrust Law, the Guidelines exhort associations to avoid the exchange of “sensitive” information and to limit that exchange only to historic data and to provide it on an aggregate basis.

According to the Guidelines, sensitive information includes, above all, price information, volume of production, future commercial strategies, business plans, etc. Moreover, the anticompetitive risk would be higher depending on the level of concentration of the market, on the frequency of the exchanges and on the low diffusion of such information beyond the associated companies.

The possession of sensitive information from competitors entails the possibility for companies not to take commercial decisions in an individual manner, thus creating competition problems if there is a coordination of the competitive behavior and the monitoring of a collusive agreement.

Associations should not turn into a discussion forum for sensitive information and its potential effects on commercial strategies and, bearing in mind transparency and objectivity purposes, data compilation should be made by an entity not related to the associated companies.

“Measures on the entry and exit of members”

Even though the Guidelines recognize that associations are used to having some kind of social or ethical regulation for the benefit of their associated companies, in some cases they might have a negative impact on competition and harm the general economic interest.

It is recommended then to associations for those regulations to be transparent and unbiased, so that they do not impose price or fees policies or commercial conditions, that there is an independent and transparent regulatory entity to evaluate its compliance, that arbitrary or unfounded measures are not to be implemented and that these do not exclude or restrict competition.

“Measures on standardization”

The Guidelines recommend associations to take standardization measures (i.e. to establish a set of essential characteristics for a certain product or service) only when these are deemed necessary to provide information to consumers, avoiding the creation of barriers of entry to the market and/or restrictions to innovation. The standardization may often be beneficial for the consumers, when it helps to reduce the existing asymmetry in the information between producers and consumers, facilitating the interoperability of the products; therefore, reducing the costs of changing suppliers.

However, standardization may also have anticompetitive effects if, as a consequence, some products that are appreciated by the consumers are no longer produced or if the creation of standards significantly raises the entry barriers into a certain market.

Some aspects to consider for a standardization measure to be considered legal from an antitrust perspective are the existence of a previous and extensive discussion in the industry and a strong consensus that leads to a transparent creation of the standard (which should be open  to companies that are not members of the association), so that the standard helps to reduce the asymmetry of information between consumers and producers of the good or service and so that the standard is openly shared with other companies in a clear and non-discriminatory manners.

Furthermore, the Guidelines warn that the implementation of mandatory standard contracts is not usually considered as a practice that reinforces competition because the obligatory standardization of terms and conditions may become a tool that facilitates cartelization among the members of an association.

“Measures on publicity”

Besides the benefits of institutional announcements, associations can also establish rules regarding the publicity that their members are allowed to make, hence affecting competition negatively.

The Guidelines caution about the possibility to infringe the Antitrust Law whenever the possibility of the members to advertise their products is restrained or if there are penalties for those that trespass the criteria set up by the association.

“Recommended practices”

It is also remarkable that, in addition to the Guidelines, there are some recommendations included for the reduction of risks and for avoiding sanctions, such as the implementation of a compliance program that includes prevention on antitrust matters and general tools to adapt the day-to-day activities of the associations to best practices in competition and the call to inform before the authority about the existence and development of these anticompetitive practices (and to apply for the leniency program if necessary), which will become essential for associations in the future.

Conclusions

The Guidelines reflect the growing interest of the Antitrust Commission for the activities carried out within associations and business chambers, which have often been the facilitating vehicle for the commission of anticompetitive conducts. The direct or indirect participation in anticompetitive conducts by these entities entails possible and important penalties, which is why they have to advocate for the conscious application of the LDC and for the full understanding of its provisions by their members.

With these Guidelines, the Commission has set a stepping stone in its regulatory activity, further increasing the publicity of its normative interpretation of the Antitrust Law and providing associations with a leading light under which to conduct their activities. Likewise, and almost in parallel with this initiative, the recent inclusion of the leniency program to the LDC constitutes another effective tool to report the commission of certain anticompetitive conducts. This implies that the Commission has an increasingly sophisticated regulatory framework that allows it to deter and to ultimately detect and sanction anticompetitive conducts that may have taken place within associations or business chambers.