The Antitrust Commission Monitors the Competitive Conditions within the Media Delivery Market

1. Introduction

On June 10, 2011 the National Commission for the Defense of Competition (“Antitrust Commission”) issued a new preventive measure within the terms of Section 35 of the Law 25,156 (“Antitrust Law”) (see Decision issued by the Antitrust Commission on June 10, 2011, available at http://www.cndc.gov.ar/dictamenes/1387.pdf).

This preventive measure was originated by an accusation filed by Editorial Sarmiento S.A. (“Editorial Sarmiento”) against the entity in charge of the newspaper and magazine distribution called “Sociedad de Distribuidores de Diarios, Revistas y Afines” (the “SDDRA”). The Antitrust Commission decided to issue a preventive measure so as to reestablish the competitive conditions in the media delivery market.

2. Background

On June 9, 2011 Editorial Sarmiento filed an accusation against SDDRA before the Antitrust Commission. The accusation alleged irregularities within the delivery of Editorial Sarmiento’s products (newspapers and magazines). Editorial Sarmiento is the editor of several media products which are distributed through SDDRA, such as the newspaper “Crónica” and the weekly political magazine “Democracia”.

Editorial Sarmiento explained in its accusation how the newspaper and magazine delivery system works in Argentina. Newspapers and magazines are normally printed at the editor’s workshop and then delivered to the authorized distributors. Such distributors classify and organize the publications’ distribution within the kiosks and newsstands. Once such publications are sold out, the remainder is returned to the editor.

This system usually varies according to the type of publication. In the case of newspapers, editions are returned to the editor the day after their delivery, whereas for weekly magazines (such as “Democracia”) the remaining editions are returned to the editor the week after their delivery (i.e. when a new magazine edition comes out).

SDDRA is in charge of coordinating the distribution of all the publications that are sold to the public. Such entity also indicates to the kiosks and newsstands the moment in which the newspapers or magazines should be withdrawn from the market and returned back to the editor. The delivery provided by SDDRA is performed through a limited number of companies and such service constitutes an essential asset for those companies that commercialize newspapers and magazines.

Specifically, Editorial Sarmiento stated that SDDRA’s delivery showed irregularities regarding Editorial Sarmiento’s magazine “Democracia”. Editorial Sarmiento explained that “Democracia” is released on a weekly basis and therefore the editions should remain available to the public for a period of one week. After one week has passed the remaining editions should be returned back to the editor.

Pursuant to Editorial Sarmiento’s brief SDDRA did not respect this delivery policy. On June 6, 2011 Editorial Sarmiento released a new edition of its magazine “Democracia” to the market. However, on June 8, 2011 – i.e. only two days after Democracia’s edition was released - SDDRA ordered all the newsstands and kiosks to return Democracia’s editions to the editor.

Such conduct had a negative impact on Editorial Sarmiento’s commercial reputation, implied an unfair commercial advantage for its competitors (whose magazines were available to the public for an entire week) and also was a way of preventing the public from reading this political magazine. Editorial Sarmiento stated that SDDRA’s behavior represented an obstacle to free competition in the magazine market.

The analysis carried out by the Antitrust Commission focused on determining the commission of a possible infringement of Section 2, Sub-Section (f) of the Antitrust Law, which prohibits the performance of conducts which imply a prevention or obstruction to third parties from entering or remaining in the market or excluding them from it.

The Antitrust Commission performed several inspections in newsstands and kiosks in order to confirm the accusation and collect evidence. After several investigations the Antitrust Commission confirmed that “Democracia” had been withdrawn between 48 and 72 hours as of its issuance. Such conduct constituted an additional and artificial entry barrier to the market which limits the commercial development of “Democracia”.

On June 10, 2011 the Antitrust Commission issued a preventive measure within the terms of Section 35 of the Antitrust Law. This Section enables the Antitrust Commission to issue, during the course of an investigation, preventive measures establishing the compliance of certain conditions or ordering the cease of an anticompetitive behavior, when said conduct has the potential to damage competition.

The resolution compelled SDDRA to deliver Editorial Sarmiento’s products in regular market conditions. Therefore, from now on SDDRA should return “Democracia” to the editor one week after the pertinent edition was released to the market. The Antitrust Commission analyzed the case thoroughly and concluded that the requirements of likelihood of the law and danger in the delay were met.

This new resolution confirmed that the Antitrust Commission is engaged in preventing anticompetitive conducts through the issuance of preventive measures. Additionally, it shows that the agency decides not to delay the analysis of the cases when there is a certain danger of harm to competition.

3. Conclusion

This new resolution confirms a trend of the Antitrust Commission in the issuance of preventive measures. Given the long time the Antitrust Commission takes to resolve anticompetitive cases, these measures are a form to prevent a potential harm to competition, decide the cases and thus enforce the provisions set forth in the Antitrust Law.