Supreme Court Confirms Fine Imposed on Cablevisión and Multicanal

1. Introduction

On August 22, 2012, Argentina’s Supreme Court dismissed the appeal filed in “Video Cable 6 S.A., and others re. infringement Section 1 Law No. 22,626 (C.463)”. This confirmed the sanction applied by the Antitrust Commission related to a market allocation scheme in the city of Paraná, Province of Entre Rios, regarding the cable television market due to the acquisition of cable networks that belonged to the city’s prior cable television providers.

2. Analysis

The issue discussed in the present case was an agreement carried out between Argentina’s top two cable television operators (Multicanal and Cablevisión) that divided the cable television market in the city of Paraná restricting access to their clients as they were not able to change or freely choose which company to hire.

Following certain allegations carried out by the consumers before the Entre Rios’ Internal Trade and Consumer Protection authority (Dirección General de Comercio Interior y Defensa del Consumidor) due to the sudden, arbitrary and unilateral changes that the companies carried out, the Antitrust Commission initiated its investigation, which lead to the discovery of a collusive practice from both companies which generated an actual harm for the current and potential subscribers.

On the one hand, Cablevisión stated that the criteria used for the asset division of the acquired companies was the allocation of a similar portion of current and potential subscribers and networks; in the places where this was not economically viable, the companies compensated in another place. Due to the market features, currently, there was no overlapping of networks, but Cablevisión stated that this did not entail an agreement for market allocation.

On the other hand, Multicanal stated that subscribers paid the same price and received the same service as before the acquisition took place. Moreover, it alleged that when dividing the networks they had two options: (i) allocate the complete city to Multicanal or to Cablevisión, and thus, consolidate a monopoly in it, or (ii) divide the network between the companies. Multicanal stated that the latter was chosen as it favored competition, and also because the geographic division was the most cost-effective alternative.

However, the Antitrust Commission determined that those companies acted illegitimately as they allocated the cable television market in Paraná, and imposed limiting conditions for the subscribers of the cable television in that city.

Those infringements are set out in Section 1, Law No. 22.262 as follows: “There are prohibited and will be sanctioned regarding the regulations set out in the present law, the performance or actions related to the production or exchange of goods and services that limit, restring, distort the competition or constitute an abuse of a dominant position in a market, in a way that can damage the general economic interest.”

The Antitrust Commission ordered the cease of the conduct and the payment of an Ar$ 2,500,000 fine to each of the investigated parties.

The investigated parties appealed this decision, and the issue was analyzed by Paraná’s Court of Appeals.

The first argument used by the parties before the Court of Appeals was the one corresponding to the statute of limitations applicable to the conduct, since twelve years had passed between the alleged fact and its sanction. In September 2006, the defendant companies became part of the same economic group - Grupo Clarín - which also entailed that they were no longer competitors.

The Courts of Appeals dismissed the argument since it considered the conduct as a continuous infringement, which meant that the statute of limitation period would not initiate while the infringement was still being performed, as per the settings of the Penal Code.

In second place, the defendants considered that satellite television had to be included in the relevant market definition. Regarding this second issue, the Court of Appeals stated that satellite television cannot be included in the cable television market since they had substantial differences, from a price and technology point of view.

This latter statement made by the Court of Appeals clashes with Opinion No. 637 of the Antitrust Commission, dated December 7, 2007, which clearly stated that “(…) it is considered that cable television and satellite television can be included in the same product market (…)”, while approving the Cablevisión and Multicanal merger.

Finally, the defendants alleged there was no damage to the general economic interest as there were other direct competitors, such as Gigacable. Regarding this statement, the Court of Appeals decided, following the Supreme Court’s precedents, that the creation of a danger for the general economic interest “(…) does not require necessarily the harm to exist, but that the performance has the capacity to create it (...)” . After the Court of Appeals confirmed the fine, the Supreme Court disregarded the request for an appeal filed by the accused parties, thus ratifying the Antitrust Commission’s decision.

3. Conclusion

The analyzed conduct shows the confirmation of a new collusion case in Argentina, with the additional ingredient of being part of the cable television market, which has been deeply analyzed due to the approval of the Multicanal and Cablevisión merger. The definition provided by the Court of Appeals to the relevant market also shows important differences to the one that had been issued by the Antitrust Commission regarding satellite television and its relation to cable television.