Challenges to the validity of current enforcing agency are finally dismissed by the Supreme Court

1.    Introduction

Last April 16, 2008 the Argentine Supreme Court of Justice (the “Supreme Court”) issued a decision in a case that had been widely discussed over the last 4 years[1]. It had concerned a challenge to an important merger transaction between Cencosud S.A. and Ahold International Holding N.V. for the acquisition by the former of the Disco and Vea supermarkets in Argentina.

The Supreme Court has resolved the discussions and declared the total validity of the current enforcing agency (the National Commission for the Defense of Competition (the “Antitrust Commission”) and the Secretary of Domestic Trade) until such time as the National Tribunal for the Defense of Competition (the “Tribunal”) created by the Antitrust Law No 25,156 (the “Antitrust Law”) is set up. Additionally, the Supreme Court decided that decisions by the Antitrust Commission must be taken by at least a majority of their members.

2.    Background

In 2004, as a result of proceedings filed by Manuel Belmonte and others, a federal judge in San Rafael, province of Mendoza, suspended the analysis of such acquisition by the Antitrust Commission on the grounds that, as the independent Tribunal created by Antitrust Law had not been set up, there existed no legal agency with the power to analyze the antitrust effects of the transaction.

On March 22, 2006 the Federal Court of Appeals of Mendoza upheld this decision, but stated that:

(i)            The Antitrust Commission is vested with all the powers granted to the Tribunal by the Antitrust Law and, until the Tribunal is created, it should be considered as the Tribunal with full powers to review and decide cases.

(ii)           The Antitrust Commission is an independent agency and its decisions should be final, without any subsequent intervention of the Secretary of Domestic Trade.

(iii)          The quorum for decisions issued by the Antitrust Commission should be the presence of all its members (the Antitrust Commission has five members but only three members are currently appointed).

3.    The Supreme Court Decision

As mentioned, on April 16, 2008 the Supreme Court overruled this decision by stating specifically that it does not agree with any of the three above-mentioned points.

Regarding the first two items, the National Supreme Court referred to its decision in the cases “Credit Suisse First Boston Private Equity II LLC-Sucursal Argentina, Nueve Artes SA y HFD Media SA”[2] and “Recreativos Franco s/ apelación resolución National Commission for the Defense of Competition”[3] where it stated that the current enforcement authorities (the Antitrust Commission and the Secretary of Domestic Trade) have the power to analyze and decide antitrust cases until the Tribunal is set up. According to the Supreme Court, Article 58 of the Antitrust Law establishes that the former enforcement agency that acted pursuant to the terms of the abrogated Antitrust Law No 22,262 must continue analyzing the cases until the Tribunal is finally formed. It specifically states that the Antitrust Commission must instruct, investigate and issue a recommendation and that the Secretary of Domestic Trade must issue the final decision.

The Supreme Court also modified the Court of Appeal’s interpretation of the quorum needed by the Antitrust Commission members to reach decisions. It stated that, since the former Antitrust Law No 22,262 did not contain rules on quorum, the quorum for the members of the Commission to adopt a decision should be the same as the one mentioned in other laws that rule other agencies of the Federal Government (all refer to a majority of members as constituting a valid quorum). This interpretation is particularly relevant as the Antitrust Commission has only three members appointed and, should the previous interpretation have been confirmed, no transaction could have been reviewed and approved by the Antitrust Commission.

4.    Comment

Although the discussion about which agency had full powers to analyze merger and acquisition transactions was resolved by the Supreme Court last year, the challenges to this specific transaction prevented the Antitrust Commission from continuing to analyze it. Therefore, the decision of the Supreme Court is very important as it ends the discussions about the valid enforcing agency for antitrust matters and the quorum that the Antitrust Commission must have in order to reach decisions.

This transaction started at the beginning of 2004 and is material from the antitrust point of view. In order for the Antitrust Commission to reach a decision the parties will have to up-date all market information. A final decision is expected soon.

As a result of this case and the two previous cases mentioned above, it is very clear that, until such time as the Tribunal created by the Antitrust Law in 1999 is set up, the system for analyzing antitrust issues in Argentina involves two agencies: (i) the Antitrust Commission that must issue a recommendation and (ii) the Secretary of Domestic Trade who must issue the final decision. It is worthwhile mentioning that the Antitrust Commission is independent of the Secretary of Domestic Trade.