Guidelines Regarding Vertical Restraints Forbidden Under Law No. 25,156

On November 27, 2013, the Secretary of Domestic Trade (the “Secretary”) issued Resolution No. 128 by which it ordered to file the proceedings initiated as a result from a claim submitted by COAFI S.A. (“COAFI”) in which it alleged an abuse of a dominant position from the following companies: Volvo Constructions Equipment Do Brasil, Volvo Construction Equipment NV I and Volvo Sudamerica S.A. (jointly “Volvo”).

The case: the claim
On June 7, 2001, COAFI, a company involved in the distribution of automobiles, all-terrain vehicles, heavy trucks, soft chassis and minibuses, filed a claim before the Court for Criminal Economic matters against Volvo, a company which main purpose is the import and distribution of automobiles, trucks, buses, machinery and marine and industrial motors, their spare parts and provision of related services. After the Court of First Instance of the National District No. 7, Secretariat No. 13, declared the case to be beyond its competence, the proceedings were submitted to the National Antitrust Commission (the "Commission").
According to the complainant, Volvo committed an abuse of a dominant position as a consequence of Volvo's intervention in the Argentine market while the exclusive distribution agreement with COAFI was in place and with the subsequent termination of said agreement. According to COAFI, in 1999 it was simultaneously selected by Volvo and by Komatsu Machinery (“Komatsu”) to handle the commercialization of their products in the country. As soon as Volvo became aware of the offer made by Komatsu, it offered COAFI an exclusive agreement for an unlimited period prompting COAFI to sign with Volvo. However, during the term of the distribution agreement with COAFI, Volvo made direct sales commercializing its products at the same price as COAFI but entering them with a reduced value of 20% which implied a greater benefit to Volvo. Therefore, according to COAFI, Volvo incurred in a vertical restrictive practice when, once it had organized its own distribution chain, it decided to terminate the exclusive distribution agreement with COAFI. The complainant also stated that by means of this maneuver Volvo benefited from the commercial and administrative organization set out by COAFI, as well as the investments and advertisings incurred by COAFI.
On December 6, 2001, Volvo appeared before the Commission and stated that the distribution agreement expressly restricted Volvo from the possibility of performing direct sales during the term of the same and the possibility of terminating the agreement in the event of breach by COAFI. According to Volvo, on February 22, 2000 it had requested COAFI to comply with its obligation of performing minimal sales, establishing and maintaining an adequate and functional organization for sales, among other obligations. Furthermore, Volvo stated that on April 1, 2000, it notified COAFI of the termination of the agreement and was forced to assume from that moment the distribution of the products in Argentina.
When considering the complaint, the Commission understood that there were two relevant involved markets: the road equipment fabrication market and the commerce and distribution market of those products.
Having defined the relevant market, the Commission considered the vertical effects resulting from the termination of the distribution agreement with COAFI and the vertical integration of the manufacturing, distribution and commercialization stages in Volvo. In this regard, the Commission concluded that even if sometimes vertical effects may create competitive concerns, for example, when they lead to an anticompetitive foreclosure of the vertically related markets or when they increase the capacity and incentives of the participants to collude, it is possible that in some cases they may actually increase efficiency. Thus, the Commission considered that there were no competitive concerns arising from the vertical integration since (i) Volvo’s products did serve as an input for any productive process, that is to say that these only participated in the commercialization and distribution; and (ii) Volvo only assumed the distribution role in the absence of a distributor. The Commission held that, in a competitive environment, it is expected that a manufacturer carries out certain acts in relation to its distributors aimed for them to place their product in the market in the best possible way.
The kind of restrictions analyzed in this case can generally diminish intra-brand competition, but this diminishment is counteracted by an increase of the inter-brand competition, given that the main purpose is that less competition between the sellers of the same brand provides the company with a better possibility of competing with other brands. Therefore, the Commission understood that in the relationship between manufacturer and distributor, the former can decide and choose how its products are to be commercialized as long as this does not cause harm to the general economic interest.
Regarding Volvo, the Commission concluded that it did not hold a dominant position and that the competition between multinational manufacturers would allow COAFI the possibility of commercializing other brands.
Finally, the Commission also stated that, although entering in an agreement with Volvo deprived COAFI of the distribution of the products manufactured by Komatsu, it could not be concluded that Volvo would have excluded Komatsu from the Argentine market. Such was the case since it was effectively verified that Komatsu entered the market and also because the Commission understood that there were no significant entry barriers.
The Commission concluded that there was no anti-competitive conduct by Volvo pursuant to the terms of Law 25,156 (the “LDC”) provided that the case solely involved a dispute over an agreement voluntary entered by the parties which contained a termination clause that became effective.

Conclusion
This precedent confirms that the sole purpose of the LDC is to protect the general economic interest. Thus, to the extent that a conduct does not exhibit harm or a potential harm to the general economic interest, the complainants cannot expect the Secretariat to intervene in order to safeguard the particular interest of the parties.