Antitrust Commission Issues Guidelines for Market Investigations

On January 13, 2023, by means of Provision No. 37, the National Commission for the Defense of Competition approved the Guidelines for Conducting Market Investigations (MI), drafted by the National Directorate for the Promotion of Competition. The guidelines establish the general criteria for the MI, as described below.

Market investigations according to the Antitrust Law

MI are procedures created by the Commission to promote competition. In them, the competitive conditions of the specific market are diagnosed through the study of the sector. MI can be used to identify competition issues and modify or prevent harmful practices. Further, if the case requires so, IM serve to make pro-competitive recommendations or even open ex-officio investigations in face of the existence of possible practices violating the National Antitrust Law No. 27442. 

MI entail the following stages:

1. Selection of sectors or markets to be investigated

Once the possible sectors to be investigated have been identified, the Commission will decide which MI to initiate, based on different criteria, to establish an order of priorities such as:

1. The importance of the market, including the impact on final consumers.
2. The existence of entry barriers.
3. The degree of concentration in the market.
4. The link with other sectors of the economy.
5. The expenditures on research and development.
6. The magnitude of the involved investments.
7. The level of participation of demanders belonging to low-income sectors of the population.

 

2. Definition of the scope of the investigation and identification of the economic agents involved

This stage involves a set of organizational activities that specify how the MI will be carried out, starting with the delimitation of the topics to be investigated, defining the expected time to carry out the research, defining the composition of the work team, and determining the people and external institutions that will be involved in the research and how they will be involved in the procedure.

 

3. Preliminary information gathering and communication of the conduct of an investigation

Here, the information on the market to be investigated (studies, statistics, databases, regulations, etc.) is collected and compiled. This may involve information from both public and private sources, at national or international levels, as well as from the Commission’s own investigation records. If deemed necessary, the Commission may issue communications regarding the initiation and/or course of the investigation at any stage of the procedure.

 

4. Analysis methodology

Different procedures may apply to analyze the information collected. For example, the analytical tools commonly used in MI include:

1. Identification of the market structure and its specific features.
2. Analysis of quantitative variables.   
3. Potential competition and performance of firms in the market.
4. Evaluation of the regulatory framework of the investigated sector.

 

5. Instructive measures

When the MI demand information in addition to the preliminary information collected, the Commission can use its broad instructive measures to obtain it. For instance, it may request public agencies, companies, experts, or individuals any type of information considered relevant for the investigation. According to sections 36 and 39 paragraph a) of the Antitrust Law, the requested parties will have ten business days as of receiving the request to respond to it.

 

6. Possible results of an IM

MI end with the publication of a document detailing the results, conclusions, and, if applicable, proposed recommendations. There are four categories of possible outcomes:

1. Cases not detecting competition problems or opportunities for policy or regulatory improvements to promote competition.
2. Cases identifying the possibility of improving market competition conditions through changes in regulation or other public policies.
3. Cases where indications of a potential violation of the Antitrust Law arise from the IM. In these, it may be recommended to open an ex-officio investigation for presumption of anticompetitive behavior.
4. Cases detecting possible competition problems in other markets not associated with the presumption of a violation of the Antitrust Law during the course of the investigation.  Here, the result of the investigation may be opening a new MI or commissioning a market study to an external consultant.

 

7. General structure of an MI

Although the structure of the MI may vary according to the intrinsic features of the analyzed sectors, generally they are outlined as follows:

1. general characterization of the industry
2. background
3. definition of the relevant product and geographic markets
4. competitive analysis
5. conclusions and recommendations.

 

8. Ex-post evaluation

The Commission will evaluate the need and convenience of following up the results of the study to verify, among other relevant issues, the degree of compliance and effectiveness of the recommendations made (both regarding other areas of the public and private sectors) and the correction or persistence of the potential competition problems identified.

The issuance of these guidelines is an important advancement toward a greater understanding of how these procedures will operate and what are their possible outcomes.