Another transaction fined in Argentina for late filing

Since 1999 Argentina has enacted regulations regarding the control of certain merger and acquisition transactions and they provide economic sanctions for those who breach it, up to AR$ 1,000,000 -approximately US$ 322,580- per day of delay in filing.

Under Resolution No 98/2007 dated July 25, 2007, the Secretary of Domestic Trade and the National Commission for the Defense of Competition (the “Antitrust Authorities”) imposed a fine of AR$ 288,000 -approximately US$ 92,900- on Grupo Sampedro, Masampe and Grupo Franco Muñoz, for the late filing of a transaction that consisted of the acquisition of the sole control of Codere S.A. by Grupo Sampedro. The filing was performed on November 6, 2006.

In its resolution, the Antitrust Authorities stated that the parties filed the notification 144 days after the legal deadline and imposed a fine of AR$ 2000 (approximately US$ 645) for each day of delay.

The parties to the transaction challenged the resolution of the Antitrust Authorities. They stated that the filing was not late since, although the shares were transferred on March 29, 2006, the terms and conditions agreed among the parties established that the completion of the transaction was due upon payment of the full price (that was going to take place on April 30, 2008). In addition, the parties pointed out that regulatory decree 89/2001 establishes that the parties to a transaction must notify it within one week from closing and, in this particular case, the transaction will not be considered as closed until the full price is paid.

The parties also requested the Federal Court of Appeals for Civil and Commercial Matters (the “Court”) to reduce the amount of the fine and argued that the Antitrust Authorities did not take into account the mitigating circumstances introduced during the proceedings. The first mitigating circumstance brought up by the parties was that the transaction was not notified in Spain, the European Union or any other Latin American country in which Codere is present. Besides, they stressed that the transaction did not generate concerns from an antitrust point of view and that it only implied a change in the nature of control of Codere.

The Court rejected all the arguments introduced by the parties to challenge the resolution. The Court stated that the condition to which the transaction was subject was a condition subsequent (condición resolutoria) and that the Antitrust Authorities were correct in establishing that, upon the execution of the share transfer agreement, the shares of Codere were effectively transferred and the change of control took place.

The Court explained that with the inclusion of a condition subsequent the acquired right is lost only if the specific event established by the parties takes place. The Court further stressed that, in any case, the filing obligation would have existed even if the condition subsequent had taken place since the change of control would have been evidenced at least for a short period of time.

Regarding the amount of the fine, the Court also rejected the arguments of the parties and stated that said arguments were duly addressed by the Antitrust Authorities. The Court pointed out that the first decisive factor to assess the amount of the fine is the delay of the parties in performing the filing. According to the Court the excessive delay of the parties (144 days) was duly considered as an aggravating circumstance by the Antitrust Authorities.

The Court further stated that the fact that the transaction was not filed in any other jurisdiction was not relevant since said fact did not allow the parties to avoid the filing in Argentina. Finally, the Court expressed that, although the transaction did not generate concerns from an antitrust point of view, the amount of the fine was reasonable considering the total value of the transaction (€ 367,896,664.20).

This fine shows the intention of the Courts and the Antitrust Authorities to apply the terms of the Argentine Antitrust Law in connection with merger control filings strictly. The Court also maintained the parameters used by the Antitrust Authorities for calculating the amount of the sanction and this fact gives some level of certainty on the calculation of potential sanctions in the future.