ARTICLE
First case of private antitrust litigation decided in Argentina
Ten years after the enactment of the Antitrust Law, the first case in which a private antitrust claim in Argentina has been analyzed provides several guidelines for future claims.
November 25, 2009
1. Introduction
A recent decision issued by Commercial Court No 14 shows that decisions in private antitrust litigation cases in Argentina are starting to be issued.[1] As it will be showed, this new decision leaves the door open for future private antitrust litigation based on resolutions issued by the Argentine Antitrust Commission (the “Antitrust Commission”).
Private antitrust litigation is provided in Section 51 of the Argentine Antitrust Law No 25,156 (the “Antitrust Law”), which sets out that all persons that are affected by the acts forbidden can claim damages and reparations before court. This section reinforces the general civil law provisions provided in the Argentine Civil Code that authorizes the claim for reparations when a party is damaged by means of an illicit act.
2. The case
In the year 1999, an investigation against Yacimientos Petroliferos Fiscales (“YPF”), a local petroleum company, was initiated due to increases in the price of liquid petroleum gas (“LPG”), an essential source of energy for many residences in Argentina.[2] The relevant market was determined to be the bulk supply of LPG. The Antitrust Commission determined that YPF had a dominant position in all phases of LPG production and supply which was abused in order to harm the local LPG distributors. It also found out that the market entry barriers were high and that imports were not a constraint on domestic producers.
The conduct assessed by the Antitrust Commission was YPF’s practice of exporting a high amount of LPG at prices that were lower than in Argentina. Furthermore, YPF’s export contracts prohibited the re-importing of LPG to Argentina. The Antitrust Commission concluded that this conduct was harmful to the general economic interest and ordered YPF to cease its price discrimination as between the domestic and export markets and to eliminate the prohibition of re-importing LPG. Additionally, it imposed YPF a fine of AR$ 109,644,000 (approximately US$ 28,500,000). The decision was upheld by the Argentine Supreme Court.[3]
This new private claim case was initiated by Auto Gas S.A. (“Auto Gas”), a company that claimed that it had been affected by the anticompetitive conduct performed by YPF. Auto Gas stated that at the time of the conducts analyzed by the Antitrust Commission, Auto Gas was a company created for the distribution of LPG. It based its claim on the fact that the abuse of dominant position performed by YPF had a twofold effect: an unduly increase of prices and a diminishment in the quantities of LPG that were commercialized by Auto Gas.
Auto Gas stated in its claim that after suffering for four years the conduct performed by YPF, LPG was no longer provided to the company as a result of a supply cut and was therefore forced to perform a bulk asset transfer of its business to Shell Capsa.
3. Private claim analysis
The claimant requested the sum of AR$ 117,113,962 (approximately US$ 30,500,000 under the current exchange rate), based on the following damages:
(i) abuse of dominant position,
(ii) breach of contract,
(iii) supply cut,
(iv) coordinated activities regarding pricing and retention and use of Auto Gas’ canisters and
(v) bulk transfer of business.
YPF filed a preliminary defense based on two exemptions set out by the Civil and Commercial Procedural Code, which were rejected by the Judge. The first one stated that the claim fell under a non-contractual statute of limitation, which is of two years in Argentina. However, the Judge decided that the statute of limitation applicable to contracts was to be applied to the case, which is of 10 years for the prosecution of this type of cases. The second exemption posed by the claimant was based on the statement that Auto Gas did not have a legal standing to file the claim, since it had not been affected by the anticompetitive conduct. However, the Judge considered that LPG distributors such as Auto Gas were a part of the demand chain and as such, were affected by YPF’s practice.
The Argentine Civil Code sets out that in order to seek reparations, the following conditions must be met:
(i) there must be an illicit act;
(ii) there has to be a damage,
(iii) there has to be a link between the former and the latter and
(iv) the act must have been performed either by negligence or by means of deceit.
After disregarding YPF’s defenses, the Judge left on record that it would not analyze YPF’s anticompetitive conducts, since that had already been analyzed and sanctioned by the Antitrust Commission and ratified by the Supreme Court. Thus, it considered that the existence of the conduct had already been proved, as well as the fact that it had been performed by means of deceit. The analysis was therefore focused on whether there had been damages to Auto Gas and whether it had been caused by the already proved act.
Regarding the damage caused by the abuse of dominant position, Auto Gas considered that it was composed by two items.
The first one was the difference in prices that Auto Gas had to pay between the LPG’s local price and the one that had been set up for the exporting of the product. On this matter, the Judge took into account what had been informed by the Antitrust Commission on whether such increase in prices had been transferred to the final price paid by the consumers. Thus, the parties that would have been harmed by YPF’s conduct would not have been the LPG distributors, but the final customers, who had to endure such increase of price. After analyzing the financial expert witness reports, the Judge decided to accept 30% of such claim.
The second item within the abuse of dominant position was the loss of profits from the reduction in the amount of LPG that was commercialized by Auto Gas, due to the practice performed by YPF. The Judge took into account the analysis performed by the financial expert witnesses regarding the financial records of the company, which showed that this loss of profit arose to 15% of the requested amount, due to the relationship between the cost of the product and the financial cost for its commercialization.
The Judge also analyzed other types of damages, such as those that stemmed from the breach of contract or the ones that were originated by the alleged supply cut performed by YPF to Auto Gas.
As a result of its analysis, the Judge ordered YPF to pay AR$ 13,094,457 (approximately US$ 3,410,000 under the current exchange rate) to Auto Gas due to the above mentioned damages, plus attorneys’ fees.
This decision is still subject to an appeal process by the parties.
4. Conclusion
Ten years after the enactment of the Antitrust Law, the first case in which a private antitrust claim has been analyzed provides several guidelines for future claims.
[3] Argentine Supreme Court of Justice, “Fallos” 325:1702.
A recent decision issued by Commercial Court No 14 shows that decisions in private antitrust litigation cases in Argentina are starting to be issued.[1] As it will be showed, this new decision leaves the door open for future private antitrust litigation based on resolutions issued by the Argentine Antitrust Commission (the “Antitrust Commission”).
Private antitrust litigation is provided in Section 51 of the Argentine Antitrust Law No 25,156 (the “Antitrust Law”), which sets out that all persons that are affected by the acts forbidden can claim damages and reparations before court. This section reinforces the general civil law provisions provided in the Argentine Civil Code that authorizes the claim for reparations when a party is damaged by means of an illicit act.
2. The case
In the year 1999, an investigation against Yacimientos Petroliferos Fiscales (“YPF”), a local petroleum company, was initiated due to increases in the price of liquid petroleum gas (“LPG”), an essential source of energy for many residences in Argentina.[2] The relevant market was determined to be the bulk supply of LPG. The Antitrust Commission determined that YPF had a dominant position in all phases of LPG production and supply which was abused in order to harm the local LPG distributors. It also found out that the market entry barriers were high and that imports were not a constraint on domestic producers.
The conduct assessed by the Antitrust Commission was YPF’s practice of exporting a high amount of LPG at prices that were lower than in Argentina. Furthermore, YPF’s export contracts prohibited the re-importing of LPG to Argentina. The Antitrust Commission concluded that this conduct was harmful to the general economic interest and ordered YPF to cease its price discrimination as between the domestic and export markets and to eliminate the prohibition of re-importing LPG. Additionally, it imposed YPF a fine of AR$ 109,644,000 (approximately US$ 28,500,000). The decision was upheld by the Argentine Supreme Court.[3]
This new private claim case was initiated by Auto Gas S.A. (“Auto Gas”), a company that claimed that it had been affected by the anticompetitive conduct performed by YPF. Auto Gas stated that at the time of the conducts analyzed by the Antitrust Commission, Auto Gas was a company created for the distribution of LPG. It based its claim on the fact that the abuse of dominant position performed by YPF had a twofold effect: an unduly increase of prices and a diminishment in the quantities of LPG that were commercialized by Auto Gas.
Auto Gas stated in its claim that after suffering for four years the conduct performed by YPF, LPG was no longer provided to the company as a result of a supply cut and was therefore forced to perform a bulk asset transfer of its business to Shell Capsa.
3. Private claim analysis
The claimant requested the sum of AR$ 117,113,962 (approximately US$ 30,500,000 under the current exchange rate), based on the following damages:
(i) abuse of dominant position,
(ii) breach of contract,
(iii) supply cut,
(iv) coordinated activities regarding pricing and retention and use of Auto Gas’ canisters and
(v) bulk transfer of business.
YPF filed a preliminary defense based on two exemptions set out by the Civil and Commercial Procedural Code, which were rejected by the Judge. The first one stated that the claim fell under a non-contractual statute of limitation, which is of two years in Argentina. However, the Judge decided that the statute of limitation applicable to contracts was to be applied to the case, which is of 10 years for the prosecution of this type of cases. The second exemption posed by the claimant was based on the statement that Auto Gas did not have a legal standing to file the claim, since it had not been affected by the anticompetitive conduct. However, the Judge considered that LPG distributors such as Auto Gas were a part of the demand chain and as such, were affected by YPF’s practice.
The Argentine Civil Code sets out that in order to seek reparations, the following conditions must be met:
(i) there must be an illicit act;
(ii) there has to be a damage,
(iii) there has to be a link between the former and the latter and
(iv) the act must have been performed either by negligence or by means of deceit.
After disregarding YPF’s defenses, the Judge left on record that it would not analyze YPF’s anticompetitive conducts, since that had already been analyzed and sanctioned by the Antitrust Commission and ratified by the Supreme Court. Thus, it considered that the existence of the conduct had already been proved, as well as the fact that it had been performed by means of deceit. The analysis was therefore focused on whether there had been damages to Auto Gas and whether it had been caused by the already proved act.
Regarding the damage caused by the abuse of dominant position, Auto Gas considered that it was composed by two items.
The first one was the difference in prices that Auto Gas had to pay between the LPG’s local price and the one that had been set up for the exporting of the product. On this matter, the Judge took into account what had been informed by the Antitrust Commission on whether such increase in prices had been transferred to the final price paid by the consumers. Thus, the parties that would have been harmed by YPF’s conduct would not have been the LPG distributors, but the final customers, who had to endure such increase of price. After analyzing the financial expert witness reports, the Judge decided to accept 30% of such claim.
The second item within the abuse of dominant position was the loss of profits from the reduction in the amount of LPG that was commercialized by Auto Gas, due to the practice performed by YPF. The Judge took into account the analysis performed by the financial expert witnesses regarding the financial records of the company, which showed that this loss of profit arose to 15% of the requested amount, due to the relationship between the cost of the product and the financial cost for its commercialization.
The Judge also analyzed other types of damages, such as those that stemmed from the breach of contract or the ones that were originated by the alleged supply cut performed by YPF to Auto Gas.
As a result of its analysis, the Judge ordered YPF to pay AR$ 13,094,457 (approximately US$ 3,410,000 under the current exchange rate) to Auto Gas due to the above mentioned damages, plus attorneys’ fees.
This decision is still subject to an appeal process by the parties.
4. Conclusion
Ten years after the enactment of the Antitrust Law, the first case in which a private antitrust claim has been analyzed provides several guidelines for future claims.
The decision leaves on record that anticompetitive claims proved by the Antitrust Commission and confirmed by the Supreme Court would not be analyzed by Judges in these claims, since they would focus their ruling on the relationship between the anticompetitive conduct and the damages caused to the parties.
It also provides an interesting interpretation on the statute of limitation that could be applicable to these cases, which could lead to an increase of litigation seeking damages from high profile cases that fall within such timeframe, such as the renowned cement and oxygen liquid cases of the last years. In this regard, this case may be the forerunner of the shape of antitrust litigation to come in Argentina.
[1] Ruling issued by Commercial Court No 14, Clerk’s Office 27, on September 16, 2009, in proceedings “Auto Gas S.A. c/ YPF S.A. y otro s/ ordinario”
[2] Decision No 314, issued by the Antitrust Commission on March 19, 1999.This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.