Rejection of the Cablevisión - Multicanal merger by the Antitrust Commission

1. Introduction

In accordance with such opinion, on March 3, 2010, the Ministry of Economy (“MECON”) issued Resolution No. 113/2010 which analyzed the merger and decided to terminate the effects of the authorization opportunely granted by the Argentine Antitrust Commission (the “Antitrust Commission”) and the Secretary of Domestic Trade (the “Secretary”).

2. Background

The merger between Cablevisión S.A. (“Cablevisión”) and Multicanal S.A. (“Multicanal”) (the “Transaction”) was notified before the Antitrust Commission on October 4, 2006, pursuant to Section 8 of Law No. 25,156 (the “Antitrust Law”).

As a result of the Transaction, the companies Grupo Clarín S.A. (“Grupo Clarín”) and Fintech Advisory Inc. became, directly and indirectly, the owners of 60% and 40% respectively of the shares of Cablevision. Additionally, Cablevision acquired a participation of 98.54% in Multicanal and its related companies.

The Transaction consisted of the provision of cable TV, cable Internet, and broadband Internet services.

On December 7, 2007, the Secretary, by means of Resolution No. 257/2007, and based on the opinion of the Antitrust Commission, accepted the irrevocable commitment offered by both companies (the “Commitment”). Among the main requirements of the Commitment it was stated that:
(i)    the value of the basic subscription of cable TV in different parts of the country should continue to be reasonable,
(ii)    the provision of free cable TV content to schools and public nursing homes is obligatory; and
(iii)    the provision of free programming to hospitals, health centers, firehouses and police stations in towns of up to 100,000 citizens is obligatory.

In that same resolution, the Secretary authorized the Transaction under the terms of Section 13.a) of the Antitrust Law, that sets out the unconditioned authorization of a merger.

It must be left on record that Section 13.b) of the Antitrust Law grants the Antitrust Commission the possibility of authorizing a transaction subject to the compliance of certain conducts or divestments; however, this was not used in this case.

3. Post-authorization scenario

In August 2008, the Antitrust Commission ordered audits to verify the effective implementation of the Commitment in both Cablevisión and Multicanal. These audits were accepted by the companies, while they were still complying with the duty to submit quarterly reports, under the terms of the Commitment. In September of that year, the Antitrust Commission ordered the suspension of the audits.

A year later, in September 2009, the Antitrust Commission ordered a new audit but this time Multicanal did not accept the terms of the audit and requested an injunction before the competent Court. The acting Judge decided to suspend the effects of the audit, until the resolution of the pending injunction.

On September 23, 2009, the Secretary requested the Antitrust Commission to verify the effective compliance of the Commitment. Subsequently, on December 7, 2009, Grupo Clarín and Cablevision requested the removal of the Secretary from the case, which was refused by the Antitrust Commission. This decision was appealed by the parties.

On December 14, 2009, the Secretary issued Resolution No. 1011/2009, which established the non-compliance of the Commitment offered by the parties and declared the cease of the effects of the authorization granted to the Transaction.

On December 16, 2009, the notifying companies requested the annulment of Resolution No. 1011/2009 arguing that the Court had not yet issued a decision regarding the injunction and the removal of the Secretary. The annulment was granted and consequently suspended the effects of Resolution No. 1011/2009.

On February 26, 2010, the Court of Appeals on Economic Criminal Matters resolved to remove the Secretary of the case, since Resolution No. 1011/2009 had not been issued in the correct manner and it involved a prejudgment by the Secretary deciding on this matter. The Secretary was consequently replaced by the MECON, who would resolve the case.

4. Refusal

Finally, on March 2, 2010, the Antitrust Commission issued an opinion that strongly claimed a breach of the Commitment by the parties, in particular the obligation to provide free cable TV to public hospitals and health units. Based on this opinion, on March 3, 2010, the MECON issued Resolution No. 113/2010 by means of which it resolved to:
(i)    reject the annulment request of Resolution No. 1011/2009;
(ii)    declare the non-compliance of the Commitment taken on by the parties;
(iii)    declare the cease of the effects of the authorization; and
(iv)    order the parties to make the necessary changes to comply with this resolution within the term of six months.

The resolution issued by the MECON was appealed by the parties and now the authorization of the Transaction would have to be resolved by the Court of Appeals on Economic Criminal Matters.

5. Conclusion

This precedent shows a clear change in analysis on the part of the Antitrust Commission. The Transaction had been authorized without any condition other than a self-imposed commitment by the notifying parties. However, more than two years later, the Antitrust Commission changed its decision and declared the lack of effect of the Transaction. It remains to be seen whether this change in the decision will be accepted by the Courts.