I Introduction

Antitrust legislation began in Argentina with the enforcement of Act No. 11,120, which was inspired by the provisions of the United States Antitrust Law. This was replaced by Act No. 12,906, which was itself replaced by Act No. 22,262 in 1980. The enforcement of Act No. 22,262 led to the establishment of the first antitrust agency of Argentina, the National Commission for the Defence of Competition (CNDC).2

The provisions envisaged by Act No. 22,262 were mostly focused on the analysis of anticompetitive conduct; in this law, some anticompetitive conducts could be sanctioned with imprisonment and there was no mergers and acquisitions control. Finally, on 25 August 1999, Act No. 22,262 was abrogated and a new antitrust regulation was enacted: Act No. 25,156 (Antitrust Law).

The Antitrust Law was complemented by Decree No. 89/2011, which was later amended by Decree No. 396/2001. The Antitrust Law and the Decrees were complemented by regulations regarding the procedures established by them.3 Some sections of the Antitrust Law were modified in September 2014 with the sanction of Act No. 26,993. The new regulation abrogated imprisonment and established a mergers and acquisitions control procedure. Further, the Constitution of Argentina promotes effective competition between markets in Argentina.

The above is the complete regulatory plexus that currently controls both anticompetitive conduct and merger and acquisition procedures in Argentina. Notwithstanding the above-mentioned, it is worth mentioning that a bill of the Antitrust Law is being currently analysed by the Argentine Congress.

The relevant authority that enforces the Antitrust Law and its complementary regulations is the Secretary of Trade, led by Mr Miguel Braun, which formally depends on the Minister of Production, Mr Francisco Cabrera, assisted by the CNDC (mainly comprising economists and lawyers). The CNDC is currently led by Mr Esteban Manuel Greco, who assumed the leadership of the agency in February 2016. Under Resolution No. 190/2016, the Secretariat of Trade delegates powers to the CNDC.4

Further, the CNDC is the agency that investigates both anticompetitive conduct and merger and acquisition procedures by formal requirement of the Secretary of Trade. The Secretary of Trade has full power to investigate and decide on the existence of anticompetitive conduct, either at the request of a party or ex officio.5

Investigations of anticompetitive conduct or analyses of mergers and acquisitions made by the CNDC end with a non-binding recommendation to the Secretary of Trade. The Secretary of Trade will make the final decision in the case, subject to analysis. The decisions of the Secretary of Trade may be appealed by parties to the judicial courts.

II Year in Review

In the year in review, according to public sources,6 the antitrust authorities closed investigations in 48 anticompetitive cases. These 48 cases involved the analysis of claims and investigations of possible anticompetitive conduct (including but not limited to abuse of dominant position). As an exception, Asociación de clínicas y sanatorios privados de la provincia de Salta was closed in 2017 with fines amounting to approximately US$1 million for collusion. All the other cases during the period under review were closed without sanctions. As in 2016, mostly the cases were closed because the antitrust authorities accepted the explanations given by the companies under investigation.

Notwithstanding the above, the antitrust authorities opened new investigations. In the year under review, the antitrust authorities, through the CNDC, opened 12 markets studies and initiated three market investigations.

Regarding the PRISMA case (in which the CNDC stated, as a result of an analysis regarding the credit card and electric payments markets, that the company has a dominant position in some sub markets), in 2017 the Secretary of Trade approved the proposal filed by the company.

Likewise, PRISMA is currently owned by Visa International and 14 private banks that operate locally in Argentina. The proposal filed by PRISMA obliges the company to divest 100 per cent of the shares and prohibits more than one bank, that is operating in Argentina, to be shareholder of the company, so as to prevent vertical integration. Further, the proposal states that PRISMA cannot commercialise other brands of credit card until there is in the Argentine market another company that commercialises VISA. According to the Secretary of Trade, this proposal will promote competition in the markets that were involved in the investigation. This is the first time, in the history of the competition authority, that an investigation has resulted in a divestment of assets.

III Market Definition and Market Power

According to the legislation of and usual practices in Argentina, the analysis of anticompetitive acts, conduct or behaviours follows a procedure in which, as a first issue, the definition of the scope of the relevant product and geographic market involved in the investigation is highlighted. Following this, the antitrust authorities focus mainly on the analysis of market power and market shares of the companies involved in the case. Further to the analysis of the market shares of the companies, the antitrust authorities also focus their attention on barriers

to entry, efficiency gains, technological advantages, chains of commercialisation and market power, among other things.

The relevant market in an investigation will comprise two basic dimensions: the relevant market of the product involved, and the relevant geographical market where the conduct, act or behaviour is taking place. The assessment of the impact of an investigation will be largely determined by the relevant market definition, the market power involved and the market shares of the companies involved in the case.

The relevant market of the product shall comprise all products and services that consumers consider interchangeable or substitutable by reason of their characteristics, price and intended use. More precisely, sets of products or services constitute the same relevant market when said services or products are substitutes from both the demand7 and supply8 side.

Having reached the stage of defining the relevant market for a product, the next step is to do the same in geographical terms. Defining a geographic market involves the same considerations mentioned above for the definition of the relevant market for the product, with the difference that the substitution estimate, in this case, is in terms of physical distances or capabilities of displacement, for the users as well as the producers.

The above-mentioned definitions will be followed by the analysis of market power and market shares of the companies involved in the investigation, as well as the analysis of barriers to entry into the market previously defined.

IV Abuse

i Overview

The Antitrust Law applies to all behaviours that have effects in the Argentine territory. This means that the Antitrust Law is applied not only to acts and behaviours that occur in the Argentine territory, but also to certain acts or behaviours that take place in other countries and that have effects on the Argentine market. The current national government has declared that it intends to modify some of its sections – mostly the ones regarding thresholds for merger and acquisition notification, and including the leniency programme – that are still not enforced in our current legislation.

The Antitrust Law does not prohibit conducts per se; conducts must be analysed in all cases by the rule-of-reason criteria, and for sanctioning, the antitrust authorities must prove an actual or potential damage to the general economic interest.

Section 1 of the Antitrust Law establishes:

The following actions or behaviours are prohibited and shall be penalised according to the rulings of this Act: actions or behaviours, however expressed, relating to the production and exchange of goods or services, the purpose or effect whereof is to limit, restrict, forge or distort competition or access to the market or constituting abuse of dominant position in a market, so that damages may result to the general economic interest. This section comprises, to the extent the conditions of the foregoing paragraph are met, the obtention of significant competitive advantages through the infringement of other rules, as declared by an administrative act or final judgment.9

Section 1 of the Antitrust Law focuses on unilateral actions, as well as bilateral or multilateral actions.

The two basic offences under the Antitrust Law are the limitation, restriction, distortion of competition or accessing to the market, and the abuse of dominant position. To be illegal, the two offences have to be able10 to cause damage to the ‘general economic interest’; this concept, while included in the Antitrust Law, is not defined in the text of the Antitrust Law, and has been interpreted, on several occasions, by courts and scholars in various ways. Currently, the undefined term ‘general economic interest’ is mostly likened to ‘consumer welfare’, which may be damaged if a conduct, act or behaviour has the potential to cause an increase in price or a reduction of the offer of the relevant product defined within the framework of an investigation.

Section 2 of the Antitrust Law details 14 practices that are, to the extent that they fit in any event described in Section 1, anticompetitive. It is important to state that this list is not exhaustive; any conduct shall be considered anticompetitive when actions of Section 1 are involved.

Chapter 2, Section 4 of the Antitrust Law is exclusively focused on dominant position. The definition of dominant position is stated in the Antitrust Law as follows:

For the purpose of this Act, one or more persons are understood to have a dominant position when for a certain type of product or service it is the only one to offer or ask in the national market or in one or more parts of the world or, when not being the only one, it is not exposed to a material competition or, when due to the degree of vertical or horizontal integration it is in a position to determine the economic viability of a competitor sharing the market, in detriment of the latter.11

To establish the effective existence of dominant position, Section 5 details a number of circumstances that shall be taken into account at the moment of analysing the position:

  1. the extent that the good or service involved can be replaced by other goods or services, either of local or foreign origin, and taking into consideration the conditions of the substitution and the time required to do so;
  2. the existence of regulatory restrictions that limit access to products, the offer of products or demand in the markets involved; and
  3. the extent that the allegedly responsible party may unilaterally have influence in the formation of prices or restrict the supply or demand in the market, and the extent its competitors are able to counterbalance such power.

Dominant position is not forbidden by the Antitrust Law – the prohibition is only focused on the abuse of such dominant position. The abuse of dominant position is a unilateral conduct and, therefore, is not reliant on any kind of contract or agreement with competitors or third parties. According to the antitrust authorities, unilateral conduct ‘stumbles upon the difficulty of determining to what extent such conducts are part of a valid or competitive behaviour or constitute or result manoeuvres whose meaning is simply to create impediments to entry or reside of competitors in a market’.12

ii Exclusionary and exploitative abuse: price discrimination

Practices that imply abuse of a dominant position usually involve those practices that obstruct the entry of potential competitors in the market and those that exclude existing competitors. Strictly, the abuse of a dominant position can be raised by exploitative or exclusionary conduct, acts or behaviours.

Abuse of a dominant position based on exclusionary conduct, acts or behaviours triggers a concern for the antitrust authorities that is based principally on the exclusion of one or more competitors in the market involved. In cases of abuse of dominant position based on exploitative conduct, the concerns of the antitrust authorities include price discrimination, imposition of exploitative prices, and any other conduct that tends to differentiate prices and commercial conditions between competitors in the same market.

The Antitrust Law provides no guidelines on what market shares give rise to the existence of a dominant position on one or several markets.

In general terms, and considering the provisions established in Section 4 of the Antitrust Law, a company is considered to have a dominant position when it is the only supplier of certain goods or services or when, as a consequence of the vertical or horizontal degree of integration, it is able to determine the economic feasibility of a competitor or participant on the market.

In effect, the CNDC has held that a position of dominance is the economic power that a company has to prevent effective competition from being maintained on a relevant market, thus enabling it to act to a great extent independently from its competitors, customers and consumers. It has also stated that a dominant position does not necessarily derive from an absolute dominance that may enable a company to exclude all competition, but it is enough for it to have a strong position that may allow it to act in a highly independent way.

Notwithstanding the above-mentioned as to the lack of a precise criteria in the Argentine legislation, the CNDC frequently adopts foreign criteria and precedents, namely the ones adopted by the EU Competition Commission, when considering the analysis of precedents.

In practice, such criteria may be used as guidelines when determining what shares may enable a company to act independently from its competitors. Following the practical approach usually adopted by the EU Competition Commission, it is possible to argue that shares lower than 30 per cent do not normally imply a position of dominance, while shares higher than 50 per cent do.

Defining what relevant markets are according to this analysis is no easy task. In most scenarios, the antitrust authorities may deem it necessary to perform a specific economic analysis on the products involved and the geographical areas in which such products are offered.

As previously mentioned, there is no specific prohibition in the Antitrust Law for having a position of dominance, just for the abuse of it. Therefore, companies that have a dominant position should avoid participating in what may be considered as abusive conduct. Such conduct may include, but is not limited to:

  1. refusing to accept orders without objective reasons that justify such refusals;
  2. selling at prices that are equal to or below cost;
  3. imposing abusive contractual conditions;
  4. lowering prices temporarily (predatory pricing);
  5. applying temporary discounts or better conditions in specific areas with the aim of eliminating actual or potential competitors;
  6. applying different prices or sales conditions in similar scenarios (price discrimination); and
  7. subordinating the purchase or the sale (or the purchase or sale under certain conditions) to the condition of not using, buying, selling or providing goods or services offered by a third party, or subordinating the purchase of goods or services to the purchase of other goods or services.

The most important case in Argentine competition history regarding the abuse of a dominant position involved exploitative conduct, specifically, price discrimination, in the 2002 National Commission for the Defence of Competition v. Yacimientos Petroliferos Fiscales case.

Yacimientos Petroliferos Fiscales (YPF) is one of the largest suppliers of liquefied petroleum gas (LPG) in Argentina, and was also the largest exporter of said product. The issue in this case was the pricing policy of YPF concerning its wholesale of LPG. The CNDC objected that YPF commercialised LPG in the local Argentine market at a higher price than it did in the markets where the company exports the product. In addition, YPF prohibited the foreign companies that buy the product to re-export the product into Argentina.

In this case, the Secretary of Trade took into consideration the recommendation of the CNDC for the fine imposed, which amounted to 109 million pesos. The decision of the Secretary of Trade was questioned by YPF in the courts; the fine was confirmed by the Supreme Court.

V Remedies and Sanctions

i Sanctions

Infringements of the Antitrust Law regarding the abuse of a dominant position may result in harsh consequences for both the infringing company and its individual employees. Under the current legislation, fines for infringements of the Antitrust Law range from 10,000 pesos to 150 million pesos.

To determine the amount of the fine, the antitrust authorities take into account: the loss suffered by all individuals who were affected by the unlawful activity; the benefit obtained by all the individuals who were involved in such an activity; and the value of the assets involved, and which belonged to said individuals at the time of the infringement.

In the case of a re-offence, the fine could be doubled. Without prejudice to other penalties that may correspond, when verified acts that constitute abuse of a dominant position or where it is noted that a monopolistic or oligopolistic position in violation of the provisions of the Antitrust Law has been achieved, the Secretary of Trade may enforce conditions aimed at neutralising the distorting aspects of competition or ask the judge that the offending companies are dissolved, liquidated, unconcentrated or divided.

Further, companies are liable for the acts of their employees (even those who are not in a managerial position) that are performed on their behalf, for their benefit or with their assistance.

As a consequence of the aforementioned, directors, managers, administrators, receivers or members of a surveillance commission who contribute, encourage or permit an infringement are joint and severally liable regarding the imposition of the fine.

In addition to all the sanctions described above, the individuals or legal entities that are injured by acts and behaviours forbidden by the Antitrust Law may sue for damages in a court of competent jurisdiction in accordance with the laws of Argentina.

Finally, any agreements or terms and conditions that infringe the Antitrust Law may be declared null and void.

ii Behavioural remedies

As mentioned above, the antitrust authorities may enforce conditions aimed at neutralising the distorting aspects of competition or may ask a judge that the offending companies be dissolved, liquidated, unconcentrated or divided.

VI Procedure

Abuses of dominant position cases mostly occur through a filing made by any natural or legal person. Notwithstanding this, an investigation may also be initiated ex officio by the antitrust authorities.

Complaints must be filed before the antitrust authorities, detailing, among the formal requirements, the complaint subject, the facts that ground the complaint and the legal basis considered for filing the claim.

The procedure will be initiated by communicating the investigation to the denounced, who will have the possibility of answering it in relation to the facts or the legal basis investigated by the antitrust authorities.

Once the defence has been filed, the antitrust authorities may consider the explanations satisfactory or conclude that there is no merit in continuing with the investigation. Otherwise, the denounced will be notified to submit its disclaimer and to offer evidence to be produced.

The complainant should cooperate with the investigation, and the antitrust authorities may require information from other competitors in the relevant market. Furthermore, the authority may convene a public audience review at any step of the procedure if the investigation merits it or to obtain more information on the investigation.

The antitrust authorities may enforce precautionary measures, such as ordering the cessation of the injurious conduct while the analysis of the investigation is taking place. This decision can only be taken when the antitrust authorities judge that the competition regime may be affected (at the complainant’s request or ex officio). This last decision, regarding a precautionary measure, may be appealed by parties.

After the evidence is produced, the antitrust authorities must decide the case in 60 days, ending the administrative claim. Nevertheless, once the resolution is notified and published in the Federal Register, interested parties may appeal it.

Despite this, the Antitrust Law gives the opportunity for the denounced to make an arrangement with the antitrust authorities by which it commits to cease immediately the conduct that affects competition. In this last case, the antitrust authorities will investigate the enforcement of the arrangement for three years.

VII Private Enforcement

Section 51 of the Antitrust Law states that individuals and companies that have been affected by anticompetitive conduct have the right to sue in judicial courts and claim for damages.13 At the time of writing, there are few private actions that have been initiated to claim damages.

As occurs in other legislation within the area of antitrust, a private individual or company that sues in the judicial courts must reveal not only the infringement relating to the Antitrust Law, but also demonstrate and quantify the damage suffered as a result of the alleged practice.

There is still much to do and explore in relation to such actions in Argentina. It is expected that new cases will be initiated in the coming years.

VIII Future Developments

The current national government has declared that it intends to modify some of the sections of the Antitrust Law – mainly those regarding thresholds for merger and acquisition notification. Clemency programmes are also being analysed by the antitrust authorities. The Congress is currently analysing a bill with modifications of the Antitrust Law. This bill was approved last April 19 by the Senate with some changes, and has been sent to the deputies for final approval.

Further, as a first step after taking office as the President of the CNDC, Esteban Greco undertook CNDC internal audits. He has also released the results of internal audits that were performed with regard to anticompetitive conduct. Mr Greco acknowledges that the antitrust authorities in the past have failed to comply with the terms established under the Competition Act as regards conduct and merger control cases. Specifically, regarding anticompetitive cases, he has stated that conduct cases that were initiated with an aim differing from the protection of market competition will be dismissed and closed.

1 Camila Corvalán is an associate at Estudio Beccar Varela.

2 Act No. 22,262, Section 6.

3 Resolution No. 40/2001; Resolution 26/2006; Resolution 164/2001.

4 Section 17, Act No. 25,156, Resolution No. 190/2016.

5 Section 20, the Antitrust Law.

7 From the point of view of substitution of demand, which is to say from the perspective of the user or consumer, the analysis will look to determine for each of the products and services offered by the companies involved the degree of substitution that exists between them and goods and services offered by other companies. So that the replacement on the demand side is effective, consumers must evaluate the products as being able to meet the same needs, under similar consumption opportunities. It is worth mentioning that substitutability from the user’s point of view depends, then, on the attributes of the product or service and the similarities or differences that are observed from those offered by other vendors. The degree of substitution given in these attributes is usually the result of a qualitative analysis that assesses to what extent consumers or users of a service provided by a supplier ‘replace’ that supplier when it raises its prices close to 10 per cent in a steady manner or non-transitory manner.

8 Once current competitors are determined and identified on the demand side, the CNDC analyses a second aspect in its determination of the relevant market for the product associated with the probability of a new supplier entering the market in the short or medium term. This issue is known technically as ‘supply-side substitutability’. This probability of entrance to the market involves the following factors: that other players exist, possibly at an international level, that potentially have an interest in entering the market, if conditions are checked for this; and most important, the level of barriers to entry to the market.

9 Section 1 of the Antitrust Law.

10 This concept was confirmed by the Supreme Court of Justice in re A Gas y Otros c/AGIP Argentina SA y Otros s/ Infracción Ley 22.262.

11 Section 4 Antitrust Act No. 25,156.

12 Secretary of Trade, National Commission on Defence of Competition, ‘Clorox Argentina S.A. s/ Infracción Ley 25.156 (C. 1122)’.

13 Section 51, Antitrust Law.