Competition Defense Law in Argentina

On May 15, 2018, the Argentine Federal Government published in the Official Gazette the new Competition Defense Law in Argentina, Law Number 27,442[1](Ley de Defensa de la Competenciaor LDC by its Spanish acronym), adjourning the local legislation and aligning it with international standards[2]. The LDC has already been regulated by Decree Number 480/2018.

The main features of the current piece of legislation are:

1. A new enforcing authority – decentralized and self-governing – will be created: the National Competition Authority, comprised of the Defense of Competition Court, the Secretariat of Anticompetitive Practices and the Secretariat of Economic Concentrations;

2. The LDC prohibits the agreements between competitors, the economic concentrations, the acts or behaviors, in any way manifested, related to the production and exchange of goods or services (LDC, Article Number 1, first paragraph, first sentence), and the achievement of competitively significant advantages by infringing other legal provisions (LDC, Article Number 1, second paragraph), that have the object or effect of limiting, restricting, distorting or disrupting competition or access to the market, or that constitute abuse of a dominant position[3]in a market, in all cases to the extent that it may result in damage to the general economic interest (LDC, Article Number 1, first paragraph, first sentence).

The LDC sets out specific hard-core cartel conducts as outright unlawful, without any further analysis[4].

Further, the LDC also sets forth a lengthy and non-exhaustive list of practices that may be deemed as anti-competitive as long as they have the object or effect of limiting, restricting, distorting or disrupting competition or access to the market, or constitute abuse of a dominant position in a market, to the extent that it may result in damage to the general economic interest[5].

3. A pre-closing obligation to notify and ask for approval of economic concentration transactions[6]exceeding certain thresholds[7];

4.Tougher sanctions for anti-competitive practices and prohibited economic concentrations[8];

5. Additionally to the sanctions provided for by the LDC, the individual or companies affected by the acts or conducts prohibited by the LDC may seek financial redress before the ordinary courts of justice. The Civil and Commercial Code of the Nation prohibits the abuse of a dominant position in the market (Article Number 11), and this practice may result in civil liabilities, like any other act or conduct that unlawfully cause damages.

Once the resolution passed by the Competition Defense Court turns final, such decision will be deemed as res judicatafor the judge hearing on the civil lawsuit filed afterward. Affected parties may also judicially pursue punitive damages.

6. A so-called leniency program (programa de clemencia) has been set up, to exempt or relieve whistleblowers from fines when they help detect cartel operations.

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Mario Eduardo Castro Sammartino

[1]A Spanish version is available here: http://servicios.infoleg.gob.ar/infolegInternet/anexos/310000-314999/310241/norma.htm

[2]. The defense of competition against all forms of market distortion and control over natural or legal monopolies are mandates of the National Constitution (Article Number 42), turned operative by the different legal regulations on the subject and currently by the LDC.

[3]One or more individuals or legal entities enjoy a dominant position when, for a particular type of product or service, they are the sole buyers and sellers within the national market or in one or several parts of the world or, when not being the single buyers and sellers, they are not exposed to substantial competition or, when by degree of vertical or horizontal integration they are in a position to determine and damage the economic sustainability of a competitor participating in the market (LDC, Article Number 5).

[4]These per se anticompetitive and prohibited practices are the agreements between two or more competitors, consisting of contracts, or dealings whose object or effect is:

a) To directly or indirectly agree on the sale or purchase price of goods or services to which those goods and services are bought or sold in the market;

b) To establish obligations to (i) produce, process, distribute, purchase or commercialize only a restricted or limited amount of goods, and/or (ii) provide a limited or restricted number, volume, or frequency of services;c) To horizontally distribute, divide, allocate or impose zones, portions or segments of markets, customers or sources of supply; and

d) To establish, agree on or coordinate bids, or abstentions in tenders, contests or auctions (LDC, Article 2).

[5]Some of the listed practices that require further analysis to be deemed anticompetitive are:

  • To fix whether directly or indirectly the sale or purchase price of goods or services in the market, as well as the exchange of information that has the same purpose or effect;
  • To set, impose or practice, directly or indirectly, in any way, conditions to (i) produce, process, distribute, buy or commercialize only a restricted or limited amount of goods, and/or (ii) provide a limited or restricted number, volume or frequency of services;
  • To make the sale of a product conditional on the acquisition of another product or use of a service, or to make the provision of a service conditional on the use of another service or the acquisition of a product;
  • To make a purchase or sale dependent on the other party not using, acquiring, selling or supplying goods or services produced, processed, distributed, or commercialized by a third party,
  • To impose discriminatory conditions on the acquisition or sale of products or services for any reason not based on business usage and customs;
  • To sell goods or provide services at prices lower than their cost to negatively affect competition in the market or to damage the image, assets, or trademark value of a competitor’s goods or a supplier’s services; and
  • The participation of an individual in executive or board positions in two or more competing companies.

[6]The LDC considers as economic concentration the take over of one or several companies through the performance of the following acts:

  • Mergers;
  • Transfer of going concerns;
  • Acquisition of ownership or any right over shares, equity participation or debt securities, that give any right to be converted into shares or equity participation, or have any influence on the decisions of the company issuing them when said acquisition grants the acquirer control of, or substantial influence over the company or the competitive strategy of a company;
  • Any other agreement or act that transfers factually or legally to a person or economic group the assets of a company or gives it a decisive influence on ordinary or extraordinary management decisions of a company.

[7]To fall within this obligation the total volume of business of the companies concentrating must exceed in the country an amount equivalent to 100-million mobile units (1 mobile unit = AR$ 20, amount that will be updated annually based on the variation of the consumer price index).

[8]The company infringing the law may be sanctioned with the cessation and reverse of effects of the relevant act or conduct, fines, dissolution and winding up, spin-offs, etc. Fines may be jointly imposed on directors, managers, statutory auditors and members of the supervisory committee of the offending company.

 

Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer or may contact us at your convenience. If you liked the article, please, share it.

 

 

 

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