Professor
DANIEL ROQUE VÍTOLO
REPÚBLICA ARGENTINA
COMPETITION and ARGENTINE ANTITRUST
LAWVítolo
Abogados
AREA: 2.8 million Km2
POPULATION: 35.6 million
GDP: US$ 298.1 billion
GDP per person: US$ 9,010
Exports Year 2000: US$ 26.2 billion
Imports Year 2000: US$ 25.3 billion
ARGENTINA TRANSFORMATION
•pPrincipal changesA stable democracyAn open economyPrivatizacion of public companiesAct of Convertibility ($ 1 = US$ 1)Tax and monetary controls
INVESTMENT IN STRATEGIC SECTORS
• Energy• Oil• Gas• Mining• Agriculture• Agricultural
Industries• Food• Transportation
• Iron• Steel• Communication• Retail of Food• Trading Centers• Distribution• Services• Tourism
the country is starting to grow;
the International Financial Armour avoids any risk of default;
there are opportunities in most economic sectors, requiring capital, know-how and technology;
there is full legal and political stability based on a democratic environment fully engaged in the international world order through Treaties, which, according to the National Constitution, prevail over any domestic law (i.e. more than 130 treaties with the U.S.A.)
there is no exchange control and there is full freedom for entrance and exit of capital, profits, dividends, and royalties.
there is equal legal and tax treatment for foreign and local investors
I would like to invest there...
FOREIGN INVESTMENTS IN ARGENTINA
• No previous approval or registration is needed
• The same conditions as the investors domiciled in Argentina
• The foreign company is ruled by the laws of the place where it was organized (in most of the cases)
• Simple registration in order to participate in local companies
HISTORICAL RECORDS• Act 11.210 (1923)• Executive Order 15.810 (1946)• Act 12.906 (1946)• Act 22.262 (1980)• Act 25.156 (1999)• Executive Order 1019 (1999)• Decrees 726 and 788 (1999)• Executive Order 89 (2001)• Decree 40 (2001)
ANTITRUST FILES
PHILOSOPHICAL CONCEPTS
• PROMOTION– Development of
the Economy– Effective
Assignment of Resources
– Benefits distributed among everyone
• PROTECTION– Transparency– Consumers– Freedom– Market
transactions
FIRST RELEVANT INNOVATION• Prohibitions considered in
themselves (“per se” conducts) disappeared from the legal sanctions.
• The analysis of the case by case was incorporated within the legal framework, under a sort of “reason rule”.
CONSEQUENCES• The application of the
legislation will depend on the balance between the anticompetition effects of a certain conduct and the achievement or a greater economic efficiency, which the latter can imply.
ACTS or CONDUCTS ACTS or CONDUCTS DISAPPROVED by LAWDISAPPROVED by LAW
• Those ones that could LIMIT, RESTRICT, FORGE or DISTORT the COMPETITION or the ACCES to the MARKET
• Those ones that constitute an ABUSE of a DOMINANT POSITION in a MARKET, so that it can cause DAMAGE to the GENERAL ECONOMIC INTEREST
SPECIFIC CASES MENTIONED by LAW
• Price manipulation
• Restrictions for good or services
• Horizontal distributions agreements
• Restrictions to offers and bids in biddings, licitations and competitions
• Limitation to technical or invest development
Anything else?• Subjective attacks to competitors• Price agreements• Limits to the technological development• Obligations to additional sales or
purchases• Obligation of consumption abstention• Unjustified refusal to satisfy orders• Interruption of supply without an
alternative• Sale below the cost• The abuse of a dominant position
SECOND MAIN INNOVATION
• Autarchic body (Court of Defense of Competition) is created as an Administrative Court
• Seven (7) members• Selected through a public contest before a
jury• Six-year period (removed partially every
three years)• Cannot be removed without justified cause
“ECONOMIC CONCENTRATIONS”
• The merger between companies• The transfer of goodwills• The acquisition of the ownership, interest
or rights on shares of stock, equity interest, debts instruments, bonds, which grant any kind of influence over the decisions of the persons issuing them, when such an acquisition gives the purchaser the control or the substantial influence over the same
Anything else?
• Any other agreement or act which practices or legally transfers to a person or an economic group the assets of a company, or which grants determining influence over the decisions about ordinary and special management and administration matters of a company.
WHAT DOES THE LAW PROHIBIT and TRY to AVOID?
• The economic concentration whose objective (or effect) is or can be to reduce, restrict or distort the competition, so that it causes damage in the general economic interest
They shall be in our hands !!!
ACTS SUBJECT TO AUTHORIZATION
• Any of the take overs mentioned before when the amount of the total volume:
– of the whole of the affected companies exceeds in Argentina the amount of US$ 200,000,000.-
– of the total business worldwide, of the group of companies affected, exceeds US$ 2,500,000,000.-
PROCEDURE(confidential)
• NOTICE TO THE COURT WITHIN ONE WEEK FOLLOWING:– Conclusion of the agreement– Registration of the business before the
competent office
• COURT MUST DECIDE WHITHIN 45 WORKING DAYS FOLLOWING THE PRESENTATION:– To Authorize– To Condition– To Deny
• IN CASE OF SILENCE THE OPERATION WILL BE CONSIDERED AUTHORIZED
YOU DO NOT NEED TO ASK YOU DO NOT NEED TO ASK FOR AN AUTHORIZATION IF:FOR AN AUTHORIZATION IF:
• The buyer was the owner of more than 50% of the shares of the stock capital before
• The bonds, shares or debentures do not give political rights (vote)
• Only one foreign company, which did not have any assets in Argentina or shares of local companies before, buys only one local company
• Acquisitions of liquidated companies that did not register activities in the country within the last year.
GOOD NEWS!!
WARNING!!!!• The acts shall only have
effects among the parties or towards third parties, once the procedure of previous authorization fixed by the law has been complied with; additionally, there are significant fines
What a problem...
• From US$ 10,000.- to US$ 150,000,000.- for the antitrust conducts (forbidden practices and abuse of dominant position)
• Up to US$ 1,000,000.- per day (no notification of economic concentrations; or not to stop the conducts or effects when the Court orders so)
• Additional penalties
HOW MUCH SIGNIFICANT?
STEPS to authorize ECONOMIC STEPS to authorize ECONOMIC CONCENTRATIONSCONCENTRATIONS
• Which is the relevant market? (Definition)• Identification of the companies that actually
act in the relevant market• Measurement and qualitative analysis of the
concentration• Possibility of increasing the power market in
an unilateral o coordinate conduct
If the answer is NO, the business is authorized
If the answer is YES: Go to the next step
NEXT STEP• Are there regulatory, logistics or
transport barriers to imports?• Are there possibilities for new
competitors to come into the relevant market?
• Do the consumers represent a limitation to the power market?
• Is the conclusion that there are a possibility to increase the market power in an unilateral or coordinate way?
NEXT STEPNEXT STEP• Are there efficiency productive
profits?
If the answer is NO
Authorization could be denied
The Court could
condition the business
IF THE ANSWER IS YES: GO TO
THE NEXT STEP
FINAL
STEP
B u s ine s s is a u th o rize d Business is denied Business is conditioned
E va lu a tio n o f the m a rk e t p o w e r in c re a s evs .
E ffi c ie nc y p ro d u c tive p ro fi ts
STANDARD OF THE DECISION• The final authorization
(administrative or judicial) turns the business unattackable
• But if the parties gave to the authority false information or false documentation, it could be attacked
WHICH IS THE PROBLEM WITH THIS PROCEDURE?• Time
– Merger (130 days)– Goodwill transfer (90 days)– Take over (45/60 days)
• Surprise factor– The market– Competitors– Workers
• Confidentiality– Disclosure– Know how– Customers– Inside information
Let me see...
ONE ADITIONAL PROBLEM
• The Administrative Court can suspend the term if it considers that the parties did not give enough documents and information necessaries for making the decision, or if a deeper investigation or analysis is necessary
• The procedure could be longer than 45 working days
THE PITFALLS• Who will lead and manage the company
in the meantime?• What happens if the company needs
supplementary financial assistance?• Who will assume the losses and the
gains of the period?• If a crisis appears... who will decide
what to do?• What happens if there are first refusal
rights?
MATERIAL ADVERSE CHANGES?
• What happens if the market changes?– Is there a way to protect good faith?– Will the affected party cooperate to obtain
authorization from the Court?
• What happens if the “relevant” market moves?– Is there any way to abort the business?
• What happens if in the meantime the business becomes not viable, or the company that was merged in suffers losses that cannot be absorbed by the price (or its adjustments)?
WHAT HAPPENS IF THE COURT DOES NOT AUTHORIZE THE BUSINESS?
If both parties agree
There is no problem
If the authorization is denied because of only one of the parties... What can the other one do?
WHAT HAPPENS IF THE COURT CONDITIONS THE BUSINESS?
If both parties agree
There is no problem
If both parties agreeThere is no problem
If one of the parties does not agree?
More pitfalls!
• When you have two different sizes of companies and you must pass by the Court only because of one of them... If the authorization is denied, or it is conditioned to another act...
• If the business aborts... Could any compensation be claimed by the affected company?
• WHAT ABOUT?:• Strategic
information• Cost and expenses• Corporate image• New chances of
business• Information got by
the competitor or the other company
• Public information• Damages in terms of
customers and market share
WHO HAS THE RIGHT TO APPEAL THE COURT DECISION?
Both of them
Suposse there are discrepancies ...
CAN THE PARTIES WAIVE THEIR RIGHTS IN ADVANCE?
How can we build a price, its adjustments, and how can we prevent all the pitfalls in this kind of business?