Argentina: Planning An Exit Strategy: Recent Developments On Commitments Before The Antitrust Commission

Last Updated: 6 November 2012
Article by Alfredo M. O'Farrell and Miguel Del Pino

The recent issuance of decisions accepting commitments offered by alleged infringers to cease anticompetitive conducts shows the interest of the Argentine Antitrust Commission in these types of procedures reserved to conducts of minor significance.

1. Introduction

During June 2012 the Secretary of Domestic Trade ("SDT") issued three resolutions concerning investigations initiated by the Argentine Antitrust Commission (the "Commission") based on complaints filed as a result of alleged anticompetitive conducts.

In all three cases, the SDT decided (upon the recommendations issued by the Commission on the matter) to accept the commitments offered by the alleged infringers: to suspend the investigation for the term of three years and to empower the Commission to take the necessary measures to monitor the compliance of the undertaken commitments by the alleged infringing parties.

Based on the Commission's considerations that resulted in the acceptance of the commitments proposed by the alleged infringers, it can be seen that infringing parties will have to carry out a risk analysis between the commitments that could be undertaken pursuant to the provisions of Section 36 of the Argentine Antitrust Law (the "Antitrust Law") and the upcoming leniency program as considered in the Bill to amend the Antitrust Law (the "Leniency Program").

2. Investigation of Anticompetitive Conducts and Section 36 of the Argentine Antitrust Law

Any person, whether private or public, is entitled to file a complaint with the Commission submitting a specific description of the complaint's purpose, the facts that support the complaint and a summary of the applicable law.

Accusations may be automatically dismissed if the Commission concludes that the alleged infringement does not fall within the legal description of restrictive practices. Otherwise, the accusation must be notified to the alleged infringer, who must submit explanations and comments and provide any evidence it may deem appropriate.

If the explanations are regarded as conclusive, the accusation may be dismissed. To the contrary, the Commission must continue the investigation. During the investigation period the alleged infringer is entitled to attach evidence.

Pursuant to the provisions of Section 36 of the Antitrust Law, the alleged infringer may propose a "commitment" entailing the immediate or gradual cessation of the actions which originated in the accusation; such commitment can be submitted at any time prior the Commission's issuance of a resolution on the matter. If the proposal is accepted, the investigation is automatically suspended and the Commission must supervise compliance with the terms of the undertaken commitment.

In the absence of a commitment, or dismissal thereof, or noncompliance therewith, and upon completion of the investigation, the Commission may impose the following sanctions:

  1. cease and desist orders;
  2. fines that can range from AR$ 10,000 (approximately US$ 2,200 at the current exchange rate) to AR$ 150,000,000 (approximately USD 33,300,000 at the current exchange rate) depending on the losses suffered by all the aggrieved parties, the benefits arising from the illegal conduct or activity and value of the assets involved. Those fines may be doubled if it is a recurrent infringement;
  3. compliance with conditions aimed to neutralize distortive effects of competition including a request to the competent judicial court to decide dissolution, liquidation, divestment or spin-off of infringing companies.

Lastly, if the commitment is not honored, the alleged infringer may be fined for the sum of AR$ 1,000,000 a day (approximately USD 2,200,000 at the current exchange rate), aside from any sanctions that could be imposed by the Commission if the denounced conduct is finally proved.

3.Recent Commission Decisions on Commitments

During June 2012, the SDT issued three resolutions concerning investigations initiated by Commission based on complaints filed by third parties.

In all three cases the complainants invoked the legal figure of "abuse of dominant position" in some of its forms, namely:

  1. In Case No. S01:0468538/2010 "PBB POLISUR S.A. re. breach of Law No. 25,156" (C. 1369) the complainant invoked abuse of dominant position of PBB which resulted in the negative to sell ethylene, necessary to the complainant's manufacturing of Polypropylene.
  2. In Case No. 064-003812/2001 "Federación Médica de Formosa y Asoc. de Clínicas y Sanatorios Privados de Formosa re. breach of Law No. 25,156", the Healthcare Professionals Association of Formosa denounced both the Medic Federation of Formosa and the Clinics and Private Hospitals Association of the Province of Formosa since these last two associations suspended or excluded as members those doctors that entered into agreements with other healthcare organizations.
  3. In Case No. S01:0143861/2010 "Cervecería y Maltería Quilmes S.A.I.C.A. y G. and Agencia Córdoba Deportes S.E. re. breach of Law No. 25,156" (C. 1332) the complainant argued that Quilmes (licensor of Pepsi in Argentina at that time) and the Directive Board of soccer team Club Atlético Talleres de Córdoba entered into an agreement which excluded all competition, particularly the possibility of advertising and selling products, in the premises of the Chateau Carreras soccer stadium.

While the legal basis argued by the complainants is not relevant to the present analysis, the considerations the Commission had at the moment of issuing its resolutions accepting the commitments filed by the defendants (some of them with the previous acceptance of the complainants) sheds light on its view on commitments.

Thus, the Commission considered that:

  • "[...] the legal figure set forth in Section 36 of Law No. 25,156 should not be automatically granted, being reserved only for those cases in which the irrelevance of the conduct under analysis, measured by the near inexistent prejudice to the general economic interest [...] makes advisable to use this useful tool provided in the Law".
  • "Law No. 25,156 grants the possibility to the Pertinent Authority to accept the commitment offered by the alleged infringer with the purpose of suspending the procedure initiated against the latter".
  • "This Commission understands that the legislator's intention was, in certain circumstances, to privilege the function of promoting the defense of competition and preventing harmful conducts against it, rather than the continuance of a proceedings that might result in the sanction imposed by virtue of an infraction allegedly performed. Considering such intention, it is possible to suspend the procedure on probation, by means of the effective fulfillment of the commitment undertaken by the alleged infringer".
  • "In this sense, the alleged infringer must recognize, at least in a vague manner, the conducts of which it is accused of committing, should its intention be to suspend the continuance of the proceeding [...]".
  • "In this order of ideas, the suspension of the proceedings is entirely up to the defendant's decision, [...] if [the suspension] is not granted the sole legal consequence is the continuance of the proceedings".
  • "In order to accept the commitments set out under Section 36 of Law No. 25,156 it should be considered that such commitments must contribute to the solution of the alleged infringement, provided that the elements and evidence produced in the proceedings until the moment the commitment is submitted [...] do not lead to the conclusion that the alleged anticompetitive conduct has had a negative effect on the general economic interest already".

4. Leniency Program

On December 15, 2010 the Commission passed Resolution No. 157 by means of which it placed under the consideration of the SDT a draft bill to amend the Antitrust Law by including the so-called "Leniency Program" (the "Bill"). Said Bill is now under consideration of the Congress.

The Bill sets out two different scenarios for infringing parties, namely an exemption one and a reduction one, both based on a "race-to-the-door" structure.

Infringing parties must comply with the following requirements in order to obtain an exemption of the sanctions set out by the Antitrust Law: (i) to be the first party, among the participants of the conduct, that provides the Commission with information and evidence, either in the event that the Commission has not initiated an investigation or if the Commission has initiated an investigation, but has not been able to gather sufficient evidence; (ii) must immediately cease with the performance of the infringing conduct, unless the Commission deems otherwise in order to preserve the investigation; (iii) must collaborate until the end of the investigation; (iv) must not destroy, forge or hide evidence of the anticompetitive conduct, nor make public the fact that it has filed for a Leniency Program, unless such communication is to another antitrust regulator and (v) must not be the leader of the anticompetitive conduct.

Those parties that would not be the first ones to require the enforcement of the Leniency Program could request for a reduction of the sanctions, if they are able to meet the remaining requirements and provide the Commission with useful information for the investigation. The Bill sets out that the reduction could be of 20%, 30% or 50% of the sanction.

The reduction ratios are to be determined by the Commission by taking into account the chronological order of the filing, as well as the number of participants involved in the conduct. Should the conduct be performed by three members, the reduction of the fine to the first requesting party would be of 50%, if the conduct is performed by four parties, the second requesting party's diminishment of the fine would be of 30% and if the conduct involves at least five parties, the diminishment of the fine pertaining to the third requesting party would be of 20%.

5. Commitments and Leniency Program

Although both legal figures may be considered as similar, the commitments set forth in Section 36 should not be confused with the effects that the Leniency Program would grant.

Hence, Section 36's commitments can be proposed by the alleged infringer once the investigation has commenced, while the Bill establishes that the first alleged infringer providing the Commission with information and evidence can do so either in the event that the Commission has not initiated an investigation or if the Commission has initiated an investigation, but has not been able to gather sufficient evidence.

Another difference would be that it does not matter how many alleged infringers commit to the cessation and modification of the alleged anticompetitive conduct; as long as the Commission approves the commitment undertaken by the alleged infringers, all of them could avoid the sanctions set forth in the Antitrust Law.

On the contrary, as stated before, the Bill sets out two different scenarios for infringing parties: an exemption one and a reduction one, both based on a "race-to-the-door" structure, meaning that only the first alleged infringer would be "exempted" from the sanction that could be imposed to it and the rest of the alleged infringers would see their sanctions gradually reduced based on the chronological order they confess their involvement in the anticompetitive conduct.

As stated in Section 3 above, the Commission considers that the commitments set out in Section 36 if the Antitrust Law should be reserved only to those cases deemed irrelevant or of no great importance; importance that would be measured by the harm to the general economic interest using the evidence attached until the moment the commitment proposal is submitted.

The aforementioned principle is of no application to leniency, which can be invoked in major cartel investigations.

Despite these differences, there is one similarity between the commitments set forth in Section 36 of the Antitrust Law and the Leniency Program (apart of the avoidance of the fines and/or remedies that could be imposed by the Commission): in both cases the alleged infringers are recognizing in some degree that their conducts were contrary to the provisions of the Antitrust Law.

As such, in both cases said admission could trigger third party damage claims or even a criminal investigation under Section 300 of the Argentine Criminal Code.

6. Conclusion

It can be observed that the commitments set forth in Section 36 of the Antitrust Law and the Leniency Program have some level of similarity, especially if it is taken into account that both are designed to provide infringing parties with the possibility of ceasing the anticompetitive conduct and avoid the fines set out in the Antitrust Law.

Notwithstanding the abovementioned, while the commitments are reserved to rather insignificant conducts, the Leniency Program would be of application to major ones.

As such, it can be seen that commitments are conceived as a way of easing the workload of the Commission in non-significant anticompetitive cases, while the Leniency Program is designed to unveil collusive practices and to promote major anticompetitive investigations.

The recent issuance of decisions on commitments shows the interest of the Commission in these types of procedures, which helps it to focus on major investigations, while alleviating its workload.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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