Argentina’s President issues regulations for new Antitrust Law

Five changes in the Antitrust Law to consider while doing business in Argentina:

1. Creates a self-regulated Antitrust Court entitled to impose sanctions, approve or prohibit economic concentration transactions.
2. Update penalties for breaching antitrust laws: up to 30% of the volume of business involved in unlawful practices multiplied by the number of years.
3. Creates a leniency program. Adopts the “leniency-plus” approach.
4. Establishes an ex-ante control system for economic concentrations, most widely adopted internationally.
5. Increases the thresholds to notify an economic concentration transaction, which will significantly reduce the number of operations subject to approval.

Argentina’s President issues regulations for new Antitrust Law

On 24 May, the new Antitrust Law No. 27442 (the Law) entered into effect. On the same day, Executive Order No. 480/2018 (the Executive Order), whereby the President regulates certain core points of the new Law, was published in the Official Gazette. This event constitutes a major step toward the modernization of the Argentine antitrust system, which was initiated by the government that took office in December 2015. The next step should be the creation of the new enforcing authority as provided for by the Law.

The reform rests on five main pillars:

1. The creation of the Antitrust Enforcing Authority (the “Authority”), a decentralized and self-regulated entity within the Executive Branch – The Authority will be composed of:
   1. an Antitrust Court, which will be mainly in charge of imposing the sanctions set forth in the Law, as well as approving or prohibiting economic concentration transactions;
   2. a Secretariat for the Investigation of Anti-Competitive Practices, which will be in charge of the investigation phase in cases involving violations of the Law; and
   3. an Economic Concentrations Secretariat, which will be in charge of the investigation phase in proceedings in connection with the approval of economic concentration transactions. The purpose of the reform is to give new authorities more independence from political authorities (after the amendment to Law No. 25156 in 2014, the Secretary of Commerce himself became its enforcing authority). The Executive Order sets forth that the Secretary of Commerce and the Antitrust Commission will continue exercising their current powers until the Authority is created.
2. A significant increase in fines due to breach of antitrust laws – Law No. 25156 imposed fines up to ARS 150 million. This amount, which was significant in 1999 when such Law was passed, has now become ridiculous as punishment for practices that adversely affect the country’s general economic interest. Therefore, the Law imposes, following the general principles laid down in comparative law, fines of up to 30% of the volume of business associated with the goods or services involved in the unlawful practices carried out, multiplied by the number of years during which the practice continued (said amount may not be higher than 30% of the consolidated volume of business at the national level) or up to twice the economic benefit obtained by the offender, whichever is higher. If the fine cannot be determined following either of these parameters, it may be fixed in up to 200 million variable units (“UM”, per its acronym in Spanish). The Law establishes that the value of the UM is ARS 20 and authorizes the Executive Branch to update said value on an annual basis, in accordance with the Consumer Price Index determined by the National Institute of Statistics and Censuses (“INDEC”, per its acronym in Spanish).
3. The creation of a leniency program that allows any individual or company participating in a cartel (i.e., an agreement between competitors not to compete) to appear before the Authority, submit information on said cartel, and receive immunity from, or a reduction of, the fines set forth in the lawIn order to qualify for the leniency program, the person must:
   • be the first one among the parties involved in the cartel to apply for leniency and provide evidence
   • put an end to the anti-competitive practice immediately
   • cooperate with the Authority
   • refrain from destroying evidence related to the anti-competitive practice
   • refrain from disclosing its intention to qualify for the benefit.

   If the applicant was not the first person to apply for the benefit, it may be eligible for a reduction of between 50% and 20% of the fine if it provides further evidence to the investigation.

   Furthermore, the Law establishes that a person who fails to qualify for the leniency program during the investigation phase but discloses and recognizes a second cartel in another market, may benefit from a 30% reduction of the sanction or fine that would otherwise be applicable for its involvement in the first cartel. This is internationally know as “leniency plus.”

4. The creation of an ex-ante control system for economic concentrations – Although Law No. 25156 originally set forth an ex-ante control system for economic concentrations, its regulations finally turned the said system into an ex-post control. The Law now returns to the original ex-ante control, the most widely adopted system by laws on the matter worldwide. Undoubtedly, this change is the one that raises more concern. Indeed, it should be noted that with the enforcing authorities under Law 25156 until December 2015, the average time frame for approval of an economic concentration transaction was around three years. Even when this period has been significantly reduced by current authorities, there is still a long way to go before it becomes possible to grant approvals within 30 days for transactions that do not pose major problems from a competition standpoint. This issue will present a key challenge to current authorities if they do not want to become an obstacle to the investments that the current government intends to attract. In the long term, we should ask ourselves what would happen if this ex-ante control system were enforced by less scrupulous and market-oriented authorities than those currently in office.The Law sets forth new terms for the Authority to review economic concentration transactions. In principle, said review should be performed within a 45-day term as of the notification, to the extent that the information provided is complete and correct (however, the Authority may take a long time to assess whether the information is complete, thus delaying the start of the review term as it currently happens). If after 45 days the Authority has not reached a conclusion, the transaction will be deemed approved.
   If the transaction may potentially restrict competition, the Authority shall notify of its objections in writing, and it shall set a special hearing to consider the potential restrictions. In these cases, the term to issue a decision may be extended for up to 120 additional days.Also, a fast-track proceeding is established for economic concentration transactions which, in the opinion of the Authority, may be less likely to restrict or distort competition.

   Failure to comply with the notification obligation will result in a daily fine of up to 0.1% of the consolidated national business volume of the group to which the company that failed to comply belongs. If the said calculation may not be carried out, the fine may be of up to UM 750,000 (ARS 15 million). Once the prior notification system is established, the same fine shall apply to those who carried out a transaction without the Authority’s prior authorization.

   It is worth mentioning that the Law provides that the ex-ante control will become effective one year after the Authority’s creation. This means that for the time being, the current ex-post regime remains in force.

5. An increase in the thresholds to notify an economic concentration transaction – Under the same doubtful legislative technique used for penalties, Law 25156 provided that the authorities must be notified for their approval of all those economic concentration transactions in which the joint annual turnover of the acquiring group and the acquired company exceeded ARS 200 million. As a result of the inflation of the last 18 years, this figure has become ridiculous and many transactions, due to their size, should not be subject to such approval, with all the costs this implies for companies and the waste of resources it implies for administrative authorities.The Law increased this threshold to UM 100 million (the variable unit value was set at ARS 20 and shall be annually adjusted), which implies an annual turnover of ARS 2,000. This increase should result in a drastic decrease in the transactions subject to approval, which will enable the Authority to better use resources to investigate behaviors with a negative impact on competition.There was also an increase in the amounts for the application of the de minimis exception to the obligation to notify. The Law provides that an economic concentration transaction shall not be notified, even if the threshold mentioned above is surpassed, when the amount of the transaction and the value of the relevant assets located in the Argentine Republic do not exceed, respectively, the amount of UM 20 million (ARS 400 million), unless within the last 12 months of operations that jointly exceed said amount, or an amount equivalent to UM 60 million (ARS 1.2 billion) in the last 36 months, have been carried out, provided that in both cases, the transactions were carried out in the same market.

   The Law also provides a notification fee, the amount of which shall be set by the Executive Branch, between a minimum of UM 5,000 and a maximum of UM 20,000.