The National Government enacted Decree No. 274/2019 (the “Decree”), published today on the Official Gazette, through which Fair Trade Law No. 22,802 was derogated and a new legal regime on this matter was approved. The Secretary of Domestic Trade, of the Production and Labor Ministry (the “Secretary”) will continue acting as the controlling authority on the matter.
The main topics of the Decree are the following:
- Public Order: The Decree is of public order. Therefore, the parties shall not be able to deviate from the Decree’s provisions, except during a judicial proceeding in order to conciliate or resolve the conflict between them.
- Prohibition of unfair competition acts: The Decree prohibits “unfair competition acts”, which are defined as any action or omission that, by unlawful means, is objectively capable of affecting the competitive position of an entity or the proper functioning of the competitive process. This definition approximates acts of unfair competition to the so-called exclusory abusive practices of antitrust regulations. The Decree clarifies that, under the terms and conditions to be established by its regulation, acts sanctioned by the Antitrust Law are excluded from the Decree’s scope. However, it does not clarify how both regimes will be coordinated, namely, whether the fair trade and the antitrust regimes will be applied exclusively or concurrently. Although it is necessary to wait for the enactment of its regulation, the difference between these acts could be that while the Antitrust Law sanctions exclusory anticompetitive acts, which imply an abuse of dominant position, the Decree would sanction those acts carry out by a company which does not have such market power.
- List of acts of unfair competition: Article 10 of the Decree includes a long list of acts of unfair competition, such as: acts of deception and confusion, violation of rules, abuse of economic dependence, improper obtainment of commercial conditions, sale below cost (similar to the figure of predatory prices of the Antitrust Law), improper exploitation of reputation of third parties and comparative advertising, among others.
- This list is restricted for the Secretary, which may only sanction those listed behaviors, while individuals may file claims for other acts of unfair competition not included in such list, but under the scope of the general definition of acts of unfair competition.
- Regulation of comparative advertising: The Decree includes a definition for advertising method and establishes the necessary requirements that the advertising shall meet to be deemed permitted by the Secretary, based on the criteria and principles already used by the Fair Trade Authority when analyzing cases of comparative advertising.
- Misleading advertising and Promotions and contests: The Decree regulates these matters based on the guidelines established by the derogated Fair Trade law. Among the powers granted to the Secretary, the same may establish the requirements needed to carry out promotions, contests and sweepstakes at a national level. This may give place to a new regulation of promotions, in replace of the ones by the National Lottery (currently on a liquidation process).
- Labeling regulation: The Decree also includes rules regarding labeling and identification of products, similar to the previous regulations, expressly maintaining the specific regulations already foreseen by Law No. 22,802.
- Secretary’s Competition: The controlling authority of the Decree is the Secretary, which nevertheless will share said jurisdiction with the competent authorities in the matter from the provinces and the City of Buenos Aires, in a similar system to the one previously in force. The only exception is applicable to acts of unfair competition, which will be judged only, in the administrative sphere, by the Secretary, as well as those that affect interprovincial commerce.
- Applicable Sanctions: Fines are substantially increased, which can reach up to 10 million Mobile Units, according to the value established by the Antitrust Law. This value is currently of AR$ 20 per unit and is annually updated, based on the Consumer Price Index.
- Claims made by individuals and associations: The Decree also authorizes any individual, who may be affected by acts of unfair competition, to appeal to the competent courts and request: (i) the termination or prohibition of the unlawful act; (ii) compensation for the damages suffered; and (iii) the issuance of precautionary measures. Consumer associations and other associations, professional or corporations representative of economic interests may also initiate these actions when the interests of their members are affected.
- Judicial review: The Decree sets forth that the sanctions established by the enforcement authority at the national level may be appealed before the Federal Civil and Commercial Court of Appeals. Likewise, it does not require the prior payment of the fine as a condition to appeal it (unlike the derogated regime), but it allows access to a 50% discount if it is consented and paid in time.
- Electronic system for the resolution of consumer claims: Finally, the Decree also modifies the Consumer Protection Law, creating, at consumer’s choice, an electronic dispute resolution system, as a prior, optional and free instance. The Secretary shall regulate this procedure.
As with any emergency decree, the Decree will be subject to review by the National Congress and, to be rejected, in accordance with Law No. 26.122, both Chambers of Congress must issue their respective resolutions expressly rejecting it if they consider that it does not comply with the applicable constitutional requirements.