Transcript COMPETITION and ARGENTINA ANTITRUST LAW

COMPETITION and
ARGENTINE ANTITRUST
LAW
Vítolo
Abogados
Professor
DANIEL ROQUE VÍTOLO
REPÚBLICA ARGENTINA
Kitzbüehl
Argentina
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 changes
A stable democracy
An open economy
Privatizacion of public companies
Act 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
STRATEGIC CONDITIONS
• A STABLE DEMOCRACY
• THE “FINANCIAL ARMOR”
• THE INTEGRATIONS
AGREEMENTS
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.)
I would like to
invest there...
 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
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
ANTITRUST LAW
MARKET
HISTORICAL RECORDS
•
•
•
•
•
•
•
•
•
Act 11.210 (1923)
Executive Order 15.810 (1946)
Act 12.906 (1946)
ANTITRUST
Act 22.262 (1980)
FILES
Act 25.156 (1999)
Executive Order 1019 (1999)
Decrees 726 and 788 (1999)
Executive Order 89 (2001)
Decree 40 (2001)
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
DISAPPROVED 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
THIRD
MAIN
INNOVATION
• Some control related to
concentrations and
mergers
“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?
They shall be in
our hands !!!
• 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
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
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!!
Of Course, You Can
Also Ask The Court
In Advance
But nobody
does that...
WARNING!!!!
• The acts shall only have
effects among the parties or
What a
towards third parties, once
problem...
the procedure of previous
authorization fixed by the law
has been complied with;
additionally, there are
significant fines
HOW MUCH
SIGNIFICANT?
• 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
STEPS to authorize ECONOMIC
CONCENTRATIONS
• 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?
If the answer
is NO, the
business is
authorized
If the answer is
YES go to the
next step
NEXT STEP
• Are there efficiency productive
profits?
Authorization
If the answer is
NO
IF THE ANSWER
IS YES: GO TO
THE NEXT STEP
could be denied
The Court
could
condition
the business
FINAL
STEP
Evaluation of the market power increase
vs.
Efficiency productive profits
Business is authorized
Business is denied
Business is conditioned
THE FINAL
DECISION CAN BE
APPEALED TO A
JUDICIAL COURT
Please... Do
not !!!!
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
Let me
– Workers
see...
• Confidentiality
– Disclosure
– Know how
– Customers
– Inside information
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?
IfIf both
bothparties
parties agree
agree
There is no problem
There 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?
If you know how...
You are a genius!!!!
If not...
Try to find
a good
lawyer !!!!
Vítolo Abogados