Argentina has a long history of competition policy and action. It was one of the first countries in Latin America with a competition law, the National Commission for Competition Defence (CNDC) was one of the first agencies with action in competition enforcement and it has a very important competition community. In the private sector, there are lawyers and economists with expertise in competition law and policy. Despite all that, so far Argentina has had very erratic policies related to competition law enforcement.
A new administration took office in December 2015 in Argentina, bringing important changes to economic policy in general and competition policy in particular. In the past, competition policy was not a top priority for the government and, as a consequence, very few competition cases were resolved, mostly related to mergers and acquisitions. The new administration views competitive markets as an efficient way to allocate resources. As a consequence, it established a different approach to competition policy, which entails, in the first place, to activate competition law enforcement and competition policy. This new approach includes the adoption of technical and professional foundations for decisions, so as to orient the Commission towards best practices in these competition matters. The main goal implies prioritising defence of competition as public policy, as an instrument to promote consumer welfare and, at the same time, improve productivity and opportunities to enhance economic development. For these reasons, the CNDC is currently in the midst of a transition, including at an organisational level. We have a lot of work to do and a large and challenging agenda ahead of us.
In this context, the main objectives of the CNDC for the near future can be summarised with the triple P rule: penalise, prevent and promote. This means:
- Penalise anticompetitive behaviour: Enforcing antitrust actions to tackle cartels and abuses of dominant position.
- Prevent concentration, to the extent that concentration may result in restrictions or distortions to competition and have a negative impact on social welfare: Review and control of mergers and acquisitions.
- Promote competition: Addressing competition advocacy issues, particularly in two dimensions: fostering acknowledgement of competition law and culture of competition as a way to allocate resources within the general public and the local business community; and evaluating regulations to identify barriers and restrictions to competition and making recommendations, in coordination with sectorial regulators, for establishing pro-competitive regulations.
To this end, the Commission is currently embarked in several projects. As a first step, the CNDC is going through a major restructuring to improve the quality of its human resources. This includes hiring of professionals, economists and lawyers, both at junior and senior levels, with the adequate skills and qualifications. Furthermore, the Commission is preparing training programmes in different aspects related to competition policy. From an internal perspective, we are setting up training sessions for young professionals who are joining the Commission, so that they will soon start working on cases and producing their own analysis. We are also organising programmes from external institutions. In May 2016, for example, we received a group of specialists from the Federal Trade Commission and the World Bank, who lectured about mergers and acquisitions analysis, cartel prosecution and IT forensics for cartels. This was a very fruitful experience, in which the CNDC’s staff got the chance to meet with and learn from specialists in the subject.
This activity was a first step towards a more comprehensive program, which would include universities, multilateral organisations and other competition agencies. We are also planning to schedule other exchanges for the remaining of the year to keep improving our staff’s analytical skills in different subjects within antitrust policy. The CNDC is committed to creating all the resources to put competition law enforcement and competition policy at the top of the political agenda.
The Commission is also changing internal procedures so as to reduce delays in reaching decisions and reallocate resources towards the most important and demanding issues. For instance, we are designing a framework to allocate simple cases to a fast-track procedure, which will allow many M&A files to be resolved within a very short period of time, reducing the amount of resources devoted to those cases. Antitrust actions and complex M&A cases, on the other hand, needing more and better analytical skills would get the special attention they deserve. Efficiency in allocating resources within the CNDC is, therefore, one of our most important short-term priorities. We received from the previous administration a large backload of files, some of them very old, and we are working hard to normalise this situation.
Regarding specific antitrust policies, cartel detection and prosecution is one area that needs to be prioritised. Argentina has a poor record for penalising cartels. In more than 20 years of competition law enforcement, we have had only three relevant cases: one in the cement industry and two in public dealings for medical supplies. Different reasons explain this fact. One is that we lack adequate tools for cartel detection, such as a leniency programme. Another reason is that we have not been allocating enough resources to this area. Finally, even if an investigation ends with a fine being imposed to a cartel, the amount of the fines we are allowed to impose is outdated, as the maximum fine was fixed in Argentine pesos in 1999, when the exchange rate of the Argentine peso to the US dollar was 15 times lower than today. The main problem is that it is very difficult to update the fines, as their amount has been established by law and, therefore, can only be changed with a change in the law.
A second issue that needs special care is the delay in dealing with M&A cases. It is a fact that merger review in Argentina has often taken too long. We have some cases with a delay of four or five years since filing. Some of this is due to the fact that the government used to take advantage of pending competition cases as a way to force firms to make concessions that would pursue totally different political goals, unrelated to competition, such as price negotiations. This has now come to an end, since we are not going to pursue any other goal apart from enforcing competition law.
Another very important area of interest for the Commission during this year has to do with changes in the legal framework. First, one issue we would like the law to address is the adoption of a leniency programme that would facilitate cartel detection. As we explained before, anti-cartel activity is one area that needs special enhancement. Second, and related to this, we are proposing to strength penalties and fines within the context of competition law. A third issue refers to the update of the thresholds for merger review. With the current figures, many small operations must be notified to the Commission, inefficiently consuming its resources. In the proposed amendment, fines and M&A thresholds figures would be excluded from the law, so that they could be more easily updated, as the macro and business environments change.
A pending issue that we have been carrying for a very long time is that of the Commission’s independence. This is a very important issue and yet it has been neglected so far. Nowadays, the Competition Authority that enacts resolutions in all competition matters is the Secretary of Trade. The CNDC has an assistant role making non-binding reports to the Secretary, prior to its decisions. This politically dependent competition authority has led, in previous years, to huge changes in the way competition law enforcement has been taking place, creating enormous uncertainties among the community about what to expect in the future. This is something we are committed to changing in our efforts to promote legal certainty and create a culture of competition.
Notwithstanding this, we need to take into account our history in this respect. The 1999 Competition Act created an independent competition tribunal composed of seven members with complicated nomination and removal procedures. This tribunal, however, has never been constituted. Learning from experience, therefore, the independence issue needs to be carefully and creatively thought through, so that the solution is politically feasible and implementable. We also need to rely on international experience and evaluate which framework would best suit our needs. In any case, whatever the institutional design we come up with, the important issue is that the renewed agency has to have independence to issue sanctions and be clear that there will be no political influence in imposing fines.
In addition, the CNDC is in the process of setting up a professional staff that would apply technical criteria independently of changes in the national government. This would contribute to establishing a long-term view of competition policy that would reduce uncertainties about how competition cases will be treated. Our main objective in this respect is to ensure that competition as a policy is durable across different administrations and political colours.
Competition advocacy is another area in which everything is to be done. There is a huge misunderstanding among the general public in Argentina regarding competition policy and what it is about. Many people have the wrong idea that the Commission is a price control agency and competition policy is a weapon against inflation. This perception has been fuelled by the previous administration’s speech and description of the Commission’s actions and favoured by the Commission’s lack of publicity efforts. One of the main goals of today’s CNDC is to educate the general public and the business community about its role in the economy. We want to create a competition culture in Argentina and we need the general public to understand and endorse the Commission’s actions. To achieve that, however, people must understand what we do, why it is relevant and how it impacts their personal lives. With this idea in mind, we are creating a special division within the CNDC to be in charge of competition advocacy. This has never been done before in Argentina. The challenges of this new division are very important and there are several projects in the agenda, including presentations to associations of firms or consumers, publicity of the Commission’s activities through the official website and other communication channels, and the elaboration of guidelines for antitrust analysis and merger review.
At the same time, the CNDC is carrying out a series of studies in several sectors of the Argentine economy, both regulated and unregulated. The sectors currently under study are air travel, mobile communications, aluminium, credit cards, pharmaceuticals, dairy products, soap, vegetable oil, steel, petrochemicals, beef and long-distance passenger transportation. These studies aim to evaluate competition conditions in the different markets so as to help the Commission identify potential issues and provide pro-competitive policy recommendations. Eventually, some of these studies may result in new investigations, while others may trigger a discussion of how to improve competition conditions in the sector. Essentially, these studies aim to create a more competition-friendly environment for doing business in Argentina.
Finally, the Commission needs to re-establish contacts and exchanges with other competition authorities and international competition organisations and forums. Although the CNDC has formal agreements with other competition agencies, it has not used them very often so far. We want to reactivate and increase our links with other agencies as a way to improve our practice and learn from the international experience. It is our view that we can only benefit from sharing methodologies and information with our colleagues around the world, especially as competition cases become increasingly international. As part of this agenda, we have met our colleagues of Latin American Competition Agencies, and also the US agencies (FTC and DOJ), and we are starting negotiations with the OECD’s Competition Committee to became an active participant as well as the European Commission to set up active collaboration channels.
In sum, all the CNDC’s actions are focused on putting competition policy at the top of the political agenda at a local level and on bringing Argentina back to the international arena, as an active and relevant participant. It is a huge challenge and a lot of work needs to be done in every aspect, but we do it with passion and we are happy to do it.