One of the major challenges regarding antitrust issues in Argentina was to update the regulatory framework to achieve best international practices, aiming at increasing deterrence and pursuing independence, transparency, efficiency and predictability of agency decisions.
With this in mind, the National Commission for the Defence of Competition (CNDC), jointly with legislators of the official party, drafted a new competition bill during the second half of 2016. In September 2016, the Draft Bill was submitted to Congress. The new competition law (Act 27,442 (the LDC)) was passed on 9 May 2018, enacted on 15 May 2018 and entered into force on 24 May 2018, the same day the Executive issued its Regulatory Decree 480/2018 (the Decree).
The LDC introduced many important amendments to the Argentine competition regime, including the creation of a new competition authority, the increase in antitrust fines and in the predictability of their determination, the creation of a leniency programme, a change from an ex post to a pre-merger review system and an increase in the notification thresholds, among others. 1
Following the enactment of the new law, Argentina’s main challenge during 2019 is to achieve full implementation of the changes and new institutions created by the law. Although some of the changes have had an immediate implementation (such as the increase in fines and notification thresholds), other modifications require additional measures to become effective. In the following sections, we explain how Argentina is working on the implementation of the new competition law, in particular as regards the constitution of the new competition authority, the implementation of the leniency programme and the transition towards an ex ante notification regime for merger and acquisition (M&A) operations.
Creation of the new competition authority
The LDC created the National Competition Authority (ANC) that will replace the current one. 2 In particular, section 18 of the LDC establishes that ‘the National Competition Authority is hereby created as a decentralized and self-governed agency within the scope of the National Executive Power for the purpose of enforcing and controlling the compliance herewith’. The ANC is composed of a Competition Tribunal comprising one chairperson and four tribunal members in charge of deciding on clearing, conditioning or blocking M&A, imposing fines for antitrust infringements and issuing pro-competitive recommendations; and two secretaries, one for anticompetitive conducts and one for merger control, with prosecution and investigation powers.
Process to appoint the members of the ANC
To guarantee independence, the law specifies the rules for appointment of the seven members of the ANC and provides for strict removal conditions. Specifically, each position will be covered after a public contest conducted before a jury composed of ‘the Federal Government Attorney, the Ministry of Production, a representative of the National Academy of Law and a representative of the Argentine Association of Political Economy. . . . The jury shall pre-select and make a short list of three candidates for each of the positions of the members of the National Competition Authority to be filled and shall send them to the National Executive Power’ (Section 20, the LDC). The Executive will appoint one candidate from each short list and send the files to the Senate for its agreement. Until this agreement is obtained, the ANC can begin its functions with interim appointments.
On 11 February 2019, the Secretary of Domestic Commerce and the Secretary of Public Employment published the rules of the public contest (Joint Resolution 1/2019) and on 24 April 2019, the Secretary of Domestic Commerce issued Resolution 146/2019, by which it declared open the contest, establishing the period to submit candidacies from 10 May to 10 June 2019. The process entails a background review, two public examinations and a personal interview with the jury. The list of applicants was published on 14 June and can be found at www.argentina.gob.ar/
convocatoria-abierta-autoridad-nacional-de-la-competencia. The publication of the seven shortlists is scheduled for 28 August 2019, following which interim appointments are expected to be defined.
The ANC will be legally constituted once the chairperson, two tribunal members and the two secretaries have been appointed. It will be fully operative 60 days after its legal constitution. During this 60-day period, the Competition Tribunal will issue its internal regulation and any other regulation it may deem necessary for its proper functioning.
Building a leniency programme
Sections 60 and 61 of the LDC set up a leniency programme for cartel cases in Argentina. The programme offers:
- a fine exemption to the first firm that reveals having participated in a cartel (with the obligation to cooperate by providing determining proof of the existence of the cartel);
- a fine reduction of between 20 per cent and 50 per cent for subsequent applicants, provided that they bring to the authority additional information to prove the existence of the cartel; and
- a supplementary benefit (leniency plus) for a firm that, not having obtained exemption in a leniency procedure, is the first to disclose or recognise a cartel in a different market.
Leniency applications can be filed at any time before having received the notification of an indictment, as provided for in section 41 of the LDC. In addition, individuals and legal entities that are granted the leniency benefit may be entitled to an exemption or reduction, as appropriate, of their responsibility for damage reparation, except for if the damage cannot be fully repaired by the other people involved in the cartel (see section 65, the LDC).
The law also establishes a marker system to determine the order of priority of the leniency applications; and obliges the applicant to cease immediately the illicit conduct, cooperate continuously and diligently with the Competition Tribunal, and keep the application confidential (except with regard to other competition agencies), and forbids the applicant to destroy, falsify or hide evidence of the cartel.
The Decree entrusts the Competition Tribunal with the creation of a procedure to deal with leniency applications, which should provide for a marker request regime, a benefit application regime, the granting of a conditional benefit at an interim stage and the granting of the definitive benefit at the end of the procedure. As a first step, on 6 July 2018, the CNDC submitted for public consultation a draft regulation for the implementation of the leniency programme. Comments and suggestions have been received from international organisations (such as the OECD and the World Bank), competition agencies from other jurisdictions (such as Mexico, Spain, Peru and the European Union) and representatives of the private sector. Taking into account the comments received, the CNDC has proposed a new draft regulation, which is now being reviewed by the Secretary of Domestic Commerce, the enforcement authority in the transition period. The regulation also provides for the creation of a special ‘leniency unit’ to guarantee confidentiality.
Building and implementing a leniency programme is not only about issuing regulations, but it also requires training public officials who would be in charge of applying these regulations. For this reason, in April 2019, the staff of the CNDC benefited from a two-day workshop organised by the World Bank covering all the steps from the marker request to the granting of the conditional benefit. The workshop was conceived from a fully practical perspective. It was based on role-playing activities aimed at training the staff on interviewing leniency applicants, ensuring proper cooperation and building trust with the applicant. The workshop benefitted from participation of leniency experts from the National Commission on Markets and Competition (Spain), the Federal Economic Competition Commission (Mexico), the Administrative Council for Economic Defence (Brazil) and the US Department of Justice, who shared their experience and gave their feedback on the role-playing activities.
Finally, during the past few years, Argentina’s competition authority has been giving signals to the market that fighting cartels is its number-one priority. In terms of enforcement activities, between 2016 and 2019, Argentina fined three cartels and opened several ex officio cartel investigations. As regards competition advocacy, Argentina has launched a project with the OECD to evaluate regulations and practices regarding competition in the procurement of public works at the federal level to improve the design of bidding procedures to reduce the risk of collusion, and to build the capacity to detect potential bid-rigging agreements. The report prepared by the OECD was presented at the June 2019 meeting of the OECD Competition Committee in Paris. Within the context of this project, four workshops for procurement officers took place in December 2018 and March 2019. The main goals of these workshops was to raise awareness among procurement officers of the potential collusion problem in public procurement, to promote the adoption of best practices for fighting collusion in public procurement and to encourage procurement officers to report any collusion suspicions to the competition authority. 3 In addition, in December 2018, Argentina published its Guidelines on Competition Policy for Trade and Professional Associations, whose main objective is to advise trade associations on the risks they may face of infringing competition law, in particular by facilitating collusion among their members.
The transition towards a pre-merger control system
Section 9 of the LDC establishes a pre-merger control system in Argentina, together with fines for gun-jumping. This change solves a current problem of M&A matters, which are submitted for evaluation after the deal is closed and creates new important challenges to the competition authority, in terms of timing for decision-making. According to section 84, this ex ante system will enter into force one year after the ANC is in operation. Up to that moment, the notification regime as established by Act 25,156 continues to hold. Under that regime, firms involved in M&A operations above a certain threshold were obliged to notify said operation to the competition authority, before or up to one week after the closing of the operation.
Up to 2016, merger review in Argentina often took too long. In fact, by the end of 2015, the average time of analysis for M&A matters was 3.2 years. In implementing a pre-merger control system, Argentina must speed up the process substantially. Improvements in this area can be shown using different indicators. First, the average time of analysis has been reduced to four months for operations notified in 2018. In addition, only 11 per cent of the operations notified in 2016 were resolved in that same year. This figure has increased to 59 per cent for operations notified in 2018. At the beginning of 2016, the CNDC had a stock of 276 files of M&A operations, which was reduced to 83 at the end of 2018. 4 This is despite 386 new files being created during that three-year period. Internal changes in procedures together with the increase in notification thresholds introduced in the new law have contributed to this.
As regards internal procedures, in June 2017 the CNDC started an internal fast-track procedure for merger control. This procedure includes a number of quantitative indicators aimed at identifying operations with a low probability to restrict competition, which are presumed to be legal. In particular, for operations with a low level of impact on competition, the CNDC uses a simplified evaluation procedure. In these cases, the analysis will be limited to classifying operations according to whether they are horizontal, vertical or conglomerate, and eventually to measuring market shares of the companies involved. 5 This fast-track procedure would also serve the purpose of being a starting point for the design of the summary proceeding provided for in section 10 of the LDC. Moreover, according to section 31(c), once the ANC is constituted and the summary proceeding established, the Secretary of Economic Concentrations would approve M&A operations analysed under said regime, eliminating a step of the procedure and, therefore, contributing to speeding up the process.
Concerning thresholds, the new law has established updated and adjustable thresholds for notification of M&A matters. The thresholds were frozen between 1999 and 2018 in the local currency (Argentine pesos). In a high-inflation economy, this implied that an increasingly high number of operations became notifiable. As this was not the object and purpose of the LDC, the thresholds not only needed to be updated, but also needed an automatic updating system to avoid this same problem arising in the future. The new law addresses this issue by providing that the threshold would be updated annually following the evolution of the Argentine Consumer Price Index. 6 This way, an operation would be notifiable under the old competition law if the total turnover of the affected companies were above 200 million Argentine pesos. 7 With the new law, this figure was increased to 2,000 million Argentine pesos in May 2018 and to 2,640 million Argentine pesos in April 2019. Because of this increase, the number of M&A operations notified decreased 66 per cent, from 149 operations notified in the June 2017–May 2018 period to 51 operations notified in the June 2018–May 2019 period.
The enactment of the LDC in May 2018 constitutes a major milestone in competition policy in Argentina. The new regulatory framework was designed following Argentina’s reality and experience, as well as international antitrust trends and developments. Along with the restructuring and improvement of enforcement practices by the CNDC, this is an important step in the process of strengthening competition rules in Argentina. Full implementation of the new regulatory framework is still a work in progress and the next important steps are the setting-up of the new competition authority – the ANC – a more effective competition law enforcement, the implementation of the leniency programme, the implementation of the pre-merger notification regime, and the taking of a more active role in fostering competition and efficient market performance.
1 See Greco, E.M., Quesada, L. and Volujewicz, F. ‘Argentina: Competition Authority’, The Antitrust Review of the Americas 2019, September 2018, for a detail of the amendments.
2 Until the ANC is constituted, the Secretary of Domestic Commerce acts as competition authority. The CNDC acts as a technical body that would advise the Secretary through non-binding opinions.
3 The workshops have already shown some interesting results. On the one hand, the National Directorate of Roads (DNV), in charge of contracting roads’ construction and maintenance, asked the CNDC for assistance to draft a Certificate of Independent Bid Determination (CIBD), to be included in all DNV’s procurement documents. By signing this CIBD, a bidder declares that: bid prices have been determined independently, without consultation, communication or agreement with any other bidder or competitor, with the aim of restricting competition; bid prices have not been and will not be disclosed by the bidder, either directly or indirectly, to any other bidder or competitor before the opening of bids, nor they were manifested, expressed or discussed in any chamber, federation or business confederation or similar body; the bidder has not or will not attempt to induce the interest to present or not present an offer for the purpose of restricting competition; and the bidder has not agreed or entered into contact with its competitors with the intention of allocating geographic areas or markets.
On the other hand, the CNDC has entered into conversations with the Public Prosecutor’s Office to exchange information and documents, and discuss assistance in investigations, for cases involving both collusion and corruption offences.
4 See CNDC statistics available at www.argentina.gob.ar/sites/default/files/gestion_cndc_2016-2018.pdf.
5 For a description of the conditions under which a fast-track procedure would apply, see OECD, Roundtable on Safe Harbours and Legal Presumptions in Competition Law – Note by Argentina, December 2017.
6 According to section 9 of the LDC, an M&A operation must be notified to the competition authority when the total turnover of the affected companies is above 100 million mobile units. Section 85, in turn, establishes the initial value of a mobile unit as 20 Argentine pesos and provides for an annual update of this value using the variation of the consumer price index. In April 2019, through Resolution 145 of the Secretary of Domestic Commerce, the value of the mobile unit has been increased to 26.4 Argentine pesos.
7 As established in section 9 of the LDC, total turnover is understood as the amount resulting from the sale of products and the provision of services performed by the affected companies during the past year corresponding to their ordinary activities, after deduction of the discounts on sales, as well as value added tax and other taxes directly related to turnover.