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Status of Judicial Review of the Decision of the Argentine Antitrust Agency
Shortly before 10 years of passing the antitrust legislation currently in force, there still remain certain aspects that are the heart of debates concerning its direct application and the judicial control of decisions made by the body which today is in charge of its application.
As we have stated in the previous issue of The Antitrust Review of the Americas, antitrust legislation has been in force in Argentina since the beginning of the 20th century. One of the landmark steps towards the development of antitrust practice in Argentina was the enactment of Law 22,262 in the early 1980s. This Law 22,262 created an administrative body, the National Commission for the Defence of Competition (CNDC), developed administrative enforcement procedures and provided for judicial review before the criminal courts. Those who violated this Law could be held criminally liable, and violating its statements may have resulted in the imposition of fines or imprisonment.1 Most scholars and practitioners did not firmly question the jurisdiction of the criminal courts having criminal charges as sanctions in the event of violation of the antitrust law.
A constitutional reform implemented in 19942 and certain market-oriented reform policies undertaken during the 1990s paved the way to significant reform of the antitrust laws in force that ended in the enactment of the Argentine Competition Law 25,156 (ACL).
ACL, among other reforms:
- introduces the merger control in compliance with the antitrust legislation in force in most of the countries around the world;
- eliminates criminal charges among the sanctions for violation of the law;
- creates a new administrative agency, namely the National Tribunal for Defence of Competition (TDC); and
- replaces the court which shall review the decisions rendered by the administrative agency.
The CNDC and the judicial courts
We would like to concentrate on the last two issues mentioned above.
Article 17 of the ACL commanded the development of the National Tribunal for the Defence of Competition (TDC) as an independent court with the faculties to decide on the subject matter. According to this article: ‘The National Tribunal for the Defence of Competition is created as a self appointed body within the scope of the Argentine Ministry of Economy, Works, and Public Services in order to apply and control the compliance of this law’.
TDC’s functions and powers are defined in article 24. Its major role is to authorise relevant economic transactions through the monitoring of economic concentrations, and it has the power to veto corporate mergers; to verify whether there is abuse, or not, from any existing dominant position; and to enforce sanctions established by the applicable law.
This TDC is supposed to replace CNDC, provided, however, that, until the TDC is appointed, the antitrust matter shall be temporarily handled by the CNDC. The theory of an independent enforcement authority was considered a relevant step towards minimising political interference over the agency in charge of antitrust. After 10 years of the enactment of the ACL, the TDC has not been constituted yet. On the other hand, most scholars and practitioners indicate the political control over the CNDC has been tightened during the past five years. In fact, under certain administrative rulings enacted last year, the reorganisation of the CNDC is under direct control of the Secretariat of Commerce.
The other key issue indicated above is the court which revises the decisions made by the administrative agency TDC or, at present, by the CNDC.
Under article 53 of the ACL Bill, it was established that the appeal to the decisions held by the TDC should be filed and justified before the same body, which within five days after the file of such recourse should raise it before the National Court for Commercial Appeal or before the Federal Chamber of a given province of the country. Several implemented decrees have modified the jurisdiction of the court capable of reviewing the decisions of the TDC.
Decree 1019/99 enacted Law 25,156 and removed any references to the ‘National Court for Commercial Appeal’ and ‘a given province of the country’. Two years later, Regulatory Decree 89/2001 of Law 25,156 established that ‘the Civil and Commercial Federal Court of the city of Buenos Aires and the respective Federal Chamber with powers in any given province of the country shall have the faculties to intervene in cases of appeals filed against decisions made by the TDC, according to the terms set forth in article 53 of Law 25,156’3
Argentina is a federal country and there coexist provincial and federal courts; therefore, defining which court has the jurisdiction on appeals against the resolutions of the TDC is beyond the construction of the article of the ACL and it tackles with certain provisos of the Argentine Constitution and the organisation of the judiciary branch.
For the purpose of this paper, the debate is related to the fact of whether the Civil and Commercial Federal Court or the Criminal Court in Economic Matters shall be in charge of reviewing the decisions made by the TDC.
As regards this aspect of Law, shall there intervene a court that acts in matters related to economic and market aspects? Or the competent court shall be one that intervenes in criminal complaint procedures with regulatory powers in economic aspects?
Since there is no easy answer to this question, the Argentine Supreme Court of Justice (ASCJ) has been requested to intervene in order to reach a solution to the concerns brought up among the different jurisdictions.
Thus, the ASCJ, through the enactment of four decisions, tried to put an end to this jurisdictional concern; however, until present, this has not been enough to establish in an accurate manner which court shall be in charge of reviewing the decisions made by the TDC.4
In re Imagen Satelital SA,5 the ASCJ named the Criminal Court in Economic Matters as having jurisdiction to decide the matters concerning the case, thus maintaining the guidelines set forth by Law 22,262.
When deciding on the case Surcor TV SA c/ Multicanal SA,6 the ASCJ followed the wording of article 53 of Law 25,156 and determined that the ruling framework envisaged an appeal ‘before the respective Federal Chamber’.
In the case Repsol YPF,7 the ASCJ named again the Criminal Court in Economic Matters as having the faculties to decide as to the matters concerning the case. Finally, in re Multicanal SA y otro,8 the ASCJ assigned jurisdiction to a Federal Chamber of Appeals of the Province with subject matter jurisdiction.
The applicable laws have been blamed for not providing certainty as to which courts have competent jurisdiction to review antitrust cases. Likewise, the development of the ASCJ decisions is yet to provide a clear cut indication as to which court shall be entrusted with full powers to undertake judicial review on appeal the decisions of the administrative agency. As some scholars have indicated, the current status of the matter requires that we shall address the issue bearing in mind what courts could be more suitable to handle antitrust cases based on the complexity and principles of economic and legal analysis that governs the antitrust law as a whole.9
Up to date, there are no signs that the TDC shall be constituted in the near future, and this poses an unresolved issue of the legal status of the CNDC. The first step toward obtaining certainty and predictability would be to organise the TDC as required by the ACL or, otherwise, replace the same by amending the law in force.
The Telecom Italia case
It has been indicated that the Telecom Italia case is a clear example of the issues yet to be solved with respect to the powers vested on and jurisdiction of the CNDC under both the ACL and the latest court decisions.
During 2007 the CNDC began preliminary proceedings in order to establish whether Telefónica SA (España) – parent company of Telefónica SA (Argentina) – had taken control, either directly or indirectly, over Telecom Argentina SA (a subsidiary of Telecom Italia SpA), by acquiring from Pirelli and Sintonía a direct controlling interest in the company Olimpia and an indirect interest in Telecom Italia SpA.
The issues were whether the transactions described above would entail a concentration of the two-major fixed telephone service providers into the relevant market of Argentina, namely, Telefónica SA (Argentina) and Telecom Argentina SA in accordance with article 6 of the Argentine Competition Law 25,156 (ACL). Additionally, another issue was whether any such acquisition could raise antitrust concern in accordance with article 7 of ACL.
The CNDC called for several hearings, further research and testimony of employees, suppliers and other telephone service providers. The two companies at stake were also called to provide evidence and challenge whether any acquisition of interest by Telefonica in Olimpia could have any antitrust concern under Argentine law.
Triggering thresholds and legal standards
Under article 6 of ACL a concentration could be achieved either through merger of companies, bulk transfers, acquisition of ownership of interest in a legal entity that amounts to legal control or enables the purchaser to obtain substantial influence thereof or by any legal act that either transfers the assets of a business or grants a ‘substantial influence’ or ‘determining influence’ in the government and administration of the business.
Article 7 of ACL sets forth that ‘Economic concentrations that have the purpose or effect of, or may result in, restrictions or distortion of competition in a manner which may be prejudicial to the general economic interest are prohibited’.
Article 8 of ACL establishes certain thresholds to be achieved in order to require filing of the concentration before the competition authorities, as follows:
[W]hen the amount of the total business volume pertaining to the group of companies involved surpluses [200 million pesos[ in the country, economic concentrations, as defined in section 6, shall be notified to be reviewed previous to its materialisation or within a week as from the date of the conclusion of the agreement, the date of the buy or swap offer release, or the date of the acquisition of a takeover interest before the Court for Fair Trading. The term shall start the moment one of the events aforementioned takes place, with warning that the respective penalties shall be enforced in case of violation of section 46, subsection d) [...]
Finally, articles 13 and 14 undertake the procedure and effects of a concentration under review by the CNDC. Article 13 sets forth that the CNDC should rule within 45 working days upon filing a concentration either to: approve the concentration; subordinate the approval to the compliance to certain conditions; or reject approval. Under article 14 whether any such 45 working days period has elapsed, and no resolution as to the matter has been reached, the transaction will be implicitly authorised.
In this context, on 9 January 2009 the CNDC, under Resolution 4/2009 ruled that the companies involved should comply with the terms stipulated under article 8 of ACL. Likewise, the CNDC determined that ’[...] until the Commission pronounces judgment as to the transaction in progress,’ neither Telefónica SA (España) nor Telecom Italia SpA may directly or indirectly exercise voting rights into Telecom Argentina SA.
TELCO SpA was a special-purpose vehicle registered by Telefónica SA (España); Assicurazioni Generali SpA; Intesa Sanpaolo SpA; Sintonia SA; and Mediobanca SpA for the sole purpose of holding the controlling interest in Telecom Italia SpA. Telco SpA had adequate standing to challenge the CNDC ruling and appealed the decision before the courts in due course.
CNDC’s business interference
On 30 March 2009 the CNDC10 doubled the bet and appointed a supervisor to control the management and decision-making process of the business. This shall also enable the CNDC to ’(i) analyse the transaction at stake in detail (ii) assess the effects into the telecommunications market in Argentina, and (iii) verify the effective compliance of resolution dated as of 9 January 2009’.
Almost one month later and upon its sole determination, the CNDC declared null and void all decisions taken by boards of directors, committees, auditing commissions, proxies, or managers (or whoever may act on their behalf) since the enactment of Resolution 4/2009.
The CNDC11 further ruled that the directors appointed by Telecom Italia SpA and Telecom Italia Internacional NV into the board of directors of Telecom Argentina SA be set aside and the former board of directors be reinstated.
CNDC has yet to reach a decision as to whether the transaction under analysis makes up a restriction to competition that may result in prejudice to general economic interest in accordance with article 7 of the ACL; however, the active intervention taken by the CNDC raises severe concern that it may rule so.
Telecom Italia appealed the resolutions of the CNDC before appellate courts and indicates that it will analyse the possibility of filing a claim before the International Centre for Settlement of Investment Disputes (ICSID) against the Argentine government. As reported by the media, key officers of Telecom Italia SpA have indicated it would amount to a violation of investment treaties the decisions taken by the competition authorities. The CNDC ‘cannot decide who is entitled to vote within a company.12
Said appeals were admitted to be heard and decided by the Civil and Commercial Federal Court. By this means, the courts shall start intervening in the process.
On 29 July the appellate Federal Court13 ruled that the CNDC has no jurisdiction to issue the resolutions interfering into the administrative bodies of Telecom Italia and its decision-making process. Since the TDC has not been yet appointed, the CNDC has not been vested any such controlling authority.
After 10 years of ACL in force, the proper organisation of the antitrust authorities is pending to be appointed. This issue seems to become paramount in recent controversial cases before the current administrative antitrust agency.
Both scholars and practitioners have claimed that in order to improve certainty and predictability to improve the business environment it is required that these pending issues be solved in the near future.
1 Miguel Angel De Dios, Antitrust in Developing Countries: a report on Argentina, Southwestern Journal of Law and Trade in the Americas, vol XIV, No. 1, 2007.
2 Article 42 of the Argentine Constitution provided that the government shall enact legislation in order to ‘defend competition against any market distortion and control of natural or legal monopolies’. The constitutional reform aimed at guaranteeing that the government complied with passing regulations which included clear and defined guidelines.
3 Decree 89/2001, article 53.
4 Argentina is a civil law country that does not have the enforceable power of the precedent rendered by a court as it has same in countries with a common law background. Whether the decisions rendered by the ASCJ enjoy the consideration and respect that a higher court decision deserves, lower courts are not fully obligated to follow the precedent issued by the ASCJ.
5 Imagen Satelital SA, ASCJ 09/14/2000 (fallos 323:2577).
6 Surcor TV SA c Multicanal, ASCJ 05/07/2002 (fallos 325:957).
7 Repsol YPF Envasado en la Ciudad de San Nicolás s recurso de queja, ASCJ 03/21/2006 (fallos 329:860).
8 Multicanal SA y otro s denuncia inf Ley 22,262, ASCJ 04/10/2007 (fallos 330:1610).
9 Carlos A Petre, ‘Tribunal de alzada en la defensa de la competencia. Una polémica abierta’ La ley 17/07/2009 1.
10 CNDC Resolution 43/2009.
11 CNDC Resolution 64/2009.
12 www.lapoliticaonline.com.ar, 6/04/2009, ‘Telecom Italia podría ir al CIADI contra la Argentina’.
13 Civil and Comercial Federal Court of the National Chamber of Appeals, Court II (Cámara Nacional de Apelaciones en lo Civil y Comercial Federal Sala 2).