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COMPETITION and ARGENTINE ANTITRUST LAW

COMPETITION and ARGENTINE ANTITRUST LAW. Vítolo Abogados. Professor DANIEL ROQUE VÍTOLO REPÚBLICA ARGENTINA. THE WORLD. Kitzbüehl. Argentina. AREA: 2.8 million Km2 POPULATION: 35.6 million GDP: US$ 298.1 billion GDP per person: US$ 9,010

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COMPETITION and ARGENTINE ANTITRUST LAW

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  1. COMPETITION and ARGENTINE ANTITRUST LAW Vítolo Abogados Professor DANIEL ROQUE VÍTOLO REPÚBLICA ARGENTINA

  2. THE WORLD Kitzbüehl Argentina

  3. 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

  4. ARGENTINA TRANSFORMATION • pPrincipal changes A stable democracy An open economy Privatizacion of public companies Act of Convertibility ($ 1 = US$ 1) Tax and monetary controls

  5. INVESTMENT IN STRATEGIC SECTORS • Iron • Steel • Communication • Retail of Food • Trading Centers • Distribution • Services • Tourism • Energy • Oil • Gas • Mining • Agriculture • Agricultural Industries • Food • Transportation

  6. STRATEGIC CONDITIONS • A STABLE DEMOCRACY • THE “FINANCIAL ARMOR” • THE INTEGRATIONS AGREEMENTS

  7. 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.)

  8. 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

  9. 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

  10. ANTITRUST LAW MARKET

  11. HISTORICAL RECORDS • Act 11.210 (1923) • Executive Order 15.810 (1946) • Act 12.906 (1946) • Act 22.262 (1980) • Act 25.156 (1999) • Executive Order 1019 (1999) • Decrees 726 and 788 (1999) • Executive Order 89 (2001) • Decree 40 (2001) ANTITRUST FILES

  12. PROMOTION Development of the Economy Effective Assignment of Resources Benefits distributed among everyone PROTECTION Transparency Consumers Freedom Market transactions PHILOSOPHICAL CONCEPTS

  13. 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”.

  14. 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.

  15. 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

  16. 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

  17. 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

  18. 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

  19. THIRD MAIN INNOVATION • Some control related to concentrations and mergers

  20. “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

  21. 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.

  22. They shall be in our hands !!! WHAT DOES THE LAW PROHIBIT and TRY to AVOID? • 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

  23. 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.-

  24. 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

  25. YOU DO NOT NEED TO ASK FOR AN AUTHORIZATION IF: GOOD NEWS!! • 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.

  26. Of Course, You Can Also Ask The Court In Advance But nobody does that...

  27. WARNING!!!! • The acts shall only have effects among the parties or towards third parties, once the procedure of previous authorization fixed by the law has been complied with; additionally, there are significant fines What a problem...

  28. 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

  29. 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

  30. 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?

  31. If the answer is NO, the business is authorized If the answer is YES go to the next step

  32. NEXT STEP • Are there efficiency productive profits? Authorization could be denied If the answer is NO The Court could condition the business IF THE ANSWER IS YES: GO TO THE NEXT STEP

  33. FINAL STEP

  34. THE FINAL DECISION CAN BE APPEALED TO A JUDICIAL COURT Please... Do not !!!!

  35. 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

  36. 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 • Workers • Confidentiality • Disclosure • Know how • Customers • Inside information Let me see...

  37. 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

  38. 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?

  39. 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)?

  40. 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?

  41. WHAT HAPPENS IF THE COURT CONDITIONS THE BUSINESS? If both parties agree There is no problem If both parties agree There is no problem If one of the parties does not agree?

  42. 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 More pitfalls!

  43. WHO HAS THE RIGHT TO APPEAL THE COURT DECISION? Both of them CAN THE PARTIES WAIVE THEIR RIGHTS IN ADVANCE? Suposse there are discrepancies ... CONSEQUENCES?

  44. FINALLY... How can we build a price, its adjustments, and how can we prevent all the pitfalls in this kind of business?

  45. If you know how... You are a genius!!!! If not... Try to find a good lawyer !!!! Vítolo Abogados

  46. THANK YOU

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