American Bar Association – Fall Meeting – Brussels

1. American Bar Association - Fall MeetingLatin American Antitrust: New Rules and Issues for American and European Investors

2. American Bar Association – Fall Meeting – Brussels American Bar Association Fall Meeting Argentine Antitrust Law New Rules and Issues for American and European Investors Alfredo M. O´Farrell

3. American Bar Association – Fall Meeting – Brussels Argentine Antitrust Rules • In 1994, when the Argentine Constitution was amended, protection for competition against any kind of market distortion, and control of natural and legal monopolies, was included as a constitutional right. • As a consequence, in September 1999, the Argentine Congress passed Law No 25,156 which abrogated the former antitrust law. • It continued to use the principle that a conduct distorting competition is not unlawful per se but only when the conduct causes or may produce harm to the general economic interest. • Currently many merger and acquisition transactions must be submitted for the approval of the Tribunal for the Defense of Competition, the agency in charge of enforcing the provisions (at the moment the Comisión Nacional de Defensa de la Competencia until the Tribunal is set up).

4. American Bar Association – Fall Meeting – Brussels Current legal scenario for antitrust enforcement in Argentina From 1999 to 2003 the Antitrust Commission has issued 123 resolutions regarding anticompetitive behaviour • 62 resolutions dismissing the action (50.40%) • 45 explanations accepted (36.58%) • 14 sanctions applied (11.38%) • 2 agreements reached among the parties (1.62%) Note: The Information was obtained by analyzing the Reports of the Antitrust Commission for the years 1999 through 2003. They can be reviewed at web site http://www.mecon.gov.ar/cndc/novedades.htm.

5. American Bar Association – Fall Meeting – Brussels Current scenario for merger control in Argentina From 1999 to 2003 the Antitrust Commission has issued 362 decisions regarding merger control cases • 343 approved (94,75%) • 16 subordinated to conditions (4,41%) • 3 denied (0,83%) Note: The Information was obtained by analyzing the Reports of the Antitrust Commission for the years 1999 through 2003. They can be reviewed at web site http://www.mecon.gov.ar/cndc/novedades.htm.

6. American Bar Association – Fall Meeting – Brussels New Rules and Issues for American and European Investors • Implications of possible modification of the Argentine Antitrust Law. • Recent prosecution of cartel activity. • Excesive use of the “amparo” proceedings. • Previous filing is recommended. • Foreign-to-foreign transactions must be informed in certain cases. • Consider divestment negotiations with the authorities.

7. American Bar Association – Fall Meeting – Brussels New Rules and Issues Implications of possible modification of Antitrust Law • The Amending Bill reduces from 45 to 40 business days the term for approval of economic concentrations by the Antitrust Tribunal. Immediately after issuing its decision, the Antitrust Tribunal has to inform the Ministry of Economy. • The Ministry may oppose the approval in transactions involving “national general interest reasons” and if they relate to public utilities, defense, energy or mining activities or the transaction has a high impact on employment or investment. The government will have a veto right over certain transactions. • It also creates the Antitrust Tribunal and establishes that its first composition will be the current members of the National Commission for the Defense of Competition and 2 additional members (one lawyer and one economist) to be appointed directly by the Executive Power.

8. American Bar Association – Fall Meeting – Brussels New Rules and Issues Recent prosecution of cartel activity • In July 2005, investigations in the liquid oxygen and cement markets were terminated and sanctions were imposed. These two investigations evidenced the interest of the government in persecuting cartel activities in consistency with the investigations of other antitrust agencies around the world. • In both cases, the authorities concluded that the parties performed a cartel through which they fixed prices, distributed markets, concerted terms and conditions in public biddings and share competitive market information. • In the liquid oxigen market the authorities sanctioned four different companies for a total of Pesos 70,3 million (approximately US$ 25,107,000) and in the cement market it sanctioned four companies and the trade association for a total of Pesos 309 million (approximately US$ 110,617,000). • Considering past sanctions imposed, the fines are extremely high and the one imposed in the cement market is the highest penalty ever imposed. The last time the antitrust Authorities imposed a high fine was in 1999 when it sanctioned YPF S.A., the principal argentine oil company, with a fine of Argentine Pesos 110 million (approximately US$ 30,000,000).

9. American Bar Association – Fall Meeting – Brussels New Rules and Issues Excesive use of the “amparo” proceedings • The “amparo” proceeding is a quick action to obtain the suspension of a possible harm to a constitutional right. It is specifically provided in the Argentine Constitution as a tool to obtain protection against restraints to competition. • There is a trend to abuse the use of the “amparo” proceeding to obtain preliminary injunctions to stop, delay or adjourn merger proceedings or conditions imposed to approve transactions. The use of this tool could be considered as the early beginning of private enforcement of Antitrust Law in Argentina. • Complex transactions such as AmBev/Quilmes (acquisition of the most important Argentine brewery company), Cencosud / Ahold (acquisition of Disco Supermarkets) and Multicanal / Cablevisión (Cable TV acquisition) have been adjourned by “amparo” proceedings.

10. American Bar Association – Fall Meeting – Brussels New Rules and Issues Previous filing is recommended • Transactions may be informed up to a week after effective closing and therefore, Argentine law permits pre or post closing filings. • Pre-filing is always recommended as the Antitrust Law states that the acts will only be effective between the parties or with respect to third parties until the Antitrust Tribunal resolves to (a) authorize; (b) subordinate to compliance of certain conditions; (c) deny authorization; or (d) if there is tacit approval as the term of 45 business days has expired. • The Antitrust Tribunal interpreted that the Antitrust Law does not prohibit the parties to close a transaction while it is being analyzed by them and in the event the transaction is denied, the parties will have to unwind all acts performed after closing. • Previous filing in complex transaction is always suggested. In the event that post filing is elected, unwinding all acts may result difficult and involve high economic costs.

11. American Bar Association – Fall Meeting – Brussels New Rules and Issues Foreign-to-foreign transactions must be informed in certain cases • Transactions taking place outside Argentina must be notified if both parties have permanent business in Argentina, either through a corporate presence or through sales made into Argentina. • The Antitrust Law is applicable to all individuals and entities carrying on business activities within Argentina and abroad, to the extent that their acts, activities or agreements may have any effects in the Argentine market. • In the case of sales (imports into Argentina), not all foreign-to-foreign transactions (with effects in Argentina) must be filed for clearance. There is a test to measure the effects in the local market. The effects must be substantial (more than 15% of market participation), normal and regular (regularity and amount of imports for the last three years).

12. American Bar Association – Fall Meeting – Brussels New Rules and Issues Consider divestment negotiations with the authorities • In the event of complex transactions with relevant share market participations, consider evaluation of potential divestments in advance and also consider to share and negotiate said potential divestments with the Antitrust Tribunal. • Last year, the Antitrust Tribunal resolved to condition the approval of two transactions to the effective compliance of agreements to divest certain assets. Those agreements had been previously negotiated by the authorities and the parties. None of those transactions / divestment agreements were challenged. • On the contrary, on a different transaction that took place at the beginning of 2003, the authorities imposed certain conditions (divestment measures) that were not previously negotiated by the parties and the authorities. Those conditions have been challenged by competitors and are still pending of compliance. The delay involves high costs for the involved parties.

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