Abogados
Professor
DANIEL ROQUE VÍTOLO
REPÚBLICA ARGENTINA

Argentina
Kitzbüehl

 AREA:
 POPULATION:
2.8 million Km2
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

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

• Energy
• Oil
• Gas
• Mining
• Agriculture
• Agricultural
Industries
• Food
• Transportation
• Iron
• Steel
• Communication
• Retail of Food
• Trading Centers
• Distribution
• Services
• Tourism

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

 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.)

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

• 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

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

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

• 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” .

• 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.

• 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

• 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

• 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

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

• 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

• 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.

They shall be in our hands !!!
• 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

• 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.-

(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

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

But nobody does that...

• 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 ...

• 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

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

• 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?

If the answer is NO, the business is authorized
If the answer is
YES go to the 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

Evaluation of the market power increase vs.
Efficiency productive profits
Business is authorized Business is denied Business is conditioned

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

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

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...

•
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

• 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?

•
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)?

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?

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

More pitfalls!
• 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

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

Vítolo Abogados