Merger control in Argentina: overview

A Q&A guide to merger control in Argentina.

The Q&A gives a high level overview of merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in Argentina. It also covers notification requirements, procedures and timetables, publicity and confidentiality, third party rights, substantive test, remedies, penalties, appeals, joint ventures and proposals for reform.

For information on restraints of trade, monopolies and abuses of market power in Argentina, visit Restraints of trade and dominance in Argentina: overview.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.

Contents

Merger control

 
1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction? What is the regulatory authority?

Regulatory framework

Mergers and acquisitions have been subject to control since 1980. The principal legislation comprises:

  • Competition Act No. 25,156 as amended by Law 26,993 of September 2014.

  • Civil and Commercial Code (section 11: Abuse of dominant position).

  • Decree 89/2001 (issued by the Executive Power).

  • Resolutions 14/99, 40/2001, 164/2001 and 26/2006 (all issued by the Interior Commerce Secretary (Secretario de Comercio Interior del Ministerio de Economía y Finanzas Públicas) (SECOM)).

The Competition Act applies to mergers and acquisitions that have an effect in the Argentine market. The Competition Act prohibits any conduct relating to the production and exchange of goods and services which limits, restricts, falsifies or distorts competition or market access, or which constitutes an abuse of a market dominant position in a way that may result in damage to the general public interest.

Section 11 of the new Civil and Commercial Code (in force from 1 August 2015) sets out that the provisions sanctioning the abusive exercise of rights (section 10) apply in cases of abuse of market position. This provision does not alter the remedies provided in specific competition law regulations (such as the Competition Act) and does not expand the principles of law that pre-existed the implementation of section 11. The newly enacted provisions on the abusive exercise of rights expressly grant judges the broad power to grant remedies that:

  • Restore the situation to its previous condition.

  • Compensate damage.

Regulatory authority

Law 26,993 creates a new regulatory authority (Autoridad de Aplicación) (AOA) to replace the old National Competition Tribunal (whose members were never appointed). However, until now, the AOA has not been put in operation by the Executive Power (PEN) and its functions are currently performed by the SECOM, which is assisted by the National Competition Commission (Comisión Nacional de Defensa de la Competencia) (CNDC).

Therefore, until the new members of the authority are designated by the PEN, SECOM (acting as the AOA) and the CNDC are primary regulatory authorities on all competition law matters. For purposes of this Guide, reference to the SECOM will imply reference to the AOA and vice versa.

Both the CNDC and SECOM report to the Ministry of Economy and Public Finance (Ministro de Economía y Finanzas Públicas) and while the CNDC issues recommendations to the SECOM, the SECOM is the authority that ultimately decides the cases and imposes sanctions and fines in accordance with the provisions of the Competition Act.

See box, The regulatory authorities.

 

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

Triggering events

The following transactions are deemed concentrations that are subject to review:

  • Merger between companies.

  • Transfers of a going concern.

  • Acquisitions of shares or any other kind of interest in a company that gives the acquirer control or substantial influence over that company.

  • Any other agreement or act transferring de jure or de facto control of the company. An acquisition of a minority interest amounts to an acquisition of control if the acquirer is also granted veto rights in relation to the "competitive strategy" of the company. If, by contrast, only defensive veto rights are granted to protect the investment, such rights are not deemed to constitute an acquisition of control.

Thresholds

An economic concentration must be notified to the CNDC if both:

  • It has an effect in the Argentine market, which may cover foreign-to-foreign transactions.

  • The aggregate turnover of the parties in Argentina exceeds ARS200 million in the previous year.

However, the following transactions are exempt from notification:

  • Acquisitions of shares if the acquirer already owns (directly or indirectly) 50% or more of the company's shares.

  • Acquisitions of company's bonds, debentures or shares with no voting rights or debt.

  • The acquisition of a single Argentine company by a single foreign company which does not own assets or shares in other companies in Argentina.

  • Acquisitions of liquidated companies with no business activity in Argentina in the previous year.

  • Concentrations where the amount of the transaction and the value of each asset located in Argentina to be acquired, transferred or controlled does not exceed ARS20 million, provided that:

    • in the 12 months preceding the transaction, the acquirer had not concluded any transaction or series of transactions which, in the aggregate, exceed such amount;

    • in the 36 months preceding the transaction, the acquirer had not concluded any transaction or series of transactions which, in the aggregate, exceed ARS60 million.

 

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

Economic concentrations that meet the relevant thresholds (see Question 2, Thresholds) must be notified for approval.

Timing

The transaction must be notified to the CNDC, either before or after the closing is made, at the latest within one week from either:

  • The date on which the closing (transfer of shares or assets) effectively occurs.

  • In the case of a tender or exchange offer, the date on which the offer is made public.

Pre notification formal/informal guidance

The parties can request an advisory opinion (Opiniones Consultivas) from the CNDC to determine whether or not notification of a particular transaction is required. The CNDC advisory opinions are regulated by Resolution 26/2006.

Responsibility for notification

The parties to the transaction are jointly responsible for the notification.

Relevant authority

Notification must be submitted to the CNDC (see Question 1, Regulatory authority).

Form of notification

Notification must be made in writing by submission of a Form F1 (F1) (Resolution 40/2001).

In complex cases the CNDC may require additional information via Form F2 (F2) or Form F3 (F3).

The above forms are available (in Spanish) at www.infoleg.gov.ar/infolegInternet/anexos/65000-69999/66243/norma.htm.

Filing fee

There are no filing fees.

Obligation to suspend

Under the Competition Act, a transaction will only be effective upon obtaining clearance or approval from SECOM, whether expressly or as a result of the expiration of the time limit (see Question 4). However, in many cases transactions are closed and implemented prior to obtaining competition clearance. Therefore, should an approval be denied, the transaction may need to be unwound or modified.

See Question 10.

 

Procedure and timetable

4. What are the applicable procedures and timetable?

The procedure begins with the submission of an F1, which must contain the following information:

  • The identity of the parties, their representatives and shareholders with an interest greater than 5% in the target.

  • Annual reports, description of business activities and background information about past investigations related to anti-competitive practices (if any).

  • Description of the concentration, detailed information concerning the transaction and description of the agreements to be entered into or already executed in connection with the investment.

  • Description of the relevant product market.

  • Description of the relevant geographical market.

If one of the parties operates in an industry sector subject to government regulation and agency oversight (for example, gas and power transmission and distribution, telecommunications), the CNDC must require the relevant agency to provide an opinion on the prospective transaction (section 16, Act). The agency must submit its opinion within 15 days from the CNDC's request. During this period, the applicable term for SECOM to give its opinion is not suspended. The agency's opinion is not binding on the CNDC. In case the agency does not respond within 15 days, the CNDC will consider that the relevant agency has no objections to the proposed concentration.

In complex cases, the CNDC can request additional information or ask the parties to clarify the information submitted, which could include a request to file an:

  • F2, which requires detailed information regarding the relevant market product (supply-side and offer-side substitution), relevant geographical market, production process, quantitative and qualitative market information, alternative or substitute products, production costs and efficiency gains.

  • F3, which may require information specifically prepared or defined by the CNDC.

The CNDC must require the submission of an F2 or F3, within 15 or 35 working days of the submission of an F1, respectively.

Once the CNDC has considered the information submitted in F1, F2 and F3 (as the case may be) and provided no additional information is required, it issues a recommendation to SECOM. The law is silent on the period within which the CNDC must make its recommendation to SECOM.

SECOM must issue a decision on the CNDC's recommendation within 45 days and if no decision is made within such term, the transaction is deemed cleared. SECOM can decide to:

  • Authorise the transaction.

  • Authorise the transaction subject to the fulfilment of conditions.

  • Prohibit or restrict the transaction.

The above mentioned periods are suspended in the following circumstances:

  • Further information is requested via an F2 or F3.

  • Information submitted under any Form is incomplete.

  • The CNDC decides to suspend the running of the period (whenever the CNDC believes there are reasonable grounds to suspend the term).

Due to the fact that the CNDC usually requests additional information or raises follow-up questions, final decisions regarding simple transactions regularly take from several months to one year from the filing of an F1. In complex transactions, it may take over a year for the final decision to be taken.

The merger clearance expires after one year in those cases where the transaction has not been implemented prior to the clearance decision.

For an overview of the notification process, see flowchart, Argentina: merger notifications.

 

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

Final decisions of the CNDC are published in the Official Gazette and may be published on the CNDC website (www.mecon.gov.ar/cndc/), unless confidentiality has been granted on a party's request. The information published only covers the decision or recommendation made.

Information is normally released at the conclusion of the procedure, when the decision is notified to the parties. No information is made public at the time the merger approval request is filed.

Automatic confidentiality

Information is not automatically kept confidential. The parties can request access to or copy proceedings documents, except for documents deemed confidential.

Confidentiality on request

The notifying parties can request that certain information submitted to the CNDC be kept confidential. Information, reports and documents that parties intend to keep confidential should be clearly identified. A confidentiality request may be admitted provided it is reasonably justified and a non-confidential summary is submitted by the interested party.

 

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

The Competition Act does not specifically grant third parties the right to make representations, access documents or be heard during the course of an investigation, unless the CNDC requests otherwise. The CNDC has broad powers to request additional information from governmental agencies, customers, competitors, suppliers, or relevant associations, including to request third parties' attendance at the CNDC hearings, which are not public.

While there is no express provision that grants third parties (including customers and competitors) the right to be heard in competition law proceedings, the Argentine Constitution grants interested parties the right to petition before the authorities.

Document access

Neither the Competition Act nor the implementing Regulations grant third parties access to the investigation files.

Be heard

See above, Representations.

 

Substantive test

7. What is the substantive test?

The Competition Act prohibits concentrations, the purpose or effect of which is to reduce, restrict or distort competition, in a manner that may be detrimental to the general economic interest. This prohibition applies to any transaction which either takes place in or has effects in Argentina. A concentration may harm the general economic interest if it creates or strengthens a company's market power sufficiently for it to restrict supply or increase prices.

 
8. What, if any, arguments can be used to counter competition issues (efficiencies, customer benefits)?

Resolution 164/2001 approving the guidelines for the control of economic concentrations including the notice rules (Lineamientos para el Control de las Concentraciones Económicas) (Guidelines) adopted a series of non-binding guidelines to be followed by the CNDC when analysing mergers and acquisitions.

Chapter VI of the Guidelines admit efficiency gains as an exceptional justification for a merger which creates or strengthens market power. All arguments in favour of the merger (for example, efficiency gains, consumer benefits such as an increase in product variety or, lower prices and so on) can therefore be used to demonstrate that the merger would not be detrimental for the general economic interest because it generates positive effects that outweigh the competitive concerns that it may raise.

The CNDC has so far not justified an economic concentration predominantly on possible efficiency gains, but in some cases it took this variable into account for approving, subject to undertakings, certain transactions that would have otherwise been prohibited.

 
9. Is it possible for the merging parties to raise a failing/exiting firm defence?

The "failing firm" defence that is explicitly provided in the horizontal merger guidelines issued by the US anti-trust agencies is not contemplated (neither favourably nor adversely) in the Guidelines.

 

Remedies, penalties and appeal

10. What remedies (commitments or undertakings) can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

Both behavioural and structural conditions to address competition concerns may be imposed by the authorities. These conditions must be fulfilled within the specified time frame. Conditions are usually imposed at the end of the merger clearance procedure but can be imposed during the evaluation stage, as a requirement for final clearance without imposing conditions.

Although the Competition Act does not provide for specific monitoring obligations, certain timing for fulfilment of conditions is typically imposed and the parties are usually required to submit reports evidencing compliance.

 
11. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

Failure to notify in due time is subject to a daily fine of up to ARS 1 million for each day of delay until the notification. The same amount may be imposed whenever the parties fail to comply with a cease-and-desist order. Other penalties may include dissolution or liquidation orders, prohibition to continue conducting business, and unwinding of transactions.

Along with the parties involved in the transaction, their administrators (that is, members of the governing boards and senior managers) and representatives are held jointly and severally liable for sanctions imposed on legal entities.

Implementation before approval or after prohibition

Transactions subject to clearance are not legally effective from a competition law perspective until such clearance is obtained. Given the confusing language of the Competition Act, and the very long periods that the authorities take to complete their review, it is quite common for concentrations to be completed prior to obtaining clearance. Such approach is not per se subject to penalties. However, depending on the contractual arrangement, one or both of the parties to the concentration run the risk of the subsequent prohibition or additional conditions being attached.

Implementation of the concentration after prohibition can result in the imposition of fines ranging from ARS10,000 to ARS150 million based on the significance of the damage caused, the benefits obtained by the parties and the value of the assets involved. The amount can be doubled in the case of repeat offenders.

Failure to observe

This is the same as for implementation after prohibition (see above, Implementation before approval or after prohibition).

 
12. Is there a right of appeal against the regulator's decision and what is the applicable procedure? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal

Decisions concerning business concentrations can be challenged by the notifying parties by submitting a motion before the competent court of appeals.

Procedure

The motion must be submitted to SECOM within ten business days from receiving notice of the decision. SECOM must refer the case to the competent court of appeals. The competent court is the national court of appeals with jurisdiction over consumer relations (Cámara Nacional de Apelaciones en las Relaciones del Consumo (CNARC), which is yet to be implemented. Until its actual implementation, the appeals are to be submitted before the court of appeals currently used to resolve these matters, which is the national court of appeals with jurisdiction over economic and business crimes (Cámara Nacional de Apelaciones en lo Penal Económico).

Despite the fact that the Competition Act states that the CNARC is competent to review the imposition of fines, a reasonable interpretation of the actual scope of the Competition Act makes the CNARC competent to review the below referenced decisions as well.

A motion can be filed before the CNARC to challenge the following decisions (section 52, Competition Act):

  • Decisions imposing fines.

  • Decisions imposing a restriction or cessation of a conduct.

  • Decisions that prohibit or impose conditions to an economic concentration.

  • Decisions rejecting a complaint.

Filling a motion to challenge the above decisions does not suspend its effects and, in case of decisions imposing fines, in order to file such motion, the corresponding fine must be paid (solve et repete).

Third party rights of appeal

General rights of appeal are not available to third parties. However, third parties may challenge decisions whenever they may cause irreparable damage. To date, there is no case law in relation to claims brought by third parties.

In addition, third parties can request SECOM to review a decision whenever it is believed to be based on false or incomplete information (section 15, Competition Act).

 

Automatic clearance of restrictive provisions

13. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

Unconditional clearance normally covers the entire transaction, including any restrictive provisions included in the relevant agreement. For example, non-compete covenants for periods normally not exceeding between five years have been regularly accepted.

 

Regulation of specific industries

14. What industries (if any) are specifically regulated?

The Competition Act does not provide special rules applicable to any particular industry or sector. However, if one of the parties operates in an industry sector subject to government regulation and agency oversight, the CNDC must request the relevant agency to provide an opinion on the prospective transaction (see Question 4).

 
15. Has the regulatory authority in your jurisdiction issued guidelines or policy on its approach in analysing mergers in a specific industry?

No. However, practitioners often look to CNDC and SECOM case-law for guidance.

 

Joint ventures

16. How are joint ventures analysed under competition law?

Concentrations by way of joint ventures are not expressly contemplated by the Competition Act. However, based on the language and purpose of the Competition Act, it is likely that a joint venture will be subject to scrutiny by the CNDC as a concentration, if all of the following apply:

  • Two or more persons join to acquire, exploit, manage or operate a business activity.

  • The activity is operated or managed as an independent enterprise or business unit.

  • The relevant threshold is exceeded.

  • The business activity is established or organised on a lasting basis.

 

Inter-agency co-operation

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to merger investigations? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information, remedies/settlements)?

The Competition Act does not contain rules providing for international cooperation in the field of information exchange and remedies/settlements. However, informal international cooperation could be expected on cross border concentrations and as a result of specific institutional initiatives.

A Cooperation Agreement entered between Argentina and Brazil on 16 October 2003 (ratified by Law 26,622 and in force from 2 October 2010) provides the cooperation between the competition regulatory authorities of both countries, including the exchange of information, consultation and meetings to exchange information.

Also a Protocol for the Defence of Competition and an Agreement for the Defence of Competition within the MERCOSUR were approved in December 1996 and in December 2010, but have not yet entered into force. The Protocol and Agreement contain specific provisions regarding cooperation between regulatory authorities.

 

Recent mergers

18. What notable recent mergers or proposed mergers have been reviewed by the regulatory authority in your jurisdiction and why is it notable?

In 2012, the authority reviewed the Bridas-Exxon case in which Bridas Corporation acquired 100% shares of Southern Cone International Holdings LLC, subsidiary of ExxonMobil International Holdings Inc. The operation is notable because the authority subjected the authorization to the expansion of the oil refinery which involved a considerable investment, expected to result in an increase of fuel production of 1,200,000 mt3/ per year and in an increase of gas production of more than 650,000 mt3/ per year. The condition, to which the approval was subjected, while unusual for a merger, was not challenged by the parties. The expansion project is nowadays subject to regular control and inspection of the SECOM.

 

Proposals for reform

19. Are there any proposals for reform concerning merger control?

The Competition Act No. 25,156 has been recently amended by Law 26,993. However, other proposed amendments to the Competition Act were submitted to Congress in 2014 and 2015 (at the time of writing this chapter, none have been debated). The proposals seek to increase both:

  • The fines for failure to comply with merger control rules and for participating in an anti-competitive practice (see Question 11).

  • The thresholds required for the notification of a merger (see Question 2).

 

The regulatory authorities

National Competition Commission (Comisión Nacional de Defensa de la Competencia) (CNDC)

Head. Ricardo A. Napolitani (President)
Contact details. Av. Julio A. Roca 651, 4th Floor – Zip Code 1322 - Ciudad Autónoma de Buenos Aires - Argentina
T +54 11 4349 3480
+54 11 4097 4349 4104/4107
F +54 11 4349 4125
E cndc@secind.mecon.ar
W www.cndc.gov.ar/

Outline structure. The CNDC is managed by a board comprising five members, one of which is appointed as President.

Responsibilities. The CNDC is empowered to:

  • Provide recommendations and opinions on business concentrations and on anti-competitive conduct (infringements).
  • Provide recommendations and opinions on sanctions and fines to be applied under the Competition Act.
  • Interpret the provisions of the Competition Act.
  • Adopt internal rules, procedures and policies.
  • Issue non-binding opinions on competition law matters.
  • Enter into agreements with consumers' associations.

Procedure for obtaining documents. The most substantive recommendations and decisions made by the CNDC are available on its website. The website also contains relevant laws, regulations and general information on the CNDC.

Authority of Application (Autoridad de Aplicación (AOA)). Nowadays entrusted to the Interior Commerce Secretary (Secretario de Comercio Interior del Ministerio de Economía y Finanzas Públicas) (SECOM)

Head. Augusto Costa (President)
Contact details. Av. Julio A. Roca 651, 4th Floor – Zip Code 1086 - Ciudad Autónoma de Buenos Aires - Argentina
T
+54 11 4349 3000
F
+54 11 4349 4125
E cndc@secind.mecon.ar
W
www.mecon.gov.ar/comerciointerior/

Responsibilities. The SECOM is empowered to (among others):

  • Impose the sanctions established in the Competition Act.
  • Arrange the performance of market studies.
  • Hold hearings with the involved parties.
  • Instruct experts to gather evidence relevant for any investigation.
  • Control the stock, check the origins and costs of raw materials and other goods.
  • Promote research and investigation on competition matters.
  • Encourage solutions mutually agreed by the parties.

Procedure for obtaining documents. The most substantive recommendations and decisions made by the CNDC are available on its website. The website also contains relevant laws, regulations and general information on the CNDC.



Online resources

National Competition Commission (Comisión Nacional de Defensa de la Competencia) (CNDC)

W www.cndc.gov.ar

Description. The CNDC's official website. Most rulings, reports and updated information on the CNDC's activities are available in Spanish.

Ministry of Economy

W www.infoleg.gov.ar

Description. The official website of the Ministry of Economy. Laws, rules and regulations are available in Spanish.

Supreme Court

W www.csjn.gov.ar

Description. The official website of the Supreme Court. Court decisions are available in Spanish.

Official Gazette

W www.boletinoficial.gov.ar/Inicio/Index.castle

Description. The official website of the Official Gazette.



Contributor profiles

Cristian J.P. Mitrani, Partner

Mitrani Caballero Ojam & Ruiz Moreno

T +54 11 4590 8605
F +54 11 4590 8606
E cristian.mitrani@mcolex.com
W www.mcolex.com

Professional qualifications. Argentina, lawyer, 1978

Areas of practice. Competition law; administrative law & business regulation; corporate law; corporate compliance and white collar crime.

Languages. Spanish, English, French, Italian

Professional associations/memberships. Member of the Chartered Institute of Arbitrators, the International Centre for Dispute Resolution (ICDR), the International Bar Association (IBA), and associate member of the American Bar Association (ABA).

María Teresa Recondo, Partner

Mitrani Caballero Ojam & Ruiz Moreno

T +54 11 4590 8631
F +54 11 4590 8601
E maria.recondo@mcolex.com
W www.mcolex.com

Professional qualifications. Argentina, lawyer, 1995

Areas of practice. Corporate law (cross-border transactions) and competition law.

Languages. Spanish, English

Soledad Vallejos Meana, Senior Associate

Mitrani Caballero Ojam & Ruiz Moreno

T +54 11 4590 8636
F +54 11 4590 8601
E soledad.vallejos.meana@mcolex.com
W www.mcolex.com

Professional qualifications. Argentina, lawyer, 2001

Areas of practice. Administrative and business regulation; competition law; white collar crime and international arbitration.

Languages. Spanish, English, French

María Paula Díaz, Senior Associate

Mitrani Caballero Ojam & Ruiz Moreno

T +54 11 4590 8617
F +54 11 4590 8601
E maria.paula.diaz@mcolex.com
W www.mcolex.com

Professional qualifications. Argentina, lawyer, 2005

Areas of practice. Corporate law (cross-border transactions); competition law; corporate compliance and white collar crime.

Languages. Spanish, English


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