The goal of this note is to briefly cover some recent trends in Argentinean merger control, especially, those arising as a consequence of the adoption of the Competition Law No. 27,442 (hereafter, ”Competition Law”) in May 2018.
1. The effective implementation of the ex-ante merger control regime, although envisaged by the Competition Law, today remains uncertain
In May 2018 Argentina adopted a new Competition Law which intended to substantially amend and modernize the competition law framework that had been in force in the country for almost 20 years.
The Competition Law envisaged several substantial modifications, two of which are relevant to merger control enforcement: 1) the adoption of a ex-ante or suspensive merger control regime whereby reportable economic concentrations could not be consummated without prior clearance from the National Competition Authority; and (2) the creation of a new, independent competition authority, i.e. the National Competition Authority, which would supersede the Secretary of Domestic Trade -a political appointee- as the enforcement authority of the Competition Law. Pursuant to the Competition Law, the National Competition Authority’s members are to be selected by the Executive Branch and subsequently agreed to by the Senate. The Competition Law also established that the ex-ante merger control regime would only enter into force one year after the establishment of the National Competition Authority by the Executive Branch.
Until now the Argentine government has not set up the new National Competition Authority as mandated by the Competition Law, which would in turn allow the one-year transition period to start running and thus allow the implementation of the suspensory merger control review.
However, a bill to amend the Competition Law, introduced by the ruling party, was approved by the Senate on February 4, 2021 and subsequently sent to the House of Representatives for analysis. The bill intends to introduce sweeping modifications to the Competition Law passed in 2018, but in this note we will only address those changes relating to merger control review.
If the bill is approved, the ex-ante merger control regime will enter into force 90 business days after the new law is published in the Official Gazette (and not one year after the creation of the new National Competition Authority as established in the current Competition Law as explained above). Once the 90-business-days period elapses, reportable economic concentrations cannot be consummated in Argentina without prior antitrust approval by the Secretary of Domestic Trade. If the bill is not approved by the House of Representatives by November 30, 2022, it will lose its parliamentary status. After losing its parliamentary status, such bill could only be passed into law if it re-enters Congress and goes through the whole congressional approval process (notably, requiring the approval of both chambers of Congress).
Consequently, the Argentinean merger control system continues to be ex-post, whereby the notification of a reportable transaction can be lodged up until 1 week after closing or the acquisition of control, whichever occurs first.
2. A novel tool: the use of Objection Reports in merger control review
The Competition Law of 2018 introduced a novel tool in the framework of merger control review: the issuance of a preliminary report by the Secretary of Domestic Trade (so-called Objection Report) for those transactions deemed to pose competition concerns.
The Objection Report is only a preliminary and initial report, which does not entail a definitive finding of infringement or opposition by the Secretary of Domestic Trade. Once communicated to the merging parties, these have 15 business days to submit their views and comments to the Objection Report and/or offer mitigating measures.
Once notified to the merging parties, the Objection Report is subsequently published on the CNDC’s website for third parties to submit their opinion and views (if they so wish) on the Objection Report, which are not binding on the Competition Authority. Thereafter, the merging parties shall be summoned to a special hearing to discuss potential mitigating measures to address the concerns laid out in the Objection Report.
Since May 2018 when the Competition Law entered into force until today, the Secretary of Domestic Trade has issued Objection Reports in four different economic concentrations (all of them since late 2020).
3. The issuance of injunctions to suspend the implementation of a consummated merger
In June 2021, as part of the Objection Report in the Mirgor/Brighstar Argentina merger, the Secretary of Domestic Trade -to prevent a potential irreparable harm to competition- issued for the first time ever an injunction ordering the purchaser to keep its business separated from the target in the manner they were prior to the closing of the reported economic concentration until a final decision was adopted. Importantly, the injunction preventing the parties from effectively merging their activities was issued almost eight months after the closing of the transaction.
The use of injunctions in merger review is extremely uncommon and such tool was last used by the CNDC more than 10 years ago in a highly political transaction (Telefónica de España/Telco), which had been consummated almost two years prior to the injunction.
This report should not be considered as legal or any other type of advice by Allende & Brea.
