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Trends and climate
How would you describe the current merger control climate, including any trends in particular industry sectors?
There is a general consensus among private practitioners that the gap between the statutory merger review term (45 business days) and existing practice (at least two years) has reached a level that is hard to justify. Argentina now ranks among those jurisdictions in which final merger decisions take longest to obtain, to the detriment of the effective enforcement of competition laws. However, there is hope that the next administration may get things back to normal.
Although most decisions are soundly based, some have been affected by the lack of independence of the competition authorities. For example, the merger between Cablevisión and Multicanal – at the time, the two largest cable television companies in Argentina – was approved in 2007 subject to a series of non-competition related commitments, which shortly thereafter were considered not to have been fulfilled in their entirety due to a change in the relationship of the merging parties with the government. The approval of the merger was therefore revoked. Although this is an extreme example, it serves as a reminder that sometimes in Argentina, factors other than competition law are involved in the review process.
Are there are any proposals to reform or amend the existing merger control regime?
The Antitrust Tribunal – created by the Competition Act (25,156/1999) – awaited implementation for many years. However, a 2014 amendment to the Competition Act (Act 26,993/2014) eliminated all references to the Antitrust Tribunal and amended other important aspects of the law (eg, the creation of new appeal courts). None of these amendments was released for public consultation in advance. However, it is expected that the law will be thoroughly revised in the future.
Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
Economic concentrations are currently examined under the Competition Act (25,156/1999), as regulated by Decree-Law 89/200 and amended by Decree-Law 396/2001 and the 2014 amendment to the Competition Act (Act 26,993/2014).
The Competition Act is divided into nine chapters as follows:
- Chapter I – Prohibited agreements and practices, which sets out the substantive test and includes a non-exhaustive list of anti-competitive practices;
- Chapter II – Dominant position, which sets out the parameters that should be considered in determining the existence of a dominant position in certain markets;
- Chapter III – Economic concentrations and mergers, which includes a mandatory merger control regime;
- Chapter IV – Authority, which establishes that the executive power will determine the enforcement agency for the application of the Competition Act, describes its authority and creates the Antitrust National Registry;
- Chapter V – Budget, which was revoked by the 2014 amendment to the Competition Act;
- Chapter VI – Proceeding, which deals with the administrative proceedings for investigating anti-competitive practices;
- Chapter VII – Sanctions, which lists applicable penalties and includes guidelines for the application of fines;
- Chapter VIII – Appeals, which indicates which decisions might be subject to direct appeal, specifies the term and procedure for appeals and identifies the competent courts to hear cases. It also incorporates the solve et repeteprinciple (ie, respect obligations before asking for reimbursement) in connection with appeals of fines;
- Chapter IX – Statute of limitations, which indicates the applicable statute of limitations and how the term is interrupted; and
- Chapter X – Transitory and complementary provisions, which includes some additional complementary provisions, such as supplemental applicable law.
Further, there are secondary sources which deal with procedural aspects of merger control, such as:
Resolution 40/2001 of the former Secretariat for Competition and Consumer Protection, which describes the procedure for the notification of economic concentrations, including:
- the basic definitions needed to understand the scope of the standard template and notification forms included therein;
- the first and second stage notification forms (Form 1 and Form 2); and
- a fast-track procedure for the analysis of economic concentrations, which is rarely followed;
Resolution 164/2001 on the Guidelines for the Control of Economic Concentrations and the Economic Concentrations Notification Rules, which was issued by the former Secretariat for Competition, Deregulation and Consumer Protection, which adopts non-binding guidelines to be followed in the analysis of economic concentrations; and
Resolution 26/2006 of the former Secretariat of Technical Coordination, which amends the procedure applicable for the issuance of advisory opinions by:
- making them binding;
- providing that the Secretariat of Technical Coordination will adjudicate decisions in this area and that the role of the National Antitrust Commission is limited to issuing non-binding opinions to the secretariat; and
- providing for the possibility to appeal such decisions.
Finally, Section 56 of the Competition Law sets out that in those cases not foreseen therein, administrative procedural law will apply.
What is the relevant authority?
The Secretariat of Trade and the National Antitrust Commission – an advisory and technical agency within the auspices of the Ministry of Economy – apply the previous Competition Act (Law 22,262/1980) under a dual-agency structure.
As anticipated, when the current Competition Act (25,156/1999) was passed, it provided for the creation of the Antitrust Tribunal as an independent sole agency in lieu of the dual-agency system then in force, whereby the National Antitrust Commission conducted investigations and issued non-binding opinions to the secretary of state, who adjudicated decisions.
Before the 2014 amendment to the Competition Act (Act 26,993/2014), Section 58 of the Competition Act provided that the public authorities appointed under the previous Competition Act (Law 22,262/1980) were empowered to apply the competition legislation until the National Antitrust Tribunal was formed. Over the years, members of the National Antitrust Tribunal were not elected and that led to a number of decisions being taken by the National Antitrust Commission and the Secretariat of Trade. The issue was settled in a series of cases, most notably in Credit Suisse, where the Supreme Court stated that the dual-agency system created by the former Competition Act was still in force.
The 2014 amendment deleted all references to the National Antitrust Tribunal from the Competition Act, stripped the National Antitrust Commission of many of its powers – thus weakening any existing decisional power – and established that the act’s new enforcement agency would be designated by the executive power. It also stated that the new enforcement agency would be assisted by the National Antitrust Commission as an advisory technical body.
As anticipated, and despite the fact that the 2014 amendment did not foresee this, the Secretariat of Trade and the National Antitrust Commission will apply the Competition Act until the new enforcement authority is established.
The regulation is yet to be issued, but presumably the new enforcement agency will be dependent on the Secretariat of Trade or act in coordination with it, thus altering the principles of autonomy and independence fostered by the original wording of the act when it created the National Antitrust Tribunal as an independent agency.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
Section 6 of the Competition Act (25,156/1999) provides that merger control is exercised over any “economic concentration of enterprises”. This is defined as the acquisition of control over one or more companies, business units, going concerns or assets from which an independent turnover can be identified by means of:
- a merger;
- the transfer of a going concern;
- the acquisition of property or share rights (where the acquisition gives the acquirer control of or substantial influence over an enterprise); or
- any act or agreement that transfers to a party or economic group a decisive influence on the passage of resolutions that relate to the ordinary or extraordinary management of a particular enterprise.
Do thresholds apply to determine when a transaction is caught by the legislation?
Section 8 of the Competition Act (25,156/1999) provides that an economic concentration will be subject to merger control if the total business volume of the group of affected companies exceeds Ps200 million, unless a special exemption applies. For the purposes of this test, the Competition Act defines ‘affected companies’ as:
- the company of which control is acquired (the target); and
- the company that acquires this control.
‘Total business volume’ is defined as the sum that results from the sale of products and rendering of services by the affected companies during the last fiscal year related to their ordinary activities, after deducting any sales discounts, value added tax and other taxes directly related to the business.
Section 8 also identifies the group of companies for which local turnover must be taken into account for threshold purposes as follows:
- the undertaking concerned;
- undertakings in which the undertaking concerned directly or indirectly:
- owns more than half of the capital or issued capital;
- has the power to exercise more than half of the voting rights;
- has the power to appoint more than half of the members of the supervisory board, the administrative board or bodies that legally represent the undertakings; or
- has the right to manage their affairs – the right to manage their affairs is considered applicable to all situations where the relevant company exercises at least substantial influence over another undertaking (ie, the standard test to determine the existence of an economic concentration);
- undertakings which have the rights or powers listed in the second point above in the undertaking concerned;
- undertakings in which an undertaking as referred to in the third point above has the rights or powers listed in the second point above; and
- undertakings in which several undertakings, as referred to in the first to fourth points above jointly have the rights or powers listed in the second point – this provision replicates the language of the EU’s Merger Regulation, but there are no specific exemptions regarding inter-group sales or joint undertakings.
However, the National Antitrust Commission has the power to review transactions that fall below the threshold and to investigate them as it would any potential anti-competitive conduct, given that the substantial test for clearance applies to all concentrations regardless of whether they must be mandatorily notified.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
Although informal guidance from National Antitrust Commission officials on a possible merger may be obtained, this opinion may not reflect the agency’s eventual position on the particular case and therefore its usefulness is questionable.
A typical procedure to obtain clarification as to whether a certain economic concentration is exempt from notification (ie, a jurisdictional perspective) is a request for an advisory opinion, which is an opinion issued by the enforcement authority – after receiving the National Antitrust Commission’s recommendations – on whether a certain concentration requires mandatory notification.
Resolution 26/2006 provides for a fast-track procedure, whereby:
- the commission must ask any follow-up questions within five days of the receipt of the original request;
- the parties must answer these questions within five days;
- the commission must issue its recommendation to the Secretariat of Trade within 10 days of the original request; and
- the Secretariat of Trade must make a decision within five days of the commission’s recommendation.
In contrast, the request for an advisory opinion suspends the notification deadline and thus the parties can obtain this opinion without infringing the mandatory terms for filing a notification.
However, consistent with the commission’s general practice, these procedures are not followed by the authorities and repeated information requests are generally made by the commission, which extends the overall review period for several months, thus making this procedure inefficient.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
The Competition Act (25,156/1999) applies to companies that undertake economic activities in Argentina (ie, through subsidiaries or branch offices) or abroad, where such activities, acts or agreements have effects on the Argentine market. In such cases, the National Antitrust Commission may consider that a foreign-to-foreign merger should be subject to notification, even if the de minimis exemption of Section 10(e) of the Competition Act would otherwise apply. Similarly, a transaction may be exempt from notification if it produces insignificant effects on the Argentine market.
The view of the authorities in this regard is to increase rather than reduce the number of transactions that are subject to notification; thus, the application of the effects test is assessed on a case-by-case basis. Further, the Argentine authorities have no jurisdiction to decide on the effects of a merger outside of Argentina.
What types of joint venture are caught by the legislation?
All types of joint venture – sole-to-joint ownership, joint-to-sole ownership and a change in the structure of control in the case of a significant change from one type of joint ownership to another – are caught by the legislation insofar as they result in a transfer of control of a business or assets from one party to another that meets the criteria of Section 6 of the Competition Act (25,156/1999), which provides that merger control is exercised over any economic concentration of enterprises.
Process and timing
Is the notification process voluntary or mandatory?
Filing is mandatory, with the following exceptions:
- intra-group transactions or acquisitions of enterprises in which the acquirer already owns more than 50% of the shares or voting rights thereof. In this case the authorities require that the acquirer has had exclusive control over the target prior to the acquisition;
- the acquisition of a single enterprise by a foreign investor that has never owned shares or assets in Argentina. In the past the National Antitrust Commission has accepted the application of this exception to more than one company, provided that they were in the same line of business and subject to common control;
- the purchase of bonds and non-voting shares of liquidated companies, the latter being those with no activity in Argentina in the preceding year; and
- acquisitions where neither the amount of the transaction nor the value of the assets located in Argentina being acquired, transferred or controlled exceeds Ps20 million, unless transactions were entered into in the same market that on aggregate exceeded Ps20 million in the last 12 months or Ps60 million in the last 36 months (Article 10(e) of the Competition Act (25,156/1999)).
The National Antitrust Commission has generally interpreted the ‘amount of the transaction’ as the Argentine portion of it, although where this cannot be clearly identified, an alternative analysis is carried out to conclude whether this part of the test would be met. Regarding asset valuation, the National Antitrust Commission has generally accepted the information in the target’s balance sheets.
What timing requirements apply when filing a notification?
According to Section 8 of the Competition Act (25,156/1999), notification must be made prior to or within one week of the date of the conclusion of an agreement, publication of purchase, exchange offer or acquisition of a controlling participation, whichever happens first.
For the purposes of this provision, the term of notification should be calculated as follows:
- in the case of mergers between undertakings, the closing date on which the definitive merger agreement is executed;
- in the case of transfers of going concerns, the date on which the sale agreement is registered with the Public Registry of Commerce;
- in the case of the acquisition of ownership or any right over shares or capital participations, the date on which the acquisition of such rights is finalised; and
- in other cases, the date on which the transaction is finalised pursuant to applicable laws.
What form should the notification take? What content is required?
All parties to the relevant transaction (ie, the buyer and seller or merging parties) should provide notification of an economic concentration by filing Form 1 and, if required, Forms 2 and 3. The contents of Forms 1 and 2 are detailed in Resolution 40, while Form 3 is tailor-made by the National Antitrust Commission according to the specific concentration.
Form 1 requires the following information:
- from the notifying parties – name and domicile, incorporation information, representatives and persons responsible for the preparation of the form, and details of shareholders;
- from the affected enterprises – a description of activities, latest annual reports and financial statements, organisational charts, a description of relevant and substitute products, the geographical areas in which those products are sold, details of the manufacturing process, market size and information on investigations into anti-competitive conduct or anti-dumping laws that involve the affected enterprises in any jurisdiction; and
- from the economic concentration being notified – a description and main components of the concentration, transaction documents and details of other foreign merger control authorities to which it has been submitted for approval and the status of such proceedings.
Form 2 focuses on gaining further information on the relevant product, supply-side and offer-side substitution, the relevant geographic market, qualitative and quantitative market information, production costs and efficiency gains. However, in practice, most filings – even if made under Form 1 – are subject to an additional set of questions that place it closer to a second-stage proceeding.
Is there a pre-notification process before formal notification, and if so, what does this involve?
The only existing pre-notification alternative is the advisory opinion (ie, an opinion issued by the enforcement authority – after receiving the National Antitrust Commission’s recommendations – on whether a certain concentration requires mandatory notification). However, given its voluntary nature, it cannot be strictly considered a pre-notification process.
Can a merger be implemented before clearance is obtained?
Section 8 of the Competition Act (25,156/1999) provides that the act will produce effects between the parties or in relation to third parties only once Sections 13 and 14, as appropriate, are complied with (ie, once tacit or express approval has been granted by the enforcement authority). Under Section 13, a final decision must authorise, prohibit or subject a merger to the fulfilment of undertakings; while Section 14 provides for tacit approval if no decision is issued within 45 business days.
This prevents post-closing filings or at least forces the parties to maintain the status quo until approval has been granted. However, in practice, the National Antitrust Commission has interpreted this provision as a subsequent condition (ie, the transaction produced effects until subjected to undertakings or until it was prohibited).
A conservative approach would advise entering into hold-separate arrangements or, at a minimum, the de factoimplementation of such agreements (ie, avoiding the appointment of new directors or managers and not changing the target’s commercial policies) until clearance, at least in transactions entailing substantial merger control risks.
Although the Competition Act does not foresee penalties for notifying parties that close a transaction before clearance, a reasonable interpretation of this would be that penalties could be applied under Section 1 (which covers anti-competitive acts in general) and Section 7 (which sets out the substantive test for clearance), as any activity performed by the affected enterprises during that period would be deemed as if made by independent parties. In this scenario, a separate investigation would be required. Further, injunctions may be issued by the competition agencies or the courts that suspend the effects of economic concentrations subject to review.
Guidance from authorities
What guidance is available from the authorities?
Resolution 40 describes the procedure for the notification of economic concentrations, including the relevant definitions needed to understand the scope of the standard template notification forms included therein and the first and second stage notification forms (ie, Form 1 and Form 2).
What fees are payable to the authority for filing a notification?
No fees are payable. The 2014 amendment to the Competition Act (Act 26,993/2014) eliminated the option for the enforcement authority to have its own budget and set fees for proceedings that fall under its remit (eg, in the case of merger filings).
Publicity and confidentiality
What provisions apply regarding publicity and confidentiality?
In principle, the process is not made public (with the exception of final resolutions of the National Antitrust Commission and the Secretariat of Trade). Only the notifying parties have access to the filing and the public officials handling files at the commission and the secretariat must maintain the confidentiality of this information. Failure to do so may subject the official to civil and criminal liability.
As regards the protection of commercially sensitive information, the notifying parties may request that data, reports or documents contained in the filings remain fully or partially confidential, in which case they must prove at a minimum their confidential nature and that under no circumstances would this information be advantageous to the investigation conducted by the commission. Further, the parties must provide a non-confidential summary of such information to make it available for inclusion in the final decision.
If the commission decides not to grant confidentiality, it should notify the affected party to allow it to decide whether to withdraw the information from the file within five days of receiving the notification or waive the confidentiality request.
Are there any penalties for failing to notify a merger?
Section 46(d) of the Competition Act (25,156/1999) provides for the imposition of fines of up to Ps1 million per day of delay in reporting a merger. In this regard, Section 47 of the act provides that legal entities are liable for the conduct of individuals acting on their behalf, while Section 48 makes them jointly and severally liable with the company for payment of the fine.
The National Antitrust Commission and the Secretariat of Trade actively enforce late filing fines, the most notable example being the Ps104 million fine imposed on Telefónica SA in 2013.
Procedure and test
Procedure and timetable
What procedures are followed by the authority? What is the timetable for the merger investigation?
The submission of Form 1, and Forms 2 and 3 if required, is followed by numerous requests for information issued by the National Antitrust Commission. These requests are generally simple at the beginning of the proceedings, but become longer and more complex as the process progresses. Further, at any point in the process the notifying parties can present other relevant information, which will generally be considered by the authorities.
Although the 2014 amendment to the Competition Act (Act 26,993/2014) removed many of the National Antitrust Commission’s former powers, it still has wide-ranging investigative powers, which are exercised according to the complexity of each merger. Simple mergers may be decided on the basis of the information presented by the notifying parties and public information, while more complex mergers may also involve hearings with competitors, customers (through a public hearing) and suppliers, and even compulsory requests for internal documents from the notifying parties and third parties.
The commission has 45 business days from the initial filing to issue its final resolution. However, the Secretariat of Trade is authorised to extend this period for a justifiable reason. In practice, the commission almost always considers the information submitted by the parties as incomplete, thus suspending this term repeatedly and extending the effective review term to up to 18 months or more.
Section 13 of the act also provides for a waiting period of 45 business days, after which the transaction is deemed to have been tacitly approved. However, due to the way that the commission applies suspensions to the review term, a transaction will rarely lack a written decision that would allow it to be considered to have been tacitly approved.
What obligations are imposed on the parties during the process?
The parties must cooperate with the authorities and provide all information that the former considers to be relevant. This obligation is reinforced by the Competition Act (25,156/1999), which provides for the termination of the proceedings if the parties do not comply with an information request after 30 working days. Further, the National Antitrust Commission may also consider non-compliance as a means of obstructing or impairing an investigation; this conduct is subject to daily fines of up to Ps500. The termination of proceedings and the application of fines are not automatic, as the law provides that the alleged infringer must be given the opportunity to provide explanations and evidence in its defence.
Section 8 of the act provides that acts will produce effects between the parties or in relation to third parties only once tacit or express approval has been granted by the enforcement authority. Therefore, a conservative approach to the act would avoid any act or conduct that could be deemed as gun-jumping by the authorities, despite the fact that the commission has rarely enforced gun-jumping practices.
What role can third parties play in the process?
During the review process, the National Antitrust Commission may conduct testimonial hearings with competitors, customers or suppliers of the affected companies, as well as public hearings in which consumer and industry groups can participate and put their case forward. In principle, third parties cannot be party to merger proceedings or appeal final decisions. However, third parties can and have requested injunctions from the courts to suspend the implementation of a merger pending the review process.
What is the substantive test applied by the authority?
Section 7 of the Competition Act (25,156/1999) prohibits economic concentrations whose object or effect is or may be to restrict or reduce competition to the detriment of the general economic interest. The Guidelines for the Control of Economic Concentrations and Supreme Court decisions have integrated this last concept with that of consumer surplus.
Does the legislation allow carve-out agreements in order to avoid delaying the global closing?
Given that the Competition Act (25,156/1999) allows for post-closing filings, global closings need not be delayed. Due to the contradiction that arises from the provisions that suspend the effects of the transaction in Argentina until clearance, carve-out agreements seem ideal. However, in cases with little or no competitive effects, they may not be needed based on existing National Antitrust Commission practice.
Test for joint ventures
Is a special substantive test applied for joint ventures?
No. If the joint venture results in a transfer of control of a business or assets, the standard substantive test (ie, Section 7 of the Competition Act (25,156/1999)) will apply.
What are the potential outcomes of the merger investigation? Please include reference to potential remedies, conditions and undertakings.
Under Section 13 of the Competition Act (25,156/1999), the potential outcomes of the merger investigation may include:
- the approval of the transaction;
- the imposition of conditions or undertakings to be fulfilled; or
- the prohibition of the transaction.
Undertakings are generally structural or behavioural. Most structural remedies have been imposed in horizontal cases, where the degree of concentration in the relevant market was considered excessive and the authorities sought to restrict the effects of the transaction as much as possible. The authorities are generally inclined to discuss undertakings with the parties, which the 2014 amendment to the Competition Act (Act 26,993/2014) has formally incorporated therein.
Behavioural undertakings can adopt many forms, including:
- the amendment of clauses in the documents relating to the notified transaction;
- non-discrimination warnings, normally within vertical cases where there may be a risk of restrictions in the sale of particular items to competitors of the merging parties downstream or warnings against tying practices; and
- not increasing market share in the given market for a certain period.
In certain cases, behavioural undertakings have been drafted in broad terms by the authorities, even extending into areas other than competition law. The determination of whether these have been fulfilled by the parties has become a challenge.
Right of appeal
Is there a right of appeal?
Yes. The parties to a transaction have the right to a judicial review of decisions that block a transaction or impose undertakings on the parties.
Appeals must be filed before the enforcement authority within 10 business days of notification of the resolution. The authority must transfer the file to the National Court of Appeals in Consumer Protection Matters – created by the 2014 amendment to the Competition Act (Act 26,993/2014) – or the corresponding federal court of appeals in the provinces within an additional 10 business days of filing the appeal. At present, the courts of appeal have not been created and consequently in Buenos Aires the courts that will hear an appeal are:
- the National Court of Appeals on Civil and Commercial Matters; and
- the National Court of Appeals on Economic Crimes.
The judicial review is unrestricted in scope and does not suspend the effects of the relevant orders or resolutions concerning cease-and-desist orders and resolutions prohibiting economic concentrations or making them conditional on certain undertakings.
As per the 2014 amendment, appeals against the imposition of fines no longer have suspensory effect, as it is compulsory to file evidence of payment of the fine jointly with the appeal brief under penalty of immediate dismissal, except where there is a risk of irreparable damage to the appellant.
Do third parties have a right of appeal?
This right is not specifically foreseen in the Competition Act (25,156/1999). However, according to the relevant case law, third parties may eventually appeal a decision that they perceive has unfairly affected their interests. In such cases, the results of an appeal will rest on whether the decision challenged caused the plaintiff a concrete injury.
In the Quilmes/Ambev merger proceeding, Isenbeck – a competing beer company – requested that the National Antitrust Commission allow it to act as a third-party plaintiff in the case. The petition was rejected by the National Antitrust Commission and the National Court of Appeals on Civil and Commercial Matters. Nonetheless, the court suggested that Isenbeck might appeal the Secretariat of Trade’s final decision and that the plausibility of such an appeal would depend on whether the decision caused the plaintiff a concrete injury. The transaction was later approved, subject to undertakings, and was then appealed by Isenbeck and a member of the National Congress. The appeals were dismissed for failure to prove irreparable damage, but the Commercial Court of Appeals left open the possibility of a third party initiating amparo proceedings (ie, an expeditious constitutional action available when other judicial means have been exhausted). As a result, several amparo proceedings have been filed in this and other cases, causing additional delays to the affected merger review process.
What is the time limit for any appeal?
The term in which to file appeals of final decisions from the enforcement agency is 10 working days.
Law stated date
Correct as of
Please state the date as of which the law stated here is accurate.
May 1 2015.