On September 24 2002 the Argentine Antitrust Commission interpreted (Consultative Opinion 170) that the Argentine Central Bank's decision to transfer certain privileged liabilities and assets of Banco Scotiabank Quilmes to Banco Comafi SA and Banco Bansud SA requires antitrust approval. This interpretation involves a conflict between Antitrust Law 25,156 and Financial Entities Law 21,526.
Section 35(2) of the Financial Entities Law contains a special procedure that authorizes the Central Bank to restructure certain financial institutions in order to protect credit and bank deposits. The Central Bank may revoke a financial institution's authorization to act as a financial entity, and may order the separation of certain assets and liabilities from the failed financial institution and transfer them to other financial entities.
The Section 35(2) procedure may involve market consolidation in light of the Antitrust Law. Section 6 of the Antitrust Law states that certain transactions are deemed to be market consolidations when they result in an assumption of control through an agreement or act by which company assets are transferred.
Such consolidation requires notice to and approval by the Antitrust Tribunal if the combined turnover of the companies involved in the transaction exceeds Ps200 million. This mandatory notice must be delivered within one week of the first to occur of either (i) the effective date of any transfer, or (ii) the publication of any cash tender or exchange offer. If the parties fail to comply with this requirement, they will be subject to a fine of up to Ps1 million for each day that notification is not made.
All Argentine financial operations of Banco Scotiabank were suspended by the Central Bank on April 18 2002. In August the Central Bank invited certain financial entities to bid for the assets and liabilities of Banco Scotiabank. Banco Comafi and Banco Bansud made offers to receive certain assets and liabilities of Banco Scotiabank.
Through Resolution 523 of August 20 2002, the Central Bank decided to separate certain assets and liabilities of Banco Scotiabank, and transfer (i) 65% of the liabilities to Banco Comafi and 35% to Banco Bansud, and (ii) the assets to a trust owned by Banco Comafi and Banco Bansud.
The Antitrust Commission did not intervene during the bidding and transfer process. However, the banks subsequently requested the Antitrust Commission to issue a consultative opinion on the matter. Under Section 8 of Regulatory Decree 89/2001, a request for an opinion suspends all terms for antitrust filings and thus suspends any potential imposition of fines.
In its consultative opinion, the Antitrust Commission held that the provisions of the Antitrust Law applied to the transaction, even though it had been reviewed and approved by the Central Bank. Therefore, the commission was also obliged to review the competitive effects of the transaction effected by the Central Bank in order to protect the local financial system. The Antitrust Commission stated that the Antitrust Law overrides all competition procedures provided under previous legislation. Therefore, the commission is the only government agency authorized to analyze the antitrust effects of the market consolidation caused by the revocation of Banco Scotiabank's status as a financial institution.
Financial restructuring transactions undertaken by the Central Bank under Section 35(2) of the Financial Entities Law must be notified to the Antitrust Commission, if the parties' combined volume of business exceeds Ps200 million. Otherwise, the Antitrust Commission may impose penalties of up to Ps1 million for each day that the parties fail to request antitrust approval.
For further information on this topic please contact Gabriel G Matarasso or Alfredo M O´Farrell at Marval, O'Farrell & Mairal by telephone (+54 11 4310 0100) or by fax (+ 54 11 4310 0200) or by email ([email protected] or [email protected]). The Marval, O'Farrell & Mairal website can be accessed at www.marval.com.ar.