The Argentine Antitrust Commission reiterates the criteria set out previously by which the existence of family ties may entail the existence of a group of control.
In a recent resolution issued in the case “Conosur Comunicaciones S.A. e Inverinter S.A. s/ Consulta Interpretación Ley 25.156”,(1) the Secretary of Domestic Trade (the “Secretary”) resolved that the transaction under analysis should be notified for merger review based on certain family ties among shareholders that evidenced the existence of a group of control. This is a new precedent in which the Antitrust Commission (the “Commission”) considers the effects of kinship between shareholders of a company so as to determine whether the transaction meets the notification requirements set out by Section 8 of Law No. 25,156 (the “Antitrust Law”).
On May 8, 2013, the Secretary of Domestic Trade issued Resolution No. 40/2013 which concluded that the operation brought for consultation by the firms Conosur Comunicaciones S.A. (“Conosur Comunicaciones”) and Inverinter S.A. (“Inverinter”, and together with Conosur Comunicaciones, the “Parties”) had to be notified for merger review analysis in compliance with the requirement set out by Section 8 of Law No. 25,156 (the “Antitrust Law”). The transaction brought for consultation consisted of the acquisition by Inverinter of 98.7596% of the shares of Lacteos Conosur S.A. (“Lacteos Conosur”) held by Conosur Comunicaciones (the “Transaction”).
According to the Parties’ interpretation, the Transaction was exempted from complying with the merger review notification requirement since the volume of business of the involved parties did not surpass the AR$ 200 million threshold set out by Section 8 of the Antitrust Law. The Parties stated that the turnover of Lacteos Conosur should only be considered in this case and that said amount did not exceed by itself the threshold established by the Antitrust Law. Furthermore, the Parties also stated that it was impossible to determine the consideration actually paid in connection to the Transaction and whether it would actually exceed AR$ 20 million, the amount provided by the de minimis exemption included under Section 10, subsection e) of the Antitrust Law.
In connection with the application of the de minimis exemption provided for in Section 10, subsection e) of the Antitrust Law, the Commission concluded that it was not applicable to the case under analysis since the fixed amount together with the variable amount provided for the consideration would exceed the AR$ 20 million mark.
Moreover, regarding the determination of the volume of business, the Commission considered the distribution of shareholdings of Conosur Comunicaciones. Thus, of the five shareholders of Conosur Comunicaciones, four of them evidenced kinship relationships. Therefore, considering the family ties between four of the Conosur Comunicaciones whose shareholders considered together amounted to 50% of the total shares in the company, the Commission concluded that the turnover calculation should also include those companies with activities in Argentina in which these shareholders also held an interest. As a result, since the total turnover of all the other firms in which the related shareholders of Conosur Comunicaciones held interests exceeded the AR$ 200 million threshold, the Commission determined that the Transaction should undergo the merger review process pursuant to Section 8 of the Antitrust Law.
The Commission referred in this case to the criteria developed by the European Commission which performs a case by case analysis when analyzing the existence of family ties in order to regard them as circumstances evidencing de facto control. The Commission considered that in this particular case under analysis the kinship links should be considered since the family ties involved were between parents and their offspring. Therefore, the Commission stated that, provided the family connection between the aforementioned shareholders, it should be understood that they act as a group of control.
This is not the first occasion in which the Commission considers the effects of the exercise of control based on the existence of family ties. A first approximation on the issue by the Commission took place in the case “Slim Helu”(2) in which the parties to a transaction involving the transfer of shares in a company consulted the Commission regarding the obligation to report said transaction pursuant to the merger review analysis of economic concentrations set out by the Antitrust Law. In the above mentioned precedent the Commission stated that, since the family ties between shareholders of the buyer and seller evidenced that they acted as a group of control and therefore the transaction involved a mere corporate reorganization which did not entail a change in the structure of control. In this case there was also a kinship link between parents and offspring, since the shareholders of the involved companies of the transaction were Mr. Carlos Slim Helu and his six children.
This precedent reiterates the criteria set out by the “Slim Helu” case in which the Commission determined that the existence of family ties may entail the existence of a group of control. Thus, notwithstanding that following the criteria of the European Commission, the Commission conducts a case by case analysis, the approach on the existence of a control structure based on family ties is further reinforced by this precedent.