An extract from The Dominance and Monopolies Review - 7th edition

Abuse

i Overview

The new Antitrust Law applies to all behaviours that have effects in the Argentine territory. This means that the new Antitrust Law is applied not only to acts and behaviours that occur in the Argentine territory, but also to certain acts or behaviours that take place in other countries and that have effects on the Argentine market.

With the enforcement of the new Antitrust Law, certain practices are considered per se illegal; this is new in the Argentine antitrust system, taking into consideration that, before the enforcement of the new Antitrust Law, all anticompetitive conducts were analysed by the rule of reason criterion. These practices, which are considered per se illegal, must be deemed null and will not generate any kind of effect. Practices considered per se illegal are listed under Section 2 of the new Antitrust Law, as follows:

  1. fixing, directly or indirectly, the price of the purchase or sale of products or services;
  2. establishing obligations of manufacturing, distributing, buying or commercialising a limited amount of goods, or providing a limited number, volume or frequency of services;
  3. dividing, distributing or horizontally imposing areas, portions or segments of the markets, clients or supply sources; or
  4. establishing or coordinating submissions or abstentions in public tenders.

Section 1 of the new Antitrust Law establishes that acts or behaviours relating to the production or trading of goods and services that limit, restrict or distort competition or constitute abuse of a dominant position in a market in a way that may result in (potential or actual) damage to the general economic interest, are prohibited and shall be sanctioned pursuant to the rules of the Law.

Further, Section 3 of the new Antitrust Law provides a detailed list of anticompetitive conduct that could be considered unlawful by the competition authorities. The types of anticompetitive conduct that will be analysed by the rule of reason criterion are:

  1. fixing, agreeing or manipulating, directly or indirectly, the price for the sale or purchase of goods and services in the market, as well as exchanging information for the same purpose or to the same effect;
  2. establishing obligations to produce, process, distribute, purchase or commercialise only a restricted or limited quantity of goods, or rendering a restricted or limited number, volume or frequency of services;
  3. agreeing upon the limitation or control of the technical development or investments bound to the production or commercialisation of goods and services;
  4. preventing or precluding third parties from entering or staying in a market, or excluding them from a market, or rendering this difficult;
  5. regulating goods or services markets, by agreeing to limit or control research and technological development, the production of goods or the rendering of services, or rendering difficult the investments bound to the production or distribution of goods and services;
  6. subordinating the sale of an asset to the acquisition of another or to the use of a service, or subordinating the rendering of a service to the use of another or the acquisition of an asset;
  7. submitting a purchase or sale to the condition of not using, acquiring, selling or supplying goods or services produced, processed, distributed or commercialised by a third party;
  8. imposing discriminatory conditions to the acquisition or alienation of goods or services, with no reason grounded on commercial uses and customs;
  9. refusing, without justification, to meet specific orders for the purchase or sale of goods or services, made in the conditions standing in the market involved; or
  10. suspending the supply of a dominant monopoly service in a market to a user of public utilities or public interest service.

The two basic offences under Section 3 of the new Antitrust Law are the limitation, restriction or distortion of competition or access to the market, and the abuse of dominant position. To be illegal, the two offences must be able to cause damage to the 'general economic interest'; this concept, while included in the new Antitrust Law, is not defined in the text of the Law, and has been interpreted, on several occasions, by courts and scholars in various ways. Currently, the undefined term 'general economic interest' is mostly likened to 'consumer welfare', which may be damaged if a conduct, act or behaviour has the potential to cause an increase in price or a reduction of the offer of the relevant product defined within the framework of an investigation.

Section 3 of the new Antitrust Law details 12 practices that are, to the extent that they fit in any event described in Section 1, anticompetitive. This list is not exhaustive; any conduct shall be considered anticompetitive when actions of Section 1 are involved.

Chapter 2, Section 5 of the new Antitrust Law is exclusively focused on dominant position. The definition of dominant position is stated in the new Antitrust Law as follows:

For the purpose of this Act, one or more persons are understood to have a dominant position when for a certain type of product or service it is the only one to supply or demand in the national market or in one or more parts of the world or, when not being the only one, it is not exposed to a material competition or, when due to the degree of vertical or horizontal integration it is in a position to determine the economic viability of a competitor sharing the market, in detriment of the latter.

To establish the effective existence of dominant position, Section 6 details a number of circumstances that shall be taken into account at the moment of analysing the position:

  1. the extent that the good or service involved can be replaced by other goods or services, either of local or foreign origin, and taking into consideration the conditions of the substitution and the time required to do so;
  2. the existence of regulatory restrictions that limit access to products, the offer of products or demand in the markets involved; and
  3. the extent that the allegedly responsible party may unilaterally have influence in the formation of prices or restrict the supply or demand in the market, and the extent to which its competitors are able to counterbalance such power.

Dominant position is not forbidden by the new Antitrust Law – the prohibition is only focused on the abuse of such dominant position. The abuse of dominant position is a unilateral conduct and, therefore, is not reliant on any kind of contract or agreement with competitors or third parties. According to the antitrust authorities, unilateral conduct 'stumbles upon the difficulty of determining to what extent such conducts are part of a valid or competitive behaviour or constitute or result manoeuvres whose meaning is simply to create impediments to entry or reside of competitors in a market'. Further, in May 2019, the CNDC published a guide for the analysis of exploitative abuse of dominant position. The aim of the guide is to establish different guidelines for foreseeable decisions.

ii Exclusionary and exploitative abuse: price discrimination

Practices that imply abuse of a dominant position usually involve those practices that obstruct the entry of potential competitors in the market and those that exclude existing competitors. Strictly, the abuse of a dominant position can be raised by exploitative or exclusionary conduct, acts or behaviours.

Abuse of a dominant position based on exclusionary conduct, acts or behaviours triggers a concern for the antitrust authorities that is based principally on the exclusion of one or more competitors in the market involved. In cases of abuse of dominant position based on exploitative conduct, the concerns of the antitrust authorities include price discrimination, imposition of exploitative prices, and any other conduct that tends to differentiate prices and commercial conditions between competitors in the same market.

The new Antitrust Law provides no guidelines on what market shares give rise to the existence of a dominant position in one or several markets.

In general terms, and considering the provisions established in Section 5 of the new Antitrust Law, a company is considered to have a dominant position when it is the only supplier of certain goods or services or when, as a consequence of the vertical or horizontal degree of integration, it is able to determine the economic feasibility of a competitor or participant on the market.

In effect, the CNDC has held that a position of dominance is the economic power that a company has to prevent effective competition from being maintained on a relevant market, thus enabling it to act to a great extent independently from its competitors, customers and consumers. It has also stated that a dominant position does not necessarily derive from an absolute dominance that may enable a company to exclude all competition, but it is enough for it to have a strong position that may allow it to act in a highly independent way.

Notwithstanding the above-mentioned as to the lack of a precise criteria in the Argentine legislation, the CNDC frequently adopts foreign criteria and precedents, namely the ones adopted by the EU Competition Commission, when considering the analysis of precedents.

In practice, such criteria may be used as guidelines when determining what shares may enable a company to act independently from its competitors. Following the practical approach usually adopted by the EU Competition Commission, it is possible to argue that shares lower than 30 per cent do not normally imply a position of dominance, while shares higher than 50 per cent do.

Defining what relevant markets are according to this analysis is no easy task. In most scenarios, the antitrust authorities may deem it necessary to perform a specific economic analysis on the products involved and the geographical areas in which such products are offered.

As previously mentioned, there is no specific prohibition in the new Antitrust Law for having a position of dominance, just for the abuse of it. Therefore, companies that have a dominant position should avoid participating in what may be considered as abusive conduct. Such conduct may include, but is not limited to:

  1. refusing to accept orders without objective reasons that justify such refusals;
  2. selling at prices that are equal to or below cost;
  3. imposing abusive contractual conditions;
  4. lowering prices temporarily (predatory pricing);
  5. applying temporary discounts or better conditions in specific areas with the aim of eliminating actual or potential competitors;
  6. applying different prices or sales conditions in similar scenarios (price discrimination); and
  7. subordinating the purchase or the sale (or the purchase or sale under certain conditions) to the condition of not using, buying, selling or providing goods or services offered by a third party, or subordinating the purchase of goods or services to the purchase of other goods or services.

The most important case in Argentine competition history regarding the abuse of a dominant position involved exploitative conduct, specifically, price discrimination, in 2002.

Yacimientos Petroliferos Fiscales (YPF) is one of the largest suppliers of liquefied petroleum gas (LPG) in Argentina, and was also the largest exporter of said product. The issue in this case was the pricing policy of YPF concerning its wholesale of LPG. The CNDC objected that YPF commercialised LPG in the local Argentine market at a higher price than it did in the markets where the company exports the product. In addition, YPF prohibited the foreign companies that buy the product from re-exporting the product into Argentina.

In this case, the former Secretariat of Trade took into consideration the recommendation of the CNDC for the fine imposed, which amounted to 109 million Argentine pesos. The decision of the former Secretariat of Trade was questioned by YPF in the courts; the fine was confirmed by the Supreme Court.