According to the Antitrust Law, certain transactions are deemed to be economic concentrations when they result in the assumption of control of one or more companies by means of any of the following acts:
- transfer of businesses;
- acquisition of shares or equity interests, any interest thereto, convertible debt securities or securities that grant the acquirer control of, or a substantial influence over, the issuer; and
- any other agreement or act through which assets of a company are transferred to a person or economic group, or which gives decision-making control over the ordinary or extraordinary management decisions of a company.
These economic concentrations require approval if the aggregate volume of business of the companies involved in the transaction exceeds 100 million Adjustable Units in Argentina. Please note that all the amounts set out by the new Antitrust Law will now be fixed in Adjustable Units, which will be adjusted on an annual basis. The initial value has been set at 1 Adjustable Unit = 20 Argentine pesos. At the time of writing, the relevant authority has not yet updated this unit. The volume of business is defined as the combined gross sales of products or services of the target and the buyer during the preceding fiscal year arising from their ordinary businesses, net of discount sales, value added tax and other taxes directly related to the volume of business.
Economic concentrations that fall within this definition must be mandatorily notified to the Antitrust Commission for clearance. The new Antitrust Law sets out a suspensive system according to which companies will not be able to close a transaction without the prior authorisation of the Antitrust Commission. However, this system will enter into force one year after the creation of the new Antitrust Authority. Therefore, it is expected that the suspensive system will enter into force during the first quarter of 2020 on a best-case scenario. In the interim period, the post-closing notification is applicable, according to which the mandatory notice must be delivered prior to or within seven calendar days after the closing of the transaction or the publication of any cash tender or exchange offer.
Upon submission of the notice, the Antitrust Commission and the Secretary of Trade have 45 business days (such term is suspended in cases where additional information is requested) in which to decide whether to unconditionally approve the transaction; approve the transaction, but impose conditions; or reject the transaction. Should the Antitrust Commission consider the transaction may restrict or distort competition, prior to the issuance of its final decision, it must communicate in writing its objection to the parties (statement of objections) and summon a special hearing to consider the remedies. In these cases, the term to resolve is extended by up to 120 additional business days.
If a decision is not issued within 45 business days of the filing of an application and relevant documents, the transaction shall be considered tacitly approved. However, it should be noted that the current average review time frame is of nine to 12 months, even in non-material transactions, due to a stop-the-clock interpretation by the Antitrust Commission, which considers that the first request for information stops the 45-business-day term until it has obtained all necessary answers for the issuance of its decision. Under the new Antitrust Law, there is a summary proceeding foreseen for certain concentrations (fast-track), for which the review time frame for approval is approximately three months.
The transaction has no effects with regard to the parties involved or any third parties until it has been approved, whether expressly or tacitly.
The following transactions are exempt from the notification requirement:
- the acquisition of companies in which the purchaser already holds more than 50 per cent of the shares (understood as already holding exclusive control);
- the acquisition of bonds, debentures, non-voting shares or debt securities;
- the acquisition of only one company by only one foreign company that has no assets or shares of other companies in Argentina;
- the acquisition of wound-up and liquidated companies (which performed no activities in Argentina during the preceding calendar year); and
- the acquisition of companies if the total local assets of the acquired company and the local amount of the transaction each do not exceed 20 million Adjustable Units, provided, however, that the exemption would not apply if any of the involved companies were involved in economic concentrations in the same relevant market for an aggregate of 20 million Adjustable Units in the past 12 months or 60 million Adjustable Units in the past 36 months.
If the parties do not comply with this requirement, they will be subject to fines of up to 0.1 per cent of the national consolidated volume of business for each day they fail to comply. If this method of calculation of the fine is not feasible, then the fine shall be up to 750,000 Adjustable Units, which represents 15 million Argentine pesos per day of delay.
Section 9 of the Antitrust Law states that any transaction subject to control by the Antitrust Commission does not bring about any effects in relation to the involved parties or any third party until it is approved by the Antitrust Commission, either expressly or tacitly.i Significant cases
During 2018, the Antitrust Commission has continued to improve its merger analysis.Bayer/Monsanto
The transaction entailed the acquisition of exclusive control over Monsanto on behalf of Bayer. These companies operate globally and their activities include solutions for agricultural production, agrochemical products and biotechnological developments.
The companies were close competitors regarding non-selective herbicides, vegetable seeds and extensive crop seeds. They also vertically overlapped since the investigation stage and the development of active ingredients and biotechnological events up to the stage of commercialisation of the products. Given the potential anticompetitive effects of the transaction, Bayer had to globally divest certain assets and businesses in favour of BASF in order to obtain clearance on behalf of the European Commission, the American DoJ and other competition authorities. Owing to the application of this 'fix-it-first' remedy, the Antitrust Commission considered that the transaction would not raise any concerns to the general economic interest in Argentina and therefore decided to unconditionally clear the transaction.Telecom/Cablevisión
The transaction entailed a significant merger between two major undertakings in the telecommunications sector. The parties' activities overlapped in the supply of residential access to internet, mobile telecommunication services, access to the wholesale internet network and local links or relays (capacity) in Argentina. Furthermore, some vertical relations had been identified in the upstream markets.
The Antitrust Commission's competition concerns were finally settled through the application of a fix-it-first remedy and the transaction was cleared. This case reflects the Antitrust Commission's recent inclination towards the application of the up-front buyer and fix-it-first remedies, following international standards, mainly from the European Commission.SAB Miller/AB InBev
The transaction entailed the global acquisition of SAB Miller by its main competitor, AB InBev. The parties are the two main breweries at a global level. Therefore, in order to remedy the potential anticompetitive effects of the proposed acquisition, AB InBev was ordered to divest seven of its brands in Argentina to the Chilean brewery CCU. In exchange, the latter had to assign rights of the Budweiser brand in Argentina to AB InBev.
The transaction was conditioned on the fulfilment of the divestment and brand swap. This was a very relevant case as it was the first time that this type of 'swap' solution had been used in the interplay between a merger and a conduct investigation.ii Trends, developments and strategies
One of the most important modifications introduced by the new Antitrust Law is the creation of a new merger control system, which greatly increases the amounts for both the notification threshold and the de minimis exemption; seeks to reduce review time frames; and sets out a suspensive system, as opposed to the current interim post-closing notification system.
As mentioned above, the new Antitrust Law modifies the notification threshold, using Adjustable Units that will be updated annually. Pursuant to the Antitrust Law, the new threshold is met if the acquiring group and target surpass a combined turnover of 100 million Adjustable Units, thus increasing the threshold to an amount closer to the one that had originally been envisaged. It is worth noting that the threshold is the same across industries, and that the entire volume of business of the involved companies must be taken into account, irrespective of whether they have been generated by the market in which the transaction will take place or not.
The same update takes place as regards the de minimis exemption, which is now applicable if both the local amount of the transaction and the local amount of the assets being transferred each do not surpass 20 million Adjustable Units; and if the previous condition is met, the acquiring group or target must not have carried out transactions in the same relevant market for 20 million Adjustable Units in the past 12 months or 60 million Adjustable Units in the past 36 months.
The Antitrust Law also sets up a suspensive regime in which the parties will not be able to close the transaction prior to its approval. This is the most relevant departure from the former Antitrust Law as regards the notification system, in which parties could close the transaction and file for notification up to one week afterwards. The Antitrust Law now sets out fines for gun-jumping, which had hitherto never existed in Argentine merger control proceedings. However, it must be noted that the suspensive regime will become effective one year after the enactment of the law, so as to provide sufficient time for the Antitrust Authority to clear its abundant workload on merger control cases. This is expected to occur during the first quarter of 2020.
Further to this suspensive system, the Antitrust Law defines a review time frame of 45 working days plus an additional 120-working-day term. The former Antitrust Law also had a 45-working-day review time frame, which over the passing of time was ignored, reaching average review time frames of over 30 months even in non-material transactions. However, it must be taken into account that said delays took place in a non-suspensive system that eliminated the pressure for the Antitrust Commission to issue the clearances in time. Under this system, it remains to be seen whether the Commission will be able to meet the time frames set out by the new Antitrust Law.
In that regard, the Antitrust Law sets out a fast-track system for those transactions that do not present competition concerns. However, this system has not been regulated yet.
Finally, the new system also includes a mechanism for third parties to file their comments on the merger, which are non-binding for the Antitrust Commission; nor is there an obligation for it to comment on them.Merger Control Guidelines
In addition to the news introduced by the Antitrust Law, the Antitrust Commission has issued an updated version of its Merger Control Guidelines (which had not been updated since 2001). The new Guidelines provide a much-needed reference for practitioners in their day-to-day interactions with the Antitrust Commission, of which the following matters can be highlighted.
The Guidelines clearly set out that transactions with a combined market share of 20 per cent or less will be considered to be non-problematic, which triggers the application of the fast-track procedure. Unlike past practice, this indicates that these transactions will be cleared in rapidly and will not be subject to intensive review by the Commission.
This approach is further complemented with clear rules on the usage of the Herfindahl–Hirschman Index (HHI), which used to referred to, but with no specific rules. Pursuant to the Guidelines, those transactions that have a post-transaction HHI below 2,000 will be considered as non-relevant. Transactions that surpass such amount, but where the delta between the prior and post-transaction scenarios is below 150 points, will also be considered non-problematic. Furthermore, if the post-transaction market shares are lower than 30 per cent and if the post-transaction HHI is less than 3,000 or has a delta of less than 250 points, then the transaction will also be deemed as non-relevant.
Furthermore, the Guidelines now provide for a more fulsome approach as regards the techniques to be used by the Antitrust Commission. In that regard, they now incorporate the notion of upward pricing pressure as a method to determine possible unilateral actions post-transaction as well as including a specific review on coordinated effects. Other factors that are now included as relevant comprise competition from imported products, countervailing buyer power, the creation of a portfolio effect and the failing firm approach to a transaction.
The Guidelines also provide a commentary on the possible review of ancillary restraints, following the current practice by the new Administration of not setting out specific terms for their duration, but rather to analyse them on a case-by-case basis.
In short, the Guidelines provide clearer rules for parties interested in carrying out a merger control notification in Argentina, which allows them to fully assess the type of review that they will be subject to as well as have a better estimate regarding the proposed timeline.iii Outlook
Owing to the issuance of the new Antitrust Law, the complete overhaul of the merger control system helped the regulator steer away from the slow and cumbersome review process it has had for more than a decade, significantly improving the results during the course of 2018.