Competition & Antitrust Department Report: The new Fair Trade Act in brief
Dear Sir or Madam,
On April 22nd, 2019, the Need and Urgency decree No. 274/2019 (the “Decree”) was published in the Official Gazette in Argentina. The Decree repeals the Fair Trade Act (No. 22.802), replacing it with a new version that will come into force on May 1st, 2019. The Decree:
1. Regulates a number of business practices that may affect the competitive position of a person (or entity) or the functioning of the competitive process and includes the following:
• Acts that may be misleading or are likely to deceive in connection with the main characteristics, marketing conditions or commercial origin of products or services.
• Obtaining significant advantages resulting from the breach of regulations.
• The exploitation of a “situation of economic dependency of a company” (client or supplier) that does not have equivalent alternatives to carry out its activity. Such exploitation shall be presumed when a supplier grants additional advantages that it does not grant to similar suppliers.
• Obtaining commercial conditions (including prices, payment terms, marketing conditions, payment of additional charges and others not agreed or not based on uses and customs) under the threat of breaking commercial relationships.
• Sales at prices below costs when part of a strategy aimed at eliminating competitors or hindering their entry into the market.
• The undue exploitation of a competitor’s reputation that leads to confusion.
• The imitation of goods and services, or business initiatives, likely to cause confusion; to the extent that it leads to an improper use of competitors’ reputation or efforts.
• Acts of discreditation or denigration, except those resulting from true and accurate statements.
• The violation of business secrets made with the intention of obtaining profit or causing harm.
• Inducing employees, suppliers, customers, etc., to breach contracts with competitors.
• Discriminatory treatment of buyers without justification when the seller has published a price list.
2. Includes regulation on comparative advertising.(1)
3. Maintains the Secretariat of Commerce as the enforcement agency.(2)
4. Raises the maximum amount of the penalty of a fine up to 10 million Mobile Units (3) (currently equivalent to 264 million pesos (4)) and maintains the rest of the penalties included in Law No. 22.802.(5) In addition, it includes a new penalty (“rectification of advertising”).
5. Includes specific procedural rules that must be followed by the enforcement agency in order to determine infringements,(6) and by companies to appeal penalties(7), as well as the steps that the enforcement agency must follow for the purposes of requesting precautionary measures from a judge.
6. Regulates civil claims involving unfair competition, including actions of cessation, actions for compensation for damages and requests for precautionary measures.(8)
7. Amends the statutes of limitation.(9)
8. Substantially keeps (although it introduces minor modifications) the regulation included in Law No. 22,802 regarding misleading advertising, promotions, labelling and product identification(10), energy efficiency standards for certain products and designations of origin.
In addition to passing a new Fair Trade Law, the Decree creates the Electronic System of Resolution of Conflicts within the scope of the Conciliation Service for Dispute Resolution in consumer relations (COPREC).(11)
1) Comparative advertising is lawful as long as (i) it is not misleading; (ii) compares goods or services that satisfy the same needs; (iii) is based on objective parameters; (iv) aims to inform the advantages of the product or service advertised; (v) does not discredit competitors or denigrate their intellectual property; (vi) does not take unfair advantage of the reputation of a competitor, its trademarks or designations of origin, and (vii) does not involve an imitation or replica of goods or services bearing a protected trademark or trade name.
2) However, it specifies that the intervention of the Secretary of Commerce or of provincial and City of Buenos Aires governments shall be excluded in investigations, summary instructions or penalties involving the infringement of specific regulations issued by agencies with jurisdiction in regulated matters. In addition, it establishes that provincial governments (and CABA) also have powers to enforce the law in their respective jurisdictions (as in the previous Act), but that the Ministry of Commerce will have exclusive jurisdiction regarding business practices listed in point 1.
3) The value of the reference Unit shall be updated on a yearly basis considering the variation of the Consumer Price Index.
4) The updated value of a Mobile Unit for 2019 is 26.40 pesos (value published in the Official Gazette on 04.25.2019).
5) Including (i) suspension of the record of the State Suppliers for up to 5 years, (ii) the loss of state concessions, privileges, special tax benefits or credit regimes and (iii) closure of the establishment for up to 30 days.
6) The plaintiff shall be a party to the proceedings.
7) Eliminates the need to pay the fine as a condition for the appeal, and introduces the “voluntary payment” under which the offender can obtain a 50% reduction in the amount of the fine if it is paid without appealing.
8) In addition to delimiting legal standing to sue (which includes certain associations) and legal standing to be sued, it reverses the burden of proof with respect to the accuracy of certain statements included in advertisements and establishes that the final decision of the enforcement agency shall be considered res judicata in relation to facts and legal classification.
9) Although the general statute of limitation continues to be three years as from the infringement, it establishes that the statute of limitations for civil claims is (a) two years following (i) the commission or cessation of the infringement, or (ii) the acknowledgement of the act by the injured party; or (b) one year after the penalty of the enforcement agency has become final.
10) In this sense, the regulation seems to anticipate that specific regulations will be published to regulate labelling of products.
11) Under this optional system for the consumer (and mandatory for providers), conciliation hearings and settlement agreements may be carried out through the use of electronic systems.
Should you require any further information on this matter, please do not hesitate to contact us.
Tomás López Bisso