For the first time, Argentina’s Secretariat of Commerce imposes structural remedy as sanction for Antitrust Law infringement.
Competition & Antitrust Department Report | For the first time, Argentina’s Secretariat of Commerce imposes structural remedy as sanction for Antitrust Law infringement
On November 25th, 2022, Argentina’s Secretariat of Commerce issued Resolution No. 115/2022 – upon recommendation of the National Competition Commission (“CNDC”)-, which establishes a fine for the companies ALLIANCE S.A.S., GRISÚ S.A., and POWERLINK S.R.L. for infringement of the Antitrust Law, for collusion in the market of nocturnal entertainment for student tourism in the City of San Carlos de Bariloche (POWERLINK was exempted from penalties based on the collaborative role it played as a whistleblower). As revealed from the investigation, the companies signed a document in 2004 – valid until 2017- which structured a scheme of dividing and sharing the market in two ways:
– By time slot: the Pre-Dancing time slot (until midnight) was assigned to POWERLINK, while the remaining companies were assigned the Night Disco slot, POWERLINK not being able to offer services in the time slot of the other discotheques, nor the latter in the time slot assigned to POWERLINK.
– Per client/night: the distribution consisted of ensuring that students attend at least each of the following clubs per night: BY-PASS, ROCKET, CEREBRO, GENUX, and GRISÚ. Tourist agencies and students were therefore forced to hire all discotheques as a package, not being able to choose between different discotheques.
The conduct took place continuously between 2004 and 2017, so Law 25,156 (“LDC”), in force during that period, was applied. The fines were as follows: (i) 150 million pesos for ALLIANCE S.A.S.- the maximum possible under the LDC; (ii) 90.3 million pesos to the company GRISÚ S.A. A structural remedy was also established against ALLIANCE, comprising the obligation to sell and totally disassociate itself from the company CADEHSUR (owner of the discotheque GENUX).
This case has two relevant novelties: (i) one of the investigated companies (complainant and collaborator with the investigation) was exempted from the sanction without having followed the procedure foreseen for the leniency regime under the current Antitrust Law 27,442; and (ii) it is the first time that the CNDC / Secretariat of Commerce orders a divestiture in the context of a sanction for anticompetitive conduct, making use of the powers conferred by section 46, subsection c) of the Antitrust Law (analogous to the current section 55, subsection c) of the current Law 27,442). We analyze both aspects below.
Exemption from the sanction to one of the investigated companies
Although POWERLINK was part of the agreement and it was determined that it had indeed infringed the LDC, it was exempted from sanctions for having denounced the conduct and provided evidence that was relevant to the investigation. The interesting aspect of the case is that, despite applying the previous Law (25,156), with respect to the exemption of the sanction, the CNDC applies art. 56 of Law 27,442 currently in force, which allows “mitigating” the sanction (not exempting it). The resolution also includes references to the leniency regime of art. 60 LDC, which provides for the exemption of the sanction but under certain circumstances that, at least based on the published records, do not appear to have been clearly met.
Structural remedy – divestiture of one of the discotheques
The offer of night discos in the city of Bariloche was limited to 5: GENUX, CEREBRO, ROCKET, and BY-PASS (owned by ALLIANCE) and GRISÚ (owned by GRISÚ S.A.); that is to say that 100% of the offer was in the hands of two players and that one of them controlled 80% of the market.
The CNDC understood that, in order to ensure competition, it was not enough to disrupt the collusive agreement that established the sale of all the tickets to its discotheques with pre-established prices and conditions and prevented the potential player (POWERLINK) from offering services in competition. Therefore, it recommended that ALLIANCE and its shareholders be forced to divest themselves of the GENUX discotheque as well as terminate any type of relationship that could give them de facto control of the same.
In short, this is the first precedent that includes a structural remedy (tending to modify or increase the number of players in a market) as a consequence of an infringement of the Antitrust Law.
Although this measure will surely be appealed by the investigated companies (so it remains to be determined what the judicial review will decide), it raises the question of the extent to which the competition authority can or should actively intervene in the structure of a market.
Agustín Waisman
Tomás López Bisso
Tomás Kook Weskott