Argentine Antitrust Law No. 25156 (Antitrust Law) provides for a control procedure to be conducted prior to business combination transactions as defined under Section 6 of the Antitrust Law, subject to such exceptions as provided in Section 10 of the Antitrust Law. In this case, we analyze Subsection (e).

Introduction

The final exception under Section 10, Subsection (e), which provides as follows: “Business combination transactions provided under Section 6 requiring notice, as provided for under Section 8, where the transaction amount and value of the assets located in the Republic of Argentina to be merged, acquired, transferred or controlled do not exceed, individually, ARGENTINE PESOS TWENTY MILLION (AR$ 20,000,000), unless within the past twelve months there have been transactions exceeding, in the aggregate, such amount, or ARGENTINE PESOS SIXTY MILLION (AR$ 60,000,000) within the past thirty-six months, as long as in both cases such transactions occur within the same market. (Subsection incorporated by Article 3 of Executive Order No. 396/2001, published on the Argentine Official Gazette on 04/05/2001.- Effective 04/09/2001)”.

Review

This exception, contained in Section 10, Subsection (e) of the Antitrust Law, has been incorporated into the Antitrust Law by Executive Order No. 396/2001, Article 3, effective April 9, 2001, and has not been subject to clarifications or subsequently supplemented.

Such Section 10, Subsection (e), applies whenever the amount of the transaction involved and the value of the assets to be merged, acquired or transferred, both in connection with Argentina, do not exceed, individually, AR$ 20,000,000. That is to say, if just one of any such elements exceeds the threshold prescribed by law, the transaction will not fall within the scope of the exception and thus, shall be subject to notification.

In this respect, Advisory Opinion No. 203 has considered: “for the exception to apply, both the amount of the transaction involved and the value of the assets to be merged, acquired or transferred in Argentina shall be taken into account”, expressly referring to the considerations made in previous Advisory Opinions (No. 163, 159 and 187, among others).

But, how should such elements be valued and what should be taken into account?

1. On the one hand, the assets have been defined as “all such assets as permitting the conduction of one or several activities, which, in addition, may be attributed an independent turnover, each with their own clients and values originated in the possibility of generating business affairs” (Advisory Opinion No. 131).

2. On the other hand, in order to value the amount allocated to the transaction in Argentina, the following guidelines have been considered: (1) the amount reported in the agreement between the parties; (ii) the overall transaction amount and the amount disclosed by the notifying parties in the advisory opinion application or file; and (iii) any direct or indirect imports that may be defined as substantial, usual and foreseeable. We understand that all these guidelines are analyzed by Comisión Nacional de Defensa de la Competencia (Argentine Antitrust Authority, hereinafter referred to as “CNDC”) throughout the procedure, considering the local effects of the transaction, irrespective of the impact of such transaction upon the local general economic interest (Advisory Opinion No. 1016, which expressly states that such impact is only relevant for the purposes of the resolution under Section 13 of Law No. 25156).

With respect to (iii) above related to imports, CNDC has held in several opportunities that in order to determine whether any transaction executed by a person that conducts business outside the Republic of Argentina has an impact upon the Argentine domestic market, the substantial, usual and foreseeable nature of the imports involved should be assessed (see Advisory Opinions No. 44, 52, 64, 65, 68, 99 bis and 211, among others). Therefore, as therein noted “if the local sales of the company involved are insignificant, they will not generate substantial local effects” (Advisory Opinions No. 52 and 68, among others), and “any agreement or contract between companies conducting business outside Argentina the impact of which upon the Argentine domestic market is harmless will obviously not be subject to local laws” (Advisory Opinion No. 4). In connection with the foregoing, certain international rules require that the effects should be direct, substantial and reasonably foreseeable (see Section 7 of the Foreign Trade Antitrust Improvements Act, which amended the Sherman Act). Accordingly, the European Union has held that, in these cases, the existence of direct, substantial and foreseeable effects must be ascertained (Gencor Ltd. c/ Commission of the European Communities, Case T-102/96 dated March 25, 1999).” (Advisory Opinion No. 899/2011).

Recently, CNDC has decided on another transaction performed abroad and, following the relevant analysis, it was able to also conclude that the existence of substantial, usual and foreseeable imports led to believe that the transaction under review had effects in Argentina and, therefore, was subject to notification, without the exception being applicable (Advisory Opinion No. 1016).

This means that CNDC will take into account, in principle, the frequency of the imports made during the past 3 years, the existence of distribution or business cooperation agreements, and whether such agreements contain exclusivity provisions, the amount of such imports, among other aspects. This information will very likely be required during the review procedure for the purpose of the analysis conducted by CNDC. And if the circumstances described in each case so permit, CNDC will understand that, for the purposes of the analysis of such case, imports shall be taken into account because they generate effects in the Republic of Argentina, as provided under Section 3 of the Antitrust Law.

3. Finally, consideration should be given to the final part of the same paragraph since it provides for certain counter-exceptions. These attempt to exclude staggered or successive mergers carried out in the same market within not more than 36 months from the exception.

Conclusions

Given the universality of business transactions and the transnational effects of trade, this exception is key to determining whether any one transaction (in principle, outside Argentina) is subject to the notification requirement contained in Section 8 of the Antitrust Law in Argentina.

For such purpose, the assets to be merged, acquired or transferred in Argentina as well as the price allocated to the transaction in Argentina should be valued, pursuant to such definitions and guidelines as outlined above. Failure to update the thresholds provided for in the Antitrust Law and the devaluation of the Argentine currency, among other aspects, have contributed to generalizing the obligation to notify in Argentina.

This exception has been recognized in Advisory Opinions No. 126, 127, 131, 134 and 142, all from 2001 (when Subsection (e) was incorporated under Executive Order No. 396/2001), among others.