This is the first time that the CNDC has recommended the adoption of such broad and ambitious divestment measures in the framework of an investigation for violations of competition regulations. Although it is highly probable that the Resolution will be appealed in court, it shows the increasingly stringent enforcement of the CNDC in the application of competition regulations.
We recommend that companies consider reviewing their competition risk in order to identify and mitigate any potential conduct that could give rise to cartel activities:
- Implement a competition compliance program or review existing policies in place
- Perform an assessment (health check) of possible cartel risks within the various business lines
- Train employees, including key senior individuals involved in strategic positions such as pricing, contract negotiations and sales, on antitrust compliance
- Perform annual health checks to deter and quickly detect possible cartel activity and collusive behavior
- Update policies to account for changing risks in the business, industry and/or regulatory landscape
The Resolution2 put an end to an investigation initiated in 2018 for cartel practices in the market for discotheque services for student tourism in the city of Bariloche.
According to the National Commission for the Defense of Competition (CNDC), three companies were investigated: one controlled around 80% of the market and was identified as the leader of the cartel ("Company 1"); a co-conspirator company ("Company 2"); and a third company, which while also a participant, was the complainant and was granted an exception from the penalty3 for its cooperation in the investigation ("Company 3").
The conduct investigated dates back to at least 2003 and included the following allegations:
I. Competitor agreement on prices and conditions of sale.
II. Impeding other competitors' access to the market by subjecting companies to the sale of their services to student tourism travel agencies, to the non-acquisition by the latter of any type of night-time tourist service offered by third parties.
III. Tied sales, the companies involved in the conspiracy would market their nights in packages of at least five days.
IV. Discrimination among student tourism agencies by recognizing one of these agencies with better prices and granting exclusive access to their nightclubs.
Due to the fact that the anti-competitive conduct was carried out during the validity of both the old competition Law 25,156 (Defense of Competition) and the superseding law (Law 27,442), the former Law 25,156 was applied because it is considered more lenient in terms of sanctions and remedies of the behaviors investigated.
In addition to a fine (which reached the maximum provided by Law 25,156 of ARS 150 million for Company 1 and ARS 90 million for Company 2), the novelty of the Resolution is that it endorsed the recommendation of the CNDC to adopt " a structural measure... intended to break the contractual and/or corporate ties and/or the administrative bodies" of the companies involved. This is because the CNDC understands that it is necessary to "dismantle the oligopolistic structure of the analyzed market, disaggregating the market power of the lead conspirator company" (i.e., Company 1).
Based on the foregoing, the Resolution orders Company 1 to carry out the following within 60 days:
- Rescind any contract for the lease of real estate and/or goodwill through which Company 1 participates in the business of its subsidiary.
- Cease the participation of its directors and shareholders in the administrative and supervisory bodies of its subsidiary, further prohibiting Company 1, its shareholders and/or directors, its controlling and/or controlled companies, as well as the shareholders and/or directors of the latter, to participate as shareholders in the subsidiary.
Additionally, if Company 1 does not comply with what is ordered by the Resolution regarding divestment within the aforementioned sixty (60) days, it orders that the corresponding legal actions be initiated before the competent judge to comply with what is ordered.
Download the Spanish version.
1 Resolution 115/2022 (Resolution)
3 Provided for by Law 25,156.