Ingrear: Structural and Behavioral Remedies in Its Formation

On February 12, 2021, a transaction was notified to the National Commission for the Defense of Competition (CNDC) involving the formation of a joint venture between ARCOR SAIC and INGREDION ARGENTINA SRL to carry out activities related to wet corn milling and the commercialization of its derivative products. This was achieved through the incorporation of Ingrear, an entity to which the parties transferred the relevant assets for these activities.

Arcor is the parent company of an Argentine business group that operates in three divisions: mass-consumption food products, agribusiness, and corrugated cardboard packaging. In the food production and commercialization sector, Arcor offers a range of confectionery, chocolates, ice cream, jams, and other products marketed under well-established and recognized brands. Arcor also produces certain inputs, either sold to third parties or used in the production of its own mass-consumption food products. This includes products derived from wet corn milling, for which Arcor operates three plants: two in the Province of Cordoba and one in the Province of Tucuman.

Ingredion, on the other hand, is the local subsidiary of Ingredion Inc, a US-based multinational group supplying ingredients for the food and beverage industry. In Argentina, Ingredion is involved in the production and commercialization of ingredients, particularly those derived from wet corn milling, for which it operates two plants in the Province of Buenos Aires.

After analyzing the transaction, the CNDC concluded that the incorporation  would reduce the number of independent competitors in the markets for wet corn milling and the commercialization of its derivatives due to the consolidation of two of the leading producers with significant milling capacity. The CNDC also identified potential vertical effects, as the joint venture's creation could enable exclusionary practices affecting Arcor’s competitors in downstream food and beverage production and commercialization industries.

Based on these findings, in April 2022, the CNDC issued an Objection Report, indicating that the transaction had the potential to restrict or distort competition, potentially harming general economic interest and infringing article 8 of the Argentine Competition Law 27442 (LDC).

The CNDC also identified that the transaction could generate certain efficiency gains, including cost savings and improvements in the quality, quantity, and variety of available products.

In this context, in August 2023, the parties proposed a commitment involving behavioral obligations, which the CNDC deemed insufficient to neutralize the risks the transaction posed. Subsequently, the parties offered additional commitments, including both structural and behavioral remedies.

After evaluating the proposed remedial measures, the CNDC issued an opinion under article 14(b) of the LDC, recommending that the Secretariat of Industry and Commerce conditionally approve the formation of Ingrear, subject to the fulfillment of a commitment consisting of the following remedies:

1. Divestment of production capacity equivalent to 350 tons/day of wet corn milling, involving the sale of milling equipment at Arcor’s “PMHI” plant in Arroyito.
2. Capacity Allocation: making available, at cost, a production capacity equivalent to 200 tons/day of wet corn milling for five years, to be acquired and commercialized by one or more competitors through a capacity transfer mechanism.
3. Transfer Pricing Regulation: transfer prices charged to Arcor must be equal to or higher than those set for its downstream competitors for similar product volumes, for a minimum of five years.
4. Competitor Supply Assurance: the parties must fulfill all purchase requests from Arcor's competitors, provided they have the stock and/or technical and operational capacity to supply them for at least five years.
5. Antitrust Compliance Program: hiring an independent competition defense specialist to develop an antitrust compliance program for the Chamber of Starch, Glucose, Derivatives, and Related Manufacturers (CAFAGDA) to mitigate the risk of coordinated practices within the institution.
6. Non-Solicitation Clause: prohibition on hiring employees and/or executives from competitors for at least three years.
7. Export Commitment: maintaining an average annual export volume equivalent to no less than 550 tons/day of production capacity over a five-year period.

The implementation of these remedies includes involving a monitoring agent, who will submit semi-annual progress and compliance reports to the CNDC. The execution of Remedies 1 and 2 will also be overseen by a selling agent, to prevent the joint venture from engaging with competitors in the market.

The Secretariat of Industry and Commerce, through Resolution SIyC 261, formally conditioned the approval of the transaction on compliance with these remedies.