New Fair Trading Regime in Argentina

On April 22, 2019 Emergency Decree No. 274/2019 (the “Decree”) was published in the Official Gazette. The Decree derogates Fair Trading Law No. 22,802 and establishes a new normative regime for this matter that aims to (i) improve the competitive conditions of the economy, (ii) boost and simplify trade and (iii) complement the provisions contained in new Antitrust Law No. 27,442 (“LDC”).

The Decree came into force on April 30, 2019, eight days after its publication in the Official Gazette. Although the Decree has yet to be ratified by the Argentine Congress, as there is no deadline for such ratification, the Decree will be in effect unless Congress repeals it.

The Decree introduces the following significant novelties:

Unfair Competition

Unlike the previous regime, in article 10 the Decree lists the specific acts that would constitute unfair competition. This list has an exhaustive character for the purpose of imposing administrative sanctions, and a non-exhaustive character for the purpose of filing judicial claims by the affected party.

Among the cases of unfair competition listed by the Decree are the following:

1. Acts of deception regarding the nature, production method, key features and conditions of the goods and services,
2. Acts of confusion regarding the corporate origin of the activity, goods or services,
3. Violation of rules for benefiting from a significant advantage,
4. Abuse of an economic dependence situation, in which a client corporation or provider may find itself if lacking of an equivalent alternative for the exercise of their activity in the market,
5. Undue attainment of commercial conditions under the threat of terminating business relationship,
6. Sale below manufacturing cost or purchase price with the intention of hindering entry to a market or eliminating a competitor from the market,
7. Undue exploitation of the reputation of others inducing to confuse one's own goods or services with those of the competition,
8. Acts of unfair imitation capable of generating confusion regarding the origin of the goods,
9. Acts of denigration in order to diminish the image, credit, fame or prestige, unless the assertions are accurate, relevant and true,
10. Violation or disclosure of business secrets,
11. Induction of employees, suppliers, and / or customers to the breach of contractual obligations entered with a competitor,
12. Discrimination acts towards buyers and,
13. Comparative advertising.

The Decree introduces features that are already regulated in other norms, making it possible for a specific act to be affected and sanctioned simultaneously by more than one normative regime.

In particular, certain acts that were already considered to be anticompetitive practices by the Consumer Defense Law (the “LDC”, after its Spanish acronym) were included regardless: (i) the abuse of economic dependence,(article 3.i LDC); (ii) the undue attainment of commercial conditions (article 3.b LDC); (iii) discriminatory treatment (article 3.h. LDC) and; (iv) predatory Prices (article 3.k LDC).

Regarding the cases listed above, it does not seem clear under which conditions the acts may be brought before the Argentine Competition Authority or claimed under the Fair Trading Law proceedings. It would seem that the Fair Trading Law is more applicable since it does not require (i) a dominant position held by the alleged infringer, nor (ii) does the alleged victim have to prove that the general economic interest has been affected by the act. We must now wait for the regulation of the Decree to see if  this topic is clarified.

Advertising

As in the prior regime of Law No. 22,802, the Decree prohibits deceptive advertising and regulates aspects related to the organization of contests and draws. Furthermore, it prohibits the control of advertising prior to its diffusion, limiting the power of the Application Authority to an ex post audit.

The Decree also regulates comparative advertising, which is defined as that which explicitly or implicitly alludes to a competitor, its brands, products and / or services. In this regard, comparative advertising will be allowed to the extent that it meets the conditions stipulated in the regulation itself, such as the following:

• Do not mislead or deceive.
• The comparison is objective.
• To inform the consumer of the good’s advantages to promote it.
• Do not be derogatory.
• Do not try to gain an undue advantage from the reputation of others.

Information

The Decree imposes requirements regarding the identification of products and incorporates aspects referring to appellations of origin. The use of a national or foreign denomination of origin is prohibited when the good or service does not come from that respective area. Moreover, the Decree establishes that  denominations in common use will be of free use; i.e., those that happen to be the name or type of the good.

Enforcement Authority

By this Decree, the Domestic Trade Secretariat  of the Argentine Production and Labor Ministry is the designated  enforcement authority, and granted with greater powers, and thus has a more extensive supervisory power over the matter.

Administrative Procedure

For the administrative procedure, the principles in National Administrative Procedure Law No. 19,549 are applicable. Furthermore, the following novelties are included:

• Although the procedure may still begin ex officio, it may now begin upon request by a party. The request or complaint may be filed by and against any person, be it natural or legal, public or private.
• The appeal against the decisions of the enforcement authority should be filed with the Federal Court of Appeals on Civil and Commercial Matters or the Specialized Competition Court if it exists at that time.
• Regarding sanctions, the Decree includes:

1.  a warning;
2.  a fine ranging from between one (1) and ten million (10,000,000) Adjustable Units. These Mobile Units are a measure of value which are upgradeable annually according to the Consumer Price Index (IPC). For 2019, one Adjustable Unit is equivalent to ARS 26,40;
3.  suspension of the National Register of State Providers for up to a 5-year term;
4.  loss of concessions, special tax or credit regimes that they enjoy and;
5. the closing of facilities.

• The statute of limitations for claims regulated in this Decree are limited to a three-year term to be counted from the time that the infractions are committed.

 

Judicial Proceedings

The Decree includes the possibility to file a claim for damages produced by the conducts typified in said regime, to cease and desist the penalized acts as the request for precautionary measures.

Additionally, the Decree widens the standing to sue to:

• Any person that participates in the market if their economic interests are harmed or threatened.
• Furthermore, it lists various admitted entities such as consumer protection associations and professional associations.

Conclusion

This Decree aims to revitalize the fair trading tools that, in conjunction with the competition and consumer protection regimes comprehend the  regulations that govern the relationship between suppliers and consumers in the market.

Prior Law No. 22,802 was outdated and  did not provide real control tools.

It is expected that this regime will complement said regulations and will improve competition in the market.