Argentina’s antitrust regulator issues injunction to prevent oil companies from abusive price discrimination
On January 26, 2012, the Secretary of Domestic Trade (“SDT”) of Argentina, based on a report prepared by the Commission for the Defense of Competition (“CNDC”), issued an injunction (1) in accordance with Section 35 of the Antitrust Law (No. 25,156), prohibiting certain oil companies to discriminate gas oil prices among its different customers.
The CNDC’s investigation had its origin in a claim filed by the Secretary of Transport on January 11, 2012, in which it reported that oil companies, namely YPF (a local subsidiary of Repsol), Shell, Esso (a local subsidiary of Exxon Mobil), Petrobras, and Oil Combustibles (collectively, the “Oil Companies”), were jointly abusing of their dominant position in the gas oil commercialization domestic market by charging bulk gas oil to the passenger transport industry at higher price than that charged to end consumers through their self-owned gas stations, with no apparent business justification.
The Secretary of Transport’s claim was backed-up by several passenger transport associations, which expressed their views on various hearings held at the CNDC prior to the issuance of the injunction. On the side of the investigated Oil Companies, YPF was the only to be called for a hearing prior to the issuance of the injunction.
The CNDC alleged that the Oil Companies were charging gas oil to the companies active in the passenger transport market at higher prices compared to that paid by individuals at gas stations owned by the same Oil Companies. The CNDC reasoned that the Oil Companies should supply gas oil to the transport industry at a lower price –or at least at the same price- since they are large volume sales and transport companies pay in advance of effective delivery. Said behavior, according to the CNDC, increased the costs of the passenger transport industry, thus, affecting the general economic interest, which is the goal protected by the Antitrust Law.
The CNDC calculated that the Oil Companies appropriated only during 2011 a consumer surplus of approximately USD65 million. This value could be considered by the CNDC should it ultimately decide to impose a fine in this investigation.
The Oil Companies amounted to roughly 95% of gas oil sales in Argentina during 2011, thus, the CNDC characterized the market as an oligopoly, which increased the possibilities of either express or tacit coordination. Notably, YPF accounted for 59% of the gas oil sales in Argentina during 2011 (with a market share of 95% in some provinces such as Tierra del Fuego), with put the company by itself in a dominant position, as acknowledged by the CNDC’s report.
The injunction of the SDT ordered the Oil Companies to charge wholesale gas oil at least at the same price than for retail gas oil, and empowered the CNDC to monitor the prices charged by the Oil Companies both in the wholesale and the retail markets of all the combustibles they commercialize in Argentina.
Additionally, the CNDC’s report stated that it could recommend the SDT the application of the Supply Law (No. 20,680), which was passed in 1974 in the midst of great regulation and intervention of the State in the economy. Said law empowers the Executive Branch to determine the prices and quantities of the goods that companies should supply, among other broad discretionary powers.
The investigated companies have appealed the injunction, which will now have to be decided by the Court of Appeals. However, in the meantime, the Oil Companies will have to abide the injunction and charge bulk gas oil at a price equal to or below that of the retail level.(1) The SDT’s injunction is available at http://www.cndc.gov.ar/dictamenes/resolucion_y_dictamen_C_1419.pdf
For further information on this topic please contact Julián Peña