Sharp decrease in filing-thresholds and penalties due to Argentina’s currency devaluation and inflation

The combination of both a strong devaluation and inflation processes suffered by Argentina, aggravated in the first month of 2014, had a significant impact in both the filing thresholds and antitrust penalties which have not been updated since the antitrust law was enacted in 1999.

During the last decade Argentina has been slowly, yet constantly, devaluating its currency to achieve, among other economic policy objectives, a boost of competitiveness of its exports. In 2001 Argentina abandoned its fixed-exchange rate regime adopted in 1990 to put behind hyperinflation and adopted a managed floating regime. However, the devaluation pace has sharply increased during the beginning of 2014, which up to February 2014 accumulated a peso depreciation of 23% in relation to the U.S. dollar. As of early February 2014  the official exchange rate was approximately 8 pesos per each U.S. dollar.

Amid the peso devaluation, Argentina is also experiencing a strong inflationary process, with an accumulated inflation of approximately 238% since 2001, as measured by the official statistics bureau, though private measurements are significantly higher.

The combination of devaluation and inflation is diminishing the real value of both the filing thresholds and penalties provided in the Antitrust Law, thus endangering its effective enforcement by the authorities. The current filing thresholds were established in 1999, time at which Argentina had a fixed exchange rate tied to the value of the U.S. dollar set at 1 peso equaling 1 U.S. dollar and an inflation rate close to zero.

This means that the deterioration in the value of the official currency and the increasing inflation will result in a larger number of transactions being caught by the now-low filing thresholds, most of them so insignificant from an economic perspective that could never pose a threat to competition. However, given the long time the Argentine antitrust authorities are taking to clear transactions, even simple ones, companies are increasingly prone to avoid notifying foreign-to-foreign transactions in Argentina.

In connection with the fines established in the Antitrust Law, which amount to 150 million pesos (as of February 2014 approximately US$ 18.5 million) in the case of cartels and abuses of dominant position and up to 1 million pesos a day in the case of delays in notifying mandatory transactions, considering devaluation-inflation trend described above, it may result advantageous or economically rational for certain companies to breach the antitrust law and attain a monopolist rent through cartelizing or abusing their dominant positions compared to paying the fines derived from such infringements.

At present, there are different bills in Congress to amend the antitrust law by means of updating the amount of the filing thresholds and penalties alike, though none of them are in advanced status.

For further information on this topic please contact Julián Peña