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The Government studies potential cartelization cases

October 29, 2018 - By Joseph Taylor

The National Commission for the Defense of Competition (CNDC) initiated market research on medicines, fuels and cement to identify possible distorting practices that imply inappropriately high prices in those sectors. Under the rule of a new law, which creates the figure of “repentant” in cases of cartelization, the body also analyzes in reserve some specific cases and lists guidelines so that business chambers are not vehicles to commit this lack.

The actions of the Commission, which operates under the orbit of Production, are based on the purpose of exercising some control over the prices of basic inputs with a strong impact on the economy. The market investigations are the preliminary step for the opening of a file that determines the commission of an offense subject to fines of up to 4,000 million pesos or equivalent to 30% of the turnover of an exercise, according to the parameters of the brand new law 27,442.

For these inquiries, in recent months the companies involved had to parade through Commerce to give details about their cost structures and marketing criteria. Shell, Bagó, Aceros Zapla or Acindar are just random examples of firms cited in these data collection processes, a key complement of studies hired by private consultants.

In the case of medicines, the question to be clarified is whether the vertical integration of laboratories that produce drugs and, at the same time, integrate companies together with their competitors to distribute them, does not encourage price coordination and, at the same time, hinders the access to the points of sales of products of other brands.

If the analysts commanded by Esteban Greco conclude that this is the case, the formalities will follow so that the Secretary of Commerce applies the penalty and recommends possible disinvestments.

The trigger to put the magnifying glass on fuels was the deregulation from the elimination of the barrel Creole, local price higher than the international. This led to the convening of refiners of all brands to explain the behavior of suppliers, on an arbitrarily chosen criterion: import parity. In other words, the Commission is trying to find out if the local prices of gasoline are in line with what it would cost to import it and if, indeed, there are conditions to freely buy from abroad.

Cases and issues Official technicians have no doubt that the conformation of the local fuel market is oligopolistic, although that in itself is not a fault as it would be the coordination of prices between refiners, something always difficult to prove. “That the prices move in parallel is not in itself a guideline,” Greco points out before the Economist. Moreover, in this case, the hypothesis of some distortion resulting from the dominant position held by YPF is also handled. The end is open.

The current market research on the cement sector is inspired by interpreting why prices have risen sharply in recent months, with the aggravation of a strong precedent that is not forgotten: in 2005, Competition Defense sanctioned the small handful of producers by collusion and distribution of a market that has few suppliers, a fact that strengthens suspicions.

Another item also linked to construction, such as non-flat steel, led to a process recently concluded that identified Acindar as allegedly responsible for the abuse of a dominant position. Now there is an open file to understand why the domestic prices of this commodity would be notoriously higher than the international ones.

One problem is that the drastic devaluation of recent months affects relative prices and conditions the import and export parameters in several cases under analysis. To the ex officio investigations, the Commission adds others triggered by complaints, such as the one made by Queruclor against Dow Chemical for alleged abuse of a dominant position when setting the price of a vital input for its business. Another process muddied by inflation that triggered the new exchange rate.

There are also serious difficulties to prove price agreements or the distribution of market shares, behaviors characteristic of cartelization. The new Law of Defense of Competition tried to correct this deficit with the creation of the leniency program by which the member of a cartel can be exempted from the penalty if he incriminates denouncing the agreement of which he is a part. Brand new figure not yet regulated.

Cameras in the sights The new law recognizes the status of illegal cartelization, which facilitates the penalty: until only months ago it was sanctioned if it proved that it caused damage to a third party.

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