Argentine Government suspends the effects of the purchase of the Argentine business of Telefónica by Telecom Argentina

Bomchil - The recent acquisition of Telefónica’s Argentine business by its main competitor, Telecom Argentina, refers to conflicting precedents between the local competition authority and these same parties. The closest precedent dates back to 2007, when Telefónica of Spain acquired an indirect shareholding in Telecom Argentina. The National Commission for the Defense of Competition (Comisión Nacional de Defensa de la Competencia, CNDC) considered that such participation implied a substantial influence and therefore required prior notification. Telefónica challenged this interpretation, which prompted a strong response from the CNDC, which issued a cease and desist order with respect to post-closing corporate actions. Although several of these measures were subsequently annulled by the courts, Telefónica had to notify the transaction and face penalties for untimely notification. The transaction was finally approved, subject to conditions.

Another relevant precedent refers to the oscillating relationship between the Argentine State and one of Telecom Argentina’s shareholders and operators. Throughout time, several economic concentration operations involving it received different treatments: from approvals with conditions considered lenient, to attempts of reversal due to non-compliance with such conditions; and even, in some cases, approvals without conditions.

In this context, and simultaneously with the announcement of the current operation, the Office of the President of the Nation issued an unusual communiqué describing the operation as generating a monopolistic situation, and announcing that the government would use all means at its disposal to prevent it.

In line with this position, the Ministry of Industry and Commerce -the antitrust enforcement authority, while the CNDC acts as a technical advisory body- issued a preliminary injunction. Such resolution orders Telecom Argentina to refrain, for a term of six months or until a substantive resolution is issued, from performing legal, corporate or commercial acts that directly or indirectly imply the integration or consolidation with Telefónica Móviles Argentina. The measure expressly prohibits the unification of equipment, as well as the exchange of sensitive information, such as prices, commercial strategies, margins, costs, customer and supplier information, and investment plans. However, the agreements for reciprocal use of infrastructure remain in force.

It should be noted that Argentine legislation allows post-closing notifications, and that the transition to a prior control regime is subject to the creation of an independent competition authority, a condition not yet met since the CNDC is hierarchically dependent on the Ministry of Industry and Commerce. Although the precautionary measures are provided for in the regulations in force, their issuance in a scenario in which management and corporate changes have already taken place in the target company raises doubts as to their real effectiveness.

The case promises new developments as the investigation progresses. A judicial outcome cannot be ruled out, in case the government decides to block the operation and the acquirer challenges the decision, as has happened in the past. An intermediate solution cannot be ruled out either, with commitments that would allow Telecom Argentina to move forward with the transaction, thus overcoming the objections of both the CNDC and ENACOM, the regulatory authority of the sector.


Marcelo den Toom is Head of the Antitrust practice and a partner in the Corporate / Mergers & Acquisitions practice at Bomchil, Argentina

His competition law experience focuses on investigations into anti-competitive practices, internal audits and preventive advice. He also has a solid track record in mergers and acquisitions, specialising in the coordination of due diligence processes, the drafting and negotiation of acquisition contracts and related documents, as well as advising on corporate and contractual matters.

During 1998 and 1999, Marcelo worked as a foreign associate at Skadden, Arps, Slate, Meagher & Flom (New York) and Haynes & Boone (Houston). In 2000 he was admitted to the New York State Bar Association. Between 2014 and 2017, he served as Co-Chair of the International Antitrust Committee of the American Bar Association’s Section of International Law.

Marcelo has also shared his experience as a professor at several renowned universities in Argentina. He is the author of books and chapters related to antitrust and anti-competitive practices, including ‘Competition Law in Argentina’ (2012, Wolters Kluwer).

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