Argentina: Not So Fast: Argentine Court Puts The Brakes on The Biggest Deal of The Year

By Mariela del Carmen Caparrós, Damián Rodríguez Peluffo and Vanina Veiga

This edition of Argentine Business Law Watch reports on two significant federal court decisions. Freshly Frozen Goods informs on a stay that has halted the US$315 million sale of the Disco and Vea Supermarket chains to the Chilean conglomerate, Cencosud. You May Be Entitled to A Refund alerts you and your clients to a Supreme Court decision that enables companies registered with the Superintendency of Corporations to obtain a limited refund of fees paid to that regulatory entity. Isn’t that a nice bit of news to end the week?

On April 16, 2004 a federal judge in the small, provincial town of San Rafael, Mendoza, loosed his sling and let fly a stone against the designs of two corporate giants.² In Asociación Ruralista de General Alvear, the court has temporarily restrained the government’s antitrust review of the US$315 million sale by Royal Ahold of its Disco-Vea shares to Cencosud, the parent of Jumbo supermarkets. The transaction, if consummated, would give Cencosud an approximately 19% market share in Argentina.

The stay was granted as a temporary measure in the context of an amparo action, a constitutional claim that allows the plaintiff speedier relief. The action has been brought by a small association of growers and ranchers, which argues that the sale to Cencosud is unconstitutional unless approved by a special administrative court created under a 1999 antitrust law.³ Nonetheless, despite the four-year lapse since this legislative mandate, the administrative tribunal has yet to be created. In the meantime, the Comisión Nacional de Defensa de la Competencia (the Federal Antitrust Commission) has filled this void, continuing its role as a transitional authority under the 1999 law.

Without ruling on the merits of the amparo, the federal court has indicated its acceptance of the Antitrust Commission’s transitional authority. Nonetheless, the court refused to permit the Commission’s review, noting that with only two current members, the Commission fails to reach quorum from among a five-member panel. As a result, the court has stayed review of the transaction pending a ruling on the merits.

Meanwhile, the government has indicated that it is presently selecting candidates to fill the antitrust court vacancies. Conventional wisdom suggests that the government will appeal the decision but, before the courts rule on the appeal, the matter will be concluded administratively. Further, if past rulings—which have overwhelmingly favored economic concentration—are indicative, the transaction is likely to be approved.

Last year the Argentine Supreme Court declared unconstitutional Congress’s delegation to the executive branch of authority to determine fees charged by the Inspección General de Justicia (the Superintendency of Corporations or IGJ).⁴ The plaintiff successfully argued that the IGJ’s increase of registration and administrative fees since 2000, when Congress authorized the executive branch to delegate authority, constituted an improper exercise of power.

We have discussed this ruling with IGJ officials and have obtained the green light for the IGJ’s recognition of fees paid above the amounts regulated by Decree 67/1996 before the 2000 delegation. While unlikely to represent a large sum, it should come as a welcome surprise to many registrants. Clients should be cautious in expecting cash back. The IGJ may decide simply to credit overages toward future fees.