In an Article recently published by me in Abogados.com.ar[1] I mentioned which were the conditions set forth by section 15 of the Emergency Executive Decree 274/2019 (new regime of Fair Commercial Practices) to consider the so-called “comparative advertising”[2] lawful in the Argentine Republic.
I explained then that comparative advertising will be lawful when it complies with the following conditions:
a) It should not lead to mistake, deceit or confusion between the advertiser and a competitor or between the goods or services of the advertiser and those of a competitor.
b) It should compare goods or services satisfying the same needs or having the same purpose.
c) Comparison must be made objectively, among one or more material, relevant, representative and verifiable characteristics of the goods or services subject matter of comparison.
d) Its purpose should be to inform the public on the advantages of the advertised goods or services.
e) It should neither discredit nor denigrate intellectual and industrial property rights or the circumstances of any competitor.
f) Through comparative advertising no improper advantage should be obtained from renowned trademarks of any competitor.
g) It should not present a good or service as an imitation or replica of a good or service having a protected trademark or trade name.
h) In the case of goods protected by a denomination of origin, a geographical indication or a specific denomination, the comparison should be made with other goods of the same denomination.[3]
If the advertising fails to comply with all the conditions mentioned above, then its spreading should be violating the legal framework.
The purpose of this review is to list the available legal means to try to discontinue the spreading of an unlawful comparative advertising.
• EMERGENCY EXECUTIVE DECREE 274/2019. Unfair Competition
When advertising fails to comply with the conditions set forth in section 15 of the Emergency Executive Decree 274/2019 it shall be considered as an unfair competition act, in accordance with the current express provisions of subsection m) of section 10 of the Emergency Executive Decree, which categorizes “Comparative advertising infringing the provisions of section 15”as a particular event of unfair competition act.
In this scenario, the unfair competition act will authorize competitors:
(i) Within the administrative area, to report it before any of the Enforcement Authorities of the Emergency Executive Decree, applying for the discontinuance of the advertising during the preliminary administrative investigation.
The discontinuance order may be issued by the National Enforcement Authority[4] and also by the provincial Enforcement Authorities.[5]
If the advertising is broadcasted in more than one jurisdiction, the reports and applications for the discontinuance thereof may be made both in the national jurisdiction and in one or more jurisdictions in which it is broadcasted. But, considering that inter-jurisdictional trade would be affected, the proceedings – even after the issuance of an order to discontinue the advertising – should be referred to the National Enforcement Authority, for its subsequent pendency.[6]
An appeal shall be filed requesting the reversal of the resolution (recurso de reposición) ordering the discontinuance of the advertising, hypothetically issued without proving the truth thereof,– with or without an Alternative appeal – regulated by section 40 of the Emergency Executive Decree 274.
The regulation does not set forth the effect with which the appeal shall be sustained; but since it is an order to suspend a precautionary measure, I understand that the effect thereof could be none other than the devolutive effect.
If finally advertising is considered unlawful, the applicable fines shall be those imposed upon infringements to the Fair Commercial Practices regime, which at present range between a minimum amount of AR$ 26.40 (Twenty-six with 40/100 Argentine Pesos) and a maximum sum of AR$ 264,000,000 (Two hundred and sixty-four millions Argentine Pesos).[7]
In addition to the imposition of the fine, the Emergency Executive Decree empowers the Enforcement Authority to impose an administrative penalty to “rectify the advertising” upon the infringer which, through information or advertising had incurred in deceptive o abusive practices.
Should the infringer fail to comply with the penalty to rectify the advertising, it shall be subject to an additional maximum fine, of fifty percent (50%) of the original fine, notwithstanding the infringer’s reimbursement of the expenses incurred by the Enforcement Authority if infringer publishes the advertising.
(ii) Before the Courts:
The legal action for discontinuance of the advertising, hypothetically unlawful, provided that it is an unfair competition act, set forth in section 61, subsection 1), of the Emergency Executive Decree. Likewise, this action may include a compensation for damages caused by the unfair competition act. In such event, the compensation may include the publication of the judgment at the infringer’s expense.
The above said section 61 expressly provides in its section 3), the possibility of requiring from the judge the rendering of precautionary measures ordering the discontinuance or temporary prohibition of the act (in this case, of the comparative advertising allegedly unlawful).
The National Courts having jurisdiction in Civil and Commercial Federal Matters may hear said legal actions and competitors would have the legal standing to file them provided that they participate in the relevant market and – hypothetically – their economic interests would be directly damaged or threatened by the alleged unfair competition act.
• Civil and Commercial Code. Forbidden Advertising
If comparative advertising is in addition deceitful, the discontinuance thereof may be obtained within the framework of the legal action mentioned in section 1102 of the Civil and Commercial Code of the Nation, and may be exercised not only by competitors but also by consumers, provided that said advertising is forbidden by section 1101 of the same Code, that forbids every advertising which, in so far as it is relevant here:
a) contains false indications or of such a nature that they induce or may induce consumers to mistake, when they are referred to essential elements of the product or service, or
b) it compares goods or services inducing consumers to mistake.
Even though it has not been expressly set forth in the Civil and Commercial Code, the issuance of a precautionary measure may be applied for, within the framework of said action, temporarily ordering the discontinuance of the unlawful advertising, based on the regulations on precautionary measures ruled by the Civil and Commercial Code of Procedure of the Nation.
• EMERGENCY EXECUTIVE DECREE DNU 271/2019. Deceitful Comparative Advertising
If the comparative advertising subject to questioning induces the public to mistake, deceit or confusion with respect to the characteristics or properties, nature, origin, quality, purity, mix, quantity, use, price, commercialization conditions or manufacturing techniques of the products or services subject matter of the advertising, under the terms of section 11 of the Emergency Executive Order 274/2019,the administrative reports for the alleged violation to said regulation would be available for any consumer (and not only for competitors).
And as I mentioned above, both the National Enforcement Authority of the Emergency Executive Order and the provincial Enforcement Authorities may – as a precautionary measure – decide the discontinuance of the advertising during the preliminary administrative investigation.
• Consumer’s Defense Act. Violation of the Duty to Inform
I believe that unlawful comparative advertising could be considered – at least in some events – as violating the regulation of section 4th of Act 24,240, of the Consumer’s Defense, that sets forth the obligation of suppliers to supply to consumer in a certain, clear and detailed manner everything related to the material characteristics of the goods and services it supplies, and the conditions for their commercialization.
And as decided in the eighth paragraph of section 45 of the above referred Act, at any time during the pendency of the proceedings, the Enforcement Authority may order, as a precautionary measure, the discontinuance of the conduct that violates the law.
• Antitrust Regime. Abusive Exclusionary Conduct
Should the comparative advertising fail to satisfy the guidelines provided for in section 15 of the Emergency Executive Order 274/2019 and the advertiser in charge of it would have a dominant position in the relevant market of the product, then the conduct could generate – in addition – an allegation for the violation of the Antitrust Act 27,442, (the “AA”).
To typify competitive infringements the conduct must imply a distortion to competition, with a current or potential damage to general economic interest.[8]
The “GUIDE FOR THE ANALYSIS OF CASES OF ABUSE OF DOMINANT POSITION HAVING AN EXCLUSIONARY NATURE” (GUÍA PARA EL ANÁLISIS DE CASOS DE ABUSO DE POSICIÓN DOMINANTE DE TIPO EXCLUSORIO)[9], specifies that when the conduct is unilateral, for it to have as a purpose or effect the distortion of competition with the intent of damaging the general economic interest, it must be developed by the party having a dominant position in the market.[10]
Then, if the advertiser has a dominant position, the comparative advertising made contradicting the guidelines of section 15 of the Emergency Executive Order could be considered as one of the restrictive practices of competition that the AA contemplates under the legal concept of “abusive exclusionary conduct”.[11]
In such event, the party considering that competition is affected may report it before the Enforcement Authority of the AA so it may investigate possible infringement to the regulations.
And as authorized by section 44 of the AA, in any stage of the proceedings, the Enforcement Authority may order to discontinue or refrain from performing any conducts provided for in chapters I and II of the Act, so as to avoid any damages or to reduce the extent, continuation or worsening thereof.[12]
• Unlawful Comparative Advertising. Unfair Competition vs. Consumer’s Defense
Considering that the unfair competition regulations contained in the Emergency Executive Order 274/2019 apply only when the act or conduct provided for in its sections 9th to 10th are not reached by the AA (pursuant to the second paragraph of section 7th of the Emergency Executive Order and by the first paragraph of section 3rd of Resolution 248/2019 issued by the Secretariat of Domestic Trade, that partially regulates the Emergency Executive Order), if the conduct in question were reached by the AA, the affected party would not be entitled to file the actions provided for in the Emergency Executive Order.
Section 3rd of Resolution 248/2019 sets forth in such sense that no simultaneous administrative proceedings may be filed before the NATIONAL AUTHORITY OF COMPETITION – currently, the SECRETARIAR OF DOMESTIC TRADE, until after said Secretariat is organized and in operation – and before the Fair Commercial Practices Bureau (Dirección de Lealtad Comercial) for the same acts or conducts.
In cases where ex officio investigations corresponding to alleged conducts reached by the AA have been reported and a preliminary investigation has began pursuant to section 39 of said Act, the resolution issued by the Enforcement Authority will represent a final judgment for the purposes of said Decree and said circumstances cannot be discussed again in the administrative action or proceeding provided for in said decree.
But, if the resolution issued under the AA dismisses the report for considering it unsuitable or closes the case before the opening of the preliminary investigation, as provided for in sections 38 and 39 of said Act and Decree N° 480/2018, the interested party may file the report before the Fair Commercial Practices Bureau (Dirección de Lealtad Comercial) if the same events imply an infringement to section 10 of the Emergency Executive Order.
Regulations do not solve cases, however, the fact that a report on a violation to the unfair competition rules contained in the Emergency Executive Order is filed and that likewise, they constitute a violation to the AA only before the Fair Commercial Practices Bureau (Dirección de Lealtad Comercial) or through the promotion of the legal actions regulated by section 61 et seq of the Emergency Executive Order. The latter do not require a previous report to be filed before the administrative authority; especially pursuant to the provisions set forth in the second paragraph of section 61 of the Emergency Executive Order if the affected party elects to apply for the administrative proceeding, once it is filed, the legal action shall expire, except for the action for damages.
[1] “COMPARATIVE ADVERTISING IS – FINALLY – LAWFUL IN THE ARGENTINE REPUBLIC” (Abogados.com.ar, November 27 and 28, 2019).
[2] They must, explicitly or implicitly, refer to a competitor or its trademark or the products or services offered by it, pursuant to the definition contained in the first paragraph or section 15 of the Emergency Executive Decree.
[3] Section 15 of the Emergency Executive Decree, in so far as it is relevant here, reads, and I quote:
“… Comparative Advertising shall be allowed if it complies with all the following conditions:
a) It should not lead to mistake, deceit or confusion between the advertiser and a competitor or between the goods or services of the advertiser and those of a competitor.
b) It should compare goods or services satisfying the same needs or having the same purpose, and said comparison must be made objectively, among one or more material, relevant, representative and verifiable characteristics of said goods and services, among which the price may be included.
c) Its purpose should be to inform the advantages of the advertised goods or services.
d) It should neither discredit nor denigrate intellectual and industrial property rights or the circumstances of any competitor.
e) No improper advantage should be obtained from renowned trademarks of any competitor or from the denominations of origin of any competitor’s goods.
f) It should not present a good or service as an imitation or replica of a good or service having a protected trademark or trade name.
g) In the event of goods protected by a denomination of origin, geographical indication or specific denomination, comparison should be made with other goods of the same denomination.
[4] As authorized by the regulation of subsection n) of section 26 of the Emergency Executive Decree 274/2019.
[5] In accordance with the regulation provided for in section 28 of the Emergency Executive Decree 274/2019.
[6] As set forth in section 29 of the Emergency Executive Decree 274/2019.
[7] These amounts must be automatically adjusted, in 2020, pursuant to the variation of the Consumer Prices Index (Índice de Precios al Consumidor), prepared by the INDEC (National Institute of Statistics and Census).
[8] Act 27,442, Section 1st – The agreements between competitors, mergers, acts or conducts, represented in any manner, related to the production and exchange of goods or services, which purpose or effect is to limit, restrict, falsify or distort competition, the access to the market or which constitute an abuse of a dominant position in a market, so that it may generate a damage for the general economic interest are forbidden.
[9] Published by the National Commission for the Defense of Competition (Comisión Nacional de Defensa de la Competencia) (“CNDC”) and available in https://www.argentina.gob.ar/sites/default/files/guias_abuso_posicion_dominante.pdf.
[10] See the Guide, page 3: “A typical classification of conducts that infringe the AA is the one that makes a difference between those that are carried out unilaterally from the coordinated ones. This document is referred only to the former, particularly to possible abuses of a dominant position by a single company or legal person.”
[11] “Section 3rd – The following conducts are practices that restrict competition, among others, provided that they are considered the determining conditions of section 1st of this Act:… d) to prevent, hamper or hinder the entry of third parties into a market or to exclude them from it;”
[12] The administrative procedure may end with the imposition of a penalty that may be set forth pursuant to the parameters specified in section 55 of the AA:
a) The discontinuance of the acts or conducts as applicable, the removal of its effects;
b) A fine of (i) up to thirty percent (30%) of the size of the business associated to the products or services involved in the unlawful act committed, during the last fiscal year, multiplied by the number of years that said act lasted, which amount cannot exceed thirty percent (30%) of the size of the business consolidated at a national level registered by the economic group to which the infringers belong, during the last fiscal year or (ii) up to twice the economic benefit reported for the unlawful act committed. If the fine may be calculated according to the two criteria set forth in paragraphs (i) and (ii), a higher fine shall be applied.
If it is not possible to assess the fine according to the criteria provided for in paragraphs (i) and (ii), the fine could reach the maximum amount of two hundred millions (200,000,000) of variable units (currently equivalent to AR$ 5,280,000,000).