Antitrust Litigation in Uruguay

Under Uruguayan Antitrust Law, there are two types of litigation proceedings available:

• to seek compensation for the damages produced by the anti-competitive practice, to be filed before the Judicial Branch; and/or
• to seek the annulment of a ruling by the Uruguayan Antitrust Authority (“Comisión de Promoción y Defensa de la Competencia”) when administrative enforcement has concluded on a finding of an anti-competitive practice, to be filed before the Administrative Litigation Court (“Tribunal de lo Contencioso Administrativo”) (hereinafter, the “Court”).

Please note that even though Uruguay enacted its Antitrust Act No 18,159 (hereinafter, the “Antitrust Act”) in 2007, domestic case law has been scarce. In this regard, the Court and the Judicial Branch have only ruled on antitrust matters on approximately 50 occasions in the last two decades, and they have neither analysed nor ruled on all the anti-competitive practices that are explicitly set forth under the Antitrust Act.

This review will focus specifically on the rulings issued by the Court, as:

• it is the sole jurisdictional body that has the constitutional power to confirm or annul administrative acts issued by state agencies under Uruguayan Law; and
• it has provided some valuable precedents, which will be addressed below:

Some considerations on the concept of dominance

Section 6 of the Antitrust Act forbids the abuse of dominance, considering that one or several agents hold a dominant position in the market “when they can substantially affect the relevant variables of the market, regardless of the conduct of their competitors, buyers or suppliers”. Section 6 of the Antitrust Act further specifies that abuse of dominance exists when the economic agent holding such dominant position “acts in an undue manner in order to obtain advantages or cause damage to others, which would not have been possible in the absence of such dominant position”.

Regarding this concept, there are three relevant guidelines set by the Court, covered below.

Acceptance of a market share threshold for dominance

In Abal Hermanos S.A. v Ministry of Economy and Finance (Court’s Ruling No 972/2017), the Court annulled the decision through which the Antitrust Authority sanctioned Abal Hermanos S.A. (hereinafter “Abal”), subsidiary of Philip Morris International in Uruguay, for alleged predatory pricing.

The Court understood that, although the Antitrust Act does not explicitly establish a percentage market share for the purpose of assessing whether an economic agent can be considered dominant, for an economic agent to be considered as such in a given relevant market and to therefore have the ability to affect other agents, it must hold at least 40% of the market share. Abal did not reach the 40% market share threshold in this case.

The ruling sets a relevant precedent for dominance claims and overrides the previous interpretation of some authors and agents who stated that under the original wording of Section 7 of the Antitrust Act, which provided for a pre-merger control threshold of a 50% share of the relevant market reached as a result of the operation, such a share could also be considered the threshold for dominance.

Dismissal of the concept of “atypical dominance”

Furthermore, in the aforementioned case, the Court explored another topic regarding dominance: the concept of “atypical dominance”, introduced by the Antitrust Authority in the previous hearing of the case, arguing that Abal’s alleged dominance did not derive from its specific and low (10%-20%) market share in the local relevant market (sale of cigarettes in Uruguay) against a local rival which consistently held a share of roughly 80%, but rather from its international strength given the fact that it was the subsidiary of Philip Morris International, a multinational company with “deep pockets”. Therefore, although Abal had an insignificant market share in the relevant geographical market, the Antitrust Authority stated that it still had a huge financial ability that enabled it to set predatory prices over a long period of time, which led the Antitrust Authority to sanction Abal.

However, the Court concluded that the sole condition of being a subsidiary does not suggest the existence of dominance “per se”. Moreover, admitting the concept of “atypical dominance” would imply an undue extension of the geographical relevant market to a worldwide relevant market any time the case included a subsidiary of a multinational company, thus departing from the applicable provisions in place in relation to geographical market definitions. In this specific case, this would lead to an absurd result in which the relevant market would be comprised of three players all reputed as dominant, despite two having market shares below the 10-20% range.

Anti-competitive practices can occur regardless of dominance

In Visuar Uruguay S.A. et. al. v Ministry of Economy and Finance (Court’s Ruling No 520/2019) the debate as to whether a non-dominant economic agent may participate in anti-competitive practices was opened. The case involved six household appliance distribution companies which were sanctioned by the Antitrust Authority during administrative enforcement after concluding that they were colluding in setting minimum resale prices for the online sales of televisions by Baranur SA.

The plaintiffs requested the annulment of the Antitrust Authority’s decision based on the argument, among others, that the economic agents involved did not hold a dominant position in the relevant market. In this regard, the Court held that Section 2 of the Antitrust Act not only prohibits the abuse of dominance but also “all practices, conduct or recommendations, individual or concerted, that have the effect or object of restricting, limiting, hindering, distorting or preventing current or future competition in the relevant market”. It was on this basis that the plaintiffs were sanctioned and not for abuse of a dominant position.

However, the most relevant aspect of the ruling consists of a clarification that the Court made in this regard. In this sense, it is highlighted that, although the Antitrust Act does not only sanction the abuse of dominance, there would be only two scenarios with the possibility of distorting competition:

• unilateral practices by parties that hold a dominant position or at least a broad market power; or
• concerted practices by parties that, without holding a dominant position, by means of an agreement achieve a similar effect.

Therefore, in a scenario of unilateral practices by parties that do not hold a dominant position, in spite of the generic wording of Section 2 of the Antitrust Act, there would be no possibility of distorting competition, and hence such practices could not be considered anti-competitive.

In this case, the market shares of the economic agents were reviewed jointly because of the concerted nature of the practice. They had a joint market share of 30%. Although it may not seem reasonable to argue that a 30% market share could distort competition, there is no “de minimis” rule or equivalent safe harbours or safe havens under the Antitrust Act.

Anti-competitive acts, not anti-competitive legal rules

In Megal v Ministry of Economy and Finance (Court’s Ruling No 765/2011), the Court concluded that legal rules could not be regarded as anti-competitive practices. The Court understood that the Antitrust Act, establishing a general principle that all markets shall be governed by the principles and rules of free competition, clearly qualifies only certain practices or types of conduct, but not legal rules, as anti-competitive.

In this regard, Section 3 of the Antitrust Act sets forth a broad subjective scope of application of antitrust law in Uruguay, stating that “all individuals and legal entities, public and private, national and foreign, that carry out economic activities, whether for profit or not, in Uruguayan territory, are obliged to abide by the principles of free competition”. However, there are no known records of successful enforcement (sanctions) or litigation (damages rulings) against state agencies for having engaged in potentially anti-competitive practices, other than setting non-binding recommendations for state agencies pursuant to Section 26 of the Antitrust Act.

Professional associations and fee-setting

In 2014, there was a series of leading cases regarding professional associations, in which the Antitrust Authority and the Court reviewed various systems of professional memberships and associations, including the Uruguayan Bar Association, the Uruguayan Association of Accountants, Economists and Administrators, and the Uruguayan Association of Notaries Public (Court’s Rulings No 659/2014, No 400/204 and No 458/2014 respectively).

The Antitrust Authority had concluded that professional associations set fees for the practice of their professions for their members (and even fellow professionals who were not associated) and that their existence, since they had a certain degree of binding nature and established single or minimum prices for the services to be rendered at, constituted a recommendation intended to restrict, distort or prevent competition. As a consequence, the Antitrust Authority ordered the associations to repeal the established professional fees.

However, the Court annulled these decisions, based essentially on the absence of sufficient evidence of anti-competitive distortion. Quoting comparative precedents, the Court held that there was no anti-competitive effect caused by the fixing fees because fees were not mandatory. Both associated and non-associated professionals generally charge fees that are different from those specified, and there are no controls by the associations to ensure compliance with the fees. Therefore, economic agents have no real barriers to market entry, other than the time invested in obtaining a university degree.

Jurisdictional interpretation of the Antitrust Act wording

Refusal to sell or refusal to deal?

Under Antitrust Law, “refusal to deal” is often referred to as including different types of conduct: refusal to buy and refusal to sell. Strictly speaking, Section 4(h) of the Antitrust Act explicitly includes only the “refusal to sell” as a prohibited practice. It does so by prohibiting entities from “unjustifiably refusing the sale of goods or the rendering of services”.

Notwithstanding the language of the rule, in Savio Quevedo, Fabio Valentin v Ministry of Economy and Finance (Court’s Ruling 89/2020), the Court proposed an extensive interpretation of the terms of the concept, including both the refusal to sell and the refusal to purchase within the prohibition envisaged under Section 4(h) of the Antitrust Act. When this case was ruled upon by the Supreme Court of Justice, it was stated that it is erroneous to hold that the prohibition envisaged under the Antitrust Act is limited only to sales and that it is the unjustified refusal to enter into any type of transaction that is prohibited. Refusal to sell was explicitly regulated as it is the most common practice, but without forcing the wording of the provision, by analogical extension, the refusal to purchase is also included in the Antitrust Act.

General interest

Marbury v Executive Branch (Court Ruling No 580/2014) is a case governed by antitrust regulations preceding the enactment of the Antitrust Act. In this regard, Section 14 of Act No 17,243, which the Antitrust Act subsequently replaced, set forth that “the application of certain antitrust provisions would proceed when the distortion in the market generated relevant damage to the general interest”.

In the Court's view, the concept of general interest referred to an interest comprising the entire population, and it was not sufficient that a group of companies were affected. It was further stated that the effects of anti-competitive conduct shall be assessed not in relation to an isolated aspect of the system, but instead taking into account the more global consequences of such conduct on the economic values recognised by the community. The general economic interest is not the interest of a particular competitor or group of competitors, but instead the interest of a society in general, with particular attention to consumers.

This idea was later reflected as the subject of legal protection in Section 1 of the Antitrust Act, which states that “this act is of public order and its purpose is to promote the welfare of current and future consumers and users, through the promotion and defence of competition, the encouragement of economic efficiency and the freedom and equality of access conditions of companies and products to the markets”, and it was confirmed afterwards by the Court (Court Rulings 575/2010 and 580/2014).

Notwithstanding the above, the Court has repeatedly acknowledged the legal standing of competitors to challenge potentially anti-competitive practices carried out by their rivals. This specific legal standing is not explicitly envisaged under the Antitrust Act, and therefore another question has been clarified as to the scope of litigation under the Antitrust Act (Court Rulings 711/2015 and 580/2014).