Nuts & Bolts of Vertical Restraints in Latin America

On November 20^th, the ABA International Committee held a webinar where vertical restraints in Latin America were discussed. Nicole Nehme (FerradaNehme, Chile), Amadeu Ribero (DLA Piper, Brazil), Carlos Mena (Creel, Mexico) and Miguel del Pino (Marval O'Farrell Mairal, Argentina) shared their experience and insights on how resale price maintenance (“RPM”), minimum advertised price policies (“MAP policies”), customer and territorial restrictions, exclusivities and online sales bans are dealt with in their countries. 

RPM

In Chile, RPM rules apply to both minimum and maximum RPM. Minimum RPM is considered the most harmful vertical restraint. Chilean National Economic Prosecutor’s Office (“FNE”) has disregarded the 35% market share safe harbor when investigating minimum RPM cases (see FNE’s gas (2024) and pet food markets cases (2018)). Suggested and maximum RPM are considered less harmful, but indirect mechanisms (such as pressures or incentives) are analyzed (see FNE’s Adidas Case (2024)). The Chilean Antitrust Court (“TDLC”) approach was illustrated with the Nokia Case (2013) –dismissed due to insufficient evidence–, Supermarkets Case (2019) –hub-and-spoke collusion involving minimum RPM– and CDF Case (2024) –abuse of dominance through the limitation of the ability of operators to set resale prices and promotions–. In Argentina, RPM is governed by Section 3, Subsection a) of the Antitrust Act and analyzed on a case-by-case basis under the rule of reason. No cases have prohibited maximum RPM (see Danone Case, 2008), and the Argentinian National Commission for the Defense of Competition (“CNDC”) views them as potentially beneficial. Suggested prices are allowed if they are recommendations. Brazil also applies the rule of reason for RPM, with market shares above 20% triggering a presumption of illegality, shifting the burden of proof to the defendant. Maximum RPM is accepted, while minimum RPM is prohibited. Suggested prices are permitted. In Mexico, vertical restraints are seen as potential barriers to competition. Minimum and maximum RPM, as well as suggested prices, are treated similarly. It was highlighted that RPM can facilitate hub-and-spoke cartels.

MAP agreements or policies

In Chile, MAP policies have not been directly addressed but would likely be treated as minimum RPM. In Argentina, MAP policies are often seen as anti-competitive, potentially forcing price increases. The Guidelines for Abuse of Dominance state that MAP policies without penalties for non-compliance may not constitute an abuse, as they are not true RPM but suggested prices. In Brazil, they have not been seen widely but they could carry minimum RPM risks. A 2018 CADE ruling found Continental's MAP policy permissible due to low market shares and its unilateral application. In Mexico, there is no specific case law, but Coface would likely view MAP as de facto RPM.

Territorial and/or customer restrictions. Active and passive distinctions

In Mexico, vertical restraints are analyzed under the rule of reason and there are no safe harbors.  Two cases were mentioned: one in the distribution of cement market and another in the telecoms industry. Both cases were dismissed, due to insufficient evidence of harm. Regarding active and passive distinctions, it was explained that there are not many cases but were discussed regarding the use of geo-blocking, that is, territorial restrictions to impede distributors from stepping into territories. It has been considered to represent a blocking system for passive sales. In Chile, these restraints are assessed under the rule of reason. The FNE’s categorizes exclusive territories as a type of intra-brand vertical restraint. Three landmark cases were mentioned: ACAM v Silfa Case (2012), Shopping Malls Case (2003) and Nestlé Case (2024). While Chilean case law on active versus passive sales is limited, it often draws on European practices. In Argentina, territorial restrictions are analyzed under the rule of reason. In the Philip Morris Case, the CNDC upheld a change in the distribution system, rejecting claims that territorial restrictions were anti-competitive, decision that was confirmed by the Court of Appeals. A restriction on passive sales would likely be deemed anti-competitive by CNDC, similar to the approach in Europe. In Brazil, they are generally analyzed under the rule of reason. There are no clear-cut rules distinguishing between active and passive sales. Enforcement in this area is limited.

Online sales restrictions/marketplace bans

In Argentina, there are no specific guidelines for competition in digital markets, so the CNDC would likely follow the EU criteria. Two relevant cases involve restrictions from vertically integrated companies: the Prisma Case and the Payment Aggregators Case. In the Prisma Case, the CNDC found that Prisma's dominant position and vertical integration led to exclusionary practices in the payment market. The Payment Aggregators Case involves self-preferencing, where the CNDC investigated restrictions imposed by MasterCard and Visa on certain payment aggregators, following complaints of collusion and abuse of dominance. In Chile, there are no precedents, and the FNE Guide does not address the issue, but a similar approach to the EU is expected. In Mexico, there is no specific guidance or cases, and the rule of reason would apply. In Brazil, these issues are likely to be analyzed in the context of merger reviews, where there is significant debate over online versus offline competition.

Exclusivity and loyalty programs

In Brazil, exclusivity and loyalty programs are assessed under the rule of reason. These cases are often litigated, and CADE is receptive to competitor complaints. The Heineken/Ambev Case (2022-2023) involved allegations that Ambev abused its dominance through exclusivity agreements in the beer market. CADE imposed a cease-and-desist agreement, limiting the number of exclusivity agreements, banning financial penalties, and capping their duration at 5 years. In the Ambev-To Contigo Case (2015), CADE ruled that a loyalty program granting higher discounts, bonuses and gifts in exchange for purchasing almost all beer from Ambev constituted de facto exclusivity and an abuse of dominance. In Chile, exclusivity agreements are considered practices that may raise barriers to entry or expansion. Like Brazil, de facto exclusivities are closely scrutinized (see CCU Case, 2008 and 2024). FNE has also analyzed retroactive discounts, with mixed outcomes (see Unilever (2014) and Electrolux (2020) Cases). In Argentina, the CNDC in the Quilmes/CCU Case (2021), found that Quilmes engaged in anticompetitive conduct through loyalty strategies designed to create exclusive retail spaces, effectively closing the market to current and potential competitors. In Mexico, the TicketMaster Case involved exclusivity in live-show production, venue management, and ticket distribution. An agreement was reached requiring TicketMaster to eliminate exclusivity clauses and refrain from including them for the next 10 years. Regarding loyalty programs, it was mentioned that Cofece is investigating Mercado Libre and Amazon, focusing on, among other issues, loyalty programs.