Supply Law: what sanctions are provided for in the regulation mentioned by President Alberto Fernández

President Alberto Fernández today convened, through a recorded message, employers, representatives of the productive sectors, the countryside, workers and civil society to a working group to combat inflation and in that context, he warned that if necessary he would apply the Supply Law.

The president issued a recorded message in a context in which inflation reached 52.3% in the last twelve months, according to the National Institute of Statistics and Censuses (Indec). “We are not going to stop controlling and controlling prices, applying the Supply Law if necessary and using all the instruments available to the state to meet the objective of controlling prices,” Fernández announced in a message that was expected in the morning, then it was postponed to 19 hours and finally took place around 21.

“Our battle today is against speculators. Against the greedy. Against those who seek even in such complex situations to obtain an extraordinary income. Against the usual agoreros, who will try to install the save who can or look for quick culprits and simple answers,” stressed the head of state.

In this regard, he said that he will convene representatives of different sectors from Monday “to an agreement table that will allow us to design a tomorrow in the fight against inflation”.

“We hope to find agreements that will help lower inflation and ensure that the purchasing power of wages increases,” he continued.

In warning about the application of the Supply Law, Fernández reiterated the appeal to a legal tool that empowers the Executive Branch to determine prices, carry out inspections, suspend shops and seize products, among other sanctions. It also provides for fines; closures of establishments for 90 days; disqualification from receiving loans or tax benefits.

In November 2020, in the midst of the revival of construction after the months of quarantine, the President had also threatened the implementation of the Supply Law in the face of rising material prices. He then instructed the Minister of Productive Development, Matías Kulfas, to act “with the full weight of the law” on those who hoarded products. The presidential announcement was made at a virtual event to celebrate Construction Day.

At the end of last year, the Secretary of Internal Trade, Roberto Feletti, referred to the then negotiation with companies to set prices around more than 1,300 products in the mass consumer basket and warned: “Obviously if an agreement is not reached we will have to apply the laws. It's something I try to prevent, because I believe in social agreements.”

The law cited today by President Alberto Fernández was passed in 1974, when inflation had escaped the control of the government. At that time, after a few years of relative stability at the end of the 1960s, under the management of Adalbert Krieger Vasena, when annual inflation remains below 10%, Argentina began to rise sharply in prices, to an initial range of 40% in 1971, but which began to spiral with a 64% jump the following year.

Between 73 and 74, Minister José Ber Gelbard was trying to implement his “Social Pact”. It implemented a price and wage program in the Act of National Commitment, signed by workers, employers and the Government. The objective was to establish a new distribution of income in favor of workers, through an increase in wage levels and family allowances, which was then sought to be maintained through intervention on the process of price formation.

The plan worked, with a decline in inflation and economic growth. But soon after, the lack of consistency with an expansive monetary and fiscal policy generated tensions between the parties to the agreement and a sharp delay in tariffs and the exchange rate, which led to less than 2 years resulting in what was the first major precedent for hyperinflation, called the “Rodrigazo”, when Minister Celestino Rodrigo released prices and opened parity prices, and public companies could not sustain themselves with frozen tariffs.

The original text was modified in 2014 by Kirchnerism: it empowers the State to intervene in markets to set prices and profit margins when it deems it necessary. In addition, it allows you to apply sanctions, suspend shops or carry out searches and proceedings in industrial establishments without a court order.

Articles 4 and 5 establish sanctions for those who “hoard raw materials or products”.

The regulation provides for economic fines of up to 10 million pesos; closure of the establishment for 90 days; disqualification from access to the credit market; special disqualification of 5 years from trade and public service; suspension of 5 years in the registers of State suppliers; loss of concessions and privileges in tax regimes; confiscation of goods.

In turn, article 12 empowers the State to enter and inspect establishments, hijack accounting books, intervene in the transport of materials, carry out preventive closures, immobilize goods and summon alleged offenders to give evidence.

Background

In the recent past, the Supply Act was repeatedly enforced but rarely applied.

In 2011, in a fight that ended in court, the Secretary of Commerce headed by Guillermo Moreno, through a resolution, forced the oil company Shell, then led by Mauricio Macri's former Minister of Energy, Juan José Aranguren, to roll back an increase in fuels.

In 2012 it appeared again, this time as a threat. The then-president Cristina Fernández de Kirchner mentioned it as a possibility in the face of a conflict over the price of yerba mate that interrupted the deliveries of that input to shops.

“Let's hope we don't miss the weed, because if not, there will be problems and we will implement the Supply Law,” said the president, but she failed to implement the Law.

A year later, on the other hand, in July 2013, Kirchnerism decided to implement the Wheat Supply Act, through resolution 67/2013, published in the Official Gazette again under the signature of Guillermo Moreno.

“The various sectors involved in the production processes of wheat, bread, standard condition and flour for bakery derived therefrom that have physical possession of that product shall carry out the commercial actions aimed at providing adequate supply to the domestic market from the day of publication of this resolution”, indicated the measure.

That resolution was finally repealed on January 13, 2017 by the Government of Mauricio Macri.

As early as 2019, Mauricio Macri's government also announced that it would apply the Supply Law, in that instance, to prevent the increase in fuel prices. Finally, and about the time, the then president decided to resort instead to a decree of necessity and urgency to issue a freeze for 90 days after his defeat in the presidential PASO that year followed by a sharp rise in the dollar and a spike in inflation. Thus, he avoided resorting to the old norm.

More recently, Alberto Fernández himself assured that he would not hesitate to apply it in November 2020 when during the exchange rate tensions that led to a rise in the free dollar to $195 construction materials began to be recorded.

The applications of this text go until the beginning of this century, when in the midst of the political crisis that led to the resignation of President Fernando De la Rúa, followed by a succession of short presidential periods. During the week of Adolfo Rodríguez Saá's presidency, the Minister of Foreign Affairs and Worship, José María Vernet, even talked about “putting tanks” on the doors of shops to stop price increases.

“I want to recall that no action has been taken and that if they are acting at these prices we will have to legislate. And we're going to have to make tough decisions. I am Chancellor, if I were Minister of Defense I would do what the Israeli army did when there was a shortage. The Israeli army at the time of greatest shortage tore the blinds off businesses,” he said in a television interview.

Below is the full text of the Supply Act:

Rules governing the purchase and sale, exchange and location of movable things, works and services.

Ley Nº 20.680

Sanctioned: June 20, 1974

Enacted: June 24, 1974

ARTICLE 1 — This law shall govern with respect to the purchase, exchange and location of movable things, works and services — their direct or indirect raw materials and their inputs — as well as to benefits — whatever their nature, contract or legal relationship that gave rise to them, of a free or onerous nature, habitual or occasional — intended for production, construction, processing, marketing, health, food, clothing, hygiene, housing, sports, culture, transport and logistics, recreation, as well as any other movable property or service that satisfies — directly or indirectly — basic or essential welfare needs of the general population.

The scope of application of this law covers all economic processes relating to such goods, services and any other stage of economic activity directly or indirectly linked to them.

Exempt from the regime established by this Act, economic agents considered micro, small or medium-sized enterprises (MSMEs), in accordance with the provisions of Law 25,300, provided that they do not have a dominant position under the terms of Articles 4 and 5 of Law 25,156.

(Article replaced by art. 1 of Law No. 26.991 B.O. 19/09/2014) ARTICLE 2 — In relation to everything included in article 1, in the event of any of the cases provided for in paragraphs a), b), c), d), e), f) and g) of article 4, the enforcement authority may:

(a) Establish, for any stage of the economic process, profit margins, reference prices, maximum and minimum price levels, or all or some of these measures;

(b) To issue regulatory rules governing marketing, intermediation, distribution and/or production, except for matters relating to infringements of formal duties provided for in Law 11.683, t. o. 1998, and its amendments;

(c) Provide continuity in the production, industrialization, marketing, transport, distribution or provision of services, as well as in the manufacture of certain products, within the minimum levels or quotas established by the implementing authority. For the purposes of fixing such minimum levels or quotas, the implementing authority shall take into account, with respect to those required, the following data and elements:

I) Usual volume of production, manufacture, sales or provision of services.

II) Productive capacity, economic situation of the obligated subject and economic equation of the process or activity.

The implementing authority in the provision of this measure shall provide that continuity in production, industrialization, marketing, transport, distribution or provision of services, as well as in the manufacture of certain products, is economically viable, failing that it shall establish a fair and timely compensation;

(d) Agree on subsidies, where necessary to ensure the supply and/or provision of services;

e) Require all documentation relating to the business direction of the company or economic operator; such information shall be reserved and confidential, and shall be for exclusive use within the framework of the powers assigned to the implementing authority.

It may also require information on the sales prices of the goods or services produced and rendered, as well as their availability of sale;

(f) Require the presentation or display of all types of books, documents, correspondence, trade papers and all other items related to business administration; to carry out technical expertise;

(g) To proceed, if necessary, to the seizure of all the elements referred to in subparagraphs (f) and (h), for a maximum period of thirty (30) working days;

(h) Create registers and oblige the keeping of special books established;

(i) Establish commercial licensing regimes.

Those who are bound by the application of this rule and who consider that as a result they will suffer serious and irreparable economic damage, may request partial or total revision of the measures affecting them. However, this will not excuse them from strictly complying with the obligations imposed, as long as no resolution is adopted in relation to their request, which must be issued within fifteen (15) working days of the complaint. Otherwise, the measure will be void. (Article replaced by art. 2 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 3 — The Governors of the Province and/or the Head of Government of the Autonomous City of Buenos Aires, by themselves or through the bodies and/or officials they determine, may set —within their respective jurisdictions— maximum prices and the relevant complementary measures, while the Executive Branch or the agency national implementation did not establish them, immediately reporting to the latter. These prices will survive as long as the Executive Branch does not use the powers accorded to it by this law for that purpose. They may also provide for the measures authorized in Article 2 (e), (f), (g) and (h).

Likewise, the above-mentioned authorities, and only as regards supply within their respective jurisdictions, may modify the prices set by the national implementing authority, as long as the location of the source of production, the lower incidence of freight rates or any other circumstance or factor allow a reduction of them. If, conversely, these factors determine the need to increase them, prior authorization must be required from the national implementing agency; it must be issued within fifteen (15) working days; otherwise the price proposed by the local authority shall be approved.

(Article replaced by art. 2 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 4 — The penalties set out in Article 5 and, where appropriate, in Article 6, shall be liable to those who:

(a) Artificially or unjustifiably raise prices in a manner that does not respond proportionately to cost increases, or obtain abusive profits;

(b) Revaluing stocks, unless expressly authorized by the implementing authority;

(c) To hoard raw materials or products, or form larger stocks than necessary, whether acts of a monopolistic nature or not, in order to meet the usual production or demand plans;

(d) Intermediate or allow unnecessary intermediation or artificially create stages in distribution and marketing;

(e) Destroy goods or goods; or prevent the provision of services or perform in any other act, whether monopolistic in nature or not, which tends to make their production, sale or transport scarce;

(f) Unjustifiably deny or restrict the sale of goods or the provision of services, or unreasonably reduce habitual production or not increase it, having been prompted by the implementing authority for this purpose five (5) working days in advance, if they have productive capacity, to respond to demand;

(g) Divert or discontinue normal and customary supply from one area to another without justified cause;

h) Do not have for sale or discontinue, depending on the respective commercial sector, the production of goods and services with maximum and minimum price levels, or fixed profit margins, except for justified exemptions established by regulation, taking into account branch, habitual, modality, situation of market and other circumstances specific to each case;

i) Not to provide an invoice or proof of sale, the information or documentation provided for in article 2, paragraphs e) and f) hereof, or carry out their activity outside the registers and licenses provided for in article 2, paragraphs h) and i) of this law, if applicable, all in the form and conditions established by the regulatory provisions;

j) Breach any of the provisions adopted in the exercise of the powers conferred by articles 2 and 3 of this Act.

(Article replaced by art. 3 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 5 — Those who commit the acts or omissions provided for in article 4 shall be liable to the following sanctions:

a) Fine of five hundred pesos ($500) to ten million pesos ($10,000,000). The latter limit may be increased to triple the profit obtained in infringement;

b) Closure of the establishment for a period of up to ninety (90) days. During the closure, and for another equal period, goodwill and goods concerned may not be transferred;

c) Disqualification of up to two (2) years from the use or renewal of credits granted by public entities subject to Law 21,526 on Financial Institutions, and its amendments;

(d) Confiscation of the goods and products subject to the infringement;

(e) Special disqualification of up to five (5) years from the practice of trade and public service;

(f) Suspension of up to five (5) years in State supplier registers;

(g) Loss of concessions, privileges, tax or special credit regimes enjoyed.

The penalties provided for in this article may be imposed independently or jointly, depending on the circumstances of the case. (Article replaced by art. 4 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 6 — In the event of a repeat offense, the maximum limits of the amounts of paragraph a) of article 5 and the terms of paragraphs b), c), e) and f) may be increased to double the original sanction.

(Article replaced by art. 5 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 7 — For the determination of sanctions of any kind, pecuniary or personal, the following shall be taken into account in each case:

(a) The economic dimension of the enterprise, business or operation, with particular regard to working capital;

(b) The market position of the offender;

(c) The effect and socio-economic importance of the infringement;

(d) The profit generated by the sanctioned conduct and its temporary duration;

(e) The damage caused to the market or consumers.

(Article replaced by art. 6 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 8 — When the offences punishable by this law have been committed for the benefit of a legal person, association or society, it shall be given character as a party, without prejudice to the personal responsibility of the authors. In cases of conviction of a legal person, association or partnership, the loss of personality and the expiration of the privileges granted to him may be imposed as a supplementary sanction. Directors, administrators, managers and members of such entities who have participated in the commission of the sanctioned acts acting with malice or serious fault, shall be liable to the sanction provided for in article 5, paragraph a), reducing to a quarter the minimum and maximum limits to be imposed.

(Article replaced by art. 7 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 9 — All those who obstruct or hinder the action of those responsible for applying the provisions emerging from this law or supervising and controlling the observance of it or of the provisions that consequently are issued, or fail to comply with the requirements of the enforcement agencies, shall be liable to a fine of up to pesos one million ($1,000,000).

(Article replaced by art. 8 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 10.- Verification of infringements of this Law and the rules that are issued as a consequence, and the conduct of the proceedings arising from them, shall be in accordance with the procedure established below and other formalities determined by the enforcement authorities:

(a) A verification report shall be drawn up indicating by the acting official, especially affected by the enforcement agency, of the name and address of the witnesses, if any, and in the same act the alleged offender, or his factor or employee, shall be notified that within ten (10) working days he or she may submit in writing his defense and offer the evidence, if any, and must also indicate the authority to which it must submit it and provide a copy of the proceedings. This record shall specify the conduct alleged and the relevant circumstances of the type corresponding to the offence; any of the persons appointed may record any records that it deems appropriate and which refer to the fact or facts underlying the offence and the witnesses present;

(b) Evidence shall be admitted only if there are disputed facts and provided that they are not manifestly inconducive.

(c) The evidence must be produced within ten (10) renewable working days when there is justified cause, those not produced within that period being considered withdrawn, for cause attributable to the offender;

d) Once the summary proceedings have been completed, within five (5) working days, the final decision will be issued, which must have a prior legal opinion.

(Article replaced by art. 9 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 11. — The records of the record drawn up in a form that are not enervated by other evidence, shall constitute sufficient proof of the responsibility of the offender. In the event that the latter refuses to sign it, it shall be recorded and considered formally valid with the sole signature of the acting official and shall serve as a principle of proof.

ARTICLE 12. — For the performance of their duties, acting officials may:

(a) To require the assistance of the security forces;

(b) To enter and inspect industrial and commercial premises and establishments during working hours and days of operation, and to request search warrants from the competent judges when this procedure is to be carried out on non-working days and hours or in the residence or room of the alleged offender;

(c) To hijack books and any other element related to business administration for a maximum period of up to thirty (30) business days;

(d) Intervene the infringing goods, even when in transit, by appointing depositary;

e) Preventively close the premises where the infringement has been found for up to three (3) days, when this is essential for the best course of the investigation or if there is an imminent risk that the infringement will continue to be committed. The enforcement authority may request a judicial extension of this period, up to a maximum of thirty (30) days;

(f) Intervene and declare goods that have been the subject of a maneuver aimed at reducing supply to be frozen;

g) To summon the alleged infringers to agree to give or extend a declaration on a date that will be fixed, which must be later than two (2) days following the act. Likewise, persons injured by an offence or eyewitnesses thereof may be summoned, including those who refuse to sign the corresponding act as such.

(Article replaced by art. 10 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 13. — In all cases of closure, whether preventive or temporary, offenders may immediately withdraw perishable property, provided that they do not constitute indispensable evidence. For the duration of the preventive or temporary closure, those prevented or punished must pay the full remuneration of staff in relation to dependency.

(Article replaced by art. 10 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 14. Goods that are intervened pursuant to article 12, paragraphs (d) and (f), may be sold, located or consigned when they are perishable and/or when the supply of them is insufficient, for which purpose no prior deposit or judgment of expropriation is necessary. In the event of a decision that exempts its owner from liability, the amount of compensation that may be due to him shall be determined, following the established guidelines on expropriations as appropriate.

(Article replaced by art. 11 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 15. — The Executive Power shall designate the authority for the application of this Law at the national level, with powers to issue the complementary rules necessary for its implementation.

Violations of this Act affect the economic rights and interests of citizens and the Nation. Those committed in territories of national jurisdiction or when they affect or may affect inter-jurisdictional trade, shall be controlled and judged in administrative headquarters by the enforcement authority, with the exception of the sanctions of closure and special disqualification from exercising trade or public service which shall be imposed, in the scope of the Autonomous City of Buenos Aires, by the National Judge of First Instance in Federal Administrative Disputes, and in other jurisdictions, at the request of the implementing authority, by the corresponding federal judge.

For the purposes of this rule, interjurisdictional trade shall be understood as trade with foreign nations, that carried out by the provinces among themselves or with the Autonomous City of Buenos Aires, that which is practiced by a province or the Autonomous City of Buenos Aires with an establishment of national utility, and the latter with first.

(Article replaced by art. 12 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 16. — The administrative decision imposing sanctions may be challenged only by direct appeal to the National Chamber of Appeals in Federal Administrative Contentious Matters or to the competent federal appeals chambers, depending on the seat of the authority that ordered the sanction.

The appeal must be lodged and founded before the same authority that imposed the sanction, within ten (10) working days of notification of the decision; the enforcement authority shall submit the appeal with its reply to the Chamber within ten (10) days, accompanied by the file in which the administrative act was issued resorted.

(Article replaced by art. 13 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 17. In all cases, in order to lodge a direct appeal against an administrative decision imposing a fine, the amount of the fine imposed on the order of the authority that ordered it must be deposited, and the proof of the deposit must be submitted with the written appeal, without which requirement it shall be dismissed, unless the compliance with it could cause irreparable harm to the appellant.

(Article replaced by art. 14 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 18. — Offences committed in the provinces and which exclusively affect the trade of their respective jurisdictions shall be judged at administrative headquarters by the bodies determined by each of them, without prejudice to the provisions of article 3.

ARTICLE 19. — The decision that imposes a fine may provide that it shall become the final decision, if it is not paid within the period established in that decision. — The term of the closure shall be set at the equivalent between PESOS FIVE HUNDRED ($ 500.-) and in PESOS ONE MILLION ($1,000,000) for each closing day, but not may exceed ninety (90) days. (Amounts replaced by art. 3 of Decree No. 496/2002 B.O. 13/03/2001)

ARTICLE 20. — Failure to pay fines shall require their collection by the procedure of fiscal enforcement, and the testimony of the final conviction issued by the judging body constitutes a sufficient title of enforcement.

ARTICLE 21. — The confiscated property shall be sold or located by the enforcement authority within a maximum period of thirty (30) calendar days from their confiscation, taking into account the nature and characteristics of those assets. In the event that confiscated assets are perishable, the period shall be reduced to five (5) calendar days; the proceeds of the sale or location will enter the general income of the Nation.

(Article replaced by art. 15 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 22. — Violations of this law and its complementary norms shall be barred after three (3) years. The statute of limitations shall be interrupted by the commission of new infringements or by the commencement of administrative or judicial proceedings.

(Article replaced by art. 16 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 23. — The amount of fines and/or resulting from seizures shall be entered into the National or Provincial Treasury, according to the Body that issued the conviction decision.

Local governments shall determine the destination of funds received in their respective jurisdictions.

(Article replaced by art. 40 of Law No. 23.110 B.O. 09/11/1984. Validity: from the end of the 1984 budget year.)

ARTICLE 24. - Officials and employees who in any way participate in the application of this Law shall be obliged to keep secret about all data of actions that come to their attention in the exercise of their duties. Violation of this rule shall be considered a serious misconduct for administrative purposes, without prejudice to the corresponding criminal sanctions.

ARTICLE 25. — (Article repealed by art. 19 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 26. — (Article repealed by art. 19 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 27. In the event of a situation of shortage or shortage of goods or services that meet basic or essential needs aimed at the general welfare of the population, the implementing authority may, by a well-founded resolution, order their sale, production, distribution or supply throughout the territory of the Nation, regardless of its owner, under warning in the event of failure to impose the sanctions provided for in article 5. This measure shall last as long as it takes to rehabilitate the situation of shortages or shortages and shall be proportional in scope to the seriousness of the events that motivate it.

(Article replaced by art. 17 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 28. — In order to resolve matters not expressly provided for in this Act, the provisions of the National Administrative Procedures Act 19,549 and its regulations shall be applied by default.

(Article replaced by art. 18 of Law No. 26.991 B.O. 19/09/2014)

ARTICLE 29. This Law is public order; it shall apply from the day after its publication in the Official Gazette and repeals Decree Law 19.508/72, as amended by 20.125/73. Infringements completed during the validity of the latter shall be punished according to their provisions, even if they have been verified later.

ARTICLE 30. — Communicate the Executive Branch.

Given in the Sessions Hall of the Argentine Congress, in Buenos Aires, on the twentieth day of June in the year one thousand nine hundred seventy-four.

—Registered under No. 20,680—

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