The relevant Brazilian Merger Control Legislation consists of the Law No 12,529/2011 (“Brazilian Competition Law”) and some other internal rules of the Administrative Council for Economic Defence (CADE or the “Brazilian Antitrust Authority”). The main CADE’s internal rules – and also guidelines – in this regard are:
Some transactions involving regulated sectors (eg, banking, aviation, oil and gas, telecommunication, among others) may require the approval of specific regulatory agencies besides CADE’s approval.
In the banking sector, for instance, transactions that meet the jurisdictional thresholds must be submitted to both CADE and Brazilian Central Bank (BCB), requiring the antitrust approval of the two agencies, as per CADE and BCB’s Joint Normative Act No 01/2018.
Also, it is important to observe that there is no specific foreign investments Merger Control Legislation in Brazil.
Brazilian Merger Control is enforced by CADE, a federal agency with jurisdiction over the entire Brazilian territory. CADE’s General Superintendence is responsible for analysing and approving simple transactions and may send some complex cases to CADE’s Administrative Tribunal (“CADE’s Tribunal”). The decisions of CADE’s General Superintendence can be reviewed by CADE’s Tribunal upon request of one of its Commissioners or if challenged by a given interested third party.
In complex cases, CADE’s Economic Studies Department may be requested to render economic opinions, while CADE’s Attorney General is responsible for monitoring the fulfilment of CADE’s decisions in complex merger cases.
The submission is compulsory for certain transactions classified as “concentration acts” (eg, mergers, direct or indirect equity or assets acquisitions, incorporations, associative agreements, consortia or joint ventures) once the jurisdictional turnover thresholds are met and the transaction generates effects in Brazil. There is a single exception related to associative agreements, joint ventures or consortia, that need not be submitted if their purpose is to participate in public bids. Nevertheless, CADE can also accept voluntary notification of transactions that fall below the thresholds and are notified on an ad cautelam basis by the merging parties.
Both the failure to notify a transaction and the implementation of a transaction before CADE’s clearance decision (res judicata) (see 2.13 Penalties for the Implementation of a Transaction Before Clearance) are treated broadly as gun jumping violation pursuant to the relevant Brazilian Merger Control Legislation.
The penalties for the failure to notify a mandatory concentration act (as well as for the implementation of a transaction before CADE’s clearance decision) are listed below:
With regards to pecuniary fine, CADE has recently issued the Resolution No 24/2019, which establishes objective parameters for the dosimetry of fines in view of a gun jumping violation, considering the transaction value and also mitigating and aggravating factors such as the time lapse in notifying a transaction, the gravity of the violation and the intention of the merging parties.
The mentioned penalties are applied in practice and, for reference purposes, with respect to precedents on failing to notify, CADE already applied penalties in light of Administrative Proceeding for Merger Investigation No 08700.002655/2016-11 [“Blue Cycle/Shimano (2016)”], imposing a fine of BRL1.5 million (approximately USD450,000 in 2016) and declaring the parties’ supply agreement null and void. Also, in Administrative Proceeding for Merger Investigation No 08700.004924/2015-94 [“Saga (2019)”], the merging parties settled an agreement with CADE, committing themselves to collect a pecuniary contribution of BRL2 million (approximately USD500,000 in 2019) due to the failure to notify several car dealers acquisitions.
All transactions that involve at least two different economic groups, fit within the legal concept of concentration acts (eg, mergers, direct or indirect equity or assets acquisitions, incorporations, associative agreements, consortia or joint ventures), and generate effects in Brazil are caught by the Brazilian Merger Control and, therefore, are subject to previous and mandatory antitrust approval.
In particular, with respect to associative agreements, CADE’s Resolution No 17/2016 provides that associative agreements with a duration superior to two years, whose parties are competitors and share risks and results from the activity under the scope of the agreement, are notifiable. For the purposes of associative agreements, there is no transfer of shares or assets nor a new company is set up.
Finally, it is worth mentioning that intra-group transactions are not caught by the Brazilian Merger Control.
A precise definition of “control” is lacking in the relevant Brazilian Merger Control Legislation and this matter is evaluated on a case by case analysis. In this regard, bylaws or specific corporate agreements and arrangements should be analysed to conclude whether a transaction can entail control by the acquirer group.
However, the concepts of “controlling shareholder” – ownership over the majority of votes and the appointment of the majority of managers – set forth in Article 116 of Law No 6,404/1976 (“Brazilian Corporations Law”) and of “presumed significative influence” – when a shareholder holds at least 20% of the voting capital – set forth in Article 243, Paragraph 5, of the same law, are both worth having in mind.
Furthermore, acquisitions of minority or other interests less than control are also caught by Brazilian Merger Control, when resulting in:
The jurisdictional thresholds consist of a double turnover system that is applied equally to all transactions classified as concentration acts (see 2.1 Notification). Both following thresholds should be met on a cumulative basis, as follows:
Such values were updated by the Interministerial Ordinance No 994/2012.
In the Brazilian Merger Control Legislation, there are only thresholds based on each parties’ total gross revenues (they do not follow a pro-rata pattern). In this vein, the jurisdictional thresholds are calculated by the sum of the total gross revenues of all corporate entities of the economic groups directly involved in the transaction (see 2.7 Business/Corporate Entities Relevant for the Calculation of Jurisdictional Thresholds).
For gross revenues based on foreign currency, as a general rule, the figures are converted based on the BCB’s exchange rate of the last business day of the year prior to the transaction year.
According to the relevant Brazilian Merger Control Legislation, all the economic group corporate entities in the moment of the transaction and with activities within the Brazilian territory (including exports to Brazil) should be considered for the sake of the jurisdictional thresholds’ calculation.
For jurisdictional thresholds’ calculation purposes, companies under common (internal or external) control should be regarded as part of the same economic group, as well other companies in which those companies hold interests (directly or indirectly) superior to 20%. In case of investment funds, these should be regard as part of a company’s economic group if they hold at least 50% of its quotas, while other companies in which the investment fund holds at least 20% of their quotas are also considered as part of the economic group.
It is also worth pointing that the target company’s total gross revenue should be considered as a seller economic group entity.
Foreign-to-foreign transactions classified as concentration acts are subject to Brazilian Merger Control if they have any actual or potential effects in the country. The relevant Brazilian Merger Control Legislation does not set forth any explicit provision or definition of what can be considered as an existent or potential transaction effect in Brazil. In this sense, CADE establishes a local effects test to verify a direct or an indirect presence of the parties involved in the transaction within the Brazilian territory.
A direct presence is usually identified by the existence of any Brazilian subsidiaries or productive assets or even businesses in Brazil held by the foreign entity.
An indirect presence encompasses a broader scope of elements and relies on CADE’s case by case analysis. Usually, exports to Brazil or even sound plans of commercial activities in Brazil are a sufficient factor to attest the existence of potential effects in the Brazilian territory. Although harder to identify, some guidance can be followed to verify an indirect presence in Brazil, such as:
There is no market share jurisdictional threshold in the Brazilian Merger Control Legislation. For reference sake, under the previous Brazilian merger control regime provided by Law No 8,884/1994 and revoked by the Brazilian Competition Law, one of the jurisdictional thresholds (non-cumulative) was based on a proxy of 20% of market share held by the merging companies in the affected relevant market.
Joint ventures are subject to Brazilian Merger Control when the jurisdictional thresholds are met and have effects in Brazil. In other words, joint ventures are subject to the same jurisdictional thresholds as mergers, provided that their purpose is not aimed to participate in public bids, case in which there would be no concentration act (see 2.1 Notification).
CADE has the power to require the submission of any transaction that did not meet the jurisdictional thresholds within a year from its completion either on a discretionary basis (ex officio) or by means of a complaint.
It is also interesting to highlight that CADE has different ways to become aware of potentially non-notifiable transactions (eg, news, third parties’ information on ongoing procedures, electronic system for anonymous complaints, etc). In this sense, recently, one can mention the merger investigation of Administrative Proceeding for Merger Investigation No 08700.005079/2019-06 [“Prosegur/Sael (2019)”] that started ex officio based on information provided by a third party during other Merger Control case. Under the mentioned investigation, CADE ruled that the transaction between Prosegur and Sael (although not reaching the thresholds for mandatory notification) should be notified vis-à-vis its potential competition concerns.
Moreover, it is valid to mention a complaint that resulted in a large investigation of potential non-notified concentration acts between car dealers (Complaint No 08700.003214/2019-71).
According to the Brazilian Competition Law, a notifiable transaction must be fully suspended until CADE’s clearance decision (res judicata). Thus, the implementation of a notifiable transaction is authorised after the waiting period is elapsed, namely, within 15 running days from the approval of the transaction by CADE’s General Superintendence or after the release of CADE’s Tribunal’s decision in the Brazilian Official Gazette.
Under the Brazilian Merger Control Legislation, the penalties for implementing a transaction before CADE’s clearance decision (res judicata) are the same as the ones for the failure to notify a transaction (see 2.2 Failure to Notify) and they are made public.
Recently, in Concentration Act No 08700.001908/2019-73 [“IBM/Red Hat (2019)”], a record pecuniary contribution of BRL57 million (approximately USD14 million in 2019) was established to the merging parties for implementing the transaction before CADE’s clearance decision (res judicata). Also, in Concentration Act No 08700.009018/2015-86 [“Cisco/Technicolor (2015)”], CADE established a pecuniary contribution of BRL30 million (approximately USD7.5 million in 2015).
Associative agreements, joint ventures or consortia for public bids are not mandatory notifiable with CADE (see 2.1 Notification).
Also, it is opportune to note a provision sets forth in Article 59, Paragraph 1, of Brazilian Competition Law, and Article 114 of CADE’s Internal Regulation, concerning a possibility of precarious and preliminary authorisation be granted to the merging parties in order for them to implement a transaction, provided that, on a cumulative basis:
CADE’s precarious and preliminary authorisation for the implementation of a transaction does not imply its clearance by the Brazilian Antitrust Authority. Ultimately, CADE can even block a transaction that was precariously and preliminarily authorised upon its full antitrust analysis.
To date there has been only one case in which CADE granted the precarious and preliminary authorisation, namely, Concentration Act No 08700.007756/2017-51 (“Excelente/Aeroporto Rio de Janeiro (2017)”).
Except as explained immediately above in connection with the precarious and preliminary authorisation for the implementation of a transaction (see 2.14 Exceptions to Suspensive Effect), there are no circumstances in which CADE permits the closing of a transaction before its clearance (res judicata), neither is possible to carve out the businesses or assets in the Brazilian jurisdiction and implement the global closing before CADE’s final decision.
The Brazilian Merger Control Legislation does not set forth deadlines for notification. However, considering the prohibition of consummating a transaction before CADE’s clearance decision (res judicata), the notification must be proceeded before any act aiming its completion (eg, exchange of commercially sensitive information, hiring of employees held by the merging parties, the acquisition of assets, among others). Failing to meet this provision is a violation subject to different penalties by CADE (see 2.13 Penalties for the Implementation of a Transaction Before Clearance).
It is worth observing that the exchange of relevant information that is strictly necessary for the completion of the negotiations is in principle allowed, being usually recommended the drafting of an antitrust protocol and/or the use of clean teams for this purpose. In addition, under more complex cases, antitrust protocol and clean teams are recommended compliance measures to govern the relation of the merging parties between the signing and the closing of the transaction.
The notification shall be preferentially based on any formal binding document. However, CADE usually accepts letter of intent or memorandum of understanding.
There are filing fees in the fixed amount of BRL85,000 (approximately USD20,000 on 31 December 2019) regardless of the transaction amount that must be collected by any of the merging parties for the filing of the transaction. Proof of collection must be attached to the documents’ dossier that is filed with CADE.
The parties directly involved in the transaction are responsible for filing – one should observe that a single filing is required per transaction.
In sum, general information required for filing a transaction with CADE is:
For non-fast track procedure, in particular, further information is required to encompass matters related to demand structure, monopsony analysis, entry and rivalry conditions, possibility of collusion and the counter-factual effects of the transaction.
Additionally, the documents required by CADE for filing are the binding document (preferentially) on which the transaction is outlined, its relevant attachments and the latest financial statements of the merging parties and their respective economic groups. Other documents prepared during the transaction can be voluntarily submitted by the merging parties or expressly required by CADE. It is important to mention that the filing of a transaction with CADE must be submitted in Portuguese and all contractual and corporate documents must be sworn translated to Portuguese (the lawyers of the merging parties are allowed to provide free translations and certify its trustworthiness).
If the notification is deemed incomplete by CADE, the merging parties have one single opportunity to amend it upon the request of the Brazilian Antitrust Authority. If they do not amend the notification or if the incompleteness persists after the amendment, the concentration act is shelved without a decision on its merits and the parties may file again upon another payment of the filing fees (the filing fees of the shelved filing cannot be redeemed) (see 3.3 Filing Fees).
If the notifying party is deemed to have provided inaccurate or misleading information, CADE may impose a fine ranging from BRL5,000 (approximately USD1,200 on 31 December 2019) up to BRL5 million (approximately USD1.2 million on 31 December 2019). Notwithstanding that, CADE can review the case and issue its decision.
Recently, CADE imposed a fine of BRL2 million (approximately USD500,000 in 2019) to the merging parties of the Concentration Act No 08700.002566/2019-17 [“Ultra Som/GSFRP (2019)”] after verifying they concealed information regarding some relevant markets affected by the transaction.
The review process of concentration acts conducted by CADE can have two main phases. All concentration acts submitted to CADE are, initially and necessarily, assessed by CADE’s General Superintendence. Some cases could also be assessed by CADE’s Tribunal when they are sent to CADE’s Tribunal by the General Superintendence or are challenged by a given interested third party, or are even requested by one of the Commissioners of CADE’s Tribunal.
According to the Brazilian Competition Law, CADE’s review process shall be made within 240 days from the filing of the transaction with CADE or its amendment (see 3.6 Penalties/Consequences of Incomplete Notification). This timeframe can be extended up to 90 days, totalling a maximum period of 330 days after which the concentration act would be tacitly approved. To date there is no precedent related to CADE’s tacit approval.
In fast track cases, CADE’s review shall not last more than 30 days. On average, CADE reviews fast track cases within 16 days. For non-complex cases under the ordinary procedure (non-fast track), CADE’s review process usually lasts from 60 up to 90 days. In complex cases, CADE’s review process usually lasts more than 120 days, varying by their complexity.
For reference purposes, in 2019, there were 433 concentration acts submitted to CADE, out of which 360 were submitted under the fast track procedure and 73 under the ordinary procedure (non-fast track). The main industries that submitted concentration acts to CADE were energy, oil and gas, real estate and health insurance.
In transactions assessed under the ordinary procedure (non-fast track), the merging parties usually engage in pre-notification discussions with CADE, and this practice is indeed encouraged by the Brazilian Antitrust Authority. The pre-notification procedure is not binding and is treated confidentially by CADE, usually ranging, on average, from two to four weeks.
During the review process of transactions under the ordinary procedure (non-fast track), as part of its market test, CADE usually issues additional requests for information by way of written questionnaires to the merging parties, third parties (eg, clients, suppliers, consumers etc), and, in a few cases, other public agencies. However, in cases assessed under the fast track procedure, this practice is uncommon. In any case, the issuing of requests for information does not stop the clock or suspend the review process by the Brazilian Antitrust Authority.
According to relevant Brazilian Merger Control Legislation, a transaction can be reviewed under the fast track procedure when it implies:
Despite these parameters, any fast track procedure could be ultimately converted to a non-fast track procedure according to CADE’s discretion.
CADE relies its merger assessment on the structural conditions of the affected relevant markets and their barriers to entry and rivalry conditions. If competition concerns persist, the Brazilian Antitrust Authority will deepen its assessment to the efficiencies arising from the transaction so as to evaluate its impacts on the affected relevant markets.
To determine the relevant markets affected by a transaction, CADE applies the hypothetical monopolist test, supported by its case law and also by written questionnaires to competitors, suppliers, consumers, and, in some instances, to other governmental agencies. In principle competition concerns are deemed unlikely if a transaction implies horizontal overlaps below 20% of market share or vertical integrations where the merging parties do not hold more than 30% of market share on downstream and upstream relevant markets affected by the transaction – both scenarios for transactions assessed under the fast track procedure (see 3.11 Accelerated Procedure).
CADE has a broad collection of precedents that are routinely used as case law to support its decisions. Moreover, CADE also relies on case law from other jurisdictions, primarily from the precedents of the European Commission and the USA. Overall, it is more common to see express references to foreign case law in decisions handed down under more complex cases.
There is no specific scope of competition concerns for assessing a transaction, meaning that the concerns effectively depend on a case by case analysis. Based on CADE’s case law, one can infer that the precedents were scrutinised under a multiple scope of competition concerns (actual or potential), such as creation or increase of barriers to entry, network effects, lock-in effects, co-ordinated effects, conglomerate and portfolio effects, vertical concerns, among others. For example, in Concentration Act No 08700.006444/2016-49 [“Ipiranga/Alesat (2017)”], CADE blocked the transaction on the basis that it could strongly raise co-ordinated effects among gas distributors and resellers, besides the high degree of market power concentration.
Moreover, in Concentration Act No 08700.008483/2016-81 [“WEG/TGM (2017)”], CADE applied merger remedies taking into account the combined portfolio effects of the merging parties.
According to Brazilian Competition Law, CADE should consider economic efficiencies in Merger Control Review. The economic efficiencies are assessed by the Brazilian Antitrust Authority upon having verified a relevant concentration of market share, high entry barriers and insufficient rivalry conditions in the relevant markets affected by the transaction. If that is the case, then CADE would assess the specific economic efficiencies arising from the transaction to measure the impacts of the concentration act in the affected relevant markets.
Under the relevant Brazilian Merger Control Legislation, non-competition issues are not, as a general rule, taken into account in a decisive fashion as part of the review process. As such, CADE is traditionally restricted to competition concerns under the review process.
There are special considerations in the substantive review of joint ventures by CADE, chiefly regarding the exchange of commercially sensitive information and potential collusion between the parties, suggesting a particular attention to the need for robust governance and compliance programs and mechanisms to curb exposure and competition risks. In this sense, the Brazilian Antitrust Authority is likely to examine possible co-ordination issues between joint-ventures parents.
In Concentration Acts No 08700.002792/2016-47 [“Credit Bureau (2016)”] and No 08700.010266/2015-70 [“Saint-Gobain/SiCBRAS (2016)”] – both involving joint ventures –, there were a series of robust governance subsidiary commitments with a view to eliminating co-ordination risks.
CADE has the ability and the legal powers to prohibit a transaction and interfere on its structure by means of antitrust merger remedies, as provided in the Brazilian Competition Law. Any interference by the Brazilian Antitrust Authority does not demand any lawsuit and can occur if the assessed transaction gives rise to competition concerns that ultimately are not countervailed by its efficiencies.
The merging parties are fully able to negotiate any sort of antitrust merger remedies with CADE when competition concerns resulting from a transaction are likely to be identified. As a matter of fact, CADE encourages the negotiation of remedies with the merger parties from scratch.
Although there is no legal standard that merger remedies must meet in order to be deemed acceptable, CADE has recently issued a “Guidelines on Merger Remedies” synthesising its best practices on this topic, as a soft law instrument (see 5.4 Typical Remedies).
In principle, there is a general preference for structural antitrust merger remedies, as expressly mentioned in the CADE’s Guidelines on Merger Remedies. However, CADE’s precedents show that behavioural or even hybrid merger remedies were more frequently applied than structural measures. In fact, out of 40 merger remedies applied since the Brazilian Competition Law until 2019, structural measures were adopted in only 25% of the cases, whereas behavioural solutions totalled approximately 40% of the cases.
Still, under the structural remedies, it is interesting to note that CADE rarely demands a previous acquirer (eg, upfront buyer or fix-it-first divestitures) for the divested assets.Furthermore, although in principle the Brazilian Antitrust Authority does not hold non-competition issues during its assessment on a transaction, it is possible that the antitrust merger remedies adopted by CADE provide some ancillary commitments not directly related to competition concerns. This was the case, for example, in Concentration Act No 08700.006723/2015-21 [“Simba (2016)”], where the new joint-venture committed to develop new television content. Moreover, in Credit Bureau (2016), there were a series of commitments to ensure the implementation and consolidation of the Brazilian Positive Credit Database by the banks participating in the credit bureau.
Further, in Concentration Act No 08700.005447/2013-12 [“Kroton/Anhanguera (2014)”], some commitments of the remedy applied referred to minimum quality levels for educational services according to parameters established by the Brazilian Ministry of Education.
First, it is worth noting that transactions which implies antitrust remedies’ negotiation are necessarily submitted to CADE’s Tribunal after CADE’s General Superintendence analysis.
In such cases, according to CADE’s Internal Regulation, the merging parties are able to negotiate antitrust merger remedies with CADE until 30 days from the sending of the concentration act to CADE’s Tribunal.
In this context, it is important to bear in mind that the proposal of fix-it-first solutions by the merging parties is possible, as it happened, for example, in Concentration Act No 08700.002350/2017-81 [“Maersk/Hamburg Sud (2017)].
Also, it is opportune to mention that CADE has the ability and the legal powers to impose unilateral merger remedies (ie, the ones that are not agreed with the merging parties).
After the design and adoption of antitrust merger remedies, a monitoring phase is conducted by CADE’s Attorney General, which renders opinions regarding the fulfilment of the commitments undertaken by the merging parties on the scope of the antitrust merger remedy.
According to CADE’s Guidelines on Merger Remedies, the Brazilian Antitrust Authority would have a theoretical preference for adopting structural merger remedies (as a clear-cut solutions), although in practice CADE has been adopting behavioural or hybrid remedies more frequently. In any case, there is no hard law provision on the conditions of antitrust merger remedies in the Brazilian Merger Control Legislation.
Usually, antitrust merger remedies are initially proposed by the merging parties within CADE’s General Superintendence assessment phase, ensuring enough time for carrying out the market test.
Furthermore, the merging parties can complete a transaction before remedies are fully complied provided that hold-separate and ring-fencing practices are established, in tandem with CADE’s monitoring. In this sense, CADE’s merger remedies usually hold provisions regarding trustees for the monitoring of their compliance and effectiveness in several moments of their implementation (eg, divestiture, management of divested business, overview of other provisions, among others), as it happened, for example, in Concentration Act No 08700.007777/2017-76 [“Praxair/Linde (2016)”].
The possible penalties for violating antitrust merger remedies range from fines set forth in the same legal commitment document negotiated between CADE and the merging parties, without prejudice of a full reassessment of CADE’s decision.
CADE issues a formal decision clearing, remedying or prohibiting a transaction. The decision is released in confidential and non-confidential versions. Only the non-confidential version is publicly available in the case dockets.
In several occasions, CADE required antitrust merger remedies in foreign-to-foreign transactions which were submitted due to the effects generated in Brazil. The most recent precedents in this sense were Concentration Acts No 08700.001206/2019-90 [“Pfizer/GSK (2019)”], No 08700.004494/2018-53 [“Disney/Fox (2018)”] and No 08700.001390/2017-14 [“AT&T/Time Warner (2017)”]. In any event, to date there has been no case in which a foreign-to-foreign transaction was prohibited by CADE.
A clearance decision issued by CADE can cover related arrangements of the submitted transaction (eg, non-compete commitments, exclusivity agreements, among others) if those arrangements are also informed in the filing. Usually, the Brazilian Antitrust Authority accepts ancillary restraints which do not exceed five years and are restricted to the scope (material and geographic) of the relevant markets affected by the transaction.
According to CADE’s Internal Regulation, interested third parties (eg, associations, competitors, suppliers, retailers, consumers, among others) are allowed to officially take part in the review process. For such purpose, within 15 running days from the release of the public notice of the concentration act in the Brazilian Official Gazette, interested third parties should submit grounded reasons in order for CADE to decide on the intervention request.
Once accepted, interested third parties have the right to submit grounded motions, engage more actively in the review process of the case by presenting technical opinions, reports and studies to provide alternative market scenarios, and also, in case of transactions cleared by CADE’s General Superintendence, they are entitled to appeal to CADE’s Tribunal, for instance.
In transactions assessed under the ordinary procedure (non-fast track), CADE usually contacts third parties as part of its market test by means of written questionnaires. Normally, the Brazilian Antitrust Authority also tests with the market any antitrust merger remedies offered by the merging parties.
The notification form will be made public available in CADE’s case dockets immediately after the notice of the concentration act is published in the Brazilian Official Gazette. The notice, objectively showing the name of the merging parties, their lawyers, nature of transaction and affected sector, is released as long as CADE is comfortable with the information provided by the merging parties in the notification form.
On average, for fast track procedure, the notice is published in the Brazilian Official Gazette after five to seven days from the filing of the transaction.
For ordinary procedure (non-fast track) this average directly depends on the result of the pre-notification discussions with CADE.
With regard to confidentiality of information included in the notification form, commercial information and business secrets, for example, can be kept confidential at the merging parties’ request. In this case, a redacted version of the notification form is made public.
Usually, in complex and foreign-to-foreign transactions, CADE indeed co-operates with other jurisdictions and has several agreements with foreign authorities in this regard. The co-operation performed by CADE concerns both general policy matters and sharing information in the context of specific transactions. In the latter case, a waiver must be issued to CADE to seek the merging parties’ permission to share confidential information with other jurisdictions.
According to the public available information, since 2012, there have been more than 50 international cases where CADE has co-operated with other jurisdictions.
If CADE’s General Superintendence technical opinion decides on the prohibition of the transaction or the adoption of antitrust merger remedies, the concentration act is automatically sent to CADE’s Tribunal for review and a final decision. Accordingly, the merging parties do not need to appeal from CADE’s General Superintendence technical opinion deciding on the prohibition or remediating the transaction, since it would necessarily be reviewed by CADE’s Tribunal in such scenarios.
Moreover, pursuant to the Brazilian Constitution, every administrative act or decision can be subject to a judicial review under the non-obviation of the judiciary control principle. Therefore, CADE’s final decision on a concentration act could also be reviewed by a federal court, although in practice it is very rare to see a judicial body being provoked to review decisions rendered by the Brazilian Antitrust Authority in a Merger Control case.
Transactions that are not unconditionally cleared or which are not approved at all by CADE’s General Superintendence are necessarily sent to CADE’s Tribunal for review and final decision. Under this context, the merging parties do not need to formally appeal from CADE’s General Superintendence decision (see 8.1 Access to Appeal and Judicial Review).
In cases of concentration acts unconditionally cleared by CADE’s General Superintendence, the interested third parties can appeal before CADE’s Tribunal within 15 running days from the publication of the decision of CADE’s General Superintendence in the Brazilian Official Gazette.
The most recent successful appeal in this regard with significative consequences was the Simba (2016) case that had been cleared by CADE’s General Superintendence without any restrictions and, after third parties’ appeals, CADE’s Tribunal conditioned its clearance decision to the adoption of behavioural merger remedies.
In 2019, CADE issued the Resolution No. 24/2019 that provides for guidelines for the calculation of fines resulting from the implementation of a transaction before its clearance decision (see 2.2 Failure to Notify). This CADE’s internal rule establishes the methodology for imposing fines in connection with gun jumping violation, besides depicting some other procedural aspects for its assessment.
Furthermore, more recently, as a result of discussions held in Concentration Act No 08700.000180/2020-04 [“Siros FIA IE/Kepler Weber (2020)”], CADE's Tribunal suggested further reflection on the economic group definition particularly for investment funds, creating a working group specifically for such purpose.
CADE has also initiated a full review process of Resolution No 02/2012 (see 1.1 Merger Control Legislation) and it is expected that this will result in several fine tuning and improvements to the Merger Control rules and proceedings.
CADE’s recent gun jumping’s enforcement is the IBM/Red Hat case (2019), in which a pecuniary contribution of BRL57 million (approximately USD14 million in 2019) was established due to the implementation of the transaction before the Brazilian Antitrust Authority’s clearance decision (res judicata).
In terms of full prohibition, the last enforcement records were Concentration Acts No 08700.002155/2017-51 [“Ultragaz/Liquigás (2018)”], No 08700.006185/2016-56 [“Kroton/Estácio (2017)”] and Ipiranga/Alesat (2017). None of those involving foreign-to-foreign transactions.
In addition to these, there is a number of other mergers that were gave up by the parties clearly because they were unable to reach an agreement with CADE regarding remedies to address the competition concerns with the authorities. Finally, CADE’s last enforcement record on application of remedies in foreign-to-foreign transactions was Pfizer/GSK (2019), where a divestiture was proposed to curb the competition concerns resulting from the parties’ joint venture.
One of CADE’s main current - and broad - competition concerns is digital markets. In Merger Control, CADE is also historically concerned with transactions performed in sectors with a remarkable degree of concentration in Brazil – eg, aviation, banking, cash-transport, and telecommunications – conducting a careful assessment in transactions involving such sectors.
In addition to that, other hot-topics on CADE’s radar are killer acquisitions, potential competition and portfolio effects. Further, one may eventually expect more development on the interplay between antitrust merger remedies with arbitrage procedures.
Finally, gun jumping discussion and its facets is also a key theme to be highlighted – to date CADE has a public track record of 12 cases where gun jumping violation were identified and punished, and the Brazilian Antitrust Authority has already flagged its keen interest to deepen the debates on the repercussions of gun jumping.
The social and economic impacts of the COVID-19 crisis are vividly on CADE’s radar, as one can infer from clarifications and public statements from the Brazilian Antitrust Authority, as well as from comments of CADE’s representatives under a series of webinars. In general terms, in light of COVID-19 times, CADE has been following the main guidelines issued by the International Competition Network (ICN) and Organisation for Economic Co-operation and Development (OECD).
In that regard, CADE has already signalled its sensitivity as to the extraordinary circumstances of the pandemic, pointing that it will be even more reasonable and cautious for the purposes of merger review, taking into account the specific characteristics of the concrete case (the same is true for the investigation of alleged anticompetitive practices). Nonetheless, it does not mean that the Brazilian Competition Law is not enforceable or will be derogated during COVID-19 times. On the contrary, CADE is attentive and vigilant concerning the market movements.
CADE’s proceedings and timeframe were not suspended as to merger review and its staff are mostly working from home. In fact, CADE claims to be even more productive in merger reviews during these times.
Temporary Suspension of Prior Notification
For sake of completeness, it should be mentioned the enactment of Law No 14,010/2020 during the COVID-19 pandemic. With regards to competition law, specifically on merger control, such Law sets forth that, on a temporary basis (in principle, up to the end of October 2020), some kind of concentration acts – associative agreement, consortia and joint venture – will not require mandatory prior notification with CADE. This temporary derogation applies to agreements related to fighting or mitigating the consequences of the COVID-19 pandemic.
Such temporary derogation does not preclude the possibility of CADE analysing, later on, concentration acts that were not necessary to fight or mitigate the consequences of the COVID-19 pandemic.
Further minimising the effects of COVID-19
Last but not least, a very recent case that is worth mentioning refers to a collaboration among a group of competing companies that was authorised by CADE as a measure to minimise the effects of the crisis due to the COVID-19 [Proceeding No 08700.002396/2020-04, establishing the “STAR Program - Small Trade Activity Recover”]. Basically, some competing companies undertook a project aiming to recover the activity of small retailers in their sectors. In an exceptional and temporary basis, the collaboration was approved during an Extraordinary Judgment Session of the Tribunal held on 28 May 2020. In short, Cade concluded that there was a reasonable economic justification for the agreement, the parties adopted protocols to prevent antitrust risks, there was no evidence of attempted anticompetitive practice, and that the companies were concerned in restoring competitiveness and normality in the retail sector.
Also, CADE noted that in order to authorise the collaboration at issue, it relied on international recommendations from ICN and OECD, and its decision aimed to preserve a competitively healthy economic environment. In particular, CADE also stressed that the exceptionality of the measure did not represent an antitrust immunity. More recently, after the analysis of the STAR Program, CADE has published a provisional Informative Note to guide the economic agents on the collaboration between companies to fight the COVID-19 crisis. This Informative Note sets out general guidelines on the parameters recommended for drafting commercial strategies to fight the COVID-19 pandemic, and also on the possible procedures to be followed by the companies with a view to obtaining statements from CADE as to their initiatives in light of this extraordinary circumstance.
Finally, under the context of the COVID-19 crisis, one could expect a trend on the argument of the failing firm doctrine being invoked more frequently by the affected merging parties, necessarily requiring a careful and reasonable competition assessment.