Brazil: Merger Control

Recent developments

Antitrust enforcement in Brazil has kept its consolidation and evolution trend verified in recent years. As one of the BRIC economies, it goes without saying that the economic growth in the country brings additional components to the Brazilian context: more complex transactions submitted to merger control in 2011-2012, as well as more complex and veiled antitrust investigations, have contributed to increase the visibility and relevance of the Brazilian System for Economic Defence (SBDC) worldwide, especially of the Administrative Council for Economic Defence (CADE), the main antitrust agency. Keeping up with this trend, CADE has been able to increase its efficiency, transparency, technical qualification and staff, which reflected the evolving results during 2011-2012.

According to CADE’s 2011 Annual Report, the number of ‘acts of concentration’ (merger filings) saw a 57.5 per cent increase, in comparison with the number registered in 2005. Since 2005 CADE has seen an increase in the number of technical staff, who were also given more responsibility, resulting in a rise in the number of cases analysed per year (which rose from 666 in 2005 to 814 in 2011), as well as the average time taken, within CADE, to analyse merger filings, which went from 81 days in 2005 to 47 days in 2011.

In addition, the staff increase, the reformulation and the enhancement of cooperation within the SBDC (ie, the Secretariat of Economic Monitoring (SEAE), the Secretariat of Economic Law (SDE), CADE’s Attorney General Office, Federal Public Prosecution Office and CADE) eliminated overlapping activities and granted a significant reduction on the average length of analysis of merger filings, from 252 days in 2005 to 147 days in 2011.

The depth and strength of the decisions can also be regarded as an achievement. In May 2012, CADE authorised the assets swap between Brasil Foods (BRF) and Marfrig Alimentos S/A, in compliance with heavy commitments of selling assets assumed by BRF involving approximately 35 per cent of the parties’ production capacity in Brazil comprising production facilities, distribution centres and an important portfolio of products and brands. Also, the authority cleared the transaction between the airline companies LAN and TAM, subject to the swap with a competitor of some slots and infrastructure in the São Paulo International Airport and to the exit of one of the worldwide airline companies alliances (One World or StarAlliance).

In the steel sector, CADE has granted an injunction to prevent completion of the acquisition, by the Brazilian Companhia Siderúrgica Nacional (CSN), of additional stakes in its competitor Usinas Siderúgicas de Minas Gerais SA (Usiminas). Accordingly, CADE ordered that, until a final decision is rendered and subject to the imposition of fines of 10 million reais plus 10,000 reais per day of violation, CSN would not be allowed to appoint any member to the board of directors or any other management board of Usiminas; neither any company of CSN’s economic group should have access to competitively sensitive information nor exercise any management or political rights over Usiminas (eg, voting in the general shareholders’ meetings).

Additionally, CADE has executed some Agreements to Preserve Reversability of the Transaction (APROs) in important transactions, in order to maintain the competitive environment, as well as to keep the parties independent until a final decision is reached. This was the case of the merger between the Brazilian airline companies Gol and WebJet, as well as the transaction concerning the acquisition by Diagnósticos da América SA (DASA) of control over MD1 Diagnósticos SA, and the subsequent acquisition by AMIL Group of a participation on DASA’s shares in the health assistance and diagnosis services sector.

Besides this, CADE was chosen for the first time to host the Annual Conference of the International Competition Network (ICN) in Brazil. CADE also celebrates its 50th anniversary in 2012. In other global developments, CADE participated in the second International BRICs’ Conference in China; furthermore, it held meetings with French competition authorities as well as with the Brazilian Cooperation Agency (Brazilian Ministry of Foreign Affairs), both of which resulted in the execution of international cooperation agreements.

Finally, the most expected and commented-on development of antitrust in Brazil concerns the enactment of the new Brazilian Antitrust Law, which brings mixed feelings of enthusiasm and scepticism among competition/antitrust players both in public and private sides. Some of its highlights are explored below.

The New Brazilian Antitrust Law (NBAL - Law No. 12529/11)

On 30 November 2011, the NBAL was enacted. In short, the main changes brought by this new Law are related to the organic structure of the system and to the merger control. The ‘Super CADE’, as it is usually called, is now composed of three bodies, operating within the same structure:

  • the Administrative Tribunal, which takes on CADE’s current roles and powers, delivering judgments of all cases under the Antitrust Law;
  • the General Superintendency (GS), which replaces SDE’s and SEAE’s functions both on mergers and behaviour controls; and
  • the Department of Economic Studies (DEE), which will support both the Tribunal and the GS on complex economic matters.

CADE’s Attorney General Office will keep its main role in supporting to Super CADE’s decisions in courts. SEAE will restrict its function to competition advocacy. The main structural changes can be seen in table 1 at the end of this chapter.

The NBAL was enforced on 30 May 2012 and has been applied to all cases held thereafter. In addition to the organic restructuring, the NBAL brings reinforcements of more than 200 staff who will be fully dedicated to case analysis within the SBDC. As of 29 May 2012, this additional task force has been approved by President Dilma Rousseff via Decree No. 7338. It was not immediately enacted, but a gradual implentation of the task force is expected, with an estimate of over a year until it is finally implemented in full. Other than structural matters, the NBAL brings the pre-merger notification system into the Brazilian antitrust arena, making it closer to the EU and US merger control systems.

Merger control

Under the NBAL, the general concept of ‘concentration’ is very broad. Article 88 of the NBAL refers to ‘any form of market concentration’, including in its scope, cooperative agreements, contracts, informal arrangements and other arrangements.

In the new system, aimed at absorbing the international model (US and EU) to control structures, the NBAL implemented the prior analysis, or prior control system (ex ante/a priori) of business transactions. In this prior control, Article 88 of the NBAL sets forth that the transactions that meet the revenue criterion (the largest party or its economic group has a gross revenue of at least 750 million reais and the smallest party or its economic group has at least 75 million reais, both registered in Brazil in the year prior to the transaction - these triggering values were increased by means of the Ministry of Justice and Ministry of Finance Joint Regulation No. 992, as of 30 May 2012) shall be given mandatory submission and cannot be consummated before CADE’s final ruling (something similar to the known concept of ‘prior consent’ from the Brazilian regulated sectors, such as telecommunications and transports).

Therefore, in addition to the risk related to the merits of the deal, ie, the risk of CADE approving the deal with restrictions or even rejecting the deal, the economic players have to face what is internationally known as ‘gun jumping’.

According to the international experience, ‘gun jumping’ is the practice of consummating the deal (or ‘closing the deal’, in opposition to ‘signing the deal’) before the antitrust agency manifests itself for or against it. The international experience, which will probably serve as grounds for CADE’s case law, lists some examples of ‘gun jumping’: irreversible measures, or measures hard to reverse, such as the allocation of clients, interruption of competitive marketing between the parties, unification of management, sharing of price information, production capacity and trade strategies (Gemstar/TV Guide, 2003 and Qualcomm/Flarion, 2006, both cases in the US); actions that change incentives between players, such as the commercialisation of products of the acquired company by the acquiring company (Bertelsmann/Kirch/Premier, 1998, in the EU); unification of power within companies, such as failing to make business and offering discounts arising from the possible closing of the deal (Computer Associates / Platinum Technology case, 1999, in the US); sharing trade secrets (eg, client portfolio, prices, strategies, and others) for reasons beyond the due diligence questions (Gemstar/TV Guide, 2003, in the US).

In addition to the high fine (varying from 60,000 reais to 60 million reais), should a deal be consummated before receiving CADE’s decision and given the nature of the factors considered to consummate a deal, the deals could be declared as null, and the parties can undergo an investigation for cartel formation. For example, in horizontal concentration deals (between competitors), the sharing of information such as client portfolio, prices, etc, may immediately change the incentives of the parties to compete between themselves. In this sense, a good way to avoid this risk would be to always consider the following question: ‘What would you tell your competitor if there was no ongoing deal?’

As the authorities in charge of governing the matter have already stated that they will leave it to case law to find the limits for ‘gun jumping’, Brazil, in the first period of the NBAL’s enforcement, will face a (potentially difficult) process of growth and cultural change in which the risk of ‘gun jumping’ will possibly be bigger at times than the risk of the merit itself. For this reason, it is advisable that during the this initial period of the NBAL’s enforcement, the economic players adopt, whenever possible, more conservative measures to ensure that deals that have been notified to the SBDC are not consummated.

Other changes related to merger control can be seen in table 2.

Please note that the NBAL is only applicable to transactions executed from 29 May 2012 onwards. Transactions which had their first binding document signed on or before 28 May 2012 are subject to the previous system (ex post merger control) provided by Law No. 8884/94 and, therefore, shall be submitted to CADE up until 19 June 2012. Ongoing transactions which are to be signed after 29 May, however, fall within the scope of the NBAL, and must be previously notified according to the new ex ante merger control system and applicable regulation.

Moreover, on the very first day of enforcement of the NBAL, CADE approved four new regulations concerning the new law. The first is CADE’s new internal regulations, which provides for CADE’s structure and procedural aspects of the application of the NBAL. The second regulates the submission of transactions to merger control (the new Brazilian Antitrust Merger Filing Forms). The third provides on the imposition of fines for antitrust violations. The fourth establishes formal and material criteria to file independent technical opinions in complex merger and conduct cases.

The main provisions of these regulations are described below:

Notification thresholds

These transactions - in which the parties or their respective economic group have achieved, in the previous year, the minimum revenues in Brazil for mandatory notification (750 million reais on one side and 75 million reais on the other side) - must be submitted to merger control only if:

  • they result in acquisition of control; or
  • they do not result in the acquisition of control, but, directly or indirectly,
    • in the case of non-competing parties,
      • the acquired interest is equal of higher than 20 per cent of the seller’s share capital, or
      • the purchaser already holds more than 20 per cent of the share capital of the seller and acquires an additional stake of 20 per cent or more of the seller’s capital; and
    • in the case of competing parties (ie, holding horizontal relationship):
      • the acquired interest is equal or higher than 5 per cent of the seller’s share capital; or
      • the purchaser already holds more than 5 per cent of the share capital of the seller and acquires an additional stake of 5 per cent or more of the seller’s capital; and
    • in the case of an additional stake acquired by the controlling entity, the acquired interest is equal or higher than 20 per cent of the seller’s capital.

Concept of an economic group for the purposes of calculating the notification thresholds

These are companies under the same direct or indirect control, or those of which at least 20 per cent of the share capital is held by a company under direct or indirect common control. Private equity funds, managing funds, investment funds which are under the same management and those in which their shareholders have a minimum of 20 per cent stake are part of the same economic group. This also includes the portfolio companies whose share capital is held by a private equity fund at a interest of 20 per cent or

New merger filing forms

There are two new merger filing forms, both inspired in the volume and content of the ones required in the US and the EU - one of them is applicable to transactions that are not able to raise competition concerns and are likely to be analysed under the fast-track procedure; the other, longer and more thorough, is applicable to complex transactions.

Transactions involving a public offering

Such transaction may be notified after the offer is published and its completion does not depend on CADE’s prior approval. However, the acquirer is prohibited to enforce any ‘political rights’ (such as voting rights) linked to the acquired interest until the transaction is cleared by CADE. Please note that mandatory public offerings for cancelling the registration of publicly traded companies or raising stakes by the controlling entity must not be submitted to merger control.

Preliminary clearance

Transactions that are unlikely to raise competition concerns may be ‘preliminarily cleared’ by CADE upon request by the notifying parties, in the case that:

  • the analysis waiting period is likely to cause irreversible and substantial financial damages to the parties;
  • the adoption of closing measures by the parties is irreversible; and
  • preliminary clearance will have no negative effect on the competition environment.

Such a preliminary approval may be granted in up to 60 days after the transaction’s notification to CADE and may be modified or cancelled by CADE, as the case may be, being valid up to a final ruling is rendered.

Tacit approval

Should CADE not render a final ruling in a merger control case within the maximum deadline of 330 days, the transaction is considered tacitly cleared.

A brief sketch on new conduct control rules

While merger control faces a deep renovation, the behaviour control faces not many changes, albeit very important. The main changes are related to the efficacy of the enforcement primarily derived from the staff increase, and to the change in the main fines for anti-competitive practices, which can be briefly seen in table 3.


In the 2010 OECD Peer Review, it was concluded that ‘the Brazilian competition policy has registered a constant and notable progress, becoming more efficient especially in merger review.’ In the very same review, it has been said that although the Brazilian system is far from perfect, it is doing very well. Based on these comments, the SBDC currently faces some very important challenges for the future. Due to the enactment of the NBAL, CADE members will face an intense transition phase in implementing the NLAB and CADE’s new structure.

Firstly, there must be an effort made to applying the new rules and maintaining CADE’s case law and practices that are compatible with the new system. In this regard, the first impressions are that CADE is prepared for the future: part of the case law concerning relevant influence, control and private equity funds has already been incorporated into the new regulations.

Additionally, new service positions have already been approved by President Dilma Rousseff and some have already been fulfilled by recent appointments: the former CADE Commissioner Carlos Emmanuel Joppert Ragazzo is currently the head of CADE’s General Superintendence; CADE’s Tribunal Presidency is occupied by the former CADE Commissioner and head of the SDE, Mr Vinícius Marques de Carvalho; and Commissioner Alessandro Octaviani Luis was appointed for an additional two-year term. Moreover, two nominations have been made, awaiting the Brazilian Senate’s approval, for CADE Commissioner roles: Ana de Oliveira Frazão, professor at the Brasília Federal University, to replace current president Olavo Zago Chinaglia, whose term of office ends in August 2012; and the current chief economist of CADE’s Department of Economic Studies, Eduardo Pontual Ribeiro. In other positions, the following appointments have been made: in the role of CADE’s deputy superintent-general, Diogo Thomson de Andrade and Mr. Eduardo Frade Rodrigues, both from the former SDE; as CADE’s administrative officer, Daniel Josef Lerner, also from the SDE; and as chief economist of CADE’s economic studies department, Victor Gomes da Silva.

The task force must adapt to the new routine and structure. As of 15 June 2012, CADE has new headquarters. New practices are to be adopted, including new merger guidelines. The number of merger filings is estimated to decrease by 50 per cent with the new notification thresholds, which may not cover minor and regional markets. On the other hand, this factor may increase antitrust violations enforcement (behaviour control). Nevertheless, this would only be possible with a higher degree of consciousness by a relevant part of the Brazilian people and local players in regard to their rights to competitive markets.

In any event, there were great expectations for the approval of the NLAB. Now that it has been enacted, there are greater expectations and guessing on the NBAL’s effects and the new expertise to be acquired. Whatever the results may be, it is known that, besides the law and the SBDC, the NBAL will bring significant changes not only to companies’ policies and antitrust lawyers, but also to the Brazilian society, economy and politics as a whole. It would be great if such changes were as positive as expected.

Table 1:

Law No. 8884/94

Law No. 12529/11

Structural changes

Competition laws are protected by CADE (an administrative tribunal with national jurisdiction for all competition/antitrust matters), and SEAE and the SDE (which issue non-binding technical opinions on concentration acts and breaches of competition laws).

The SDE becomes a General Superintendence (GS), which will operate within CADE’s structure. There will be a Department of Economic Studies, which will be in charge of the economic analysis to be carried out by SBDC. SEAE will no longer analyse concentration acts, but will keep its role in competition advocacy.

Source: Gaban, Domingues. Antitrust Law in Brazil, Wolters Kluwer, 2012, p.382.

Table 2:

Merger Control

Law No. 8884/94

Law No. 12529/11 and regulations

Analysis of mergers between companies

Ex post control - an evaluation and discussion of the effects of a merger on competition are carried out after the deal is done.

Ex ante control - the evaluation will be carried out beforehand, with the creation of the so-called ‘previous notification’.

Scope of CADE’s jurisdiction on merger control

Cases in which one of the parties (economic groups) has a gross revenue of at least 400 million reais per year or controls 20 per cent of the relevant market should be evaluated. All cases that fall into this must be analysed.

Cases in which the largest party or its economic group has a gross revenue of at least 750 million reais (in the year prior to the transaction) and the smallest has at least 75 million reais will be analysed. The General Superintendent will have the power to exempt the less complex cases from the analysis via the Administrative Tribunal.

Time limit for the analysis of mergers

30 days at the SDE, 30 days at SEAE and 60 days at CADE, but note that the countdown of the time limit is interrupted every time new information is requested.

240 days; this can be extended by 90 days in extremely complex cases. The countdown of the time limit is not interrupted by requests for additional information.

Source: Gaban, Domingues. Antitrust Law in Brazil, Wolters Kluwer, 2012, p. 382.

Table 3:

(1) One of the regulations issued by CADE contains a list of all the ‘business activities under investigation’, which can make the fine heavier, lighter or equal than the one set forth by Law No. 8884/94, as the case may be. Nevertheless, CADE may also consider the total gross revenue in imposing fines for antitrust violations, if the investigated party is not able to demonstrate the specific revenues representing the ‘business activities under investigation’.

Source: Gaban, Domingues. Antitrust Law in Brazil, Wolters Kluwer, 2012, p. 383.

Conduct control

Law No. 8884/94

Law No. 12529/11

Scope of CADE’s jurisdiction on conduct control

Fighting abuse of dominant position and cartel formation. A dominant position is presumed when players hold 20 per cent or more of a given relevant market. Fines of between 1 per cent and 30 per cent of the companies’ gross revenues (taxes excluded) in the year prior to the introduction of the process.

Fighting abuse of dominant position and cartel formation. A dominant position is presumed when players hold 20 per cent or more of a given relevant market. Fines of between 0.1 per cent and 20 per cent of the companies’ total profits from the business activities under investigation, in the year prior to the introduction of the process.1


CADE can go to the companies to search for proof of anti-competitive practices, but must give 24 hours’ notice.

CADE can carry out inspections in the companies at any time, without prior notice, and without judicial permission.

Cease and desist agreement (TCC)


The agreement is negotiated only between the respondents and the authorities at CADE.

Interested third parties can participate in the negotiation phase of a TCC (probably in the last phase, prior to its exection/signing).


According to Resolution No. 46/2007, in cartel cases where there is a leniency agreement, the interested parties must confess their involvement.

There is no requirement for a confession in the NBAL. However, CADE’s internal regulation maintained the parties’ obligation to confess their involvement in the practice for cartel investigations whenever a leniency agreement is entered into.


There is no provision for publishing the agreement.

The agreement shall be published.

Leniency Programme

‘Leading the cartel’

The leniency programme does not apply to individuals and/or companies in charge of the coordination of the cartel.

This exception was eliminated from the NBAL, in Article 86; making even the leader of the cartel eligible for the leniency agreement.

‘First to apply’

In cases where the violation remains unacknowledged, individuals and/or companies must be the first to notify the authorities of its existence. In cases where the authorities are already aware of the violation and it is under investigation, individuals and/or companies must provide new information.

Only companies must be the first to notify the authorities about the unacknowledged violations (or provide the authorities with new information if the violation is acknowledged and under investigation).

Cartel as a crime

The great majority of cases end in plea bargaining agreements because of the alternative penalties provided by Law No. 8137/90 (Article 4).

The sanction of imprisonment is cumulative with the fine, eliminating grounds for a plea bargain agreement in the criminal sphere.

Bid riggings

The current Leniency Programme does not cover this crime.

Immunity is granted for the leniency applicant if the other requirements are met.


There is no legal provision for immunity in case of a leniency agreement and a cease and desist agreement.

Immunity for criminal action is extended to the crime of conspiracy (Brazilian Criminal Code, Article 288).

1 One of the regulations issued by CADE contains a list of all the ‘business activities under investigation’, which can make the fine heavier, lighter or equal than the one set forth by Law No. 8884/94, as the case may be. Nevertheless, CADE may also consider the total gross revenue in imposing fines for antitrust violations, if the investigated party is not able to demonstrate the specific revenues representing the ‘business activities under investigation’.

Source: Gaban, Domingues. Antitrust Law in Brazil, Wolters Kluwer, 2012, p. 383.

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