Brazil: Merger Control

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On 30 November 2011, Law No. 12529 (New Brazilian Antitrust Law – NBAL) was enacted. In short, the main changes brought about by this new Law are related to the organic structure of the system and to merger control. The ‘Super CADE’, as it is usually referred to, is now composed of three bodies, operating within the same structure:

  • the Administrative Tribunal, which took on CADE’s former roles and powers, rendering judgments on all cases under the Antitrust Law;
  • the General Superintendency (GS), which replaced SDE’s and SEAE’s functions of legal and economic analysis both on mergers and behaviour controls; and
  • the Department of Economic Studies (DEE), which will support both the Tribunal and the GS in complex economic matters.

CADE’s Attorney General Office has kept its main role of supporting Super CADE’s decisions in courts. SEAE restricted its function to competition advocacy, which also remained under the Tribunal Bench’s powers. 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 brought a promise of reinforcements of more than 200 staff members that 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 implantation of the task force has begun. Other than structural matters, the NBAL brought 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 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 a 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) and must be given mandatory submission and cannot be consummated before CADE’s final ruling (something similar to the known concept of ‘prior consent’ of 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’s 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 expresses 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 asserted to be null and void, 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 of ‘gun jumping’, and no case law has been found so far, the valuable tip from the lawyer’s side is to avoid taking risks on this matter. It is so because until a settled case law is built, Brazil still may face a (potentially difficult) process of growth and cultural change in which the risk of ‘gun jumping’ will possibly be greater at times than the risk of the merit itself. For this reason, it is advisable that during 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 will not be consummated.

If the complexity of the cases make it difficult to see the boundaries to avoid gun jumping problems, it is now possible to approach CADE in a similar way done in the EU pre-merger notification system, ie, the parties can negotiate the draft of the filing with the authorities and obtain signals related to the limits of the pre-merger exchange of information and action. However, since no regulation is found on this sense, a case-by-case approach should apply and the acceptance of the authorities depends on the reasonableness of the applicants’ request in relation to the good reputation of their attorney’s in the competition law field.

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

Please note that the NBAL has been applicable to transactions executed from 29 May 2012 onwards. Transactions that had their first binding document signed on or before 28 May 2012 were subject to the previous system (ex post merger control) provided by former Law No. 8884/94 and, therefore, should have been submitted to CADE by 19 June 2012. Ongoing transactions, which were signed after 29 May, however, fell within the scope of the NBAL, and must have been 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 to apply 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

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 or 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;
    • in the case of competing parties (ie, holding a 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 an interest of 20 per cent or more.

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 within no more than 60 days after the transaction’s notification to CADE and may be modified or cancelled by CADE, as the case may be, being valid until 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.

Merger control settlement agreements (ACC)

In the case of transactions that raise competitive concerns, CADE’s GS shall challenge the filing before CADE’s Tribunal and the notifying parties may present a proposal for settlement agreement, besides a response to the appeal filed by the GS. Such an agreement replaces both the Performance Agreement and the Agreement on the Reversibility of Transactions, both provided by former Law No. 8,884/94 in order to combat or prevent, respectively, negative effects arising from transactions.


The NBAL sets forth some penalties concerning merger control, not only for gun jumping, but also for misleading information, unjustified late response, etc. Please see Table 3 for more details.

Recent achievements

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, 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 2011–2013.

According to CADE’s 2012 Annual Report, CADE has seen an increase in the number of its technical staff, to whom there was also given more responsibility, resulting in a rise in the number of cases analysed per year (which rose from 666 in 2005 to 955 in 2012, out of which 825 were merger filings notified under the old regime, and 102 merger filings submitted under the new regime). In 2013 (from January to June), 82 proceedings were filed, 158 were ruled (out of which 59 were merger filings) and only 219 are still pending.

In addition to the staff increase, the reformulation and enhancement of cooperation at the SBDC (ie, the Secretariat of Economic Law – SDE, CADE’s Attorney General Office, Federal Public Prosecution Office and CADE) eliminated overlapping activities and was able to make a significant reduction on the average length of analysis of merger filings, from 252 days in 2005 to 48 days (ordinary procedure) and 19 days (summary procedure), both in 2012.

The depth and strength of the decisions can also be regarded as an achievement. In June 2013, after one year of the New Brazilian Antitrust Law (Law No. 12529/2011) CADE is still keeping its eye on the healthcare industry, which is shown by the restrictions imposed on some transactions involving the acquisition of hospitals in several Brazilian cities, especially involving Rede D’Or and Medgrupo Participações SA. It is worth mentioning the veto to the acquisition of Hospital Regional de Franca by Unimed and the suggestion of veto to the acquisition of Aliança by Qualicorp health-care insurance industry.

In the steel industry, CADE imposed restrictions on the creation of a partnership between Usiminas and 19 distributors of flat steel, eliminating an exclusivity clause set forth in their agreement.

CADE has also entered into the first two merger control settlement agreements (ACCs) in transactions that raised competition concerns, as a condition for their clearance under the NBAL. The first case refers to the acquisition of MACH by Syniverse. During examination thereof, the GS found out that the transaction would result in high concentration in the GSM data clearing and Near Real Time Roaming Data Exchange (NRTRDE) markets, which are technological services, provided to mobile telecommunication companies for the charging of roaming. To remedy competition concerns, MACH and Syniverse proposed executing the agreement, through which they undertook certain obligations to remove any anticompetitive outcomes from the transaction.

In the second case, involving Ahlstrom Corporation and Munksjö AB, CADE concluded that there was high concentration in the pre-impregnated decorative paper (PRIP) market, which is used in indoors furniture as kitchens, bedrooms and offices, and in the heavy abrasive paper market (used to manufacture abrasive coating, and to polish materials tools in many industrial sectors), with no prospects of new entrants in the sector nor of a sufficient number of firms able to compete in these markets. Therefore, the sale of an industrial unit of Ahlstrom was established as a condition for the deal.

Other decisions were also remarkable in 2013, such as the veto to the acquisition of porcine assets of Doux Frangosul by Brasil Foods (the resulting company from the merger between Sadia and Perdigão, the largest meat processors in Brazil), as well as the GS’s suggestion to block the acquisition of the metallic protection bars and galvanisation division of Mangels Industrial SA by Armco Staco SA and the acquisition of American Chemical by Oxiteno.

On the opposite, CADE cleared complex transactions, eg, the merger between two retail companies Casas Bahia and Ponto Frio, acquisition of Skype by Microsoft, several acquisitions in the meat sector by JBS (although CADE is monitoring the market by means of monthly reports sent by the company).

With regard to the commented-on merger between airline companies Azul and Trip, CADE cleared the transaction conditioned to the termination up to the end of the year 2014 of the flight share agreement (codeshare) that Trip has with TAM, as well as the intensive use of at least 85 per cent of their scheduled takeoffs and landings at the Santos Dumont airport, located in Rio de Janeiro.

However, this showed that CADE is paying attention and verifying in depth all information provided by the applicants, as the authority imposed a 3.5 million reais fine upon the companies for misleading information. Former Law No. 8884/94 had already provided for this kind of penalty, although there are no decisions that are worth mentioning in this sense. Such penalty was maintained in Law 12529/2011 (please see Table 3 below) and only now CADE started applying a strict and harsh treatment to the analysis of accuracy and completeness of information provided by the parties and has become keen on punishing any minimal evidence of misleading information.

In Azul/Tryp, for instance, CADE imposed such a high fine (please note that the maximum fine is 5 million reais) because the parties failed to inform the existence of a codeshare agreement with TAM. This information came out during complementary discovery by CADE and was determinant to the imposition of restrictions upon the transaction.

The second and more recent case of misleading information involves Lauriate Group and the Brazilian private university Anhembi Morumbi, which were fined 4 million reais for hiding information on their economic groups, which would show that Lauriate Group’s members were already active in the education sector. The transaction involved rising the equity interest of Lauriate Group in the managing company of Anhembi Morumbi from 51 per cent to 100 per cent.

The first precedent of misleading information concerned the transaction between the companies Cruzeiro do Sul Educacional SA and ACEF SA, in the distance learning industry. According to CADE, the parties failed to inform an accurate number of courses offered and the number of students enrolled. CADE imposed a 200,000 reais fine.

As a further achievement, CADE has focused the analysis of merger filings on consolidating a restrictive and objective approach in regard to the notification thresholds, as well as acknowledging the need to enact regulations concerning some concepts of Law No. 12529/11, such as the ‘associative agreements’ (including distribution agreements, consultancy agreements, partnerships in general, service agreements, etc) that fall within the scope of antitrust law, as well as the concepts of control and relevant influence for the purposes of submitting a transaction to merger control.

Finally, CADE was awarded four stars (out of five) in the Global Competition Review ranking, being classified after the competition authorities of the European Union, France, Germany, United Kingdom, United States of America (Department of Justice and Federal Trade Commission) and Japan.


The former Law No. 8884/94 was enacted in a scenario of significant change in Brazil. From this period on, the competition policy has strongly improved compared to the period from 1962 to 1994, in which only minor changes took place. Law No. 12529/2011 has come to confirm the evolution trend of the country towards a competition culture, which can be expressed by two famous phrases: ‘a level playing field’ and ‘competition drives innovation’.

The SBDC has increasingly evolved in these approximately two decades. However, this is not enough to put Brazil in the first tier in terms of antitrust enforcement and competition culture. Cultural and latent problems, not exclusively related to competition law and to the SBDC, but rather related to Brazil as a whole, make the challenge even more important.

Discussions about competition defence in Brazil are in progress, as well as the discussion about competition law, which actually started in Brazil less than 20 years ago. The competition culture in Brazil is therefore not fully established not only at academic and governmental levels, but also in the business environment and in society as a whole.

The three pillars of Brazilian Competition Policy (merger control, behaviour control and competition advocacy) are still being developed. In merger control, CADE has quite a settled case law and methodology, that, in addition to its institutional maturity, gives society the desired predictability as to whether a transaction should be submitted to CADE and whether there will be difficulties for unconditional clearance.

In the international arena, the SBDC is succeeding in following the latest best practice in terms of policies, normative models, structural organisation, etc. Therefore, it is important that the Brazilian authorities continue to observe international experiences and also international recommendations (soft laws) to further improve Brazilian competition policy.

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 has become a General Superintendence (GS), which operates within CADE’s structure. There will be a Department of Economic Studies, which is 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.

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 notice’.

Scope of CADE’s jurisdictioan 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 category 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 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.

Table 3

Penalties provided by the NBAL concerning merger control




Article 88, §3º

Gun jumping

Fine from R$60,000 to R$60 million and/or voidance of the transaction.

Article 39

Continuing violation or breach of an obligation / decision imposed by CADE

Minimum daily fine of R$5,000, which can be raised by up to 50 times this amount.

Article 40

Refusal, omission or unjustified delay to provide information

Minimum daily fine of R$5,000, which can be raised by up to 20 times this amount.

Article 43

Misleading or fraudulent information / documents

Fine from R$5,000 to R$5 million. In the case of merger filings, the submission may be rejected for lack of grounds, withou prejudice to other penalties.

Article 65, § 3º

Malicious prosecution

Fine from R$5,000 to R$5 million.

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