COVID-19 NOTICE – TEMPORARY MODIFICATIONS OF PROCEDURES
Select Countries/Jurisdictions
Africa
expand/collapse
Asia and Oceania
expand/collapse
Europe
expand/collapse
North and Central America
expand/collapse
South America
expand/collapse
Argentina
Brazil
Chile
Select Topics
Relevant legislation and authorities
show/hide chapter
  1. Is a merger control regulation in force?
  1. Which authorities enforce the merger control regulation?
  1. Relevant regulations and guidelines with links:
  1. Does general competition regulation apply to mergers or ancillary restrictions?
  1. May an authority order a split-up of a business irrespective of a merger?
  1. Other authorities that also require merger filing or may prohibit transaction
    (Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)
  1. Are any parts of the territory exempted or covered by particular regulation?
Voluntary or mandatory filing
show/hide chapter
  1. Is merger filing mandatory or voluntary?
Types of transactions to file – what constitutes a merger
show/hide chapter
  1. Is there a general definition of transactions subject to merger control?
  1. Is "change of control" of a business required?
  1. How is "control" defined?
  1. Acquisition of a minority interest
  1. Joint ventures/joint control – which transactions constitute mergers?
Thresholds that decide whether a merger notification must be filed
show/hide chapter
  1. Which thresholds decide whether a merger notification must be filed?
  1. Special thresholds for particular businesses
  1. Rules on calculation and geographical allocation of turnover
  1. Special rules on calculation of turnover for particular businesses
  1. Series of transactions that must be treated as one transaction
Exempted transactions and industries (no merger control even if thresholds ARE met)
show/hide chapter
  1. Temporary change of control
  1. Special industries, owners or types of transactions
  1. Transactions involving only foreign businesses (foreign-to-foreign)
  1. No overlap of activities of the parties
  1. Other exemptions from notification duty even if thresholds ARE met?
Merger control even if thresholds are NOT met
show/hide chapter
  1. May a merging party file voluntarily even if the thresholds are not exceeded?
  1. May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?
Referral to and from other authorities
show/hide chapter
  1. Referral within the jurisdiction
  1. Referral from another jurisdiction
  1. Referral to another jurisdiction
  1. May the merging parties request or oppose a referral decision?
Filing requirements and fees
show/hide chapter
  1. Stage of transaction when notification must be filed
  1. Pre-notification consultations
  1. Special rules for acquisitions on stock exchanges and public takeover bids
  1. Forms available for completing a notification
  1. Languages that may be applied in notifications and communication
  1. Documents that must be supplied with notification
  1. Filing fees
Implementation of merger before approval – "gun jumping" and "carve out"
show/hide chapter
  1. Is implementation of the merger before approval prohibited?
  1. May the parties get permission to implement before approval?
  1. Due diligence and other preparatory steps
  1. Veto rights before closing and “Ordinary course of business” clauses
  1. Implementation outside the jurisdiction before approval – "Carve out"
  1. Consequences of implementing without approval/permission
The process – phases and deadlines
show/hide chapter
  1. Phases and deadlines
Assessment and remedies/decisions
show/hide chapter
  1. Tests or criteria applied when a merger is assessed
  1. May any non-competition issues be considered?
  1. Special tests or criteria applicable for joint ventures
  1. Decisions and remedies/commitments available
Publicity and access to the file
show/hide chapter
  1. How and when will details about the merger be published?
  1. Access to the file for the merging parties and third parties
Judicial review
show/hide chapter
  1. Who can appeal and what may be appealed?

 
BRAZIL

Cristianne Saccab Zarzur
Partner

czarzur@pn.com.br

Tel: +55 11 3247 8992

Leonardo Rocha E Silva
Partner

lrochaesilva@pn.com.br

Tel: +55 61 3312 9488

Jose Alexandre Buaiz Neto
Partner

jabuaizneto@pn.com.br

Tel: +55 61 3312 9461

Renê Guilherme S. Medrado
Partner

medrado@pn.com.br

Tel: +55 11 3247 8797

No new regulation adopted or proposed

Note that relevant regulations may be changed before your contemplated transaction is completed. Mergerfilers.com and our national experts keep information on regulations up to date and even provide alerts on adopted or proposed changes that have not come into force yet but may come into effect before the transaction is completed. When this field is green, we have no knowledge of such imminent changes to the relevant regulations.

Relevant legislation and authorities

1) Is a merger control regulation in force?

Yes. The 2011 Competition Act (Law 12.529/2011) and Regulation 2/2012, which entered into full force and effect in May 2012, contain the merger control rules applicable to certain transactions with effects in Brazil.

2) Which authorities enforce the merger control regulation?

The Administrative Council for Economic Defense (“CADE”) is the primary competition authority in Brazil, responsible for enforcing the merger control rules contained in the 2011 Competition Act and Regulation 2/2012. 

CADE’s structure is composed of two main entities: (i) the CADE’s General Superintendence (“General Superintendence”); and (ii) the CADE’s Administrative Tribunal (“Administrative Tribunal”), composed by a President and six commissioners, all appointed by the President of the Republic.  

The General Superintendence is the first authority to analyze merger cases in Brazil and may either issue a definitive decision to approve the transaction, or issue a non-binding decision referring more complex transactions to the Administrative Tribunal, for a final decision, recommending that the transaction should be prohibited or approved with certain conditions.

The Administrative Tribunal, in turn, is responsible for the analysis of the transactions referred by the General Superintendence, as well as cases in which third parties appeal the General Superintendence’s approval decisions. The Administrative Tribunal may also request to review any transactions approved by the General Superintendence.

CADE includes a Department of Economic Studies, which may provide economic assessments on merger cases, especially analysis of the possible anticompetitive effects of a transaction, coordination risks and the effectiveness of the commitments negotiated with the merging parties.

3) Relevant regulations and guidelines with links:

The 2011 Competition Act contains the primary merger control rules. Since May 2012, when the 2011 Competition Act entered into full force and effect, several regulations and guidelines have been issued by CADE, providing more detailed rules for the merger review process. The most relevant legislation and guidelines are listed below:

Original Portuguese version

English version

Lei de Defesa da Concorrência (Lei nº 12.529/2011)

2011 Brazilian Competition Act (Law 12.529/2011)

Regimento Interno do CADE (RICADE)

Internal Regulation of the Administrative Council for Economic Defense (RICADE) (Not available in English)

Resolução nº 2/2012

CADE’s Resolution 2/2012 – Rules of merger review process (Not available in English)

Resolução nº 17/2016

CADE’s Resolution 17/2016 – Rules on notifiable Associative Agreements (Not available in English)

Resolução nº 24/2019 - Procedimento Administrativo para Apuração de Ato de Concentração

CADE’s Resolution 24/2019 - Administrative Procedure to Investigate Mergers (Not available in English)

Guia de Análise de Atos de Concentração Horizontal

Guidelines for Horizontal Merger Analysis (Not available in English)

Guia de Remédios Antitruste

Guidelines for Antitrust Remedies (Not available in English)

Guia para Análise de Consumação Prévia de Atos de Concentração Econômica (Gun Jumping)

Guidelines for the Analysis of Previous Consummation of Merger Transactions (Gun Jumping)

 

4) Does general competition regulation apply to mergers or ancillary restrictions?

Ancillary restrictions such as non-compete or exclusivity clauses may be analyzed by CADE in the context of merger review. Indeed, CADE may determine adjustments to non-compete and exclusivity clauses as a condition for the approval of the merger under review.

5) May an authority order a split-up of a business irrespective of a merger?

The authority may order divestures in the context of an administrative procedure. According to the 2011 Competition Act, based on a breach of the competition law and whenever the severity of the facts or the public interest so requires, the authority may impose penalties such as the company's spin-off, transfer of corporate control, sale of assets, or partial discontinuance of activities.

CADE has already determined divesture obligation in the past. In 2014, in the so called Cement Cartel case, CADE ordered the divesture of concrete units as a penalty for cartel behavior. CADE considered that such penalty was important to reestablish the competitive conditions and reduce the incentives for coordination in the concrete industry. Further, in 2017, CADE executed a Cease and Desist Commitment Agreement with Cascol Combustíveis para Veículos Ltda., which included the obligation to divest certain gas stations active in the Federal District region. More recently, in 2019, CADE executed Cease and Desist Commitment Agreements with Petrobras, in the context of some unilateral conducts investigations, including divestment obligations related to the oil refining and natural gas markets. 

6) Other authorities that also require merger filing or may prohibit transaction
(Note that this may not be an exhaustive list and that industry-specific legislation should always be considered. Furthermore, a merger will often require change of registrations with – but not approval from – the companies register, land register and authorities that have issued permits for the activities of the merging parties.)

CADE is the authority responsible for enforcing merger control in all economic sectors. Nevertheless, transactions that occur in regulated sectors (e.g., banking, healthcare, telecommunications, oil and gas, aviation, etc.) may also require an additional analysis by the respective regulatory body. In those cases, CADE and the regulatory bodies usually conduct independent analysisaccording to their own specific rulesbut may cooperate in order to provide the most efficient and well-based market analysis. Indeed, CADE has signed several cooperation agreements with other regulatory bodies in Brazil in order to guarantee that those institutions will act in the best way possible whenever multiple reviews are considered to be necessary.  

In December 2018, CADE executed a Joint Normative Act with the Brazilian Central Bank, which determined their specific roles in merger control cases involving the baking sector that are subject to the analysis by both regulatory bodies. This represented a major step towards ensuring greater transparency and certainty to financial institutions that are subject to regulation and control by those authorities.

7) Are any parts of the territory exempted or covered by particular regulation?

No. The 2011 Competition Act is mandatory in all Brazilian territory.

Voluntary or mandatory filing

8) Is merger filing mandatory or voluntary?

The 2011 Competition Act has introduced a mandatory pre-merger review of certain transactions classified as concentration acts (as defined in topic 9).

Types of transactions to file – what constitutes a merger

9) Is there a general definition of transactions subject to merger control?

The 2011 Competition Act determines that the transactions that constitute a concentration act and are subject to mandatory pre-merger review process in Brazil(provided that the turnover thresholds are met) are the following: (i) there is a merger involving two or more companies that were independent until then; (ii) one or more companies directly or indirect acquire – by purchase or swap of shares, membership units (quotas), securities or share convertibles, or tangible or intangible assets, by operation of contract or through any other means or ways – the control over or parts of one or more companies; (iii) one or more companies absorb another company or companies; or (iv) two or more companies enter into an associative agreement, consortium or joint venture agreement. 

CADE’s Resolution 17/2016 determines more specifically which are the associative agreements subject to mandatory pre-merger review process in Brazil. Accordingly, these associative agreements are the ones that have all of the following characteristics (i) duration of two years or more; (ii) creation of a joint undertaking to pursue an economic activity; (iii) sharing of the risks and results of the underlying economic activity; and (iv) execution between parties (or economic groups) that are competitors in the relevant market affected by the agreement.

10) Is "change of control" of a business required?

The “change of control” of a business is not a criteria for a transaction to be considered subject to mandatory pre-merger review process in Brazil. CADE’s Resolution 2/2012 sets forth that acquisitions of minority interest carried out by the controlling shareholder that already holds sole control of the target company are not subject to mandatory notification, even when the turnover thresholds are met. 

11) How is “control” defined?

The 2011 Competition Act does not provide any definition of "control". CADE normally understands that control involves the ability to interfere with the activities of a company or undertaking, either by majority of equity interest or contractual arrangements.

12) Acquisition of a minority interest

With regards to acquisition of minority interest, CADE’s Resolution 2/2012 stipulates that the following transactions are subject to mandatory pre-merger review process in Brazil: 

(i) When the acquirer and target are not competitors or active in a vertically-related market: (i.a) acquisition conferring upon the acquirer the direct or indirect ownership of twenty percent (20%) or more of the capital stock or voting capital of the target; OR(i.b) acquisition by an owner of twenty percent (20%) or more of the total capital stock or voting capital, provided that the ownership interest directly or indirectly acquired, from at least one seller taken individually, is equal to or exceeds twenty percent (20%) of the total capital stock or voting capital. 

(ii) When the acquirer and target are competitors or active in a vertically-related market: (ii.a) acquisition conferring a direct or indirect ownership interest equal to five percent (5%) or more of the total capital stock or voting capital; OR(ii.b) the most recent acquisition which, individually or together with others, results in an increase in ownership interest at or above five percent (5%), where the acquirer already holds five percent (5%) or more of the total  capital stock or voting capital of the target.

Please also see topic 20 about the exemption for minority interests acquired by an acquirer that already holds a controlling interest. 

13) Joint ventures/joint control – which transactions constitute mergers?

The joint ventures that meet the thresholds indicated in item 14 below must be notified to CADE. The 2011 Competition Act exempts only joint ventures created with the specific purpose of participating in public bids.

Thresholds that decide whether a merger notification must be filed

14) Which thresholds decide whether a merger notification must be filed?

a) Turnover thresholds

The 2011 Competition Act establishes a cumulative turnover threshold to determine whether a concentration act is subject to mandatory pre-merger review process in Brazil: (i) At least one of the “economic groups” involved in the transaction had a registered gross turnover or volume of businesses equal to or exceeding BRL 750 million in the year before the transaction in Brazil; and (ii) At least another “economic group” involved in the transaction had a registered gross turnover or volume of businesses equal to or exceeding BRL 75 million in the year before the transaction in Brazil.

For turnover calculation purposes, the definition of “economic group” takes into consideration; (i) companies under common control and/or (ii) companies in which any member of the group holds at least 20% of the corporate capital or voting rights. There is a specific rule for investment funds, described in topic 17. 

b) Market share thresholds

N/A

c) Value of transaction thresholds

N/A

d) Assets requirements

N/A

e) Other

N/A

15) Special thresholds for particular businesses

The thresholds described in topic 14 apply to all industries. 

16) Rules on calculation and geographical allocation of turnover

As described in topic 14, calculation of turnover should consider, first, gross turnover or volume of businesses registered by the companies within the “economic groups” of the parties in the audited accounts of the financial year before the transaction. 

Gross turnover is the net turnover derived from sale of products and services within the undertaking’s ordinary activities without deduction of taxes or costs. 

CADE understands that it is necessary to sum 100% of the gross revenues of the companies within the economic group (including 100% of the turnover generated by companies in which the group only has 20% of the corporate capital or voting rights). Turnover must be adjusted to take into account any divestments or acquisitions of businesses after the end of the financial year that the turnover calculation is based on. In addition, according to CADE’s Internal Regulations, the exchange rate considered for turnover calculation should be the one from the last working day of the year before the transaction.

The geographical allocation of the turnover threshold considers annual gross turnover or volume of business in Brazil, which includes both the turnover of companies incorporated in Brazil and the turnover of foreign companies with sales into Brazil. 

17) Special rules on calculation of turnover for particular businesses

There is a specific rule for the definition of “economic group” in cases involving investment funds, which considers as members of the same economic group, (i) the economic group of any shareholder that holds an ownership interest equal to or higher than 50% of the fund; and (ii) the companies controlled by the fund, as well as those in which the fund holds an ownership interest equal to or higher than 20% of the corporate capital or voting rights. 

18) Series of transactions that must be treated as one transaction

There is no specific rule that determines whether series of transactions, subject to different notification criteria, should be submitted as one transaction. 

Exempted transactions and industries (no merger control even if thresholds ARE met)

19) Temporary change of control

There is no exemption for temporary change of control.

20) Special industries, owners or types of transactions

CADE’s Resolution 2/2012 determines that acquisitions of minority interest carried out by the controlling shareholder are not subject to mandatory notification. 

The 2011 Competition Act also establishes that associative agreements, consortium or joint venture agreements created with the specific purpose of participating in public bids may not be submitted to CADE.

21) Transactions involving only foreign businesses (foreign-to-foreign)

The 2011 Competition Act applies to all transactions wholly or partially performed in the Brazilian territory or may produce effects in the Brazilian territory. 

In this sense, in the analysis of previous cases involving foreign-to-foreign transactions (Bosch/HeFei andBosch/ZF/Knorr-Bremse), CADE has taken into consideration elements such as (i) the occurrence of actual or potential effects in Brazil; (ii) the capacity of a joint venture to develop activities or generate revenues in Brazil; (iii) the existence of horizontal or vertical relationships that could affect Brazil; and (iv) the international geographic market definition.

A transaction involving only foreign business that is unable to produce effects in Brazil would not be subject to mandatory notification to CADE, even if the turnover thresholds are met.

22) No overlap of activities of the parties

There is no exception for transactions with no overlap of activities. Nevertheless, transactions that do not arise any overlap of activities of the parties shall be analyzed under a simplified/fast track procedure (see topic 33). 

23) Other exemptions from notification duty even if thresholds ARE met?

See topics 12 and 20.

Merger control even if thresholds are NOT met

24) May a merging party file voluntarily even if the thresholds are not exceeded?

Yes. The merging parties may voluntarily notify the transaction ad cautelum. This usually occurs in cases in which there is a reasonable doubt on whether thresholds are met. 

25) May the competition authority request a merger notification or oppose a transaction even if thresholds are not met?

The 2011 Competition Act establishes that CADE may request the submission of any transaction (even if thresholds are not met) within one year of its closing.

This provision aims at enabling merger review, for example, of transactions between parties that do not meet the turnover thresholds, but which could raise competition concerns.

Referral to and from other authorities

26) Referral within the jurisdiction

N/A

27) Referral from another jurisdiction

There are no legal provisions that specifically address referral from another jurisdiction. Nevertheless, CADE has several cooperation agreements with competition authorities from other jurisdictions and frequently interacts with these authorities in the review of complex international mergers. In these cases, CADE usually ask the parties for a waiver to exchange confidential information with other authorities in order to improve the merger analysis and decision.

28) Referral to another jurisdiction

There are no legal provisions that specifically address referral to another jurisdiction. Nevertheless, CADE has several cooperation agreements with competition authorities from other jurisdictions and frequently interacts with these authorities in the review of complex international mergers. In these cases, CADE usually ask the parties for a waiver to exchange confidential information with other authorities in order to improve the merger analysis and decision. 

29) May the merging parties request or oppose a referral decision?

N/A

(See topic 50 with respect to appeals)

Filing requirements and fees

30) Stage of transaction when notification must be filed

Notification is usually filed when a binding agreement is signed between the parties. Nevertheless, a merger may be submitted to CADE based on a memorandum of understandings. In this case, the document submitted should cover all relevant competitive aspects of the transaction, since the antitrust approval is specific for the merger structure notified to CADE. Any relevant changes on the structure should be reported to CADE and, in certain cases, the transaction would need to be notified again.

31) Pre-notification consultations

In cases submitted under the full-form procedure, a pre-notification phase is currently accepted, for preliminary discussions about the case, prior to the formal submission of the merger. 

32) Special rules on timing of notification in case of public takeover bids and acquisitions on stock exchanges

Special rules applicable to acquisitions on stock exchanges and public takeover bids provide that CADE does not demand merger filing before the offer is consummated. However, CADE prohibits the exercise of voting rights by the new owner before clearance of the transaction. 

The special rules are provided for in CADE’s Resolution 2/2012, which defines that the transactions involving the subscription of securities convertible into shares are subject to mandatory notification when, cumulatively: (i) the future conversion into shares will result in acquisition of control or in the notifiable hypothesis of acquisition of a minority interest (see topics 11 and 12); and (ii) the security or value involved grants to the acquirer the right to designate members of the management or inspection boards, or to exercise voting or veto rights regarding competition issues, except for the rights already prescribed by law.

33) Forms available for completing a notification

There are two review procedures and forms for completing a notification in Brazil: fast-track and full form.

CADE’s Resolution 2/2012 establishes that the following transactions qualify for the fast-track procedure: (i) creation a new joint venture under common control between separate companies exclusively to explore market(s) that are not horizontally or vertically related to the parties’ activities; (ii) cases in which the acquiring company or its economic group did not participate in the same market as target or in a vertically related market before the transaction; (iii) cases in which the transaction will result in a horizontal overlap but the consolidated market share is below 20%; (iv) cases in which the transaction will result in a vertical integration but none of the parties or their economic groups hold more than 30% in the vertically related markets; (v) the horizontal overlaps resulting from the transaction are limited (HHI variation is less than 200 points), unless the post-transaction market share exceeds 50%; and (vi) other cases that, at the discretion of the General Superintendence, may be considered simple enough to justify that a more detailed analysis would not be necessary. 

In cases submitted under the fast-track procedure, parties may present to CADE a simplified filing form, which includes: (i) the description of the deal; (ii) information on the parties and their economic groups; (iii) elements related to the deal; (iv) documentation from the parties and the deal; (v) definition of the relevant markets; and (vi) analysis of the supply structure of the market.

Cases submitted under the full-form procedure will require the completion of a more detailed filing form, which, besides the information/documents described above, includes: (vii) analysis of the demand structure of the market; (viii) review of monopsony power; (ix) analysis of entry conditions and rivalry; (x) analysis of coordinated power; and (xi) counterfactual scenarios. 

34) Languages that may be applied in notifications and communication

Portuguese. 

35) Documents that must be supplied with notification

The following documents must be supplied with a merger notification in both fast-track or full-form procedures: 

  1. a copy of the final or most recent version of all contractual instruments related to the execution of the transaction, listing the relevant attachments for the merger review; 
  2. copies of non-competition agreements and of shareholders agreements, if any; 
  3. list containing the information of all other documents that have been created as a result of the transaction; and
  4. copy of the most recent annual report and/or the audited financial statements of the parties directly involved in the transaction and the respective economic groups.

In cases submitted under a full-form procedure, additional documents should be presented, including: 

  1. copies of analyses, reports, studies, inquiries, presentations and other similar documents prepared by or for any member(s) of the board of directors; supervisory board; general meeting of shareholders; or other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), for the purpose of assessing or analyzing the proposed deal (with respect to market competition standards, market shares, competitors, estimates of sales growth or estimates of expansion into other geographic markets or other matters relevant to competition); 
  2. market studies, surveys, reports, forecasts and any other document, which are related to competitive positioning of the company and of its competitors; supply and demand conditions; battle for customers; strategic behavior (price, sale, launchings, entries/exits, etc.); complaints with respect to anticompetitive behavior of companies that make up the relevant market; effects on the supply, demand, cost, price, attributes of the product/service caused by direct competition of another possible product or service; sectoral balance sheets, market diagnosis, etc.; 
  3. marketing report, business report, brand promotion plans and strategies, product positioning report and any other similar report; and 
  4. strategic planning, business plan, expansion and cost-cutting plan, and any other similar plan.

During the merger review, CADE may request additional documents related to the parties, the relevant market or the transaction through formal requests for information.

36) Filing fees

The filling fee for the submission of a merger in Brazil is BRL 85,000.00.

Implementation of merger before approval – “gun jumping” and “carve out”

37) Is implementation of the merger before approval prohibited?

Yes.  Antitrust approval is a condition precedent for the closing/consummation of transactions subject to mandatory filing in Brazil. 

There is, therefore, a standstill obligation, meaning that the parties to a reportable transaction must keep the physical structures and competitive conditions unchanged until CADE’s final decision. Activities contrary to these provisions may constitute previous consummation of a merger (gun jumping).

According to CADE’s Gun Jumping Guidelines the following are activities that might constitute gun jumping: (i) any exchange of competitively-sensitive information between the parties in the merger (see topic 39); (ii) contractual clauses governing the relationship between economic agents providing for activities that cannot be reversed (e.g., prior non-compete clause, clause for payment, clause allowing interference by one party to the other party’s business strategy); and (iii)  activities of the parties before and during the implementation of a merger, such as transfers of assets,  exercise of any influence of one  party over the other party’s activities and development of joint strategies.

38) May the parties get permission to implement before approval?

According to CADE’s Internal Regulations, the parties notifying a merger may request on exceptional basis a preliminary authorization for the consummation of the merger, in cases in which, on a cumulative basis (i) there is no danger of irreparable damages for the competition conditions in the market; (ii) the measures to be authorized are fully reversible; and (iii) the notifying party is able to prove that there is an imminent risk of substantial and irreversible financial damages to the purchased company in case the authorization is not granted.

In those cases, CADE’s General Superintendence will issue an opinion about the request within 30 days from the submission, referring the case to the Administrative Tribunal, which, in turn, will issue a final decision within 30 days from the referral by the General Superintendence.

39) Due diligence and other preparatory steps

The 2011 Competition Act establishes that the exchange of commercially sensitive information between competitors may be considered an anticompetitive conduct. 

CADE’s Gun Jumping Guidelines, in turn, provide that the abuse of information exchange during due diligence may constitute gun jumping. In this sense, the Guidelines provide a non-exhaustive list of what could be considered commercially sensitive information (and, therefore, should not be exchanged), to be used as standards for companies in merger negotiations and due diligence: (i) costs; (ii) capacity level and expansion plans; (iii) marketing strategies; (iv) prices and discounts; (v) main clients and their respective discounts; (vi) employee’s salaries; (vii) main suppliers and the terms of the agreements with them; (viii) not public information on brands, trademarks and research/development; (ix) plans on future mergers; and (x) competitive strategies, etc.

Since the list provided above is not exhaustive, special attention should be dedicated to any other information that could be considered competitively sensitive or be used strategically in a context of exchange of information between competitors.

CADE’s Gun Jumping Guidelines indicate measures to mitigate the risk of gun jumpingrelated to the exchange of commercially sensitive information deemed necessary in the context of a due diligence. Accordingly, CADE suggests the adoption of an independent committee (clean teams), which will be responsible for sending, receiving, gathering, analyzing and consolidating the commercially sensitive information related to the merger. Parties of the clean team shall enter into a confidentiality agreement (Antitrust Protocol), agreeing to prevent executives, employees or representatives of one party from having access to competitively sensitive information from the other party.

CADE’s Gun Jumping Guidelines also establishes that integrating the activities of the merging parties before the approval of the transaction may constitute gun jumping. Therefore, before CADE’s approval, parties should continue to operate with separate business structures and continue to make autonomous decisions in their best interest. Any preparatory steps, therefore, should be limited to planning the organizational structure of the combined companies.

40) Veto rights before closing and "Ordinary course of business" clauses

CADE's Gun Jumping Guidelines establish that contractual provisions that allow direct interference by one party with strategic aspects of another's business, such as decisions related to prices, customers, business/sales policy, planning, marketing strategies and other sensitive decisions may constitute gun jumping. Veto rights related to decisions of this nature could be considered gun jumping by CADE.

The guidelines include a specific provision, establishing that clauses related to the protection of the normal course of business and, consequently, to the protection of the value of the acquired business may not constitute gun jumping. 

Nevertheless, these issues are usually decided after a case-by-case analysis by CADE.

41) Implementation outside the jurisdiction before approval – "Carve out"

Past rulings issued by CADE have established that a carve-out agreement, pursuant to which parties decide to isolate Brazil and proceed with the closing, or partial implementation, of a multi-jurisdictional transaction in other countries, constitute gun jumping in Brazil.

Carve-out agreements were already analyzed by CADE in the merger review of the purchase of a subsidiary of Cisco Systems, Inc. by Technicolor S.A. During the analysis of the transaction (and before the Brazilian antitrust clearance) CADE became aware of a public announcement of the global closing on Technicolor’s website. Three days later, the applicants informed CADE about the global closing and after a month presented the carve-out agreement as a justification, alleging that it would preserve the competitive conditions in the Brazilian market until CADE’s approval. CADE decided that there had been a violation since the transaction was implemented before clearance, and that neither the urgency, nor the absence of anticompetitive impact could justify the prior closing of the merger. CADE stressed that carve out agreements should not be accepted as a measure to exclude or mitigate gun jumping penalties, following international best practices. CADE and the parties entered into an agreement setting forth a pecuniary contribution of BRL 30 million. 

42) Consequences of implementing without approval/permission

Penalties for gun jumping practices in Brazil comprise (i) fines ranging from BRL 60 thousand to BRL 60 million; (ii) the possible annulment of the acts (e.g. total or partial implementation of the transaction) performed by the parties before obtaining CADE´s approval and; (iii) the commencement of an administrative investigation into potential anticompetitive conducts.

The process – phases and deadlines

43) Phases and deadlines

Fast-track procedure:

Phase

Duration/deadline

Cases to be reviewed under the fast-track procedure are directly submitted to CADE (without a pre-filing phase). They are analyzed by CADE’s General Superintendence and shall be decided within 30 days after the formal filing. Receiving the direct approval by the General Superintendence, the transaction can only be consummated after a 15-day term. During such term, third-parties can file appeals (see topic 50) and/or members of CADE’s Administrative Tribunal may decide that the deal shall be reviewed by the Administrative Tribunal. 

Decision must be made within 30 calendar days after the formal filing.

Transaction not to be consumated until 15 calendar days after decision date.

 

Full-form procedure:

Phase

Duration/deadline

Pre-notification phase:

In cases reviewed under the full-form procedure, there is a pre-filing phase, in which parties usually present the main aspects of the merger and the relevant markets involved to CADE and submit a draft of the filing form for the authority’s initial review. After these initial communications, parties will formally submit the transaction to CADE. 

No set duration or deadline

Investigation phase: 

The General Superintendence is the first authority to analyze merger cases in Brazil. 

The General Superintendence will then initiate the investigation phase, analyzing the documents and information submitted by the parties and carrying out market tests, sending requests for information to both competitors, clients and suppliers of the parties in the relevant markets under analysis. In more complex cases, the General Superintendence may request a waiver from the parties to start the market tests during pre-filing phase. It is worth noting that market tests may also occur in mergers analyzed under a fast-track procedure. 

After the investigation phase, the General Superintendence may either (i) issue a definitive decision to approve the transaction, or (ii) issue a non-binding decision referring more complex transactions to the Administrative Tribunal, for a final decision, recommending that the transaction should be prohibited or approved with certain conditions. 

240 calendar days

Extension: 

60 additional calendar days by the initiative of the parties, or 90 additional calendar days if CADE considers it necessary. 

The total maximum period is 330 calendar days. 

 

Administrative Tribunal:

In case the transaction is referred to the Administrative Tribunal, CADE's Internal Regulations establish that the parties have 30 days to present arguments and studies against the opinion rendered by the General Superintendence, as well as a proposal of Merger Control Agreement (Acordo de Controle de Concentrações – ACC), with possible remedies to be negotiated in order to mitigate the competitive concerns identified.

After analyzing the case, CADE’s Administrative Tribunal may decide to: (i) unconditionally approve the transaction; (ii) approve the transaction with conditions established unilaterally or defined in a Merger Control Agreement; or (iii) prohibit the transaction. 

Mergers approved by the Administrative Tribunal may be consummated after the minutes of the ordinary session in which the case was decided is published in the local Official Gazette.

The parties have 30 days to present arguments and studies against the opinion rendered by the General Superintendence, as well as a proposal of Merger Control Agreement. 

The total maximum period for the investigation phase and the case handling at the Administrative Tribunal is 330 calendar days. 

 

 

Assessment and remedies/decisions

44) Tests or criteria applied when a merger is assessed

The 2011 Competition Act provides that mergers that may freeze out competition in a substantial portion of the relevant market, or which may create or reinforce a dominant position or otherwise result in dominance of a relevant market for specific goods or services, should be prohibited, except if they: (i) are intended to (i.a) increase productivity; (i.b) improve the quality of goods or services; or (i.c) cause an increased efficiency, as well as foster the technological or economic development; and (ii) a relevant portion of the resulting benefits is passed on to consumers.

CADE’s Guidelines for Horizontal Mergers establish that classical merger analysis will observe the following steps/tests/criteria (i) definition of the relevant market; (ii) review of the levels of concentration and assessment of the possibility of exercising market power in a post-merger scenario; (iii) evaluation of the probability of market power in a post-merger scenario, considering possible entries and rivalry conditions in the market; (iv) assessment of the merger-specific economic efficiencies that will be passed on to consumers. In vertical mergers, this assessment will also take into consideration the possibility and probability of conducts such as market foreclosure and discrimination. 

Based on this analysis, CADE will assess whether the benefits from the merger outweigh the harm caused by elimination of competition (i.e., if the merger will not reduce consumer welfare). In case the conclusion is positive, CADE shall unconditionally approve the transaction. In case the conclusion is negative, CADE may either approve the case with conditions capable of reestablishing consumer welfare or, prohibit the merger.

45) May any non-competition issues be considered?

In general, the analysis conducted by CADE tends to rely exclusively on competition law issues. 

The Joint Normative Act executed between CADE and theBrazilian Central Bankincludes a special provision establishing that theBrazilian Central Bankmay unilaterally approve mergers involving financial institutions in which there is relevant risk to the reliability and stability of the National Financial System. In such cases CADE will not assess the merger.

46) Special tests or criteria applicable for joint ventures

The 2011 Competition Act does not provide for a specific test or criteria applicable to joint ventures. Thus, all types of joint ventures are subject to CADE’s merger review if they produce effects, even if potential, in the Brazilian market; and meet the turnover jurisdictional thresholds. The only exception envisaged in the 2011 Competition Act concerns joint ventures constituted for the specific purpose of participating in public bids.

47) Decisions and remedies/commitments available

CADE may impose structural and/or behavioral remedies as a condition for clearance. In October 2018, CADE published its Guidelines for Antitrust Remedies describing the best practices and procedures adopted in the design, application and monitoring of antitrust remedies.

According to the guidelines, remedies negotiations with CADE shall observe principles such as proportionality, timeliness, practicality, and verifiability that will contribute to the effectiveness of the remedies and their implementation. 

Publicity and access to the file

48) How and when will details about the merger be published?

In general, merger documents are considered public, except for some information that may be considered confidential (see topic 49). After the notification, CADE’s General Superintendence publishes an announcement with a summary of the notification in the Official Gazette. CADE’s General Superintendent’s opinion/decision on the transactions are made available in the website (confidential parts are redacted).

Also, all CADE Administrative Tribunal’s decisions (including the ones related to complex transactions under review) are taken in a public judgment session, live streamed in CADE’s website. All votes rendered by CADE’s commissioners are made available in the website.  

49) Access to the file for the merging parties and third parties

The merging parties:

The notification form and other public documents are given full publicity, except for information treated as confidential. The merging parties may require confidential treatment of certain information, pursuant to CADE’s Internal Regulation (i.e. records, documents, data, and information related to tax, bank, and industrial secrets, financial statements, value and volume of sales, and others) and third parties may access the remainder of files. 

CADE’s Internal Regulation also provides a list of information that is considered public, such as the shareholding structure of the merging parties and their respective economic group and market information related to third parties. According to the 2011 Competition Act, CADE may apply a fine for the request of confidential treatment of public information. 

Third parties:

Third parties have access to the review procedure, except for information treated as confidential to the merging parties. Depending on the complexity of the transaction, CADE may request additional information from third parties (e.g. competitors, consumers and suppliers), as well as other authorities (e.g. regulatory bodies) and treat them as confidential. 

Third parties can request to be accepted as “interested third party” and directly participate in the review process (i.e. submitting expert opinions, market test, and documents). 

Judicial review

50) Who can appeal and what may be appealed?

Interested third parties admitted during the review process by the General Superintendence (as mentioned in topic 49) may appeal against CADE’s merger clearance decision within 15 days from publication. The Federal Public Prosecutor’s Office also understands that it is entitled to filing appeals to CADE’s Tribunal in case it disagrees with CADE’s General Superintendence’s decisions. Moreover, at the CADE’s Administrative Tribunal, if any omission, ambiguity, contradiction or material error exists in its decision, the parties and/or interested third parties may file a motion for clarification within five days.

Decisions by CADE’s Administrative Tribunal are final at the administrative level and can only be reviewed by judicial courts. The Brazilian Federal Constitution allows the parties to seek judicial review of the decisions rendered by administrative authorities, such as CADE. The courts’ capacity to examine procedural aspects is unlimited, but it is not clear whether they can review the material aspects. 


modify selections