There is a controversy between the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica - Cade) and the Central Bank of Brazil (Banco Central do Brasil - Bacen) about who should judge merger and acquisition (m&a) transactions in the banking industry in Brazil. After ten years of dispute, however, Bacen finally assumed the exclusive competence for judging this matter.

The decision was made by Justice José Antonio Dias Toffoli, of the Brazilian Federal Supreme Court (Supremo Tribunal Federal - STF), who in June 27, 2014 denied the appeal proposed by Cade. Rapporteur of the case, he understood that this is not a constitutional issue and should not be appreciated by the STF.

Cade can still appeal to the other Justices of the STF but the decision of Toffoli indicates that the case should not be tried by the STF. For Toffoli the debate about who is the body that should judge m&a transactions was definitively closed in August 2010, when the Brazilian Superior Court of Justice (Superior Tribunal de Justiça - STJ) decided that the task fits to Bacen.

This decision will have direct implications on the Brazilian financial system. Based on this decision, m&a transactions made by financial institutions do not have to undergo the approval of Cade. In theory, Cade could impose conditions on those businesses whenever the antitrust agency understood that the competition in any segment of banking services would be threatened. Toffoli´s decision ends this possibility.

From now on, Cade can only analyze possible anti-competitive practices in the financial sector, as accusations of cartel or supposed deals to circumvent the competition. The fact that Cade cannot judge businesses in the banking segment does not mean that financial institutions are exempt from inspection because they must still submit the m&a transactions to the approval of the monetary authority (Bacen).

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