Brazil: Brazilian Antitrust Authority (CADE) Approves Changes In Merger Control Regulations

Last Updated: 11 February 2016
Article by Paulo Lilla

Brazil's Administrative Council of Economic Defense –CADE approved on 1 October 2014 changes in its internal regulations. The aim was to provide better guidance on Brazil's merger control review. The outcome is the result of three Public Consultations issued last February. The changes came into effect on 7 October.

The main changes were made in Resolution No. 2/2012, which regulates the acquisition of corporate participations and defines transactions eligible to the fast-track procedure, as per the following:

1. New criteria for the definition of "economic group" when investment funds are concerned

According to the previous wording of Resolution No. 2/2012, there was a single concept for economic group to be used for purposes of calculating turnover thresholds and for submitting information in the CADE filing form. As per the new wording of Resolution No. 2/2012, from now on there will be two different concepts: (i) one concept of economic group for purposes of calculating turnover thresholds and (ii) another concept for purposes of submitting information in the antitrust filing form.

1.1 Turnover Calculation. The following entities will be treated as being part of the same economic group for purposes of the turnover calculation when an investment fund is the acquiring/selling entity:

  • The turnover of all companies of the economic group of each investor/shareholder which holds directly or indirectly at least 50% of the quotas of such investment fund (which takes part in the transaction) via individual participation or by means of any type of shareholders' agreement; plus
  • the turnover generated by companies controlled by such an investment fund (which takes part in the transaction) if such investment fund holds directly or indirectly a participation of at least 20% of the corporate or voting capital.

1.2 CADE Form. For purposes of submitting information in the CADE filing form that allows the antitrust assessment of merger filings (merit analysis), the following entities will be treated as being part of one single economic group:

  • investment funds involved in the transaction;
  • investment funds under the same management as the funds involved in the transaction;
  • the fund's manager;
  • economic groups of the investors holding, directly or indirectly, over 20% of the quotas of funds involved in the transaction;
  • companies controlled by the funds involved in the transaction and the companies in which such funds hold, directly or indirectly, participation of at least 20%; and
  • companies controlled by the investment funds under the same management of the funds involved in the transaction and the companies in which these funds under the same management hold, directly or indirectly, participations of at least 20%.

In any case, information on other funds under common management and their portfolio companies must only be provided in the filing form when their activities horizontally overlap or when they are vertically integrated with the activities of the target.

2. Exclusion and/or alteration of some of the alternatives of mandatory notification

Pursuant to the previous wording of Resolution No. 2/2012, the following transactions were subject to mandatory notification: (i) acquisitions of shares that provide the acquirer with the status of a major individual investor; and (ii) consolidation of corporate control (when an additional stake is acquired by an already controlling entity and the acquired interest is equal or higher than 20% of the seller's capital).

The new wording of Resolution No. 2/2012 excludes the alternative provided for in item "i" above. This means that a filing is no longer required for acquisitions of shares that provide the acquirer with the status of a major individual investor.

Moreover, CADE has changed the alternative dealing with consolidation of corporate control provided for in item "ii" to exclude transactions that result in acquisitions of shares by the unitary controlling shareholder.

Moreover, the new wording expressly clarifies that both acquisitions of unitary control and shared control have to be notified for approval by CADE.

3. Mandatory filing for acquisition of bonds convertible into stock

CADE included a new rule in Resolution No. 2/2012 setting forth that the acquisition of convertible bonds has to be notified at the time when such convertible bonds are granted provided that:

  • such bonds can in the future be converted into stock;
  • result in the transfer of corporate control or may result (upon conversion) in the transfer of (i) 20% or more of the corporate capital or voting capital, if the parties are not competitors nor operate in vertical related markets, or (ii) 5% or more in case the parties are competitors or active in vertical related markets. A filing is in such case required upon subscription of the bond, not upon its conversion into shares.

Moreover, the acquisition of bonds that grant the subscriber (i) the right to appoint officers or directors, or (ii) affirmative voting or vetoing rights over competitively sensitive matters must mandatorily be filed with CADE for approval, unless the bondholder already enjoys such voting or veto rights under Brazilian law.

The new rule further clarifies that when it comes to a public offering of convertible bonds, the corresponding acquisition would not be subject to CADE's prior approval. However, the acquirer would be prohibited to enforce any political and voting rights linked to the acquired securities until approval by CADE.

Finally, the new rule expressly sets forth that the actual conversion of the bonds into stock is not subject to a new notification.

4. Amendments to the definition of transactions eligible to fast-track procedure

Transactions which raise no substantive concerns are eligible for the fast track procedure. A short version of the notification form is submitted to the authorities in fast track cases, which require less information than the ordinary notification form. The decision on whether a case should be reviewed on fast track is at the discretion of CADE's General Superintendence ("GS").

According with the new wording of Resolution No. 2/2012, the following transactions will be eligible to fast track proceedings:

  • Creation of a concentrative or cooperative joint ventures, under joint control, to offer products and/or services that are not horizontally or vertically related to the activities developed by the parents
  • Mere substitution of an economic agent (i.e. transactions that do not result in any actual or potential horizontal overlap or vertical link);
  • Transactions resulting in only minor horizontal overlaps, with combined market shares below 20%;
  • Transactions resulting in only minor vertical links, in which none of the parties involved has over 30% market share in any of the vertically related markets;
  • Horizontal overlaps resulting in variation of HHI below 200, provided that the transaction does not result in the control of at least 50% of the relevant market (i.e. horizontal overlaps above 20% market share, provided that the market share accrual resulting from the transaction is not relevant); and
  • Other transaction that the GS concludes that do not merit a detailed review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.