Brazil's Council for Economic Defence ("CADE") recently issued a decision in which it once again had to determine whether transactions that are carried out in different jurisdictions are required to be submitted to CADE  when objective turnover thresholds are met, but where the transaction has no effects in Brazil. In its decision, CADE's General Superintendence stated that the effects issue is indeed a controversial matter in CADE's case law, with decisions on both sides of the issue.

The current case concerned a transaction through which Robert Bosch GmbH ("Bosch") acquired Siemens AG's ("Siemens") 50 percent stake in a joint venture between Siemens and Bosch in order to become the sole shareholder. The involved market included manufacturing and marketing home appliances that were not sold in Brazil. In this case, the General Superintendence did not acknowledge the transaction,1 alleging that it would not lead to real or even potential effects in Brazil, considering that the joint venture itself was not at all active in the country.

This decision did, to a certain extent, apply the effects test. And, based on the reasoning on which the decision was grounded, it became clear that one of the main arguments used by the General Superintendence was the company's lack of activities in Brazil, combined with a context in which the involved relevant market was defined as "national" by CADE. Where a relevant market is deemed to be national, it is indeed reasonable to assume that a transaction carried out in other jurisdictions would not lead to real or potential effects in Brazil.

In order to determine the absence of the joint venture in Brazil, CADE's General Superintendence considered the turnover figures and volume of business of the joint venture and the parties, and also noted the fact that none of the companies had any kind of income derived from the commercialization of products in the Brazilian market—through sales, royalties or any other method.

This decision is one more precedent signaling CADE's apparent intention to adopt the effects test when similar conditions are met. However, it is prudent to point out that in Brazil, precedents tend to be less binding than in common law countries. So, until the case law is settled, the more conservative approach of notifying CADE may still be the most advisable course of action.

The evolution of the case law, as slow as it has been, is at least providing clearer grounds for assessing the risks that would be assumed by companies in their decisions involving this particular issue. It now seems possible to more safely determine, for instance, that a transaction should not be notified to CADE when the following premises are observed:

  • The turnover thresholds are met;
  • The involved company has no activities in Brazil (and no income of any kind in the affected relevant market(s)); and
  • The relevant market involved in the transaction has already been defined as national by CADE.       

While it is still not clear exactly how CADE will apply the effects test to determine if Brazilian Antitrust Law (Law No. 12529/12) is applicable to a transaction, with this current decision, it does seem to be the direction they are heading. Accordingly, a good starting point for companies wondering about notifying CADE is to conduct a minimal preliminary antitrust assessment to verify whether the above-listed conditions are present. Even still, deciding whether or not it would be advisable to notify a transaction would still need to be determined on a case-by-case basis.


1.When CADE "acknowledges" a transaction, it agrees to open the administrative procedure through which the transaction will be assessed. This act of acknowledgement recognizes CADE's jurisdiction to asses the transaction, and states that all formal requirements were duly observed by the applicants.

Visit us at Tauil & Chequer

Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

© Copyright 2014. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.