Merger Control rules in Brazil

The authority responsible for antitrust matters in Brazil is the Administrative Council for Economic Defence (Conselho Administrativo de Defesa Econômica) – CADE –, dealing with both antitrust violations and merger control procedures.

CADE’s internal structure may be summarized in two main entities:

1. the General Superintendence, where investigations are conducted, initial assessments of the proceedings are made and with whom non-prosecution agreements may be negotiated; and
2. the Administrative Tribunal, composed of six commissioners and its president, where the final decisions of the proceedings are rendered and with whom merger consent decrees are executed.

The mergers that reach a certain threshold shall be reviewed by CADE before they are completed, meaning that the parties shall submit the applicable documents and information to the General Superintendence. The latter will then recommend the approval, rejection or approval subjected to a merger consent decree to the Administrative Tribunal.

The threshold for a mandatory submission of a merger to CADE consists of two financial requirements:

1. the gross revenue from businesses in Brazil of one the involved firms in the year prior to the operation being of at least R$ 75,000,000.00 (seventy-five million Brazilian reais); and
2. the gross revenue from businesses in Brazil of another of the involved firms in the year prior to the operation being of at least R$ 750,000,000.00 (seven hundred and fifty million Brazilian reais).

Although no other threshold for mandatory filing is provided by law, CADE may unilaterally decide to analyse a transaction if it deems to be relevant to competition in Brazil (provided that the closing of such a transaction has taken place in less than a year).

CADE may review mergers, acquisitions and joint ventures between companies.

However, internal corporate restructures (that do not involve other firms) and joint ventures created for biddings conducted by governmental entities are not subject to merger control by CADE.

“Control” in the Brazilian jurisdiction means the power to make the decisions in the shareholders’ meeting and to appoint the majority of the members of a board of directors and officers.

Despite not being seen as “control”, CADE will also consider relevant the corporate structures where a company holds at least 20% of the voting shares of another company, deeming them as part of the same economic group.

The merger review shall be completed by CADE within 240 days, provided that this time frame may be postponed by the Administrative Tribunal, reaching a total of 330 days.

At the end of a merger review, CADE’s Administrative Tribunal may decide to approve the merger, reject it, or approve it conditioned to a merger consent decree.

In case of rejection, the firm may choose to challenge CADE’s decision before the Brazilian Judiciary.

In both cases, the merger will be considered null, and CADE may impose a penalty varying from R$ 60,000.00 (sixty thousand Brazilian reais) to R$ 60,000,000.00 (sixty million Brazilian reais).

The merger consent decree will be negotiated by the firms with CADE’s Administrative Tribunal or with the General Superintendence (in this case, the execution of the merger consent decree will have to be approved by the Administrative Tribunal).

The remedies available for negotiation may be divided in structural remedies (i.e., when the firms agree to change the structure of the merger) and/or behavioural remedies (i.e., when the firms agree to a set of conditions or restrictions to how their business will be conducted within a certain period after the merger is completed).

The compliance with the merger consent decree is usually monitored by CADE directly or through a trustee appointed in the negotiation procedure (under CADE’s supervision). If a violation is identified, the firms will be subject to the penalties provided in the decree, including the reversion of the merger.