Smallest session of CADE's History

CADE's 511ª Section that happened yesterday, March 28th was the fastest in the history of the Board.


With all the concentration acts being approved in the fast track analysis, and just one cartel case (on oil sector) dismissed, the section lasted only 25 minutes. Cases of Hypermarcas, Novartis and Odebrecht and EBX Groups were all cleared.


From May 30 on, Brazilian Antitrust Law will demand previous analysis and approval.

New antitrust bill approved by the Brazilian Parliament

A new antitrust bill has been approved last week by the Brazilian Parliament. The bill has still to be approved by the President Dilma Rousseff and published in the Official Gazette.

It will not come into force before 180 days of its publication. During this time, the authorities will prepare the transition for the new system.

The bill creates the mandatory pre-merger notification, with severe fines for gfun jumping, and a new structure for the antitrust bodies. Thresholds for mandatory notification will be 400 million Reais (for at least one of the Applicants' Group in Brazil) plus 30 million Reais of the other Group, replacing the current alternative criteria (400 million Reais for at least one of the Groups in Brazil or the transaction resulting in a market share of 20% of more in at least one relevant market).

Other relevant modifications include a new system of fines for anticompetitive behavior (for companies and individuals).

CADE'S BOARD IS NOW COMPLETE, WITH CHALLENGES AHEAD

Three new Commissioners formally took office on May 4, 2011 at CADE. At the same date, Fernando Furlan (former Commissioner and acting-President of CADE) took office as President of the autarchy, which is the higher administrative authority in antitrust enforcement in Brazil.
With this assignments, CADE's Board is complete again.

Headed by Fernando Furlan, the Board is now composed by Olavo Chinaglia (the dean, in his second mandate), Carlos Ragazzo (in his second mandate), Ricardo Ruiz (in his first mandate, since January 2010), Alessandro Octaviani (in his first mandate, since April 2011), Elvino Mendonça (former SEAE, in his first mandate, since May 2011), and Marcos Paulo Verissimo (former BNDES, in his first mandate, since May 2011).

The new Board will decide important cases, both in merger and behavior antitrust control areas. Perdigão- Sadia transaction (creating the giant Brasil Foods) will probably be the first one. The transaction returned to the Midia after CADE's General Attorney office issued a non-binding opinion conditioning its approval to major restrictions (including relevant divestments). The stock market reacted and Brasil Foods' stocks dropped substantially at BMF-Bovespa, what caused a heated exchange of public declarations between the company 's management and the General Attorney. CADE's decision in this case will be polemic, independently of the results. One of the new Commissioners (Elvino Mendonça) and CADE's president Fulan are prevented and will not participate in the judgment. Mendonça is part of the team that signed SEAE's opinion; Furlan is related to Sadia's executives.

CADE grants clearence to the creation of largest petrochemical group of the Americas

The Conselho Administrativo de Defesa Econômica (Cade) approved on February 23 the purchase of Quattor by Braskem, creating the largest petrochemical group in the Americas.

As a condition for granting clearance CADE imposed some obligations on the Parties to enable the enforcer to monitor the group´s operations.

For instance, the merged entity shall previously notify CADE about any exclusive thermoplastic resin agreements entered into with overseas suppliers, as well as reporting several data on a periodic basis so the enforcer can monitor performance of the market.

All thermoplastic resin related contracts utilized buy foreign companies on the commercialization of the product must be informed to CADE, as well as any other form of contract that may confer with Braskem some sort of exclusivity.

Despite of the high concentration on the raw petrochemical material in the market, the Commissioners considered that there is not a threat to competition because of the possibility of the customers to turn to the international market to obtain its supply of material.

Magazine Luiza acquisiton approved by CADE with restrictions

Magazine Luiza acquisition of FS Vasconcelos e Cia Ltda ("Lojas Maia") was approved by CADE with restrictions referring to the non-competition clause in the geographic dimension.

Magazine Luiza is one of the major retail and durable goods chain of stores in Brazil. It has 459 stores in seven states and also acts on e-commerce delivering products to the whole country. Lojas Maia has 133 stores in nine states.

The Secretariat of Economic Monitoring (SEAE) had released and opinion suggesting the approval of the transaction with restrictions on the non-competition clause to adequate it on the geographic feature, restricting the clause to some municipalities.

The Reporting Counselor voted on the same line as SEAE suggested to approve the operation with restrictions of the non-competition geographic clause to have municipal dimension and its validity only in cities in the states of Alagoas, Bahia, Ceara, Maranhão, Paraiba, Pernambuco, Piauí, Sergipe and Rio Grande do Norte.

All the other counselors agreed with the Reporting Counselor.

CADE may appoint an intervenor at Saint Gobain plant

In July 2008 CADE rejected the acquisition by Owens Corning of Compagnie de Saint Gobain's fiberglass division in Brazil. The acquisition was part of a multinational deal, and marked one of the few opportunities in which CADE has blocked a transaction completely. At the time, the Brazilian competition agency provided Owens Corning with a deadline until February 1st 2011 to either divest a Saint Gobain's plant in State of São Paulo or submit a strategic plan for the sale to be completed (as the use of an independent investor to intermediate the divestiture).

According to a statement by CADE's President Fernando Furlan earlier this week, the deadline expired without any alternative solution being suggested by Owens Corning, which could cause CADE to begin an intervention at the former Saint Gobain's plant until the manufacturing unit is sold to an independent third-party. This would be the first time in CADE's history that it would make use of the powers granted by article 63 of the local antitrust law ("the execution of CADE's decisions shall be carried out by all means, including by way of intervention in the company, if necessary").

Health Care Insurance Acquisiton Approved by CADE.

CADE has approved the acquisition of health care insurance companies "Planos de Saúde Integrais S.A.", "Assistência Médica São Paulo S.A." and "Orion Participação e Administração S.A." by Amil Assistência Médica Internacional Ltda last Wednesday - February 9th, 2011. The Counselors decided to follow the guidance of the National Health Insurance Agency ("ANS") over the territorial concept advocated by the Secretary of Economic Monitoring ("SEAE") in the analysis of the relevant market in the sectors of health care services providence and health insurance sales. The Counselors approved the transaction with a restriction of the non-competition clause for the next five years in markets operated by "Assistência Médica São Paulo S.A." and "Planos de Saúde Integrais".

2011 Breaking News: Vinicius de Carvalho appointed as new Secretary of Economic Law (and other subjects)

Since this is the first post in the blog in 2011, Happy New Year, Readers and co-Bloggers!
The year began with Dilma Rousseff taking office as Brazil's new President. Dilma is the first woman to have this job in the Brazilian history. José Eduardo Cardozo, congressman (former lawyer) and Law professor has been appointed Minister of Justice and invited Vinicius Marques de Carvalho (currently one of CADE's Commissioners) as new Secretary of Economic Law (known as SDE). Carvalho accepted the offer, but he is not taking office before February. CADE currently has 5 members (the minimun quorum for decisions) and without Vinicius Carvalho the analysis of all cases would be immediately suspended. The antitrust community is now expecting for 3 new appointments that will be made by Dilma Rousseff to fullfill the vacant places at CADE, including CADE's President (CADE's Presidency is currently being occupied by Fernando Furlan). CADE's new members have to be approved by the Senate, after an official hearing before the Commission of Economic Matters.
Other fresh news from 2011 are upcoming. In the next days we will also include a few posts about December 2010's updates, pending publication.

Brazilian Senate approves new competition law bill with amendments

On December 1^st the Brazilian Senate has approved the bill for a new competition law.

Because the Senate has proposed amendments to the bill, it will return to the Chamber for review of acceptance of each of the amendments.

The bill was originally proposed by the government in 2005 and had previously been approved by the Chamber of Representatives in 2009.

The proposal for a new competition law was aimed to simplifying the institutional structure of the Brazilian Competition Authorities as well as implementing a pre-merger review process. Brazil currently has 3 different agencies involved in antitrust proceedings and is one of the very few jurisdictions that allow parties to conclude the merger before receiving green light from the enforcers.

One of the amendments to the bill proposed by the Senate is been subject to controversy. If accepted by the Chamber, the turnover thresholds for mandatory filing of mergers would be raised from R$400million to R$1billion, locally. Critics say Brazil would then have one of the highest thresholds in the World and therefore would face the risk of not been notified mergers that could have the potential to harm competition.

It is expected that the bill will be voted by the Chamber in the course of next year. It will not have immediate effects – the bill provides for a 12 month period for the restructuring of the authorities and preparation for the new pre-merger review system

Brief update about what happened while we've been away

There were two judgement sessions uncovered 480ª and 481ª Sessions happened November 24 and December 8 respectively.

It is worth of noticing the case Alesat Combustíveis S.A. and Repsol YPF Distribuidora S.A was approved (480ª) with a Consent Decree determining the parties not to renew the agreement with the MFB Gas Station.

There was also the 16th International Antitrust Conference that happened between November 26 and 27 at Guarujá. You can see the Program here (yes! it is in English!) and the presentations that were made there are here. Unfortunately, of course, not everything is in English but Roberto Pardolesi's presentation regarding Unilateral Conduct is! You may also enjoy the presentations made by Matteo Bay (from Lathan& Watkins), Susan Hinchliffe (Arnold&Porter), José Ramón González-Magaz (Steptoe&Johnson) and Brian Byrne (ClearyGottlieb). And maybe Google Translator help you enjoy the rest!

Cheers!

CADE's new 'official precedents'

On November 5th, CADE has issued two new 'official precedents', both concerning certain events that may trigger the need for a merger submission in Brazil.

CADE's 'official precedents' are enacted after the Brazilian competition agency has reached the same decision in 10 different cases, and have the purpose of indicating to the market how CADE will decide about a specific issue in future rulings.

The first one (Official Precedent n. 09) states that for the purposes of counting the deadline set forth in parag. 4 of article 54 of the local competition law, the transaction is considered to have 'occurred' after the sale/purchase option has been exercised, and not at the date such an option was formalized in a written agreement. The exception for such a rule is the situation where the instrument predicting the possibility of exercise of this option already produces rights and obligations that are capable of changing (even if merely potentially) the competitive landscape between the parties.

The second precedent (Official Precedent n. 08) states that for the purposes of counting the deadline set forth in parg. 4 of article 54 of the local competition law, the transaction is considered to have 'occurred' at the date the transaction was executed, and not after the implementation of a certain condition precedent.

Partial outcome for soccer broadcasting rights' investigation

CADE decided this week, during its 478th Ordinary Session, to partially shelve a 13 year-long investigation involving soccer broadcasting rights. The shelving benefits one of the Defendants, Organizações Globo, one of the main Midia Groups in Brazil.

The investigation, initiated in 1997, concerned exclusivivity and preference rights in connection to the television broadcasting of soccers games.

During CADE's 477th Session held in October 20, 2010, CADE's Board decided to suspend the investigation against both Organizações Globo and Clube dos Treze (the major association of soccer teams in Brazil), conditioned to the execution of two Consent Decrees. Other defendants were acquitted.

The Consent Decree with Globo states that the Group will waive its preference to acquire broadcasting rights in connection to the main Brazilian soccer championships, as of the next season. As per the Decree executed with the team's Association, it says that the rights will be subject to negotiations between owners (the teams' Associations, especially Clube dos Treze) and potential buyers. Clube dos Treze agreed to offer and negotiate separately the rights to exhibit soccer games in five different Midias: free-to-air television, general pay television, pay-per-view channels, Internet and mobile devices. It also agreed to provide objective and transparent criteria for the biddings related to broadcasting rights and to allow the acquirer of the rights to freely sublicense them.

CADE's decision for the execution of Consent Decrees was not unanimous. CADE's President Arthur Badin, whose mandate expires this week, considered the obligations foreseen in the Decrees insufficient to guarantee the competition in the offer of broadcasting rights. However, all 6 Commissioners, including the Reporting Commissioner Cesar Mattos, were convinced that the Consent Decrees were the most suitable way to end the long administrative litigation and also that rights’ purchasers would have incentives to denounce restrictive behavior directly to CADE, during the monitoring phase of the Consent Decrees.

The investigation against Organizações Globo has now been shelved, since the Group demonstrated that it has already renounced to its contractual rights (preference clauses).

CADE will monitor the behavior of Clube dos Treze during the next 5 years, after which the case against it shall be shelved (unless irregularities - such as systematic refusals to deal - are verified by CADE).

Convicted Industrial Gas Companies go to Court

Last month several Industrial Gas Manufactures and Individuals were convicted by CADE for illegal collusion with a historic fine. Since last week many of them have filed actions before the Federal Court against CADE´s decision and the fines applied. So far, manufacturer Linde Gases has gotten an injunction from the Federal Court in Brasília to stop CADE from executing the fine. This injunction is being allowed only if the Company deposits a warranty in the same amount of the fine imposed by CADE.

ADI against SDE's power to inspect

The National Confederation of the Industries (CNI) has filed an ADI (Direct Action of Inconstitutionality) before the Supreme Court (STF) this week questioning the articles 26-A and 35 of Law 8884 (Brazil's antitrust act). CNI believes that the power to inspect officies and facilities without a judicial order given by article 35 is inconstitucional. They also consider against the constitution the fact that article 26-A imposes a fine to companies and individuals that deny access to their offices and facilities. That would be afecting the garantee of non auto-incrimination.
The inspection does not demand a judicial order but has to be warned 24 hours before it begins (while the judicial dawnraid is unexpected).
The reporting Justice is Ayres Brito.

CADE approves agreement between TNL and Phorm

Brazil´s Antitrust Authority has this week approved the partnership agreement celebrated between TNL and Phorm. The operation involved internet marketing where the publicity will be directed to the customers according to the websites that are visited. The Reporting Counselor, Fernando Furlan, did not see any harm to competition concluding there were low barriers to entry of new competitors and allowed the transaction. There was a discussion involving internet privacy, but Furlan understood that the discussion was not under CADE´s jurisdiction. The decision will be sent to the Internet Government Committee, to the Telecommunications Agency and to the Department of Consumers Protection of the Ministry of Justice due to the data protection concerns.

CADE blocks acquisition of concrete assets from Cimentos Tupi by Polimix

The Brazilian competition tribunal (CADE) has rejected clearance to the acquisition of concrete services assets from Cimentos Tupy by Polimix Concreto.

According to the Reporting Commissioner Fernando Furlan, the transaction would result in high market shares in a series of municipalities and harm competition, while there would be no compensatory efficiencies to allow approval of the deal.

The remaining Commissioners unanimously agreed with Furlan, highlighting the correction of his approach regarding the calculation of market shares - summing up the shares of all companies on which the controling group of Polimix has (even minority) equity interest,

According to CADE's decision the acquired assets shall be returned to Tupi within 30 days from the publication on the Official Journal.

CADE enacts five new administrative rules

Aiming to optimize its internal procedures in merger control and behaviour cases, CADE has issued five new administrative rules on September 22. Rules# 54, 55, 56 and 57 amend CADE's internal guidelines; for companies and individuals that are parties in antitrust proceedings in Brazil, new rules#54 and 57 should receive the greater attention.

While administrative rule#54 supresses CADE's duty of officializing its decision to the public by means of the publication of a summary of each decision in the Brazilian Official Gazette, new rule#57 sets forth new rules for the imposion of fines related to the submission of misleading information.

Finally, new administrative rule#58 establishes new mechanisms for the control/review of the truthfullness and veracity of the information provided by companies in merger control filings.

Industrial gas industry once more among highlight's of CADE's Session

Two weeks after convicting companies and individuals in the industrial gas industry for collusion, CADE analysed petitions for clarification presented by the defendants and decided to review the nature of the interest applicable to the case. Compound interest has been replaced by simple interest. As a result, the total amount of the conviction decreased from R$ 2.9 billion to R$ 2.3 billion. It is still the highest total fine ever imposed by CADE.
in its website, CADE divulged the amounts to be paid by each company and by each individual. Fines imposed to companies were:
Air Products Brasil Ltda.: R$ 179,202,512.38
Air Liquide Brasil Ltda.: R$ 197,561,635.66
Linde Gases Ltda.: R$ 188,391,885.29
White Martins Gases Industriais Ltda.: R$ 1,758,545,326.50
Indústria Brasileira de Gases: R$ 6,708,631.21

CADE will keep an eye on increasing concentration on the health care industry

On yesterday's judgment session, CADE's commissioners have expressed the agency will follow attention the consolidation of health care companies.

While approving without restrictions the of two aqcuisitions involving large operators of health insurance plans, Commissioner Ricardo Ruiz noted that the industry is going through a very fast process of concentration and that competition concerns may arise in the near future.

Commissioner Carlos Ragazzo added that there is also a movement towards verticalization in the sector with integration of plan operators, hospitals and even pharmacies.

The one highlight of CADE's last Session: Industrial gas manufactures convicted for cartel

During CADE's Session in August 4, 2010, industrial gas manufacturers Linde, Air Liquide, Air Products, Indústria Brasileira de Gases and White Martins, as well as seven individuals connected to the companies, have been convicted for illegal collusion. According to CADE's decision, which was unanimous, companies and individuals have been involved in market division practices, with serious consequences to the Brazilian market and to the public health system. Upon impediment, CADE's President Arthur Badin and Commissioner Olavo Chinaglia have not participated in the judgment.

The investigation has been initiated in 2003 and culminated with the highest administrative fines ever imposed by CADE (totalizing R$ 2.9 billion – approximately US$ 1.7 billion). The case has been distinguished by several judicial and administrative incidents. Criminal investigations - still in course - included dawn raids and wires, and their fruits have been transferred to the administrative investigation, which has been strongly challenged by companies and individuals. The case against one particular individual has been shelved.

Besides fines, CADE recommended that federal authorities did not grant tax benefits or subsidies to the convicted companies, and that existing benefits were cancelled. Finally, CADE determined that the decision and other materials of the files were published in the Midia.