Highlights of CADE’s 471th Judgement Session

The bulletin published at CADE’s official website (www.cade.gov.br) with highlights of the July 21^st Judgment Session comments the following:

(i) the unconditional approval of the acquisition of concrete services assests from Camargo Corrêa Cimentos S.A. (CCC) by Polimix Concreto Ltda. (Concentration Act 08012.000836/2009-23). The transaction involves assets located in the cities of Tatuí and Ubatuba, in the State of São Paulo.

Polimix is one of the largest nationwide concrete services company with equity held by Group Votorantim, which is very active in the cement market

Reporting Commissioner César Mattos identified the substitution of a vertical integration (cement – concrete) in the Camargo Correa Group by other involving the Group Votorantim. Mattos highlighted that the decision could be reviewed in the future if it is verified that the verticalization increases coordinated market power and allows cartelization in the cement market. If that happens, Cade could order the deverticalization of the industry.

Chairman Arthur Badin reminded that CADE’s decision was taken assuming as true the information that there is no coordination in the relevant market in analysis. He also suggested that the clearance decision should wait for the end of the investigations conducted by the Secretaria de Direito Econômico (SDE) about suspicion of catel in the sector. However, the majority of commissioners opted for approving the transaction.

On previous transactions, Polimix and Group Votorantim have executed an agreement (Termo de Compromisso de Desempenho) with CADE to neutralize the influence of Votorantim in the management of the concrete services business of the Vieira Family, which has interest in Polimix Concreto, in Polimix Cimento and in Mizu S.A.

[it is interesting to note that the SEAE (Secretaria de Acompanhamento Economico) issued an opinion suggesting this transaction should be approved with restrictions]

(ii) the unconditional approval of the acquisition of assets from Cimpor Cimentos do Brasil Ltda. By Supermix Concreto S.A. in the city of Capivari de Baixo in the State of Santa Catarina (Concentration Act 08012.008947/2008-05). Cimpor is active mainly in the production and sale of cement and concrete services. Supermix provides concrete services and is jointly controlled by Soton Participações Ltda. and Silcar Empreendimentos Comércio e Participações Ltda. Silcar is a holding belonging to Group Votorantim.

Reporting Commisioner Carlos Ragazzo highlighted the fact that there were 16 similar transactions notified to CADE between 2003 and 2009 relating to vertical integration (through acquisition of control or acquisition of minority interest on independent concrete service companies). To him, such verticalization may constitute a risk to competition if, in some way, they are part of an attempt to undermine the strengthening of the bargain power of the independent concrete companies.

Ragazzo recommended that the CADE’s Department of Econômic Studies conducts a study about these similar transactions. The aim of the study would be to verify if the verticalization through the acquisition of the independent concrete companies has resulted in the exit of competitors, avoided entry of newcomers and if there was an impact on prices and quantities.

[it is interesting to note that the SEAE issued an opinion suggesting this transaction should be blocked]