The New Parameters For Submission Of Concentration Acts To The Brazilian Antitrust Agency

As from May 29, 2012, merger and acquisition (m&a) transactions which are deemed to be acts of economic concentration (concentration acts) and meet certain thresholds set forth in the applicable law and regulations cannot be closed without the prior authorization of the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica – Cade) has been duly obtained by the parties.

The matter is now governed by Law No. 12,529, of November 30, 2011 (Law 12,529/2011), which structures the Brazilian System for Protection of Competition (Sistema Brasileiro de Defesa da Concorrência – SBDC, sets forth preventive measures and sanctions to the violations against the economic order and amends the Brazilian antitrust legislation.

The SBDC is comprised of CADE and the Economic Monitoring Department of the Ministry of Finance. CADE become the sole Brazilian antitrust agency and consists of three bodies: (i) the Administrative Court of Economic Defense (Tribunal Administrativo de Defesa Econômica) - comprised of seven duly appointed Commissioners, which is the decision-making body in charge of rendering final and binding administrative decisions in both m&a and conduct cases; (ii) the General Superintendence (Superintendência-Geral) - empowered to approve m&a transactions that do not raise competitive concerns and to provide non-binding opinions in m&a cases that could not be unconditionally cleared, and will be responsible for conducting investigations of anticompetitive practices; and (iii) the Department of Economic Studies (Departamento de Estudos Econômicos) - in charge of providing non-binding economic opinions and preparing economic studies. From now on, any transaction subject to clearance will have to wait for CADE's final approval before it can be closed so that its consequences can be verified before they potentially become irreversible. This is expected to give more legal certainty to the market in general.

Law 12,529/2011 applies to any concentration act performed in full or in part within the Brazilian territory or that produces or may produce effects thereon. Any foreign company that performs transactions or has its branch, agency, subsidiary, office, establishment, agent or representative in Brazil shall be considered domiciled in the Brazilian territory will be subject to the rules contained in Law 12,529/2011.

The concentration acts that are subject to Cade's prior approval are the following transactions: (i) merger - when two or more previously independent companies merge; (ii) acquisition - when one or more companies acquire, directly or indirectly, by purchase or exchange of stocks, shares, bonds or securities convertible into stocks or assets, whether tangible or intangible, by contract or by any other means or way, the control or parts of one or other companies; (iii) consolidation - when one or more companies incorporate one or other companies; or (iv) association - two or more companies enter into an associative contract, consortium or joint venture (other than when destined to biddings promoted by direct and indirect public administration and to contracts arising therefrom, which shall not be considered concentration acts and are...