Merger Control 2020A practical cross-border insight into merger control issues

16th Edition

Featuring contributions from:

A.M Wood and Company (Inc. Abha Patel and Associates)Accura AdvokatpartnerselskabAdvokatfirmaet Grette ASAlixPartners UK LLPAnesuBryan & DavidAntitrust AdvisoryArthur CoxAshurst LLPBányaiová Vožehová, s.r.o., advokátní kancelářBlake, Cassels & Graydon LLPBUNTSCHECK Rechtsanwaltsgesellschaft mbHCOBALTConstantina Mitsingas & Associates LLCDeHeng Law OfficesDittmar & IndreniusDORDA Rechtsanwälte GmbHDrew & Napier LLC

ELIG Gürkaynak Attorneys-at-LawFORTHamiltonIbarra AbogadosIlyashev & PartnersKing & Wood MallesonsL&L Partners Law OfficesLee and Li, Attorneys-at-LawLEĜA AbogadosLNT & PartnersLPA-CGR avocatsMarval O’Farrell MairalMinterEllisonMinterEllisonRuddWattsMorais Leitão, Galvão Teles, Soares da Silva & AssociadosMoravčević Vojnović i Partneri AOD in cooperation with Schoenherr

MPR Partners | Maravela, Popescu & RomanMSB AssociatesNagashima Ohno & TsunematsuNorton Rose Fulbright South Africa IncOLIVARESPinheiro Neto AdvogadosPopov, Arnaudov & PartnersPortolano CavalloPUNUKA Attorneys & SolicitorsSchellenberg Wittmer LtdShin & KimSidley Austin LLPSkadden, Arps, Slate, Meagher & Flom LLPStibbeURBAN FALATH GAŠPEREC BOŠANSKÝWardyński & PartnersYrarrázaval, Ruiz-Tagle, Ovalle, Salas & VialZdolšek Attorneys at law

Table of Contents

Expert Chapters

Q&A Chapters

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A Road Map to Assessing Local Market MergersDavid Wirth & Tom Punton, Ashurst LLP

Af Gammelt Jern Smedes Nye Våben: Vestager’s First Term in EU Merger Control and What to Expect Going ForwardFrederic Depoortere, Giorgio Motta & Alexander K. Pascall, Skadden, Arps, Slate, Meagher & Flom LLP

Economic Evidence in Retailer Mergers After Sainsbury’s/Asda: Death by GUPPI?Ben Forbes & Mat Hughes, AlixPartners UK LLP

AlgeriaLPA-CGR avocats: Rym Loucif

ArgentinaMarval O’Farrell Mairal: Miguel del Pino & Santiago del Rio

Merger Control 2020

DenmarkAccura Advokatpartnerselskab: Jesper Fabricius & Christina Heiberg-Grevy

EstoniaFORT: Rene Frolov & Liina Käis

AustraliaMinterEllison: Geoff Carter & Miranda Noble

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45 AustriaDORDA Rechtsanwälte GmbH: Heinrich Kuehnert & Lisa Todeschini

52 Bosnia & HerzegovinaMoravčević Vojnović i Partneri AOD in cooperation with Schoenherr: Srđana Petronijević & Danijel Stevanović

61 BrazilPinheiro Neto Advogados: Leonardo Rocha e Silva & José Rubens Battazza Iasbech

BulgariaPopov, Arnaudov & Partners: Hristo Koparanov & Emiliyan Arnaudov

75 CanadaBlake, Cassels & Graydon LLP: Julie Soloway & Corinne Xu

ChileYrarrázaval, Ruiz-Tagle, Ovalle, Salas & Vial: Arturo Yrarrázaval, Gerardo Ovalle & Aníbal Vial

90 ChinaDeHeng Law Offices: Ding Liang

101 ColombiaIbarra Abogados: Gabriel Ibarra Pardo & Santiago Osorio Salazar

CroatiaMoravčević Vojnović i Partneri AOD in cooperation with Schoenherr: Srđana Petronijević & Zoran Šoljaga

116 CyprusConstantina Mitsingas & Associates LLC: Constantina Mitsingas

Czech RepublicBányaiová Vožehová, s.r.o., advokátní kancelář: Lucie Dolanská Bányaiová & Zuzana Kulhánková

European UnionSidley Austin LLP: Ken Daly & Steve Spinks

165 FinlandDittmar & Indrenius: Ilkka Leppihalme & Katrin Puolakainen

FranceAshurst LLP: Christophe Lemaire & Marie Florent

GermanyBUNTSCHECK Rechtsanwaltsgesellschaft mbH: Dr. Tatjana Mühlbach & Dr. Andreas Boos

GreeceMSB Associates: Efthymios Bourtzalas

208 IndiaL&L Partners Law Offices: Gurdev Raj Bhatia & Kanika Chaudhary Nayar

IrelandArthur Cox: Richard Ryan & Patrick Horan

228 ItalyPortolano Cavallo: Enzo Marasà & Irene Picciano

JapanNagashima Ohno & Tsunematsu: Ryohei Tanaka & Kota Suzuki

245 KoreaShin & Kim: John H. Choi & Sangdon Lee

LatviaCOBALT: Dace Silava–Tomsone & Uģis Zeltiņš

260 MexicoOLIVARES: Gustavo A. Alcocer & José Miguel Lecumberri Blanco

267 MontenegroMoravčević Vojnović i Partneri AOD in cooperation with Schoenherr: Srđana Petronijević & Danijel Stevanović

275 NetherlandsStibbe: Floris ten Have & Simone Evans

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Table of Contents

New ZealandMinterEllisonRuddWatts: Dr. Ross Patterson & Kristel McMeekin

NigeriaPUNUKA Attorneys & Solicitors: Anthony Idigbe, Ebelechukwu Enedah & Tobenna Nnamani

397 SpainKing & Wood Mallesons: Ramón García-Gallardo

409 SwedenHamilton: Mats Johnsson & Martina Sterner300 North Macedonia

Moravčević Vojnović i Partneri AOD in cooperation with Schoenherr: Srđana Petronijević & Danijel Stevanović

309 NorwayAdvokatfirmaet Grette AS: Odd Stemsrud & Marie Braadland

PolandWardyński & Partners: Andrzej Madała & Marcin Kulesza

PortugalMorais Leitão, Galvão Teles, Soares da Silva & Associados: Carlos Botelho Moniz & Pedro de Gouveia e Melo

RomaniaMPR Partners | Maravela, Popescu & Roman: Alina Popescu & Magda Grigore

342 RussiaAntitrust Advisory: Evgeny Khokhlov & Igor Panshensky

350 SerbiaMoravčević Vojnović i Partneri AOD in cooperation with Schoenherr: Srđana Petronijević & Danijel Stevanović

359 SingaporeDrew & Napier LLC: Lim Chong Kin & Dr. Corinne Chew

SlovakiaURBAN FALATH GAŠPEREC BOŠANSKÝ: Ivan Gašperec & Marián Bošanský

SloveniaZdolšek Attorneys at law: Stojan Zdolšek & Katja Zdolšek

417 SwitzerlandSchellenberg Wittmer Ltd: David Mamane & Amalie Wijesundera

TaiwanLee and Li, Attorneys-at-Law: Stephen Wu & Yvonne Hsieh

434 TurkeyELIG Gürkaynak Attorneys-at-Law: Gönenç Gürkaynak & Öznur İnanılır

UkraineIlyashev & Partners: Oleksandr Fefelov

451 United KingdomAshurst LLP: Nigel Parr & Duncan Liddell

USASidley Austin LLP: James W. Lowe & Marc E. Raven

479 VenezuelaLEĜA Abogados: Faustino Flamarique & José Gregorio Torrealba

VietnamLNT & Partners: Dr. Nguyen Anh Tuan, Tran Hai Thinh & Tran Hoang My

ZambiaA.M Wood and Company (Inc. Abha Patel and Associates): Nakasamba Banda-Chanda & Namaala Liebenthal

499 ZimbabweAnesuBryan & David: Simon Chivizhe & Tafadzwa Masukume

South AfricaNorton Rose Fulbright South Africa Inc: Rosalind Lake

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Merger Control 2020

Chapter 9 61

Brazil

Pinheiro Neto Advogados José Rubens Battazza Iasbech

Leonardo Rocha e Silva

Brazil

© Published and reproduced with kind permission by Global Legal Group Ltd, London

securities, insurance, aviation) may require clearance from both regulated bodies and CADE. In February 2018, CADE and the Brazilian Central Bank regulated their respective roles in bank merger control cases, which are reportable to both agen-cies. CADE’s decision should be in line with the Central Bank’s ruling on deals that generate “high and imminent” risks to the Brazilian banking system.

2 Transactions Caught by Merger Control Legislation

2.1 Which types of transaction are caught – in particular, what constitutes a “merger” and how is the concept of “control” defined?

Under the 2011 Competition Act, the following transactions/events qualify for CADE’s review (on reaching the turnover thresholds): (a) a merger involving two or more companies that were independent until then; (b) an acquisition of control over or parts of one or more companies – by purchase or swap of shares, membership units (quotas), securities or share convertibles, or tangible or intangible assets, by operation of contract or other-wise; (c) when one or more companies absorb another company or companies; or (d) when two or more companies enter into an association, consortium or joint venture agreement. For CADE, “control” involves the ability to interfere in the decision-making process related to commercially sensitive issues of a company.

2.2 Can the acquisition of a minority shareholding amount to a “merger”?

The acquisition of a minority shareholding qualifies for CADE’s review in the following events: ■ I –when the investee is not a competitor or active in a

vertically-related market: a) acquisition conferring upon the acquirer the direct or indirect ownership of 20% or more of the capital stock or voting capital of the investee; and b) acquisition by an owner of 20% or more of the total or voting capital, provided that the ownership interest directly or indirectly acquired, from at least one seller taken individually, equals or exceeds 20% of the total or voting capital; or

■ II–whentheinvesteeisacompetitororactiveinavertical-ly-related market: a) acquisition conferring a direct or indi-rect ownership interest of at least 5% of the total or voting capital; and b) most recent acquisition which, individually or together with others, results in an increase in ownership interest at or above 5%, where the investor already holds 5% or more of the total or voting capital of the investee.

1 Relevant Authorities and Legislation

1.1 Who is/are the relevant merger authority(ies)?

CADE, the Administrative Council for Economic Defence, is the primary competition authority, an independent body whose leading members are appointed by the President of the Republic and approved by the Federal Senate. As from 2012, CADE’s General Superintendence is tasked with examining and approving complex and non-complex transactions, being also in charge of referring complex transactions to CADE’s Administrative Tribunal for a final decision whenever it understands that the deal should be blocked or cleared with restrictions/remedies. CADE’s Tribunal comprises a president and six commissioners. CADE’s Department of Economic Studies also plays an important role in complex merger reviews and remedy negotiations.

1.2 What is the merger legislation?

The 2011 Competition Act (Law No. 12,529) contains the primary merger control rules. Effective since May 2012, it introduced the mandatory pre-merger review process in Brazil. Several regulations issued by CADE since 2012 also apply to its merger review process – notably Regulation No. 2/2012, detailing the rules of merger review procedure, including: minority acquisition exemptions; levels of disclosure for review of complex and non-complex transactions; definition of economic groups; and other issues. Additionally, Regulation No. 17/2016 provides for notification of associative agreements, and the recently enacted Regulation No. 24/2019 sets out the rules for calculation of fines imputable to companies closing deals otherwise subject to mandatory notification without/before proper approval from CADE (gun-jumping). Further, CADE has issued guidelines on Gun Jumping (2016), on the Assessment of Horizontal Mergers (2016), and on Remedies (2018).

1.3 Is there any other relevant legislation for foreign mergers?

No, there is not.

1.4 Is there any other relevant legislation for mergers in particular sectors?

The 2011 Competition Act applies to all economic sectors. Deals in regulated sectors (e.g., telecom, oil and gas, electricity,

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■ III – pure “vertical agreements” (distribution, supply, manufacturing contracts, etc.), even those containing an exclusivity clause, unless they also involve an economic activity in which the companies are competitors; and

■ IV – associative agreements without at least one of thefollowing characteristics: a) minimum duration of two years; b) creation of a joint undertaking to pursue an economic activity; c) sharing of the risks and results of the underlying economic activity; and d) execution between parties (or economic groups) that are competitors in the pertinent relevant market.

2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions?

CADE’s rules remain silent on whether various stages of a trans-action constitute a single transaction or a series of transactions, subject to different notification criteria.

Although CADE has sometimes decided that multi-stage transactions qualify for single notification when all competitive conditions are predictable at the distinct negotiated stages (e.g., transactions involving acquisitions with a future put/call option provision), the parties should bear in mind that CADE would be interested in examining the market conditions at the moment of actual exercise of the put/call option(s), especially if it takes place in different years from the first notification.

3 Notification and its Impact on the Transaction Timetable

3.1 Where the jurisdictional thresholds are met, is notification compulsory and is there a deadline for notification?

Notification is compulsory where the jurisdictional thresholds are met. The 2011 Competition Act establishes no deadline for notification, but conditions the closing of the deal to CADE’s prior approval.

3.2 Please describe any exceptions where, even though the jurisdictional thresholds are met, clearance is not required.

CADE has ruled that even transactions involving economic groups falling into the turnover criterion (see above) may be exempted from mandatory notification if the relevant markets involved are local/limited to certain regions, i.e., products/services would not potentially reach Brazil in view of their nature (geographic limitation).

3.3 Where a merger technically requires notification and clearance, what are the risks of not filing? Are there any formal sanctions?

Failure to notify a reportable transaction is punishable with void-abilityandafinebetweenR$60thousandandR$60million.

3.4 Is it possible to carve out local completion of a merger to avoid delaying global completion?

CADE has already ruled against carve-out arrangements, which maybefineduptoR$60million.

2.3 Are joint ventures subject to merger control?

Yes, if they have an effect on Brazilian markets and the economic groups involved reach the turnover thresholds. The 2011 Competition Act exempts only joint ventures for the specific purpose of participating in public bids.

2.4 What are the jurisdictional thresholds for application of merger control?

Merger control in Brazil applies when the following thresholds are met: (a) at least one of the groups involved in the deal has posted, on the latest balance sheet, an annual gross turnover or overallvolumeofbusinessinBrazilatoraboveR$750million,in the year before that of the deal; (b) at least another group involved in the deal has posted, on the latest balance sheet, an annual gross turnover or overall volume of business in Brazil at oraboveR$75million,intheyearbeforethatofthedeal;and(c) the proposed merger/deal has or may have effects in Brazil.

In relation to this last part, CADE has decided that even transactions involving economic groups that have met the turn-over thresholds in Brazil do not qualify for mandatory notifica-tion if the pertinent relevant markets are local/limited to certain regions, i.e. the products/services involved would not poten-tially reach Brazil in view of their nature (geographic limita-tion). For example, the creation of a joint venture that will only be active outside Brazil, that will not generate a turnover or have assets in Brazil, that has no plans of expanding the business to Brazil or which products would not potentially reach Brazil in view of their nature, would not have to be submitted to CADE.

2.5 Does merger control apply in the absence of a substantive overlap?

Yes, even in the absence of a substantive overlap in which the deal would lead to control of less than 20% in the relevant market. A fast-track review procedure is then available to the parties.

2.6 In what circumstances is it likely that transactions between parties outside your jurisdiction (“foreign-to-foreign” transactions) would be caught by your merger control legislation?

Transactions “wholly or partially performed within the Brazilian territory” are caught by the Brazilian merger control rules if the parties’ economic groups reach the turnover thresholds and “the effects of [such deals] are or may be felt in Brazil”. In Bosch/HeFei, for instance, CADE expressly ruled that mandatory notification “requires the actual or potential occurrence of effects in Brazil”. Hence, a transaction that “does not produce or is unable to produce effects in Brazil” does not qualify for mandatory notification.

2.7 Please describe any mechanisms whereby the operation of the jurisdictional thresholds may be overridden by other provisions.

Exemption from notification may apply (even when the jurisdic-tional thresholds are met) in the following events:■ I – acquisition of a minority stake by the controlling

shareholder that already holds sole control of the target company;

■ II–consortiaor joint ventures created with the specific purpose of participating in public bids;

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Thebasepenaltywillbesetattheminimum(R$60thousand).Then, CADE will consider aggravating factors (such as dura-tion of the violation, seriousness of the conduct, intent); and will reduce the amount vis-à-vis the moment when the transaction is notified.

Additionally, CADE’s Internal Rules establish that the parties, upon notification or after opposition by CADE’s General Superintendence, may request a temporary and prelim-inary authorisation to perform the concentration act whenever, cumulatively: (i) there is no risk of irreparable damage to compe-tition conditions in the market; (ii) the measures for which an authorisation is sought are fully reversible; and (iii) the appli-cant successfully demonstrates the impending occurrence of substantial and irreversible financial losses to the acquired company unless temporary authorisation is granted for comple-tion of the merger deal.

3.8 Where notification is required, is there a prescribed format?

Yes, there are two set forms for notification: one for non-com-plex transactions (eligible for the fast-track review procedure); and another for transactions not qualifying for the fast-track procedure under CADE’s rules.

3.9 Is there a short form or accelerated procedure for any types of mergers? Are there any informal ways in which the clearance timetable can be speeded up?

A fast-track review procedure applies when: ■ I–twoormoreseparatecompaniessetupajointventure

under common control solely and exclusively to pursue a share in markets where products/services are not horizon-tally or vertically related;

■ II– the acquireror its groupdidnotparticipate,beforethe act, in the market involved, or in the vertically-re-lated markets, or in other markets where the acquiree or its group operated;

■ III–thedealleadstocontroloflessthan20%intherele-vant market;

■ IV–noneoftheapplicantsortheirrespectiveeconomicgroups control more than 30% in any of the vertically inte-grated relevant markets; or

■ V–thehighhorizontaloverlapsarenotadirectresultofthe deal (HHI variation is inferior to 200, provided that the deal entails no control above 50% over a portion of the relevant market).

The parties can try to speed up the process by providing addi-tional information on the deal and on the parties and markets involved, and by engaging in conversations with the authorities.

3.10 Who is responsible for making the notification?

CADE’s Regulation No. 2/2012 establishes that, whenever possible, notifications must be jointly made by the parties involved in the deal.

3.11 Are there any fees in relation to merger control?

Afiling fee ispayable atR$85 thousand forCADE’smergercontrol to take place.

In the Cisco/Technicolor merger, CADE understood that the parties’ press release indicating that they had carved out Brazil and closed the deal in the rest of the world while the merger was still under review by CADE, constituted gun-jumping. CADE’s Tribunal expressly stated that carve out of local completion of a merger is not accepted and executed an agreement with the companieswheretheyagreedtopayaR$30millioncontribu-tion for gun-jumping.

From 17 July to 7 October 2019, CADE was faced with the lack of a minimum quorum by its Tribunal, resulting in the stay of all procedural terms until the quorum was re-established. No mergers approved during this period were allowed to close. Global mergers were affected by this stay, like the IBM/Red Hat merger, which is yet to be examined by CADE’s Tribunal although its closing was announced in July 2019. CADE’s Tribunal is expected to rule before the end of 2019 on the IBM/Red Hat deci-sion to carve out the Brazil operations and close their global deal.

3.5 At what stage in the transaction timetable can the notification be filed?

Parties normally notify after execution of the binding agree-ments but, in some cases, CADE has accepted notification based on a memorandum of understanding or term sheet containing sufficient information on the competitive aspects of the deal. The parties must forthwith report on supervening changes to the initial notification, if applicable.

3.6 What is the timeframe for scrutiny of the merger by the merger authority? What are the main stages in the regulatory process? Can the timeframe be suspended by the authority?

CADE’s General Superintendence has 30 days to review trans-actions under the fast-track procedure, counting from filing of the notification (or amended notification, if any). On average, CADE has completed fast-track procedures in less than 20 days. CADE cannot stay the timeframe, but can call on the parties to amend the notification, resetting the countdown. CADE has 240 days to review transactions not qualifying for the fast-track procedure (extendable up to an additional 90 days for complex transactions). CADE has taken 60–90 days on average to review them. In case of lack of minimum quorum of CADE’s Tribunal due to the end of the terms of at least four commissioners, the timeframes are also stayed.

3.7 Is there any prohibition on completing the transaction before clearance is received or any compulsory waiting period has ended? What are the risks in completing before clearance is received?

Completing a transaction qualifying for mandatory notifica-tion before clearance is prohibited. The parties cannot consum-mate the deal until CADE has completed its pre-merger review, under penalty of voidability and imposition of a fine between R$60thousandandR$60million(dependingontheeconomiccondition of the parties, wilful misconduct, bad faith and poten-tial anticompetitive effects, among others) and, if applicable, commencement of administrative proceedings against the parties.

For greater legal certainty regarding the calculation of the financial redress for gun-jumping violation, CADE enacted in 2019 Regulation No. 24/2019, which sets forth the following methodology for calculating the fines for gun-jumping violation.

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merger review in the official gazette, putting forth all docu-ments and expert opinions necessary to prove its claims (under exceptional circumstances and at its sole discretion, CADE’s General Superintendent may grant an additional 15 days when strictly necessary).

The interested third party may voice its opinion on the trans-action and prompt discussions and analyses to be conducted by CADE. Additionally, if CADE’s General Superintendence gives unconditional clearance for a deal, the interested third party can appeal this decision to the CADE Tribunal, which will then re-examine the case and render a final ruling.

Alternatively, a company not acting as an interested third party may even so voice its opinions via responses to CADE’s requests for information.

4.5 What information gathering powers (and sanctions) does the merger authority enjoy in relation to the scrutiny of a merger?

CADE may issue official letters to the parties and to third parties (clients, suppliers, competitors, etc.), as well as to other authorities (regulatory agencies, etc.) requesting information and studies that could help in the merger review. Additionally, economic studies may be ordered to CADE’s Department of Economic Studies (DEE).

Use of false or misleading information for clearance of amerger byCADE is punishable by fines fromR$ 60 thou-sandtoR$60millionpluscommencementofanadministrativeproceeding against the offenders.

4.6 During the regulatory process, what provision is there for the protection of commercially sensitive information?

Article 51 of CADE’s Internal Rules establishes that restricted access may be accorded to records, documents, effects, data and information involving: (i) commercial bookkeeping; (ii) economic and financial condition of the company; (iii) tax or bank secrecy; (iv) company secrets; (v) production process and industrial secrets, notably industrial processes and formulas relating to product manufacture; (vi) turnover; (vii) transac-tion date, value and payment method; (viii) documents formal-ising the notified concentration act; (ix) latest annual report prepared for shareholders or partners, except when the docu-ment is public; (x) value and volume of sales, and financial state-ments; (xi) customers and suppliers; (xii) installed capacity; (xiii) production costs and expenses with research and development of new products or services; or (xiv) other events, at the discre-tion of the granting authority, and subject to the Information Access Act (Law No. 12,527/2011) and Decree No. 7,724/2012.

5 The End of the Process: Remedies, Appeals and Enforcement

5.1 How does the regulatory process end?

Upon unconditional clearance by CADE’s General Super-intendence, the parties must wait 15 days to close the transaction. During such period, third parties may appeal against the deci-sion and any of CADE’s Tribunal Commissioners may ask to review the transaction. In either scenario, or if CADE’s General Superintendence holds that the transaction should be rejected or cleared with conditions, for instance, the case files are sent to the CADE’s Tribunal for analysis and final decision.

3.12 What impact, if any, do rules governing a public offer for a listed business have on the merger control clearance process in such cases?

According to CADE’s Regulation No. 2/2012, no prior approval from CADE is required for subscriptions in a public offer of convertible securities. However, no voting rights related to those securities are exercisable until CADE’s clearance.

3.13 Will the notification be published?

CADE publishes an announcement of notifications in the offi-cial gazette. The notification form and other public documents can be downloaded by the interested parties on CADE’s website after such publication.

4 Substantive Assessment of the Merger and Outcome of the Process

4.1 What is the substantive test against which a merger will be assessed?

CADE usually runs the hypothetical monopolist test and the hypothetical monopsonist test to define the relevant markets affected by the deals to assess whether the transaction would create or strengthen a dominant position and result in the less-ening of competition in the relevant market where concentra-tion takes place, or else in foreclosure and consequent exclusion of competitors and increase in prices. CADE examines whether negative effects outweigh positive effects in a merger. If the net effects of the transaction are not negative for consumers, then a merger fulfils the conditions to be cleared by CADE. In its analysis, CADE also looks into unilateral, coordinated and conglomerate effects.

4.2 To what extent are efficiency considerations taken into account?

Under the 2011 Competition Act, efficiencies are assessed and factored into for clearance purposes. Based on CADE’s 2016 Guidelines on the Assessment of Horizontal Mergers, the transfer of relevant benefits to consumers is instrumental in CADE’s assessment of the effects of the alleged efficiencies.

4.3 Are non-competition issues taken into account in assessing the merger?

Non-competition issues are usually not taken into account in assessing the merger. Importantly enough, the Guidelines on the Assessment of Horizontal Mergers seem to enshrine CADE’s good practice of not including – overtly at least – in the merger review process, considerations such as employment mainte-nance/promotion, protection of national champions, industrial policy goals, financial stability, and other non-economic factors.

4.4 What is the scope for the involvement of third parties (or complainants) in the regulatory scrutiny process?

The 2011 Competition Act allows potential complainants to join in as “interested third parties”. The interested third party must do so within 15 days from announcement of transactions under

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approval of the ACC by CADE’s Tribunal (or if negotiation takes place with the Tribunal), the parties and CADE execute the ACC setting forth the conditions for clearance.

5.5 If a divestment remedy is required, does the merger authority have a standard approach to the terms and conditions to be applied to the divestment?

Pursuant to CADE’s Remedies Guidelines, structural reme-dies must be considered a priority, as CADE considers that “the competitive problem ensues from the change in structure of a relevant market in mergers with overlaps and vertical integra-tions”. For CADE, effective remedies “are those that actu-ally solve the competitive concerns arising from a merger” and observe the following general principles: proportionality; time-liness; feasibility; and verifiability.

Merger Control Agreements (ACC) executed between the parties and CADE normally set the terms and deadlines for compliance with remedies, and may include (in case of divest-ments) the obligation to find a buyer within a certain period (usually three to six months). During this period, the obliga-tions can be separated into categories, and establish penalties and loss of the applicants’ independence in conduction of the remedy in case they do not fulfil their obligations.

The Remedies Guidelines also mention that after conclu-sion of the sales agreement until actual transfer of the assets, the applicants must eliminate all links with the divested assets except to the extent otherwise indispensable for sustainability of the remedy, which may involve regulatory authorisations and/or licences (including supply contracts, use of distribution chan-nels, or other contracts and relationships necessary for running the divested business). In such exceptional cases, the Remedies Guidelines indicate that post-sale links should be transparent and for the shortest possible time, as to maintain the effectiveness of the remedy in mitigating the competitive harm of the transaction.

CADE usually requires the parties to hire an independent trustee for this divestment process, which will be tasked with supervising the divestment process, providing CADE with timely information on compliance with the negotiated terms, thus increasing the effectiveness of the remedies.

5.6 Can the parties complete the merger before the remedies have been complied with?

CADE may authorise the parties to complete the merger before all remedies have been complied with. In the recent past, CADE has conditioned the closing of a merger to identification of the buyer, which occurs after approval of the deal by CADE (up front buyer clause). In the Disney/Fox transaction, CADE has allowed the parties to close the deal before the sale is made.

5.7 How are any negotiated remedies enforced?

CADE’s Attorney-General is tasked with overseeing enforce-ment of the remedies. In the past few years, CADE has required the parties to hire an independent external auditor (trustee) to monitor compliance with remedies and report to CADE’s Attorney-General from time to time.

5.8 Will a clearance decision cover ancillary restrictions?

In some cases, CADE can ask the parties to make changes to non-compete, exclusivity or non-poach clauses when imposing restrictions.

After the Tribunal: (i) clears the transaction (a) uncondition-ally, or (b) conditioned to the imposition of restrictions (reme-dies); or (ii) blocks the deal, a short summary of the decision is published in the official gazette. If the deal eventually is given unconditional clearance and no motion for clarification (in cases of omission, ambiguity, contradiction, or material error) is filed, the parties may close it right after publication of this decision. Upon conditional clearance, the parties must abide by the reme-dies imposed by/negotiated with the authority.

5.2 Where competition problems are identified, is it possible to negotiate “remedies” which are acceptable to the parties?

Yes, it is possible.

5.3 To what extent have remedies been imposed in foreign-to-foreign mergers?

CADE has never imposed remedies for clearance of a pure foreign-to-foreign transaction.

It is worth mentioning that, in Disney/Fox, CADE conditioned its approval to divestment of Fox Sports in Brazil. CADE’s General Superintendence concluded in December 2018 that the transaction could only be approved in Brazil upon imposition of behavioural or structural remedies, due to the high concentration in the domestic sportscast market (Disney’s ESPN channel was the only possible competitor against Fox Sports and Globosat SporTV channels). While two commissioners understood that behavioural remedies only, such as maintaining the current licensing terms with small and medium pay-TV operators, would suffice for clear-ance, CADE’s Tribunal decision was taken by a 4-2 majority vote for divestiture of Fox Sports assets in Brazil. In CADE’s view: (i) the merger would create, in practice, a duopoly in the sports-cast market; (ii) there are high entry barriers; and (iii) it is unlikely that the broadcasting rights of major leagues/championships will change hands. Disney and Fox entered into an agreement and undertook: (i) to divest Fox Sports channels to an effective competitor other than Globo that is able to compete with Disney in the international sportscast market; (ii) to license the “Fox” brand to the buyer for free; (iii) to sublicense sporting rights owned by Fox Sports to the buyer, in case the buyer prefers not to have the rights transferred; (iv) not to participate in new bids for sporting rights for a period; (v) not to poach employees being transferred and not to reacquire the assets being sold; and (vi) to maintain current agreements with pay-TV operators. The companies were authorised to close the deal before the sale was made. According to CADE, given that the transaction was notified in 25 jurisdic-tions, international cooperation with several antitrust authorities (such as the ones from the US, Chile and Mexico) had an important role in securing higher review quality, remedies effectiveness and lower chances of conflicting or inconsistent decisions.

5.4 At what stage in the process can the negotiation of remedies be commenced? Please describe any relevant procedural steps and deadlines.

Negotiation of remedies may commence upon notification until 30 days after an objection by CADE’s General Superintendence is issued, without prejudice to review the deal on its merits.

If negotiation takes place with CADE’s General Superintendence, the resulting Merger Control Agreement (ACC) must be submitted to CADE’s Tribunal for approval. After

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6.3 Are there any proposals for reform of the merger control regime in your jurisdiction?

Not at the moment.

6.4 Please identify the date as at which your answers are up to date.

Our answers are up to date as of 20 October 2019.

7 Is Merger Control Fit for Digital Services and Products?

7.1 Is there or has there been debate in your jurisdiction on the suitability of current merger control tools to address digital mergers?

Yes. CADE has promoted debates regarding the enforcement of the 2011 Competition Act in the digital economy. In September 2019, CADE published, along with the competition authorities of the BRICS countries (excluding China), the first edition of the “BRICS in the digital economy” report, where CADE states that “no particular formal changes in the legislation are under consideration to specifically address the digital economy. The same applies for changes in notification thresholds”, as CADE understands that “the possibility of reviewing any merger and acquisition upon its request, within one year of the execution of the agreement, regardless of the parties’ annual gross sales or total turnover” would be sufficient to address deals in the digital economy. CADE understands that “the respective legal frame-work leaves enough room to adapt the existing concepts and tools, so that the current toolkit has been suitable to analyze the cases involving digital markets”.

7.2 Have there been any changes to law, process or guidance in relation to digital mergers (or are any such changes being proposed or considered)?

Not yet.

7.3 Have there been any cases that have highlighted the difficulties of dealing with digital mergers, and how have these been handled?

In 2016, CADE reviewed the formation of a joint venture for credit scoring by Brazil’s leading banks (Banco do Brasil/Bradesco/Caixa Econômica/Itaú/Santander), where it decided to impose a behavioural remedy to avoid consumer data being used as an entry barrier to future competitors. In 2017, in Naspers/Delivery Hero and Itaú/XP, CADE addressed a number of issues involving the digital economy, such as the definition of relevant markets in multi-sided platforms and the assessment of market power, having considered that the increase or the reduction in the incen-tives to innovate plays a huge role in the assessment of technolo-gy-intensive markets. CADE has also showed concerns with the series of acquisitions of innovating firms in their early stages of product development carried out by incumbents, as they could have a deleterious effect in competition by eliminating future competitors and stifling technological progress.

5.9 Can a decision on merger clearance be appealed?

Interested third parties admitted during the review process by CADE’s General Superintendence may appeal against its merger clearance decision within 15 days from publication. The Federal Public Prosecutor’s Office also understands it is enti-tled to appeal to CADE’s Tribunal against CADE’s General Superintendence’s clearance decisions. Further, at the CADE’s Tribunal level, if any omission, ambiguity, contradiction or material error exists in the CADE Tribunal’s decision, the parties and/or interested third parties may file a motion for clar-ification within five days. The Federal Constitution allows the parties to seek judicial review of decisions rendered by adminis-trative authorities, such as CADE.

5.10 What is the time limit for any appeal?

As mentioned, clearance by CADE’s General Superintendence may be appealed within 15 days, and a motion for clarification may be filed within five days.

5.11 Is there a time limit for enforcement of merger control legislation?

Under the 2011 Competition Act, CADE is entitled, within one year from the corresponding completion date, to request notifi-cation of transactions not falling under the turnover thresholds. The purpose is allowing CADE to assess a potential compe-tition harm resulting from a transaction involving players that do not meet the turnover thresholds, for example, but which could generate significant concentration in the relevant markets involved and an injury to competition.

6 Miscellaneous

6.1 To what extent does the merger authority in your jurisdiction liaise with those in other jurisdictions?

CADE frequently interacts and coordinates with competition authorities in other jurisdictions during the review of complex merger cases with international reach. CADE’s officials usually ask the parties for a waiver to exchange confidential information with other authorities and thus improve the level of information and remedies to be imposed on or negotiated with the parties.

6.2 What is the recent enforcement record of the merger control regime in your jurisdiction?

From January to October 2019, CADE analysed 321 mergers. Unconditional clearance was issued for 298 mergers, while four had their clearance conditioned to execution of a Merger Control Agreement (ACC). Five cases were shelved (for lack of infor-mation or for becoming moot), and 14 did not meet CADE’s thresholds (i.e., CADE decided not to exert jurisdiction). Out of 321 mergers, only 14 were examined by CADE’s Tribunal.

In 2018, CADE analysed 404 mergers, 385 of which received unconditional clearance, while six had their clearance condi-tioned to execution of an ACC. One merger was blocked (Liquigás/Ultragaz), three were shelved (for lack of information or for becoming moot), and nine did not meet CADE’s thresh-olds (i.e., CADE decided not to exert jurisdiction). Out of 404 mergers, only 15 were examined by CADE’s Tribunal.

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Merger Control 2020

Pinheiro Neto Advogados

Leonardo Rocha e Silva has been a partner at Pinheiro Neto Advogados since 2006. He has more than 20 years’ experience in defending clients’ interests before CADE and the Brazilian courts. Leonardo constantly guides his clients through merger control issues and investi-gations, including cartels, vertical restraints and abuse of dominance. His practice areas include antitrust, civil and commercial litigation, especially litigation before the Brazilian higher courts. Leonardo previously worked in Switzerland and in the UK, and holds an LL.M. in International Economic Law from the University of Warwick.

Pinheiro Neto AdvogadosSAFS, Quadra 2, Bloco B70070-600, Edifício Via Office – 3° andarBrasília-DF Brazil

Tel: +55 61 3312 9488Email: lrochaesilva@pn.com.brURL: www.pinheironeto.com

José Rubens Battazza Iasbech is a member of Pinheiro Neto Advogados’ competition law practice group and has significant experience representing clients in complex antitrust matters, including merger review cases and investigations, comprising cartels, vertical restraints and abuse of dominance, negotiation of settlement agreements with CADE, judicial litigation and general antitrust counseling. His practice areas also include civil and commercial litigation. José Rubens holds a PgD Diploma in Civil Procedural Law from the Instituto Brasiliense de Direito Público – IDP and another PgD Diploma in EU Competition Law from King’s College London.

Pinheiro Neto AdvogadosSAFS, Quadra 2, Bloco B70070-600, Edifício Via Office – 3° andarBrasília-DF Brazil

Tel: +55 61 3312 9445Email: jiasbech@pn.com.brURL: www.pinheironeto.com

Pinheiro Neto Advogados’ Competition Law Practice Group is part of the firm’s highly regarded Litigation Department. The experienced team has in-depth knowledge of merger control rules and has helped myriad clients from various industries in clearing their complex deals. Pinheiro Neto has equity partners and complete teams of associates with exper-tise in competition law not only in São Paulo but also in Brasília, where the authorities conduct the investigations and judgments. The team has recently been very active in helping clients in review and/or implementa-tion of internal investigations and compliance training programmes. The team members have published various articles in the field, and have been constantly recognised by Who’s Who, Chambers & Partners, Best Lawyers, LACCA Approved and other institutions as leading practitioners in Brazil.

www.pinheironeto.com

© Published and reproduced with kind permission by Global Legal Group Ltd, London

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