Impact of new antitrust legislation on mergers and acquisitions - International Law Office

Pre-merger system
New notification thresholds
Statutory time periods
New notification forms
Comment

The new Brazilian antitrust legislation entered into force on May 29 2012. The most significant changes are as follows.

Pre-merger system

According to Law 12,529, parties must receive clearance from the Administrative Council for Economic Defence (CADE) before implementing a merger. Failure to notify reportable transactions and consummation of a reportable merger before CADE's approval has been received may result in invalidation of the transaction and a fine of between R60,000 and R60 million.

New notification thresholds

Inter-ministerial Ordinance 994, dated May 30 2012 and issued jointly by the Ministries of Finance and Justice, establishes that a merger must be submitted for CADE's prior approval when it cumulatively meets the following thresholds:

• At least one of the groups involved in the transaction has registered, in its last balance sheet, annual gross sales or total turnover in Brazil (for the year preceding the transaction) that are equal to or greater than R750 million.
• At least one of the other groups involved in the transaction has registered, in its last balance sheet, annual gross sales or total turnover in Brazil (for the year preceding the transaction) that are equal to or greater than R75 million.

These higher thresholds will certainly reduce CADE's caseload. However, for a period of one year from the date on which the transaction is consummated, CADE is entitled to request the submission of a merger that is not subject to the notification thresholds above, under the 'clawback' mechanism. Furthermore, it is expected that in such cases, CADE would work with consumer associations, competitors, suppliers and clients, which could file complaints against transactions that were potentially harmful to competition and had not been presented before the agency.

Statutory time periods

Law 12,529 establishes that CADE's review must be concluded within 330 days of the date on which the transaction is notified - that is, a 240-day period that can be extended for up to 90 days. There is no rule for simple cases (ie, fast-tracked proceedings), but CADE's reviewers have already said that those will be decided within 60 days.

New notification forms

According to Resolution 2, two notification forms apply (Annex I and Annex II) - one addressed to the more complex transactions from a competition point of view and the other for fast-tracked proceedings. For the more complex transactions in particular, the new resolution requires an increased amount of information from parties, particularly in connection with transaction documents and market data.

Comment

The new regime aims to bring Brazil into line with US and European antitrust standards, and will clearly present a significant challenge for the authorities and the professionals that will have to adapt to the new system.

For further information on this topic please contact Pedro Dutra or Patricia de Campos Dutra at Pedro Dutra Advogados by telephone (+55 11 3085 9033), fax (+55 11 3064 7487) or email (pdutra@pedrodutra.com.br or pcamposdutra@pedrodutra.com.br).