Structural Changes For Antitrust28/02/2013
The new Brazilian Antitrust Law (Law nr. 12.529, dated November 30, 2011) implemented important changes in the structure of the Administrative Council for Economic Defense (“CADE”) and in the rules concerning the notification of mergers and acquisitions and the investigation of anticompetitive behaviors in order to ensure greater efficiency and increased legal certainty in the application of competition rules in Brazil.
(i) Main changes introduced by the new Brazilian Antitrust Law
As a result of the new Law, the Secretariat of Economic Law of the Ministry of Justice (”SDE”) was abolished. The Secretariat for Economic Monitoring of the Ministry of Finance (“SEAE”) continues to exist, along with CADE, although the former only plays a “competition advocacy” role. Therefore, CADE has become the authority responsible for reviewing mergers and acquisitions and investigating anticompetitive practices in Brazil. CADE is now formed by the Administrative Economic Defense Tribunal (Tribunal Administrativo de Defesa Econômica), the General-Superintendence (Superintendência-Geral) and the Department of Economic Studies (Departamento de Estudos Econômicos).
One of the most important changes introduced by the new Antitrust Law concerns the fact that all filings are due prior to closing instead of post-closing. Therefore, the mergers and acquisitions that are subject to mandatory notification may not be completed before receiving CADE’s approval. Moreover, the gross turnover threshold triggering submission of a given transaction to CADE has been raised. Companies may only submit their transactions to CADE if the economic group of at least one of the parties has recorded at least R$750 million (equivalent to US$350 million) and the economic group of the other has recorded at least R$75 million (equivalent to US$35 million) in Brazilian territory during the previous financial year.
Considering that a transaction should be notified to CADE prior to the closing, the business community was concerned about the timeline for the issuance of a decision by CADE. In order to tackle this concern, the Law has established that the analysis of a merger review should be concluded within 330 days.
The new Antitrust Law also introduced a reduction in penalties for anticompetitive behavior, which range now from 0.1% to 20% of the gross turnover registered either by the individual company in the relevant market, or by the group or conglomerate, calculated in respect of the gross turnover registered in the financial year prior to the investigation, instead of 1% to 30% of the gross turnover registered by the corporate group, as set forth by the previous Law. It also determines the fines to managers who have engaged in anticompetitive behavior, corresponding from 1% to 20% of the penalties imposed upon the group committing the infraction. Considering that the penalty should never be less than the amount of the advantage obtained through the anticompetitive behavior, in the event of it being impossible to measure the turnover registered by the corporate group, it will vary from R$50,000 (equivalent to US$23,000) to R$2 billion (equivalent to US$940 million).
(ii) CADE’s performance after the new Brazilian Antitrust Law entered into force
A few days before the new Antitrust Law entered into effect, hundreds of mergers and acquisitions were submitted for CADE’s analysis under the previous Law. The uncertainty of this new legal scenario and the fear of delay in the approval of the transactions due to CADE’s limited staff led these companies to register their transactions, even though the majority of these cases did not meet the new threshold criteria and, therefore, did not need to be notified under the New Law. As a consequence, CADE received more notifications in 20 days than it receives in a regular three month period.
In June, CADE moved to a bigger building in order to accommodate its new functions. Even though the hiring of 200 employees has not yet taken place (today CADE has a staff of 100 technicians, which is significantly fewer than the staff of other antitrust agencies around the world), it has adapted very well to the new Law and the mergers and acquisitions have been analyzed much faster.
Regarding the legal framework, CADE issued a few important internal rulings in May, 2012, concerning the following subjects: (i) Internal Ruling nr. 2, dated May 29, 2012 – this regulates the filing of the acts referred to in Article 88 of Law nr. 12.529/2011 and establishes the summary proceeding for the analysis of concentration acts; (ii) Internal Ruling nr. 3, dated May 29, 2012, which establishes the List of Business Activities referred to in Article 37 of Law nr. 12.529/2011; (iii) Internal Ruling nr. 4, dated May 29, 2012, which establishes recommendations for other technical opinions submitted to CADE in order to advise upon the presentation of such documents and facilitate interlocution in the proceeding; and (iv) Internal Regulation, consolidated on May 29, 2012.
In 2012, CADE decided upon 955 cases, of which 825 were merger review proceedings. Only 102 of these were filed under the new Antitrust Law and, on average, these cases were decided upon in 19 days. The simple cases were decided upon in 9 days and the most complex case (the merger between BMG and Itaú) took 48 days.
(iii) Perspectives for 2013
In view of the above, it is undeniable that CADE has performed very well over the last eight months, especially concerning all the difficulties imposed by the new legal framework. There are, however, some important challenges that should be addressed by this entity in 2013.
In the beginning of 2013, there were still 107 mergers and acquisitions submitted under the previous law that have not been decided by CADE. Among these, there were important cases, such as the merger between Casas Bahia, Pão de Açúcar e Ponto Frio.
Also, CADE needs to find a balance between the analysis of mergers and the investigation of anticompetitive practices. In 2012, CADE focused on the analysis of merger reviews, which corresponded to approximately 90% of the totality of the cases decided by the Administrative Economic Defense Tribunal. The investigations of anticompetitive practice should be a top priority of the Brazilian antitrust authorities in 2013 and in the coming years.
In this sense, on 14 December 2012, CADE initiated the period for public comments on the proposal for a new policy of settlements in investigations of anticompetitive behavior to encourage the signing of such agreements, as they are an important tool to obtain evidence for cartel investigations. There are currently many requests for settlements in investigations of anticompetitive conducts under analysis, which are concluded by the signature of a Cease and Desist Agreement (TCC to use its acronym in Portuguese).
Hopefully, CADE will continue its phenomenal work in 2013, in spite of the technical and administrative difficulties that it might face, in order to strengthen competition policy in Brazil.
For more information on the changes to CADE and other matters relating to international trade, contact Fernanda Manzano Sayeg at FernandaSayeg@felsberg.com.br
 These figures were updated by Inter-Ministerial Administrative Ruling (Portaria Interministerial) nr. 994, dated May 30, 2012.