The New Brazilian Competition Act

Brazil

The new Brazilian Competition Act - Law 12.529/2011 - comes into effect on 29 May 2012.  It brings significant changes to merger control and to the rules on investigations of anticompetitive behaviour, as well as restructuring the Brazilian competition authority (Conselho Administrativo de Defesa Economica – CADE).

Key aspects include:

Merger Control

  • The big change is that transactions caught by the new merger control rules must be pre-notified and may not close until clearance is obtained from the CADE;

  • Transactions covered by the merger control procedure include acquisitions of controlling interests, mergers and joint ventures;

  • Threshold requirements: the group turnover generated in Brazil by at least one party must exceed BRL 400 million (approx. £140 million) and the group turnover generated in Brazil by at least one other party must exceed BRL 30 million (approx. £10 million);

  • Fines may apply for failure to notify (up to BRL 60 million, approximately £22 million) and for gun-jumping (putting the merger into effect before clearance);

  • CADE will have up to 240 days to render a final decision, although this period may be extended by 60 days if requested by the parties or 90 days if requested by the competition agency (non-cumulative).  An important point is that there is no automatic clearance on expiry of the period – if CADE does not reach a decision within even the extended period, closing of the transaction will remain suspended.  This will produce both commercial and legal uncertainty.  Parties will be allowed to negotiate an acceleration of the analysis with CADE.  Transactions that do not raise competition concerns may be approved under a summary procedure;

  • Further detail on implementing rules is expected from CADE in the coming months.

Anticompetitive behaviour

  • Undertakings found to breach the prohibitions on cartel activity and unilateral exclusionary practices (abuse of dominance) may be subject to fines.  The new levels of fines will be based on the turnover generated on the relevant market under investigation and will range from 0.1% to 20% of the companies’ income from that line of business.  In addition, corporate officers may also be subject to fines ranging from 1% to 20% of the fine imposed on their relevant businesses.  There will doubtless be much discussion of the definition of the relevant market in each case.

The new CADE

  • CADE will have a Tribunal formed by one President and 6 commissioners, an Economic Studies Department and a General Officer.  The Ministries of Finance and Justice will no longer be required to issue mandatory reports on matters falling within CADE's jurisdiction.