Brazilian law and regulations distinguish between domestic and foreign investors. Brazilian investors are those with residency and living in Brazil, and foreign investors are those living outside Brazilian borders, including Brazilian citizens living abroad.
For both Brazilian and foreign investors – whether for private equity and joint ventures or mergers, amalgamations and acquisitions, or other associative agreements of any kind – depending on the involved parties' gross revenue amount (see below), an approval by Brazil's Administrative Council for Economic Defence (CADE) may be necessary prior to the closing of the transaction.
Pursuant to the Competition Law, any transaction in which at least one of the parties involved has registered gross revenue in the preceding year (or businesses in Brazil) above the threshold of 750 million reais, and at least one other party involved has registered a gross revenue in the preceding year (or businesses in Brazil) above the threshold of 75 million reais, must be filed with CADE, as a request for market concentration approval. In this context, a 'party' effectively includes the economic group revenue of that party in Brazil as well.
Under the Competition Law, a request for market concentration approval may be classified as a summary procedure or an ordinary procedure. The request shall be treated as a summary procedure:
- for transactions involving joint ventures;
- when there is no relationship (horizontal or vertical) between the economic groups of the parties involved;
- when the horizontal market concentration is less than 20 per cent of the relevant market;
- if none of the parties involved in the transaction holds a 30 per cent share or more in vertically related markets; or
- if the transaction constitutes a horizontal market concentration between the economic groups of the parties concerned in excess of 20 per cent but less than 50 per cent.
The request will be treated as an ordinary procedure in all other scenarios.
The analysis of a request by CADE may result in three outcomes: (1) approval with no restriction; (2) approval with restrictions; or (3) refusal. In the case of points (2) and (3), the parties involved in the transaction may file an appeal against the decision. CADE's internal regulation establishes that an appeal will be reviewed and judged by CADE's General Superintendence, which acts as a superior body, similar to an administrative court of second instance, within CADE's organisational structure.
There is also the option for third parties unrelated to the transaction but with a direct interest in it to appeal any of CADE's decisions, and these appeals are subject to the same administrative formalities and procedures as those lodged by the parties involved.
All request procedures for market concentration approval submitted to CADE will be treated as non-confidential, in keeping with the publicity principles applicable to administrative bodies in Brazil. This non-confidential aspect of the procedures contributes to third-party control of market concentration approval requests, given that these are public interest matters, and a market concentration must not harm any market participants, either by way of market position or prices for products, goods or services related to the transaction.
CADE shall reach a decision about any requested procedure for market concentration approval within 240 days, with the option of a single 90-day extension period, if duly justified by CADE.
In the case of investigations by CADE into misconduct, the procedure will be confidential until its conclusion, and CADE will notify the parties regarding the submission of their administrative defences. The Competition Law sets out behaviour that constitutes misconduct by market participants, including cartels, international cartels, cartels in public bid procedures, influencing uniform conduct, predatory pricing, retail price fixing, territorial fixing and client bases, exclusivity agreements, combined sales, abuses of dominant market position, refusal to hire, sham litigation and imposing difficulties on competitors.