In brief: the key features of merger control legislation in Brazil

Legislation and jurisdiction

What is the relevant legislation and who enforces it?

The main legislation is Law No. 12,529 of 2011 and a series of resolutions issued by the Administrative Council for Economic Defence (CADE), the antitrust agency. In terms of merger control, the main resolutions are as follows:

• CADE’s Internal Rules of Proceedings (Resolution No. 1 of 2012, as amended by Resolution No. 22 of 2019);
• Resolution No. 12 of 2015 establishes the rules for consultation on CADE’s position on the application of merger control rules in specific cases;
• Resolution No. 17 of 2016 establishes the criteria for filing of associative (collaborative) agreements;
• Resolution No. 24 of 2019 establishes the procedures for gun-jumping investigations and the report of transactions that do not meet the threshold for mandatory reporting; and
• Resolution No. 33 of 2022, as amended, provides for the definition of ‘group of companies’, the cases eligible for fast-track proceedings, the required information under both the fast-track and ordinary proceedings, and stake acquisition rules.

CADE includes three distinct bodies: the Administrative Tribunal, the General Superintendence in charge of merger analysis and antitrust investigations, and the Department of Economic Studies.

With respect to merger review enforcement, the General Superintendence is responsible for reviewing and clearing transactions that do no raise antitrust concerns and challenging cases before the Tribunal, while CADE’s Tribunal is responsible for deciding on the cases challenged by the General Superintendence, by the Tribunal or by interested third parties and regulatory agencies.

CADE has issued a series of guidelines establishing directives on issues related to competition policy or institutional procedures and providing explanations of the existing legislation, in terms of merger control, including the Guidelines on Gun Jumping, the Guidelines on the Assessment of Horizontal Mergers, the Guidelines on Remedies and others on specific procedural aspects.

What kinds of mergers are caught?

Mergers, equity and assets acquisitions, joint ventures, consortia, associations and any foreign-to-foreign transactions are caught, provided they produce effects in Brazil and meet the double turnover jurisdictional threshold.

Effects, for the purposes of Brazilian merger notification, are defined very broadly to include deals in which the target company (including joint ventures) has either assets or legal entities in Brazil or revenues originating in Brazil, even if through exports only and regardless of their amounts. There is no precise definition by CADE regarding the level of sales in Brazil to which the business involved in the transaction could establish sufficient nexus or effects to trigger CADE’s jurisdiction – generally, even minimal sales or revenues can require a notification if the other thresholds are met.

Associative or collaborative agreements between competitors must be filed with CADE if the following criteria are met:

• the parties or groups meet the double Brazilian turnover criterion; and
• the agreement is for a period of at least two years, and its object is the creation of a joint enterprise to develop a certain economic activity, provided that:
  • it establishes the sharing of risk and results between the parties regarding the object of the agreement; and
  • the parties or groups are competitors in the relevant market that is the object of the agreement.

Agreements between vertically related parties are not subject to notification as ‘associative or collaborative agreements’ since 2016, when Resolution No. 17/2016 came into force.

What types of joint ventures are caught?

All types of joint ventures are subject to merger review in Brazil provided they produce effects in Brazil and meet the double turnover jurisdictional threshold. The only exception envisaged in the Competition Law concerns joint ventures, consortia, or associative or collaborative agreements for the specific purpose of participating in public bids.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

Brazilian competition legislation does not provide a firm definition of ‘control’. CADE states broadly that control involves the ability to interfere in the activities of a company or undertaking. It can either be owing to the possession of a majority of the equity interest or when a minority shareholder has control powers as a result of contractual arrangements, for example. Control can be sole or shared.

Control can also be external when exercised by a party that does not actually hold a shareholding interest in another party, but it has the ability to direct the development of a business, such as in the franchiser–franchisee relationships (Merger Review No. 08700.000395/2019-83, Sonic/Chilli Beans/GIF IV).

The acquisition of minority and other interests is also caught by merger control rules under certain circumstances described in articles 9 and 10 of Resolution No. 33/2022:

• when the acquisition results in acquisition of control, sole or joint;
• when, provided that the activities of the purchaser group and the target do not overlap or are vertically related:
  • it grants to the purchaser direct or indirect participation of 20 per cent or higher in the target; or
  • the holder acquires 20 per cent or more of the social capital or voting capital, provided that the acquired participation, direct or indirectly, of at least one individual seller, represents 20 per cent or more of the social or voting capital; or
• when, provided that the activities of the purchaser group and the target overlap or are vertically related:
  • it grants to the purchaser direct or indirect participation of 5 per cent or higher in the target; or
  • the purchaser already had 5 per cent of participation in the social or voting capital of the target, and the last acquisition, individually or added to others, results in an increase of participation of 5 per cent or more in the social or voting capital.

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

Law No. 12,529 of 2011 introduced a double turnover system. The legal thresholds for mandatory notification – determined by Ordinance No. 994/2012, issued by the ministries of justice and finance – are:

• turnover or volume of sales in Brazil by one of the parties equal to or greater than 750 million reais in the year preceding the transaction; and
• turnover or volume of sales in Brazil by another party equal to or greater than 75 million reais in the year preceding the transaction.

Parties are considered as the consolidated economic groups to which they belong.

For the purposes of calculation of the turnover, CADE considers as part of the same economic group the companies that are subject to a common control and companies in which any of the companies under common control has, directly or indirectly, at least 20 per cent of the voting or share capital.

Companies that are ultimately state-owned are considered part of separate or autonomous economic groups, meaning that other state-held interests are not considered part of the economic group, provided there is no coordination with these other companies. Transactions between two separate state-owned companies are subject to normal merger control regulations as if they were fully independent.

For investment funds, the following will be considered as part of the same economic group:

• the quota holders with more than 50 per cent participation in the fund directly involved in the transaction, and the companies of its economic group; and
• the companies in which the fund involved in the transaction holds an interest of 20 per cent or more.

CADE has the prerogative of requiring the submission of any transaction within a period of one year as of its closing date, even if it does not satisfy the notification thresholds mentioned herein.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Filing is mandatory whenever the transaction can produce any effects in Brazil and meets the double Brazilian turnover jurisdictional threshold. The only exception contained in the Competition Law concerns joint ventures, consortia or associative or collaborative agreements with the specific purpose of participating in public bids and the agreements derived from these public bids.

CADE can request the filing of transactions that do not fulfil the jurisdictional thresholds up to one year after the closing.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

Yes, foreign-to-foreign mergers must be notified whenever they produce or can potentially produce effects in Brazil and the double Brazilian turnover jurisdictional threshold is met. Effects, for the purposes of Brazilian merger notification regime, are defined very broadly to include the presence of assets or legal entities in Brazil or revenues originating in Brazil related to the business involved in the transaction, even if through exports only. There is no ‘minimum or sufficient effects’ test in place, and even minimal sales or revenues generated in Brazil can trigger a notification.

On certain occasions, CADE has decided that it has jurisdiction over foreign-to-foreign or international transactions where a worldwide relevant market definition is possible, and the economic groups are active in the directly affected or related markets in Brazil.

CADE also has, on other occasions, decided not to assess foreign-to-foreign transactions when effects in Brazil are sufficiently demonstrated not to be concrete or plausible. An assessment of potential effects of the envisaged transaction in the Brazilian territory is recommended whenever the parties reach turnover thresholds.

Are there also rules on foreign investment, special sectors or other relevant approvals?

There is no specific legislation for merger control involving foreign investment in Brazil. Merger review provisions apply similarly across the board.

Law No. 12,529 of 2011 applies to all economic sectors, which means that no special clearance should be fulfilled by sector regulators or agencies, except for the banking sector.

Since February 2018, CADE and the Central Bank have a memorandum of understanding in force regulating each agency’s jurisdiction in merger control cases involving the financial sector. Mergers in the financial sector must be submitted to both agencies, but transactions that may pose ‘high and imminent’ risks to the stability of the Brazilian financial system – at the Central Bank’s discretion – may be unilaterally approved by the Central Bank, and CADE will have to approve the deal without restrictions as well.

Other regulated sectors may require not only the standard merger review clearance by CADE, but also special clearance by their respective sector regulators or agencies. Depending on the nature of the transaction, this may be the case, for example, for the telecommunications industry, insurance, oil and gas, electricity, aviation, health insurance, securities and hydro transportation.

CADE has cooperation agreements in place with several other government agencies – including most regulatory agencies and other bodies – and cooperation between CADE and regulatory agencies has been a legal requirement since 2019, when Law 13,848 came into force.

CADE may ask relevant regulatory agencies for their views on a transaction and interact with them throughout the merger review proceeding. This has been the case, for instance, in the recent reviews of AT&T/Time Warner (Merger Review No. 08700.001390/2017-14), Disney/Fox (Merger Review No. 08700.0044944/2018-53), Banco Itaú/XP Investimentos (Merger Review No. 08700.004852/2018-28) and TIM/Telefónica/Claro/OI (Merger Review No. 08700.000726/2021-08).