Brazil’s Council for Economic Defence (“CADE”) recently issued a decision in which it once again had to determine whether transactions that are carried out in different jurisdictions are required to be submitted to CADE when objective turnover thresholds are met, but where the transaction has no effects in Brazil. In its decision, CADE’s General Superintendence stated that the effects issue is indeed a controversial matter in CADE’s case law, with decisions on both sides of the issue.
The current case concerned a transaction through which Robert Bosch GmbH (“Bosch”) acquired Siemens AG’s (“Siemens”) 50 percent stake in a joint venture between Siemens and Bosch in order to become the sole shareholder. The involved market included manufacturing and marketing home appliances that were not sold in Brazil. In this case, the General Superintendence did not acknowledge the transaction,1alleging that it would not lead to real or even potential effects in Brazil, considering that the joint venture itself was not at all active in the country.
This decision did, to a certain extent, apply the effects test. And, based on the reasoning on which the decision was grounded, it became clear that one of the main arguments used by the General Superintendence was the company’s lack of activities in Brazil, combined with a context in which the involved relevant market was defined as “national” by CADE. Where a relevant market is deemed to be national, it is indeed reasonable to assume that a transaction carried out in other jurisdictions would not lead to real or potential effects in Brazil.
In order to determine the absence of the joint venture in Brazil, CADE’s General Superintendence considered the turnover figures and volume of business of the joint venture and the parties, and also noted the fact that none of the companies had any kind of income derived from the commercialization of products in the Brazilian market—through sales, royalties or any other method.
This decision is one more precedent signaling CADE’s apparent intention to adopt the effects test when similar conditions are met. However, it is prudent to point out that in Brazil, precedents tend to be less binding than in common law countries. So, until the case law is settled, the more conservative approach of notifying CADE may still be the most advisable course of action.
The evolution of the case law, as slow as it has been, is at least providing clearer grounds for assessing the risks that would be assumed by companies in their decisions involving this particular issue. It now seems possible to more safely determine, for instance, that a transaction should not be notified to CADE when the following premises are observed:
- The turnover thresholds are met;
- The involved company has no activities in Brazil (and no income of any kind in the affected relevant market(s)); and
- The relevant market involved in the transaction has already been defined as national by CADE.
While it is still not clear exactly how CADE will apply the effects test to determine if Brazilian Antitrust Law (Law No. 12529/12) is applicable to a transaction, with this current decision, it does seem to be the direction they are heading. Accordingly, a good starting point for companies wondering about notifying CADE is to conduct a minimal preliminary antitrust assessment to verify whether the above-listed conditions are present. Even still, deciding whether or not it would be advisable to notify a transaction would still need to be determined on a case-by-case basis.