Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There is no deadline for filing, but transactions in which filing is mandatory cannot be closed or implemented before clearance. Failure to notify or gun jumping is subject to penalties that can include rendering the deal null and void. On 20 May 2015, the Administrative Council for Economic Defence (CADE) published gun-jumping guidelines, which provided examples of conduct that may be interpreted by CADE as gun jumping and suggested measures to mitigate risk, such as the creation of an antitrust protocol and clean teams.

In addition, CADE may impose penalties ranging from 60,000 to 60 million reais, require the parties to file the transaction for merger control review, and launch an administrative proceeding to investigate whether the parties could have engaged in anticompetitive practices. Pecuniary sanctions can be collected from any of the parties of the transaction. Failure to pay the fine will lead CADE to start proceedings for collection in a federal court.

Carve-out agreements (to hold Brazil-related assets separate and consummate the transaction elsewhere) are not acceptable under CADE’s current case law.

Filing should occur preferably after the execution of a formal binding document between the parties and before the consummation of any act associated with the transaction. It should also be submitted, whenever possible, jointly by the parties participating in the transaction.

CADE has been increasingly strict in enforcing its gun-jumping regulations and has been employing all tools at its disposal to enforce its pre-merger control regime, which includes being informed by regulatory agencies about mandatory notification transactions not submitted to the relevant authorities (eg, the National Petroleum, Natural Gas and Bio-Fuel Agency in Merger Review No. 08700.003028/2022-37, 3R Fazenda/Petrobras).

In 2022, Veolia settled a gun-jumping investigation with a record 60 million reais fine (Merger Review No. 08700.005713/2020-36, Veolia/Engie), after its competitor Suez reported the implementation of the transaction before clearance to CADE.

Which parties are responsible for filing and are filing fees required?

All parties (including the seller) are responsible for filing (one filing per deal only) and any party can be punished for non-compliance. The flat filing fee is 85,000 reais and the receipt must be submitted at the filing date.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

Parties cannot close transactions before clearance. Transactions carried out in over-the-counter or stock exchange markets do not require CADE’s prior clearance to be implemented. However, political rights related to the acquired shares shall not be exercised by the buyer before CADE’s approval.

After the clearance decision is published, a 15-day waiting period applies during which the parties cannot close the deal.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

The penalties for gun jumping are:

  • nullification and voidance of the deal;
  • a penalty ranging from 60,000 to 60 million reais; and
  • the launch of administrative proceedings if the deal is considered harmful to competition.

 

There have been several cases in which CADE imposed gun-jumping fines on the parties, and a couple of cases in which CADE declared the deal null and void.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

CADE will not accept carve-outs of Brazilian assets or businesses as a means of avoiding gun-jumping penalties. A gun-jumping investigation recently launched by CADE relating to foreign-to-foreign joint venture Catena-X is ongoing (Merger Review No. 08700.004293/2022-32, BASF/BMW/Henkel/Mercedes-Benz/Bosch/SAP/Schaeffler/Siemens/T-Systems/Volkswagen/ZF).

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

CADE may authorise parties to close a notified transaction at least partially before clearance if there would be no irreparable harm to competition, the measures for which the authorisation was requested are fully reversible and the target company would face serious financial losses if it could not proceed more quickly. This exception has been granted only once (Merger Review No. 08700.007756/2017-51, Excelente BV/Rio de Janeiro Airports).

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

Public takeover bids do not require clearance before the offer is consummated, but voting rights may not be exercised by the new owner before clearance.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

Filing requires the preparation of a notification form; a simple form for transactions that are eligible for fast-track proceedings or a complete form for non-fast-track transactions. Both forms require corporate information on the parties, the economic groups to which the parties belong and the transaction itself.

In contrast to some other jurisdictions, Brazil requires the parties to a transaction to present a relevant market definition up front. Estimates of market shares for the parties and their main competitors, clients and suppliers are also required, as well as some elaboration on barriers to entry and other market conditions. The information is requested in a substantially more detailed way in the complete filing form, which usually demands considerable time for the parties to prepare.

The parties are also required to present transaction documents, annual reports, available market reports and relevant internal documents (in non-fast-track cases).

The payment receipt for CADE’s fee must be submitted along with the filing form on the filing date. CADE’s filing fee is the same for, and applies to, both fast-track and non-fast-track proceedings.

There are legal sanctions for supplying wrong or missing (labelled ‘false or misleading’) information in merger reviews to CADE, which range from 5,000 to 5 million reais in fines. If the misleading information is the basis of an approval, the applicable fine varies from 60,000 to 6 million reais and the decision can be reviewed.

CADE is becoming especially sensitive with regard to the submission of information that is central to the antitrust assessment and it has sanctioned parties on several occasions for supplying misleading or incomplete information. In the investigation into the Catena-X foreign-to-foreign joint venture, CADE decided to investigate whether the parties omitted information or submitted misleading information when filing occurred, or both (Merger Review No. 08700.004293/2022-32, BASF/BMW/Henkel/Mercedes-Benz/Bosch/SAP/Schaeffler/Siemens/T-Systems/Volkswagen/ZF).

Providing accurate information to CADE should be a priority even during pre-notification contacts since the same regulations apply. CADE has previously applied fines to inaccurate information presented during pre-notification contacts.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

The review starts at CADE’s General Superintendence, which oversees merger investigations. Within the General Superintendence, all cases are first analysed by the Triage Unit, which is in charge of a preliminary analysis to distinguish fast-track from non-fast-track or complex mergers. Non-fast-track mergers are sent to one of CADE’s other specialised units (according to the market area involved) for analysis.

The final decision on either path comes from the General Superintendence, which can approve the merger outright as it normally does for cases involving fast-track proceedings or non-fast-track cases that are not considered harmful to competition.

If the General Superintendence believes the merger cannot be cleared or needs remedies, it challenges the merger to the Tribunal; complex cases will take longer and are usually analysed by CADE’s Tribunal. Mergers can also be sent to CADE’s Tribunal for analysis when interested third parties (admitted by CADE) challenge CADE’s clearance decision.

If the merger review is to be analysed by the Tribunal, a commissioner will be assigned to the case by draw. The commissioner may request the parties to provide further additional information. The commissioner will then prepare a report and the final vote, which is then submitted to the full Tribunal during a public session. The final decision at the Tribunal is taken by a majority vote.

What is the statutory timetable for clearance? Can it be speeded up?

Simple transactions with little impact on competition are subject to fast-track proceedings. Fast-track treatment is granted at CADE’s discretion – for example, for mergers involving no overlaps, horizontal overlaps of less than 20 per cent or with a small market share increment (Herfindahl-Hirschman Index delta of less than 200, provided that the transaction does not generate over 50 per cent market share) and for mergers involving vertical overlaps in which none of the parties have more than 30 per cent market share in any of the vertically related markets.

The General Superintendence’s decision on fast-track cases should be issued within 30 days of filing or amendment (plus 15 waiting days after the publication of the General Superintendence of CADE’s approval, during which clearance can be challenged at CADE’s Tribunal). Ordinary cases usually take longer (up to the 330-day legal limit), although the average review period is 125 days. Cases in which remedies have to be negotiated have usually taken an average of approximately 180 days.

Providing the relevant information in a manner that is as complete, clear and timely as possible, and arranging pre-notification meetings with the authorities to try to anticipate discussions with case handlers, can help speed up the clearance procedure. Also, in complex cases, offering remedies earlier on in the process may be helpful.