This article provides an overview of the Brazilian merger control process, outlines Brazilian practitioners' key criticisms of the system and examines the key merger control aspects of the competition reform bill currently pending approval by the Brazilian Congress.
M&A activity in Brazil has boomed in recent years, partly as a result of consolidation in sectors such as banking and telecoms. Examples of such consolidation can be found in JBS's acquisition of Bertin, which created the world's largest beef producer and the all-share merger between Chilean and Brazilian airline groups Lan and Tam.
The surge in M&A activity has placed Brazil under increasing domestic and international pressure to tackle several flaws in its current merger control system, such as unduly onerous notification requirements and delay in the review of complex cases.
Measures taken to address these weaknesses include the drafting of Bill 06/2009 (Reform Bill), which was approved by the Brazilian House of Representatives (Câmara dos Deputados) in December 2008 and, at the time of publication, is pending approval by the Senate (Senado Federal) (see Legal update, Brazilian legislative reform approved by Congress (www.practicallaw.com/0-384-3494)). In addition, the Brazilian competition authorities have implemented measures to streamline the merger review process in recent years, including the creation of a fast-track procedure for simple cases.
Against this background, this article examines recent developments in Brazilian merger control. In particular it:
Provides a brief overview of the merger control process in Brazil. For a detailed examination of Brazilian competition law, see 2010 Cross-border Competition Handbook: Brazil (www.practicallaw.com/4-501-1911).
Outlines the main criticisms of the present review process, based on interviews with practitioners at some of Brazil's top competition practices.
Highlights the key merger control aspects of the Reform Bill.
Considers likely developments going forward.
Law no. 8,884 of 11 June 1994 (Anti-trust Law) sets out the regulatory framework for merger control in Brazil. An English language version of the Anti-trust Law is available at the SEAE's website.
As Sergio Bruna, a competition law partner at Lobo & de Rizzo Advogados explains, the Brazilian merger control process consists of three stages, each formally handled by one of the three bodies that comprise the Brazilian Competition Policy System (BCPS). These bodies are:
The Secretariat for Economic Monitoring at the Ministry of Finance (Secretaria de Acompanhamento Econômico) (SEAE).
The Secretariat of Economic Law at the Ministry of Justice (Secretaria de Direito Econômico) (SDE).
The Administrative Council for Economic Defence (Conselho Administrativo de Defesa Econômica) (CADE).
The three stages of the merger control process are:
Review and approval.
Notification. Article 54 of the Anti-trust Law imposes a mandatory notification requirement for "economic concentrations" (including, mergers, joint ventures (JVs) and other corporate groupings) that meet one of the following thresholds:
The annual gross turnover in Brazil of any of the parties or their economic groups exceeded BRL400 million (about US$226 million) in the last financial year (turnover test).
The joint market share after the transaction will be at least 20% of the "relevant market" (market share test), which is either:
the market where the parties' businesses overlap; or
the market in which the target operates.
Transactions meeting one or both thresholds must be notified to the SDE within 15 working days of their execution date, which Article 98 of CADE Resolution 45/2007 defines as the "date of execution of the first binding document". Letters of intent (www.practicallaw.com/2-107-6757) and memoranda of understanding (MOU) can fall under the definition of a binding document in some instances.
There is no requirement that the transaction be approved by the BCPS before it is implemented (that is, there is no obligation to suspend the transaction). As long as CADE does not issue a preliminary order or obtain a non-integration undertaking from the parties, the transaction can complete at any time before or during the review process (see box, Interim orders and stand-still agreements).
For more information on the notification process, see 2010 Cross-border Competition Handbook: Brazil (www.practicallaw.com/4-501-1911). For a comparison of the merger notification requirements in several jurisdictions, see Practice note, Transactions and practices: International merger notification (www.practicallaw.com/2-107-3706).
Initial analysis. The SEAE and the SDE perform the initial analysis of the transaction, which consists of the following stages:
Parties notify the SDE, which forwards the notification to the SEAE.
The SEAE has 30 days from the date it receives the notification to prepare a report on the economic impact of the concentration. A 15-day fast-track procedure is available for simple cases (see below, Delay).
The SDE then has 30 days from the date of receipt of the SEAE's report (15 days in fast-track cases) to submit a non-binding recommendation to CADE.
During this stage, the SEAE and the SDE can request information from the parties to the transaction and other market participants. These requests suspend the countdown to the deadline until the information is received. Failure by either agency to meet its deadline has no effect on the final approval, or otherwise, of the concentration.
Review and approval. Within 60 days of receiving the SDE's recommendation, CADE must prohibit or clear the merger (either unconditionally or subject to remedies). Failure to deliver a decision by the deadline results in deemed approval of the concentration. Like the SEAE and the SDE, CADE can issue formal information requests, which also freeze the 60-day countdown as long as they are supported by a "reasoned decision" (see Legal updates, Brazilian Federal Court overrules CADE decision to block Nestlé/Garoto merger (www.practicallaw.com/0-246-2956) and Brazilian Court ruling on CADE's decision in the Nestle-Garoto merger case adjourned (www.practicallaw.com/4-384-8282)).
If CADE considers that a transaction will damage or limit competition, it only clears it if it results in efficiencies for the participants that are:
Greater than the losses resulting from the concentration.
Likely to be shared with consumers.
In practice, CADE clears the majority of cases. For instance, in 2009:
437 transactions (95.6% of all referrals) were cleared unconditionally.
19 transactions (4.2% of all referrals) were cleared subject to conditions.
Only one concentration was prohibited, being UNIMED's acquisition of the Centro Médico Hospitalar (see Organisation for Economic Co-operation and Development (OECD), Annual Report on Competition Policy Developments in Brazil 2009, available at the SDE's website).
Brazilian lawyers have identified several flaws in the country's current merger control system. These include problems associated with:
The notification thresholds.
The absence of an obligation to suspend the transaction pending approval.
Staff shortages at the BCPS.
Practitioners believe that the current Anti-trust Law's notification thresholds are too onerous in some instances. In response to these criticisms, the BCPS has relaxed its interpretation of the notification tests in recent years. For instance, since January 2005, the turnover test applies only to turnover generated in Brazil rather than worldwide turnover as was initially the case (see Legal update, Number of merger filings decrease in Brazil (www.practicallaw.com/6-202-1917)).
Likewise, it used to be the case that all transactions resulting in a market share equal to or above 20% in the relevant market used to be subject to merger control regardless of whether they resulted in a change in "market concentration" or not. This meant that, for instance, a transaction between a company which had a 20% share and another one which had a 0% share in a given market would have fallen under the old interpretation of the market share test. This definition resulted in CADE having to review a high volume of "competition neutral" transactions, which placed an unnecessary strain on its resources and contributed to the build-up of a backlog of cases. Consequently, since 1 October 2008, only transactions where the parties' activities overlap and, therefore, there is some degree of market concentration require notification (see Legal update, Change in interpretation of notification thresholds in Brazil (www.practicallaw.com/1-383-8374)).
According to Barbara Rosenberg, a competition partner at Barbosa Müssnich & Aragão Advogados and former head of the SDE's Competition Division, despite the importance of this change in interpretation, along with other recent guidelines that have provided better guidance regarding the transactions that must be notified, the test remains too strict and there is still uncertainty regarding which transactions must be notified. For instance, the term "economic concentration" covers a wide array of transactions, such as exclusive supply contracts, which are not usually subject to merger control in other jurisdictions. In the EU, for instance, Article 3 of the EC Merger Regulation (www.practicallaw.com/0-107-6174) limits the definition of a "concentration" to situations where two or more previously independent undertakings merge, or, broadly, where one or more undertakings acquire direct or indirect control of the whole or part of one or more other undertakings.
In addition, the applicability of the turnover test to all parties can be counter-intuitive in cases where only the seller meets the turnover threshold. As Rosenberg explains, this means that "a transaction which, strictly speaking, could constitute a de-concentration, such as a multinational selling a small subsidiary to a new entrant, can be subject to merger control."
The definition of "first binding document" can also create uncertainty regarding the date of notification. In particular, if the wording of a specific MOU brings it within the definition of a binding document, the BCPS may have to be notified at a very early stage in the transaction.
Practitioners identify the lack of an obligation to suspend the transaction while awaiting clearance as one of the main differences between Brazil's merger control system and the systems in other jurisdictions.
However, according to Francisco Todorov, a competition law partner at Trench Rossi & Watanabe Advogados (Associado a Baker & McKenzie), the fact that CADE unconditionally approves the vast majority of concentrations means that "in practice, the lack of a suspension requirement only impacts on a few transactions each year, albeit some of the largest and most complex ones."
According to a peer review of competition law in Brazil published by the Organisation for Economic Co-operation and Development (OECD) on 14 May 2010 (2010 Peer Review), between 5.4% and 9.7% of all transactions referred to CADE between January 2004 and September 2009 required some kind of remedy (see OECD Report, Competition Law and Policy in Brazil: A Peer Review and Legal update, OECD's Peer Review of Competition Law and Policy in Brazil (www.practicallaw.com/2-502-3552)).
CADE can impose remedies unilaterally or negotiate them with the parties and incorporate them into a performance agreement (compromisso de desempenho) under Article 58 of the Anti-trust Law. For instance, in April 2010, Telefónica entered into an agreement with CADE regarding its acquisition of an indirect 10% stake in Telecom Italia (see Legal update, Minority shareholdings in merger control in Brazil (www.practicallaw.com/3-502-6277)).
The lack of an obligation to suspend a transaction pending merger review effectively limits the range of remedies that CADE can impose (for example, prohibition). While CADE has the power to prohibit an anti-competitive concentration, it has only done so on three occasions since 2004. Bruna attributes the lack of outright prohibitions to the "practical difficulties involved in unwinding a deal which, in some cases, may have completed over a year before CADE's decision."
This problem could in turn discourage parties from notifying the transaction before completion. It also forces CADE to negotiate or order preliminary remedies to suspend completion pending review (see box, Interim orders and stand-still agreements).
On the other hand, the lack of an obligation to suspend can be beneficial for businesses to a certain extent. For instance, as there is no long period of waiting for merger clearance prior to completion, the merging parties have the flexibility to decide whether or not to complete based on their own assessment of the risk of CADE blocking or imposing conditions on the transaction (which only happens in a small minority of cases anyway (see above)).
Some practitioners believe that the lack of an obligation to suspend a transaction partly explains why, according to the 2010 Peer Review, between 2007 and 2009, behavioural remedies were 50% more prevalent than structural remedies (www.practicallaw.com/1-107-7328) in Brazilian competition cases. As Bruna explains, "if the transaction has completed, behavioural remedies are often the only ones that can be realistically implemented".
However, Rosenberg highlights that a high proportion of behavioural remedies imposed in Brazilian merger cases arise in instances where CADE orders the parties to modify an excessively restrictive non-compete clause (rather than to remedy market share issues that arise from a transaction that has already completed). According to the 2010 Peer Review, concentrations containing unduly restrictive non-compete clauses make up between 40% and 78% of all cases in which remedies are imposed.
It is also worth noting that CADE's commissioners have ordered structural remedies in several major recent cases (for example, see box, The Vale case and structural remedies).
Delay is a longstanding problem in the Brazilian merger control process. Practitioners identify the BCPS's tri-partite structure and the lack of permanent qualified staff across the three agencies as two of the key contributing causes of delay (see below, Staff shortages at the BCPS).
In an effort to resolve the issue of delay, Brazil's competition authorities have strived to streamline the review process in simple cases over the past few years. In February 2003, the SEAE and the SDE adopted Joint Administrative Act No. 1 (Portaria Conjunta Nº1), which formally established a fast-track procedure for straightforward transactions. Under this procedure, each agency prepares a short-form report in 15 days instead of 30.
More recently, the SEAE and the SDE have attempted to turn the two-stage merger analysis into a seamless single process. In 2007, CADE's attorney general's office (Procuradoria) (ProCADE) and the SDE entered into a technical co-operation agreement for fast-track cases (Acordo de Cooperação Técnica-Operacional ProCade/SDE), which established that the SDE will adopt the SEAE's report as its own without looking into the matter any further if, after reviewing the report, it agrees with its conclusion.
The success of this initiative, which sped up the SDE's performance in fast-track cases by 70%, encouraged CADE, ProCADE, the SEAE and the SDE to enter into a second agreement in September 2009 (Acordo de Cooperação Técnico-Operacional CADE/PROCADE/SEAE/SDE). As a result of this agreement, ProCADE, which used to submit written legal opinions in all ordinary merger reviews, will now only do so in cases where the commissioner assigned to the case or CADE's attorney general conclude that a written report is necessary due to the transaction's legal or procedural complexity.
These initiatives have slashed delay in straightforward cases. According to the first OECD Peer Review, published in October 2000, before the introduction of the fast-track procedure, it used to take the BCPS "six months or more to conduct a review of any merger" including those that raised "no apparent competition issues" (see OECD, Competition Policy and Regulatory Reform in Brazil: A Progress of Report (2000 Peer Review) available at the SDE's website).
In contrast, as noted in the 2010 Peer Review, as at October 2009, fast-track cases, which made up between 63% and 68% of all mergers analysed by the SEAE and the SDE between 2005 and September 2009, took an average of 21 days to be analysed and a further 35 days to be approved by CADE. Indeed, practitioners note that it is not uncommon for fast-track cases to be cleared in 30 days or less, which is similar to the timeframe for clearance in jurisdictions like France, where mergers which do not entail particular competition difficulties can be cleared within 25 business days (see Cross-border Competition Handbook: France (www.practicallaw.com/7-500-4886)).
Although Brazilian competition practitioners agree that the fast-track has been a significant improvement they also note that delay in non fast-track cases remains a major problem. Todorov notes that ordinary merger reviews "take almost longer nowadays than before the fast-track was introduced" due to the lack of pressure on the SEAE to expedite its analysis of these transactions.
Rosenberg notes that the issue of delay is particularly acute in medium-to-complicated cases, notably concentrations resulting in a 35% to 50% market share, which comprise a large number of non fast-track cases. While the SEAE tends to allocate significant resources to high profile transactions and deal with them as speedily as possible (as well as being very effective in reviewing fast-track cases), concentrations that fall somewhere in between fast-track cases and major transactions can take up to a year or so to be reviewed even in the absence of third party challenges or other substantial controversial features. This delay is clearly caused by the overload of the authorities and the widely reported lack of resources (see below, Staff shortages at the BCPS).
From the merging parties' perspective, delay creates a considerable amount of business uncertainty about the possible remedial action that CADE may take if it finds the transaction to be anti-competitive. This may deter some companies from completing the transaction (despite being legally able to do so) until they are confident of their ability to manage any remedies that CADE may impose.
The SEAE and the SDE have tried to reduce delay in non-fast track cases through the joint examination of transactions (known as instrução conjunta). In January 2006, the SEAE and SDE adopted Joint Regulation 33/2006 (Portaria SEAE/SDE No.33), which formalised their joint analysis and reporting relationship and extended it to other areas of competition law such as cartel investigations (see Legal update, New Regulation aims to expedite Brazilian merger and anti-trust proceedings (www.practicallaw.com/6-201-9231)).
Despite a modest gradual reduction in delay in recent years, in 2009, it took an average of 220 days for the SEAE to review a non fast-track merger and a further 55 days for CADE to deliver its decision, according to the 2010 Peer Review. Some commentators do not view this timeframe as acceptable or consistent with comparable timeframes in other jurisdictions. For instance, the review of "complex" and "very complex" transactions in Canada generally takes ten weeks and up to five months respectively (see Cross-border Competition Handbook: Canada (www.practicallaw.com/6-500-7423)).
The lack of permanent qualified personnel has affected the BCPS since its creation. The 2000 Peer Review lamented the lack of permanent professional staff at the BCPS. Likewise, the second OECD Peer Review, published in October 2005 (2005 Peer Review), recommended the creation of career and permanent positions in all three agencies (see OECD, Competition Law and Policy in Brazil: a Peer Review available at the SDE's website).
The BCPS's personnel shortages stem partly from the fact that a substantial number of Brazil's professionally qualified federal civil servants (known as gestores) are hired on a contract basis and rotate between different departments throughout their career.
SEAE. Rosenberg explains that, out of the three BCPS bodies, the SEAE has been, until recently, the most successful at attracting and retaining qualified staff. However, despite a 16% boost in professional staff between 2005 and 2009, the SEAE stills suffers from a high attrition rate. For instance, in 2008, the SEAE lost 35% of its professional staff (27 of 77 people). The number of support staff has also declined steadily from 101 in 2005 to 72 in 2009 (according to the 2010 Peer Review). In Todorov's opinion, given the SEAE's present role in merger control cases, it is the lack of personnel at this particular body that is most problematic.
Some practitioners believe that the changes to the SEAE's role envisaged in the Reform Bill (see below, Structural reforms) may be causing an exodus of merger control specialists at this body.
SDE. "Adopting measures with the scope of providing incentives to retain qualified staff and preserve institutional knowledge were two of the key challenges I faced during my time as head of the SDE's Competition division" recalls Rosenberg, who also commends the fact that the SDE's current management comprises several gestores (as does CADE, where two of the current commissioners are gestores).
Todorov notes that, since handing over primary responsibility for merger analysis to the SEAE, the SDE's personnel needs as far as merger control is concerned have diminished. However, other areas of the SDE's competition mandate, such as anti-cartel investigations, continue to be affected by staffing shortages.
CADE. Although the Anti-trust Law provided for the creation of permanent staff at CADE, it took until 2006 for the first 27 permanent positions to be authorised. As at October 2009, 25 of these roles were filled, accounting for about half of CADE's professional staff.
The lack of permanent staff at CADE used to partly stem from the fact that several of its employees were "attached" to individual commissioners, who typically serve two-year terms renewable just once (meaning that the commissioner and his staff would stay a maximum of four years at CADE). In recent years, however, CADE has successfully changed this scenario and managed to attract and retain public servants, who have been staying at CADE, despite the change of commissioners, which Rosenberg notes as being a very positive development.
A lack of co-ordination around the appointment and re-appointment of commissioners has also led to difficulties in the past, and even resulted in CADE lacking the required quorum of commissioners to take its decisions for a short period in 2005 (see Legal update, Lack of quorum paralyses Brazilian competition agency (www.practicallaw.com/4-201-6714)).
Reform of the competition law framework has been an issue for several years. Efforts to reform the Anti-trust Law have stalled in the past. However, while the approval of the current Reform Bill is by no means guaranteed at the time of publication, it has attracted strong endorsements from stakeholders in the business and legal communities.
The Reform Bill aims to change the tri-partite structure of the BCPS by giving an enlarged CADE responsibility for both analysis and decision making in merger review cases. The expanded CADE would consist of the following bodies:
A Directorate General (Superintendência-Geral) (SG) headed by a superintendent and two directors. The SG's responsibilities would include:
replacing the SDE and SEAE as the bodies responsible for merger analysis;
preliminary enforcement functions;
representing CADE before the federal courts.
An administrative tribunal (Tribunal Administrativo de Defesa Econômica) (Tribunal) which would continue deciding competition cases. The Tribunal's members would serve single four-year terms.
A Department of Economic Studies (Departamento de Estudos Econômicos), which would conduct economic research and publish technical reports.
The SDE's competition division would be abolished and its functions transferred to the SG. The SEAE would continue to exist, but its role will be confined to competition advocacy.
Bruna believes that these changes, if enacted, will streamline the BCPS's structure by making a single entity responsible for the entire merger review process. This new structure could, however, lead to issues in the future. While the SG and the Tribunal would be part of the same legal entity (that is, CADE), they would be independent of each other and headed by different people. Todorov asks: "What will happen if they don't get along or if disputes over authority, budget or staffing arise?" He notes that "it would be wrong to assume that unifying the different competition bodies equals unifying the decision-making too".
The Reform Bill proposes the elimination the market share test to be replaced with a combined turnover test consisting of BRL400 million (about US$226 million) for the larger entity and BRL30 million (about US$17 million) for the smaller one. CADE would be able to modify these thresholds according to the changing dynamics of the market. Practitioners believe that this test would increase objectivity and eliminate the uncertainties plaguing the current tests.
In addition, the notification requirement would be expressly restricted to "mergers" (which Article 90 of the Reform Bill defines as mergers, acquisitions and JVs resulting in the creation of a new company), eliminating the need for certain transactions, such as exclusive supply contracts, to be notified.
Under the proposed system, parties would not be able to complete their notified transaction until CADE approved it or the statutory time period expired. Practitioners regard the introduction of this obligation to suspend a notified transaction as the cornerstone of the Reform Bill. "If adequately implemented, this particular reform will be a genuine revolution", notes Bruna.
However, there is considerable apprehension regarding the practical implementation of the suspension requirement. In particular, commentators believe that the system can only work if the government allocates the necessary resources for CADE to recruit and retain enough qualified staff. Otherwise, practitioners fear that delay in the handling of cases would result, leading to a backlog of matters.
Imposing an obligation to suspend transactions without sufficient personnel to adequately deal with notifications could have implications for both domestic and international transactions. As Bruna notes, "if an obligation to suspend a notified transaction is introduced, completion in cross-border transactions may have to be suspended and/or made conditional on competition clearance in Brazil. It is therefore essential that CADE has enough resources to process pre-completion notifications within a reasonable timeframe."
Article 122 of the Reform Bill envisages the creation of 200 permanent positions in CADE to enable it to meet its enlarged role. However, based on previous experience, commentators note that it is unclear whether the staffing of these posts will take place before the Reform Bill comes into force (see above, Staff shortages at the BCPS). The Bill also provides for a transitional period during which CADE would be allowed to waive the suspension requirement until it is logistically equipped to handle the expected workload increase. Rosenberg suggests that implementation of the suspension requirement ought to be delayed until CADE has recruited and trained the necessary number of employees.
The Reform Bill proposes to replace the current fast-track procedure with an early termination system that will allow the SG to clear simple cases in a reduced timeframe. Under the proposed system:
The SG would publish a summary notice of the proposed transaction within five days of receiving a notification (notification date) (references to days in this section mean business days).
Within 20 days of the notification date, the SG would have to approve the merger or request further information.
If the SG requested additional information, it would have 60 days from the notification date to decide whether to approve the merger or refer it to CADE along with a recommendation to prohibit or modify it. Further information requests by the SG would not suspend the countdown of the 60-day period.
Approval by the SG would trigger a 15-day period during which:
The Tribunal would have the option (but not the obligation) to review the SG's decision.
Third parties would have the right to appeal the SG's decision to the Tribunal.
In the absence of one of these events, the merger would be cleared on expiry of the 15-day period.
Under the proposed system, the SG would be able to declare a merger "complex" within 50 days of the notification date. If it did so, it would have to request supplementary information within the 50-day period, which parties would have to provide within 90 days of the notification date.
The SG would then have ten days to approve the merger or recommend its prohibition or conditional approval to the Tribunal.
If the SG recommended the prohibition or modification of a merger, the case would be assigned to a reporting commissioner at the Tribunal within 48 hours. The commissioner would have 20 days to schedule the case for review by the Tribunal or order the SG to request further information. If the case was scheduled for review, the Commissioner would have to undertake this review within 30 days of receipt of the additional information.
In any event, the Tribunal would have to make a final decision within 240 days of the notification date, extendable by 60 days on request by the applicant or at the Tribunal's discretion for 90 days. CADE would therefore have to decide every merger within a maximum period of 330 days of the notification date.
As noted above, Brazil has a highly active M&A market. According to Mergermarket, Brazilian M&A transactions accounted for 54% of total deal volume in Latin America during the first quarter of 2010 (see Mergermarket, Press Release, Latin American M&A Round-up for Q1 2010). To maintain its regional leadership and rising global prominence as an M&A hub, Brazil must modernise and improve its merger control framework. Despite the commendable reforms that the BCPS has introduced in recent years, practitioners believe that further progress can only be accomplished through effective legislative reform. As Arthur Badin, current president of CADE, noted in a recent press article, "if the Reform Bill is not approved, CADE may sadly end up lacking the capability to handle the remarkable influx of investment coming into Brazil".
There is cautious optimism about the adoption prospects of the Reform Bill in the near future. However, the general election scheduled for October 2010, has made adoption of the Bill this year somewhat uncertain. In August 2010, the Senate announced that voting on the Reform Bill would be delayed until after the election.
While the provisions of the Reform Bill address many of the major flaws in the existing Brazilian merger review system, practitioners believe that the ultimate success of these reforms will depend on their practical implementation, which in turn will be reliant on the allocation of sufficient personnel and resources.
To mitigate problems caused by the lack of an obligation to suspend a transaction pending approval, CADE has developed two preliminary temporary remedies. These include:
Interim orders suspending transactions or blocking other corporate actions (medidas cautelares).
Stand-still agreements (Acordo de Preservação de Reversibilidade da Operaçao) (APRO).
Third parties can apply for interim orders in certain circumstances and CADE may grant them ex parte in urgent cases (Articles 132 to 138, Resolution 45/2007). Failure to comply with an interim order suspending a transaction does not invalidate the transaction, but may result in administrative fines. For an example of the use of interim orders, see Legal update, CADE suspends two high profile transactions in Brazil (www.practicallaw.com/1-314-7956).
Alternatively, the parties to the transaction and CADE can enter into an APRO with CADE whereby they agree to freeze completion, totally or partially, until CADE issues its decision. This increases the available range of structural remedies that CADE can impose in anti-competitive mergers.
APROs are generally preferable to interim orders as their terms are negotiated. Indeed, parties often ask CADE for permission to negotiate an APRO as a means of pre-empting a looming interim order. For instance, in March 2010, Votorantim entered into three APROs to block a potential interim order (which a third party had initially requested ex parte) suspending its acquisition of a 17% stake in CIMPOR. For further information on interim orders and APROs, see Legal update, Stand still agreements and preliminary injunctions in Brazilian merger control (www.practicallaw.com/4-386-2089).
In October 2005, CADE ordered Companhia Vale do Rio Doce (CVRD) (subsequently renamed Vale) to either dispose of one of its recent acquisitions or renounce its exclusive right to buy the excess mining production of a mine owned by another company (see Legal update, CADE imposes restrictions on transactions involving Brazil's largest mining company (www.practicallaw.com/3-201-3612)).
CVRD challenged CADE's decision before the federal courts arguing that it was not taken by a majority vote of CADE's Commissioners (initial voting resulted in a tie, which led CADE's president to use his casting vote, something which Article 8(2) of the Anti-trust Law expressly authorises him to do) (see Legal update, Companhia Vale do Rio Doce challenges CADE decision before the court (www.practicallaw.com/4-201-6709)). Brazil's Superior Court of Justice upheld CADE's original ruling in the first instance. Vale then appealed to the Brazilian Federal Supreme Court, which ultimately upheld the validity of CADE's decision.
For a list of the top competition law firms and practitioners in Brazil as endorsed by PLC Which lawyer, click here