CADE orders Videolar-Innova transaction to be undone
On April 28th, the Tribunal of the Administrative Council for Economic Defense (“CADE”) ordered the Brazilian polystyrene producer Videolar-Innova to undo the transaction previously approved by CADE in 2014, conditioned on behavioral remedies, due to non-compliance with the Merger Control Agreement (“MCC”).
According to the Reporting Commissioner, Sérgio Ravagnani, the parties did not meet their production levels commitment and did not prove that the efficiency gains were transferred to consumers. He also found that the transaction generated a duopoly in a highly concentrated market, with low probability of entry and absence of rivalry; moreover, he found that the polystyrene prices increased after the 2014 approval.
Finally, the Reporting Commissioner voted for the transaction to be undone, concluding that neither structural nor additional behavioral remedies would be sufficient to address the competitive concerns. He was unanimously followed by the remaining Commissioners. The Tribunal also upheld a 9 million reais fine imposed in 2019, due to failure to comply with the MCC.
Leniency agreement conditions have been fulfilled, albeit the lack of evidence to open an Administrative Proceeding
A leniency agreement, which did not foster the opening of an Administrative Proceeding due to lack of evidence, was upheld by the majority of CADE’s Tribunal on April 14th. The case furthered a debate among the Commissioners about the possibility of holding a lenient party accountable for the lack of robust evidence presented for the leniency agreement.
The Reporting Commissioner, Sérgio Ravagnani, concluded that it would not be possible to find that the leniency agreement had been fulfilled, if no Administrative Proceeding resulted from it, voting for the non-ratification of the leniency agreement and for the punishment of the company through the prohibition of entering into new leniency agreements for three years.
However, the majority of CADE’s Tribunal, led by the Commissioner Lenisa Prado, argued that only the SG could assess whether the evidence offered by applicants of the leniency program would suffice for the opening of the Administrative Proceeding, being that such analysis is made when the agreement is executed with the SG. Thus, a potential lack of evidence or the inherent risk related to the outcome of the case could not create a liability for the signatories. Therefore, the leniency agreement was upheld, and no sanction was imposed against the signatories.
Tupy acquisition of Teksid is conditionally approved
CADE unanimously approved with conditions, on April 9th, the acquisition of Teksid’s cast-iron business by Tupy.
Including both structural and behavioral remedies, the commitments solution includes a substantial divestment of contracts executed for the supply of iron engine blocks and iron heads, in addition to the inclusion of contractual clauses for current customers of Tupy and Teksid, aiming to foster possible changes in demand. Additionally, as the Reporting Commissioner, Luis Henrique Braido, found that imports exert significant competitive pressure on the markets affected by the transaction, the MCC also establishes that the parties are prohibited from requesting anti-dumping measures or interfering in drawback demands regarding imports of iron engine blocks and iron heads for 5 years.
Brazilian competition authority initiates first employment market probe and puts a spotlight on HR conducts
CADE opened on March 17, 2021 an Administrative Proceeding against three dozen healthcare companies to investigate the following conducts: (i) exchange of sensitive information between competitors on wages, salaries and benefits offered to current and future employees in the metropolitan area of São Paulo; and (ii) price-fixing agreement between competitors as regards conditions of employment, such as wages, salaries and benefits (i.e. cartel).
The probe initiated after a leniency agreement signed on September 2019 by CADE’s General Superintendence (“SG”) and federal prosecutors. According to the SG, the conduct took place between 2009 and 2018, and potentially harmed competition between companies on hiring or retaining their employees, affecting wage conditions, labor benefits and employees’ mobility.
HR conducts have been under review since 2016, when the “Antitrust Guidance for HR Professionals” was launched by DOJ and FTC in the US. After that, labor market competition was analyzed by China and Japan (2018) and discussed by OECD in 2019. Companies and HR professionals should seek guidance regarding competition issues before exchanging sensitive information.
Plamed acquisition of Hapvida is conditionally approved
On February 24th, CADE unanimously approved with conditions the acquisition of Plamed’s customer portfolios of healthcare plans by Hapvida.
Previously to the Tribunal’s analysis, CADE´s SG had recommended the transaction to be blocked due to Hapvida’s expressive market share increase on the Northeast region of Brazil, and also to the sector’s high entry barriers and reduced level of rivalry.
The extensive MCC, negotiated by the Reporting Commissioner Luis Braido, establishes both structural and behavioral remedies. The obligations settled in the agreement includes the divestment of Plamed’s individual/family and corporate healthcare plans portfolio in Aracaju city. Furthermore, in addition to other commitments, Hapvida shall (i) maintain, for two years, its current prices for individual/family healthcare plans in Aracaju city; and (ii) offer to Plamed’s customers the possibility of migrating to Hapvida’s correspondent healthcare plans for two years.
Delta-Latam joint venture unconditionally cleared
Delta Air Lines and Latam Airlines Group’s joint venture, through which the companies will jointly offer air transportation services in the passengers and cargo segments on routes between the USA, Canada and South American countries, was unconditionally approved by the CADE’s Tribunal .
The case, which had been approved without conditions by the CADE’s SG in September 2020, was submitted to the Tribunal’s analysis after being adjudicated by the Commissioner Lenisa Prado, due to the high market concentration resulting from the transaction, reaching 80%-90% in some market scenarios.
In a decision led by the Reporting Commissioner Luis Braido, the Tribunal concluded that the transaction “does not seem to stiff competition in a considerable part of the relevant market, does not create or strengthen dominant position, nor does it result in dominance of the relevant market for goods and services”. Additionally, the transaction would result in efficiencies to be transferred to consumers, due to price reduction.
CADE’s Tribunal also decided to reopen a former deal between Delta and Latam, which was approved by it in 2020, to verify whether the parties submitted misleading information on overlaps between Latam over Aeroméxico.
Low-level employees convicted in a cartel probe
A recent debate over cartel penalties has cast doubt on whether CADE can impose fines on all company employees regardless of their level.
On this regard, on February 3rd, CADE’s Tribunal fined two companies and three individuals for engaging in a cartel conduct in the market of telecom-components after an extensive debate on whether low-level employees could be fined by CADE.
On one side, Commissioners Sérgio Ravagnani, Paula Azevedo and Lenisa Prado found that individuals who did not hold “administrator” position at the time of the conduct could not be fined. On the other side, following the dissent led by Commissioner Luiz Hoffman, the majority of the Tribunal decided that the Brazilian competition law is applicable to any entity or person who has participated in a cartel, regardless of their job title. Therefore, by majority, CADE’s Tribunal decided for the conviction of a low-level employee for the cartel conduct.