A regulatory clearance regime applicable to mergers and similar transactions is set forth by Law No. 12.529/2011 ("Antitrust Law"), which came into force on May 29, 2012.

Such a law adopted a suspensory merger control regime, under which the parties may only close and implement a transaction subject to mandatory filing in Brazil after obtaining final antitrust clearance. As such, antitrust clearance is a condition precedent to the closing of the transaction. Parties must remain independent until antitrust clearance is obtained, which includes the exchange of commercially sensitive information between the parties that exceeds the transaction’s perimeter.

The Antitrust Law also regulates contractual matters that require antitrust clearance prior to its implementation - such as Associative Agreements, as set forth in Regulation No. 17/2016, as further explained in item 5.

The Brazilian System for Competition Defense (“SBDC”), which is responsible for the defense of competition in Brazil, including merger reviews, is formed by the Administrative Council of Economic Defense — ("CADE"), which is composed of CADE's tribunal, the General Superintendence ("GS") and the Department of Economic Studies, all directly involved in the analysis of merger cases.

It shall be also noted that the Secretariat of Economic Monitoring - ("SEAE") - also composes the SBDC, being in charge of competition advocacy and the Intensive Front of Regulatory and Competition Evaluation (“FIARC”), which evaluates the competition impacts of norms and regulations within all governmental instances and actively advocates for procompetitive amendments to such norms.

In addition to the above, other national agencies may also play an additional role in merger cases involving certain sectors, such as the Brazilian Central Bank (“BACEN”)- for matters involving transactions among banks and the National Telecommunications Agency (“ANATEL”)- which has jurisdiction on regulatory aspects of mergers involving telecommunication companies.

No. CADE is the only Competition Authority responsible for merger review in Brazil. 

As mentioned above, depending on the market involved in a given transaction, it may also require clearance from other agencies responsible for the regulation of specific sectors, such as BACEN and ANATEL, as well as the National Health Surveillance Agency ("ANVISA"), the National Agency of Energy Electricity ("ANEEL"), the National Civil Aviation Agency of Brazil ("ANAC") and the National Petroleum Agency ("ANP").

Pursuant to the Brazilian Antitrust Law, a filing in Brazil is mandatory if all the elements of a three-prong test are met:

• Effects test: The transaction or agreement must have actual or potential effects in Brazil. A given transaction has effects in Brazil if (i) it takes place in Brazil, or (ii) even though the transaction takes place abroad, the target (or the new company in the case of a joint venture) has or will have direct and/or indirect presence (e.g., through exports) in Brazil;
• Revenues thresholds: At least one of the economic groups involved in the transaction or agreement has registered gross revenues in Brazil (including export sales) in excess of BRL 750 million in the year prior to the transaction, and at least one of the other groups involved registered gross revenues (including export sales) in Brazil in excess of BRL 75 million in the year prior to the transaction; and
• Concentration test: The transaction or agreement amounts to a concentration pursuant to the definitions set out in Brazil's competition law (e.g., share capital acquisitions (20% or 5% when competing firms are involved), joint ventures, private consortia, etc.).

Pursuant to Article 90 of the Brazilian Antitrust Law, the following transactions satisfy the concentration test:

• mergers;
• acquisition of control (sole or joint) or stake in companies through the purchase/exchange of stocks, shares or assets (the transaction is also reportable if the minority thresholds explained in the section below are met);
• associative agreements, which according to CADE’s Resolution No. 17/2016, refer to those where the parties to the agreement are competitors in the relevant market affected by the agreement. In such cases, other requirements apply (a) a minimum term of 2 years; (b) the creation of a joint undertaking to pursue an economic activity; and (c) the share of risks and results of the economic activity;
• consortia and joint ventures; and 
• acquisition of convertible securities provided that (a) such securities are attached to rights to appoint members to the managing board, board of directors, supervisory board or voting/veto rights over competitively sensitive issues; and (b) upon future conversion into equity, the securities result in the holding of joint or sole control, 20% or more of the capital or voting stock of the target, or 5% or more of the companies involved if they refer to competitors or vertically related companies.

As an exception to the rules provided above, pursuant to Article 90, the sole paragraph of the Antitrust Law, any consortia and joint ventures formed for the sole purpose of participating in public tenders and aimed at the execution of public contracts are exempted from mandatory filing.

In addition, it shall be noted that once the acquisition of the convertible securities is cleared by CADE, the actual conversion of the securities into equity is exempted from submission. In this regard, the regulation provides that the calculation of the number of shares acquired should be made under a hypothetical exercise as if they were to be converted on the subscription date.

The Brazilian Antitrust Law sets forth the following specific thresholds for the acquisitions of minority stakes:

• acquisitions of 5% or more of the total/voting shares of the target must be reported when the transaction involves a competitor or a vertically-related entity; and
• for all other situations involving non-competitors or non-vertically-related entities, the transaction shall be reported when 20% or more of the total/voting shares of the target is being acquired (if the buyer already holds 20% or more, each additional acquisition of a 20% or more interest shall be reported).

It is to be noted that the filing obligation does not apply to stakes acquired by the controlling shareholder already exercising sole control over the target.

Foreign-to-foreign transactions are captured by the merger control regime whenever the transaction produces effects in Brazil.

In this regard, and as a general rule, local effects are found whenever the target has assets, sales, or a subsidiary in Brazil. A filing would also be recommended in the event that Target holds an effective plan to enter the Brazilian market.

It should be noted that the Brazilian Competition Authorities have a wide interpretation of the effects test. In this regard, at least in one precedent involving the banking sector, CADE considered that the offer of financial services to Brazilian clients located outside Brazil would satisfy the local effects test. CADE has also suggested more than once that a global market definition would result in the obligation to report, due to potential effects in the Brazilian market.

Please refer to the response to the question, "Are there merger filing requirements? If so, where are they set out?"

Filing in Brazil is mandatory in case all merger filing requirements (item 4) are fulfilled. In addition, CADE may also require a transaction to be submitted for a period of up to 1 year after the closing of the transaction, even if the thresholds for mandatory filing are not met.

A filing shall be made at any time prior to the closing of the transaction.

There is no deadline or triggering event for the submission of the transaction to CADE. CADE’s regulation provides that the submission should preferably - but not necessarily - be made after the execution of a formal legal instrument that binds the parties. 

If the transaction does not move forward, the parties may withdraw the notification, but the filing fee of BRL 85 thousand shall not be refunded.

Brazil has adopted a suspensory merger control regime under which the parties can only close and implement a transaction subject to antitrust filing in Brazil after obtaining final antitrust approval. 

CADE’s Antitrust Laws further set forth that the parties shall maintain their physical structures and competition conditions unchanged until final approval from CADE, being prohibited, for instance, to transfer any assets and exercise any type of influence from one party to the other, as well the exchange of sensitive commercial information which is not strictly necessary for the execution of the formal agreements between the parties.

CADE’s Resolution No. 33/2022 updated the previous resolutions and provided Exhibits I and II, which contain relevant information for the submission of the transaction under the regular and fast-track procedures, respectively.

It is to be noted that a fast-track procedure shall be adopted when the transaction does not raise competition concerns from an antitrust standpoint, in the situations described in CADE’s Resolution No. 33/2022.

A filing fee of BRL 85,000 shall be paid by the submitting parties prior to the transaction’s assessment.

There are two different procedures under which the parties may submit the transaction: the fast-track procedure and the regular procedure.

The fast-track procedure takes, on average, 21.4 calendar days and the GS must not exceed a 30-day limit for its assessment, counted from the submission date. Fast-track cases are unconditionally approved by the GS, but can be challenged by CADE’s Tribunal, third parties or regulatory agencies.

The assessment of cases submitted under the regular procedure takes, on average, 125.4 calendar days. Under such cases, technically the review may take up to 240 calendar days, which can be further extended for an additional 60 calendar days for assessment if requested by the parties or by an additional 90 calendar days if requested by CADE’s Tribunal. Regular procedure cases may be approved unconditionally by the GS or may be referenced to CADE’s Tribunal for conditional approval (with remedies) or blocking. CADE’s Tribunal has the ultimate decision on these cases.

Complex mergers, which usually result in high concentrations and discussions on efficiency and remedies between the parties and CADE, usually take a longer time, varying from 180 days to up to 330 calendar days.

Merger cases which are reviewed under the regular procedure are sometimes declared “complex” by the GS. When the GS declares the case complex, it usually (i) requires an economic study from CADE’s economic department, (ii) grants the parties the chance to present efficiencies resulting from the transaction, and (iii) determines further prosecution, as well as demand additional diligences, such as request information from customers, suppliers, and competitors.

CADE may further admit third-party intervention, such as customers, suppliers, and competitors, provided that such request is filed with CADE within fifteen days following the publication of the summary of the transaction in Brazil's Official Gazette.

It is important to mention that there is a 15 calendar day waiting period (regardless if the transaction is analyzed at the fast track or regular proceedings) after the publication of the clearance opinion by the GS in the Official Gazette. This is the time period granted to interested third parties to appeal to CADE’s Tribunal or for a commissioner of CADE’s Tribunal to call the case for review.

According to § 5 and 6, Article 88 of Law 12.529/2011, transactions that may result in a substantial reduction of competition in a relevant market or which tend to create or reinforce a dominant position or result in market domination, must be prohibited by the antitrust authority. 

The exception is made for those circumstances in which the applicants demonstrate that the transaction should increase productivity or competition, improve the quality of goods and services, provide technological and economic development, and demonstrate the benefits transmitted to consumers.

CADE’s tribunal may either:

• approve the transaction unconditionally;
• approve the transaction conditionally; or
• block a transaction. 

The GS may only issue a final unconditional clearance decision. In case it concludes that a transaction requires any type of remedy, the case must be submitted to CADE’s tribunal.

Remedies are generally discussed with CADE when the transaction raises competition concerns and can be proactively offered by the parties. They could be both structural and behavioral, although CADE has a preference for structural remedies. 

The parties can submit a remedy proposal to the GS (in the early stages of the process), or, if the case is already in the Tribunal, parties must submit the proposal to CADE up to thirty days after the GS concluded the review.

CADE’s GS highly recommends that the parties submit remedies early in the process, and during the assessment phase once competition concerns are identified.

Failure to submit and subsequent implementation of a mandatory transaction (therefore prior to CADE’s approval) may result in the application of fines for gun jumping, ranging from BRL 60,000.00 to BRL 60 million. In addition, the parties become exposed to a formal investigation regarding their behavior. Finally, the parties will be requested to submit the transaction to CADE’s assessment. CADE has already imposed the highest gun jumping fine of BRL60 million (approximately USD $12,632,642).

If the transaction is incompletely submitted for the assessment of the antitrust authority, CADE’s GS will require the parties to amend the filing form, restarting the timeframe for the analysis from zero. It should be noted that a transaction may only be amended once.

Pursuant to Article 91 of the Antitrust Law, the transaction’s approval may be reviewed by CADE’s tribunal, ex officio or upon request of the GS, if the decision is based on false or misleading information provided by the parties, in case of non-compliance with any of its obligations, or if the intended benefits are not achieved.

In addition, pursuant to the sole paragraph of Article 91, providing false or misleading information shall be also punished with a pecuniary fine ranging from sixty thousand reais (BRL 60,000.00) to six million reais (BRL 6,000,000.00), and the opening of administrative proceedings or adoption of any other appropriate measures.

As mentioned in the item above, the implementation of a transaction prior to CADE’s approval may result in the application of fines for gun jumping, ranging from BRL 60,000.00 to BRL 60 million. In addition, the parties become exposed to a formal investigation regarding their behavior. And finally, the preferred acts of implementation may be annulled by CADE.

The lowest fine applied, through a settlement procedure, was the minimum fine, in the amount of R$ 60,000, while the highest concerned the maximum penalty of BRL 60 million.

Transactions that do not meet the thresholds set forth in the Brazilian Antitrust Law may be subject to ex officio review. The Brazilian Competition Authority may, at its discretion, request parties to notify transactions that do not meet the thresholds within one year of the closing date of the transaction.

The risks in practice highly depend on the visibility of the transaction and on the likelihood of complaints by competitors or customers, which should be assessed on a case-by-case basis. 

There are three main situations where CADE may decide to investigate:

• CADE may read about a merger in the press and become interested;
• CADE may want to assess a transaction involving companies with a dominant market position, which is generally presumed in case that parties hold a market share of 20% or more; or
• CADE may receive complaints from third parties, i.e. most likely competitors, customers, or suppliers, negatively affected by the deal.

With the enactment of Resolution No. 13/2015, CADE established procedural rules for the assessment of transactions caught within the following definitions:

1. merger cases submitted to CADE but implemented before antitrust clearance; 
2. merger cases not submitted to CADE and implemented before antitrust clearance; and
3. merger cases where submission is not mandatory, but may be required by CADE within a year after its closing.

In any of these cases, the GS is responsible for the assessment under a specific procedure named Procedimento Administrativo: para Apurações de Atos de Concentração ("APAC").

For gun jumping investigations (first two items mentioned above), the GS may recommend:

• the proceeding to be shelved;
• the submission of the merger case to the Brazilian competition authority; and/or
• the establishment of an administrative proceeding to investigate the conduct and possibly to impose a fine for gun jumping.

For non-reportable transactions, the GS may recommend the case be shelved or submitted for merger review. In the event that the GS determines the case to be shelved, any Commissioner from CADE’s Tribunal may request to review the case within 15 calendar days. In case the GS understands that the case shall be reported, the APAC shall be submitted to CADE’s Tribunal for a final decision on the competition merits of the case. The Tribunal will be also responsible for the imposition of gun-jumping fines, if applicable.

The recent years were marked by enhanced discussions and cases on abuse of dominance cases and developments in CADE’s relatively consolidated case law on several topics, such as antitrust enforcement in the labor market, which has never been seen before in Brazil. The Brazilian Congress also recently enacted a new law on cartel damage claims, bringing double damages to the surface.

• Antitrust enforcement in the labor market: In 2021 CADE has also opened the first investigation in the labor market, a discussion that has also received some attention around the world and mainly in the U.S. In March 2021 CADE opened an administrative proceeding to investigate whether a group of thirty-seven companies in the healthcare industry (including multinational companies) would have exchanged competitively sensitive information on human resources to support their decision-making on hiring, compensation, and maintenance of employees, and would have also fixed labor compensation. The proceeding is currently in its early stages and defendants are still going to present their defenses. In any case, this decision may provide guidance on antitrust enforcement practice in the labor market and whether this type of conduct will be closer to the ‘information exchange’ spectrum rather than traditional hardcore cartels.
• More activity in the prosecution of abuse of dominance cases: With the new coordination of unilateral conduct cases at the GS, CADE wants to show that it is focusing on the fight against abuse of dominance cases. CADE still has the preference to end these cases with settlements rather than litigating for years. Most of the cases launched in the last 10 years concern unilateral conduct investigations, such as exclusivity arrangements with foreclosure effects, discrimination, and tie-ins, among others.
• New cartel damage claims legislation: With the enactment of a new law in November 2022, a hot topic in Brazil concerns civil damages claims resulting from cartel investigations. The new statute brings double damages incentives for the injured parties against the cartelists. Exception for the double damages and also joint and several liabilities are reserved for those cartels that settle with CADE, through leniency or settlement agreements. It also settles that CADE’s decision is the landmark for the calculation of the five-year statute of limitation period to bring the claims.
• Remedies in merger reviews: The increase in the number of negotiated remedies in 2022 in merger reviews shows the continuous willingness for CADE to negotiate remedies, mainly those with fix-it-first and upfront buyer features.
• Sustainability Agreements: The Brazilian antitrust authority has already come across transactions with sustainability efficiencies. However, such few cases were only analyzed and approved considering antitrust aspects, rather than arguments in favor of sustainability.

Please refer to the response to the question, "Describe, briefly, your assessment of the regulatory agency's current attitudes/activities, including enforcement trends and recent developments."