Acquisition of American Chemical by Oxiteno cleared by CADE

The acquisition of the Uruguayan company American Chemical I. C.S.A by Oxiteno S.A. Indústria e Comércio was approved by the Administrative Council for Economic Defense – CADE on this Wednesday’s (20) judgment session. The Tribunal’s approval, however, was conditioned to the signing of a Performance Agreement (“TCD” for its acronym in Portuguese).

The operation (Merger No. 08700.004083/2012-72) involves the manufacturing market of chemical components such as sodium lauryl ether sulphate (LESS), linear alkylbenzene sulphonate (LAS), and lauryl alcohol ethoxylate (LAE), used in the production of household cleaning and personal hygiene products like detergents, washing powders, shampoos and liquid soaps.

According to the reporting commissioner, Ricardo Machado Ruiz, although the operation increases substantively Oxiteno’s participation in the LESS supply market, there are other producers from MERCOSUR that guarantee the competition in the sector.

Moreover, in this market, the access of new competitors is feasible, since companies that only produce LAS have high capacity of also manufacturing LESS on the same plant. This expansion would consist basically on the implementation of one more stage in the production chain – which demands low investment.

The reporting commissioner also highlighted that in the LAE market, whose production in Brazil is done exclusively by Oxiteno, the imports are also possible. “The possibility of importing the input and the existence of a large supply source with various global economic agents render impossible the excessive increase of prices by Oxiteno, since there is the beaconing of the imported product price”, he explained.

In order to take away any possibility of market closure and to prevent any competition abusive discrimination by Oxiteno, there was the signature of a TCD.

Under the terms of the agreement, the company commits itself to provide LEA to LESS producers in a determined price flotation band. The TCD does not fix prices or any business conditions, but limits what can be considered “commercial usages and practices in the LEA market” – what does not configure refusal to supply or abusive discrimination, making it viable to purchase the product and allowing competition.