Acquisition of Uniseb by Estacio is approved with restrictions

The Administrative Council for Economic Defense – CADE approved with restrictions the acquisition by Estácio Participações S/A of 100% of quotas representing the social capital of TCA Investimentos em Participações Ltda., a company of Grupo SEB and controller of União dos Cursos Superiores SEB Ltda., also known as Uniseb (Merger file no. 08700.009198/2013-34).

The Tribunal verified that the transaction has potential to generate anticompetitive effects in the distance learning market in nine cities, in which there were identified 20 problematic courses.

The conjoint participation of Estácio and Uniseb in the national distance learning market – almost 9% - was considered pro-competitive as far as it generates capacity to compete more effectively with major players, such as Kroton and Anhanguera, that own a market share of 27% and 13% respectively.

To solve the competition problems identified in the municipal level, Estácio and Uniseb signed a Merger Agreement (ACC for its acronym in Portuguese) with CADE through which they commit to limit the students’ enrollment in the affected locations during four academic semesters, starting in 2014.

In the second academic semester of 2014 and in the first academic semester of 2016, the number of enrollments in the institutions shall not surpass half of the total achieved in 2013.

In the 2015 academic year, in three courses the number of enrollments in the institutions shall not surpass the sum of the total registrations of 2013. To the other 17 courses, the limit is the total number of new students of the company that registered more enrollments in the specific year.

Efficiencies – The ACC was proposed by the institutions and accepted by the Council. To the Reporting Commissioner, Ana Frazão, the remedy presented is enough to solve the problems identified in the transaction, once the offer restriction established by the agreement will create incentives to a third party to absorb the demand.

“It is necessary to overcome the absence or the fragility of rivalry in the few problematic markets. The behavioral remedy intends to create favorable conditions to the entry or expansions of competitors, being possible to restore sufficient competition and to prohibit eventual exercise of market power”, stated.

The Reporting Commissioner highlighted that in the nine cities there are rivals with potential to compete effectively. Even if some of them do not currently offer the problematic courses pointed by the analysis, they could quickly absorb the demand due to the existence of structured institutions already accredited by the Ministry of Education.

The unjustified non compliance of the obligations subjects the parties to the payment of a BRL 12,000 fine per each student that surplus the limit established by the ACC, and to the possibility of transaction review by CADE.