CADE assesses the pricing strategy of building materials companies

On 3 April, the Administrative Council for Economic Defense (CADE) reviewed the consultation document presented by the companies Cassol and Todimo, from the building materials market. The Tribunal of CADE became aware of the consultation and unanimously concluded that the pricing strategy proposed is legal, from a competitive perspective. Likewise, the strategy does not constitute a partnership agreement.

The companies filed a request for CADE’s assessment, regarding the possibility of acting jointly to negotiate supply terms with their main suppliers. To this end, the parties proposed the creation of a purchasing committee comprised of their members, which would be responsible for hiring suppliers and negotiating with them, placing orders, and managing stocks.

According to the companies, the agreement would increase its negotiating power, by combining sales volume and a wide variety of products. The result would be an increased supplier base, a lower transaction cost, and, consequently, an improvement in the consumers' well-being. 

Even though Cassol and Todimo operate in the building materials retail market, they claim not to be competitors from a geographical perspective, since they own businesses in different municipalities. On the other hand, at a national level, the companies are competitors in the acquisition of the building material market. 

Carlos Jacques, the rapporteur of the case, issued a favourable opinion and highlighted the lack of evidence of monopsony power. He claims the companies do not compete directly at the municipal level. Besides, the commissioner mentioned the lower market share, as well as the contract and market characteristics. His vote was unanimously supported by the members of the Tribunal. 

In addition, the commissioner also underlined that the risk of sharing competitively sensitive information is mitigated in this case, due to the characteristics of the agreement.

Lastly, Carlos Jacques, highlighted that the Memorandum of Understanding does not constitute a partnership agreement, as there was no organisation capable of characterising a joint venture structure and no risk-sharing. As he stated, “For the record, the decision does not affect CADE’s performance in terms of structural control, in case the consultants do not act within the limits of their Memorandum of Understanding, or if there are future investigations for merger reviews”. 

Access the case no. 08700.001177/2024-23.