CADE blocks Trevo acquisition of Knauf

On 17 April, the Tribunal of the Administrative Council for Economic Defense (CADE) unanimously decided to block the acquisition by Knauf Brazil of a drywall manufacturing plant of the company Trevo Industrial de Acartonados. 

In Brazil, gypsum drywall is increasingly used in construction, especially in commercial buildings. The product is made in an industrial process using gypsum ore, water aggregate, additives, and paperboard applied to both sides of the walls. According to the Rapporteur Commissioner Victor Oliveira Fernandes, there are no substitute products and only four supplies in the Brazilian drywall market, including Knauf and Trevo. Mr Fernandes also stated that despite the market having grown more than eightfold between 2006 and 2022, no new competitors have entered in recent years. 

The rapporteur commissioner of the case highlighted that the Office of the Superintendent General challenged the transaction due to competition issues. He also mentioned the attempts to apply antitrust remedies, that could avoid the case objection. Victor Oliveira Fernandes observed that the proposal of behavioural remedies consisted mainly in production plans and price fixing, which are difficult to monitor and potentially inefficient. “The applicants’ proposals were insufficient to mitigate the competition concerns arising from the acquisition, which resulted in blocking the transaction.” 

The transaction review also revealed that the market entry conditions could be harmed especially in the northeast region of Brazil. The Tribunal of CADE concluded that the potential of this region to the growth of the Brazilian demand will promote a competitive environment.  

 Access Case no. 08700.003198/2023-01.