CADE clears Dabi Atlante and Gnatus Merger

The Administrative Council for Economic Defense – CADE approved, on 25 November 2015, the merger of the companies Dabi Atlante S/A Indústrias Médico-Odontológicas and Gnatus Equipamentos Médico-Odontológicos Ltda. The merger was conditioned to the signature of a Merger Control Agreement (ACC in its Portuguese acronym) proposed by the parties (Administrative Procedure nº 08700.001437/2015-70).

The companies are among the market leaders in the sector of dental products in Brazil. By the ACC, they agreed to adopt structural and behavioral remedies that solve competition problems identified for the following dental products: vacuum pumps; clinical or dental sets; intraoral x-ray; manual instruments; and prophylaxis equipment.

One of the foreseen remedies will be the divestment of the brand “Gnatus” in favor of an economic agent with the needed conditions to be a rival of the new company. “The aim is to create a new competitor to mitigate the anticompetitive effects caused by the merger”, explained the Reporting Commissioner Paulo Burnier.

Dabi and Gnatus also proposed the end of exclusivity on the distribution of the products and the technical assistance services supply, besides not signing any new exclusivity contract of this nature during the period established by the ACC.

On CADE’s evaluation, the proposed remedies will be able to keep the competition in the sector of dental products in Brazil. “The end of the exclusivity in the distribution of products and on the technical assistance services supply, as well as the divestment of one of the main brands, in this case “Gnatus”, are sufficient to preserve the competitive environment in the dental products market”, said the Reporting Commissioner.

Burnier also remembered that the entry of a new player with conditions of competing with the other players will keep the number of competitors existent prior to the merger.

Superintendence – The remedies proposed by the ACC were considered after the merger was challenged before CADE’s Tribunal by technical opinion of the General Superintendence. On August 2015, the Superintendence recommended to the Tribunal not to approve the operation in the form it was being presented.

On this occasion, the Superintendence understood that the merger, as it was structured, could result in price increases and elimination of competitors.

With the ACC and the consequent remedies approved in the session of 25 November 2015, CADE understands that the competition aspects of the market will be preserved.