CADE conditionally clears DaVita’s acquisition of Brasnefro

On 23 May, the Administrative Council for Economic Defense (CADE) cleared Davita’s full acquisition of Brasnefro, with restrictions. The company is a Brazilian branch of the German group Fresenius Medical Care. 

The transaction, which covers dozens of haemodialysis clinics in the country, was approved subject to the Merger Control Agreement negotiated with the Tribunal of CADE, imposing structural and behavioural remedies. 

The merger transfers the clinics’ healthcare activities and contracts on dialyses services to DaVita, while Fresenius will remain providing equipment and inputs. 

Commissioner José Levi, rapporteur of the case, mentioned competition concerns regarding the high levels of concentration in local haemodialysis markets in some Brazilian cities such as Recife, João Pessoa, Rio de Janeiro, São Paulo, and the  Federal District. 

According to the rapporteur, the combination of remedies in the Merger Control Agreement is the most appropriate and proportional alternative to ensure the preservation of a competitive environment, besides being enough to mitigate the risks associated with market concentration and to avoid abuse of market power, given the barriers to entry and low rivalry. In addition, Mr Levi highlights that the vote materialises CADE’s monitoring of the Brazilian haemodialysis market. 

Remedies 

Mr Levi stated that CADE imposed the obligations to mitigate the competition concerns identified, suggesting the clearance of the transaction subject to remedies. 

Therefore, the Merger Control Agreement imposes the sale of the petitioners’ clinics in the Brazilian cities of Recife, João Pessoa, São Paulo, Rio de Janeiro, and the Federal District, in order to reduce DaVita’s participation in the market and to encourage competition, allowing the entry of new players. 

Among behavioural requirements, DaVita has to make a mandatory notification of all transactions in Brazil for five years, even if they do not fulfil the criteria, the prohibition of acquisitions in the Brazilian cities of São Paulo and Rio de Janeiro for three and four years, respectively; and the adjustment of the non-competition clause to a term and scope compatible with CADE's case law. 

In this regard, CADE must monitor DaVita, and may impose fines in case of non-compliance of these conditions. A trustee will assist the fulfilment of all obligations in the Merger Control Agreement and the authority will supervise it.