CADE imposes restrictions to JBS and Rodopa transaction

The Administrative Council for Economic Defense – CADE approved with restrictions on 20 August 2014, the leasing by JBS of three cattle slaughtering units of Rodopa Indústria e Comércio e Alimentos Ltda. The plants subjected to the transaction (Merger File no. 08700.010688/2013-83) are located in the cities of Santa Fé do Sul, in the state of São Paulo, Cassilândia, in the state of Mato Grosso do Sul, and Cachoeira Alta, in the state of Goiás.

CADE’s Tribunal followed the understanding of the General Superintendence that the merger could lead to the absorption by JBS of a relevant competitor in the market composed mainly by small slaughterhouses.

To address the competition concerns, the approval was conditioned to a series of commitments settled by a Merger Control Agreement (ACC for its acronym in Portuguese). Among the obligations, Rodopa will have to divest one of its brands and to put into function two cattle slaughtering units currently inactive. The reactivation may happen either by Rodopa’s own initiative or by selling the units to third parties.

JBS must maintain the plants subjected to the transaction operating. CADE understands that the plants must be active to guarantee one more point of sale to the cattle farmers, and to guarantee one more company offering meat to the consumers. It is expected that this measures will increase competition in the sector.

JBS also committed not to acquire new units in states in which the company holds a determined market share. The share limit is confidential.

In the states in which JBS’ market share has not been affected by the transaction, the company commits to notify CADE of any acquisition, rental or leasing of cattle slaughtering units for the next years.

Reporting Commissioner Márcio de Oliveira Júnior reminded that the agreement also determines that the companies must maintain an open door policy with CADE. This means to grant access to its premises to any agency employee to perform inspections upon a 72 hour-request and regardless the existence of a court order.

The Commissioner also stated that “as this market has been changing influenced by the its major companies’ own activities, it is essential to CADE to analyze future transactions and to be able to have full access to market information, which brings extreme importance to the terms agreed”.