CADE publishes Guidelines on Horizontal Mergers

During the Tribunal session of 27 July, the Administrative Council for Economic Defense – CADE released the new Horizontal Merger Guidelines – Guideline H. Submitted to public consultation between March 17 and April 30, the document clarifies the agency’s assessment of mergers related to agents acting in the same stage of the production chain.

The Guidelines’ objective is to enhance the transparency of CADE’s assessment regarding horizontal mergers, provide guidance to public authorities by offering  the best competition practices available, and assist market agents in assimilating the procedures adopted by CADE in operations, such as mergers and acquisitions. 

The Guidelines are structured on the following items: analysis; information sources; relevant market; concentration levels; unilateral effects; purchase power; coordinated effects; efficiency gains; complementary and alternative methods; merger-related judicial recovery proceedings; and a non-competition clause.

The document outlines CADE’s competencies regarding the assessment of horizontal mergers and highlights market agents’ good practices that may speed up the proceeding.

The Guidelines on Horizontal Mergers is the second document released by CADE concerning this subject – the first one was released in 2001 and was developed in partnership with the extinct Secretariat for Economic Law, of the Ministry of Justice (SDE in its acronym in Portuguese) and the Secretariat for Economic Monitoring, of the Ministry of Finance (SEAE in its acronym in Portuguese).

In line with the best antitrust practices abroad, the new version of the Guidelines  is based on the new Brazilian Competition Act (Law No. 12.5291/11), which restructured the Brazilian Competition Defense System and adopted the pre-merger review system.

Moreover, the new Guidelines present significant changes, when compared to the first one. Whereas in the latter the definition of relevant market was presented as the first step in the agency’s antitrust analysis – and as one of the most important steps in the assessment, the new Guidelines present methodologies that may disregard such definition in specific cases (such as counterfactual analysis and some simulations).       

Conversely, in cases where the relevant market definition continues to be used, the Guidelines present complementary methodologies, such as the Critical Loss Analysis, among others.

The new Guidelines also include the analysis of portfolio power, potential competition, ‘mavericks’ elimination and partial acquisitions, thus representing an important update in the assessment of mergers and deepening the analysis of specific issues concerning competition barriers.

Additionally, the Guidelines approach market participation and balance, inputs supply to competitors, unilateral effects, homogenous and differentiated products, purchase power, consumers’ welfare and coordinated effects, among other relevant subjects.