CADE’s Superintendence concludes opinion about Joint-Venture between Banks in the sector of credit information services

The General Superintendence of the Administrative Council for Economic Defense, in decision published on the Federal Official Gazette on Monday (05/09/2016), recommended to the Tribunal the approval of the transaction. This approval is conditioned to the signature of a Merger Control Agreement, for the joint venture between Banco do Brasil, Bradesco, Caixa Econômica, Itaú  and Santander,  that will create a new credit bureau.

A credit bureau provides services on information concerning defaulting and non-defaulting individuals and legal entities for purposes of decision on granting credit. The new bureau will operate with both non-defaulting and defaulting clients’ records.

After the analysis of the information obtained from the market, the General Superintendence verified that the market of information on defaulting and non-defaulting individuals and legal entities would be affected by the operation due to the existing vertical integration between the banks and the credit bureaus, since banks are at the same time, input suppliers to the bureaus and consumers of services provided by them.

This vertical integration could entail anticompetitive conducts such as the discrimination in access to information generated by the banks to the credit bureaus existing in markets, which will be competitors of the created joint venture, in addition to the discrimination of access of competitors’ banks to the services of the new bureau.

However, the General Superintendence also concluded that the transaction may consolidate the records of consumer’s and companies’ financial information (the so-called Positive Register), which, despite being legally prescribed since 2011 (Law nº12.414/2011), is still in a structuring stage. The consolidation of such database in Brazil may generate positive impacts that go beyond the market of credit information, with the reduction of default rates, interests and banking spreads, benefits that may enjoyed by all credit borrowers.

In this sense, to put away competition concerns coming mainly from the vertical integration between the applicants and the new credit bureau, banks agreed on signing the Merger Control Agreement with CADE, as a condition for the approval of the transaction.  The Merger Control Agreement provides, among other obligations, goals for the expansion of the Positive Register, non-discrimination assurances for competing credit bureaus on credit information access and mechanisms of corporate governance to avoid information exchange between the associate banks through joint ventures.

 The case now goes to CADE’s Administrative Tribunal, which is responsible for the final decision.

The Merger (nº 08700.002792/2016-47) was notified in April 2016 and the legal deadline for CADE’s final decision is 240 days that may be extended for additional 90 days.