CADE's investigative arm recommends Pague Menos' acquisition of Extrafarma be conditionally cleared

CADE's investigative body remitted the acquisition of the pharmacy chain Extrafarma to the Tribunal, suggesting its approval subject to a merger control agreement to preserve competition in the pharmacy market.

Pague Menos is a retail pharmacy chain which operates across Brazil and distributes medicine, cosmetics, and personal care products. Imifarma Produtos Farmacêuticos e Cosméticos (Extrafarma) is a company with retail pharmacies in ten Brazilian states that also works as a wholesale supplier of medicine, cosmetics, and personal care products; moreover, the company is a distributor of medicine, cosmetics, and personal care products, primarily to its own pharmacies.

CADE observed the parties involved compete in 37 municipal markets and 130 neighbourhood markets. Their combined post-merger market shares would be higher than 40% for 16 municipal and 52 neighbourhood markets, calling for a more in-depth examination of these areas.

Against this backdrop, the agency assessed the potential entry barriers in those places, detecting the actual rivals, their competitive capacities, and their presence in each municipality and neighbourhood where there were some competition concerns. Eight towns were considered problematic.

Hence, to mitigate the competitive issues, Pague Menos and Extrafarma proposed a merger control agreement, suggesting a divestiture that the authority considers could ease the entry of new players, thus allowing the deal’s clearance.

The Tribunal of CADE will now hear the case for a final decision on the merger.

Access Case no. 08700.005053/2021-74.