Cade approves transport “joint venture”

The creation of a transport joint venture (JV) between Amaggi Exportação e Importação Ltda., Bunge Alimentos S.A., Cargill Agrícola S.A., Louis Dreyfus Company Brasil S.A. and Sartco Ltda. was approved by the Administrative Council for Economic Defense (Cade). An employee of the municipality concluded that the business could be carried out without restrictions. However, he stressed that the approval of the deal "does not prevent or harm any future investigation".

• ATTENTION: see the case update later in this article. •

The operation was reported by Cultivar Magazine on 17/05/2023 ("Amaggi, Bunge, Cargill, LDC and Sartco intend to create a transport company")

During the administrative process, it was found that the business does not lead to horizontal concentration, but involves the following vertical integrations: (a) road transport of cargo by the JV with the companies' activity as shippers of agricultural cargo; (b) demand for road freight by the JV with the intermediation of road freight through software, an activity carried out by Carguero and Vector; and (c) demand for electronic payment of freight by the JV with electronic payment of freight, carried out by Green Net, a subsidiary of Carguero.

Despite this, the entity's reviewer states that "the companies presented to Cade the instruments in which the safeguards that govern the relations between them, the JV and any users thereof are foreseen. This SG [general secretariat, Cade's body] understands that they are measures capable of mitigating the risks of coordination and exchange of sensitive information between applicants". In the next point, she adds that the companies "attached to the files an Antitrust Governance Protocol, with commitments that aim to guarantee respect for antitrust legislation". The complete content presented by the companies could not be analyzed, as it was classified as "restricted access".

In any case, simplifying the matter, companies promise to comply with the law.

Opinion No. 18/2023/CGAA1/SGA1/SG/CADE was signed by Alexandre Barreto de Souza, general superintendent, on 11/08/2023, at 18:46 pm. SG Order nº 1058/2023, an administrative act that approved the opinion and authorized the operation, was also signed by Alexandre Barreto de Souza, general superintendent of the municipality, on 11/08/2023, at 18:46 pm. (UPDATE 15/08/2023: on 14/08/2023, Opinion No. 18/2023/CGAA1/SGA1/SG/CADE was also signed by "Danielle Kineipp de Souza, substitute General Coordinator, on 14/08/2023, at 10:30"; and "Diogo Thomson de Andrade, Deputy Superintendent, on 14/08/2023, at 16:04".)

There has not yet been publication in the Official Gazette of the Union. It should occur next Monday or Tuesday. (It was published on 15/08/2023, a Tuesday.)

CASE UPDATE (29/08/2023)

On 29/08/2023, the National Transport Confederation (CNT) petitioned Cade protesting against the decision that allowed the concentration act. This is a measure provided for in Law 12.529/11, which can be used by third parties interested in the case. One of the effects is the suspension of the effects of the decision that allowed the business to be carried out.

According to the statement, the CNT "disagrees with the conclusion that there would be no serious risks to the closure of the market for transport companies due to the Operation. This is because, as will be outlined, in the Confederation's view, the Superintendency's conclusions do not reflect the real functioning and dynamics of the cargo transportation market, especially considering the agricultural cargo segment".

When analyzing the appeal, Lenisa Rodrigues Prado, Cade's advisor, considered it necessary for the case to be assessed by the Administrative Court for Economic Defense (a collegiate body of the local authority).

His statement included:

"40. Therefore, the Merger Act under discussion lacks data that reflects the current reality to support its approval, meaning that a new investigative analysis by the Superintendency will be necessary.

41. One of the central issues in competitive market practices refers to the sharing of competitively sensitive information between companies. The possibility of coordination and exchange of this type of information can create scenarios where competition is unduly harmed.

42. The situation becomes even more complex when we consider the alleged dominant position of the applicants in their respective markets. This dominant position can potentially facilitate coordination in the segment, further increasing the risk of anti-competitive practices.

Further on, he added:

"49. Finally, I am concerned that the approval of this Operation without any restrictions opens space for the creation of a situation analogous to a monopoly, with a high probability of raising strategic barriers to entry (cost and access) and accommodation of competition in this sector. "

For these reasons, the counselor ordered the administrative process to be recalled for trial. Avocation is a figure of administrative law. In a nutshell, it means that the hierarchically superior authority, in certain situations, has the power to bring to its attention a decision made by a hierarchically inferior authority for reassessment.

There is no date set for trial.

CASE UPDATE (15/08/2023)

On 14/08/2023, there was a meeting between representatives of one of the legal entities involved and a public agent from Cade. On the same date, later, counselor Lenisa Rodrigues Prado reviewed her position. She declined the call proposal. As a consequence, there was a “final res judicata” (closing of the discussion at the administrative level).