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Inventory of Domestic Laws and Regulations Relating to
Competition Policy in the Western Hemisphere

Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies

VIII. Economic Considerations (Mergers, Acquisitions, Joint Ventures)



Private economic power shall not be allowed to accumulate to the extent that it endangers the economic independence of the state. No form of private monopoly is recognized. When public service concessions are granted, as an exception to this policy, they shall not be for longer than 40 years. (Constitution, Article 134).

As provided in the Constitution, no form of private monopoly is recognized. Activities of production, domestic marketing, export, import, and financial services cannot seek protected status from the government. They must operate in a framework of economic efficiency and competition. (Investment Law, Article 14).

Companies incorporated in the country, state enterprises, including independent companies and citizens or foreigners resident or represented in the country, may associate with each other in joint ventures for any activity permitted under law. (Investment Law, Article 17).

Merger of competitive companies and entities subject to regulation under this law shall be prohibited if it would result in establishment, encouragement, or consolidation of a dominant position in a given market.

For the purpose of this law, a company or entity shall be considered to have a dominant position in the market if it is the only buyer or seller of a given type of regulated goods or services, or if not the only one, it lacks substantial competition in the market. (Sectoral Regulation System Law, Article 18).


Brazilian legislation provides for controls on all acts and contracts that may limit or in any way harm free competition or result in the dominance of relevant markets of goods or services.

These acts include those expressly aimed at any type of economic concentration, be it through merger or incorporation of firms, chartering of corporation or partnerships to exercise control of a firm, or any type of corporate organization.

It requires measurement of market share by all companies or groups of companies with more than a 20% share in the relevant market, or gross annual receipts of at least R$ 400,000,000.00 (four hundred million reals) on record for any market participants.

Notification can be a priori or a posteriori, within a maximum term of 15 working days after the transaction.

Oversight is exercised by the Administrative Council for Economic Defense (CADE), which may authorize acts involving economic concentration if it deems justified the increased economic efficiencies invoked by the participants and the advantages to the consumers or end users, so long as it does not eliminate a substantial part of the relevant market, and abides by the limits strictly necessary for attaining the objectives sought with the operation.

The efficacy of the acts submitted to the CADE for review is conditioned on its approval, in which case it will be retroactive to the date they were effectuated. If not reviewed by the CADE in the time period established by law, they will automatically be considered approved.

The approval may be reviewed if the decision is based on false or deceitful information provided by the interested persons, if there is non-compliance of any of the obligations assumed, or if the benefits sought were not attained.

In case of non-approval, the acts not carried out subject to suspension, or if they have already had effects on third persons, including physical persons, the CADE will determine the appropriate measures to undo them in their entirety, or in part.


The Act defines mergers as the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person. (Section 91).

The Director of Investigation and Research (the "Director"), who directs the Competition Bureau, may consider all mergers, proposed or otherwise, in all sectors of the economy, which come to his attention. Where a transaction prevents or lessens, or is likely to prevent or lessen, competition substantially, the Director may ask the Competition Tribunal (the "Tribunal") to issue a remedial order in accordance with the provisions of the Competition Act. (Section 92).

The Act provides a list of factors which the Tribunal may consider in making its determination. (Section 93).

Other merger provisions include:
(I) Section 92 (2): stipulating that the Tribunal's finding cannot be based solely on evidence of concentration or market share;
(ii) Section 96: containing an exception, with some restrictions, for situations where the merger brings about, or is likely to bring about, gains in efficiency. Such gains must be greater than and offset, the effects of any prevention or lessening of competition, and these gains would not likely be attained if the order were made; and (iii) Section 97 stipulating that no application can be made by the Director in respect of a merger more than three years after that merger has been substantially completed.

Review before the Competition Tribunal.
A merger that the Director believes will prevent or lessen competition substantially may be taken to the Tribunal for review any time up to three years after completion of the transaction. If the Tribunal finds that a merger prevents or substantially lessens competition, it may order the dissolution of the merger or the disposition of assets or shares. In the case of a proposed merger, the Tribunal may order that the merger not proceed, or prohibit the parties, shoud the merger be completed, from doing anything that prevents or substantially lessens competition. In the case of completed mergers, the Tribunal may issue an order of dissolution or require divestiture of assets or shares. Regardless of whether the merger is proposed or completed, the Tribunal may also, on consent of the Director and those against whom the order is directed, require that any other remedial action be taken to counter the anti competitive effects of the merger. Where an application is made to the Tribunal for a consent order, the tribunal may make the order on those terms.

The Merger Enforcement Guidelines.
The Director's approach toward mergers has been described in considerable detail in the 1991 Merger Enforcement Guidelines (the "Guidelines"). The Guidelines also set out certain "safe harbours" that will, in most cases, be sufficient to satisfy the Director that a merger will not result in a substantial lessening or prevention of competition. A merger will likely not give rise to a challenge on the basis of unilateral exercise of market power if the merged entity has a post-merger market share of less than 35 percent. The merger will also be unlikely to raise concerns about inter-dependent exercise of market power if the merged entity's post-merger market share is less than 10 percent and the concentration of the share of the market accounted for by the largest four firms in the market post-merger is less than 65 percent.

There is no presumption that certain mergers are anti--competitive. Subsection 92(2) prevents the Tribunal from making an order solely on the basis of evidence relating to market share. There is no bias against bigness in Canadian merger policy. There are no "likely challenge" bright lines relating to market share or concentration. Nevertheless, given that high market share or concentration is a necessary condition that must exist before anticompetitive outcomes can result from a merger, the Guidelines set forth market share and concentration bright lines below which challenges are unlikely to occur.

The sole function of these bright lines is to screen out the vast majority of mergers that do not present the potential for anticompetitive effects. These thresholds do not give rise to any presumption or adverse inference regarding the effect that a merger is likely to have on competition. They merely separate those mergers that do not warrant significant review ln terms of the various sectors set forth in section 93 of the Act, from those that do.

Requirements to notify the Director of Investigation and Research:
Part IX (sections 108 to 123) of the Act dealins with notifiable transactions. Certain large mergers may be subject to pre-closing notification and waiting period requirements. There are two general thresholds to the application of these provisions. First, the parties to the transaction together with their affiliates must have assets in Canada or annual gross revenues for sales in, from or into Canada in excess of C$400 million. The C$400 million values are determined by aggregating all assets and sales of all member of the two corporate families including controlled and controlling affiliates. The second threshold is one that involves examining the nature of the transaction itself. In the case of an acquisition of assets, the value of the Canadian assets acquired or the annual gross revenues in or from Canada generated by those assets must be greater than C$35 million. In the case of an amalgamation, this second threshold is C$70 million for the two companies.

In the case of an acquisition of voting shares, pre-notification is required where the same C$35 million asset or sales threshold is met and the acquisition results in the acquiring party holding voting shares which exceed specified percentages of share ownership. In the case of a publicly traded company, this threshold is 20% of the outstanding voting shares (or 50%, if 20% is already owned).

Failure to notify a notifiable transaction is a criminal offence under section 65(2) and is subject to a fine of up to C$5,000 or imprisonment for up to two years. In addition, the Director may apply to the Tribunal pursuant to Section 100 for an order preventing the completion or implementation of the proposed merger until proper notification is filed.


It is regulated in Article 4 of Law 155/59, Article 5 of Decree 1302 of 1964, and Articles 45(4) and 51 of Decree 2153/92: Companies engaged in the same sector of production, supply, distribution, or consumption of a given article, raw material, product, merchandise or service, whose individual or aggregate assets are twenty million pesos (20,000,000.00) or more are required to inform the national government of any plans for merger, consolidation, or integration among themselves, regardless of the legal form of the consolidation, merger, or integration. (Article 4, Law 155/59).

Acquisition of Control: The possibility of directly or indirectly influencing economic policy, the beginning or termination of the firm=s activity, the change of activity the firm is engaged in or the disposal of goods or rights essential for the development of the firm=s activity. (Article 45, numeral 4, Decree No. 2153/92).

The Superintendency may object to the action when it would lead to undue restraint of free competition in the following cases: a) when it follows agreements among the companies with a view to unify or fix prices for producers of raw materials or consumers, or for dividing markets among themselves or limiting the production, distribution, or provision of a service; b) when the situation of the products and services in the market is such that the merger, consolidation, or integration of the companies that produce or distribute the product can result in unfair prices to the detriment of competitors or consumers. (Article 50, Decree No. 1302 of 1964).

Integration of Firms: The Superintendent of Industry and Commerce may not contest the cases of mergers, consolidation, integration or acquisition of the control of firms that come to his attention, within the terms of Article 4 of Law 155 of 1959, if the parties involved prove that there may be significant efficiency improvements, that this will result in cost savings that may not be obtained through other means and they guarantee that such act shall not result in a reduction of the supply in the market. (Article 51, Decree No. 2153/92 ).

Costa Rica

Concentration shall be construed to mean the merger, acquisition of control, or any other act by virtue of which there is a joining of companies, associations, stock, trusts, or assets in general of competitors, suppliers, clients, or other economic agents for the purpose or effect of restraining, damaging, or impeding competition or free enterprise concerning equal, similar, or substantially related goods or services.
In the investigation of such circumstances, the criteria used for measuring substantial power over the relevant market shall be those established in Article 15 of the Law, relating to monopolistic practices. (Article 16).

The powers of the Commission for the Promotion of Competition shall include the power to investigate the existence of monopolies, cartels, or other practices or concentrations prohibited by this Law. (Article 24 (c)).

The Commission for the Promotion of Competition may order the partial or total dismantling of any improperly constituted concentration. (Article 25(b)).


There are no specific provisions governing market control. However, in light of the comprehensive nature of the general prohibition under Article 1 of the Law, that prohibition has been applied to instances of concentration among firms that threaten to interfere with free competition within the country.

Dominican Republic

State monopolies and those provided for in law are permitted. (Constitution).


Practices that lead to the excessive concentration of goods and means of production to the detriment of society are prohibited. (National Constitution).


Economic concentrations are analyzed under the Fair Competition Act in terms of dominance. The Act defines a dominant company as one which "occupies" such a position of strength in the market as will enable it to operate in the market without effective constraints from its competitors or potential competitors".

However, simply being dominant does not constitute a breach of the Act. An enterprise must be found to have abused its dominant position and that such abuse has had or is likely to have the effect of lessening competition substantially in the marketplace.

The Act states that the enterprise "abuses its dominant position if it impedes the maintenance or development of effective competition in a market" it goes on to outline specifically, conduct which would be considered evidence of an enterprise=s abuse of its dominant position. The list in the Act is illustrative only.


For purposes of this Act, a concentration is defined as a merger with or acquisition of control over another firm, or any other act joining together companies, associations, stockholders, business partnerships, trust companies or assets in general, which is carried out between competitos, suppliers, customers, or any other economic agents, whose purpose or effect is to diminish, harm or impede competition with respect to identical or substantially similar goods and services. (Article 16).

When investigating consolidations, the Commission will regard as indicative of the assumptions to which the preceding article refers any act or attempt that:
I. Gives or can give the merging party, buyer or business resulting from the consolidation the power to fix prices unilaterally or to curtail a significant portion of the supply on the relevant market, without the competition being able, either in fact or in theory, to counter that power;
II. Is or can be intended to drive out the competition or keep it out of the market in question unfairly; and
III. Has the actual or intended effect of making it significantly easier for the parties to engage in the monopolistic practices to which the second chapter of this law refers.
(Article 17).

In determining whether to deny approval of, or to assess penalties under this Act, against a concentration, the Commission shall consider the following:
I. the relevant market as defined in Article 12;
II. identification of the economic agents supplying the market, analysis of their market power in accordance with Article 13, and the degree of concentration within that market; and
III. such other criteria and factors as may be prescribed in the regulations implementing this Act. (Article 18).

If an investigation and the proceedings conducted under this Act conclude that the transaction this Chapter, the Commission may, in addition to applying applicable legal measures or penalties:
I. subject the concentration to such conditions as it deems appropriate; or

II. order the total or partial divestiture of the concentration formed in violation of these provisions, the abandonment of a control relationship, or the cessation of the relevant actions. (Article 19).

The Commission must be notified before any of the following transactions is entered into:
I. where a transaction or series of transactions is worth over 12 million times the basic minimum wage applicable within the Federal District;
II. where a transaction or series of transactions results in acquisition of 35 percent or more of the assets or shares of an economic agent whose; or assets or sales are worth over 12 million times the basic minimum wage in the Federal District; or III. where two or more participants in the transaction have total assets or annual sales in excess of 48 million times the basic minimum wage applicable within the Federal District, and the transaction involves the acquisition of capital or assets in excess of the equivalent of 4.8 million times the basic minimum wage applicable in the Federal District.

In order to register transactions in the commercial Registry, economic agents to which any of the three sections of this Article apply must either show that they have obtained a favorable determination from the Commission or present proof that the Commission, having been duly notified, has not issued a determination. (Article 20).

For purposes of the foregoing Article, the following requirements must be met: I. Notification must be in writing, accompanied by a copy of the relevant legal documents for the transaction, including names of the individuals and companies involved, their financial statements for the most recent fiscal period, their market shares, and any other information necessary for analysis of the proposed transaction;
II. The Commission shall have 20 calendar days from the date it receives notification in which to request additional data and documents, which must be supplied by the parties involved within 15 calendar days after the request -- although this latter deadline may be extended where justified;
III. The Commission shall have 45 calendar days from the date on which notification or, where applicable, additional documentation referred to in the preceding paragraph is received. Where no ruling is issued during this period, the Commission shall be deemed to have no objection;
IV. In exceptionally complex cases, the Chairman of the Commission shall be authorized to extend the deadlines specified under II and III above by up to an additional 60 calendar days;
V. A determination of the Commission and in accordance with law shall include a statement of reasons;
VI. A favorable determination under this Article shall not be considered a judgement as to the legality of other practices prohibited by this Act, nor shall it relieve the economic agents involved from liability for other anticompetitive practices. (Article 21).

The following are not subject to challenge under this Act:
I. transactions which have received a favorable determination, unless that determination was based on false information provided to the Commission; and
II. transactions not requiring prior notification that were entered into at least one year beforehand. (Article 22).


Economic concentration shall be understood to mean a merger, takeover or any act whereby corporations, partnerships, shares, partners' shares, trust funds, establishments or assets in general are combined, by suppliers, customers or other economic agents who compete with one another.

Economic concentrations are prohibited which have or may have the effect of diminishing, restricting, harming or unreasonably impeding free economic competition and free competition with respect to equivalent, similar or substantially related goods or services.

An exception to this prohibition is made in the case of concentrations involving an economic agent who is in a state of insolvency, provided that he can show that he tried unsuccessfully to find noncompeting buyers.

Temporary partnerships formed for a given period of time to carry out a specific project shall not be considered economic combinations for purposes of this chapter. (Article 19).


There is machinery for control of concentration in the electric sector. It is a violation of Decree 701 if, in the same interconnected system, the people who control a corporation in a dominant position, which has the concession or authorization for generation, transmission, or distribution of electric power, are partners in or control another company in the same field, or when said company merges or associates with another in the same field. (Supreme Decree No. 27-95-ITINCI of October 19, 1995).

United States

Mergers and acquisitions are prohibited "in any line of commerce or in any activity affecting commerce in any section of the country, (where) the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly..." (Clayton Act, Section 7).

Mergers and acquisitions may also be challenged under sections 1 and 2 of the Sherman Act and section 5 of the FTC Act.

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, notification to the FTC and Department of Justice is required before the consummation of an acquisition of stock or assets exceeding specified size of firm and size of transaction thresholds. Generally, premerger notification is required if all of the following conditions are met: 1) either the acquiring person or the acquired person is engaged in interstate commerce, 2) one of the parties has annual net sales or total assets of $100 million or more, and the other has annual net sales or total assets of $10 million or more, and 3) as a result of the acquisition, the acquiring party will hold either (i) voting securities or assets of the acquired firm valued at more than $15 million, or (ii) 50% or more of the voting securities or assets of a firm with annual net sales or total assets of $25 million or more.

For transactions other than cash tender offers or acquisitions of bankrupt firms, the waiting period prior to consummation is 30 days. When a second request for additional information has been issued by the antitrust authorities within that period, the merger cannot be consummated for 20 days after compliance with the request (in practice, the time it takes to respond to a second request can vary widely depending on the scope of the request and the merging parties' decision as to how quickly to respond, among other factors). Cash tender offers and acquisitions of bankrupt firms have a shorter waiting period -- 15 days (plus 10 days after compliance with a request for additional information). The agencies' enforcement policy is outlined in the 1992 Horizontal Merger Guidelines. If an agency concludes that a proposed merger would violate the antitrust laws, it must apply to a court to enjoin a merger prior to its consummation.


Economic concentrations are prohibited, especially if they arise from the exercise of a single activity, when as a consequence of this activity free competition is restricted or a situation of dominance results in the market or in any part of the market. (Article 11).

Regulation No. 2 concerning economic concentration applies to all operations in which the volume of the business of the corporations or divisions engaged in the operation exceeds the level set by the Office of the Superintendent by means of a resolution. (Article 2 of Regulation No. 2).

Total business volume is calculated by adding the value of the sales of products and provision of services by the companies involved during their last fiscal year. There are special rules for: a) fractional acquisitions; b) interlinked companies; c) companies with joint branches; d) banks and financial institutions; and e) insurance companies. (Article 3 of Regulation No. 2).

The following actions constitute operations of economic concentration: a) merger of two or more unrelated actors covered by this law; b) formation of a common corporation by two or more unrelated actors covered by this law, when the operation has as its result economic concentration and the resulting company acts as an independent economic actor, not simply for coordination of competitive behavior of the founding companies among themselves, nor between them and the common corporation; c) direct or indirect acquisition by an actor covered by this law to control other corporations through purchase of stock, participating in capital, or any other contract or legal device to gain control of the enterprise; d) acquisition of tangible or intangible productive assets, and acquisition of trade funds; and e) any other act, contract, or legal device, including repossession, voluntary or forced liquidation of bequests or legacies, which result in concentration of companies, divisions, or parts of companies, trade funds, or productive assets in general. (Article 4 of Regulation No. 2).

The economic concentration operations to which this Regulation pertains may be evaluated by the Superintendency for the Promotion and Protection of Free Competition before they are performed or executed. A request for prior evaluation does not require the enterprises concerned to suspend the execution of an operation, without prejudice to the provisions of Articles 13 and 15 of this Regulation. (Article 6 of Regulation No. 2).

Requests for prior evaluation shall be accompanied with the information and documents indicated in the AInstructions on Economic Concentration Operations@, prepared by the Superintendency for the Promotion and Protection of Free Competition, to be published in the Gaceta Oficial de la República. (Article 7 of Regulation No. 2).

Pursuant to Article 42 of the Law to Promote and Protect the Exercise of Free Competition, requested economic concentration operations shall be evaluated in accordance with the ordinary procedure provided for in Title III, Chapter 1 of the Organic Law of Administrative Procedures.

If a request for prior evaluation lacks or omits the requirements provided for in the "Instructions on Economic Concentration Operations", the applicants shall be notified in writing to make up such defects and omissions within 15 days, in accordance with Article 50 of the Organic Law of Administrative Procedures. (Article 8 of Regulation No. 2).

Requests for prior evaluation of economic concentration operations shall be filed separately by each enterprise taking part in a concentration operation. Each such enterprise shall also individually comply with the "Instructions on Economic Concentration Operations" referred to in Article 7 of this Regulation. (Article 9 of Regulation No. 2).

Agreements, decisions, collective recommendations or joint practices among competitors with regard to goods or services do not significantly alter behavior of the respective market: a) when they do not exceed 15% of the volume of business done with identical products or those deemed similar by the user in terms of their characteristics, price, or use; and b) participating companies that have annual gross sales of not more than 30,000,000 bolivars each. (Resolution No. 05-93 for application of Regulation No. 1).

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