The strategic use of Brazilian antitrust procedures in private disputes

Paulo Cezar Aragão
BMA Advogados, São Paulo and Rio de Janeiro
pca@bmalaw.com.br

Bernardo Cascão
BMA Advogados, São Paulo and Rio de Janeiro
cascao@bmalaw.com.br

In recent years, the Brazilian Competition Authority (Conselho Administrativo de Defesa Econômica, ‘CADE’) has increasingly become a forum for resolving predominantly private disputes. While the Brazilian Competition Law (Law No 12.529/2011, ‘BCL’) was designed to safeguard competition as a public good, parties increasingly use antitrust procedures strategically to influence private disputes, such as corporate transactions, contract enforcement or judgment execution, whenever these matters fall within CADE’s jurisdiction.

This phenomenon is not unique to Brazil, but the country's experience offers a particularly illustrative case study due to the breadth of CADE’s powers and the procedural mechanisms available under the BCL. Such strategic use has become more frequent, even where competition law’s applicability is merely formal or competitive effects are negligible. Both merger control mechanisms and procedures for the investigation of anti-competitive conduct have been invoked in this context, sometimes not to protect competition itself, but rather to influence the outcome of private disputes.

The use of such tactics is facilitated by the risks, legal uncertainty, and costs imposed on the counterparty. These, in turn, serve as a bargaining leverage for the party deploying the strategy. The relatively low cost of initiating such proceedings, compared to the potential delay or disruption caused, further incentivises their use as a strategic tool.

Recent cases before CADE have demonstrated the use of antitrust procedures to:

• delay the implementation of corporate transactions or the execution of contracts or judgments by filing appeals against the approval of mandatory merger notifications;
• prevent the exercise of political rights attached to shares acquired on the stock exchange in the context of unsolicited business combination offers, through requests for investigations of alleged failure to obtain prior CADE approval, including requests for interim measures; or
• initiate investigations of alleged anticompetitive conduct arising from the exercise of corporate rights acquired through previously consummated and legally valid transactions.

The purpose of this article is not to assess the substantive merits of the competition arguments advanced in these cases. Rather, it aims to analyse how the procedural mechanisms established by the BCL, originally intended to prevent and remedy anti-competitive effects, can be leveraged to influence private disputes, thereby generating risk and legal uncertainty in situations that may attract CADE’s jurisdiction.

The use of antitrust procedures is entirely legitimate when aimed at protecting competition as a public good. The concern arises when these mechanisms are employed primarily to pursue private objectives which fall outside the intended scope of the BCL, potentially distorting its function and undermining legal certainty.

The BCL and strategic litigation in private disputes

Brazil’s competition law is designed to promote consumer welfare by preserving a competitive environment, functioning as an instrument for the protection of free enterprise. The current legal framework provides CADE with mechanisms to prevent and punish anti-competitive conduct and to block unjustified market concentrations, with merger control as its principal instrument.

Unlike some jurisdictions, the BCL and CADE’s practices promote transparency and stakeholder participation, with public access to filings and decisions. While this fosters openness, it can also lead to unintended consequences when misused.

Merger control: scope, criteria, and strategic use

Merger control in Brazil operates through filters which, in principle, only subject transactions with potential competitive impact to CADE’s review.

In the context of minority acquisitions, the criteria for mandatory notification are set out in the BCL and applicable regulations, CADE’s Internal Rules (RICADE), and applicable regulations, which provide objective thresholds for prior approval, define what constitutes a ‘concentration’: mergers, acquisitions of control or parts of companies, incorporations, and certain associative contracts, consortia or joint ventures. For a transaction to be subject to CADE’s review, it must not only fall within one of these categories but also meet the turnover thresholds and produce effects in Brazil. This objective definition has addressed the uncertainties of previous legislation, which relied on open-ended concepts and generated legal uncertainty.

Despite this greater precision, interpretative doubts remain, particularly regarding the scope of ‘acquisition of part of a company’. This concept encompasses both the acquisition of equity interests and the transfer of assets. Merger control should be selective, avoiding the burdening of the authority with transactions lacking competitive significance and, at the same time, not imposing unnecessary transaction costs on businesses.

The BCL adopted a system of prior notification (ex ante), replacing the previous model of post-closing notification (ex post), making the effectiveness of transactions conditional on CADE’s approval and imposing severe sanctions for premature consummation, known as ‘jumping the gun’. While this change aims to prevent irreparable harm to competition, it also increases transaction costs and delays deal completion, emphasising the need for clear and stable criteria for mandatory notification.

Predictability and legal certainty are essential for business. Objective notification criteria, such as fixed percentage thresholds for shareholdings (de minimis), are widely adopted in other jurisdictions and enhance transparency. However, these filters must be carefully calibrated to avoid both under-notification of potentially harmful transactions and over-regulation, which can stifle free enterprise and impose unnecessary barriers to economic activity.

For minority acquisitions, the applicable regulations sought to establish objective thresholds for mandatory notification. Where the target company is neither a competitor nor active in a vertically related market, notification is required only if the acquired stake reaches 20 per cent of the share capital or voting rights. For transactions involving competitors or companies in vertically related markets, the threshold is five per cent. Once these thresholds are met, the transaction must be notified to CADE, regardless of other factors such as relevant influence or political rights.

Additionally, regulations provide specific rules for acquisitions carried out through tender offers on the stock exchange. In these cases, the transaction may be consummated before CADE’s approval, as an exception to the general rule of prior control. However, until approval is granted, the exercise of political rights attached to the acquired shares is prohibited, unless specifically authorised by CADE to protect the value of the investment.

Appeals in merger approvals as a means to delay transaction closing

A notable trend in recent CADE practice is the use of appeals against merger approval decisions to delay the closing of transactions, particularly in the context of private disputes. This strategy typically involves third parties seeking to intervene as ‘interested third parties’, in merger proceedings, thereby acquiring standing to appeal the approval decision.

CADE’s merger review procedures are structured to provide both efficiency and due process, with statutory deadlines which vary depending on the complexity of the case. Third parties may request intervention within 15 days of public notice and, if admitted, may appeal the Superintendence-General (GS) decision. The threshold for admission remains relatively low, granting significant procedural rights, including the ability to delay closing by filing an appeal. In fast-track cases, the GS may decide before the intervention period ends, but regulations allow third parties to appeal within 15 days of the decision.

Regardless of the procedure, the filing of an appeal triggers mandatory review by CADE’s Tribunal. While the Tribunal may summarily dismiss appeals that lack merit or quickly decide on the substance, the mere existence of an appeal inevitably delays the transaction timeline. This procedural feature, combined with the relatively accessible standard for third-party intervention, creates opportunities for strategic use of the appeals process, particularly in the context of private disputes where the underlying competitive concerns may be minimal or absent.

In one case, a third party argued procedural irregularities, including the alleged lack of a binding agreement and the absence of necessary parties in the notification, as well as the existence of ongoing arbitration regarding the transfer of assets. Although the merits of the competition concerns were not the focus, the appeal was admitted for further analysis, and the parties were required to provide additional clarifications. The mere filing of the appeal prevented the closing of the transaction.

Similarly, in another transaction notified only by one applicant, based on an arbitral award, the other parties contested the notification, arguing that the absence of a binding contract and the ongoing arbitration should preclude CADE’s review. CADE, however, reaffirmed that unilateral notification is permissible and that the existence of private disputes does not prevent the authority from conducting its competition analysis. Nevertheless, the procedural manoeuvering by the parties resulted in delays.

Recently, in a high-profile case involving listed companies, a competitor sought to intervene and subsequently appealed the approval of a corporate reorganisation. Although the competitor’s standing as an interested third party was recognised, the appeal was ultimately not admitted on the merits, as the transaction was deemed a mere intra-group restructuring with no competitive impact. Nonetheless, the process required the parties to respond to the appeal and delayed the closing of the transaction. In this specific case, CADE’s leading opinion stated that the third parties must unequivocally demonstrate a qualified legitimate reason to appeal (‘qualified argumentative burden’).

Under Brazilian law, parties to a notified transaction are generally prohibited from closing the deal until CADE’s final decision, including the resolution of any appeals. The mere filing of an appeal, regardless of its substantive merit, can therefore delay closing, potentially causing significant harm to the parties involved. This delay may be further extended by requests for additional review, procedural motions or even dilatory tactics, such as requests for the recusal of decision-makers or the submission of supplementary information.

In practice, this procedural leverage can be used by appellants to extract concessions or to gain bargaining power in parallel private disputes, even when the appeal lacks substantive competition grounds. The risk of delay and the associated costs may incentivise parties to settle or to modify the terms of the transaction to the benefit of the appellant. While CADE has consistently reaffirmed that its role is not to adjudicate private disputes, the procedural framework creates opportunities for strategic litigation which can affect the timing and certainty of corporate transactions.

APAC as a defensive measure in the exercise of rights over shares acquired on the stock exchange

Another strategic use of antitrust procedures in private disputes involves the filing of requests for the opening of administrative proceedings for the investigation of concentration acts (APACs) to prevent the exercise of political rights over shares acquired on the stock exchange.

A recent example involves a business combination offer in which an acquiring group purchased shares of a competitor on the stock exchange, surpassing the five per cent threshold which triggers mandatory notification to CADE. The target company, also a competitor, requested an interim measure from CADE to block the acquirer from exercising political rights over all shares it held, including those acquired before reaching the mentioned threshold.

The central issue was whether the ban on the exercise of political rights should apply to all shares held by the acquirer or only to those acquired in the transaction that triggered the notification requirement. In line with its established understanding, CADE held that the restriction on political rights until approval only applied to the shares acquired in the transaction that constituted the notifiable concentration, that is, those acquired after surpassing the five per cent threshold. Previously-acquired shares, which did not constitute a notifiable concentration, were not subject to such restrictions.

This decision underlines the importance of objective and predictable notification criteria, ensuring that restrictions do not affect previously consummated and legally valid transactions, thereby upholding legal certainty and the legitimate expectations of market participants. CADE also rejected the argument that its rules were merely advisory.

Investigations of antitrust violations

CADE’s recent practice demonstrates that the authority may also investigate alleged anti-competitive conduct arising from the exercise of corporate rights acquired through previously consummated and legally valid transactions. In such cases, a party involved in a private dispute or corporate litigation may file an antitrust complaint against another shareholder, alleging that the exercise of shareholder rights, although legitimate under corporate law, has the effect of restricting competition or harming the market.

This approach highlights the possibility that antitrust procedures can be used strategically as leverage in ongoing private disputes, particularly where parties seek to influence corporate governance or the outcome of related litigation. The mere initiation of an antitrust investigation, especially when accompanied by interim measures restricting the exercise of corporate rights, can create significant pressure and uncertainty for the targeted shareholder. As a result, CADE’s willingness to examine the competitive effects of conduct that is otherwise permissible under corporate law underlines the growing intersection between private disputes and competition enforcement in Brazil.

Conclusion

Under the BCL, parties to a concentration subject to mandatory filing are generally prohibited from closing the deal until CADE’s final decision, including the resolution of any appeals. The mere filing of an appeal or the use of other procedural mechanisms can therefore delay closing and potentially cause significant harm to the parties involved, regardless of substantive merit. These delays may be further extended by requests for additional review, procedural motions or other tactical measures.

This procedural framework creates opportunities for third parties to extract strategic leverage in parallel private disputes. While CADE has consistently reaffirmed that its mandate is not to adjudicate private disputes, the current system nonetheless enables strategic litigation which can affect timing and undermine certainty of corporate transactions.

This article has examined the procedural dynamics and strategic use of antitrust mechanisms in private disputes before CADE, focusing on merger appeals, APACs and investigations of alleged anticompetitive conduct arising from the exercise of corporate rights. The analysis demonstrates that, while antitrust procedures are legitimate and necessary tools for protecting competition as a public good, their use as instruments in private disputes can generate legal uncertainty and increase transactional risk. The challenge for competition authorities and policymakers is to ensure that the procedural framework remains robust against abuse, while preserving the accessibility and effectiveness of competition law in its intended public interest function. Ongoing attention to the balance between transparency, stakeholder participation and procedural safeguards will be essential to maintaining both the integrity and the credibility of the competition enforcement system.