Page 20 - COMPETITION LAW_Flip

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MERGER CONTROL

wire rod; rebar; electro-welded mesh; annealed wire; IN TERMS OF
truss frames; and scrap. Entry, rivalry and imports would IMPLEMENTATION, THE
be insufficient to challenge the merging entity ability TRIBUNAL DEMANDED
to raise prices company might exercise. The decision AN UPFRONT BUYER
also notes that the transaction would create a virtual COMMITMENT, SO THAT
duopoly, increasing the risk of coordination and efforts PARTIES COULD ONLY
to exclude market entrants. CLOSE THE DEAL AFTER
Parties managed to interact with FINDING SUITABLE BUYERS
CADE’s Tribunal and design remedies to make the deal FOR THE DIVESTED
viable. A key aspect during remedies negotiation was the ASSETS. FURTHERMORE,
commitment from Parties to divest first and only later COMMISSIONERS ALSO
close the deal (upfront buyer commitment), an innovation DEMANDED THE COMMITMENT
in Brazil that was later used by CADE in coming cases. TO ESTABLISH A DIVESTITURE
In the analysis of the proposed consent TRUSTEE TO PROCEED
decree, the Tribunal took into account the current state WITH AN AUCTION IN CASE
of the market, highlighting its inability to meet the PARTIES WERE UNABLE TO
economic expectations created between 2010 and 2013 COMPLETE THE DIVESTITURE.
and the industry’s substantive idle capacity (around ADDITIONALLY, THE TRUSTEE
50%). This contributed for CADE to accept the consent SHOULD ALSO MONITOR
decree proposed with two divestiture packages and a COMPLIANCE WITH THE
performance commitment: CONSENT DECREE.

i. Divestiture of rolling mills to a purchaser able to meet several pre-defined criteria that were
not publicly disclosed;

ii. Divestiture of machinery of transformed products to a separate purchaser able to meet
several pre-defined criteria that were not publicly disclosed;

iii. Commitment to maintain minimum level of sales of products (details were not publicly disclosed).

In terms of implementation, the Tribunal demanded an upfront buyer
commitment, so that Parties could only close the deal after finding suitable buyers for
the divested assets. Furthermore, Commissioners also demanded the commitment to
establish a divestiture trustee to proceed with an auction in case Parties were unable to
complete the divestiture. Additionally, the Trustee should also monitor compliance with
the consent decree.