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COMPETITION LAW IN BRAZIL: 2018 OVERVIEW 23

Itaú’s partial acquisition of XP Investimentos:
approved with restrictions; more restrictive conditions
later imposed by the Central Bank

In March, in another split decision, CADE’s Tribunal approved Itaú-Unibanco’s
partial acquisition of XP Investimentos subject to a consent decree .
4
XP is the largest independent investment platform in Brazil. The acquisition
would take place in three phases, resulting in Itaú acquiring 49.9% of XP’s voting stock and
74.9% of its entire stock by 2022. The transaction included an option to sell the remaining stake
to Itaú and a shareholder agreement that would initially ensure the remaining shareholders
would retain control over XP.
The Tribunal held that XP was an innovative firm that had created the
market for online investment platforms. These platforms operate as two-sided markets, where
customers can go to look for investment offerings and banks and funds are able to offer their
investment portfolios. XP was seen as leading platform, fostering competition among the
various financial tools and players.
With the acquisition by Itaú, there would be a significant vertical integration,
as Itaú, a large retail bank, offered various investment alternatives. There were concerns that
the acquisition was an attempt to eliminate disruption in the investment market by forcing XP
to remain limited to Itaú’s investment portfolio, stifling competition from smaller banks and
financial institutions that currently use XP to offer their own products. XP could also deprive other
market agents of options through discriminatory practices
involving its management fees and investment costs, THE TRIBUNAL NOTED THAT
which would make it impossible for smaller investment SUCH RISKS WOULD BE
providers to effectively compete with Itaú. MINIMIZED BECAUSE OF ITAÚ’S
The Tribunal noted that such risks SUPPOSED INABILITY TO
would be minimized because of Itaú’s supposed inability INFLUENCE XP’S DECISIONS
to influence XP’s decisions on competition-related ON COMPETITION-RELATED
issues. According to CADE, the shareholders’ agreement ISSUES. ACCORDING TO
would reduce the number of avenues through which CADE, THE SHAREHOLDERS’
Itaú would be able to exercise any influence. Despite AGREEMENT WOULD REDUCE
this recognition, CADE held that a consent decree was THE NUMBER OF AVENUES
required for the deal to be cleared. THROUGH WHICH ITAÚ WOULD
As part of the consent decree, Parties BE ABLE TO EXERCISE ANY
agreed to reinforce corporate governance mechanisms INFLUENCE. DESPITE THIS
guaranteeing the management independence for XP’s RECOGNITION, CADE HELD
THAT A CONSENT DECREE
WAS REQUIRED FOR THE DEAL
TO BE CLEARED.

4
See Merger Review No. 08700.004431/2017-16.