Effects in Brazil

On 18 October 2005 the CADE issued a precedent (CADE's Precedent No. 1) “formalising” its understanding that the turnover criterion dealt with in the Competition Act should apply to the turnover achieved by any of the parties to the merger transaction in Brazil (and not worldwide, as previously stated by CADE). This precedent affords merging parties the necessary legal certainty when evaluating whether they must notify their operation in Brazil.

On 27 August 2007 CADE issued another precedent, CADE's Precedent No. 2, consolidating its understanding that notification of transactions involving simple corporate reorganisation is not mandatory. According to this precedent, acquisition of a minority ownership interest in the voting capital, by a partner that already holds a majority ownership interest, does not constitute a transaction that requires notification to the Brazilian competition authorities, provided that:

1. the seller does not hold powers arising from laws, by-laws or agreements to appoint senior managers, determine the company's business policy or veto any corporate matters; and

2. the transaction does not include non-compete clauses for a period exceeding 5 years and/or a territorial scope broader than that in which the company actually operates; or clauses that entail any type of control between the parties.