Brazil′s antitrust tribunal has approved a US$3.2 billion merger between the Brazilian airline TAM and Chilean flag carrier LAN - but lawyers say time will tell whether conditions imposed by CADE are sufficient to prevent excessive concentration on certain routes serviced by the new company.
The decision was approved by unanimous vote yesterday and saw CADE impose two conditions on the merger, which will see the creation of Latin America′s biggest airline.
Further details of Cade′s decision will be published tomorrow, according to securities filing which will be submitted to the securities superintendancy later today.
These conditions were that LATAM, the new name of the joint company, give up one of the two alliances established by the two companies before the merger - either TAM′s Star Alliance or LAN′s oneworld - as well as two pairs of airport slots supplying the route between Santiago′s airport and São Paulo′s Guarulhos.
Other routes, including between São Paulo and Lima and São Paulo and Buenos Aires, were also considered by the regulator but not restricted, according to Cade′s Olavo Chinaglia, who prepared the report.
In a statement released yesterday, LAN said that the two conditions were "in line" with mitigation measures previously negotiated through an out-of-court agreement with Chile′s National Economic Prosecutor last January and since adopted by the country’s antitrust authority, TDLC.
TAM says that the decision was the "last pending approval from a competition watchdog" and both companies have been "studying these measures" in the same way as those handed down by the TDLC in September.
In that ruling the TDLC imposed 11 conditions on the merger - three of which were subsequently challenged by LAN - which included capping fares between Santiago and São Paulo until the company gave up four daily slots at São Paulo′s Guarulhos airport.
TozziniFreire Advogados antitrust partner Marcelo Calliari says while CADE′s ruling "pretty much follows international standards for analysis of airline mergers", which are considered on a route-by-route basis, the "big question" remains the efficiency of the remedies.
"In Europe we have seen similar cases where the regulators have attempted to open up competition by freeing slots [in airports] but the competition didn’t show up wanting to take up those slots," he says. "The challenge is whether this remedy will work and competition will actually occur."
Gabriel Nogueira Dias, competition and arbitration partner at Magalhães, Nery e Dias - Advocacia, says CADE′s ruling reflects a "well-discussed solution for the case."
"The intention of CADE…is to enable a new entry company to operate the mentioned routes in a highly competitive level, flying during the most appealing commercial hours," he explains. "The commissioners were certain that the restrictions applied are very important to maintain a competitive environment in Latin America. At least in Brazil, there will possibly be no further challenges for the merger going forward."
Counsel to TAM
General counsel to TAM - Luiz Claudio Aguiar
US
Clifford Chance LLP
Partners Anthony Oldfield and Sarah Jones and associates Anand Saha and Kristyn Walker
Brazil
Machado Meyer Sendacz e Opice Advogados
Partners Antonio Corrêa Meyer, Carlos José Rolim de Mello, Raquel Novais and Fernando Tonnani and associates Fabio Falkenburger and Paula Magalhães
Chile
Cariola, Diez, Pérez-Cotapos & Cía Ltda
Partners Francisco Illanes and Juan Cristóbal Gumucio and senior counsel Pedro Deutsch
Counsel to TAM′s shareholders
Turci Advogados
Partners Flávia Turci and associates Carlos Fujita and Ana Matsuda
Counsel to LAN
General counsel - Cristián Toro
US
Partners Sergio Galvis, Duncan McCurrach and Juan Rodriguez and associates Carlos Pelaez, Felipe Capella, Rachael Dugan
Brazil
Partner Alexandre Bertoldi and associates Vânia Marques Ribeiro Moyano and Roberta Stettinger Bilotti Demange
Chile
Partners José Maria Eyzaguirre and Felipe Larraín
(Latin Lawyer 15.12.2011)
(Notícia na Íntegra)
