The Superintendence General of the  Administrative Council for Economic Defense (SG/Cade) recapitulated, in a recent decision concerning a merger control filing, the discussion on which companies should be considered as part of the economic group involved in a transaction, and on the moment the group’s revenues should be accounted for, which are fundamental for the assessment of the reportability of the transaction to CADE.

In the referred case, the transaction would only be subject to mandatory filing with Cade if the revenue of a company that, at the time of  that transaction, had already been the subject of a sale and purchase transaction duly cleared by CADE but with closing still pending on the fulfillment of certain conditions precedent, was to be considered as part of the seller’s economic group.


SG/Cade has expressed in the past that the revenue assessment should consider the composition of the economic group at the moment of the transaction – which the agency has already established as the date of the filing with Cade, which can be carried out at any time before closing – and the revenues of the companies of each economic group in the year before that of the moment of the operation, under the terms of Law 12.529/2011 (the Competition Law).

In  the precedents addressing this subject, SG/Cade held that acquisitions and/or divestitures of companies, even if carried out during  the year the transaction was submitted to Cade, affect the composition of the economic group, expanding or reducing the set of companies whose revenues in the previous year should be considered for the purpose of calculating the revenue of the economic group. It also concluded that the consummation of the previous transaction and the effective transfer of the ownership of the company are not required in order to consider the company as part – or not – of the economic group.

According to SG/Cade’s understanding, the acquired company should be considered as part of the buyer’s economic group and excluded from the seller’s, even if the consummation of the transaction is still pending suspensive conditions (since those are viewed by Cade as mere conditions for the effectiveness of the transaction) and the transfer of ownership has not yet occurred. This would apply both for transactions submitted to Cade (even if Cade’s approval is pending) and for transactions not submitted to the agency.

Cade's justification for this approach was the need to assess the actual impacts of the transaction and to evaluate its risks considering the reality of the market. Assessing a market structure that ignores changes in the companies, which will no longer belong to (or that will soon become part of) a given economic group in the near future, could lead to inaccurate conclusions on the competition concerns arising from the transaction.

A close interaction between the companies’ internal M&A teams and their external legal advisors is, therefore, very important in the assessment of the need to submit a transaction to Cade, ensuring that the economic group definition is properly following Cade’s views. This would help identifying previous transactions that are relevant for the assessment of whether the revenue thresholds are met (which may happen at any time between the signing and closing).