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CADE imposed a BRL 3 million fine against OGX for gun jumping

Merger

The Tribunal decided that the transaction was completed before Cade’s approval
published: Aug 28, 2013 04:00 PM last modified: May 02, 2016 03:33 PM

The company OGX committed before Cade to pay the amount of BRL 3 million for the practice of gun jumping during the Tribunal’s public trial session held on August 28, 2013.

Cade understood that there was gun jumping in the merger file no. 08700.005775/2013-19 that involves the OGX’s acquisition of 40% of the participation of Petrobras in BS-4 Block, located in the Santos Basin, in the State of São Paulo. Cade’s General Attorney and General Superintendent also disclosed official opinions informing that the transaction occurred prior to Cade’s analysis.

According to Law no. 12.529/11, a merger that is within the thresholds established must be notified to Cade before it is concluded. If companies fail to act in such manner, merging companies are subject to penalty or even transaction annulment. The law also provides for a fine of BRL 60 thousand to BRL 60 million and the possibility to open administrative proceedings to investigate the merger.

Ana Frazão, case reporting Commissioner, said she did not rule for the nullity of transaction because of "the extraordinary circumstances". She pointed out that in addition to the fact that the operation does not generate any anticompetitive effects, the final objective has not started its operations. Hence, the gun jumping was characterized purely for the existence of administrative acts related to the transaction.

The reporting commissioner also found an unusual regulatory situation in regards to whether or not those type of operations should be notified to CADE. Until the publication of internal ruling no. 003/2013/SEP by the National Petroleum Agency (“ANP” for its acronym in Portuguese), in April 2013, there was not any clear provision that determined the antitrust analysis.

The amount to be paid by OGX was defined through the negotiation of a Merger Control Agreement (“ACC” for its acronym in Portuguese). The fine will be collected by the Brazilian Diffused Rights Fund (“FDD” for its acronym in Portuguese), which entrusts the money to public agencies and civil nonprofit projects that aim at the recovery of assets and protection of diffuse rights like those entrenched within the ambit of environment protection, historical and cultural heritage or consumer rights.