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CADE imposes remedies to Kroton and Anhanguera merger

Merger

The approval is conditioned to the fulfillment of a series of measure
published: May 14, 2014 02:20 PM last modified: May 02, 2016 03:29 PM

The Administrative Council for Economic Defense – CADE approved with restrictions the merger of all shares of the social capital of Anhanguera Educacional Participações S/A by Kroton Educacional S/A. The approval is conditioned to the fulfillment of a series of measures foreseen in a Merger Agreement (ACC for its acronym in Portuguese) signed between CADE and the parties.

The first commitment is the divestment of Uniasselvi, owned by Kroton, to a third party. The deadline for the divestment is confidential. Reporting Commissioner Ana Frazão explained that this measure enables a rival to have sufficient conditions to compete with the merged company in the national distance learning market.

During the case development, CADE’s General Superintendence pointed competition problems in 171 courses in 55 cities due to the absence or insufficiency of competitors, since other educational institutions would not be capable of effectively compete with the new merged company. Kroton and Anhanguera detain important advantages regarding students enrollment, scale, course catalogue, institutions and education centers capillarity, prices, marketing and other variables.

According to the Reporting Commissioner, the divestment of Uniasselvi solves most of the concerns detected in 12 of the 55 cities. 

To address to the remaining issues in the other 43 cities, the ACC foresees behavioral measures, imposing that the company with major market share – Kroton or Anhanguera - in the courses where competition problems were detected will be prevented from offering places. The one with less market share also cannot increase students’ enrollment. The main objective is to limit the expansion of the merged parties and to enable the competitors to thrive.

The third applied remedy regards to places where Kroton and Anhanguera are not simultaneously present, but that a future overlapping is a concern due to previous requests to the Ministry of Education that were not authorized yet. To solve the potential problem, only one of the parties can offer the courses that raised more competition concerns in the areas.

Furthermore, the ACC foresees objective quality goals in regards to the offer of distance learning courses by Kroton and by Anhanguera such as, for example, the increase of the current proportion of teachers with Masters Degrees and PhDs to 80% and the increase of the available tools and teaching material. This measure aims at ensuring significant quality goals and it will reflect directly in benefit of the main consumer: the student.

Finally, to solve problems detected in formal education, there will be divestments in the cities of Rondonópolis and Cuiabá, both in the state of Mato Grosso.

The Reporting Commissioner highlighted that the adoption of the structural and behavioral measures was only possible due to the agreement signed with the parties. “The consensual solution was the key element to enable an alternative to the difficult options of structural remedies possible to implement in the educational market”.