Gás Local and Gasmig to pay BRL 90,000 for gun jumping
On CADE’s public hearing of 24 June 2015, the companies GNL Gemini Comercialização e Logística de Gás Ltda. (GásLocal) and Companhia de Gás de Minas Gerais (Gasmig) agreed, before the Tribunal of the Administrative Council of Economic Defense (CADE), to pay BRL 90,000 for the practice of gun jumping – when the merger transaction is consummated without the previous authorization of the antitrust authority.
Gasmig is part of the Cemig Group that acts with exclusivity in the distribution of piped natural gas in the state of Minas Gerais (through a state government grant). Gás Local, on the other hand, is a joint venture between White Martins Gases Industriais Ltda., from Praxair Inc. Group, and Petrobras Gás S., from Sistema Petrobras. The main activity of GásLocal is the commercialization of liquefied natural gas (LNG).
Cade understood that there was gun jumping in the transaction regarding the agreement signed between the companies in order to regulate the general conditions for LNG supply to Gasmig by GásLocal (Merger file no. 08700.000137/2015-73). The goal of Gasmig is to fulfill the demand for natural gas in the city of Pouso Alegre/MG, which does not have distribution pipelines yet.
The transaction was formalized in January 2014 and notified to the antitrust authority a year later. Although completion concerns have not arisen, CADE’s General Superintendence stated that the deal was prematurely consummated and sent the merger to CADE’s Tribunal for analysis.
According to Reporting Commissioner Ana Frazão, the premature consummation of the transaction was not limited to acts of ordinary administration, but also involved management acts intended to close the deal. She highlighted that during the period between the signature of the agreement and its notification to Cade, the companies performed actions in which there are clear evidence of gun jumping.
The amount of the pecuniary contribution to be paid by GásLocal and Gasmig was settled with CADE through a Merger Control Agreement (ACC for its acronym in Portuguese) proposed by the parties. By the agreement, the companies admitted that acts performed by them resulted in the premature consummation of the deal, thereby violating the Brazilian antitrust law.
“The obligations assumed by companies, especially the confession and the pecuniary contribution, are sufficient and proportionate to ensure its character of deterrence intended by CADE. Furthermore, the measures encompass all case particularities without affecting consumers”, stated the Reporting Commissioner.
The Reporting Commissioner also asserted that the transaction enables the expansion of distribution pipelines, directly benefiting the consumers of the city of Pouso Alegre/MG.