Superintendence issues technical opinion on Ball/Rexam merger transaction in the sector of metal beverage cans
CADE’s General Superintendence, in technical opinion published in the Official Gazette on 5 October 2015, submitted the merger file referring to the acquisition of Rexam PLC by Ball Corporation for analysis by CADE’s Tribunal (Merger File no. 08700.006567/2015-07).
After assessing information from the parties, competitors and clients, the General Superintendence concluded that Ball and Rexam are among the three main competitors in the market of metal beverage cans. Furthermore, the parties’ market shares are very significant in all Brazilian regions.
According to the technical opinion, evidence suggest that the transaction may result in the exercise of market power by the companies, considering the high barriers to the entry in the sector and the low effective rivalry. Among the difficulties for a new entrant to compete with Ball and Rexam, there are the necessity of high scale gains and high production of cans in various sizes, with distribution capacity in different regions of the country.
Due to the competition concerns the transaction arises, the General Superintendence understood that the approval of the operation, as it was presented, could result in the increasing of can prices, thereby affecting final consumers of the products that use cans as recipients – such as beer, soda, ice tea and juice. In this sense, the General Superintendence challenged the merger before the Tribunal, which will be responsible for the final decision about the approval, disapproval or the adoption of remedies that may solve the identified problems. The determinations of the Tribunal may be applied unilaterally or through agreement with the parties.
The merger was notified on June 2015. The legal term for the final decision of CADE is of 240 days, which can be extended for more 90 days.