Brazil antitrust watchdog classifies deal as complex, increasing scrutiny of market power in asset registration.
B3 may face a tougher approval process than it had expected for its purchase of a 60% stake in Central de Registro de Direitos Creditórios (CRDC), a deal that would combine two of Brazil’s leading asset registrars.
Cade’s General Superintendence, the investigative arm of Brazil’s antitrust authority, has classified the deal as “complex,” shifting it to a more demanding review process and requiring the companies to provide additional information.
Cade wants to determine whether the transaction has characteristics similar to a conglomerate merger because of B3’s portfolio power, meaning its ability to offer a range of different products that could make it easier to dominate a market.
“Depending on its scale, portfolio power can make it harder for smaller competitors to access the market and can also weaken the competitive drive of established rivals,”
the Cade’s technical arm said in a ruling published on March 3.
Broader review
In the ruling, the superintendence said it plans to take a closer look at the level of rivalry in the market, barriers to entry, and the state of the financial asset registration market after the transaction.
To do so, it said it will examine whether the deal creates “conglomerate effects” and whether it could strengthen B3’s existing portfolio. It also plans to gather more information and assess the competitive impact of the partnership agreement signed by the parties as part of the deal.
Once a case is deemed “complex,” the General Superintendence can seek more than the usual 240 days for review. That gives it more time to question competitors and the companies involved. A list of questions has already been sent to the companies, and the technical staff is expected to receive their responses soon.
The agency’s view of the case changed after Central de Recebíveis (Cerc) was admitted as an interested party, also late last year. Cerc also operates in the registration, custody, and settlement of financial assets.
In a filing, Cerc said that while the companies argued that the market for registering trade receivables, Bank Credit Bills (CCBs) and Rural Product Notes (CPRs) is highly fragmented, that claim contradicts B3’s own position in another Cade case.
In that earlier case, B3 argued that “small and midsize financial institutions have a smaller captive client base for offering their own financial assets and therefore tend to distribute them to the broader market, resulting in greater demand for custody services.”
According to Cerc, there is an “evident” contradiction in B3’s arguments before Cade, emphasizing at one point the concentration of large clients in the market for registering financial assets or securities, while at another saying the same markets have a highly dispersed client base.
Concerns over client base
Cerc also argues that B3 omitted information about the companies’ client bases, especially in trade receivables services. It said the São Paulo Commercial Association, known as ACSP, has “well-known reach and influence among companies in the real economy, especially suppliers that routinely operate with commercial instruments, notably trade receivables.” ACSP is a minority shareholder in CRDC.
Cerc also said that once digital trade receivables come into operation in 2027, competition will essentially shift to a fight over client bases. Beginning next year, financial institutions will be allowed to negotiate commercial receivables with companies exclusively through trade receivables issued in digital form.
In Cerc’s view, if the deal is approved, ACSP will benefit from the control to be assumed by B3. “That control will certainly be guided by B3’s current anticompetitive policy, consisting of tying arrangements, conditional discounts, exclusivity clauses and portability restrictions, all of which are under investigation by Cade in another administrative proceeding,” Cerc said.
Another risk, Cerc added, is that ACSP could steer its member base to CRDC to register digital instruments, which would then receive fees, discounts and other non-public commercial advantages from B3.
In a statement, B3 said it has been providing all necessary clarifications to Cade and that the deal “is following all legal procedures required for submission to the competition authority.”
“The acquisition of CRDC is part of B3’s strategy to position itself as an infrastructure solution across the credit chain, with a focus on developing products and services for the new digital trade receivables market, while leveraging CRDC’s role as a technology provider in the market for credit rights investment funds [direct-lending funds, or FIDCs] and in the real economy,”
B3 said.
CRDC did not respond.
Source: Valor International
