Brazil’s CADE authorized, in the judgment session on 8th of June the use of an exclusivity clause, on a temporary basis, in a contract for the supply of products entered into between Cervejaria Petrópolis (Grupo CP ) and Bunge Alimentos. The Court approved the operation conditioned to the conclusion of an Agreement on Control of Concentrations (ACC).
In April 2022, CADE's General Superintendence approved the deal without restrictions. Days later, Grupo Imcopa, the third party interested in the merger, filed an appeal against the decision. The case, then, was taken to the Court of the Council, under the rapporteur of the counselor Gustavo Augusto.
The Bunge Group operates in the agriculture and food sector, developing the following activities: purchasing; storage; transport; processing and sale of agricultural commodities, as well as processing and production of vegetable oils; grain processing; production and sale of flour, bakery mixes and sale of packaged vegetable oils. Grupo CP produces beers, alcoholic and non-alcoholic beverages, in addition to distributing soy oil.
Through the transaction, the companies signed a contract in which Bunge will supply soy and soy molasses to Grupo CP, which, in return, will offer manufactured products derived from degummed soy, refined soy oil (bulk and packaged); soybean meal; concentrated soy protein, in addition to lecithin, hulls, molasses and soy lees.
The contract granted the option to transform the simple supply relationship into an exclusivity contract between the parties, transferring control of production from Grupo Imcopa, currently held by Grupo CP, to Bunge.
Therefore, Bunge will control both the supply of inputs (soybean and molasses) to the Imcopa plants in Araucária and Cambé, in Paraná, as well as the effective sale of goods, and the plants in question will start to produce exclusively for Bunge . It is these plants that today produce the soy oil of the “Leve” brand, which belongs to Imcopa and currently competes with the soy oil “Soya”, from Bunge.
In his vote, the rapporteur Gustavo Augusto stated that he did not see any competition problems arising from the merger in relation to most of the markets involved in the operation.
However, concerns were identified with regard to the bottled refined soybean oil segment. In this case, he pointed out that the product is in short supply in the market, the prices charged for it increased significantly in the years 2020 and 2021, and, among other issues, this market is concentrated and will be controlled by only three companies.
“Applicant Bunge is the market leader and has held this position for more than five years. After the operation, the second place will not be able to contest the volumes added by the operation without significant investments, since its idle capacity is not enough to face the concentration act, in the short term”,
said the advisor.
The ACC entered into with Bunge aims to address the competition concerns identified by CADE and preserve the sector's conditions of competition, specifically in relation to the sale of refined soybean oil packaged under the brand name "Leve ”.
Although the agreement between Bunge and Grupo CP provides for the continuity of the distribution of Imcopa's soybean oil, which may mitigate the risk of damage to the brand and to the product's offer, the Board understood that the condition must be contemplated in the agreement to ensure that the “Leve” brand is available on the shelves of supermarkets and commercial establishments.
In this context, among the obligations established in the ACC, Bunge undertakes to continue selling soy oil without unjustifiably ceasing to sell the “Leve” brand.
Furthermore, in order to prevent the consumer from being confused as to the origin of the product, Bunge will not be able to create a new packaging, label or any other brand or visual signs of the “Light” soybean oil. In the same vein, the company is prohibited from making significant changes to its visual identity, product characteristics and packaging design.
The determinations of the agreement will last until February 27th, 2024 or until the closing of the transaction, if this occurs before the established date.