Appeal may bring case before antitrust tribunal and delay rival retailers’ merger plans.
Petlove has filed an appeal with Brazil’s antitrust regulator CADE (Administrative Council for Economic Defense), challenging the agency’s technical approval of the merger between retailers Petz and Cobasi. The appeal could move the case to CADE’s tribunal and, at the very least, delay the integration plans of the rival chains.
Announced in August of last year, the merger brings together the two largest players in Brazil’s pet retail market. Under the agreement, Petz shareholders will hold a 52.6% stake in the new entity, while Cobasi shareholders will retain 47.4%. Petz will operate as a subsidiary of the combined company. The new company is expected to have revenues of approximately R$7 billion. Despite the deal’s consolidation of two industry giants, it was cleared without conditions by CADE’s General Superintendence. A key factor in the approval was the agency’s broad definition of the “relevant market,” which considered a wide range of pet retailers—including small shops—and the presence of e-commerce platforms, rather than focusing solely on large-format stores.
That market definition is the central point of Petlove’s challenge. In its appeal, the company argues that in other retail merger cases, the antitrust regulator has considered store size and the distinction between online and physical formats in determining market boundaries. The filing also notes that recent precedent has treated marketplace activity as a distinct segment within the broader online retail space. Petlove cited rulings in the mergers of Arezzo and Grupo Soma, Mobly and Estok, Casa & Vídeo Brasil and Lojas Le Biscuit, Lojas Americanas and Uni.co, and Magazine Luiza and Kabum.
“The General Superintendence’s opinion adopts an overly broad definition of the relevant market for physical and online pet retail, disregarding CADE’s established practice of differentiating players based on size, business model, product range, and consumer profile,”
the appeal states.
Petlove, the third-largest player in Brazil’s pet retail market, operates primarily online and argues that a merged Petz–Cobasi would enjoy a disproportionate advantage in supplier negotiations. Smaller pet shops, it says, are already unable to match the combined players’ scale in product offerings and pricing.
The filing further argues that the antitrust watchdog itself acknowledges the competitive pressure large-format stores exert on smaller ones, but not the reverse. Products sold in small and mid-sized pet shops can be found in superstores, but the reverse is not always true. Moreover, the lower prices at superstores tend to drag down prices at smaller outlets, whereas the opposite does not occur.
“The fact that neighborhood pet shops see Petz and Cobasi as competitors doesn’t mean that Petz and Cobasi view these smaller establishments as direct competitors,”
Petlove claims in its filing. The company argues that the dominant players’ scale and range of offerings put them in a different competitive tier.
Petlove also notes that Petz and Cobasi provide services unavailable from any other player in the market, and that they offer premium products from various suppliers — many of which are exclusive—as well as an increasing array of private-label items. “The combined company will have unrivaled bargaining power with suppliers,” the filing states, adding that the General Superintendence’s report fails to address this concern.
According to Petlove, market testing conducted by the agency itself confirms that most competitors and suppliers view the deal with apprehension, citing risks such as the exclusion of rivals, price hikes, and reduced consumer choice.
The company also criticizes the lack of a “minimally detailed” analysis of the deal’s strategic rationale. It points out that Petz’s CEO has publicly stated that “the main benefit of this transaction” is ending a head-to-head rivalry with Cobasi, in which “we were wearing ourselves down fighting for the same markets,” and that combining the two companies avoids the “waste of energy” from ongoing competition.
Petlove is calling for the merger to be blocked altogether. Failing that, it is urging the antitrust regulator to impose substantial remedies as a condition for approval.
Source: Valor International
