CADE approves with restrictions joint venture between banks in the sector of credit information services

The Tribunal of the Administrative Council for Economic Defense – CADE approved, on November 9, the joint venture between Banco do Brasil, Bradesco, Caixa Econômica, Itaú and Santander, which creates a new credit bureau. The approval was conditioned upon the signature of a Merger Control Agreement (ACC in its acronym is Portuguese).

A credit bureau provides services related to the information concerning solvent and insolvent legal or natural persons for purposes of granting credit. The new bureau will operate with both insolvency and solvency registers.

After the analysis of the sector’s information, CADE verified that the operation would affect the market of solvency and insolvency information on legal and natural persons due to the existing vertical integration between banks and credit bureaus, since banks are, at the same time, suppliers and consumers of services provided by the bureaus.

On the one hand, this vertical integration could result in anticompetitive conducts, such as the discrimination in access to information provided by the banks to the credit bureaus that will be their competitors after the joint venture or the discrimination in access of banks that are competitors to the new bureau’s services.

On the other, CADE also concluded that the transaction may consolidate a solvency register in Brazil. Despite of being legally prescribed since 2011 (Law nº12.414/2011), the register is still in a structuring stage. The consolidation of such database may stimulate positive impacts that go beyond the market of credit information services, with the reduction of insolvency, interest rates and banking spreads. These benefits may profit all credit borrowers.

In this sense, in order to eliminate competition concerns regarding the vertical integration between the parties and the new credit bureau, the banks agreed to sign a Merger Control Agreement, as a condition for the transaction’s approval. The Merger Control Agreement foresees, among other obligations, goals related to the register’s expansion, guarantees of non-discrimination for competing credit bureaus accessing credit information and mechanisms of corporate governance in order to avoid information exchange between the associated banks through the joint venture.

In his vote, the Reporting Commissioner, Mr. Paulo Burnier, considered that the obligations assumed by the banks solve the identified competition issues. “I understand that the Merger Control Agreement’s restrictions mitigate adequately the competition issues detected by the authority. Furthermore, it will generate positive externalities aiming to boost the solvency register in the country”, said the Commissioner.

The Administrative Tribunal’s final decision confirms the analyses and the opinion issued by CADE’s General Superintendence. Only specific adjustments have been done on the Merger Control Agreement draft version, initially submitted by the banks.