The Federal Public Ministry (MPF) recommended that the Administrative Council for Economic Defense (Cade) disapprove of the purchase of Oi by TIM, Vivo (Telefônica) and Claro due to “competition violations”. The Attorney’s assessment is that the operation is harmful to the market and that the telecoms broke the law by forming a consortium to buy the competitor.
In an opinion, the Public Prosecutor Waldir Alves, MP’s representative at the agency, also determined the initiation of two administrative proceedings against the three telecoms to investigate irregularities. A process to investigate the existence of combined conduct between companies and “possible exclusionary practices”. Another investigation was determined to determine whether the operators communicated the operation to Cade within the deadline defined in the legislation.
In the opinion, the prosecutor assesses that the purchase of the fourth largest mobile operator by the first three will prevent new competitors from entering the market. “Due to the high concentration of spectrum bands through which the data of the operators travel, granted to the operators Tim, Telefônica, Claro and Oi (practically all), with the approval of the Operation, the three mobile telephony giants will have the capacity to close the market” , says.
The purchase of Oi by the three telecoms will be judged by the Cade court next Wednesday, the 9th. The opinion of the MPF is not binding, that is, the counselors are not obliged to follow the understanding of the Attorney General’s Office.
As shown last week the broadcast, Grupo Estado’s real-time news system, members of the antitrust authority want the telecoms to sell part of the assets purchased from Oi to give the go-ahead for the operation. According to sources, part of the court, which will analyze the process, understands that, without the sale of infrastructure, the operation may be disapproved by the council.
The purchase of Oi Móvel by the consortium of the country’s main telecoms, a R$ 16.5 billion deal, was made in December 2020 after a long process of judicial recovery. At Cade, however, the understanding of some directors is that, as it stands, the business creates a “triopoly”, that is, the market would be divided equally between three large companies. This would reduce the incentives for them to compete and harm the market.
Hi dispute opinion
Oi refuted, in a note, the opinion of the Federal Public Ministry that recommended that Cade disapprove of the purchase of the company by Claro, Tim and Vivo and said that the deal reinforces competition between operators.
In the text, Oi said that the MPF representative does not consider the importance of the operation for the economic recovery of the Oi Group and the pro-competitive aspect of the business which, according to the company, enables the creation of one of the largest network companies neutral in the country, which “will offer capacity to all operators, helping to increase competitiveness in the market”.
“Regarding the remedies, Oi understands that the measures imposed by Anatel’s prior consent, the intense sectoral regulation and the actions being considered by Cade will be sufficient to mitigate any competition concerns”, completes the company.
The telephone company Vivo also rebutted the criticism made by the Federal Public Ministry of the purchase of Oi Móvel In response, Vivo, through its press office, claims that all applicable legal procedures were followed in the offer made by the mobile telephony assets of Oi, unanimously approved by the National Telecommunications Agency (Anatel), on the 31st of last month.
“The purchase proposal was carried out in a public auction within the scope of the operator’s judicial recovery and, therefore, supervised by the Public Ministry of Rio de Janeiro and the Judiciary. Contrary to what the prosecutor claims, the offer was made jointly by the three companies, but not in the form of a consortium, and will result in three absolutely independent acquisitions by the buyers, which continue and will continue
to compete vigorously in the market”, said Vivo, adding that the purchase proposal was designed to preserve and encourage competition in the cellular telephony market.
In its official letter, the MPF asks “for the non-approval of the present merger between Tim, Telefônica, Claro and Oi, due to competition violations”. The Federal District attorney also asks CADE to analyze a possible practice of “gun jumping” violation by the companies, with the application of the penalty of annulment of the operation (purchase of Oi) and that the antitrust agency investigate the “occurrence of conduct concerted action between competitors and possible exclusionary practices”.
“Gun jumping” is the consummation of an operation without the prior approval of Cade. This type of practice has already led the agency to cancel a distribution agreement signed between the Blue Cycle joint venture and Shimano. At the time, CADE’s advisers argued that the practice is serious and that they will be strict in their decisions to avoid the repetition of this type of conduct. Sought by the report, TIM and Claro had not yet manifested themselves until the publication of this article.
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