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Brazil: CADE rejects healthcare merger

By  |  February 8, 2013

Brazil’s antitrust authority CADE has announced in a press release that it has decided not to approve of a merger between two healthcare benefits administrators Alianca and Qualicorp. Qualicorp is seeking 60 percent of the company. According to the press release, which can be read below, the Tribunal will now give a final ruling on the case. CADE said in its statement that the merger would significantly reduce competition and result in a loss of service and benefits for existing customers.

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    The General Superintendence of the Administrative Council for Economic Defense – CADE – recommended the rejection of the purchase of companies that integrate Aliança Administração de Benefícios and GA Consultoria by Qualicorp. The transaction entails the acquisition by Qualicorp of 60% of the both companies’ shares. The case will now be reviewed by the Tribunal of Cade, which renders the final decisions within the Council.

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    For the General Superintendence, the acquisition would lead to reduction in competition in the healthcare benefits administrator market and thus reducing existing benefits and welfare to consumers of that service.

    The healthcare benefits administrator market is relatively recent and consists of companies that intermediate, before health plan operators, the contracting of health plans by collective entities or associations (unions, associations, etc.) and employers. Companies that operate in this segment assist the contractors in the operational management of these benefits, assuming responsibility for various activities, such as the issuance of bills for beneficiaries, collection of debt and negotiations with Health Plan Operators.

    According to the released official opinion, Qualicorp is the market leader with a participation of over 70%. On the other hand, Aliança is the main competitorand holds approximately 10% of market share.

    The official opinion explains that the acquisition would result in the control of about 80% of the national market for both companies. Aside from the high concentration, the General Superintendence recognized that the market has a number of barriers to the incoming of new competitors. Finally, it was identified that the healthcare benefits administrator market has a low level of rivalry, because of the large size difference between the remaining competitors in the market and the company resulting from the merger – which limits the ability of these small businesses to compete with the market leader.

    In the opinion of the General Superintendence of Cade, any of the alleged benefits that might result from the transaction are not able to fend off the potential negative effects on competition.

    The merger was notified in June and is being processed under the old antitrust law, Law no. 8.884/94.

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