Antitrust regulator accepts appeal against American-Azul deal, opens probe

The rapporteur also ordered a further investigation focused on issues that remain disputed in the deal between Azul and the U.S. airlines—as part of Azul’s Chapter 11 bankruptcy proceedings in the United States, American and United agreed to invest $100 million each in the Brazilian airline.

United’s investment, which involved an existing Azul shareholder, was approved by the Cade in February. More recently, the Cade’s General Superintendence also cleared American’s investment.

On August 18, Abra filed an administrative appeal with the Cade challenging the unconditional approval of American Airlines’s investment in Azul. The approval had been granted July 31 by the Cade’s General Superintendence. This was the appeal accepted by the Cade on Wednesday. In the rapporteur’s view, all legal requirements had been met, including timeliness, standing, and legal interest in appealing. The merits of the appeal will now be formally considered by the Cade’s tribunal.

“Among other issues, further examination may address Azul’s corporate and governance structure, safeguards applicable to potential information risks, and the possible effects of the transaction on commercial relationships and competitive conditions in the affected markets,” the rapporteur said in her opinion. “Supplementing the investigation does not presume that the concerns raised are well-founded, does not entail a broad reopening of the analysis already conducted, and does not prejudge the merits of the appeal.”

One of the issues brought to the Cade by IPSConsumo is a request to open an Administrative Proceeding for the Investigation of a Concentration Act (APAC) to examine indications that the effects of transactions involving American Airlines, United Airlines, and Azul may have been implemented prematurely. According to IPSConsumo, if the practice known as “gun jumping” is proven, Brazilian law provides for a fine of up to R$60 million.

According to the institute, the U.S. airlines were already participating in strategic discussions and negotiations involving the Brazilian company, with direct effects on third parties and the market, while the competition reviews were still underway as part of the Chapter 11 process.

“There are public elements that justify an investigation into the joint participation of competing companies in strategic discussions and negotiations with third parties while antitrust reviews were still underway. It is up to the Cade to examine the facts and, if premature implementation is proven, impose the sanctions provided by law with appropriate rigor,” said Juliana Pereira, president of IPSConsumo.

American and Azul declined to comment.