Anticompetitive doesn’t translate to Portuguese

Walmart could be put at a competitive disadvantage in Brazil if a bizarre merger between the company’s two larger rivals proceeds and secures regulatory approval.

The nation’s two largest retailers, Pao de Acucar and France-based Carrefour are attempting to merge their operations in a convoluted deal that has drawn the ire of fellow French retailer Casino, which owns a large stake in Pao de Acucar. 

The folks at Casino didn’t take kindly to the head of Pao de Acucar engineering a deal to merge with Carrefour behind their back. If the merger can get past the challenge of a jilted major shareholder the deal would still need to pass regulatory muster and presumably Walmart would have a few thoughts to share on the topic of Brazil’s two largest retailers being allowed to join forces.

Things must work differently in Brazil because in the United States such a combination wouldn’t even be entertained. Here it seems regulators would rather allow a company to flounder, file for bankruptcy and eventually liquidate before approving a combination that might be viewed as diminishing competition. Just look at the situation now facing the three major players in the office superstore channel. Staples has recently fallen on difficult times, and its two smaller rivals are not weathering well the protracted downturn in business spending. 

A combination of Office Depot and OfficeMax is viewed by many in the space as a rational move that could create a stable and viable company yet the deal doesn’t move forward due to lingering antitrust issues and a narrow view of the competitive landscape that dates back to 1997. That is when Staples tried to buy Office Depot and the deal encountered stiff opposition from regulators and wound up in court. Ironically, the market was more fragmented back then, but the government prevailed.

Brazilian regulators wouldn’t bat an eye at that deal considering Carrefour and Pao de Acucar decided to move forward with a tie up that is said to result in the combined company owning one third of the retail market.