The National Commission for the Defence of Competition (CNDC, for its acronym in Spanish) issued an opinion recommending acceptance of the commitment offered by Natura and Avon in the framework of their global merger. This commitment consists of a series of behavioural measures aimed at neutralising the risks to competition that were detected during the notified transaction analysis.
Within this framework, the Secretary of Industry and Commerce by means of Resolution 362/24 (RESOL-2024-362-APN-SIYC#MEC) adopted in all its terms the recommendation of the CNDC, and subordinated the approval under the terms of Section 14, paragraph (b), of Act 27.442 on the Defence of Competition (LDC, for its acronym in Spanish).
Both companies specialise in the direct sale of beauty and personal care products through resellers. Based on the analysis of the different markets where horizontal effects were identified, the CNDC issued in June 2022 an Objection Report identifying competition risks in two specific markets: colour cosmetics ―and the sub-segments of eye, face and lip cosmetics― in which the merged entity would exceed 40% market share, and mass fragrances, with a market share close to 54%.
In both markets, some concerns had been identified around barriers to entry for new entrants or expansion of existing firms ―especially in the direct sales channel― and potential portfolio effects.
To mitigate the concerns identified by the CNDC, the parties submitted in due course a series of commitments including behavioural measures aimed at preserving competition and reducing the identified risks.
The commitment submitted and finally accepted by the CNDC, stipulates, for a period of three years following the signature of the Resolution by the Secretary of Industry and Commerce, compliance with the following measures: i) not to include exclusivity clauses in contracts with tollers, raw material suppliers and resellers related to the products in question, and; ii) to ensure the availability and individual offer of the products included in the kits or bundled product packages that are usually offered in each commercial cycle.
According to the CNDC's assessment, the commitment not to establish exclusivity clauses in the contracts governing the relationship with third parties is a fundamental aspect of preserving competitive conditions in the product markets involved, keeping down barriers to entry in terms of production capacity and the development or maintenance of the distribution network in the door-to-door channel, where Natura and Avon are mainly active.
In terms of portfolio effects, the individual and simultaneous availability of products offered as part of a kit reduces the competition risks that had been identified on this respect.
Thus, the threat of entry and/or expansion of new competitors or competitors already present remains, especially in the direct sales channel, where the horizontal effects of the operation are more significant. In addition, the presence of international companies operating with well-known brand portfolios in the beauty and personal care industry would mitigate any concerns about horizontal effects of price increases in the colour cosmetics and mass fragrances markets.