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Magalu wins first round of antitrust dispute with Argentine rival Mercado Libre

Mercado Pago argued that Magalu's acquisition of Hub Prepaid was due to its database: Hub holds Mercado Pago data from January 2016 until January 2021

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  • Mercado Pago argued that Hub Prepaid could provide transactional data from Mercado Pago to Magalu, harming competition;
  • Brazil’s antitrust watchdog understood that Hub is prohibited from providing this information to Magalu and authorized the operation.

Brazil’s antitrust watchdog (Cade) decided, on Wednesday, by the dismissal of the appeal of Mercado Pago, the payments arm of Mercado Libre, on the acquisition of fintech Hub Prepaid by Brazil’s Magalu. Cade authorized the deal (started last year and approved by Cade’s General Superintendence in March) without restrictions.

READ ALSO: Magazine Luiza acquires Jovem Nerd, a platform focused on geek content

Brazil’s retailer Magazine Luiza acquired 100% of Hub for BRL 290 million, including subsidiaries Hub Payments, Hub Benefits, Paypaxx, and Hub Argentina. The matter was brought to Cade’s Court through an appeal filed by Mercado Pago, a third party interested in the case (in addition to Magalu and Hub Prepaid), against the General Superintendence’s decision.

READ ALSO: Brazil’s antitrust watchdog approves the acquisition of Hub Fintech by Magazine Luiza

Mercado Pago argued that there was a lack of instruction from the Superintendence case, which would have led to an incorrect understanding of the obtaining of sensitive data from Mercado Pago transactions by Hub Prepaid. According to Mercado Pago, Magalu would have acquired Hub on account of its database.

Mercado Pago was a Hub customer from January 2016 until January 2021. During that period, Hub would have aggregated information on purchase, lottery card, and withdrawal transactions from Mercado Pago, which could be used by Magalu, harming the competition.

READ ALSO: Magazine Luiza acquires digital fashion platform Steal the Look

On its behalf, Magalu argues that the acquisition will add to the retailer the entry into financial services such as the provision of prepaid cards and virtual accounts to its customers.

According to the case’s reporting counselor, Paula Azevedo, there are doubts about the strategies that could be used by Magalu with this data, as they are transactional and not end-to-end.

READ ALSO: From a brick-and-mortar stores chain to the largest Brazilian retail ecosystem: Magazine Luiza’s next steps

Also, according to Azevedo, Brazilian Central Bank’s and regulations and contractual terms between Hub and Mercado Pago prevent the fintech from supplying the Mercado Pago data to Magalu. “The contractual elements contain causes of confidentiality aimed precisely so that institutions cannot exploit this data,” she said.

The rapporteur’s understanding was followed by the Court. Earlier on Wednesday, Magalu announced its 6th acquisition in 2021: the geek content platform Jovem Nerd.

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