* Cade says auditing could follow if accord not fulfilled
* BRFoods says Valor story on auditor has “no basis”
* Cade councilor said BRFoods exerts excess market power
* Cade could ask courts to impose auditor for 180 days (Add comments from Cade, BRFoods in paragraphs 1-5)
SAO PAULO, July 8 (Reuters) - Brazil’s antitrust regulator denied on Friday that it will ask the courts to name an auditor for Brasil Foods (BRFS3.SA)(BRFS.N), a food processor it is scrutinizing for excess market power.
Valor Economico newspaper reported on Friday that the agency, known as Cade, was considering the move to ensure the company abides by restrictions on market concentration. The newspaper did not say how it obtained the information.
Cade is currently reviewing whether the creation of Brasil Foods in 2009, through a takeover of Sadia by rival Perdigao, resulted in a company with too much pricing power in the food processing market. A councilor at Cade recently said the takeover would harm competition and lead to higher prices, stoking concerns the transaction could be rejected.
“That type of mechanism is only implemented after a ruling (on the combination), with the existence of restrictions and the failure of the company to meet such restrictions,” a Brasilia-based Cade spokesman said in an emailed statement.
Cade councilors will meet on July 13 to resume a vote on the legality of the merger. Cade and Brasil Foods are trying to reach an agreement before that date.
Several Cade councilors have said that BRFoods, as the company is known, is too dominant in most markets it operates, such as cold cuts and frozen foods, but the company is reluctant to give up some of its flagship brands.
Shares of Brasil Foods fell 2 percent in early afternoon trading in Sao Paulo to 25.07 reais. The stock has shed 7.1 percent in the past month.
Brasil Foods, through a spokesman, said the Valor report has “no basis.” He reiterated that the company is currently talking with Cade councilors about solutions that would stop the agency from banning the Perdigao-Sadia combination.
Valor noted that a Brasil Foods offer to sell integrated production chains in some market segments, distribution centers, slaughterhouses and production lines has so far failed to satisfy regulators at Cade, who called the efforts insufficient to rein in price increases.
Only a judge can name an auditor, who can remain in the company for a maximum 180 days. The same judge would determine pay and other conditions for the auditor, Valor reported.
The use of an auditor has been successful in Brazil on prior occasions. Cade’s decision to name an auditor to oversee a mandate to reduce Owens Corning’s market power in the glass market led to the sale of a factory, Valor reported. (Reporting by Guillermo Parra-Bernal and Fabiola Gomes; Editing by Steve Orlofsky)