Brazil: CADE Launches A Public Consultation On New Notification Criteria For Associative Agreements

On Wednesday, May 11th, the Brazilian antitrust authorities ("CADE") launched a public consultation on a draft resolution that stipulates new criteria for the mandatory notification of the o called "associative agreements". The deadline for submission of comments and contributions is May 31, 2016.

The below table shows a comparison between the current and the draft regulation.

As illustrated, the draft regulation proposes to reduce the number of transactions that should be submitted for approval as as "associative agreements".

However, some criteria remain unclear, such as "market potentially affected by the agreement" and "agreements that could result in exclusivity" and would benefit from further clarification from the authorities in the final version of the regulation.

Requirements Current Regulation Draft Regulation Changes
Turnover $ 750 million (approx.. USD 210 mi) for one of the groups involved in the agreement (obtained in Brazil, in the last FY) and

R$ 75 million (approx.. USD 21 mi) for at least another economic group involved in the agreement (also in Brazil in the last FY).
R$ 750 million (approx. USD 210 mi) for one of the groups involved in the agreement (obtained in Brazil, in the last FY) and

R$ 75 million (approx.. USD 21 mi) for at least another economic group involved in the agreement (also in Brazil in the last FY)
Agreement´s term 2 years or more (including renewal) 2 years or more (including renewal). An agreement with a term shorter than 2 years or with an indefinite term should be notified once it reaches or passes 2 years, counted as of the moment of execution. Yes, the draft regulation determines the moment of notification in case of indefinite or shorter (than 2 years) agreements.
Type of agreements Any contract that fulfils either the below criteria (i) and (ii) Any contract in which the parties enter into a "common enterprise", which is defined as a contract that:
  • involves a regime of cooperation between the parties
  • establishes sharing of risks/results between the parties
  • results in the offer and/or acquisition of goods and/or services, and
  • fulfils the either of below criteria
Yes, the draft regulation establishes that in all associative agreements the parties mush share the risks/results and the agreement should result in the offer and/or acquisition of goods and/or services.
(i) Horizontal criterion If the parties (and/or their groups) are horizontally related in relation to the market object of the contract, the overlap is in excess of 20% If the agreement results in a horizontal cooperation between the parties (and/or their groups), the overlap in at least one of the markets potentially affected by the agreement is in excess of 20% Yes, the draft mentions "potentially affected markets" instead of "market object of the agreement"..
(ii) Vertical criterion If the parties (and/or their groups) are vertically related in relation to the market object of the agreement, at least one of the parties′ market share (and/or their groups) is in excess of 30%, provided that:
  1. the agreement provides for sharing of revenues/losses between the "contracting parties", or
  2. the agreement results in an exclusive relationship
If the agreement results in a vertical cooperation between the parties (and/or their groups), provided that:
  • the market share of at least two of the parties (and/or their groups) is in excess of 20% in the markets potentially affected by the agreement, and
  • the agreement results or could result in exclusivity
Yes, the draft regulation establishes that both parties involved in the vertical relationship must have a market share of at least 20% in the "potentially affected markets" (as opposed to only one party having 30% in at least one market object of the agreement), and that the agreement should or could result in exclusivity.
Multiple associative agreements N/A In case the same party signs multiple associative agreements with common characteristics, where there are clearly no concerns, CADE may approve all simultaneously based on the assessment of one or more of such agreements. Yes, the draft regulation establishes the possibility of simultaneous approval for multiple and similar agreements executed by the same party.
Additional comments N/A The regulation only applies for contracts signed after it enters into force. However, in case of existing contracts that are renewed, resulting in a total term of 2 or more years, they should be reported if, under the terms of this regulation, they are considered associative agreements. Yes, the draft regulation establishes the hypotheses of notification in case of existing agreements which falls under the "associative agreement" category under the new regulation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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