On Tuesday, October 25th, the Brazilian antitrust authority ("CADE") published a new resolution that stipulates new criteria for transactions to be considered "associative agreements", and thus subject to its mandatory merger control (Resolution No. 17 of 2016). The regulation mainly catches commercial agreements which, under certain criteria, must be reported to CADE before implementation.

This new resolution will come into force on November 25th, 2016.

The submission of certain types of commercial agreements ("associative agreements") was established by the Antitrust Law of 2011 (Law n. 12.529/11). However, the law did not specify which types of agreements would be considered within this concept.

CADE then enacted Resolution No. 10 of 2014 in January 2015, which was the first to define which  types of agreements would be  considered "associative agreements" for purposes of antitrust control.

The newly enacted regulation narrowed the concept of "associative agreement", substantially limiting the types of transactions that are caught.

The key difference between the new and the old regulation is that the new one only applies to agreements in which the parties (or their groups) are horizontally related vis-à-vis the object of the agreement (regardless of their market shares) - i.e., where there is an agreement between competitors, and not to agreements that result in vertical relations between the parties, which were also caught by the old regulation - such as ordinary distribution agreements.  

This is a welcome improvement as it will remove the burden of notification to many commercial agreements that are unlikely to result in competition concerns.

Under the new regulation, any agreement that results in an horizontal cooperation, in a market in which the parties are already active, and provide for the sharing of risks and/or results, will need to be notified, even if it involves "de minimis" market shares. This change actually increases the number of agreements between competitors that have to be filed, as under the previous law only those where market shares were greater than 20% were subjected to control.

Requirements Previous Regulation
(Resolution No. 10 of 2014)
New Regulation
(Resolution No. 17 of 2016)
 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).
No.
 
Agreement´s term

 
2 years or more (including renewal)  2 years or more (including renewal).
An agreement with an initial term shorter than 2 years or with an indefinite term, which will reach or even surpass 2 years term, should be notified before renewal or reaching the 2 years term.
 
 
Yes, the new regulation defines the moment of notification in case of indefinite or initially shorter (than 2 years) agreements.
 
Type of agreements

 
Any contract that fulfils eitherthe below criteria (i) and (ii) Any contract in which the parties enter into a "common enterprise", which is defined as a contract that:
 
- establishes sharing of risks/results between the parties, and
 
-  results in the offer and/or acquisition of goods and/or services, and
 
- fulfils the below horizontal criterion
Yes, the new regulation establishes that in all associative agreements the parties must 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 parties and/or their groups) are horizontally related in relation to the market object of the contract. Yes, in the new regulation there is no longer a market share threshold to fulfil this criteria.
 
(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:
 
(i) the agreement provides for sharing of revenues/losses between the "contracting parties", or
 
(ii) the agreement results in an exclusive relationship.
N/A Yes, there is no longer a vertical criterion.
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 new regulation establishes hypotheses of notification in case of existing agreements, which will now fall under the "associative agreement" category as per the new regulation.

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