pre-merger control rules on collaborative agreements

January 21, 2014
PRE-MERGER CONTROL RULES ON
COLLABORATIVE AGREEMENTS
On January 3, 2015, the new rules on the submission of the so-called “collaborative agreements” to the Administrative Council for Economic Defense (“CADE”) became effective. The mandatory submission of such agreements to CADE was already set forth in the new Brazilian antitrust law, which entered into force on May 29,
2012. The new rules aim at providing additional clarity to this matter by establishing the types of agreements
that shall be considered “collaborative” in nature, and therefore subject to CADE′s pre-merger control.
Pursuant to Resolution No. 10/2014, which entered into force on January 3, 2015, an agreement shall be
considered “collaborative” if it lasts for more than two years, and the following additional conditions are met:
(i) The agreement gives rise to a horizontal overlap between the contracting parties or their respective
groups, and their combined market share is equal to or in excess of 20%; or
(ii) The agreement gives rise to vertical link between the contracting parties or their respective groups,
and one of them has a market share of at least 30% in one of the markets affected by the agreement,
provided that (a) the agreement contains a profit/loss sharing provision; or (b) the agreement contains
exclusivity obligations.
Agreements lasting less than two years that meet the thresholds above may be also subject to CADE’s premerger control if, upon renewal, the two-year period is reached or exceeded.
For example, a two-year agreement will be deemed “collaborative” if it relates to competitors jointly selling a
given product in Brazil, and the contracting parties’ combined market share in the market in question is equal
to or in excess of 20%. Likewise, a two-year exclusive distribution agreement with effects in Brazil will be considered a “collaborative” agreement whenever the manufacturer of the product to be distributed holds a market
share equal or in excess of 30% in the market at issue.
When a transaction falls within the concept of “collaborative agreements”, the contracting parties shall assess
whether the other thresholds for mandatory filing set forth in the Brazilian antitrust law are also met. In the
event such thresholds are met, the parties must submit the agreement to CADE′s pre-merger control before
taking any measure to implement it.
The reproduction or dissemination, in whole or in part, of the contents of this memorandum without the prior written consent of Mattos Filho is prohibited.
First, a “collaborative agreement” shall be subject to CADE′s pre-merger control if it has effects in Brazil. Second, at least one of the groups involved in the transaction must have had gross revenues in Brazil of at least
BRL750 million (roughly USD318.5 million, based on the average exchange rate for 2014) in the fiscal year
immediately prior to the execution of the agreement; and at least one other group involved in the transaction
must have had gross revenues in Brazil of at least BRL75 million (roughly USD31.8 million based on the average
exchange rate for 2014) in that same fiscal year.
Sectors such as aviation, pharmaceutical and retail, among others, in which players typically engage in various types of distribution and supply relationships and partnerships, should carefully assess how the new rules
may affect their businesses in Brazil. Failure to comply with such rules may result in substantial fines and other
administrative penalties. Also, the acts implemented prior to obtaining CADE’s approval may be declared null
and void.
For additional information, please contact:
Lauro Celidonio
[email protected]
T +55 11 3147 7617
Amadeu Ribeiro
[email protected]
T +55 21 3231 8245 / +1 646 695 110
Carlos Emmanuel J. Ragazzo
[email protected]
T +55 3231 8201
Michelle Marques Machado
[email protected]
T +55 11 3147 7639
Marcio Dias Soares
[email protected]
T +55 11 3147 2701
The reproduction or dissemination, in whole or in part, of the contents of this memorandum without the prior written consent of Mattos Filho is prohibited.