Antitrust Law Daily Wrap Up, ANTITRUST NEWS: ABA Sections comment on CADE’s rules for associative agreements notification, (Jul 12, 2016)

By Michael Menzhuber, J.D., LL.M.

The Antitrust and International Law Sections of the American Bar Association on July 6 released joint comments to the Brazilian Administrative Council for Economic Defense (CADE) on its proposed amendments to rules for notification of associative agreements. The comments are in response to a call for public comments from Public Consultation n. 02/2016, dated May 5, 2016.

CADE Public Consultation n. 02/2016 proposes to repeal and replace the current rules (CADE Resolution n. 10/2014) that define when an arrangement qualifies as an "associative agreement" and is subject to Brazil’s pre-closing notification regulations. The ABA acknowledges that CADE’s proposed changes are intended to clarify the definition of "associative agreements." However it believes that the proposed definition still appears to be overly broad and to capture a wide range of cooperation and collaboration agreements that are not subject to premerger notification requirements in the great majority of other jurisdictions.

The ABA believes that a better approach would be to limit the definition of "associative agreements" to those that result in a meaningful transfer or change in control in a business with a current presence in the marketplace. It suggests that purely vertical and economic agreements that do not involve this type of transfer of control or structural change to the market should not fall within the scope of the merger control regulations.

CADE’s proposed resolution also establishes new thresholds to determine which associative agreements would be subject to mandatory filing agreements. The ABA recommends that certain purely vertical and economic agreements should not fall within the scope of the merger control regulations and these types of vertical contractual relationships should remain subject solely to anticompetitive conduct investigations. In the alternative, the ABA recommends that CADE consider that such transactions be filed under a voluntary regime, and not a mandatory pre-merger notification.

The ABA also recommends that, if the narrower scope for "associative agreements" is adopted, CADE should consider eliminating market share criteria to determine whether or not an associative agreement should be subject to CADE review. If, however, CADE decides to maintain the proposed definition of "associative agreements," the ABA recommends that some form of meaningful screen be provided to ensure that it is not overwhelmed with notification of a huge number of ordinary business transactions that are unlikely to have a significant effect on Brazilian commerce.

News: Antitrust