On October 1st, 2014, the Administrative Council of Economic Defense ("CADE") approved the amendments on CADE's Resolution n. 2 (through the enactment of Resolution n. 9, published in the Brazilian Official Gazette in October 07th 2014), which provides the regulation of Pre-Merger Control Notification, resulting from the public consultation in February/2014.
The new regulation, in general, establishes: new criteria on turnover calculation regarding transactions involving investments funds; new criteria related to acquisition of shares; new rules on notification regarding securities and/or bonds convertible into shares; and also new rules for Summary Procedure on pre-merger control.
In relation to investment funds, the regulation sets forth a new definition of Economic Group, which shall be applied for the group turnover calculation purpose and, thus, when the notification of such transaction will be due.
Another important modification is related to control acquisition. As per the new rules, transactions related to acquisition of minority equity interest by a company's controlling shareholder will be no more subject to submission before CADE, since the purchaser already has the full control of the target.
Likewise, we point out the new criteria established in the regulation in reference to the Summary Procedure for Pre-Merger Control before CADE. Through the new regulation, in addition to deals that do not result in horizontal concentration or vertical market integration, to transactions which result in a horizontal concentration minor than 20%, and to other specific cases already set forth in Resolution n. 2, transactions resulting in a market share higher than 20% may be considered for the Summary Procedure if the increase of the market share is derisive. Moreover, deals with vertical integration, in which the economic group of the parties involved owns a market share of up to 30% within the related market, may also be subject to Summary Procedure.
Furthermore, on October 29th, 2014, CADE has also enacted Resolution n. 10 (published in the Brazilian Official Gazette on November 4th 2014), a new rule which provides guidelines in relation to "collaborative/association agreements" that shall be subject to mandatory pre-merger control notification before CADE. We point out that such Resolution n. 10 shall enter into force within 60 days from the date of its publication.
Therefore, according to Resolution n. 10, an agreement shall be considered as "collaborative/associative" whenever the parties involved fulfill the turnover thresholds provided in the Brazilian Antitrust Law (Law nº 12.529/2011), in case the agreement lasts for more than two years and involves a horizontal or vertical cooperation or sharing risks in which may derive an interdependence relation between the parties.
In other words, agreements (i) in which the parties or their respective economic groups are horizontally related to the subject matter of the agreement, and their combined market share in a relevant market affected by that specific agreement is equal to or in excess of 20%; or (ii) in which the parties or their respective economic groups are vertically related to the subject matter of the agreement, and at least one of them has 30% market share or more in a vertically related relevant market affected by that specific agreement, and provided that the agreement contains a profit/loss sharing clause or exclusivity obligations arise from the agreement.
Moreover, agreements which fulfill the above mention criteria and last for less than 2 years shall be subject to submission before CADE when, through their renewal, supersedes the 2 years period.
Finally, we point out that the new rules and criteria set forth by Resolutions n. 9 and 10 are the result of over two years of implementation of the new Brazilian Antitrust Law. Hence, the new antitrust system in Brazil through pre-merger control reflects the constant process of improvement and review of the practices and case law before the antitrust authorities.
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