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The Brazilian Competition Authority publishes general guidelines for competitor collaborations allowed during the COVID-19 crisis

On July 6th , the Brazilian Antitrust Authority (CADE) published the so-called “Provisional Informative Note” to guide the economic agents on the collaboration between companies to fight the Covid-19 crisis.

The document (available here), [1] awaited by the antitrust community, sets out general guidelines on the parameters recommended for drafting commercial strategies to fight the Covid-19 pandemic, ensuring the compliance with the Antitrust Law, and also on the possible procedures to be followed by the economic agents with a view to obtaining statements from CADE as to their initiatives in light of this extraordinary circumstance.

The purpose of the Informative Note is to promote a greater sense of transparency and legal certainty, providing guidance on collaboration between companies and establishing swift and effective analysis mechanisms to support commercial strategies in the fighting of the pandemic, in line with recommendations issued by OECD and also in conformity with procedures already adopted in other jurisdictions.

It is worth noting that the Informative Note is instructive in nature, that is, without normative or binding force. Therefore, it is of utmost importance that the guidelines are considered in light of the specificities of the case. Ultimately, the companies remain full responsible for the assessment of their commercial strategies on collaboration to be eventually adopted to deal with the crisis arising from the pandemic scenario.

Main aspects

The general guidelines cover four key aspects to be considered by the economic agents when designing and executing a collaboration agreement, namely, (i) scope, (ii) duration, (iii) territorial extension, and (iv) governance, transparency and good faith. In short, with regard to these aspects, the Informative Note points:

  1. Scope: the collaboration strategy must be specific and aimed at addressing a defined problem caused by the pandemic or its effects, strictly necessary to achieve the intended results.
  2. Duration: the duration of the collaboration should be limited to the period strictly necessary to fight the deleterious effects of the Covid-19 crisis. Companies should be attentive to eventually review collaboration strategies vis-à-vis the developments of the pandemic in time.
  3. Territorial extension: the geographical territory of the collaboration must be limited to the objective of fighting the effects of the pandemic. The pandemic may develop unevenly within the Brazilian territory, which may require different actions according to the location of the companies or the object of the strategy.
  4. Governance, transparency and good faith: the agents must act with caution and diligence, adopting measures that ensure the maintenance of competition and neutralize the competitive risks arising from eventual collaboration. For instance, strategies involving participation of competitors must be based on strict governance and compliance controls. Also, when reaching out to CADE to seek a view on a given strategy, the agents must act with transparency and present all documents and information that assist the authority in forming the preliminary judgment and that prove the urgency and need of the strategy.

The guidelines also depict some possible “procedures” that can be followed by the economic agents with the aim of obtaining statements from CADE on their commercial strategies, thus improving legal certainty, setting forth the available mechanisms for the companies to reach out to CADE on their proposed agreement. The communication procedures are: (i) communication channel, (ii) submission and (iii) consultation/inquiry. In particular, given certain novelties behind the procedures (i) and (ii), we shed a brief light on them, as follows:

  1. Communication channel: channel of communication specifically designed for this circumstance by means of which economic agents can address doubts and questions about their strategies to face the crisis. Companies will be able to obtain a preliminary assessment from CADE’s General Superintendence, indicating the existence or absence of evidence of violation against the economic order vis-à-vis the strategy planned and presented at the moment. This procedure involves the analysis of CADE’s General Superintendence only, through a preliminary and non-binding statement. Interested companies should email CADE’s General Superintendence, requesting a meeting or sending over information and documents about the planned collaboration.
  2. Submission: this mechanism specifically designed for this circumstance [2] is linked to the “right to petition”. [3] Economic agents can swiftly obtain written and non-binding statement from CADE’s General Superintendence and from the Tribunal on the existence of anticompetitive evidence in the context of strategies involving collaboration between companies in the face of specific and concrete situations to fight the crisis caused by the Covid-19 pandemic. To that end, the companies should provide the authority with all information, documents and studies concerning the collaboration (intended or already initiated) by means of a petition addressed to CADE’s General Superintendence, with a request for subsequent referral to the Tribunal. The statements of CADE’s General Superintendence and Tribunal will be independent and limited to the opinion of each one on the existence or absence of evidence of violation against the economic order based on the elements brought to their knowledge, thus determining: (i) the dismissal of the case, if they conclude by the lack of evidence of violation against the economic order; (ii) the opening of any proceeding sets forth in the Antitrust Law to investigate the practice; (iii) the adoption of measures and request for information in order to adequate monitoring the activities reported by the economic agents. Although the scope and legal effects of CADE’s statement within this procedure are limited, in principle the submission will be regarded by CADE as a good-faith trait of the companies.

Important clarifications

By “collaboration agreements between competitors”, CADE clarifies in this context that they are those that establish ways of acting between companies in the same market, on an emergency, urgent and provisional basis, with the aim of overcoming adversities arising from a comprehensive and non-sectoral crisis situation, as well as to mitigate its main immediate effects in order to preserve competition in the affected sectors. In that vein, CADE advises that strategies that involve collaboration between companies should be limited in scope to address a specific problem resulting from the crisis, with the demonstration that the expected results could not be achieved without such collaboration. Accordingly, strategies must limit duration and territory to what is strictly necessary for results to be achieved, all in consistency with the recommendations stated above.

Furthermore, the Informative Note warns that “agreements between competitors for price fixing, market division and restriction of supply will continue to be strongly repressed by the antitrust authority, as well as the exchange of competitively sensitive information between companies, in compliance with antitrust legislation and consolidated jurisprudence of this Council. Strategies that involve collaboration between companies must observe all precautions so that such types of antitrust infractions do not occur, under the penalty of being investigated and punished for the illicit acts.” It should be highlighted that if in the implementation of the collaboration strategy or as a result of it CADE finds any evidence of anticompetitive practices, for example, the antitrust authority may determine the opening of proceedings for investigation.

The Informative Note also refers to the recently approved Law No. 14,010/2020, which provides for the Emergency and Transitional Legal Regime in the event of Covid-19 pandemic, and that temporarily suspended some provisions of the Antitrust Law (besides a number of implications in other spheres). In particular, pursuant to Law No. 14,010/2020, as regards associative agreements, consortia and joint ventures executed and in force between March 20 and October 30, 2020, or while the State of Public Calamity lasts in Brazil, the Note sets forth that the submission of those agreements to CADE’s review during such period is not mandatory, but does not rule out the possibility of further analysis of a merger filing (a posteriori scrutiny) or investigation of violation against the economic order of any agreement that is not necessary to fight or mitigate the consequences of the pandemic.

In any event, despite the temporary suspension mentioned above concerning associative agreements, consortia and joint ventures, from a cautionary standpoint, CADE has been recommending that the general guidelines addressed in the Note at issue be observed by the economic agents.

Practical Remarks

As reported in our previous article and based on public information, so far CADE has already had the chance to analyze one collaboration among competitors (the “STAR program” - Small Trade Activity Recover”) submitted under the “right to petition” procedure. In a general level, some recommendations addressed in the Informative Note seemed to guide the analysis carried out by CADE when analyzing the mentioned collaboration.

In addition, taken into account public statements from some of CADE’s representatives, upon a general sense of good-faith and from a conservative approach, one should prefer to submit to CADE any collaboration among competitors related to the Covid-19 outbreak, regardless of whether it triggers the notification thresholds or whether it is covered by the temporary suspension aforementioned.

All in all, a case by case assessment is essential for the economic agents to carefully decide on the ways to walk and develop their joint projects and initiatives, mainly under the current context in which some collaborations may become crucial for the commercial agreements to produce its positive effects in the scope and dimensions required. The four key aspects noted above should support the assessment of the companies in light of the concrete case. Timing is also a sensitive matter in the current environment, directly influencing the procedure that the economic agents may choose when interacting with CADE.

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

Footnotes

[1In Portuguese version. The English version of the Informative Note is expected to be released soon.

[2CADE adopted a similar procedure in the context of a cooperation among fuel distributors in view of a truckers’ strike that severely disabled nationwide logistics in 2018 – at that time, it was designed a so- called “Crisis Protocol”.

[3In general, the rational of this procedure seems to be in line with a practice implemented by the European Commission under the document “Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the current COVID-19 outbreak (2020/C 116 I/02)”, as pointed in the Informative Note.

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Authors

Quotation

Eduardo Caminati Anders, Marcio de Carvalho Silveira Bueno, Guilherme Teno Castilho Misale, The Brazilian Competition Authority publishes general guidelines for competitor collaborations allowed during the COVID-19 crisis, 6 July 2020, e-Competitions Preview, Art. N° 95803

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