26 February 2014
The Administrative Council for Economic Defense (“CADE”) has launched 3 (three) public hearings on drafts of new resolutions.
Public Hearing No. 1/2014 refers to the draft of a new resolution that, if approved, will amend CADE’s resolution No. 2/2012 with respect to: (i) definition of economic group applicable to investment funds; and (ii) notification of transactions related to acquisition of convertible debentures.
Currently, CADE’s resolution No. 2/2012 determines that, in case of investment funds, the economic group is understood as comprising: (i) investment funds whose portfolios are managed by the same entity; (ii) their portfolio managers; (iii) investors holding an interest of 20 percent or more in at least one of the funds; and (iv) companies in which the funds directly or indirectly hold more than 20 percent of the total or voting capital stock. According to the proposed wording of the amendment, the definition of economic group will be broader and will be understood as: (i) the economic group of each investor holding directly or indirectly more than 20 percent interest in the fund involved in the transaction; (ii) companies controlled by the investment fund and companies in which the investment fund holds 20 percent or more of the total or voting capital; and (iii) companies controlled by the funds that are managed by the same portfolio manager as the investment fund directly involved in the transaction, and those companies in which such investment funds hold 20 percent or more of the total or voting capital.
As for the acquisition of convertible debentures, the proposed new resolution establishes that such type of transaction must be notified to CADE if, upon conversion of the debentures, the transaction will meet the criteria applicable for notification of acquisition of shares, as currently set forth in CADE’s resolution No. 2/2012. In addition to the acquisition of convertible debentures, the proposed new resolution also provides CADE with the possibility to require, at its own discretion, the notification of the conversion of the debentures as well.
Public Hearing No. 2/2014 sets forth proposed amendments to CADE’s resolution no. 1/2012 regarding transactions in the stock market and procedures applicable for challenging decisions rendered by the General-Superintendence approving transactions. The proposed amendments determine that transactions in the stock market are subject to the same rules currently in force with respect to public offerings. As such, transactions in the stock market that meet the criteria for mandatory notification may be closed prior to antitrust approval. Notwithstanding, the acquirer will not be vested with the voting rights related to the shares acquired through the transaction until CADE’s clearance. As for the challenging of approval decisions rendered by the General-Superintendence, the proposed amendment specifies the procedures that must be met by CADE’s Tribunal or interested third-parties in order to formalize such challenge.
Lastly, Public Hearing No. 3/2014 relates to the draft of a resolution that will set forth criteria applicable for assessment of obligation to notify associative agreements. As per article 90, item IV, of Law No. 12,529/2011 (the “Brazilian Antitrust Law”), parties must submit to CADE’s analysis their joint venture, consortium or associative agreements, provided that the minimum turnover thresholds are met. Since the enactment of the Brazilian Antitrust Law, there has been discussion regarding the legal definition of associative agreements.
According to the proposed new resolution, associative agreements will be defined as those agreements executed:
(i) between competitors; or
(ii) between economic agents that carry out activities in vertically related markets, whenever at least one of the parties holds twenty percent (20%) or more of the respective relevant market, and provided that at least one of the following conditions is met: (a) the agreement sets forth sharing of revenues and losses between the parties; and (b) the agreement establishes an exclusivity relationship, either from a legal or factual standpoint.
For the purpose of assessing horizontal or vertical overlaps between the parties to the associative agreement, the draft of new resolution determines that the activities carried out by the parties directly involved in the transaction and by the companies that are part of the their economic groups (as defined by CADE’s resolution No. 2/2012) must be taken into account.
All three public hearings will be open for suggestions until March 21, 2014. If you need more information or have any interest in the subjects addressed by these proposed new resolutions and wish to submit suggestions to CADE, please contact