CADE clears JV aiming to standardize metrics for reporting of sustainability data and signals recommendations for companies considering sustainability-related agreements
Last week the Brazilian Competition Commission Tribunal (Conselho Administrativo de Defesa Econômica, “CADE”) issued an important decision in the area of sustainability-related cooperation agreements. The decision sets out specific guidance that companies should observe in order to mitigate potential antitrust risks arising from standard-setting activities and information sharing.
Background
On May 19, global traders Cargill , Louis Dreyfus , ADM and ESG data consultancy firm SustainIt (the “Parties” or “JV Partners”) notified to CADE a partnership to create and operate a platform of technological solutions, aimed at standardizing sustainability records in the food and agriculture supply chain.1 CADE approved the JV in a Phase 2 review on 21 June, and said that the case is “destined to be a model for [future] assessments of sustainability agreements” at CADE.
CADE Review
CADE considered two possible antitrust concerns: (i) foreclosure of competitors as a result of potential sustainability standards set by the JV, or creation of commercial advantages to the JV Partners; and (ii) potential access to competitively sensitive data from competitors, suppliers and customers.
CADE understood that, among other reasons, both concerns would be mitigated by the antitrust protocol submitted by the JV Partners.
Though the specific terms of the protocol are confidential in the decision, CADE mentioned that it contained several provisions to ensure that the interaction between the JV Partners would comply with competition law. These include: (i) there will be no discriminatory treatment between the platform users; (ii) there will be no undue exchange of competitively sensitive information between competitors, (iii) there will be no exclusivity, preference, or privilege in the use of the platform, so that all users would be free to contract competing platforms; and (iv) the separation of the corporate structure of the JV from its shareholders. Also, the JV Partners committed to appoint a qualified and specific team (a compliance team lead by an independent Chief Compliance Officer), as well as conducting periodic trainings and audits to ensure their obligations are being fulfilled.
Practical Considerations
The reporting commissioner emphasized the importance of the antitrust protocol submitted by the parties for the approval of the JV. For future cases involving similar concerns, he urged applicants to employ best efforts to present final (or almost final) versions of risk-mitigating covenants or safeguards for the authority’s review. Such measures should be formalized in specific documents so as to be perceived as credible , and must be specific and clear as to the behavior to be avoided or incentivized. Additional precautions to promote effectiveness may be considered, such as the designation of a compliance officer and periodic trainings for executives. These recommendations highlight the need to engage antitrust counsel at the very early stages of sustainability-related partnerships.
1 According to the Applicants, participants will report to the platform data such as traceability and environmental data, enabling the platform to provide customers with cumulative information on product sustainability metrics throughout the supply chain.
