CADE published Resolution 17/2016 on October 25th, 2016. This Resolution is going to regulate, as of thirty days from publication, the hypotheses of mandatory notification of “associative contracts”.
According to CADE’s Resolution 17/2016, provided that the revenue thresholds for the parties established in Law 12.529/2011 are met, the notification of an agreement longer than two years shall be mandatory when the agreement establishes a “joint enterprise” for the exploration of an economic activity, in the event that: (1) the contract establishes risk-sharing and income-sharing concerning the economic activity that constitutes the object of the contract and (2) the economic groups of the contracting parties are competitors on the relevant market of the contract.
The agreements with the above characteristics, but shorter than two years and subject to renewals or without a specific term shall be notified if the period of two years from the date of signing is reached. These agreements shall be notified prior to the two year-term, and their continued validity after that term shall be contingent upon CADE’s approval.
CADE’s Resolution 17/2016 had been anxiously awaited by the legal community specialized in competition law and by economic groups the business of met at least one of the minimum revenue thresholds established by Law 12.529/11. CADE’s Resolution 10/2014, which is being revoked by Resolution 17/2016, shall remain in force during the thirty days subsequent to the publication of Resolution 17/2016.
CADE’s Resolution 10/2014 has also produced anxiety on the business community, given the expansive manner in which it defined associative contracts subject to mandatory notification. For instance, Resolution 10/2014 does not require the presence of a “joint entreprise” for a contract to be subject to mandatory notification. Indeed, if Resolution 10/2014 were to be interpreted literally, many routine agreements of could be subject to the obligation of prior notification to CADE.
By requiring the establishment of a “common enterprise for the exploration of economic activity”, the more recent Resolution 17/2016 reduces legal uncertainty. Thereby, it improves the business environment concerning contracts between parties the economic groups of which meet the revenue criteria for mandatory notification under the law.
In addition, by requiring that the economic groups of the contracting parties be competitors on the relevant market of the object of the contract, Resolution 17/2016 excludes from the hypotheses of mandatory notification the contracts in which the resulting relations are exclusively vertical. On the other hand, Resolution 17/2016 does not solve every possible doubt regarding the notification of associative contracts. For this reason, the topic will continue to require a case-by-case analysis. After all, associative contracts is a relatively open-ended concept that is hard to apprehend.
Agreements executed before Resolution 17/2016 is in force, and which extend beyond two years by the time that Resolution 17/2016 will have been in force shall be assessed pursuant to Resolution 17/2016.
On a general and preliminary note, we recommend attention to the following:
- Resolution 17/2016 disciplines the hypotheses of notification of associative contracts under Article 90, IV of Law 12.529/11 exclusively. The Resolution does cover other hypotheses of mandatory notification pursuant to Law 12.529/11.
- The concept of “joint enterprise” is understood to dispense with the presence of legal personality. Thus, the establishment of a non-personified entity is a candidate to be analyzed according to Resolution 17/2016 – in addition to an analysis in light of the concepts of “joint ventures” and “consortia” stated in Article.90, IV of Law 12.529/11.
- The analysis of competition between the parties regarding the object of contract must take into account the activities of the contracting parties and their broader economic groups.
- CADE may determine that the notification of agreements with a term of validity over two years and executed while Resolution 10/2014 is in force (or agreements that reach a two year-term before Resolution 17/2016 is in force) is subject to Resolution 10/2014. Resolution 10/2014 remains in force until 30 days after the publication of Resolution 17/2016. Therefore, it is necessary to take Resolution 10/2014 into account in ongoing negotiations and contracts.
- Given the questions that still prevail despite the guidance in CADE’s Resolution 17/2016, it is important to permanently monitor CADE’s administrative case-law to understand the extension of the obligation to notify associative contracts from the perspective of CADE.
The Economic Law practice group at Azevedo Sette is available for any clarifications at lsalles@azevedosette.com.br.