CADE approves joint venture with unilateral application of remedies

CADE approves joint venture with unilateral application of remedies

At the last Ordinary Trial Session (SOJ) of 2022, the Administrative Council for Economic Defense (CADE) approved a joint venture between companies in the automotive sector for information sharing within the scope of Gaia-X and Catena-X. The approval was conditioned to compliance with restrictions unilaterally imposed by CADE, as determined in the opinion of Commissioner Gustavo Augusto, who had previously requested the case for adjudication. Prior to that request, the case had been approved without restriction by CADE’s General Superintendence.

When assessing the market power of companies, Commissioner Gustavo Augusto identified a concentration of nearly 70% in the truck and bus manufacturing markets. At the same time, as the affected markets would be very broad, the Reporting Commissioner understood that it would be necessary to assess the conglomerate power of companies. After all, their union in the joint venture could create significant synergies with potential competitive problems.

In this sense, several risks in this market were also highlighted, such as (1) the standardization of systems can reduce incentives for companies to innovate; (2) the automotive markets usually have recurrent cartel cases, which can be further encouraged by the exchange of sensitive information; and (3) difficulty in identifying exactly which information would be exchanged and how it would be presented (granular or aggregated; current or historical).

Before these concerns, the parties submitted a proposal for a merger control agreement (ACC), which was rejected by Commissioner Gustavo Augusto because he believed the proposal was insufficient to address all the competitive concerns. For this reason, CADE unilaterally imposed restrictions, creating an adhesion form with obligations and responsibilities aimed to avoid risks related to the exchange of sensitive information. This was the first time that CADE’s Tribunal applied a remedy unilaterally and by adhesion, without negotiation of conditions in common agreement with the parties. The adhesion form contains obligations, such as: (i) storing of messages exchanged for 5 years and respective submission of such information to CADE in the case of request; (ii) definition of a list of information that can and cannot be shared; (iii) obligation to send the contents of suspicious messages to CADE; (iv) implementation of tracking software to identify potentially sensitive data exchanges; among others.

In this case, for the joint venture to be implemented in the practice, the applicants must sign the adhesion form. Otherwise, the transaction will be rejected, and companies will not be able to exchange information within the scope of Catena-X. Likewise, if any new company becomes part of the joint venture, CADE’s Tribunal must assess its conditions before the entry is approved.