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CADE publica Guia com orientações sobre a prática de gun jumping

5/28/2015 9:00 PM Demarest News

CADE published guidelines on gun jumping 
On May 20, 2015, Brazil's antitrust authority, the Administrative Council for Economic Defense ("CADE"), published its Gun Jumping Guidelines aiming at establishing standards to be used as benchmarks for companies in negotiations. The Guidelines are non-binding but are an important indicator of CADE's rigorous approach on gun jumping.
The Guidelines are divided in three sections. The first section provides for a definition of gun jumping and describes a non-exhaustive roll of conducts that could lead up to this practice. The second section sets forth certain data protection procedures that should be adopted by the merger companies prior to obtaining antitrust clearance in order to avoid risks of gun jumping. The third section of the Guidelines provides a general explanation on the penalties that can be applied by CADE in gun jumping cases.
Among the conducts described in the Guidelines that could lead to gun jumping, we highlight the following: (i) exchange of commercially sensitive information; (ii) contractual provisions that permit influence of one party in the other; and (iii) other interacting behaviors and conducts taking place before antitrust clearance that could be considered as gun jumping.
The Guidelines are particularly restrictive. For instance, while it acknowledges that a certain degree of information exchange is necessary in most deals, it provides for a generic description of what would constitute commercially sensitive information: "specific information (i.e., non-aggregated information) that refers directly to the performance of the end-activities of the economic agents".
Aware of the vast comprehensiveness of this generic language, CADE included in the Guidelines some examples of information that may be deemed "commercially sensitive" for antitrust purposes, such capacity levels, expansion plans, brands and patents, direct contracts with clients and suppliers, employee's payment, marketing strategies, costs, among others.
Much of this information, however, are often exchanged between the parties in M&A transactions. While not explicitly, the Guidelines suggest that exchange of commercially sensitive information would be legitimate provided that it occurs in a protected environment. Likewise, the Guidelines set forth certain protection procedures and forums, the "Antitrust Protocol", which should be adopted by the merging companies prior to obtaining antitrust clearance in order to avoid risks of gun jumping procedures.
Among the contractual provisions and other behaviors that may be deemed unlawful if performed by the parties prior to CADE’s approval are, for example, buyer's nomination of members in the decision-making bodies of the target company, exercise of voting rights or influence of one party in the other (e.g. obligation to submit for approval price decisions, clients, commercial/sales policies, strategic marketing plans, etc.), and profits linked to the counterparty performance.
The Guidelines stress that gun jumping matters must always be analyzed on a case by case basis. Therefore, it is CADE's decision making practice that will establish a reasonable interpretation of the conducts described in the Guidelines that may be viewed as gun jumping.
The Guidelines are available at
Demarest Advogados   
Mario Nogueira
+55 11 3356-1519
Bruno Drago
+55 11 3356-1776
Paola Pugliese
+55 11 3356-2092
Milena Mundim
+55 11 3356-2092
Paula Salles
+55 11 3356-2125

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