CADE maintains agreement with Gympass in Brazilian health club market

On 23 November 2022, the Administrative Council for Economic Defense (CADE) ruled on requests for reconsideration opposing the decision issued by its Tribunal on 21 September 2022, upon signature of a Cease and Desist Agreement with Gympass. A majority of tribunal members maintained the decision on the same terms.

Total Pass requested reconsideration in the case, alleging there were omissions in the decision on the 20% percentage basis used for calculating Gympass exclusivity contracts, among other claims.

In his vote, the President of CADE, Alexandre Cordeiro, acknowledged the requests for reconsideration but denied upholding them, pointing out that the agreement provisions must be considered as a whole.

Therefore, Gympass exclusivity clauses with affiliated health clubs are limited to proof of achievement of the goal of increasing the number of Gympass users in associated health clubs and a maximum of 20% of its base of health clubs in cities or districts.

The president stated that 'CADE remains attentive in the follow-up of the agreements signed, and it will continue to be alert to any eventual practice by the signatory that could be deserving of an investigation. Including exclusivity matters, especially regarding investments in the health clubs, even without any explicit exclusivity clause.'

Cease and Desist Agreement

The Cease and Desist Agreement is related to the administrative enquiry that examined alleged antitrust violations in the Brazilian sector of health club aggregator platforms.

Regarding the obligations provided in the Cease and Desist Agreement, the exclusivity clauses between Gympass and health clubs are limited to proof of achievement of the goal of increasing the number of Gympass users in associated health clubs and a maximum of 20% of its base of health clubs in cities or districts.

The Agreement also prohibits other advantage clauses (such as Most Favoured Nation clauses—"MFN") and any clauses that prevent their business partners from adhering to other aggregator platforms after the end of their respective contracts. Regarding contracts with business partners, exclusivity clauses are strictly prohibited.

The decision established a daily fine in case of non-compliance with the commitments within the time limit provided. CADE is to monitor compliance with the conditions established in the Cease and Desist Agreement alongside a trustee nominated by the signatory and approved by the agency.

Access case no. 08700.004136/2020-65.