CADE publishes guidelines on gun jumping

The Administrative Council for Economic Defense (CADE) launched the document Guidelines for Analysis of Previous Consummation of Merger Transactions during the Tribunal’s public hearing on 20 May 2015. The document aims at establishing standards to be used as benchmarks for companies in their negotiations and evaluations in merger transactions, in order to avoid gun jumping – when companies consummate a merger without previous authorization by the antitrust agency.

The document is divided in three sections. The first section provides a definition for gun jumping and the actions which can lead to it; the second one set forth specific guidelines for companies as a means of avoiding the risks of this practice, such as clean teams and parlor rooms. The third section concludes with the penalties that can be applied to the parties in case of noncompliance with the established rules.

Among the actions which can lead to gun jumping, the guidelines highlight the exchange of information between companies involved in merger transactions, the definition of contractual terms, and other actions that take place before and during the transaction.

In regards to the penalties, the practice of gun jumping entails fines ranging from BRL 60,000 to BRL 60 million. The value of the fine imposed takes into consideration the status of the transaction (if it was consummated before its notification to CADE, for instance), the nature of CADE’s decision (blocking, approval with restrictions, approval without restrictions), the period of time, and the size of the infringer.

For the purpose of opening an Administrative Proceeding, the guidelines establish that an illegal conduct allegedly exists from the integration of structures resulting from merger transactions, such as exchange of sensitive information, price fixation between competitors, and interference on the acquired companies’ decisions.

On the nullity of the actions carried out by the parties, the guidelines provide that facts such as the temporal aspect of the conduct, the proportionality of the measure, and the possibility of decision’s confirmation or lack thereof shall be considered.

Since the new Brazilian Competition Law – Law no. 12.529/2011 – has entered into force, CADE has judged five cases involving gun jumping. Fines imposed sum BRL 6.7 million.