Cade authorizes collaboration among Ambev, BRF, Coca-Cola, Mondelez, Nestlé and Pepsico due to the new coronavirus crisis

The Administrative Council for Economic Defense (Cade) recently decided to authorize the collaboration among a group of competing companies as a measure to minimize the effects of the crisis due to the new coronavirus (Covid-19). Ambev, BRF, Coca-Cola, Mondelez, Nestlé and Pepsico are going to undertake the “Movimento Nós”, a project to recover the activity of small retailers in the sector. The collaboration was approved by the Tribunal last Thursday (28 May) and became public this Wednesday (04 June).

The companies alleged to Cade that, with the pandemic outbreak, many establishments, particularly those related to the commerce and services sector, temporarily suspend their activities as a measure to prevent contamination. The measures would have severe economic impacts for small and medium-sized retailers – which in Brazil comprise a significant portion of the distribution channels for consumer goods, such as beverages, food, personal and domestic care products, among others – thus, jeopardizing the survival of many of these companies.

In this context, in the face of the protracted crisis, isolated actions would not have the capacity to produce effective results and on the scale necessary to assist commercial establishments to resume their activities. Therefore, the companies decided to collaborate with each other to promote the necessary support through the Movimento Nós.

Authorization

In an extraordinary judgment session, the Administrative Tribunal approved the General Superintendence’s decision, which concluded that there is a reasonable economic justification for the agreement, the parties adopted protocols to prevent antitrust risks, there is no evidence of attempted anticompetitive practice, and that the companies are concerned in restoring competitiveness and normality in the sector.

“Regarding the collaboration among competitors in a crisis context, a topic so in trend and in discussion on the international antitrust scenario, I conclude we must understand it as ways of cooperation among competing companies, adopted on an emergency basis, in order to overcome adversities resulting from a crisis situation, aiming to mitigate its effects,” stated the president of Cade, Alexandre Barreto, in the decision.

The agreement is expected to be in force until 31 October 2020, and shall be extended in case the pandemic scenario grows. In such case, the time extension shall necessarily be informed to Cade in advance.

Competition protection

In order to authorize the collaboration among companies, Cade relied on international recommendations from the most respectful institutions worldwide, such as the Organisation for Economic Co-operation and Development (OECD) and the  International Competition Network (ICN). Therefore, the decision is aligned with the international experience as set forth in recent months, in order to make compatible the preservation of competitively healthy economic environments and specific guidelines to be in force during the current circumstances of crisis.

On the agreement analysis, Cade concluded the exceptional nature of the current scenario, the emergency to adopt measures, causal relationship between the crisis and the intended cooperation, limited time for coordination, in addition to the efficiencies generated and its transfer to the consumer. Cade considered as well that the envisaged measures may not, at first, be classified as possible competitive illicit acts, nor do they constitute, in the form reported, procedures that would violate the Brazilian antitrust legislation.

Other than having a limited term to be in force, the agreement does not include the coordination of commercial initiatives, which shall be established and implemented individually by the companies without any interaction between the participants of the initiative. The activities also do not involve the exchange of competitively sensitive information between the parties, as for instance, customer databases between companies. In addition, precautions to prevent specific antitrust risks in meetings of committees and subcommittees related to the activities provided for in the agreement must be adopted.

President Alexandre Barreto highlighted that the agreement is an exceptional measure, since sharing among competitors in the presented manner could possibly imply economic risks, and that, under normal market conditions, would require an even more detailed analysis by CADE.

“In this sense, I emphasize that the exceptionality of this measure does not represent antitrust immunity. This decision is not granting immunity to petitioners, so that no impediment is provided for CADE to take the applicable actions and measures, in the event of detecting any irregularities in the terms presented or practices potentially harmful to competition within the scope of this agreement,” he concluded.