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Blue Cycle’s joint venture is considered gun jumping

Joint venture

Cade applies fines and determines the nullity of the contract established in the Joint Venture for the exclusive distribution of bicycles parts in Brazil
published: Aug 31, 2016 12:10 PM last modified: Aug 31, 2016 12:32 PM

The Administrative Council for Economic Defense - CADE understood that there was gun jumping in the formation of the joint venture between RR Participações Ltda, Douek Participações Ltda e Shimano Inc. for the creation of the company Blue Cycle Distribuidora S/A (Administrative Proceeding n° 08700.002655/2016-11). The new company would be responsible for distributing, exclusively in Brazil, the products produced by Shimano, a Japanese manufacturer of bicycles parts. The case was tried in the judgment session of August 17.

The value of the fine imposed for gun jumping within CADE’s legal framework amounts to BRL 1.5 million.  The Tribunal also applied a sanction of nullity, which suspends the effects of the contract concluded between Shimano and Blue Cycle for the exclusive distribution of products in Brazil.

The measure aims to reestablish the former distribution model. In this sense, Shimano would maintain the sales of components in Brazil through its previous distributors – the distributors are seven in total, including two of the current Blue Cycle’s shareholders  – until CADE concludes the assessment of the transaction.  

As the Reporting Commissioner of the case, Mr. Paulo Burnier explained that:

“Considering that CADE has not yet analyzed the merit of the merger concerning the formation of Blue Cycle, the continuity of its business may harm the well-functioning of the referred market, above all on the hypothesis of the transaction being reproved or approved with restrictions.”

CADE ruled that Shimano should notify Blue Cycle and its formers distributors about the annulment of the contract, publish in their websites the sanctions imposed by CADE and provide  reports of its activities concerning the last two months, including copies of invoices issued in the period.

The General Superintendence will suspend the assessment of the merger until the effective compliance with the sanctions.