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Long-term associative contracts must be notified in advance

Vessel Sharing Agreement

CADE denies request for an extension in a ship sharing associative contract
by Assessoria de Comunicação Social published: Jun 13, 2017 12:49 PM last modified: Jun 13, 2017 12:49 PM

The Tribunal of the Administrative Council for Economic Defense – CADE, in the judgment session of 7 June 2017, rejected a request for a provisional authorization to extend the term of an associative contract signed between the companies Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft KG, Aliança Navegação e Logística S.A. and MSC Mediterranean Shipping Company S.A. (Merger 08700.002699/2017-13).

Known as Vessel Sharing Agreement - VSA, the contract is related to ships sharing and a joint operation of a regular line for the transportation of containers, on a weekly basis, between specific ports in South America’s East Coast and in the United States’ Gulf.

The agreement was signed in June 2015 and will complete two years on 14 June 2017. Considering that associative contracts longer than two years depend on CADE’s previous authorization, the parties requested a provisional authorization and a preliminary injunction to CADE on 1 June 2017.

CADE’s General Superintendence has argued for the rejection of the proposal. It has understood that the legislation requirements were not fulfilled to approve the request. The Superintendence highlighted the absence of potential financial losses of the companies.

The Reporting Commissioner, Mr. Paulo Burnier, followed CADE’s General Superintendence opinion and emphasized that the parties could have notified the merger earlier, which would have made unnecessary the request for a provisional authorization and a preliminary injunction.  

Furthermore, the Reporting Commissioner quoted the Resolution n. 17/2016 – in which it foresees that CADE has to previously approve associative contracts longer than two years. “The idea is to dispense short term contracts of CADE’s scrutiny, for the low impact they create in market structures.  On the contrary, (the legislation) has chosen the previous analysis of long-term associative contracts, because of the impact they can create in market structures”, Mr. Burnier said.

The associative contract will still be analyzed on its merits by the Superintendence, which is waiting for additional information from the parties for issuing the public notice and to start the counting of CADE’S proceedings deadlines.