On April 8, 2021, the Federal Economic Competition Commission (“COFECE”) published the update to the Guidelines for the Notification of Concentrations (the “Guidelines”),1 which include various topics that were not previously contemplated. The purpose of these amendments is to provide greater certainty to economic agents as to how the Commission analyzes concentrations. Among the most relevant amendments included in the Guidelines are the following:
• Collaboration Agreements and Joint Ventures. Given that in some cases Joint Ventures may have elements comparable to a concentration, the Guidelines provide additional information and criteria so that economic agents can determine whether they must notify collaborations or Joint Ventures to COFECE. In this regard, the Guidelines set out certain characteristics to define whether a Joint Venture or concentration must be notified. Some of these characteristics are set out below: o Duration of the Agreement. Collaboration agreements that fall within the definition of concentrations are those designed to be permanent, indefinite, or of long duration. o Independence. The creation of a new economic agent with functional and operational autonomy. When the economic agent constituted has the ability to independently determine its marketing, pricing, distribution, sales, and financial strategies and decisions, among others, this is a sign that the relevant agreement between competitors constitutes a concentration. o Scope. When a collaboration agreement is entered into between economic agents, the parties must maintain the competitive pressure they exert on markets outside the collaboration agreement. When such competitive pressure between the parties disappears, it will be considered an indicator that the collaboration could be a concentration. • Calculation of notification thresholds. To determine whether a concentration must be notified, the Guidelines provide clarifications on: (i) the calculation of the amount of a concentration, (ii) which companies must be considered for purposes of calculating the value of the transaction to be analyzed, and (iii) certain guidelines are established on when successions of acts must be notified. • Economic agents required to notify a concentration involving multiple buyers, as occurs in capital-raising rounds for startups. The Guidelines clarify the following: o In cases where there are several acquirers, it is not necessary for minority acquirers to appear before the Commission provided that: (i) individually they do not exceed the thresholds; and (ii) the transaction does not arise from a joint negotiation or a coordinated acquisition among the acquirers. o In cases of groups of economic interest, the Commission may require the appearance of any member. o It will not be necessary for an investment fund to submit information about its limited partners, provided that the limited partner holds less than 20% of the fund and does not have the right or authority to participate in, interfere with, or influence, directly or indirectly, decisions related to business plans, the annual budget, the appointment or removal of the management body or the fund's investments or, in general, the fund's operational activities. • Information that must be submitted to raise the argument of a company in a precarious economic situation. The Guidelines recommend, among various aspects, the following: o Submit documentation demonstrating the imminent risk that they could exit the market in the immediate future or that there are no solutions other than the concentration to mitigate their financial problems. o Demonstrate that the acquirer has the capacity to mitigate the problems of the failing company and that all reasonable efforts were made to find other buyers. o Submit financial information demonstrating that the precarious financial situation is permanent, as well as financial projections or independent audit reports, among others. Should you have any further questions, please do not hesitate to contact our experts: Fernando Carreño, Partner: +52 (55) 5258-1042 | fcarreno@vwys.com.mx Michel Llorens, Associate: +52 (55) 5258-1042 | mllorens@vwys.com.mx
