The Administrative Council for Economic Defence (CADE) has prohibited corporate wellness platform Gympass from executing exclusivity contracts with its clients. In its decision, the CADE considered such arrangements as potentially exclusionary as they prevent new entrants in the market from reaching customers.
In April 2021, TotalPass, a competing platform, filed a complaint. TotalPass argued that many gyms in Brazil were exclusively accredited to Gympass, which had been effectively impeding competitors from entering the market.
In December 2021, the CADE's general superintendence imposed an injunction against Gympass, prohibiting the platform from signing new exclusivity contracts with gyms. Gympass previously had exclusivity clauses with all partner gyms and studios that offered their services through the platform. As a result of such contracts, Gympass holds over 80% of the Brazilian market. Further, many companies provide Gympass as an employee benefit.
According to the superintendence's decision, Gympass will no longer be able to control the amount that gyms charge outside the platform or enter new exclusivity contracts, except for those that are already in the final stages of negotiation.
The superintendence also stated that future contracts between Gympass and clients must have termination clauses, which can be effectuated via simple written communication, at any time, at least 60 days in advance and without any fine. Moreover, Gympass shall void any contractual clauses with gyms that contain an obligation to price-parity, including any condition that limits the offer or sale, by partner gyms, of daily rates (eg, daily passes to access gyms) at prices lower than those advertised by Gympass (ie, most-favoured-nation clauses). The platform should, therefore, also render any fines for non-compliance with such contractual requirements null and void, as well as refrain from including such clauses in future contracts.
TotalPass appealed against the superintendence's decision, arguing that existing exclusivity contracts by Gympass should also be suspended. In February 2022, the CADE tribunal reviewed the decision and commissioners voted to apply stricter measures and suspend all of Gympass's exclusivity clauses with existing clients.
The commissioners' votes highlighted that exclusivity clauses are a type of vertical restraint and should only be admitted to preserve economic efficiencies, such as investments made by a player in exchange of exclusivity, which is a valid effort to prevent free riding. Despite Gympass's arguments that exclusivity agreements with accredited gyms are crucial to its continuing investments, the commissioners considered that such conditions are not observed in practice.
The CADE's decision in this case is expected to provide a signal to market agents regarding limits and conditions of exclusivity contracts in Brazil. In particular, it could also impact a similar discussion that is taking place in the food delivery market, where the dominant player iFood inserts exclusivity clauses in its agreements with bars and restaurants. This case has caught the media's attention, especially after ride-sharing giant Uber decided to leave the food delivery market – a decision that is also attributed to the CADE's continually timid approach to this matter.
For further information on this topic please contact Marcela Mattiuzzo or Levi Veríssimo at VMCA by telephone (+55 11 3939 0708) or email ([email protected] or [email protected]). The VMCA website can be accessed at http://www.vmca.adv.br.