I ENFORCEMENT POLICIES AND GUIDANCE
The Brazilian Competition Act (Law No. 12,529 of 30 November 2011) is the primary statute that deals with competition matters (both repression to violations to the economic order and merger control) in Brazil. The agency responsible for enforcing the competition laws is the the Administrative Council for Economic Defence (CADE).
Prosecution of cartel activities is in the core of CADE’s enforcement policies. In fact, CADE’s investigative body – the General Superintendence (SG-CADE) – is composed of eight units, and three of these eight units are devoted exclusively to investigating cartel activities. In addition to this, CADE also has a specialised unit for its Leniency Program.
In 2016, CADE continued its efforts to modernise the cartel prosecution system in Brazil, with actions such as (1) the development of investigative tools and state-of-the-art intelligence to track down cartels and obtain evidence of wrongdoings, especially the Brain Project, which uses big data and economic filters to identify potential cartel activities in tenders that take place throughout Brazil; (2) the development and expansion of the leniency programme, including additional care with the collection and treatment of evidence; and (3) the creation of procedures and mechanisms to speed up the review of cartel cases.
CADE’s prosecution efforts resulted in the initiation of important investigation, the conclusion of long-lasting investigations and also in the considerable increase in the number of settlement agreements entered into with CADE (until October 2016, CADE collected 208 million reais from settlement agreements). With regard to the initiation of investigations, it is clear that the ongoing Car Wash investigation (Operation Car Wash) is still one of CADE’s priorities. Until the beginning of December 2016, CADE had initiated six investigations related to Operation Car Wash, the most important corruption and cartel investigation in Brazilian history.
In 2016, CADE took important steps to clarify its internal procedures and decision-making processes. Among such steps, the following regulatory framework was issued: Guidelines for Settlement Agreements in Cartel Cases; Guidelines for Compliance; and Guidelines for CADE’s Antitrust Leniency Program. These important documents aim to provide companies, executives and lawyers with more transparency in relation to CADE’s internal rules and indicate the points that CADE considers relevant in the development of antitrust compliance programmes by companies.
CADE also issued additional regulation regarding its Leniency Program (CADE’s Resolution No. 15 of 25 May 2016) to make it clear to companies that the documents provided to CADE during the negotiation of leniency agreements will be returned to the company if an agreement is not reached. This was CADE’s practice since the first leniency agreements, but the rule makes it clear that this is an obligation according to CADE. The new Resolution also contains additional details about the marker procedure and about the rules applicable to Leniency Plus.
It is important to stress that, along with CADE’s investigative activities, the Public Prosecutor’s Office plays a relevant role in cartel prosecution, especially criminal prosecution under the White Collar Act (Law No. 8,137 of 27 December 1990). The Public Prosecutor’s Office may initiate civil claims against cartel violators in order to impose fines and even to potentially obtain indemnification.
II COOPERATION WITH OTHER JURISDICTIONS
Notwithstanding the importance of CADE’s enforcement of international cartel activities, CADE’s current investigations are mostly domestic, and not international. This is largely because of Operation Car Wash. As a result of this, the cooperation between CADE and other competition authorities was not prominent in 2016, with the exception of the notification of individuals located abroad.
However, CADE is in constant contact with various antitrust authorities from different jurisdictions in order to interchange practices and proceedings related to investigations, whether at seminars of the International Cartel Network or by direct exchanges of information. CADE has interacted with such authorities, especially the US Department of Justice and the European Commission, with the aim of simultaneously carrying out investigations and coordinating relevant strategies for the success of investigations.
III JURISDICTIONAL LIMITATIONS AND EXEMPTIONS
i Jurisdictional limitations
CADE has expressly affirmed its jurisdiction to investigate foreign cartel practices even in situations where the alleged perpetrators have no physical presence in Brazil. In these cases, CADE argues that it is sufficient that the illegal agreement has potential effects in Brazil. This approach has ignited several investigations in which CADE specifically indicated that there was no evidence that the practice took place in Brazil. Such investigations were based purely on the potential impact of foreign conduct on Brazilian markets. CADE’s approach to the matter is still subject to discussion. However, CADE decided two important cases in 2016, which provided additional guidance on how it will deal with international cartels in Brazil.
In the plastic cases,2 CADE closed two investigations initiated after leniency agreements were entered into by the Chi Mei Corporation and a number of executives. CADE concluded that the reported cartel was related to the markets of Hong Kong and China, and there was no evidence of price-fixing in Brazil or that the products that were object of the cartel were exported to Brazil.
The SG-CADE indicated that, as a preliminary analysis, CADE would have jurisdiction to prosecute international cartels with a global scope, or that involve specific regions or countries, if there is evidence of the inclusion of Brazil in the object of the cartel agreement; and international cartels with a global scope, or that involve specific regions or countries, if there is evidence that all or some of the companies that participated in the illegal activity exported their products directly to Brazil. The SG-CADE stated that it may have jurisdiction to prosecute cartels that involve specific regions or countries if there is no evidence that the companies that participated in the illegal practice exported the product directly to Brazil, but that the product was used as input for the manufacturing of sub-products that were imported to Brazil. In the latter case, CADE’s jurisdiction would depend on the materiality and relevance of the potential effects in Brazil.
In the DRAM case,3 CADE imposed fines on several companies for alleged cartel practice in the dynamic random-access memory (DRAM) market. Other companies entered into settlement agreements with CADE. In this case, CADE indicated that the international practice had effects in Brazil in two different ways: (1) because of the direct import of DRAMs; and (2) because of the import of products that used DRAMs as input. CADE indicated that it is possible to apply fines to companies that engaged in international cartel practices in view of the potential effects in the Brazilian territory, meaning that actual effects did not have to be proved. However, it highlighted that in the DRAM case there was evidence of actual effects in the Brazilian territory.
There are no express industry exemptions under the Competition Act. Despite this, a discussion is pending with respect to antitrust violations in the financial sector.
The issue relates to provisions of the Banking Act4 that may be interpreted to mean that the Brazilian Central Bank has sole jurisdiction in investigations of financial institutions and in the analysis of transactions involving such institutions. The matter has been, and continues to be, widely debated within the government and in Congress, and has already been submitted to the analysis of the General Counsel for the Executive Branch, which defended the notion that the Central Bank would have sole jurisdiction in such cases. As CADE does not agree with this approach and has thus initiated certain investigations into financial institutions,5 even though it may be argued that financial institutions are exempted from CADE’s jurisdiction, it is likely that the matter will only be definitely resolved after its analysis by the Brazilian courts, or upon a new and clear law being enacted by Congress.
IV LENIENCY PROGRAMMES
The Leniency Program was introduced in Brazil in 2000,6 but was only effectively affirmed by CADE in May 2012 through the examination of the Hydrogen Peroxide case.7 In this case, despite several attempts by the defendants to avoid or delay the analysis of the case, including court proceedings to halt the investigation, CADE confirmed the main terms and benefits under the programme.
The relevance of leniency programmes has been increasing, especially during the past year, because of the key role of plea-bargaining agreements in the investigations regarding Operation Car Wash, and it is becoming a mainstream topic in the media.
It is fairly easy to request a marker to CADE. The request for a marker may be made in writing or orally and, if available, a marker will be issued by the SG-CADE within five business days after the request is made. Markers may be obtained prior to presenting evidence of the violation in order to assure that a certain applicant is the first to qualify for leniency. Once the marker is issued, the leniency proposal shall be presented within a term defined by CADE, which may be extended.
In order to obtain a marker, an immunity applicant must only provide information about: the applicant itself; the other known participants of the violation; the products or services affected by the violation; the geographic scope of the violation; and, if possible, the duration of the violation.
The request for a marker is, of course, treated as strictly confidential by CADE. If a leniency application is not available, the applicant shall not be jeopardised for trying to obtain the marker. It will still have its right to full defence if an investigation is actually initiated in the case and the investigation may not be initiated solely based on such marker.
It should be mentioned that CADE has been increasingly cautious before entering into a leniency agreement; it has requested more evidence of the illegal practice and, for international practices, it has been requesting strong evidence of effects on the Brazilian market. For such reasons, CADE estimates that for every leniency agreement that it has currently entered into, it rejects, or the parties withdraw, approximately two leniency applications.
In any case, the Leniency Program may be considered attractive given that the offender (either an individual or a company) will have total immunity from or at least a significant reduction (from one-third to two-thirds8) of any fines and other penalties that may be imposed by CADE.9 Notwithstanding the immunity from or reduction of the administrative fine, the Leniency Program also provides for criminal immunity for applicants. However, it does not provide for immunity against private damage claims or against civil claims that may be initiated by the Public Prosecutor’s Office (see Section VII, infra). The Leniency Program also does not provide for immunity in relation to certain different, but related, violations, such as acts of corruption. Even though these acts may be subject to separate leniency programmes, it is still unclear how CADE and the anti-corruption enforcement entities will cooperate and work together to avoid inconsistencies that may weaken both programmes.
Leniency applications may be made by companies or individuals involved in cartel violations. Typically, applications are made jointly by companies and individuals, and at least in theory their legal representation may be provided by the same counsel. Under the current rules, leniency agreements may be extended to individuals and companies that were not included in the original agreement.10
Applicants under the Leniency Program are required to cooperate with CADE in investigations. In addition, applicants are required to identify the other participants in the antitrust offence11 and to provide evidence that is sufficient to support the investigation of the reported violation.12 Another sine qua non condition of leniency applications relates to the fact that applicants must be the first to qualify in order to be entitled to sign a leniency agreement.13
The level of cooperation required by CADE is typically higher than that expected under US or European investigations. This is mainly because of the fact that other defendants still tend to challenge investigations initiated by CADE. With the increase in the number of cases based on leniency applications and the confirmation of the Leniency Program in Brazilian courts, this may change in the future.
In addition to continuous cooperation, the Competition Act also requires that:
- a the applicants cease all involvement in the violation notified or under investigation as of the date on which the agreement is proposed;14
- b CADE does not have sufficient evidence to ensure the conviction of the applicants at the time of the proposal;15 and
- c applicants confessing their participation in the unlawful practice must cooperate fully and continuously with the investigations and the administrative procedures, and take part, at their own expense whenever requested, in all procedural acts until they have been completed.16
It is important to mention that, since the new Competition Act entered into force, there are no restrictions preventing a cartel instigator or leader from applying for immunity before CADE.
Under the new Competition Act, markers may be obtained before presenting evidence of the violation in order to ensure that a certain applicant is the first to qualify for leniency. To obtain a marker, an immunity applicant must indicate:17
- a its contact information;
- b the other participants in the violation;
- c the products or services affected by the violation;
- d the geographical scope of the violation; and
- e if possible, the duration of the violation.
After conducting an investigation related to a cartel practice, CADE may either shelve the process if it does not find sufficient evidence of the illegality of the investigated practice, or rule that the practice is illegal under the terms of the Competition Act and impose administrative penalties on the companies and individuals under investigation.
If CADE decides that a company’s conduct is illegal, it may impose a fine varying from 0.1 to 20 per cent of its gross revenues in the sector of activities in which the practice took place in the year prior to the start of the investigation.18 In addition, CADE may impose on the senior managers that are direct or indirectly liable for their company’s violation a fine varying from 1 to 20 per cent of the fine imposed on the company; these fines should be personally and exclusively borne by the individuals. Further, CADE may impose a fine on third parties (non-corporate) that can vary from 50,000 to 2 billion reais.19
In previous years, CADE has clarified its understanding relating to the applicability of the new Competition Act to practices that took place when the former Act was in force. In line with the previously adopted approach, CADE decided to apply the former Competition Act in the analysis of the Marine Hoses cartel case20 in February 2015, as it was more beneficial than the current Act in terms of the fines that could be imposed on the companies involved in the illegal practices. The former Act may in fact prove to be more beneficial, especially for companies that are active in only one sector, because it sets forth that taxes should be excluded from the calculation of the fine. There is no such provision in the new Act.
Besides the above-mentioned monetary fines provided for in the Competition Act, CADE may also impose other penalties, such as a half-page publication of the summary of decisions in newspapers,21 and ineligibility from participation in official financing or in government bidding procedures.22
Penalties for antitrust violations shall be calculated based on the following mitigating and aggravating factors:23
- a the severity of the offence;
- b the offender’s good faith;
- c the advantages obtained or envisaged by the offender;
- d the actual or threatened occurrence of the offence;
- e the extent of damages or threatened damages to open competition, the Brazilian economy, consumers or third parties;
- f the negative economic effects on the market;
- g the offender’s economic status; and
- h recidivism.
Until October 2016, CADE’s fines in cartel cases in 2016 totalled approximately 77,485,000 reais. The largest penalty ever applied by CADE is related to the Cement cartel, judged by CADE’s Administrative Tribunal in 2014. The case is relevant not only because of the amount of fines (3.1 billion reais), but also because of the other remedies imposed by the Board, such as the divestment of plants and a prohibition of operations in the cement and concrete sectors until 2019. CADE’s rationale was that the cartel had been widespread across the entire country for many years, thereby changing the structure of the market. In this sense, CADE ordered the sale of assets in the markets for cement and concrete by four companies; therefore, Votorantim and InterCement would have to sell, respectively, 35 and 25 per cent of their production capacity, whereas Itabita and Holcim would be obliged to sell 22 per cent of their production capacity.
Further, the new entrants in the cement sector would also have a ‘transparency commitment’, allowing CADE to request documents and information at all times and without previous authorisation, in order to ensure that such new entrants would not join the cartelised structure of the market. CADE also ordered Votorantim to sell its minority shares in competitors active in the market for cement.
The Cement case is currently being reviewed by the Brazilian courts, as some of the companies and individuals challenged CADE’s decision, requesting its annulment.
Further, the review of the decisions handed down by CADE in the Brazilian courts aiming for their annulment has become more common in Brazil. For instance, in 2015, White Martins, which was allegedly involved in a cartel related to the industrial and medical gas market, was relieved by the Judiciary Branch from the payment of one the largest fines imposed by CADE. The federal court in charge of the case decided to accept the appeal filed by the company, in view of the illegality of the evidence produced within the scope of the investigation conducted by the Brazilian antitrust authorities. The decision is still being discussed, as CADE has sought a review of such ruling.
In addition to the penalties that may be imposed by CADE, other procedures may be used by third parties or by the Public Prosecutor’s Office in relation to cartel practices. Criminal actions initiated by the Public Prosecutor’s Office may lead to imprisonment of the executives involved for a period of one to five years.24 Separate settlements are usually negotiated with the Public Prosecutor’s Office. Such settlements tend not to lead to imprisonment, but only to fines and to the obligation to perform community service. Usually, amounts involved in such settlements are substantially lower than those involved in settlements with CADE.
In the civil sphere, the Public Prosecutor’s Office may initiate public civil actions before the Brazilian courts claiming indemnification for moral and property damages caused to consumers or to society. Penalties in such cases will be of a monetary nature, and amounts may vary according to several conditions, such as the extent of the damages that society allegedly suffered. This type of action is still not usual in Brazil as, until now, the Public Prosecutor’s Office has demonstrated limited interest in the civil prosecution of such cases. However, as demonstrated below, the number of lawsuits involving damage claims filed by individuals or companies that have considered themselves affected by the cartel practices have become increasingly common in the Brazilian legal community.
According to CADE’s rules, settlements in cartel investigations require that the company or individual admits its participation in the practice under investigation.25 Because of this requirement, several defendants are unable to enter into settlement agreements with CADE. This is generally owing to:
- a potential criminal investigations that may be influenced by such acknowledgment;
- b potential civil claims that may be filed in Brazil or other jurisdictions;
- c ongoing investigations in other jurisdictions;
- d reputational and corporate governance issues; and
- e questions on whether the conduct actually took place or had effects within the Brazilian territory.
Further, CADE’s rules establish that the defendant must collaborate with the authority. Requiring collaboration may also be a problem for companies, especially when it is impossible for a defendant to provide additional evidence to CADE. For example, sometimes investigations are initiated a long time after the conduct has taken place, and therefore the defendant may no longer have information or documents about it. Moreover, a company that would be willing to enter into a settlement agreement could lack information and documents because the business concerned has been sold. In such cases, companies would not be able to settle a case and end an investigation or would end up with a low discount, which would mean that the settlement not financially viable. Needless to say, neither defendants nor CADE would benefit from having to litigate cases until the end of the process – and possibly before the Judiciary Branch.
Finally, CADE’s rules contain additional parameters for establishing the monetary contribution that would have to be paid to CADE for settling cartel cases. The rules set forth that the first defendant to propose a settlement would obtain a 30 to 50 per cent discount in relation to the fine that would be paid by the end of the process. The second defendant would obtain a 25 to 40 per cent discount. Other defendants would obtain a discount of up to 25 per cent. If settlement is requested after the end of the discovery phase, the maximum potential reduction would be 15 per cent. Discounts are defined based on the level of collaboration provided by the defendants.
CADE’s intention with this rule is to provide defendants with more information about the monetary contributions that they would have to pay. It not only helps defendants decide whether to enter into a settlement, but also reduces transaction costs during the negotiations.
However, there may well be several discussions regarding the fine amount that would be applicable to the parties. In fact, the rules do not account for the culpability of the defendants. For example, a defendant that was the leader of a given cartel and engaged in the illegal practice for 10 years would currently be subject to a lower fine than an entrant that joined the cartel for one year in order to survive in the market, if the former were to propose a settlement earlier. For obvious reasons, this appears to be a policy that could be questioned. CADE has been trying to mitigate eventual discrepancies during the negotiations to create some proportionality, but this has been on a case-by-case basis so far.
Since the new rules for settlements were established by CADE in March 2013, it has experienced an increase in the number of applications for settlements. In March 2015, for instance, CADE’s Administrative Tribunal decided to confirm and approve 13 agreements in a single hearing.
VI ‘DAY ONE’ RESPONSE
Generally, dawn raids in Brazil are regulated by the Civil Procedure Code,26 and only a judge may grant an order for a dawn raid to occur. Specifically for antitrust investigations, dawn raid orders may be obtained through two different proceedings: the SG-CADE,27 acting through CADE’s Attorney General, requests the General Counsel for the Executive Branch to seek an order in a federal court to perform a dawn raid;28 or the Public Prosecutor’s Office, based on the criminal provisions applicable to cartel behaviour, may independently seek a court order directly to obtain evidence in a certain cartel investigation. In both cases, CADE and the Public Prosecutor’s Office (and the federal police in some cases) tend to cooperate and coordinate actions to run the dawn raid.
Judges may grant dawn raid orders if it is shown that there are good arguments on the merits (fumus boni iuris) and that there is the risk of imminent and irreparable harm (periculum in mora) if the order is not granted. Judges may freely evaluate whether the evidence indicated in each case is sufficient to fulfil the first requirement.29 The second requirement is usually fulfilled by CADE based on the argument that the dawn raid would avoid the destruction of documents and additional evidence.
Dawn raid orders may be issued on notice or ex parte. CADE generally asks for an ex parte order, and for that it must also show that the order and the dawn raid itself would be useless were the company to learn about the dawn raid in advance. Based on such an argument, CADE is usually successful in obtaining ex parte dawn raid orders.
In addition to companies’ premises, CADE may request access to the homes of individuals under investigation. Courts are usually hesitant to grant orders for dawn raids on private addresses unless CADE is able to provide specific evidence to support such a request.
Dawn raid orders must be enforced by court officials and at least two witnesses. CADE officials actively participate in the dawn raids, and members of the federal police and the Public Prosecutor’s Office may also be called to join them.
One of the court officials carrying out the dawn raid is required to read the court order and request access to the premises of the company.30 If access is denied, court officials may use force to enter the premises. Court officials are also required to draft a report of the dawn raid and sign it together with the witnesses.31
The Civil Procedure Code32 establishes that obstructing court orders may result in a fine that will be duly measured by the judge but that is limited to 20 per cent of the value of the claim.33 Further, obstructing a dawn raid may also be considered a crime under Brazilian law. The Criminal Code34 sets forth that disobeying a legal order from a public official may result in imprisonment of between 15 days and six months35 and a fine.
During the dawn raid, the court officials, members of CADE, the federal police and the Public Prosecutor’s Office may seek and seize objects, papers of any kind, commercial books, computers and digital files of companies. These documents or materials must, however, relate to the ongoing investigation, as fishing expeditions are not allowed under Brazilian law. The evidence seized in the dawn raid must be sealed by court officials to guarantee its authenticity.36
As soon as a company learns about the dawn raid, it may question its legality before the courts. The company will be entitled to the right of full defence, and may question whether the requirements for the dawn raid have been complied with by CADE and duly assessed by the court that granted the dawn raid order. If the dawn raid is considered illegal, the materials seen, copied or seized will also be considered illegally obtained and will be unsuitable for use in the investigation to be carried out by CADE.
Members of the legal department of the company and its external counsel are typically allowed to participate in and monitor the search and seizure of evidence. Court officials usually accept requests to wait for members of the legal department or external counsel to arrive in order to initiate the dawn raid, despite the fact that this is not required.
The terms of the court order and the credentials of the court and other officials must be checked by members of the legal department of the company or by its external counsel. If everything is correct, court officials should be placed in a meeting room and the scope of the investigation should be established. Needless to say, companies are strongly advised to cooperate with the authorities and to ensure that no evidence is destroyed or jeopardised considering the potential consequences described above.
Employees of the company or of its external counsel should always escort the officials responsible for the dawn raid. Employees must be instructed to treat the officials with courtesy, but to contact the legal department if they have doubts as to whether a particular document may be copied or a particular room may be searched. Privileged documents and documents that fall outside the scope of the investigation should not be copied or seized. A copy and a complete list of all documents analysed or seized by the authorities must be kept by the company.
Except in specific circumstances, employees should refrain from answering on-the-spot questions. Under Brazilian law, there is no obligation to answer such questions, and employees should be instructed to always indicate that they will not answer any questions unless authorised to do so by the legal department.
In 2016, CADE made use of such proceedings in order to enforce its policies against cartel practices. As an example, in June 2016, CADE conducted dawn raids at 12 engineering companies that were allegedly involved in cartel practices in tenders of railroads. In addition, 27 dawn raids were conducted by the Public Prosecutor’s Office and the federal police in other engineering companies and in the house of executives. Fifty-one officials from CADE and 200 police officers were involved in the dawn raids, known as the Periodic Table Operation. The seized material will be included in the ongoing investigation of the SG-CADE.
VII PRIVATE ENFORCEMENT
In addition to administrative, criminal and civil investigations by CADE and by the Public Prosecutor’s Office, cartel perpetrators may also be subject to private lawsuits claiming damages. Third parties such as clients, competitors not participating in the cartel, suppliers and even consumer defence agencies may initiate lawsuits before Brazilian courts in an attempt to recover losses and damages that they may have suffered. Damage lawsuits are starting to become more commonplace, and the expectation is that this trend will continue, along with CADE analysing more cartel cases and the lower state courts ruling on such cases. In fact, when examining the Liquefied Gas case,37 CADE expressly mentioned that customers should claim damages against the defendants in such investigation. In that instance, CADE actually sent letters to certain customers indicating that they could sue the companies allegedly involved in the cartel practice, and that such customers could apply to CADE to access the evidence that could be used in such damage claims.
Under Brazilian law, most of the information gathered in an investigation may be made available to third parties at least until the end of the investigation.38 Thus, in CADE decisions, third parties may have access to a substantial level of evidence to be used in potential damage claims, but only after an investigation is over.
In fact, in the alleged Subway cartel in São Paulo, CADE restated its position that the information and documents gathered in an investigation or obtained under a leniency agreement will only be available to third parties as a result of a judicial authorisation or at the end of the process.
Regarding disclosures ruled by the Judiciary Branch, a decision handed down by Minas Gerais State Lower Court determined that Gerdau must disclose its sales documents. The company was convicted in 2005 by CADE for colluding with two competitors in the steel beams market. Two companies that acted as distributors have filed a lawsuit to seek damages regarding their supposed losses during the cartel’s active period. As those companies are gathering evidence to estimate the value of the damage allegedly suffered, the judge of the case ruled that, despite the provision of Brazilian Tax Law, Gerdau ought to provide documentation dating prior to 2000.
The fact that evidence in a case may be made available by CADE to third parties at the end of an investigation may be considered a drawback to the Leniency Program and to potential settlement agreements. This may be a relevant issue in cases involving alleged international cartels, considering that evidence made available to CADE in Brazil may end up in the hands of customers, and may therefore be used to form the basis of damage claims in Brazil or abroad.
There are no relevant precedents in Brazil in which customers have been granted damage claims based on cartel behaviour. This is partly owing to the fact that few such cases have been initiated by customers, but mainly to the fact that court proceedings in Brazil tend to take several years to be finalised.39
The value of the damages granted in such lawsuits in Brazil will depend on several factors, such as the extent of the damage caused to the eventual plaintiff and the amount of evidence available in each case. The amounts will also depend on how strongly plaintiffs will be able to demonstrate that damages may be quantified. In fact, the calculation of potential damages will certainly be a central issue in the lawsuits, as this may lead to a lengthy process in Brazilian courts.
VIII CURRENT DEVELOPMENTS
The new Competition Act was consolidated during 2013 and 2014. The years 2015 and 2016 were focused on the interpretation of the Act in order to assure its efficacy and to provide guidance to companies. There was considerable advance in 2016 in terms of transparency because of the issuance of Guidelines by CADE, which provide additional information to companies on how CADE’s cartel policy is implemented.
The main developments regarding CADE have been its efforts to reinforce the effectiveness of the provisions set forth in the Competition Act. However, CADE’s efforts to strengthen its Leniency Program and to be able to negotiate settlement agreements efficiently continue to be the focus of its work.
1 José Alexandre Buaiz Neto is a partner at Pinheiro Neto Advogados. Special thanks go to Daniel Rebello of Pinheiro Neto Advogados for his assistance in drafting this chapter.
2 Administrative Process No. 08700.001020/2014-26 (related to ABS, PS, AS and PMMA) and Administrative Process No. 08012.000773/2011-20 (related to TPE).
3 Administrative Process No. 08012.005255/2010-11.
4 Law No. 4,595 of 31 December 1964, as amended.
5 For example, see Administrative Process No. 08700.003070/2010-14, involving Banco do Brasil SA.
6 The Leniency Program was initially dealt with in Provisional Measure No. 2,055 of 11 August 2000, which was later altered and converted into Law No. 10,149 of 21 December 2000. With the enactment of the new Competition Act in 2011, most of the provisions regarding leniency applications were incorporated into the Act.
7 Administrative Process No. 08012.004702/2004-77. Previously, CADE reviewed the Watchmen cartel case (Administrative Process No. 08012.001826/2003-10), which was initiated because of a leniency agreement entered into by the owner and an executive of one of the defendants, but this investigation was local, without relevant national or international impact.
8 In cases involving practices that were previously unknown to CADE, the leniency programme will ensure total immunity. In situations in which investigations were initiated by CADE prior to the application, reductions of one-third or two-thirds of the potential fines will be determined by CADE’s Board. See Article 86, Paragraph 4 of the Competition Act.
9 Article 86 of the Competition Act.
10 Article 191, Paragraphs 1 and 2 of CADE Internal Regulations.
11 Article 86, Item I of the Competition Act.
12 Article 86, Item II of the Competition Act.
13 Article 86, Paragraph 1, Item I of the Competition Act.
14 Article 86, Paragraph 1, Item II of the Competition Act.
15 Article 86, Paragraph 1, Item III of the Competition Act.
16 Article 86, Paragraph 1, Item IV of the Competition Act.
17 Article 192, Paragraph 1 of CADE Internal Regulations.
18 Article 37, Item I of the Competition Act.
19 Article 37, Item II of the Competition Act.
20 Administrative Process No. 08012.010932/2007-18.
21 Article 38, Item I of the Competition Act.
22 Article 38, Item II of the Competition Act.
23 Article 112 of CADE Internal Regulations.
24 Such penalties are provided for in the White Collar Act, Law No. 8,137/1990.
25 The requirement of admitting participation in the practice under investigation was already included in the previous rule in cases where a leniency agreement had been entered into.
26 Articles 839-843 of Law No. 5,869 of 11 January 1973, as amended.
27 Under the Competition Act, the SG-CADE is responsible for carrying out the investigation of antitrust cases.
28 Article 13, Item VI(d) of the Competition Act.
29 It is obviously easier for CADE to have a dawn raid order granted if there is a leniency agreement or material evidence of the illegal practice. For example, in cases involving anonymous tips, orders are usually denied (see Special Appeal No. 29,447/MG).
30 Article 842 of the Civil Procedure Code.
31 Article 843 of the Civil Procedure Code.
32 Article 14, Item V, Sole Paragraph of the Civil Procedure Code.
33 In Brazil, all claims must be quantified as monetary sums. The monetary sum may be the damages, when specific damages are sought, or may be established as an estimate by the plaintiff. In a request for a dawn raid, generally the value of the claim is close to 10,000 reais.
34 Article 330 of the Criminal Code.
35 If the obstruction is by means of threat or violence, the penalty is a period of detention of between two months and two years. However, if as a result of the threat or violence the act is not executed, the agent may be subject to imprisonment for a term of one to three years. Obviously, the agent of the threat or the violence may also face charges in relation to such threat or violence.
36 CADE may request that the entire procedure be kept confidential. However, there have been cases in which leakages have occurred, and companies need to be extremely cautious with confidentiality in these cases.
37 Administrative Process No. 08012.009888/2003-70.
38 In the Hydrogen Peroxide case, for example, CADE has made available in its decision relevant evidence obtained in its investigation.
39 On average, claims for damages in the Brazilian courts may last from 10 to 15 years, considering the potential appeals involved.