I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
From the classic judicial controversy over the validity and extension of a non-compete clause at the beginning of the twentieth century to the ground-breaking decisions on monopoly rights and market closure upheld by the Supreme Court in the 1950s, the Brazilian judicial branch has always been extraordinarily active in antitrust litigation. Competition violations may take many forms and the Brazilian courts have dealt with practically every type thereof as they became progressively more complex. Claims involving non-compete clauses and refusals to deal, exclusivity agreements, abusive conduct and predatory practices are routinely found in courts – even more so after the enactment of the Brazilian Consumer Code (Federal Law 8,078/90) and Brazil’s new Competition Law (Federal Law 12,529/2011).
In more recent years, as the Brazilian Antitrust Authority (CADE) has gained visibility – and its significant investment in competition advocacy has started to mature – Brazil has also experienced a surge of class actions aimed at redressing collective damages arising out of antitrust violations to the market as a whole, most of them filed by the state and federal branches of the Prosecution Office. Although Brazil does not have the same powerful tools and incentives for collective dispute as other countries,2 CADE has been searching for new and more effective ways to encourage victims to claim damages as a group, in order to amplify the deterrent effect of the Agency’s decisions. For example, in its Industrial Gas cartel decision, CADE openly encouraged associations and other injured parties to file collective claims against the defendants.3 CADE has also decided to take a more active role in individual disputes, joining private lawsuits as amicus curiae, to ensure its view of the Competition Law will prevail also in the courts. And CADE may soon enact a new set of rules aimed at helping private litigation and establishing procedures to assist interested parties in gaining access to files and information related to antitrust violations.
It is clear that CADE plays a prominent role in the defence of competition, such that Federal Law 12529/11 even refers to CADE and the Economic Supervision Office of the Ministry of Finance (SEAE) as the sole components of the Brazilian competition system. However, CADE’s preventive and repressive functions are geared towards the protection of collective (trans-individual) rights.4 CADE is not interested in conducts with private repercussions only – CADE aims to protect competition, not competitors.5 Similarly, since the administrative activity takes into consideration the potential effects of market conduct, CADE is also not primarily concerned with the measurement and quantification of any actual damages that may have been caused by the offender.6 In fact, administrative sanctions have the immediate goal of punishing offenders – and that is it. Compensation for private damages for specific companies or consumers must be addressed through private actions, whether class or individual actions.
Under Brazilian law, victims are allowed to go to court even if CADE has expressly decided that no violation has occurred7 – given that courts are not bound by CADE’s judgment and are therefore free to take a different view of the matter.8
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
Article 5 (XXIV) of the Brazilian Federal Constitution establishes as a fundamental guarantee that any injury or threat to a right may be referred to the judicial branch. This is the basic foundation for the prevention and redress of any and all damages under Brazilian law. Moreover, Federal Law 10,406/2002 – the Brazilian Civil Code (CC) – sets out the right to obtain compensation for any damages suffered due to wrongful or unlawful behaviour. This general torts rule is applicable to virtually all disputes involving competition issues. Before the enactment of the Competition Law, the CC was at the heart of practically every claim involving unfair competition, abuse of economic power and contractual restrictions in general and, to this day, the CC continues to regulate damages, causation and liability – and the breadth and versatility of its rules allows its enduring applicability to competition issues. In addition, Article 47 of Federal Law 12,529/11 establishes that any injured individuals may file suit to cease or to seek compensation for any violation of the economic order, on their own behalf or by means of their representatives or substitutes, regardless of any prior decision or authorisation from CADE – confirming, once more, the parties’ right to access the courts and to obtain civil remedies when there is an unlawful act, damage and causation. The statute of limitations on these lawsuits is three years for injured parties in general,9 and five years if the victim is a consumer,10 counted from the date the damage occurred.11
Together with the full compensation of damages, victims are allowed to file for injunctions to prevent or stop the anticompetitive behaviour. Brazilian courts, for example, may impose daily, weekly or monthly fines on the offender, in order to seek mandatory compliance therefrom. Courts structure fines according to the situation, and have broad discretion to raise their amount, if compliance is not immediate. Fines may be accompanied by any other measure required to stop the antitrust violation.12 For example, courts have the power to suspend contractual clauses, restore unlawfully terminated agreements and impose obligations to negotiate. In extreme cases, courts may even intervene directly in the defendant’s business.13 In these situations, intervention must address the crisis in a proportional and appropriate fashion, such as appointment of a court official to supervise the defendant’s activities or temporarily replace its managers. In any event, the judicial intervention must not exceed 180 days.
Under Article 21 CPC, Brazilian courts have jurisdiction over any dispute (1) in which the defendant, regardless of nationality, has a registered office or a subsidiary in Brazil; (2) in which the obligation shall be performed in Brazil; or (3) that has arisen from a fact or act that took place in Brazil. The lawsuit may be filed in Brazil in the presence of any of the above conditions, regardless of the nationality of the parties.14 If there is more than one defendant, as long as one is domiciled in Brazil, all the others may be jointly sued in Brazil. Foreign plaintiffs, however, must post a deposit in court for the full amount of the court and attorneys’ fees in order to litigate in Brazil.15 The Brazilian Competition Law is only applicable to acts perpetrated in Brazil or that may produce effects in Brazil.16 Therefore, competition violations perpetrated abroad by Brazilian companies that produce no effects in Brazil may still be litigated before Brazilian courts but will be governed by foreign law. Ongoing disputes abroad do not prevent the filing of the same suit in Brazil.17 If final judgment has been rendered in a foreign court, it may be enforced in Brazil upon prior submission to the Superior Court of Justice (STJ) for homologation (exequatur).18
The injured party or the successors thereof may file private antitrust lawsuits in Brazil. Collective lawsuits (class actions) however may only be filed by:
- a the Prosecution Office. The role of the Prosecution Office has gained visibility, as more and more class actions are filed to seek damages arising out of anticompetitive conduct. In some cases, the Prosecution Office has filed a lawsuit even before CADE has reached a final decision. More lawsuits are expected as prosecutors increase their cooperation with CADE;
- b the unions, states, municipalities and the federal district;
- c direct and indirect government entities and agencies; or
- d associations existing for at least one year that include the defence of interests and rights of their members in their purpose.19
However, the Supreme Court has decided that only members that have expressly authorised the filing of a class action will be able to enforce the relevant decision.20 This Supreme Court precedent goes against the STJ precedents on the same matter and limited the scope of class actions for damages. Some precedents have recognised that in addition to the above-mentioned requirements, courts should also evaluate whether the association adequately provides representation for its members (i.e., such associations must demonstrate their ability to properly conduct the defence of the respective collective interest in court by revealing their technical expertise and financial capability to handle the class action, among others). Finally, certain decisions require the association to show that it is composed of at least an appropriate (minimum) number of alleged victims.
Private companies or individuals are not authorised to file class actions on behalf of the parties injured by anticompetitive behaviour. Nevertheless, certain private actions based on competition issues may in fact indirectly result in some form of collective protection, such as when parties are not only seeking damages, but also filing for an injunction to immediately cease the antitrust violation (for instance, to cease misleading advertisement or any abusive or discriminating conduct).
It is important to point out that CADE usually does not intervene in private lawsuits and courts also generally see no reason to call for CADE’s intervention.21 Also, even when called in court as an interested third party or amicus curiae, CADE does not address matters that have never been or that are currently under its investigation.22
V THE PROCESS OF DISCOVERY
The CPC deems all legal means of evidence admissible, as well as those that are morally legitimate (i.e., evidence that does not unreasonably violate, for example, the intimacy or privacy of the parties).23 Wiretapping is generally considered illegal, whether the recording was conducted by a third party or by one of the parties to the conversation24 – although occasionally the courts will admit the recording as evidence, if it is necessary to prove the defendant is not guilty in a criminal trial.25
Under Brazilian civil procedure law, parties usually produce their evidence in the course of the lawsuit – the procedure does not include any phase similar to a pretrial discovery. However, the CPC allows the anticipated production of evidence, even in cases in which there is no risk involved, when the evidence may help the parties reach a settlement or in cases when the production of the evidence may prevent a lawsuit altogether. This provision allows potential plaintiffs to assess the viability of their claims, working as an effective ‘Brazilian discovery phase’.
There is no legal hierarchy as to the different types of evidence, so courts are free to weigh them as they see fit.26 The burden of proof falls on the plaintiff as a general rule.27 If, however, owing to the peculiarities of the case, the burden of proof is deemed excessively difficult for the party the judge may shift or redistribute it;28 parties are also allowed to agree – before the lawsuit or during the lawsuit – on the distribution of the burden of proof.29 Litigation involving consumers may shift the burden to the defendant, if the plaintiff is deemed more vulnerable (i.e., when there is a significant asymmetry of information or economic resources between the parties). The parties must declare early on in the lawsuit the types of evidence they intend to produce or to obtain through discovery30 – failure to comply with this rule may result in the loss of the right to produce the evidence, as judges do not usually request its production ex officio.31 The most common types of evidence in Brazil, expressly regulated in the NCPC, consist of the testimony of parties and witnesses, documental evidence and expert examination (see Section VI, infra).
i Deposition and testimony of witnesses
The court may summon the parties at any time to question them regarding the facts of the case.32 Each party is also entitled to motion for the other party to testify33 (however, they cannot motion for their own deposition in court). The main goal of the deposition is to get the confession of the party – that is, the admission of facts that are detrimental to their cause.34 Therefore, when summoned to depose, parties cannot fail to show up in court, or refuse to answer the judge’s or the other party’s questions: if they do, without proper and justified cause, the judge will treat such behaviour as an admission of the truth of the claims made by the other party.35 The parties, however, are not obliged to answer questions regarding criminal or shameful facts; facts that may endanger them or their relatives; or facts that they are bound to maintain confidential.36
Parties also have the right to summon up to 10 witnesses – limited to three for each of the facts that the party intends to prove.37 Witnesses may be challenged for impediment (e.g., kinship) or suspicion (close friendship, or strong animosity proven through objective fact).38 The court mediates the testimony, as parties are not allowed to directly question the witnesses. Witnesses are not obliged to testify on facts that may endanger them or their relatives; or on facts that they are bound to maintain confidential.39
Parties may produce any document they possess in court. According to Brazilian law, ‘document’ means any material representation capable of reconstituting or preserving an image, sound, situation, idea, wish, etc. Therefore, contracts, declarations, statements, business records, photographs, digital files (emails) and sound recordings are considered documents. There are several rules governing the admissibility and validity of each different type of document, but, as a general rule, parties must produce the original document in court. The law establishes, however, that courts may accept copies, if properly certified by a public notary40 or if the lawyer assumes responsibility for the accuracy of the copy.41 If the document is not in the possession of the party, courts may be asked to reclaim such documents from the opposing party or any third party.42 In order to do so, however, the requesting party must describe the document as accurately as possible and inform the purpose of the evidence. The party must also demonstrate reasonable belief that the document exists and is in the possession of the other party. As a result, Brazilian law does not leave much room for ‘fishing expeditions’. Refusal to surrender the document may result in the penalty of confession or the search and seizure of the document.43 Parties are nonetheless allowed to refuse to provide documents that may subject them to the risk of a criminal action44 – a very important limitation, especially when one is dealing with cartel cases. Any document produced in the lawsuit may be challenged for its authenticity. Documents produced in previous lawsuits or administrative proceedings – for example, those provided to CADE or any other regulatory agency – are also admissible under Brazilian case law as ‘borrowed evidence’. The same applies to documents produced in foreign legal or administrative proceedings.45 It is noteworthy that administrative proceedings before CADE are sometimes confidential, meaning that third parties – including victims – may not have access to the evidence produced.46 In the Industrial Gas cartel case, for example, part of the evidence used to convict some of the defendants is confidential and, therefore, would not be readily available to potential plaintiffs. Note, however, that CADE will not allow third parties to access confidential documents, including the content of leniency agreements and cease-and-desist commitments, while an investigation is pending and will actively litigate in court to prevent such requests from being granted.47
Courts may exceptionally admit witnesses’ testimonies or the seizure of documents as a preliminary measure if the evidence is deemed helpful for a settlement or if the previous knowledge of the facts may justify or prevent the filing of a lawsuit.48 Witness depositions may also be anticipated if there is a risk of the witness defaulting (e.g., leaving the country) or dying.49
VI USE OF EXPERTS
If the dispute requires the assessment of technical issues, the judge will summon an expert in the field to perform an examination, either ex officio or upon the parties’ motion.50 Antitrust issues usually involve the opinion of an economist or accountant, but depending on the relevant market, product or infrastructure involved in the dispute, court may summon engineers, physicians or any other expert in the related field (expert examination may involve multiple fields51). The court will determine the scope of the technical opinion and parties are allowed to ask questions they want the expert to address in his or her examination. The expert may use any means available to perform the examination, including questioning witnesses and requesting documents held by the parties. The expert may therefore request books, records and other economic information of the parties to calculate, for example, lost profits or illegal surcharges applied to goods or services. The parties are allowed to hire their own experts to monitor and assess the work of the court expert. Though the court is not obligated to follow the opinion of the expert, the examination does have exceptional weight. In addition to the court-ordered expert examination, the parties are allowed to introduce their own independent analyses, economic studies or legal opinions of jurists and authorities in order to advance their case. The courts tend to be open to these contributions, as long as they comply with due process of law – in other words, as long as they are not being used to surprise the other party or to hinder the progress of the lawsuit. CADE’s decision regarding an antitrust violation will be treated as a document, as it was not produced by a court expert. Because of the authority and knowledge of the antitrust agency on the matter, however, it will have undeniable weight with the court.
VII CLASS ACTIONS
According to Brazilian law, class actions may only be filed by the entities or associations determined by law and cannot be brought by a single private party or a corporation.52
Class actions must involve collective rights; the Brazilian system identifies three types of ‘collective’ rights to this end:
- a diffuse rights, which are considered to be indivisible, belonging to a collectivity comprised of indeterminate people (i.e., indeterminability of the subjects, there being no individuation) linked by factual circumstances;
- b rights that belong to a group, category or class of indeterminate, but determinable, people, linked to each other, or to the adversary party, by a standard legal relationship; and
- c homogeneous individual interests or rights, which are individual rights arising from a common origin, which is usually the case with class actions aimed to redress antitrust damages.
Courts may grant provisional remedies in class actions so long as there is prima facie evidence on the strength of the claim and, cumulatively, there is a risk of extraordinary damages resulting from procedural delay. As sound as the lawsuit may be, courts generally understand that the mere delay of the lawsuit poses no risk to claims for monetary damages. For that reason, it is very unlikely that courts will grant an injunction for a quicker payment of damages. If the class action is successful, it will benefit the whole class. A judgment against the collective plaintiff, however, will not harm the individual rights of the members of the class – who may therefore still file their own private claims against the defendant.53 The progress of a successful class action aimed to redress antitrust injuries is divided into two phases: first, the court establishes the competition violation and the liability of the defendant, rendering a collective order;54 next, each injured member of the class must act individually to claim its own damages.55 However, if the individual damages claimed are not deemed consistent with the estimated scope and seriousness of the antitrust violation the court may order a fine be paid by the defendant to the Fund for the Protection of Collective Rights.56
VIII CALCULATING DAMAGES
Victims may seek damages for all types of damages under Brazilian law, which may be either pecuniary losses (any type of pecuniary damages, including loss of profits and loss of business) or pain and suffering (i.e., injury to the reputation or good standing of the victim). Such damages are not to be confused with the punitive damages available in the United States, for instance, as the purpose thereof is not to penalise the offender.
Brazilian law does not provide a specific or mandatory form of calculating material antitrust damages. Therefore, disputes in Brazil will face the same challenges already found by other jurisdictions, mainly, the proper form of evaluating damages arising out of an anticompetitive behaviour and, more specifically, by a cartel. Furthermore, it seems that a solution will indeed be assessed on a case-by-case basis, according to the elements available to the court.
On the other hand, in order to be entitled to pain and suffering in an antitrust case, the victim must effectively prove an actual injury to reputation. There is no strong set of judicial precedents for pain-and-suffering in cases involving private antitrust litigation – although there are usually pecuniary losses involved, and with the exception of disparagement cases, the reputation or good standing of the victim is seldom tainted by a competition violation – but ordinarily the awards in such cases do not exceed 500 times the Brazilian minimum salary.57
In recent years, certain class actions – especially those filed by public prosecutors – have claimed compensation for ‘social’ damages caused by the offender (i.e., damage to the entire market). Though such claims generally work as disguised claims for punitive damages, they have been accepted by courts in certain circumstances, mainly in cases involving labour claims or mass torts.58 In individual actions, the award also includes the payment of attorneys’ fees (to be collected by the lawyers, not the parties59), usually between 10 and 20 per cent of the amount under dispute. Defendants may also be subject to the payment of attorneys’ fees if a private party files the class action.60
IX PASS-ON DEFENCES
Brazilian law allows defendants to argue pass-on defences (i.e., the claim that the plaintiff passed on its losses to third parties or to end consumers). The CC expressly sets out that indemnification must be measured according ‘to the extent of the damage’,61 which means that it must not exceed what was effectively lost by the victim. Therefore, there is a strong body of case law stating that victims cannot claim damages for losses that have already been paid or covered by someone else (such as by an insurer or a third party), since this would not be compensation, but truly improper and unjustified enrichment. The burden of proof that the increased price was not passed on falls on the plaintiff, which in fact has better conditions to demonstrate this fact in court.
Furthermore, the courts are paying increased attention to the victim’s duty to mitigate the damage. It is unclear how this duty would apply in antitrust disputes. In addition, it is possible that the same defendant faces multiple lawsuits related to the same alleged cartel – for example, a lawsuit filed by a downstream buyer and a different lawsuit filed by end consumers. In this case, courts must try to reach a coherent solution, so as to avoid bis in idem and ensure that each alleged victim will recover the exact extent of damages experienced.
X FOLLOW-ON LITIGATION
Only a small fraction of Brazilian private antitrust litigation actually depends on CADE’s decisions. Each dispute is litigated directly by the parties in court, even if in some disputes there is also an underlying collective issue.62 Companies usually do not wait for CADE or even for its regulatory agencies to take action over matters affecting their businesses mainly because (1) as previously mentioned, under Brazilian law victims are not obliged to wait for an administrative decision to seek relief in court; and (2) the statute of limitations for damages is relatively short (three or five years) and may have already passed when CADE’s investigation is over.63 As a result, follow-on litigation is usually not a relevant issue for companies and entrepreneurs. As class actions for damages have caused consumers to take a more prominent role in the system,64 however, more and more associations (and sometimes even the Prosecution Office) are turning to CADE for information and guidance regarding collective antitrust violations.
There are virtually no limitations regarding follow-on litigation in Brazilian law: CADE’s decision on whether to convict or acquit a defendant does not prevent private antitrust litigation. The payment of administrative fines does not release the defendant from repairing the damages arising out of the antitrust behaviour. An administrative conviction, however, may foster private antitrust ligation, since it may make it easier, faster and less costly for collective plaintiffs to demonstrate the liability of the defendant and the damages caused to the market in a civil court.65 Leniency agreements or cease-and-desist agreements entered into by a defendant may involve some sort of admission regarding the antitrust behaviour or the facts underlying the investigation. Should the defendant plead guilty for the purposes of such agreements, the defendant will not be allowed to discuss his or her liability in follow-on individual or collective litigation (agreements, however, are always restrictively interpreted in Brazil).66
Under Brazilian law, attorney–client communication is privileged.67 This privilege covers the law firm or office, as well as the professional tools, work product, written, electronic, telephone and telematics communications.68 There are only two exceptions: where there is evidence indicating the authorship and material perpetration of a crime by the lawyer;69 and when the lawyer holds an element of the corpus delicti70 (Brazilian law does not differentiate between outside and in-house counsel).71 According to the Brazilian Constitution, all correspondence and data communication may not be violated and therefore cannot be used for litigation purposes.72 There is, however, no consistent body of case law defining whether this provision also encompasses emails or other forms of electronic communication. Several precedents have allowed the use in court of open letters and emails, under the principle that the Federal Constitution protects the transmission of data (the communication process) but not its content.73
On the other hand, the Brazilian Constitution allows wiretapping ‘by court order, in the situations and in the manner provided by law for the purposes of criminal investigation or fact finding’.74 Federal Law 9,296/96 sets forth very specific and restrictive conditions for such practice: first, the authority requesting the wiretap must demonstrate that all other means of investigation have been exhausted. Additionally, wiretapping must not exceed 30 days and the decision allowing the measure must be strongly grounded. Once the recording has been used in criminal court, parties may produce it (or the transcription thereof) as evidence in administrative proceedings or civil litigation.75
XII SETTLEMENT PROCEDURES
Parties are allowed to settle disputes on disposable rights at any time. Settlements are, in fact, encouraged by Brazilian courts and may even encompass rights or obligations that are not part of the original lawsuit. A settlement in or out of court has the same weight as res judicata, so that, once settled, the parties may not litigate the controversy again. Under Brazilian law, damages usually fall under the ‘disposable’ rights category, which means parties may freely agree on and even waive their rights. Antitrust law, however, is considered a matter of public interest. Therefore, while an agreement over damages would be enforceable, an agreement over discriminatory conduct might not be, and it would also not prevent CADE from taking further action against the perpetrator.
Class actions, in comparison, allow very limited room for settlements. If the plaintiff is the Prosecution Office, Brazilian law allows the parties to enter into a consent decree for the purpose of ceasing the relevant behaviour, often with a payment (contribution) connected thereto. The payment of a contribution in the context of a consent decree may prevent the application of further penalties by other authorities, as that would result in a possible bis in idem.
The payment of a contribution, however, irrespective of the amount, does not relieve the defendant of the obligation to redress individual damages, as the conduct adjustment agreement (TAC) cannot set forth the individual rights of the victims.
Under Federal Law 9,307/96 (the Arbitration Law), parties may resort to arbitration only to settle disputes on disposable property rights. Law 12,529/11 establishes that competition is a matter of public interest, narrowing the possibilities of using arbitration to deal with antitrust litigation. It is theoretically possible to refer to arbitration in Brazil to dispute the amount of damages arising out of a cartel, for example. It is very unlikely, however, for a defendant to voluntarily join an arbitration of such scope. On the other hand, agreements entered into with arbitration clauses may generate disputes involving antitrust issues – for example, contracts with exclusivity clauses. In such cases, it is possible that the arbitrators will have to face an antitrust issue as part of their brief.76 The Arbitration Law determines, however, that the court may deem an arbitration award void if the decision conflicts with public interest provisions.77 Moreover, the arbitration clause does not prevent the injured party from seeking an administrative decision from CADE, which will not be bound to the arbitration award, in any way. This means that CADE may decide to investigate and punish behaviour or contractual clauses even if they were deemed fully lawful or enforceable by the arbitrators.
XIV INDEMNIFICATION AND CONTRIBUTION
In the event of a competition violation, Brazilian law determines that all the individuals involved in the conduct – for example, all the members of the cartel – will be jointly liable for the damages caused.78 This means that each of the offenders may be called to answer for the full amount of damages.
However, the full implications of this rule have not been properly tested in court yet. For example, (1) liabilities may vary when considering the different effects of the cartel over a supply chain; (2) as mentioned, courts have applied the duty to mitigate damages to the victim, which, again, may result in different responsibilities along the supply chain; and (3) finally, the CC provides that ‘if there is excessive disproportion between the agent’s fault and the damage, the judge may equitably reduce the compensation to be paid to the victim.’ Hence, it is necessary to assess the actual behaviour of each of the alleged parties. Therefore, there are many issues that can and should be further developed in future private litigation.
Furthermore, managers and sometimes employees involved in the conduct may also be liable for the damages. Brazilian law also provides for piercing of the corporate veil in the event of fraud or property commingling79 – so that the victim, in some cases, may seek reimbursement from other companies of the same group, even if such companies were not directly involved in the violation.
XV FUTURE DEVELOPMENTS AND OUTLOOK
The reform of the Brazilian competition system, whereby the former three administrative entities in charge of antitrust analysis and investigation – the SEAE, the SDE and CADE – fused into ‘SuperCADE’ provided a significant increase in efficiency and in the rate of antitrust investigation and merger review.80 CADE is increasing its efforts in antitrust investigations, especially cartels, and therefore an increase in leniency agreements is also expected.
Furthermore, Brazil is currently developing certain relevant legislation reforms aimed at improving its judicial civil procedure and consumer protection environment that will significantly affect private competition litigation.
The CPC is expected to reduce the cost and duration of civil lawsuits. A Legislative Senate Commission has been assigned to work on a bill for a new Consumer Protection Code. The Commission is currently studying changes in Brazilian class actions in order to encourage their further use by consumers. At the same time, several regulatory agencies are studying changes to their procedures and regulations to create more competition in regulated sectors. CADE is currently discussing a regulation aimed at facilitating private actions for damages related to an antitrust violation.
In short, private antitrust litigation is entrenched in the Brazilian judicial culture and will continue to flourish in the future, as companies in Brazil tend to consider the judicial branch their main source of protection against anticompetitive conduct. In addition, class actions aimed at redressing collective damages caused to consumers are also expected to experience a significant boost in the near future as a result of CADE’s remarkable efforts in competition advocacy.
1 Carlos Francisco de Magalhães and Gabriel Nogueira Dias are partners and Cristiano Rodrigo Del Debbio is an associate at Magalhães e Dias Advocacia.
2 For instance, Brazil does not have a ‘triple damages rule’ for antitrust private litigation.
3 For example, in Administrative Proceeding No. 08012.009888/2003-70, after rendering judgment against the companies involved in the gas cartel, CADE determined that a copy of the judgment should be delivered to several trade confederations, federations and associations for any interested parties to be notified of the possibility of filing claims for damages.
4 CADE prevents anticompetitive behaviour by analysing mergers and assessing their impact on the market. On the other hand, CADE represses anticompetitive behaviour by monitoring, investigating and punishing cartels or abuse of market power.
5 Administrative Proceeding No. 08000.000146/96-55, Reporting Commissioner Ruy Santacruz. See also Administrative Proceeding No. 08000.015370/97-13, Reporting Commissioner Arthur Barrionuevo Filho; Administrative Proceeding No. 08012.001192/98-95, Reporting Commissioner Marcelo Calliari; Administrative Proceeding No. 08000.000826/97-41, Reporting Commissioner João Bosco Leopoldino da Fonseca; Administrative Proceeding No. 139/1993, Reporting Commissioner Mércio Felsky; Administrative Proceeding No. 0142/1993, Reporting Commissioner Mércio Felsky; Administrative Proceeding No. 08000.004544/1997-31, Reporting Commissioner Thompson Andrade; Administrative Proceeding No. 08012.009882/98-47, Reporting Commissioner Celso Fernandes Campilongo; Administrative Proceeding No. 08012.004363/2000-89, Reporting Commissioner Carlos Emmanuel Joppert Ragazzo; Administrative Proceeding No. 08012.002417/2008-45; Reporting Commissioner Carlos Emmanuel Joppert Ragazzo.
6 CADE only requires a ‘high risk that effects will be produced, once the conduct is practiced’ (CADE, Administrative Proceeding No. 08012.007042/2001-33, Rel. Cons. Luiz Fernando Schuartz). ‘Antitrust Law expressly states in its art. 20, that it is not necessary to prove actual effects, but only the potential effects’ (see Administrative Proceeding No. 08012.004086/2000-21, Cons. Roberto Pfeiffer). Nevertheless, some recent decisions are trying to quantify some measure of damages to consumers or the market, in order to better calibrate agreements and sanctions, especially in cartel cases.
7 As an example, the Economic Law Office (SDE) – a former part of the Brazilian competition system, now replaced by CADE – opened investigations questioning the legality of the radius clause on shopping centres, and CADE has considered such clauses illegal in certain situations. The Brazilian courts, however, have consistently upheld the validity of such same clauses.
8 Naturally, even if judges are not bound by CADE’s opinion, its authority as the antitrust agency will lend considerable weight to its influence on the judicial decision.
9 Article 206(3)(V) of the CC.
10 Article 27 of the Brazilian Consumer Protection Code (CDC).
11 Every case of damage (i.e., multiple purchases from a cartel) is counted individually.
12 Article 497 of Federal Law 13,105/2015, the Brazilian Code of Civil Procedure (CPC).
13 Article 102 of Federal Law 12,529/2011.
14 See Federal Supreme Court (STF), SEC No. 6684/EU, Reporting Judge Justice Sepulveda Pertence, Full court, decision rendered on 19 August 2004, published in the Court Register (DJ) on 8 October 2004; CR No. 10686 AgR/EU, Reporting Judge Justice Mauricio Correa.
15 Article 83 of the CPC. The bond must be equivalent to 20 per cent of the amount in dispute (which means, as a rule, the amount requested for the award, if it is a net value).
16 Article 2 of Federal Law 12,529/11.
17 Article 24 of the CPC sets forth that international treaties and bilateral agreements may allow courts to recognise international lis pendens.
18 The STJ will not analyse the merits of the foreign judgment, but determine whether it does not breach any provision of public policy or social interest.
19 Recently established associations may file class actions, provided they prove the addressed damage has extraordinary social interest.
20 Appeal to the STF 573323, Reporting Judge Justice Ricardo Lewandowski.
21 ‘CADE should not intervene in lawsuits which, in fact, aim to determine the existence of damages or abuse that interfere in private contracts, lawsuits which do not aim for the correction of the market as a whole, but only damages resulting from the practice of conducts which might be forbidden under Law 12,529/11’ (Court of Appeals of the State of São Paulo (TJSP), Interlocutory Appeal No. 0156468-75.2012.8.26.0000, Reporting Appellate Judge Manoel Justino Bezerra Filho)
22 See Administrative Proceeding No. 08012.005669/2002-31 in which CADE decided that it should not take a stand on ‘a lawsuit with the same object as an investigation pending decision […] lest we would see a situation of potential non-decisiveness’.
23 Article 369 of the CPC.
24 STJ-RT 743/208; RF 342/307; RT 620/151; 789/293; 815/242; 828/250; JTJ 143/199; 916/221.
25 STF, HC No. 74.678, Reporting Judge Justice Moreira Alves.
26 Article 371 of the CPC.
27 Article 373(I) of the CPC.
28 Article 373, Section 1, as long as the new distribution does not result in an impossible or excessively difficult situation for the other party.
29 Article 373, Section 3, as long as there is no public interest involved (undisposable rights) and as long as the distribution does not result in an impossible or excessively difficult situation for one of the parties.
30 Plaintiffs must specify the evidence they want to produce when the defendant files the claim. Defendants must specify it in their defences.
31 Although exceptionally the judge may determine the production of evidence if deemed necessary to clarify potential doubts or if it is indispensable for the proper trial of the dispute.
32 Article 385 of the CPC.
33 Article 385 of the CPC.
34 Article 389 of the CPC.
35 Article 386 of the CPC.
36 Article 388 of the CPC.
37 Article 357(6) of the CPC.
38 Article 447 of the CPC.
39 Article 448 of the CPC.
40 Article 425 of the CPC.
41 Courts may also allow regular copies, as long as the opposing party does not challenge the document.
42 Article 396 of the CPC.
43 Articles 400 and 403 of the CPC.
44 Article 404 of the CPC.
45 They must, however, first be duly translated into Portuguese.
46 See Opinion No. 206/2010 from Office of the General Counsel to CADE: ‘This Attorney believes that, as a rule, anyone may inquire or obtain copies of records of an administrative proceeding in progress with CADE, regardless of the demonstration of a private or collective interest to be defended. It is nevertheless worth mentioning that once confidentiality is granted to the files of an administrative proceeding, or to certain data, information, communication, objects or documents, it constitutes an insurmountable barrier for third parties to consult said documents or obtain copies thereof.’
47 Recurso Especial n. 1.554.986.
48 Article 381 of the CPC.
49 Article 381 of the CPC.
50 Article 464 of the CPC.
51 Article 475 of the NCPC.
52 Associations are excluded, however.
53 Article 103 (I) of the CDC.
54 Article 95 of the CDC.
55 Article 97 of the CDC.
56 Article 100 of the CDC.
57 Approximately 440,000 reais.
58 The 5th Regional Federal Appellate Court upheld a judgment against companies involved in a fuel cartel for damages caused to their consumers. The court ordered the companies to cease the anticompetitive behaviour and sentenced the companies to the payment of social damages of 1 million reais as compensation for the harm caused to society. See Appeal No. 5021730-87.2011.404.7100/RS, Reporting Judge Justice Fernando Quadros da Silva, decision rendered on 27 June 2012. See also Appeal to the STJ No. 1.057.274, Reporting Judge Justice Eliana Calmon.
59 In the event that the plaintiff is the losing party, the plaintiff must pay attorneys’ fees to the defendant.
60 See Appeal to the STJ No. 200600937910, Reporting Judge Justice Luiz Fux.
61 Article 944.
62 See precedents: Appeal No. 70018077529 – TJRS; Appeal No. 990.10.279201-3 – TJSP; Ordinary Action No. 002406984815-8 – 11th Civil Chamber of Belo Horizonte; Appeal No. 1.0702.02.002684-6/001 – Court of Appeals of the State of Minas Gerais (TJMG); Appeal No. 2.0000.00.514885-2/000 – TJMG; Appeal No. 1184536-0/4 – TJSP; Appeal No. 1057638-0/6 – TJSP; Appeal No. 70033651423 – TJRS.
63 Parties may extend the statute of limitations period by formally notifying the defendant in court.
64 The State Prosecution Office of São Paulo has recently filed a lawsuit against companies and individuals allegedly involved in the subway cartel claiming 2.5 billion reais damages in compensation for pain and suffering and for the losses in contracts involving 98 trains. The State Prosecution Office of Rio Grande do Norte has also filed a lawsuit against companies that allegedly participated in a cement cartel. See also the following precedents Appeal to the STJ No. 677.585/RS – STJ (Reporting Judge Justice Luiz Fux, Full court, decision rendered on 6 December 2005); Appeal to the STJ No. 1.181.643-RS – STJ (Reporting Judge Justice Herman Benjamin, Full court, decision rendered on 1 March 2011); Class Action No. 7099345-90.2009.8.13.0024 – 28 Civil Court of Belo Horizonte; Class Action No. 053/1.03.0002071-0 – TJRS; Class Action No. 027/1.05.0004158-2 – TJRS; Class Action No. 032/1.03.0005173-1 – TJRS; Class Action No. 0000233-25.2011.4.03.6100 – TJSP; Class Action No. 044/1.06. 0002731-1 – TJRS; Class Action No. 0029912-22.2001.403.6100 – 14th Civil Court of São Paulo; Class Action No. 2008.71.07.001547-0– TRF4; Class Action No. 2001.70.01.008206-8 – TRF4; Class Action No. 2002.72.07.000694-3 – TRF4; Class Action No. 2002.61.17.000769-6 – TRF3; and Class Action No. 2003.72.05.006266-5 – TRF4.
65 Sometimes, however, according to Federal Law 12,529/11, CADE may punish the defendant’s behaviour based on its potential to cause damages to the market. In these cases, CADE does not have to show that the behaviour caused actual damages. Plaintiffs in private antitrust lawsuits, however, still have the burden of proving the damages they suffered.
66 CADE has decided that ‘facilitating the redress of private damages resulting from anticompetitive offenses is not one of the immediate goals of the repressive action of this authority, despite being one of its likely developments’ (see Motion No. 08700.002709/2010-44, Reporting Commissioner Olavo Chinaglia). Therefore this is usually not an issue during negotiations, as CADE could frustrate interesting and valid antitrust commitments ‘just because, in the remote future, it would be likely for an agent injured by the alleged offender to eventually benefit from CADE’s unfavorable judgment upon seeking redress for its private damages’. (Motion No. 08700.002709/2010-44, Reporting Commissioner Olavo Chinaglia). Therefore, admission of guilt generally does not involve admission of harm to specific parties.
67 Article 133 of the Brazilian Constitution.
68 Article 7 of the Federal Law 8906/94.
69 Article 7(6) of Federal Law 8906/94.
70 Article 243(2) of the Brazilian Code of Criminal Procedure.
71 However, in practice, in-house counsel may have documents seized (for example, during a search carried out at the company’s headquarters) and the court will later select the documents that may be included in the administrative or judicial proceeding.
72 Article 5 (XII) of Federal Law 8906/94.
73 See opinion in Writ of Mandamus No. 21729, Full court, 10 May 1995, Reporting Judge Justice Neri da Silveira – RTJ 179/225, 270). (STF – RE 418416, Reporting Judge Justice Sepulveda Pertence, Full court, decision rendered on 10 May 2006, published in the Court Register (DJ) on 19 December 2006).
74 STF – Inq. 2424, Reporting Judge Justice Cezar Peluso, decision rendered on 26 November 2008, Full court, published in the Electronic Court Register (DJE) on 26 March 2010.
75 STF – Inq. 2424-QO-QO, Reporting Judge Justice Cezar Peluso, decision rendered on 20 June 2007, Full court, published in the Court Register (DJ) on 24 August 2007.
76 The Brazilian system also provides for the possibility of arbitrators suspending the procedure and remanding the decision of a matter involving inalienable rights to the judicial branch (Article 25).
77 Article 32 of Federal Law 9,307/96.
78 Article 942 of the CC.
79 Article 50 of the CC.
80 Due to the changes in the new law, the former 182-day period to review a merger (in 2009) has been reduced to a 25-day period. Also, CADE has been able to review and decide almost twice the administrative procedures that it used to, closing many antitrust investigations. This cognisable increase of quality and efficiency has resulted in CADE getting a four-star rating by Global Competition Review.