Brazil: from the enforcer
Address: Setor de Edifícios de Utilidade Pública Norte – SEPN
Entrequadra 515, Conjunto D, Lote 4, Edifício Carlos Taurisano
Cep: 70770-504 – Brasília/DF, Brazil
Tel: +55 61 3221 8583
Email: [email protected]
Alexandre Barreto de Souza
Alexandre Cordeiro Macedo
Questions and answers
How long is the head of agency’s term of office?
The president of the Administrative Council for Economic Defence (CADE) has a four-year mandate, with no possibility of reappointment.
When is he or she due for reappointment?
CADE’s president mandate ends in June 2021 and there is no possibility of reappointment.
Which posts within the organisation are political appointments?
The president, the general superintendent, the chief prosecutor and the commissioners are appointed by the President of Brazil and confirmed by the Federal Senate, after an interview conducted by the Commission of Economic Affairs.
What is the agency’s annual budget?
In 2019, CADE had a total budget of 56,184,444 reais.
How many staff are employed by the agency?
In 2019, CADE had 415 people in its staff, including those in administrative functions.
To whom does the head of the agency report?
Although CADE is linked to the Ministry of Justice, the authority has an independent mandate.
Do any industry-specific regulators have competition powers?
Yes. Some regulators have competition powers, which do not preclude CADE’s law enforcement activities.
If so, how do these relate to your agency’s role?
CADE has an independent jurisdiction over competition, even in the markets where regulatory agencies have competition powers. In order to avoid conflicting decisions, the authority has an intense agenda of cooperation with these agencies. This is a mutual understanding, since the regulatory agencies also consult CADE on matters related to competition. As an example, we could mention the cooperation with the Brazilian Telecommunication’ Agency (ANATEL) that has several competencies over competition and cooperates intensely with CADE.
May politicians overrule or disregard authority’s decisions? If they have ever exercised this right, describe the most recent example.
No. CADE’s decisions are not subject to any outside interference.
Does the law allow non-competition aims to be considered when your agency takes decisions?
Yes. Non-competition concerns, such as regulatory impact, can be taken into account.
Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this? Has any competition decision by the agency been overturned?
CADE’s decisions can be appealed to the judiciary, more specifically the federal courts. No competition decision was completely overturned in 2019.
Has the authority ever blocked a proposed merger? If yes, please provide the most recent instances.
Yes. The most recent disapproval was the acquisition of Liquigás by Ultragaz in 2018 (Merger No. 08700.002155/2017-51). CADE concluded that the merger would result in a significant concentration in the liquid petroleum gas market and anticompetitive effects.
Has the authority ever imposed conditions on a proposed merger? If yes, please provide the most recent instances.
Yes. In 2019, five cases were cleared upon signing of an agreement.
Administrative Proceedings 08700.004494/2018-53
In February 2019, CADE cleared the acquisition of Fox by Disney with the condition that the Fox Sports channel was sold, among other things. Even though the parties made efforts to fulfil the request, the sale was not carried out in the time frame set by the Tribunal. Thus, CADE decided, in November 2019, to review the transaction.
Administrative Proceedings 08700.005972/2018-42
In March 2019, CADE cleared the acquisition of All Chemistry do Brasil by SM Empreendimentos (part of Grupo Fragon), under a Merger Control Agreement. The company SM Empreendimentos undertakes, for the next two years, to abstain from participating in merger transactions, incorporation or acquisition of control or parts of companies that compete in the market of distribution of pharmaceutical supplies to prescription pharmacies. For the following two years after this term, the company must as well submit transactions of the same nature for prior assessment of CADE. In addition, the companies are required for the next four years to submit for prior approval of the agency any transactions in markets that are horizontally or vertically related to the Brazilian market of distribution of pharmaceutical supplies to prescription pharmacies.
Administrative Proceedings 08700.005705/2018-75
In May 2019, CADE cleared the acquisition of Mediplan Assistencial by Notre Dame Intermédica, under a merger control agreement. The parties committed not to discriminate competing health insurance plans in their hospitals, and to keep the accreditation of competing hospitals.
Administrative Proceedings 08700.001206/2019-90
In June 2019, CADE cleared, upon signing of a divestiture agreement, the joint venture between the GSK and Pfizer healthcare business. The parties suggested selling the Magnésia Bisurada line, which is the only medicine carried by Pfizer in the market of common antacids in Brazil.
Administrative Proceedings 08700.003244/2019-87
In December 2019, CADE cleared the acquisition of Transvip by Prosegur, under a merger control agreement. Among other commitments, Prosegur undertakes not to acquire control or shareholding in other companies of cash transportation services for the next three years, and commits to report any new acquisition to CADE for the next two years, regardless of the value.
Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.
Yes. CADE considers as Phase II the ordinary cases that are formally declared as complex. In 2019, CADE conducted 13 Phase II analyses.
Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.
Administrative Proceedings 08012.001395/2011-00
In 2019, CADE found two companies guilty of involvement in an international cartel related to the optical disk drives (ODD) market, which brought about adverse effects in Brazil. According to the investigations, the companies and individuals exchanged sensitive competitive information on a regular basis and entered into agreements on prices and their roles in procurement processes carried out by the main buyers of ODD. The cartel, which was operative from 2003 through 2009, led to losses in Brazil for both companies that purchased their products on a global scale (Dell, Hewlett-Packard, Samsung Electronics, Asus, Gateway, Acer and Microsoft) and to final consumers of goods that used these products in their manufacturing process. The fines imposed amounted to 19.5 million reais.
Administrative Proceedings 08012.011980/2008-12
In February 2019, CADE imposed fines amounting to 27.4 million reais to two companies and seventeen individuals after they were found guilty of partaking in an international cartel related to the market of thin-film-transistor liquid-crystal-display (TFT-LCD), which is a component of LCD monitors and notebooks. The cartel had significant effects in Brazil and, according to the investigations carried out, operated from 2001 through 2006. The conspiracy resulted in losses to Brazilian companies that acquired the product from international companies in a global scale, as well as to Brazilian consumers who bought monitors and laptops with this technology, which, at that time, was dependent on importation. The cartel operated through price fixing, market division, sharing of commercially sensitive information and production control, to manipulate both the supply and the price of the product all around the world.
Do you operate an immunity and leniency programme? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?
Yes, CADE has a consolidated leniency programme. Potential applicants should contact CADE’s General Superintendency. Leniency is only available for first-ins. Companies and individuals currently involved or that were involved in a cartel or other antitrust practice are eligible to apply for leniency. A successful applicant must commit to cease the illegal conduct, report and confess the wrongdoing, and cooperate with the investigations by submitting information and documents relevant to the investigation. The successful applicants can obtain full immunity (total leniency) or the reduction by one to two-thirds of the applicable fine (partial leniency). In addition, CADE operates a settlements programme for second-ins, with proportional discounts in fines.
Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?
The Office of the Prosecution Service is the body responsible for the criminal enforcement track.
Are there any plans to reform the competition law?
There are several ongoing discussions regarding changes in the Brazilian competition law.
When did the last review of the law occur?
The last review occurred in November 2011, through the enactment of Law No. 12.529 (which came into force in May 2012).
Do you have a separate economics team? If so, please give details.
Yes. Since the enactment of Law 12.529/2011, the Department of Economic Studies (DEE) is a body within CADE’s structure. DEE's activities are divided in two supplementary areas: advising the Superintendence and the Tribunal in the instruction and analysis of proceedings related to mergers and acquisitions, and anticompetitive practices; and carrying out studies to evaluate the competitive situation in the market and the performance of the agency. The DEE also has a role on competition advocacy, as it conducts market studies on competition issues in different economic sectors and promotes seminars to the internal and external public regarding competition policy and economic defence.
Has the authority conducted a dawn raid?
Yes. In 2019, CADE carried out three dawn raids, two of them in investigations related to bid rigging. In March 2019, CADE launched an operation named Operação Desconstrução, together with the Public Prosecution Services of the State of Rio de Janeiro. The search and seizure operation resulted from the investigation into an alleged cartel in government procurements carried out by government bodies of the city of Rio de Janeiro since 2009, in the construction, public transport and urbanisation markets. The operation involved 22 civil servants, including six of CADE’s officials. In April 2019, CADE launched an operation named Operação Contêiner, in partnership with the Public Prosecution Services of the States of Goiás, Minas Gerais, Rio Grande do Norte, Rio de Janeiro, besides the Federal Prosecution Services at the Court of Accounts of the Federal District, and the Civil Police of the Federal District. A total of 43 search and seizure warrants and nine preventive arrests have been carried out. The search and seizure operation resulted from an investigation into an alleged cartel in government procurements for building modules and assembling basic health units from 2009 through 2013. According to the investigation, the alleged cartel was started in the State of Rio de Janeiro and ended up eventually affecting at least 12 other states. The operation involved more than 350 civil servants, including 28 of CADE’s officials. In October 2019, CADE launched an operation named Operação Pacto, in partnership with the Brazilian Federal Police and the Public Prosecution Services of the State of São Paulo. The search and seizure operation resulted from a joint investigation into an alleged cartel in the market of road transportation of new vehicles. The operation, which involved 26 of CADE’s officials, involved search and seizure warrants being carried out in the States of São Paulo, Espírito Santo, Bahia and Minas Gerais.
Has the authority imposed penalties on officers or directors of companies for offences committed by the company? If yes, please provide the most recent instances.
Yes. CADE’s case law considers whether directors or administrators can be condemned if there is evidence that proves they had knowledge of the offence and did not interrupt the anticompetitive practice when they had the power to do so, even if they did not commit the offence directly. The inclusion and conviction of individuals in cartel proceedings is common and not only for those employees or officers that participate directly in the conduct, but administrators and owners also.
Administrative Proceedings 08700.004617/2013-41
In July 2019, CADE found 11 companies and 42 individuals guilty in the case of the cartel in government procurements for trains and metros in the states of São Paulo, Minas Gerais, Rio Grande do Sul and in the Federal District. The 11 companies were ordered to pay fines totalling 515.6 million reais, and the 42 individuals were ordered to pay fines amounting to 19.5 million reais. Besides fining everyone involved, the Tribunal prohibited Alstom from partaking in government procurement processes, in the fields of activities affected by the illegal practices, for five years. CADE also recommended that the companies Alstom, Bombardier and CAF should not be granted, for a period of five years, instalments of federal taxes due, tax incentives or government subsidies.
Administrative Proceedings 08012.001377/2006-52
In February 2019, CADE found three companies and nine individuals guilty for taking part in a national cartel related to electric components for air-insulated switchgear used in high-voltage power stations. The fines imposed amounted to 56.1 million reais.
Administrative Proceedings 08012.011980/2008-12
In February 2019, CADE imposed fines amounting to 27.4 million reais to two companies and seventeen individuals after they were found guilty of partaking in an international cartel related to the market of thin-film-transistor liquid-crystal-display (TFT-LCD), which is a component of LCD monitors and notebooks.
Administrative Proceedings 08700.010769/2014-64
In April 2019, CADE found twenty-seven fuel stations, two distributors and twelve individuals guilty of cartel formation and other economic crimes related to the distribution and resale of fuels in the metropolitan area of Belo Horizonte. The fines imposed amount to 156.9 million reais.
Administrative Proceedings 08012.004280/2012-40
In October 2019, CADE found four companies and six individuals guilty of forming a cartel to influence government procurements related to outsourced information technology services. The fines imposed amount to 2.2 million reais.
What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?
As per the legal provisions on the matter, mergers and acquisitions related to all economic sectors must be reported to CADE if they involve a company with an annual revenue equal to or greater than 750 million reais in the year prior to the transaction, and another whose annual revenue was equal to or greater than 75 million reais.
Are there any restrictions on investments that involve less than a majority stake in the business?
Yes. A transaction can be approved with restrictions or be rejected, even if it involves the acquisition of minority equity interest. For it to be rejected, it must be shown that the interest can generate anticompetitive effects in the analysed market.
Brazil: from the enforcer's competition economists
Alexandre Barreto de Souza
Email: [email protected]
Alexandre Cordeiro Macedo
Email: [email protected]
Guilherme Mendes Resende
Email: [email protected]
The Brazilian system for the defence of competition (SBDC) is governed by Law No. 12529/2011, which updated the Brazilian legal framework regarding antitrust matters, strengthening the defence of free competition. The SBDC is composed of two institutions: the Administrative Council for Economic Defence (CADE), in charge of antitrust enforcement and competition advocacy, and the Secretariat of Competition Advocacy and Competitiveness (SEAE), which shares with CADE the role of advocacy initiatives.
CADE is the Brazilian competition authority responsible for the investigation of economic crimes and for merger assessment. The authority is currently divided into three main bodies: the General Superintendency, the Administrative Tribunal and the Department of Economic Studies.
The General Superintendency is headed by a general superintendent with the support of two deputies, one of them responsible for merger cases and unilateral conduct and the other one responsible for cartel investigations. This body may approve mergers that do not raise competitive concerns and also give its non-binding opinion to CADE’s Tribunal on those cases that have the potential to harm competition. Moreover, the General Superintendency also conducts investigations associated with anticompetitive practices.
The Administrative Tribunal, on its turn, is composed of a president and six commissioners in charge of:
- judging administrative proceedings of anticompetitive conducts;
- judging merger cases that General Superintendency considered to be rejected, approved with restrictions, approved upon merger control agreements, or that there are no conclusive elements as to its effects on the market;
- requesting merger cases approved by the General Superintendency with no restrictions for further assessment;
- analysing and judging cases in which there was a third-party appeal against the General Superintendency's decision;
- approving cease and desist agreements;
- appreciating preventive measures adopted by the reporting commissioner or by the General Superintendency; and
- elaborating and approving CADE’s internal regulation which regulates the competition authority’s functioning.
At last, the Department of Economic Studies is headed by a chief economist and a deputy chief economist, and is responsible for:
- advising the General Superintendence and the Administrative Tribunal in the instructions and economic analysis of administrative proceedings related to mergers and anticompetitive practices;
- undertaking economic studies to ensure that CADE's decisions are taken on the basis of the most advanced economic techniques;
- conducting sectorial studies to keep CADE updated on the evolution of the competitive dynamics of certain markets;
- proposing and elaborating guides for different proceedings analysed by the Brazilian competition authority; and
- publishing some of its own technical studies related to competition defence.
Questions and answers
How many economists do you employ?
In 2019, CADE had 39 people in its staff that hold a degree in economics.
Do you have a separate economics unit?
Yes. The Department of Economic Studies (DEE) was created in 2009, as an administrative unit subordinated to CADE's Tribunal. With the enactment of Law 12,529/2011, the DEE was formally instituted as one of the bodies that make up CADE, together with the Administrative Tribunal and General Superintendency. As mentioned before, both the Administrative Tribunal and the General Superintendency rely on the DEE’s advice, to ensure the accuracy of decisions rendered by the authority with economic principles and to keep them updated with the most recent economic techniques being applied in competition analysis. The DEE also has a role on competition advocacy, as it conducts market studies on competition issues in different economic sectors and promotes seminars to the internal and external public regarding competition policy and economic defence.
Do you have a chief economist?
Guilherme Mendes Resende has been the chief economist of CADE since June 2016. He has a PhD in regional economics from London School of Economics and Political Science, a master’s degree in economics from Universidade Federal de Minas Gerais, and a bachelor’s degree in economics, law and business administration. He is a researcher from the Institute for Applied Economic Research (IPEA) since 2004, and has extensive experience on competition policy, policy evaluation and regional economics.
The deputy chief economist is Lílian Santos Marques Severino, since May 2020. She holds a bachelor's degree in economics from Universidade Federal de Uberlândia, a master's degree in business economics from Universidade Católica de Brasília, and is currently pursuing a doctorate in economics at Universidade Católica de Brasília. She has worked as technical consultant in the Department of Economic Studies since August 2017, and has experience on competition policy and econometrics.
To whom does the chief economist report?
The chief economist reports to the president and the general superintendent of CADE.
Does the chief economist have the power to hire his or her own staff?
The staff at the DEE is mainly composed of Brazilian civil servants recruited through public contests (ie, they have to take public to join the public service). The chief and deputy chief economists can recruit these civil servants from other bodies of the government to join the DEE’s team. The department also has some positions of trust to which civil servants or non-civil servants can be appointed, and some consultants hired to specific and specialised projects through a project of technical cooperation with the United Nations Development Program.
How many economists have a PhD in industrial economics?
In 2019, CADE had five economists who hold a PhD in economics in its staff.
Does the agency include a specialist economist on every case team? If not, why not?
Not as a rule. In general, a specialist economist from the DEE is appointed to assist the case team if required by the General Superintendence or the Administrative Tribunal, depending on the complexity level of the case and the data analysed. Moreover, the department provides complex and sophisticated analysis by its own initiative, such as market studies, technical opinions and consultancy papers, which may support case team analyses. In addition, there are other economists integrating CADE’s staff that are not directly linked to the DEE. Most of the studies elaborated by the DEE are available at CADE’s website (www.cade.gov.br).
Is the economics unit a ‘second pair of eyes’ during cases – is it one of the agency’s checks and balances? If not, why not?
In some ways. CADE’s DEE gives assistance on many economic issues and, therefore, might influence the investigation or case strategy, as well as preliminary conclusions. On the other hand, the DEE is not an autonomous body within CADE. According to article 18 of Law No. 12,529/2011, the chief economist will be appointed jointly by the general superintendent and the president of the Tribunal, among Brazilians of unblemished reputation and outstanding knowledge in economics.
How much economics work is outsourced? What type of work is outsourced?
The outsourcing of the DEE’s activities happens in specific occasions. First, CADE has general and specific agreements with other institutions. For instance, CADE established a technical cooperation agreement with the Institute for Applied Economic Research, aiming at developing joint initiatives, such as studies and reports about mergers, unilateral conducts, ex post evaluations and mechanisms for the detection and identification of bid-rigging.
Moreover, the DEE hires consultants to work in specific and specialised projects, usually economists, but also statisticians and IT specialists, through a project of technical cooperation with the United Nations Development Program. These consultants work on a range of competition issues, with the coordination and oversight of the DEE staff, who are responsible for selecting the themes and preparing the tenders. The projects relate to several topics such as ex post evaluation of cartel damages, remedies guidelines, competition impacts of antidumping measures, ex post evaluation of merger decisions, theoretical and empirical literature review of industrial organisation and competition economics, elaboration of competition indicators and statistics, application of machine learning and artificial intelligence in competition policy, among others. Usually, consultants are university professors, PhDs or PhD students.