Brazil: Administrative Council for Economic Defence
Since the entry into force of the new Brazilian competition law in 2012, the Administrative Council for Economic Defence (CADE) is experiencing steady and significant institutional development, as evidenced in the initiatives and results in each area of its core competencies. In 2018, CADE maintained its intensive work on providing anti-cartel enforcement and deterrence, as well as preventing and repressing violations against the economic order. CADE has also worked intensively to provide effectiveness, normative guidance, transparency and predictability to the Brazilian Competition Defence System, based on institutional strengthening, cooperation with government agencies and civil society, and improvement of international cooperation.
The adoption of the pre-merger review system in 2012, acknowledged by the Brazilian National School of Public Administration as a major innovation within the Federal Public Management, has led to significant improvement on the appraisal of mergers within the authority. In 2018, the average time for issuing a decision on merger cases was 27 days despite the increase in the number of complex mergers under analysis. Fast-track mergers, which account for almost 80 per cent of all merger cases reviewed by CADE, were decided in an average of 13 days. Compared with 2017, the average time for issuing a decision was reduced by 10 per cent for regular merger cases and 15 per cent for fast-track analysis. This efficient assessment helps the authority to uphold the quantitative balance between new notifications and the conclusion of undergoing assessments. Even with a significant increase in the number of mega-mergers assessed, the average time for reviewing merger cases remained at an excellent standard according to an international comparison and the opinion of key stakeholders.
In 2018, CADE assessed 404 merger cases. Out of this total, 384 were approved without restrictions, six were approved with remedies, nine were filed as non-admissable (out of scope), four were filed and one merger was blocked. In the same period, 405 new merger cases were notified. 1 The authority assessed major worldwide mergers such as Bayer/Monsanto, Essilor/Luxottica, Praxair/Linde and Suzano/Fibria. Moreover, there were some significant national transactions whose clearance was conditioned to the signature of a merger control agreement, including Petrobras/Petrotemex (purified terephthalic acid market), Votorantim Siderurgia/ArcelorMittal Brasil (steel market), WEG/TGM (electric generators, steam turbines and turbo reducers market) and Itaú Unibanco/XP Investimentos (banking). In addition, CADE’s Administrative Tribunal blocked the acquisition of Liquigás by Ultragaz due to possible abuse of market power in the liquefied petroleum gas market.
The efficiencies achieved with the pre-merger review system have made resources available to renewed efforts in the field of anticompetitive practices. At the same time, CADE has also managed to decrease the length of anticompetitive conduct-related proceedings. In 2014, only 49 per cent of the investigations in the General Superintendence were one year old and 25 per cent of investigations were more than five years old. By the end of 2018, 30 per cent of the investigations were up to one year old and almost 60 per cent were up to two years old. In contrast, around 11 per cent were over five years old as CADE’s efforts to reduce the backlog of lengthy investigations continue. 2
Intense cartel enforcement activity was also seen at CADE in 2018, with a special focus on bid-rigging and the role of its leniency programme in the strengthening of competition enforcement activities. The authority has continued to take a significant role in the Car Wash operation, which is investigating the largest corruption and cartel scheme in Brazilian history. In this context, CADE signed 16 cease-and-desist agreements related to six cartel investigations, which add up to 897.9 million reais in pecuniary contribution.
The settlement programme (cease-and-desist agreements) was also particularly relevant to deter and disclose anticompetitive conduct. These agreements have been particularly employed by CADE as a means of dealing with anticompetitive practices and collecting evidence, in accordance with international best practices. The agreements are also used to foster the application of CADE’s decisions, avoiding further disputes within the judiciary. In 2018, CADE signed 60 cease-and-desist agreements with companies from different economic segments, as opposed to the mere five agreements signed in 2012. Therefore, the pecuniary contributions resulting from settlements totalled almost 1.33 billion reais. These outcomes reflect a mutual openness to dialogue and negotiation, as well as this instrument’s capacity to contribute to more efficient and quicker enforcement of anticompetitive practices.
The success of CADE’s settlement programme is also due to its complementarity with the leniency programme, which provides immunity only for first-in applicants. In 2018, CADE’s leniency programme completed 15 years of a successful experience, receiving its 390th leniency request. 3 Over the year, CADE signed six new leniency agreements, four addenda to previous leniency agreements and two leniency plus agreements. Besides, during the year, CADE started eight new cartel investigations based on leniency agreements. These achievements demonstrate that the Brazilian antitrust leniency programme has been consolidated and reached a greater level of maturity. The results of the leniency programme are also related to the importance of the Car Wash operation and the cartel cases detected under it. In this sphere, CADE continues to collaborate closely with the Federal Prosecution Service – which handles criminal cartel enforcement in Brazil – to simultaneously negotiate leniency agreements and ensure that applicants of a leniency agreement in the administrative sphere are not exposed in the criminal sphere.
To maintain the good results of the programme, in August 2018, CADE updated the guidelines on its leniency programme. Although the document is not binding, a significant part of its content stems directly from Law No. 12,529/2011 and CADE’s Internal Regulation. The guidelines represent a milestone in the history of the leniency programme in Brazil, reflecting CADE’s experience with leniency agreements negotiations based on the past 15 years and in line with international best practices.
Moreover, in October 2018, CADE issued the first edition of its Guidelines for Antitrust Remedies. The document consolidates the best practices and procedures usually adopted by CADE in the design, implementation and monitoring of antirust remedies, and provides guidelines for the negotiation of antitrust remedies in Brazil. The Guidelines offer practical reference to merger and acquisition applicants, interested third parties, public servants and society, to improve predictability and transparency regarding CADE’s performance, facilitating doing business in Brazil.
CADE also issued, in December 2018, a preliminary version of the guidelines for submitting data to its Department of Economic Studies. The document aims at guiding applicants, plaintiffs, defendants, interested third parties or any other market participants about the standard of information submission requested by CADE’s Department of Economic Studies for the accomplishment of studies and economic opinions, to improve and speed up the analysis process.
Since violations against the economic order are frequently related to crimes in other legal spheres, addressing CADE’s responsibilities entails close cooperation with other government bodies and with civil society to prevent, detect and investigate wrongdoings. In this sense, CADE has actively pursued stronger ties with other institutions. These efforts contribute to the coordination and improvement of the authority’s investigations, especially those encompassing both antitrust and anti-corruption matters. In this realm, CADE is one of the members of the working group established by the Brazilian Federal Public Prosecutor’s Office, as part of the Car Wash operation, which aims at developing new methodologies, routines and techniques for the investigation of illicit acts identified during the Car Wash investigations.
In addition, in 2018, CADE acted in several working groups with other government institutions that are important to the promotion of competition law, debating important issues such as the financial market and the fuel sector. As an example, CADE established a partnership with the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP) to analyse the structure of the fuel market, and evaluate the implementation of measures proposed by CADE to rethink the fuel sector and the possibility of the permanent adoption of the exceptional regulatory measures presented by ANP. The promotion of competition as an instrument to increase competitiveness and innovation in the Brazilian economy is also in the scope of the group.
Moreover, in 2018, CADE established several technical cooperation agreements with other institutions of the Brazilian public administration. For instance, the authority has signed agreements with:
- the Central Bank;
- the National Institute of Industrial Property;
- the Ministry of Economy;
- the regional public prosecution offices;
- the Federal Court of Auditors; and
- the Court of Accounts of the State of São Paulo
In respect of cartel practices, special attention has been granted to public bids. Due to the importance of such procedures, CADE has developed a screening project – a platform that allows the integration of large public procurement databases by applying data mining tools and economic filters capable of identifying and measuring the probability of occurrence of cartels in public bids. Data analysis has played an important role in CADE’s investigations, evidence gathering and dawn raids. Furthermore, the screening project’s activities have already allowed the opening of other investigations in public procurement. This is part of a strong policy carried out by CADE’s General Superintendence over the past few years, which seeks to develop investigative tools capable of detecting cartels and other anticompetitive conduct without an exclusive dependence on leniency instruments. This includes continuous investments in intelligence tools and investigative techniques.
The results of all these initiatives towards bolstering competition enforcement are reflected not only in the relevant decisions that CADE’s Tribunal issued in 2018 but also in the high-profile, complex cartel investigations the agency initiated and completed this year. As one of the most important examples regarding this matter, the investigations within the scope of the Car Wash operation evidence the challenges and responsibilities that CADE is addressing when dealing with one of the largest investigations ever held by Brazilian authorities, comprising a sophisticated scheme based on the intersection of cartels in public bids and on corruption within the highest political levels in Brazil.
Since the beginning of CADE’s participation within the scope of the investigations in 2015, the authority has managed to act efficiently without neglecting its other competencies, despite the complexity of the case and the resources required by it. In the context of such efforts, leniency plus agreements have proven their efficiency. According to this legal instrument, a company involved in a cartel can inform CADE of a second cartel – about which the authority had no prior knowledge – to reduce the penalties in the first investigation. As previously mentioned, by signing leniency plus agreements with individuals and companies involved in the scheme, CADE is playing an important role in the investigations related to public bids in Petrobras and in other state companies, unveiling cartels and supporting domestic authorities. In 2018, CADE signed 16 cease-and-desist agreements from six cartel investigations related to the Car Wash operation, which established the payment of around 897.9 million reais in pecuniary contributions. The settlements integrate CADE’s recent efforts to align the repression of anticompetitive practices with the work of different bodies from the Brazilian public administration.
Other important examples of anti-cartel enforcement are CADE’s decisions on important markets. In 2018, CADE condemned two international cartels in the market of manufacturing and selling of cathode-ray tubes for the colour television image market. After the investigation, the antitrust authority concluded that the manufacturers of televisions’ colour picture tubes and computers’ colour display tubes had colluded, aiming to accomplish anticompetitive practices that caused harm to the Brazilian market for over a decade. In the same year, CADE’s Administrative Tribunal also condemned 18 companies, 39 individuals and three union entities for a cartel in the sea salt market. The investigation started in 2013, after a dawn raid operation in offices of saline companies and representative entities of the sector carried out in 2012. The documents collected and the evidence produced during the proceedings proved the practice of conduct to fix prices, control the supply of the product and share the market between them. The agreements between producers and refineries affected the entire production chain and lasted at least from 1992 to 2012.
Also in 2018, CADE’s Administrative Tribunal issued nearly 306 million reais in fines to parties for forming a flexible packaging cartel. Eight companies, eight individuals and two trade associations colluded to set minimum prices for raw materials and specific services between 2001 and 2006. The companies were collectively fined 298.3 million reais; the individuals together were fined 2.3 million reais; and the two associations fined 5.2 million reais. The investigation pointed out the existence of agreements signed between the companies, with the help of the associations, for the standardisation of prices and commercial strategies. Another important case was related to electric components. CADE condemned Toshiba Corporation and Mitsubishi Electric Corporation for participation in the international cartel of electric-energy gas-insulated switchgear (GIS). The two companies must pay fines totalling approximately 4.9 million reais. The investigations started in 2006, following a leniency agreement between the Brazilian government and the ABB group, which provided evidence on the existence of the collusion. The cartel members coordinated the supply of GIS projects on an international basis from 1988 to 2004, following agreed rules and principles to divide territories, and fix market shares and price.
In 2018, CADE decided to boost the investigation of unilateral conduct cases. There were 30 new investigations related to unilateral conduct and four proceedings judged by the Administrative Tribunal. For instance, CADE condemned Unilever for preventing competitors from accessing distribution channels in the ice cream market and established five settlements with institutions from the financial sector to prevent anticompetitive practices. CADE also condemned the companies Rodrimar and Tecon Rio Grande for abuse of dominance, consistent with charging abusive fees in port services. The companies are responsible for the loading and unloading of ships, and hold the monopoly of the handling and logistics of goods unloaded in their terminals. They also operate in the storage of containers, which keeps the products safe until they are ready for exportation or importation. In this market, companies compete with bonded warehouses – places inside or outside the primary zone of the port that also offer storage services. Rodrimar charged the bonded warehouses the fee for the segregation of import containers destined to other customs areas, known as Terminal Handling Charge 2, besides the usual movement fee known as box rate. Tecon, in turn, charged the ‘Faithful Deposit’ fee, to be paid by the customs office for imported merchandise, or products returning from abroad and unloaded in their terminal, alongside the box rate fee. CADE concluded that these practices were a violation of competition law and imposed on the companies fines totalling 5.7 million reais.
In addition to domestic cooperation, the cooperation between CADE and international institutions is also a relevant asset in the antitrust enforcement. The exchange of experiences has been gradually intensified over the years and is now part of the routine of CADE’s staff. CADE maintains a close dialogue with several foreign jurisdictions to make their work converge for the purpose of more effective competition enforcement, regarding not only the resolution of anticompetitive cases but also mergers assessment. In this context, CADE signed two new international cooperation agreements in 2018, with Paraguay and Costa Rica. Counting these two agreements, CADE had valid cooperation agreements with 13 jurisdictions in 2018: Argentina, Canada, Chile, China, Costa Rica, the European Union, Japan, Mexico, Paraguay, Portugal, South Africa, Russia and the United States. In addition, in 2018, CADE cooperated with 12 foreign competition authorities regarding nine merger cases and 19 benchmarking operations.
CADE is also part of relevant international competition forums – such as the Organisation for Economic Co-operation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD), the International Competition Network (ICN) and the BRICS group on competition law – with an active and fruitful participation, which contributes to the development of best practices within the international competition community.
Regarding the OECD, the dialogues for the admission of Brazil to its Competition Committee began in December 2017. Through a coordinated action with the Ministry of Foreign Affairs, CADE formalised the request during the Global Forum on Competition held by the OECD that year, in Paris. In March 2018, Cade received positive feedback on the request and underwent a peer review process, which encompassed a wide and meticulous evaluation of Brazilian competition policy, legislation and practices as well as its compliance with OECD standards. In November 2018, CADE’s delegation presented the report resulting from the peer review process during the 130th Meeting of the OECD Competition Committee, in Paris. The OECD recognised the important advances of the agency since the enactment of Law 12,529/2011 and the wide implementation of the recommendations of the previous peer reviews conducted in 2005 and 2010. The OECD report also identified CADE as one of the main antitrust agencies around the world and considered the agency one of the most efficient public bodies in Brazil. In February 2019, CADE was approved to join the Competition Committee as an associate member, consolidating more than 20 years of close cooperation with the Competition Committee.
With respect to UNCTAD, in 2018, CADE became a member of the Competition and Consumer Protection in Latin America Programme (COMPAL). COMPAL is an UNCTAD programme that aims to provide capacity building and institutional strengthening of competition and consumer protection matters to beneficiary countries in Latin America, to implement competition policies in their market and to improve consumer welfare, thus contributing to the inclusive and sustainable development of its members. With the accession, CADE began to offer technical training in competition matters to the other Latin America countries.
Moreover, in October 2018, CADE hosted the 8th Annual Meeting of the Working Group on Trade and Competition of Latin America and the Caribbean, promoted in partnership by CADE, the Latin American and Caribbean Economic System and UNCTAD. The meeting gathered 100 participants, representing more than 20 countries from Latin America and the Caribbean. The event had discussions regarding competitive and economic issues of the maritime transport, infrastructure and port services in those regions. It was a great opportunity to strengthen the partnership between regional counterparts.
Regarding the ICN, CADE has been a member of the Steering Group since 2005 and co-chair of the Cartel Working Group since 2017. In this context, CADE shares its experience with the leniency programme and contributes to overcome inherent challenges in the prevention, detection and fight against cartels. Moreover, in 2018, CADE was chosen to organise and host the 2019 ICN Cartel Workshop.
With respect to the BRICS group on competition law, CADE has chaired, since 2017, the Working Group on digital economy and conducts a strong international benchmarking agenda in this area, aiming to better design and adapt competition law for the digital era.
CADE’s successful international engagement has been acknowledged on many occasions. In 2018, Global Competition Review appointed CADE as the best antitrust agency in the Americas for the fourth time. In addition, CADE won the 2018 Antitrust Writing Awards from Concurrences in the category of ‘Most Innovative Soft Law related to concerted practices’ with its Guidelines on Dawn Raid Proceedings.
Advocacy and transparency
Apart from domestic and international cooperation as a means to disseminate competition culture, CADE has spared no efforts to provide greater guidance on the benefits of competition. The publication of guidelines on gun-jumping, competition compliance, cease-and-desist agreements, leniency programmes and horizontal mergers is evidence of that. The guidelines not only reinforce transparency and legal certainty regarding the authority’s interpretation and understanding in competition enforcement but also contribute to the engagement of the business and legal communities in the development of competition policy in Brazil, since these documents are put into public consultations, allowing citizens, companies and civil society organisations to play an active role in the development of the guidelines in question.
CADE’s above-mentioned guidelines are also important in regard to institutional memory. The consolidation of years of experience in public documents largely discussed with the legal community, the business sector and society in general, can work as benchmarks and an institutional repository for best practices and policies.
Following the same logic of its guidelines, CADE also released a series of studies conducted by the Department of Economic Studies on its website. The studies focus on contemporary issues in competition economics. In 2018, there were some relevant publications, such as market studies of mergers in the markets of health plans, hospitals and diagnostic medicine; market studies of mergers in the container shipping market; the competition effects of the sharing economy in Brazil with regard to the impact of Uber’s entry into the cab-hailing app market from 2014 to 2016; and the report on pro-competition measures in the fuel sector. The Department of Economic Studies also issued 11 formal advocacy opinions to governments, regulators and legislators about several themes – nine related to the fuel market, one related to sea transport and one related to the steel market. Furthermore, in 2018, CADE organised 11 advocacy events (eight seminars and three observatories) regarding competition policy, cartels, digital economy and commercial defence.
CADE’s Journal of Competition Defense is an important communication tool bridging the antitrust authority and the academy, and enabling close interaction between theory and practice regarding relevant topics in competition policy and enforcement in Brazil. Since 2017, the journal has been classified as ‘Qualis B1’ by the Ministry of Education’s ratings, the third tier of an eight-level national ranking, which places the journal among the 60 best journals in the country and the most outstanding in the competition area.
CADE has also organised a series of domestic events, targeting different audiences and addressing different matters. As an example, in 2018, CADE promoted an edition of the Global Seminar Series, aimed to discuss digital platforms in partnership with the American Bar Association. On the same line, one of the agency’s most remarkable advocacy initiatives, its national exchange programme has recently reached 20 years since the first initiative was launched in 1999. The authority, in partnership with some of its stakeholders, offers undergraduate and postgraduate students the opportunity to experience the day-to-day work within the antitrust agency, and provides courses on competition-related subjects. Since the beginning of the project, more than 400 students from all over Brazil have taken part in the initiative. Given its wide outreach capacity, this project is a fundamental tool in spreading competition.
In conclusion, CADE’s institutional improvements have enabled the authority to enhance the quality of its services. There is a wide variety of objectives for the following years, which include assessing the effects of the digital economy on competition, strengthening cartel enforcement with an emphasis on public bids, continuing the good performance related to merger assessment and working on several fronts to foster competition. The challenges CADE faces today are those of a newly mature authority, which is striving to maintain the level of its achievements while aiming to constantly improve in all areas of its activities and in its relationship with stakeholders, with a view to promoting a strong and consolidated competition culture in Brazil through transparency, dialogue, efficiency and effective enforcement. In 2018, CADE was awarded ‘Agency of the Year in the Americas’ by the Global Competition Review (GCR) and the rating as a four-star antitrust authority, according to GCR Rating Enforcement, good signs that CADE is following the right path.
1 CADE, 2018 Annual Report, available at www.cade.gov.br/acesso-a-informacao/publicacoes-institucionais/anuario.pdf.
3 Although the antitrust leniency agreement was established in the Brazilian legal system in 2000, the first leniency agreement was signed in 2003.