Brazil: Private Antitrust Enforcement

Introduction

Over the past 10 years, Brazil has caught the attention of the international antitrust community, mainly due to developments in the area of public cartel enforcement. Brazilian antitrust authorities¹ have dramatically increased the number of investigations initiated, refined their investigation techniques and implemented a leniency programme. Investigations have focused on both domestic and international behaviour and foreign companies have often been the target of many of these investigations. The level of the fines imposed has been escalating and criminal prosecution has become a reality to individuals supposedly involved in cartel behaviour². The results of this approach are constantly publicised and the number of investigations that have been initiated in the past few years confirms the public enforcement trend in Brazil.

In view of the increase in public antitrust enforcement, it seems appropriate to ask whether private antitrust enforcement is a possibility under the existing legal framework. Moreover, it seems adequate to ask if and how this possibility has been explored in Brazil, following the developments in public enforcement.

The purpose of this article is to make a few introductory remarks on the state of private antitrust enforcement in Brazil and to provide a brief overview of issues that have arisen in the context of the cases filed so far seeking damages or other types of relief from breaches of antitrust law.

Overview of legal framework

Law No. 8,884/94³ (the Brazilian Antitrust Act) contains a specific provision that expressly sets out that injured parties may file actions in courts seeking the cessation of practices that may constitute violations of antitrust rules, as well as compensation for damages resulting from these violations.⁴

Parties may also seek enforcement of antitrust rules based on legal provisions contained in other legal statutes, although these provisions are not specifically addressed to enforcement of competition law and are applicable to other areas of the law (eg, provisions regarding general civil liability). Thus, although there is a specific provision in the Brazilian Antitrust Act with respect to the possibility of filing private actions seeking damages and other types of relief, it could be argued that provisions contained in other statutes would already provide sufficient grounds for the filing of these actions.

In addition to the provisions foreseen in these legal statutes, the possibility of private antitrust enforcement is also indirectly assured under the general constitutional rule according to which no harm or threats to rights will be excluded from examination by the courts.⁵

Mechanisms for seeking private enforcement: individual and collective actions

Private antitrust enforcement in Brazil may be sought through different procedural mechanisms.

There are two types of actions that may be brought seeking private enforcement of antitrust rules: individual actions and collective actions.

Individual actions are governed by general civil procedure rules contained in the Brazilian Civil Procedure Code⁶. Collective actions are governed by the statutes that consolidate the Brazilian collective redress system, namely Law No. 7347/85 (Public Civil Action Law) and Law No. 8078/90 (Consumer Defense Code).⁷

Among other aspects, a collective action differs from an individual action because the rights pursued in a collective action should have a collective nature. Rights deriving from breaches of competition rules may have a collective dimension, which in turn means that collective actions may be an adequate way of seeking enforcement of competition rules. In Brazil, collective actions are very usual in consumer and environmental disputes, but are still rare with respect to competition law issues.

Standing to file

Standing to file varies depending on whether the action is an individual or a collective action.

In individual actions, in principle, any injured party has standing to bring a claim for damages. This means that, in principle, competitors, direct purchasers and indirect purchasers have standing to file individual actions, in case they are able to show they have been injured by competition law violations - and are able to show the requirements of civil liability, mentioned below.

As to collective actions, the following parties have standing to file: the Public Attorney’s Office (Ministério Público), the Public Defenders’ Office (Defensoria Pública), the Union (Federal Government), States, municipalities, public companies and associations.⁸ Under the Brazilian collective redress system, an individual does not have standing to file collective actions.

General civil liability requirements

The main circumstances under which rights to damages may arise are set out under the Brazilian Civil Code;⁹ in particular under the provisions dealing with civil liability. These requirements should also apply in cases where plaintiffs ask for damages resulting from breaches of competition law.

Broadly, for rights to damages to arise, the following requirements must be met:

• the occurrence of an action or omission which is considered an illicit act;
• the occurrence of damages caused to the victim as a result of the violator’s action or omission; and
• the causal connection between the violator’s action and the damages.

The main types of damages that may be sought under the Brazilian system of civil liability are compensatory damages. Compensatory damages allow the plaintiff to claim monetary compensation for the losses deriving from a violation of the law.

Punitive damages are not expressly foreseen in Brazilian statutes, but plaintiffs have frequently requested the award of such damages as a way to penalise defendants’ conduct. Brazil does not have a consolidated position on punitive damages yet.

Moral damages may also be compensated and are expressly foreseen under the Brazilian Civil Code. Moral damages are usually granted in civil cases to individuals who have their most personal rights violated (direitos personalíssimos) - or, as used in civil courts decisions, when the damage causes actual pain and suffering to the victim.

Interestingly, collective moral damages have been claimed in some collective actions for damages dealing with antitrust law. Since moral damages are connected to individuals’ rights, the main discussion is whether they would be applied to a collectivity. For this reason, collective moral damages are still very controversial in Brazil.¹⁰ Nevertheless, in at least two cases examined, the Brazilian courts have granted collective moral damages in collective actions for damages relating to cartel behaviour.¹¹

Brazilian courts have adopted different theories with respect to the causal connection between the violator’s action and the damages. The Brazilian Civil Code seems to adopt the direct and immediate causation theory, according to which damages must derive directly and immediately from the violator’s act. However, Brazilian courts have on occasions applied the so-called ‘adequate causation theory’, under which any among the various elements preceding the damage that could have produced the damaging result could lead to the establishment of causation. There is still some confusion in court decisions as to the prevailing causation theory to be applied in general civil liability cases.

Overview of cases

General

There is no centralised or organised database containing information on cases involving private antitrust enforcement in Brazil, nor are there official statistics on the number of cases filed to date that could be classified as such. Therefore, it is still very difficult to have a clear picture of the state of private antitrust enforcement in Brazil. However, based on an analysis of publicly available information, it is possible to say that few cases have been filed so far, although the number of cases has been increasing in the past few years.¹²

In reviewing publicly available information, one may find individual and collective actions for damages, as well as cases in which parties base their defences on antitrust grounds (eg, where antitrust rules are used as a justification for not complying with a contract). The focus of this article, however, is on cases in which parties seek some type of judicial relief related to the breach of competition rules, including damages or cease orders or both.

Most cases filed to date refer to collective actions that have been filed by the Public Prosecutor’s Office (Ministério Público) as a representative of individuals or groups of individuals who have supposedly been harmed as a result of breaches of competition rules. Moreover, most of these cases refer to claims for damages resulting from cartel behaviour.

So far, the courts have rendered final decisions in only a few cases. Therefore, it is still difficult to evaluate how courts tend to decide these cases.

Usual claims

The most usual claims made in the existing private enforcement cases are requests that the defendant or defendants cease a certain behaviour (with injunctive relief sometimes being sought), requests that the defendant or defendants perform a certain action (with injunctive relief sometimes being sought) and claims for compensation for damages. Some examples of cases where these requests or claims have been made are described below.

Plaintiffs have sometimes requested the courts to order the defendants to cease the violation of the competition rules, eg, to refrain from charging ‘cartel prices’. In at least two cases decided by the courts of the state of Rio Grande do Sul, the courts granted injunctive measures ordering the defendants to stop from engaging in certain behaviour.¹³ Both cases involved price fixing in the resale of gasoline. In one of these cases, the court granted an injunctive measure ordering the defendants to immediately cease the violations of the competition rules and, in particular, ordering the defendants to refrain from fixing the prices of gasoline and to present evidence to the court of the prices practised.

In 2005, the Superior Court of Justice (Superior Tribunal de Justiça) rendered a decision that confirmed a previous decision rendered by a court in the state of Rio Grande do Sul that had ordered the defendant to undertake a certain behaviour. The Public Attorney’s Office had filed a collective action against an association of car transporters and a car manufacturer, requesting, among other issues, that the car manufacturer allowed local independent transporters to transport cars produced by such manufacturer. The car manufacturer had opened a new manufacturing plant in the region but continued to use transportation services offered solely by transporters affiliated with the association. The court granted an injunctive relief, ordering the car manufacturer to allow independent transporters to transport its cars.¹⁴

In most cases examined, the plaintiffs asked for payment of damages. However, there have only been a few decisions that have decided the merits of cases in private actions for damages and, therefore, it is still difficult to have an idea of the methodology and parameters that courts may use in calculating damages in these cases. In addition, many of the cases refer to collective actions and, under applicable rules, the request for payment of damages in these collective actions results in a generic decision, which means that the actual amount of damages is to be assessed in a second phase (enforcement phase). At the time of writing, none of the collective actions had reached the second phase.

Interaction between private antitrust enforcement and decisions by the Brazilian antitrust authorities (public enforcement)

The analysis of existing cases shows that most private actions were filed when the facts that originated them were still being investigated by the antitrust authorities. In fact, there is no need to wait for a decision by the antitrust authorities to file claims seeking compensation for violations of competition law. This understanding is based on the constitutional rule according to which no harm or threat to rights would escape the examination of the courts. Therefore, there would be no need to wait for a decision by the competition authorities for a court case to be filed.

It is not even necessary for an investigation by the antitrust authorities to exist for a private action to be filed. At least two known cases were initiated by the Public Prosecutor’s Office where the relevant facts were not being investigated by the Brazilian antitrust authorities.

Still, the outcomes of court cases are not necessarily convergent with findings of the antitrust authorities. This is because the investigation by the antitrust authorities and the court cases run broadly independently from each other.

Findings of the antitrust authorities have only a relative impact on the outcome of the court cases. For example, the fact that a cartel case has been decided against the defendants by the Brazilian antitrust authorities does not mean that a court case against the defendants based on similar or identical facts will result in an award for damages to be paid by the defendants. A decision or statement by an antitrust authority may be used as an element that may indicate the existence of an infringement from which civil liability may arise; however, it may not be sufficient to establish civil liability. Statements by the Brazilian antitrust authorities may be taken to court, but the legal evaluation carried out by the Brazilian antitrust authorities is not considered as binding on the court’s decision. The courts will make their own assessment of the facts brought to their examination.

The possibility of outcomes of court cases being different from the findings of the antitrust authorities may be explained, among other aspects, by the different standards of liability that may apply in administrative investigations (public enforcement) and in court cases (private enforcement). Basically, the investigations conducted by the Brazilian antitrust authorities evaluate whether or not an illicit administrative act has occurred. The Brazilian Antitrust Act sets out that any act in any way intended or otherwise able to produce anti-competitive effects, even if any such effects are not achieved, shall be deemed a violation of the economic order, irrespective of guilt. Thus, it can be argued that liability assessed by the antitrust authorities does not require the conditions of liability foreseen for general civil liability, such as evidence of occurrence of damages actions and guilt. However, the discussion as to the different standards of liability has not yet been adequately addressed by legal writings or by the courts.

Final remarks

In view of the relatively small number of private antitrust actions in Brazil, many issues that are the object of controversy and discussion elsewhere have not yet been addressed by Brazilian courts and are only now beginning to arise in the ongoing cases.

It is fair to say that there is still a general lack of awareness in Brazil with respect to the possibility of private antitrust enforcement, which partially explains why only a few private antitrust cases have been filed so far. In addition, the degree of uncertainty as to the outcome of the cases and the length of court proceedings in Brazil in general does not create an incentive for parties to file these types of cases.

At present, it is not certain that private claims will follow from every public investigation initiated by the Brazilian antitrust authorities. However, as the existing private cases evolve and courts start rendering decisions on their merits, this scenario may gradually change. As a result, private enforcement may become an additional concern for companies facing investigations for breaches of antitrust law in Brazil.

Notes

1

There are three agencies primarily responsible for the enforcement of antitrust law in Brazil, namely the Secretariat of Economic Monitoring (Secretaria de Acompanhamento Econômico - SEAE) of the Ministry of Finance, the Secretariat of Economic Law (Secretaria de Direito Econômico - SDE) of the Ministry of Justice and the Administrative Council for Economic Defense (Conselho Admistrativo de Defesa Econômica - CADE).

2

Cartel behaviour in Brazil may be considered a crime under Law No. 8,137, dated 27 December 1990, which refers to the crimes against the economic order.

3

The main statute governing antitrust law in Brazil is Law No. 8,884/94, dated 11 June 1994.

4

According to article 29: ‘Injured parties, by themselves or by those who have standing under article 82 of Law # 8,708, of September 11, 1990, may file actions in courts to defend their individual or individual homogeneous rights, seek the cessation of practices that constitute a violation of the economic order, as well as the compensation for losses and damages suffered, regardless of the administrative proceedings, which will not be suspended as a result of the filing of the action.’

5

Article 5, item XXXV, of the Brazilian Federal Constitution, states that ‘the law shall not exclude from the courts any harm or threat to rights’.

6

Law No. 5,869 of 11 January 1973.

7

It should be noted that the provisions of the Consumer Defense Code relating to class actions are applicable to other areas of the law, and not only to consumer disputes.

8

According to Law No. 7,347/85, the requirements for an association to file a class action are:

• the institution of the association according to the law;
• the association must exist for at least one year before filing the claim; and
• the purpose of the lawsuit must be included in the objectives of the association.

9

Law No. 10,406 of 10 January 2002.

10

The superior courts in Brazil tend to grant collective moral damages in employment claims and have traditionally tended not to grant them in civil litigation. The examination of recent superior courts decisions, however, indicates that this approach is beginning to be set aside and collective moral damages are being granted in a greater number of cases.

11

See: decision rendered by the 3rd Chamber of the State Court of Rio Grande do Sul on 12 July 2007, appeal No. 70018714857; and decision rendered by the 2nd Civil Court of Santa Maria, State of Rio Grande do Sul, on 28 December 2010, Public Civil Action No. 027/1.05.0004158-2.

12

Based on the authors’ own research on existing cases, it is estimated that there have been between 15 and 20 cases filed so far that deal with private antitrust enforcement.

13

See: decision rendered by the 3rd Chamber of the State Court of Rio Grande do Sul on 12 July 2007, appeal No. 70018714857; and decision rendered by the 2nd Civil Court of Santa Maria, State of Rio Grande do Sul, on 28 December 2010, Public Civil Action No. 027/1.05.0004158-2.

14

Decision rendered by the 1st Chamber of the Superior Court of Justice on 6 December 2005, appeal No. 677585/RS.