The Administrative Council for Economic Defense – CADE is the Brazilian Antitrust Authority in charge of investigating and punishing anticompetitive conducts, including conducts carried out abroad if they may produce effects in Brazil. Article 2 of the Brazilian Antitrust Law (Law N. 12,529/2011) establishes that its enforcement is not limited to conducts performed within the national territory, but it also includes conducts performed abroad that may produce effects in Brazil, even if such effects are not achieved.1
CADE has developed an effects theory when analyzing international conducts that may have effects in Brazil, particularly international cartels. This chapter provides an overview of the relevant decisions in which CADE established this cause-effect connection between conducts abroad and their possible effects in the Brazilian markets.
2. Cade's jurisdiction to investigate conducts abroad and the effects Theory
Article 2 of the Brazilian Antitrust Law states that its application is not restricted to anticompetitive conducts performed within the national territory, and expressly extends its applicability to conducts carried out abroad that may produce effects in Brazil. Therefore, the Brazilian Antitrust Law adopted an effect-based approach, specifically providing for its extraterritorial applicability to conducts performed abroad that may have at least the potential of producing effects in the national territory. In order to ascertain its jurisdiction to investigate foreign conducts and to successfully prosecute and convict foreign violators, CADE must demonstrate that the conduct under investigation could have at least the potential of producing effects in Brazil.
CADE has developed this effect-based approach mostly in international cartel cases, but the same rationale may also be extended to unilateral conducts performed abroad that may have effects in Brazil. According to CADE's case law, international cartels may be classified as follows from the perspective of their possible effects in Brazil: (i) international cartels with direct effects in Brazil, where the cartel members had direct sales (i.e. export sales) in Brazil that were affected by the collusion; (ii) international cartels with indirect effects in Brazil, where the cartel members did not have direct sales in Brazil, but final products manufactured based on inputs supplied by the cartel members elsewhere and affected by the collusion ended up exported to Brazil; (iii) international cartels for the allocation of markets that include Brazil, where there is evidence that Brazil was also covered by the market allocation agreement, and (iv) international cartels with no effects in Brazil, where there is no evidence that the cartel produced or could produce effect in Brazil.
3. Cade's caselaw on international cartels investigations in Brazil
Until 2018, CADE analyzed over 25 cases involving allegations of international cartels.2 The decision on the Vitamins Cartel Case,3 in 2007, is considered the leading case on this matter in Brazil and paved the way for the investigation of other international cartels by CADE under the more efficient framework established by Law N. 12,529/11. The Brazilian investigation into this cartel started after the Brazilian authorities became aware of leniency and settlement agreements executed with foreign antitrust authorities, and of decisions rendered abroad. In its decision in this case, CADE analyzed many factors to verify the possible effects caused in Brazil and ultimately concluded that there was sufficient evidence that the cartel had effects in this country, because: i) the imported goods represented almost all of the Brazilian vitamins market and the defendants were responsible for supplying a significant amount of vitamins to Brazil; ii) the defendants' market shares in Brazil were almost identical to the "international budget" that they had divided among themselves in their anticompetitive agreement; and iii) it would not be logical for an international cartel for the allocation of markets, including the Latin American market, to exclude Brazil in the market division.
The Vitamins Cartel Case's decision established the standard approach for the assessment of effects in Brazil that would be followed by CADE in the next international cartel investigations, since most of the international cartel cases decided by CADE involved situations in which the defendants had direct sales to Brazil through exports. This was the case in the Air Cargo Cartel Case4, in which CADE concluded that the cartel agreed to fix prices and dates for the implementation of a fuel surcharge for international air cargo transportation worldwide. CADE considered that the fact that the companies involved in the cartel controlled close to 60% of the Brazilian air cargo market in the period under investigation was a strong evidence that their agreement abroad affected the national territory.
On the other hand, the analysis of international cartels that could have indirect effects in the national territory has been proving to be much more burdensome to CADE than those where defendants had direct export sales to Brazil. These situations required CADE to adopt a broader interpretation of the effects doctrine to assess possible effects in cases involving indirect sales in Brazil. In the DRAM Memory Cartel Case, CADE concluded that DRAM memory manufacturers had formed a bidrigging cartel to fix prices and sales strategies in bids promoted by original equipment manufacturers – OEMs abroad. In assessing whether the conduct could have affected the Brazilian market, the CADE argued that the defendants were responsible for providing practically all the DRAM memory in the Brazilian market – most of which had entered the country equipped in other products –, considering that there was no domestic production for this product in Brazil. Sales of DRAM products used to be negotiated abroad, even in cases where these products were sent directly to Brazil by the defendants.
In the Marine Hose Cartel Case,5 in addition to the fact that the cartel members had direct export sales to Brazil, CADE also considered that the cartel agreement involved the geographic allocation of markets that also included Brazil. According to CADE, Petrobras acquired marine hoses through certain procedures, in relation to which the competitors that participated in the conduct would have previously discussed and allocated results among themselves. The members of the cartel that were not awarded certain Petrobras' contracts proposed offers to cover the winning member's prices and were then compensated in other countries. This, in CADE's understanding, was a strong evidence that the cartel had effects in the Brazilian market.
As for international cartels with no effects in Brazil, in 2016, CADE concluded the judgement of the Elastomers Cartel Case,6 deciding for the closing of the investigation due to the lack of evidence that the conduct could have affected the Brazilian market. The conduct consisted of meetings between competitors to fix prices for the Chinese and Hong Kong markets. According to the leniency applicant, these prices had possibly been used as reference prices worldwide, including for the national territory. Nevertheless, according to CADE, the confession from the leniency applicants that they also used the reference prices agreed upon with competitors as calculation basis for the prices practiced in the Brazilian market, and the assumption that other competitors behaved in the same manner, were not considered enough to conclude that the alleged conduct would have potentially affected the national territory.
The Compressors Cartel Case7 deserves special notice, as CADE, in a non-unanimous decision, adopted an atypical approach. CADE's General Superintendent – GS had previously concluded that this case involved "two cartels": i) a national cartel involving the two local manufacturers; and ii) a foreign cartel that would not have affected the Brazilian market. According to the GS, it would not make sense for the foreign manufacturers to discuss the Brazilian market, as the compressors market was clearly a national market due to the high applicable import taxes and transportation costs, as well as the fact that the local manufacturers were able to supply the total local demand at a lower price. CADE's Tribunal, however, concluded that the evidence in the case files demonstrated that discussions abroad had mentioned the Brazilian market, and that the foreign manufacturers were present in the meetings in which Brazil was discussed by the national manufacturers. According to the majority of the members of the Tribunal, this aspect was considered enough to establish at least potential effects of the conducts in Brazil.
In the recent Color Picture Tubes Cartel Case,8 CADE established a relevant precedent regarding the defendants that may be investigated for international cartel practices in Brazil. According to this decision, since cartels are considered a multi-perpetrator offense, all companies that participate in a cartel are responsible for the possible effects that may be caused by this conduct. Thus, even if only one of the cartelized companies sells its products in Brazil, all of them may be prosecuted and convicted by the Brazilian antitrust authority for the possible anticompetitive effects of the practice in Brazil.
Finally, CADE has recently issued its decisions in the Optical Disk Drives (ODD's) Case9 and LCD Panel Case10 and, in both cases, CADE concluded that the fact that ODDs and LCD panels consumed in Brazil depended exclusively on the external market, would be sufficient to demonstrate that any collusion in these worldwide markets would necessarily affect the Brazilian markets. Therefore, the evidence that the defendants have colluded to fix prices and sales conditions abroad was considered sufficient to base the conviction of the defendants in Brazil.
The Brazilian Antitrust Law provides for an effect-based approach that expressly extends its application to conducts performed abroad and that may have at least the potential to produce effects in Brazil. An analysis of CADE's case law in international cartel cases reviews that this authority has adopted a very broad interpretation to establish this cause-effect connection between conducts abroad and their possible effects in the Brazilian markets, making use of indirect evidence and practically shifting to the defendants the burden of proof to demonstrate that certain international cartels would not have the potential of producing effects in Brazil. It is important that foreign companies be aware that possible anticompetitive conducts carried out abroad and that may produce effects in Brazil, may be subject to investigation and severe penalties in Brazil under the Brazilian Antitrust Law, even in case of companies that do not have any direct sales to Brazil.
1 See also Article 36 of the Brazilian Antitrust Law.
2 SEI/CADE N. 0518637.
3 Administrative Process N. 08012.004599/1999-18. Reporting Commissioner Ricardo Villas Bôas Cueva. Decided by the Tribunal on April 11, 2007.
4 Administrative Process N. 08012.011027/2006-02. Reporting Commissioner Ricardo Machado Ruiz. Decided by the Tribunal on August 28, 2013.
5 Administrative Process N. 08012.010932/2007-18. Reporting Commissioner Márcio de Oliveira Júnior. Decided by the Tribunal on February 25, 2015.
6 Administrative Process N. 08012.000773/2011-20. Reporting Commissioner João Paulo de Resende. Decided by the Tribunal on August 31, 2016.
7 Administrative Process N. 08012.000820/2009-11. Decided by the Tribunal on March 16, 2016.
8 Administrative Process N. 08012.002414/2009-92. Decided by the Tribunal on August 28, 2018.
9 Administrative Process N. 08012.001395/2011-00. Decided by the Tribunal on January 30, 2019.
10 Administrative Process N. 08012.011980/2008-12. Decided by the Tribunal on February 27, 2019.
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