At the administrative level,2 antitrust law and practice in Brazil is governed by Law No. 12,529/11 (the Competition Law), which entered into force on 29 May 2012 and replaced Law No. 8,884/94.3 The new Competition Law has consolidated the investigative, prosecutorial and adjudicative functions into one independent agency: the Administrative Council for Economic Defence (CADE). CADE's structure includes an Administrative Tribunal for Economic Defence (the Tribunal) composed of six Commissioners and a President, a Directorate-General for Competition (DG) and a Department of Economic Studies. The DG is the chief investigative body in matters related to anticompetitive practices. The Tribunal is responsible for adjudicating the cases investigated by the DG – all decisions are subject to judicial review.4 There are also two independent offices within CADE: CADE's Attorney General's Office, which represents CADE in court and may render opinions in all cases pending before CADE; and the Federal Public Prosecutor's Office, which may also render legal opinions in connection with all cases pending before CADE.
The first Brazilian competition law dates back to 1962, but it was only in the mid-1990s that the modern era of antitrust in Brazil began, after the country shifted to a market-based economy. Among other reforms, in 1994 Congress enacted Law No. 8,884, which governed Brazil's administrative antitrust law and policy until 2011. From 1994 to 2003, the Brazilian antitrust authorities focused primarily on merger review and substantial resources were devoted to the review of competitively innocuous mergers. In 2003, the Brazilian antitrust authorities promoted a hierarchy of antitrust enforcement and placed hard-core cartel prosecution as the top priority, making use of investigation tools such as dawn raids and leniency applications. A more recent development of Brazil's competition law enforcement is related to an increasing number of abuse of dominance cases, which is first and foremost a symptom of a system that is no longer in its infancy.
The basic framework for abuse of dominance in Brazil is set by Article 36 of the Competition Law. CADE has not yet issued a regulation under the new Competition Law covering unilateral conduct, and has been resorting to legislation issued under the previous regime and precedents. The Anglo-American concept of binding judicial precedent (i.e., stare decisis) is virtually non-existent in Brazil, which means that CADE's Commissioners are under no obligation to follow past decisions in future cases. Under CADE's Internal Regulations, legal certainty is only achieved if CADE rules in the same way at least 10 times, after which a given statement is codified via the issuance of a binding statement. To date, CADE has issued nine binding statements, all related to merger review but one (Binding Statement No. 7), which provides that it is an antitrust infringement for a physicians' cooperative holding a dominant position to prevent its affiliated physicians from being affiliated with other physicians' cooperatives and health plans.
Although abuse of dominance could also be considered a criminal violation under Article 4 of Law No. 8,137/90, punishable in the case of individuals but not corporations by a criminal fine and two to five years' imprisonment, no criminal sanction has to date been imposed on individuals for abuse of dominance practices.
II YEAR IN REVIEW
In 2016, CADE adjudicated 31 administrative proceedings. Out of these 12 were dismissed, while in 19 cases CADE found an infringement in relation to at least one defendant. This represents a significant drop if compared to 2015, when 52 cases were adjudicated in total, out of which 39 resulted in a conviction. On the other hand, there has been an increasing number of settlements reached between defendants and CADE, totalling 54 executed settlements in 2016 (out of 61 settlement proposals). As a result, imposed fines have increased from 286 million reais in 2015 to 197 million reais in 2016, while settlement sums agreed to be paid with CADE achieved a record 798 million reais, against 465 million reais in 2015 (fines collected in 2015 were 523 million reais, while in 2016 this number increased to 700 million reais). The increasing number of settlements and amounts collected may be explained by the fact that the authority established a more predictable procedure for settling cases, as well as devoting more resources to the prosecution of anticompetitive practices.
In 2016, cartels remained a priority for CADE, which accounted for most of the investigations and infringements found. Out of the 19 convictions, only five of them referred to conduct related to the abuse of dominance: two concerned port activities, one involved a radius clause in lease contracts in shopping centres, another related to price discrimination in the natural gas market and finally there was an exclusive agreement for healthcare services.
Other CADE decisions – whether to open, settle or dismiss a case or recommend the conviction of defendants – included sham litigation and exclusionary practices – namely radius clauses, refusal to sell, price discrimination and the creation of difficulties for market players. Listed below is a comprehensive list of 2016's abuse of dominance cases.
i Regulated industries
In 2016, CADE continued to be active in the review of alleged abuse of dominance practices in regulated industries, with a special focus on financial services, port services and natural gas.
In March 2016, CADE launched administrative inquiries to investigate whether large-scale financial institutions, card issuers and payment acquirers limited competition through exclusivity arrangements and refusal to deal with competitors. The agreements were thought to reinforce the dominant position of credit card providers Cielo and Rede, to the benefit of their controlling banks.
The first inquiry is looking into whether card issuers Elo, Alelo, Amex, Hipercard and Ticket had exclusive relationships with payment acquirers Rede, Cielo or with banks Banco do Brasil, Bradesco and Itaú.5 The second concerns only banks Banco do Brasil, Bradesco and Itaú-Unibanco, which were accused of refusing to process the receivable amounts schedule (agenda de recebíveis) from competitors of Rede and Cielo, their controlled entities.6 Finally, CADE is investigating whether Rede and Cielo discriminated against competitors by employing encryption technology in their pinpad equipment (machines that capture transactions with debit and credit cards in retail), preventing access from smaller competing payment acquirers.7
On 5 April 2017, CADE executed two settlement agreements concerning these investigations. Itaú-Unibanco and Hipercard settled the first inquiry, agreeing to allow access to new payment acquirers and to meet certain targets during a two-year period. Payment acquirer Rede, at its turn, settled the last inquiry by undertaking to allow access to its pinpad equipment, as long as it was given reciprocal treatment.
The investigation is still ongoing for the remaining defendants, who have argued before judicial courts that CADE has no jurisdiction to investigate and sanction in the financial sector and that Brazil's Central Bank would be the agency in charge of enforcing competition provisions regarding financial institutions. This issue is not settled in the judicial courts and there are bills pending in Congress that aim to provide a definitive solution to this controversy.
Port operators and related parties have been under antitrust scrutiny for several years. The monopolistic situation of port operators and the complex regulation on prices and fees create a variety of disputes between port operators and service providers active in ports, which are subjected not only to administrative antitrust enforcement but also to judicial challenge.
From a competition advocacy perspective, CADE usually recommends the Brazilian National Agency of Waterway Transportation (ANTAQ) to review its regulation to prevent abuse of market power and challenges involving market players.
In February 2016, CADE imposed sanctions on port operators in Salvador and Rio Grande for abuse of dominance.8 In both cases, the operators charged competitors with disproportional port storage fees (THC2 – Terminal Handling Charge 2) using their monopolistic position in the upstream market to harm competitors downstream. The total amount of fines exceeded 10 million reais, and both parties are challenging CADE's decision before the judicial courts. Salvador has managed to secure a decision suspending the effects of CADE's decision, based on a previous ruling that stated that the THC2 fee was legal. In June 2016, CADE dismissed an investigation against Tecondi Margem Direito S/A and Santos Brasil SA – Tecon for raising rivals' costs in the market of warehousing in ports. CADE's Commissioners concluded that the fees charged by the operator could be justified in view of the costs faced by port operators.9
In January 2017, following a failed attempt at a settlement agreement, CADE imposed sanctions on Associação Comercial dos Transportadores Autônomos (ACTA) and Sindicato dos Transportadores Rodoviários de Cargas e Granel de Santos, Cubatão e Guarujá (SINDIGRAN) for several anticompetitive practices, including influence to adopt uniform practices and creation of barriers to rivals in the cargo road transportation to the Port of Santos. The alleged conducts consisted, among others, of charging competitors abusive fees, limiting the number of trucks operating in the market and requiring rivals to contract unnecessary intermediate services.10 Fines imposed amounted to 78,000 UFIR11 for ACTA and 250,000 UFIR for SINDIGRAN.
1 Ana Paula Martinez is a partner at Levy & Salomão Advogados. The author would like to thank Carla Frade for conducting the research needed to update this chapter.
2 Brazil's antitrust system features both administrative and criminal enforcement. The administrative and criminal authorities have independent roles and powers, and may cooperate on a case-by-case basis. Private enforcement actions may also be initiated through the judicial courts by aggrieved competitors or damaged parties. At the criminal level, antitrust law and practice is governed mainly by Law No. 8,137/1990 (the Economic Crimes Law), as amended by Law No. 12,529/11, and Law No. 8,666/1993 (the Public Procurement Law). Federal or state public prosecutors have sole enforcement responsibility, and act independently of the administrative authorities. Also, the police (local or federal) may initiate investigations of anticompetitive conduct and report the results of their investigation to prosecutors, who may indict the reported individuals. In recent years, Brazil has developed a widely recognised programme for criminally prosecuting anticompetitive conduct – primarily cartels – and criminal and administrative authorities frequently cooperate in parallel cases.
3 Prior to Law No. 12,529/11, there were three competition agencies in Brazil: the Secretariat for Economic Monitoring of the Ministry of Finance (SEAE), the Secretariat of Economic Law of the Ministry of Justice (SDE), and the Administrative Council for Economic Defence (CADE). The SDE was the chief investigative body in matters related to anticompetitive practices, and issued non-binding opinions in connection with merger cases. The SEAE also issued non-binding opinions related to merger cases and issued opinions in connection with anticompetitive investigations. CADE was structured solely as an administrative tribunal, composed of six commissioners and a president, which made final rulings in connection with both merger reviews and anticompetitive practices.
4 On average, judicial courts confirm over 70 per cent of CADE's decisions.
5 Administrative Inquiry No. 08700.000018/2015-11.
6 Administrative Inquiry No. 08700.001860/2016-51.
7 Administrative Inquiry No. 08700.001861/2016-03.
8 Administrative Proceedings No. 08012.003824/2002-84 and 08010.005422/2003-03.
9 Administrative Proceeding No. 08012.005967/2000-69.
10 Administrative Proceeding No. 08012.000504/2005-15 and 08012.008142/2011-59.
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