Keywords: CADE, policy, cease and desist agreement, cartel
On March 11, 2013, the Administrative Council of Economic Defense ("CADE") published in the Brazilian Official Gazette the Resolution no. 5/2013 ("Resolution"), which changes the rules regarding the Cease and Desist Agreement ("TCC"). Most of the new provisions aim to create incentives for defendants in cartel cases to negotiate a TCC in the early stages of an investigation.
The TCC is one of the most important tools used by CADE in the fight against cartels. According to information disclosed by the agency, CADE has executed 11 settlements since 2007. Considering that CADE has a longstanding issue with its substantial backlog, it is essential for the agency to reach a satisfactory settlement with defendants whenever possible, in order to ensure efficient enforcement of Law no. 12.529/2011 ("Brazilian Antitrust Law").
Notwithstanding the fact that the Resolution establishes several minor procedural changes applicable to the proposal of TCC by defendants, or by the General-Superintendence, and to the negotiation of the settlement, the most relevant provisions introduced by the new rule are those in connection with the mandatory terms of the TCC in cases related to cartels, conspiracy or agreements among competitors.
In such cases, the TCC must mandatorily contain: (i) a pecuniary contribution to the Collective Rights Fund, which cannot be lower than the advantage obtained by the defendant through the illegal practice; and (ii) admission of guilt. While the pecuniary contribution has long been a requirement for settlement in cartel cases, the admission of guilt was required in past practices only in cases in which another defendant had executed a Leniency Agreement1. Now, every defendant in any antitrust case related to cartels, conspiracy or agreements among competitors must plead guilty in order to execute a TCC.
Another rule applicable to cases related to cartels, conspiracy or agreements among competitors is that, if the TCC is proposed during the first stages of the analysis of the case, the defendant must necessarily undertake the commitment to collaborate with the investigations. Currently, according to the Brazilian Antitrust Law, the initial analysis of allegedly anticompetitive practices is made by the General-Superintendence. Therefore, if a defendant proposes a TCC while the case is still under analysis by the General-Superintendence, the settlement must set forth an obligation to collaborate with the investigation. In addition, the defendant that agrees to collaborate with the investigations is eligible for: (i) reduction between 30% to 50% of the fine that was expected to be imposed upon the defendant, where the proponent is the first among several defendants to propose a TCC; (ii) reduction between 25% to 40% of the fine that was expected to be imposed upon the defendant, where the proponent is the second among several defendants to propose a TCC; and (iii) reduction of up to 25% of the fine that was expected to be imposed upon the defendant, where the proponent is neither the first or the second among several defendants to propose a TCC. These changes confirm that the intention of the Resolution is to create as much incentive as possible for defendants to seek a settlement in the early stages of an investigation, and therefore enable CADE to save resources that would otherwise be spent on a long and costly analysis.
Originally published March 15, 2013
1. The Leniency Agreement is executed between a defendant and CADE and has the purpose of granting the defendant immunity or reduction of penalties for antitrust violation in exchange for cooperation with the antitrust authorities.
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