Anti-cartel enforcement in Brazil

All questions

Cartels

Since 2012, the SG, the CADE unit responsible for investigating anticompetitive conduct, has been trying to clear the backlog of cartel cases. In 2018, CADE's Administrative Tribunal decided twice the number of cartel cases decided in 2017. In nine of them (45 per cent), CADE did not convict any defendants – against only three (30 per cent) in 2017. The fines imposed by CADE in cartel convictions total 600 million reais. In addition, CADE also initiated 35 new cartel investigations and executed 49 TCCs related to cartel investigations – including cases originated from Operation Car Wash – that amounted to 1.26 billion reais in financial compensation being paid by the defendants.

In 2018, CADE concluded various administrative proceedings concerning cartels.

In March, 18 companies, 39 individuals and three unions were condemned for cartel formation in the national sea salt market. According to CADE, the documents and pieces of evidence collected indicated that the defendants agreed to define prices, control the supply, and split the market. The conducts were supported by sectoral associations and trade unions. The SG also concluded that four companies organised a parallel collusion to obtain advantages in public bids held by Empresa Baiana de Alimentos S/A – EBAL. The fine applied by CADE was 289.5 million reais.

In June, CADE's Administrative Tribunal approved three cease-and-desist agreements to settle a cartel probe in the foreign exchange market, involving the Brazilian real and offshore currencies. The agreements were signed between CADE and the financial institutions Royal Bank of Canada and Morgan Stanley Bank. A total of 42.9 million reais was collected to the Fund for the Defence of Diffuse Rights. According to CADE, there was strong evidence that the defendants agreed to fix the exchange rate spread, to coordinate the purchase and sale of currency and the price proposal for customers, as well as setting back the activity of other operators in the currency exchange market involving the Brazilian currency.

Another important case was the conviction, in August, of Toshiba Corporation and Mitsubishi Electric Corporation (Melco) owing to their involvement in the global gas-insulated switchgear (GIS) cartel. From 1988 to 2004, the participating companies coordinated the concession of GIS projects, fixing prices and dividing geographic markets. The alleged deal would have affected all consumer countries, except the United States and Canada, since both countries were excluded from the discussions as a result of the strict antitrust laws adopted by both of them. Later China and Russia were also excluded from the discussions, due to the position gained by the ABB Group (another cartel participant) in these markets. Concerning the effects in Brazil, the investigations pointed out that the cartel affected the Brazilian electric system and companies that had acquired high-tension GIS separately, and medium and high-tension equipment for the composition of substations. CADE imposed fines of approximately 4.9 million reais on both companies.

In the same month, CADE concluded that manufacturers of TV colour picture tubes (CPTs) and PC colour display tubes (CDTs) had colluded to accomplish anticompetitive practices. According to the Brazilian antitrust authority, the cartel would have been active between 1995 and 2007. The Administrative Tribunal followed the decision rendered by Commissioner Paulo Burnier and condemned the companies Toshiba Corporation and MT Picture Display for cartel activity in the international market of CPTs, imposing fines totalling 4.9 million reais.

In December, the SG recommended the conviction by CADE's Administrative Tribunal of 16 companies and 52 individuals over allegations they were involved in a cartel to fix bids for public train contracts. According to the investigations carried out by the SG, the fraud occurred in at least 27 projects in the cities of São Paulo, Brasília, Porto Alegre and Belo Horizonte in Brazil. CADE concluded that Mitsu, Bombardier, Alstom, Balfour Beatty, Construccion y Auxiliar de Ferrocarriles (CAF), Hyundai-Rotem, and part of Hyundai Motor would have participated in the cartel. The investigation was initiated in 2013 after CADE executed a leniency agreement with Siemens, who voluntarily self-reported its alleged involvement in the price-fixing scheme to lessen its responsibility.

The SG carried out at least three high-profile dawn raids in 2018, which were related to investigations regarding cartels in the following markets: (1) the Brazilian market of orthoses and prostheses; (2) public bids held by federal agencies for the contracting of outsourced services; and (3) public bids carried out by the state of Espírito Santo for the service contracting of asphalt paving.

On 6 March 2013, CADE enacted Regulation No. 5/2013, which modified the rules regarding settlements. The purpose of this Regulation was to increase the incentives for companies to cooperate by adding more predictability and transparency regarding the amount of contribution to be paid. It contains guidelines on the levels of the settling sums to be paid by settling parties, which will vary depending on, inter alia, the level of cooperation and the moment of the investigation. Parties who are being investigated for cartel behaviour, however, need to acknowledge their participation in the violation in order to be able to settle. Since its enactment, over 249 TCCs have been executed under the new Regulation. In 2018, the Administrative Tribunal and the SG executed a total of 49 TCCs related to cartel investigations involving several markets, which amounted to 1.26 billion reais in financial compensation being paid by the defendants. The aforementioned regulation on settlements has been proving to be a very effective tool to end investigations that otherwise could take years to be decided, releasing a significant amount of public resources that could be redirected to other investigations in Brazil.

An examination of the cases initiated and concluded in recent years suggests that the investigation of cartels continues to be an enforcement priority for CADE. In 2017, CADE executed an all-time high number of leniency agreements and settlement agreements, many of which were related to Operation Car Wash. In 2018, CADE continued to analyse and to execute agreements related to public biddings.

In the past few years, CADE has devoted a substantial amount of resources to the investigations and leniency agreements related to Operation Car Wash. Owing to the profiles of the new Ministers of Justice and of Economy – and the fact the government will appoint a new General Superintendent in 2019 – CADE is expected to allocate even more resources to tackling cartels, especially cartels in public biddings. This may have the side effects of delaying other investigations and of preventing CADE from pursuing new ones. This scenario highlights the importance of boosting CADE's human and financial resources as soon as possible, as CADE has historically been understaffed. Despite the agency's strong commitment to efficient enforcement and continuing developments in recent years, there is a risk that certain antitrust violations may go undetected and unpunished to the detriment of free competition and of Brazilian consumers due to a lack of sufficient personnel and resources.