Anticompetitive agreements

Assessment framework

What is the general framework for assessing whether an agreement or concerted practice can be considered anticompetitive?

The basic framework for the assessment of anticompetitive agreements or conducts in Brazil is set by article 36 of Law No. 12,529/2011. Article 36 deals with all types of anticompetitive conduct other than mergers. The Competition Law prohibits acts ‘that have as [their] object or effect’:

  • the limitation, restraint or, in any way, harm to open competition or free enterprise;
  • control over a relevant market for a certain good or service;
  • an increase in profits on a discretionary basis; or
  • engagement in market abuse.

Article 36(3) contains a lengthy but not exhaustive list of acts that may be considered antitrust violations provided they have the object or effect of distorting competition. Potentially anticompetitive practices include resale price maintenance, price discrimination, tying sales, exclusive dealing and refusal to deal.

CADE Resolution No. 20/1999 specifically provides that exclusivity agreements, refusal to deal, price discrimination and other vertical restraints are not per se in-fringements in Brazil and shall be assessed under the rule-of-reason test. Annex II of CADE Resolution No. 20/99 outlines ‘basic criteria for the analysis of restrictive trade practices’, including:

  • definition of relevant market;
  • determination of the defendants’ market share;
  • assessment of the market structure, including barriers to entry and other factors that may affect rivalry; and
  • assessment of possible efficiencies generated by the practice and balance them against potential or actual anticompetitive effects.

In practice, no case has yet been decided on the basis that harmful conduct was justified by pro-competitive efficiencies.

Technology licensing agreements

To what extent are technology licensing agreements considered anticompetitive?

Article 36 of Brazil’s Competition Law includes as examples of anticompetitive practices conduct performed through the abuse of intellectual property rights, and CADE has been consistently stating that the grant of intellectual property rights may lead to anticompetitive effects (when, for example, a party licenses intellectual property rights to one party and refuses to do the same to its rivals). Restraints involving intellectual property rights are assessed under the rule of reason; therefore, it is likely that the assessment would take into account the specific characteristics of each case, and balance potentially competitive against anticompetitive effects.

In 2013, for example, CADE cleared with conditions four transactions involving licensing agreements between Monsanto and four other companies (Don Mario Sementes, Nidera Sementes, Syngenta and Coodetec - Cooperativa Central de Pesquisa Agrícola) in relation to the development, production and marketing of soybean seed with Mosanto’s Intacta RR2 PRO technology. The conditions refer to changes in clauses of the agreement that granted Monsanto the possibility to influence strategic decisions of the licensee companies (eg, the agreement established a compensation mechanism for licensee companies that was based on the sales of the Intacta product and on the sales of certified seeds of Monsanto’s competitors).

Co-promotion and co-marketing agreements

To what extent are co-promotion and co-marketing agreements considered anticompetitive?

The Competition Law provides no clear-cut guidance on the subject. However, since these agreements are reviewed under the rule of reason, it is likely that the assessment would take into account the specific characteristics of each case, and balance potentially pro-competitive and anticompetitive effects.

Other agreements

What other forms of agreement with a competitor are likely to be an issue? How can these issues be resolved?

Under article 36 of Law No. 12,529/2011, agreements with competitors would be an issue if they ‘have as [their] object or effect’:

  • the limitation, restraint or, in any way, harm to open competition or free enterprise;
  • control over a relevant market for a certain good or service;
  • an increase in profits on a discretionary basis; or
  • engagement in market abuse.

Therefore, there is no specific form of agreement that is forbidden a priori by the legislation. Besides their object and effect, CADE will take into consideration the market power held by the involved parties to assess the likeliness of antitrust risks. For those agreements that may concern the exchange of commercially sensitive information among competitors, confidentiality provisions will be useful tools to help reduce this exchange and thus avoid further antitrust liability.

Cartel cases, however, are an exception to the assessment under the rule of reason, as CADE historically defined it as a per se conduct. CADE also includes in the cartel definition the exchange of commercially sensitive information that may lead to the change of market conditions, even if an agreement is not reached by the parties.

Issues with vertical agreements

Which aspects of vertical agreements are most likely to raise antitrust concerns?

Vertical agreements raise antitrust concerns when they ‘have as [their] object or effect’:

  • the limitation, restraint or, in any way, harm to open competition or free enterprise;
  • control over a relevant market for a certain good or service;
  • an increase in profits on a discretionary basis; or
  • engagement in market abuse.

Article 36(3) contains a lengthy but not exhaustive list of acts that may be considered antitrust violations provided they have the object or effect of distorting competition. Potentially anticompetitive practices include resale price maintenance, price discrimination, tying sales, exclusive dealing and refusal to deal.

Patent dispute settlements

To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?

CADE has recently considered pay-for-delay conduct to be a potential violation of the Competition Law and liability may apply if a pharmaceutical company settles a patent dispute with the sole purpose of delaying the entry of a competitor into the market. We are not aware of a case targeting this conduct being reviewed by CADE.

Joint communications and lobbying

To what extent can joint communications or lobbying actions be anticompetitive?

Joint communications or lobbying actions, by themselves, are not presumably harmful to competition. However, when communications result in the exchange of commercially sensitive information as prices, discount policies, costs, clients, suppliers, among others, the practice may amount to an antitrust infringement and companies and individuals may be subject to sanctions imposed by CADE.

Regarding lobbying actions, the regular exercise of the right to complain before the public sector with the purpose of defending the sector’s best interests and ensure the defence of rights do not arise competition concerns. This only happens when the exercise of such right is considered abusive, which can also amount to a sham litigation.

Although there have been no recent relevant cases involving pharma companies, recently, in an investigation concerning gas stations located in Natal that allegedly acted to prevent the enactment of a law that would increase rivalry in their market, CADE considered three cumulative conditions to assert the abusive exercise of the right to complain:

  • the complaints’ success probability;
  • the argument’s plausibility; and
  • the adequacy of the forms and instruments used (Administrative Proceeding No. 08700.000625/2014-08).

CADE’s tribunal concluded that the companies aimed only to maintain the legislation already in force, which was more beneficial to them, and that they did this through adequate means, not abusing its rights.

Public communications

To what extent may public communications constitute an infringement?

Public communications are potentially anticompetitive when they involve the exchange of commercially sensitive information that can be used to facilitate or induce collusive practices. Such statements can also constitute a competition violation if they result in one of the effects established in article 36 of the Competition Law (see question 20).

Exchange of information

Are anticompetitive exchanges of information more likely to occur in the pharmaceutical sector given the increased transparency imposed by measures such as disclosure of relationships with HCPs, clinical trials, etc?

The Brazilian Research-Based Pharmaceutical Manufacturers Association Code of Conduct sets forth transparency clauses with regard to relationships (section 1.1.5), contracts (section 3) and donations (section 12) in the pharmaceutical sector. Clinical trials are also experiencing growth in Brazil and are contributing to the development of scientific research in Latin America.

The increased transparency granted by these measures does make it more likely for anticompetitive exchanges of information to occur. We are not aware of a case targeting a similar conduct being reviewed by CADE.