Competition Compliance In Brazil: Retrospective And Perspective

• Published date: 05 December 2021
• Subject Matter: Corporate/Commercial Law, Anti-trust/Competition Law, Compliance, Corporate and Company Law, Antitrust, EU Competition , Cartels, Monopolies
• Law Firm: Levy & Salomao Advogados
• Author: Ms Gabriela da Costa Carvalho Forsman and Mariana Tavares De Araujo

I. INTRODUCTION

Most compliance-related efforts by Brazilian authorities in the spotlight today are related to anticorruption enforcement, as a result of the legal framework in place since 2014, which introduced investigative tools that enforce corruption and promote the adoption of corporate compliance programs, and of the overall attention received by the Car Wash Investigation, in Brazil and abroad. Interestingly though, anticorruption compliance was the not the first area - and most certainty is not the only one - where compliance initiatives have prospered in Brazil.

Over twenty years ago, the National Monetary Council issued Resolution No. 2,554/1998 promoting the adoption of compliance programs to prevent money laundering, terrorism financing and systemic and prudential risks. And only a few years later in 2004, the competition authority in charge of investigations at the time (Secretariat of Economic Law or "SDE") issued Ordinance No. 14/2004 that for the first time set forth guidelines for competition compliance programs in Brazil.²

Twelve years later in January 2016, the Council for Economic Defense ("CADE") issued its "Guidelines on the Structuring and Benefits of Adopting Competition Compliance Programs" ("2016 Guidelines")³ further detailing the requirements for a corporate compliance program to be viewed as effective and with that enhancing legal certainty and transparency in this area.

This article discusses CADE's efforts to promote competition compliance programs and considers the impact of its 2016 Guidelines to business activities during the past five years, as well as points to potential areas of improvement.

II. BRAZIL'S COMPETITION COMPLIANCE LEGAL FRAMEWORK AND INITIATIVES

Article 36 of Law No.12,529/11⁴ (Brazil's Competition Law) sets forth the basic framework for anticompetitive conduct in Brazil. It addresses all types of anticompetitive conduct other than mergers. The law prohibits acts "that have as purpose or effect to" (i) limit, restrain or, in any way, adversely affect open competition or free enterprise; (ii) control a relevant market of a certain good or service; (iii) increase profits on a discretionary basis; or (iv) engage in abuse of monopoly power.

The law was broadly drafted to apply to all forms of agreements and exchange of sensitive commercial information, formal and informal, tacit or implied. Cartels, as an administrative offense, may be sanctioned with CADE-imposed fines⁵ against the companies that may range from 0.1 to 20 percent of the company's or group of companies' pre-tax turnover in the economic sector affected by the conduct, in the year prior to the beginning of the investigation.

Officers and directors⁶ liable for unlawful corporate conduct may be fined an amount ranging from 1 to 20 percent of corporate fines; unlike the previous law, CADE must currently determine fault or negligence by the directors and executives in order to find a violation. Other individuals (i.e. employees with no decision-making authority), business associations and other entities that do not engage in commercial activities may be fined from approximately BRL 50,000.00 to BRL 2 billion.⁷

Under Article 45 of the Competition Law, the following shall be taken into account by CADE when setting fines: (i) level of seriousness of the infringement; (ii) good faith of the defendant; (iii) gain obtained or aimed by the defendant; (iv) whether the conduct has been consummated or not; (v) level of actual or potential harm to competition, Brazilian economy, consumers or third parties in general; (vi) detrimental economic effects caused by the conduct in the market; (vii) economic situation of the defendant; and (viii) recidivism.⁸

Apart from being an administrative offense, cartel is a crime in Brazil, punishable by criminal fine and imprisonment from two (2) to five (5) years. According to the Economic Crimes Law (Law No. 8,137/90), this penalty may be increased by one-third to one-half if the crime causes serious damage to consumers, is committed by a public servant or relates to a market essential to life or health. Also, the Public Procurement Law (Law No. 8,666/93) specifically targets fraudulent bidding practices, punishable by criminal fine and imprisonment from two (2) to four (4) years. There is no criminal corporate liability for cartel crimes in Brazil.⁹

The first initiative targeting competition compliance dates to 2004. Pursuant to Ordinance No. 14/2004, public and private legal entities were encouraged to adopt compliance programs and to submit such programs for review by the competition authority.10 In return, companies withcompliance programs that met certain requirements would be granted a certificate and became eligible for fine reductions in case of an investigation.

In May 2012, the Competition Law entered into force and introduced key legal changes, including revised administrative and criminal sanctions to cartel conduct. Over the past 9 years, important enforcement policies were set, and others revised. Price-fixing, bid-rigging and other conducts also treated as hard-core in other jurisdictions remain a priority. During this time, CADE has turned its attention also to exchange of information cases, which in Brazil are not so clearly distinguished from cartels and may also be subject to criminal enforcement. Increasingly so, to unilateral conduct cases as well, particularly in the digital and the payment sector markets.

Since 2018, CADE opened over 100 cartel investigations, most initiated through leniency agreements and over 300 executives currently face criminal proceedings in Brazil. Criminal courts of first instance have decided at least 20 cases so far, and all criminal cases are pending appeal in court.¹¹ The investigative timeline in criminal cases tends to be longer and less predictable than investigations conducted by CADE.¹²

In the midst of its enforcement activity, in...