Editor’s note: BMA – Barbosa, Müssnich, Aragão’s Barbara Rosenberg is a force to be reckoned with in the Brazilian market. She has featured in Chambers and Partners’ Competition/Antitrust rankings for more than a decade, but in 2019 she rose to the position of Star Individual, an accolade given to very few. Rosenberg has maintained this position ever since due to her undisputed leadership in this field. Her advice to prominent companies on many of the most sophisticated matters before CADE is highly commended. Again and again market commentators line up to applaud her work. Rosenberg has co-signed the article below with partners Jose Inácio Almeida Prado Filho and Marcos Exposto. Prado Filho features in Band 3 and is also highly respected. Exposto featured as an up-and-coming lawyer in Chambers’ rankings since 2019 and has been promoted to Band 4 this year after gathering increasing market recognition for his work. BMA’s Band 1 team has advised in several landmark cases, including the approval in Brazil of Dow and DuPont USD130 billion merger and the Essilor and Luxottica USD49 billion merger. The firm is an M&A powerhouse and features highly in several other rankings.
Competition/Antitrust in Brazil
2021 marks ten years since the Brazilian Competition Act was enacted, and significant progress has been made over that time. From an institutional point of view, CADE has succeeded in maintaining its status as one of the most respected competition agencies worldwide, amidst a challenging scenario, especially in the most recent years.
The Brazilian public’s awareness of competition law matters has grown significantly thanks to CADE’s activity on high-profile matters as well as its advocacy efforts. The appointment of CADE Commissioners and General Superintendence members has garnered more attention from the business and political communities, and the strategic value of competition law enforcement is noticeably stronger.
Aiming to increase transparency and predictability about future enforcement actions, guidelines have been issued by CADE over the past ten years. Guidelines on CADE’s leniency program and settlement agreements in cartel cases were both issued in May 2016; the leniency guidelines were updated in June 2020 and the settlement guidelines updated in September 2017. These were preceded by guidelines on antitrust compliance programs (January 2016), which were further supplemented by guidelines on fighting bid-rigging cartels (December 2019). Merger control aspects were also supported by guidelines on horizontal mergers (June 2016), gun jumping (May 2015) and merger control remedies (October 2018). The production of data before the Economic Department of CADE was also the subject of guidelines (April 2019).
Considering the authorities’ past practice in the 2000s and before, when cases normally took longer than two years to be reviewed in an ex post review system, the business community and the antitrust Bar were initially skeptical of CADE’s ability to seamlessly migrate to a pre-merger system. However, even with limited resources throughout its recent history, CADE’s General Superintendence (GS) has dedicated significant efforts to its merger control program and has been generally successful in observing deadlines and clearing cases quickly after the pre-merger system was enacted, particularly those that show no concern on the merits. Fast-track deals have been reviewed in up to 30 calendar days by the GS, and cross-border cases where clearance in Brazil could become a bottleneck are very few and far between. Complex cases naturally undergo a much more thorough and lengthy review, and across time CADE has adopted strong remedies to clear some of them and even completely blocked some others.
CADE has also dedicated a lot of effort to cooperation with foreign authorities, and attention to consistency across jurisdictions has proven very important from the perspective of Brazilian practitioners.
Overall, the balance sheet for merger-related work performed by CADE is positive, from the perspective of both the efficiency and the quality of the decisions. There are, however, institutional aspects of the Brazilian merger control rules that still pose challenges to businesses. Notably, the role of interested third parties – which, admittedly, is a very important one – can sometimes be exacerbated if an excessively lax test is used to admit the complaints of an intervening third party. The possibility of third parties appealing the GS’s decisions before the Tribunal, for example, may cause unnecessary delays that could have been avoided.
Brazil has been comparatively less affected by the downturn in cartel investigations that has been observed worldwide in recent years. Even though there is an undisputed global decrease in leniency applications, and cases at CADE are moving at a slower pace, some local investigations have been launched lately still as an outcome of Operation Car Wash, which has accounted for most of CADE’s work on cartel matters since at least 2014. CADE’s cartel settlement program has remained quite active, and authorities have signaled that the bar should be raised in terms of contribution and payments required to settle. A few settlement applications that have been negotiated with the GS have gone as far as being rejected later by the Tribunal, which was not common in the past – and this indicates the need of more predictability on the matter.
CADE has also liaised with its foreign counterparts for conduct investigation whenever necessary and has remained very active in multilateral forums (ICN, OECD, etc). Likewise, CADE has strengthened its links with domestic authorities that may also have jurisdiction over the same facts investigated locally: CADE has executed cooperation agreements with several authorities responsible for criminal enforcement (state prosecutors) and has also strengthened connections with administrative bodies responsible for anti-bribery and anti-corruption enforcement (e.g. CGU, AGU and TCU).
With an increased risk of potential litigation for damages, which are still comparatively uncommon but gaining traction in Brazil, CADE adopted specific regulations concerning access to investigation documents in 2018/19. The main purpose was to strike a balance between protecting the self-incriminating documents produced in the context of leniency and settlement agreements, while allowing victims access to records that could be relevant for damage claims. The 2018 document also aimed at fostering damage claims by allowing CADE to consider any damages paid as a mitigating factor when quantifying fines and settlement contributions.
A trend of addressing unilateral conduct more intensely has been reported by CADE’s officers in several public statements in the last two years. While this agenda for future action on dominance cases is still gaining traction and has not yet been fully reflected in the number of new dominance cases, new cases have been made public and it is expected that this policy trend may be increasingly materialized in statistics.
Advocacy and COVID-19 Impact on Competition Law Enforcement
CADE has fared reasonably well during the pandemic. Sanitary precautions for remote working were put in place very quickly, and staff were able to continue their activities without major delays. Also, CADE was able to migrate very promptly to holding virtual meetings with parties in ongoing investigations, especially given the limitations for practitioners to commute to Brasilia.
Early on in the pandemic, with a surge in the demand for certain products (such as masks, hand sanitizer and medication for COVID-19 symptoms, among others), CADE started an investigation into possibly abusive price increases, asking major players for price history information for a long list of products. This investigation went on for a couple of months (during which parties were required to report their prices monthly) and is currently pending. This move sent out a clear message that CADE was monitoring this behavior closely, but no major action against any players has been taken so far.
Also, early on in the pandemic, CADE made it clear that the authority would be very careful about accepting the pandemic as a defense either for mergers that would not be otherwise approved or for any type of anticompetitive behavior. A general principle repeated publicly and constantly by CADE was that no permanent change with enduring potential negative effects would be accepted to address a temporary situation such as this crisis. Indeed, one year into the pandemic, no changes have been noticed in terms of anticompetitive conduct enforcement, application of the failing firm defense or any other factors that could have been directly affected by the pandemic.
A Look Ahead
CADE has indicated that it will continue to enforce its agenda, circumstances allowing, even considering that the effects of the pandemic are expected to last well into 2021. One of the main concerns raised by antitrust authorities worldwide and echoed by CADE relates to the enforcement of competition laws in the digital economy. On the anticompetitive conduct investigation front, CADE has signaled concern about practices by major players that could significantly impact the market (going as far as issuing injunctions).
Regarding merger control, the authority has been consistently voicing concerns about killer acquisitions and the sufficiency of current notification thresholds to capture all transactions of interest for effective competition enforcement. A market inquiry was conducted in 2020, and, in that context, CADE asked several players with a history of investment in technology about deals carried out over the past decade. No major public action has been taken over this so far, and this investigation is currently pending.
Additionally, further guidelines are expected to be issued by CADE on fine calculations for cartel cases, which underwent public consultation in 2020. The demand for more concrete parameters for fines has been in the forefront of discussions about cartel enforcement, including how to calculate the benefits gained by the convicted parties from the infringement. This trend for the future connects with the increasing number of private damage claims in Brazil and CADE’s efforts to support such trend while adopting all measures to safeguard its own leniency and settlement programs.
The appointments that are due to take place later in 2021 will be pivotal for competition policy in Brazil. The terms of office for CADE’s Tribunal Chair and one more Commissioner, as well as CADE’s General Superintendent, are due to expire in October. Their replacements will naturally play a key role in continuing of the authority’s work, and become especially important in a context where the Tribunal has been much more active and thorough as regards the oversight of the General Superintendence’s work.