BRAZIL: An Introduction to Competition/Antitrust

This year marks 12 years since the Brazilian Competition Act was enacted, and significant progress has been made over that time. From an institutional point of view, the government competition body CADE (Conselho Administrativo de Defesa Econômica) has succeeded in maintaining its status as one of the most respected competition agencies worldwide, in a challenging scenario, especially in 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, CADE has issued guidelines over the past ten years. Separate guidelines on CADE’s leniency programme and settlement agreements in cartel cases were issued in May 2016; the settlement guidelines were then updated in September 2017 and the leniency guidelines were updated in December 2021. These were preceded by guidelines on antitrust compliance programmes (January 2016), which were further supplemented by guidelines on fighting bid-rigging cartels (December 2019, updated in November 2020). 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 and the submission of evidence in leniency applications were also the subject of guidelines (April 2019 and September 2021, respectively).

Merger Control  

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 sceptical of CADE’s ability to seamlessly migrate to a pre-merger system. However, even with limited resources in recent times, CADE’s General Superintendence (GS) has dedicated significant efforts to its merger control programme and has been generally successful in observing deadlines and clearing cases quickly since 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 over time CADE has adopted strong remedies to clear some of them and has even completely blocked some others, but it has always stayed within the 330-day maximum deadline set in law.

In 2022, CADE reviewed 668 reportable deals, a 9.35% increase over 2021, and a 46.5% increase over 2020. Out of those 668 cases, 585 (87.6%) were reviewed under the fast-track procedure, presumably having less harmful potential to competition. Only 14 deals (2%) reached CADE’s Tribunal for a decision in 2022, of which only six ultimately received some type of restriction (and none were blocked). Similarly, in 2021, 13 cases reached CADE’s Tribunal and six were approved with restrictions; and in 2020, CADE’s Tribunal also reviewed 13 cases, imposing restrictions on seven of them. This means that while CADE is reviewing more cases, the number of deals actually raising competition concerns and thus requiring some type of restriction has remained stable. This has led to debates on the need to update the merger reportability thresholds, which are based on turnover and were last updated in May 2012. This debate also matches international concern with changing reportability criteria to ensure competition review of tech acquisitions, particularly innovative companies with little to no turnover, and CADE is committed to debating possible changes to its merger reportability thresholds in the coming years.

CADE has also dedicated a lot of effort to co-operation with foreign authorities, and attention to consistency across jurisdictions has proved 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 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.

Conduct Investigations  

CADE’s statistics show increasing attention to unilateral conduct, with the GS having initiated 62 new investigations in 2022. CADE’s former general superintendent and current tribunal chairman has declared dominance cases a priority for the authority, a trend which was followed by the general superintendent currently in office by creating a division dedicated solely to this matter. While this is not particularly due to worldwide increasing interest in investigating digital markets, digital services have also been the target of some of these new investigations. In 2022, CADE launched local investigations into Google’s Android practices (following a similar investigation by the European Commission which resulted in fines), as well as into the Google-Facebook ad deal known as “Jedi Blue” which was investigated in other jurisdictions. Likewise, Apple is also facing an antitrust investigation for alleged abuse of dominant position associated with its app monetisation and payment method rules.

In 2020, CADE started a market inquiry involving the so-called “Big Techs” and the transactions they entered into in the last ten years. The general superintendent recently issued a decision on this case requesting that CADE’s Economic Department prepare a study about “transactions involving the digital market” pursued by companies that received an official request in the proceeding, giving clues on the investigation’s next steps.

Still on the digital economy, in late 2022 CADE reached a settlement with iFood, the country’s main food delivery app, setting some limitations on exclusive contracts with restaurants. A few months prior to this, CADE also entered into a similar agreement with Gympass, a wellness platform, also limiting exclusivity clauses in its contracts with gyms and health clubs. In 2021, CADE had granted injunctive relief against both companies’ exclusivity practices, signalling a change in its previous practice of hardly ever granting this type of relief.

CADE has started to see the effects of the downturn in cartel investigations that has been observed worldwide in recent years, as well as an undisputed global decrease in leniency applications. CADE is working to finish its legacy cases from leniency agreements entered into in the 2010s, as well as starting to reach final judgment stage on cases related to Operation Car Wash, which has accounted for most of CADE’s work on cartel matters since at least 2014. CADE’s cartel settlement programme has remained quite active, and the authorities have signalled that the bar should be raised in terms of contribution and payments required to settle. However, while in previous years a few settlement applications negotiated with the GS have gone as far as being rejected later by the Tribunal, this has not been the case in the past three years.

In 2021, CADE opened a ground-breaking investigation into information exchanges allegedly taking place among healthcare companies’ human resources departments. In this first-of-its-kind investigation, the authority intends to investigate if the information allegedly exchanged between the defendants could have resulted in anti-competitive effects for employees, a theory of harm which CADE has never approached in the past, but which follows international concern with antitrust in labour markets (such as the US’s targeting of no-poach agreements).

CADE has also liaised with its foreign counterparts in conduct investigations whenever necessary and has remained very active in international multilateral forums (eg, 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 co-operation agreements with several authorities responsible for criminal enforcement (state prosecutors) and has also strengthened connections with domestic administrative bodies responsible for anti-bribery and anti-corruption enforcement (eg, the CGU, AGU and TCU).

Another topic that has recently gained traction in Brazil is litigation for damages. The year 2022 saw the enactment of Law No 14.470/2022 which imposes new provisions to encourage and facilitate private damages lawsuits due to antitrust violations. The new law allows harmed parties to claim for double damages against companies in violation of the antitrust law, but not against those entering into leniency agreements or settlements with CADE. It also excludes parties co-operating with CADE under leniency or settlement agreements from joint liability with other wrongdoers. This balance was set to maintain incentives for these agreements and to protect the leniency and settlement programmes, while at the same time fostering activities in private enforcement. Law No 14.470/2022 also expressly puts the burden of proof concerning the pass-on defence on the defendants who claim it, and tries to further clarify the statute of limitations for damages emerging from antitrust violations, which is set at five years but only begins once CADE reaches a final decision on the case. The effects of the new law in damages claims is yet to be seen.

Looking Ahead  

Brazil’s new federal administration has as a top priority the regulation of digital markets, especially the spreading of fake news and misinformation and the effects of this on democracy, but this may also have an effect on competition concerns. Last November, Congressman João Maia proposed a bill inspired by the European Digital Markets Act, aiming to submit digital platforms to ex-ante regulation by the National Telecommunications Agency, while also preserving CADE’s legal mandate to review digital mergers and conduct. Considering this scenario and CADE’s recent trend of initiating unilateral conduct investigations, digital markets are likely to continue a preeminent agenda this year.

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 at 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 damages claims in Brazil and CADE’s efforts to support this trend while adopting measures to safeguard its own leniency and settlement programmes.

In 2022, CADE also created two technical groups to develop guidelines on vertical mergers and unilateral conduct cases, following an international trend to create or review guidelines on these topics, but the work is still at a preliminary stage, and no draft has yet been submitted for public consultation.

The appointments that are due to take place later in 2023 will be pivotal for competition policy in Brazil, since the terms of office for four commissioners (out of a total of seven) are due to expire in October. Since the minimum quorum for CADE decisions is four votes, delays in appointments could paralyse decisions at the Tribunal level – four years ago, during a similar period of multiple terms ending, the authority struggled for two months without sufficient quorum. It should therefore be a priority for the new administration to appoint new CADE members to prevent this scenario from repeating itself. The replacements will naturally play a key role in continuing the authority’s work and, since the political party of the current Brazilian president has been known in the past to make highly technical nominations, it is anticipated that the appointment of the new commissioners will help to consolidate CADE as one of the key antitrust agencies worldwide.