CADE’s Tribunal permits company to offset fine paid to Comptroller-General’s Office for antitrust violations

In an unprecedented decision in May 2024, the Tribunal at Brazil’s Antitrust Authority (CADE) permitted an amount Construtora OAS S.A. was fined to be offset by an amount the company had paid to the Office of the Comptroller General (CGU) for the same antitrust-related offenses. CADE had penalized the company in the wake of an investigation into an alleged bid-rigging cartel.

The case (Administrative Proceeding No. 08700.007776/2016-41) concerned a public bid conducted by the Rio de Janeiro State Government’s Secretariat of Public Works, which sought to contract engineering and construction services to urbanize three areas within the city of Rio de Janeiro (Complexo do Alemão, Complexo de Manguinhos, and Rocinha, collectively known as the ‘PAC Favelas‘).

In casting the deciding vote, CADE President Alexandre Cordeiro Macedo pointed out that a bid-rigging cartel can be deemed unlawful under the Brazilian Competition Law (Law No. 12,529/2011), the Anti-Corruption Law (Law No. 12,846/2013), and the Administrative Improbity Law (Law No. 8,429/1992) simultaneously, as all these laws aim to protect the competitive nature of public bids. However, in his view, the Introduction to Brazilian Law Act (LINDB) establishes that any previously imposed penalties should be considered when calculating other penalties of the same nature and related to the same events. This would permit the deduction of any fine already paid to the CGU in the event the antitrust authority sets a higher fine. On the other hand, Macedo also indicated that CADE would not be bound to any decision by the CGU to cancel its fine against the company.

CADE’s Tribunal discusses criteria for reducing fines for signatories of partial leniency agreements

May 2024 also saw CADE’s Tribunal discuss the calculation of a fine for a company that had signed a partial leniency agreement with CADE (Medtronic Comercial Ltda.) in relation to an investigation into an alleged cartel in the Brazilian market for orthoses, prostheses, and special medical materials (Administrative Proceeding No. 08700.003699/2017-31). In contrast to ‘full leniency’, a partial leniency agreement is permissible when CADE has prior knowledge of the alleged antitrust violation, yet lacks sufficient evidence to substantiate a conviction. As a way of encouraging compliance and strengthening the antitrust leniency program, Brazilian legislation provides that the fine percentage applied to leniency signatories must not exceed the lowest rate set for the other defendants in the case. Moreover, the applicable penalty must be reduced by between one-third and two-thirds.

Given a lack of clear parameters in CADE regulations, the fine that Reporting Commissioner Luis Braido set for Medtronic Comercial Ltda. was based on the lowest fine applied to other defendants and then reduced by two-thirds, resulting in a BRL 28 million fine. However, Commissioner Victor Oliveira disagreed with this calculation, arguing the baseline rate for the partial leniency signatory should be lower than both:

• The rate set for the other defendants; and
• The rate used for calculating the monetary contributions in the other defendants’ settlement agreements (TCCs) with CADE in the same investigation.

Commissioner Oliveira therefore concluded that the rate for the partial leniency signatory in this case should be capped at 12% (the rate applied to one of the other companies that signed a TCC) but reduced to 9% (given the rate for the monetary contributions set in the other defendants’ TCCs). Only then would a further two-thirds reduction be applied to the fine, leading to an amount of approximately BRL 17 million – significantly lower than the Reporting Commissioner initially proposed. The other Commissioners at the Tribunal also supported Commissioner Oliveira’s vote.

The decision has set an important precedent in regard to these parameters, providing those considering partial leniency agreements with CADE with a clearer idea of the potential outcome.

CADE’s Tribunal rejects settlement proposal due to lack of proper collaboration

In August 2024, CADE’s Tribunal rejected a settlement (TCC) proposal from Qiagen Biotecnologia Brasil Ltda. in light of an investigation into alleged anticompetitive practices in the healthcare industry labor market (Administrative Proceeding No. 08700.004548/2019-61). The Tribunal concluded that the extent of the proposed collaboration in the agreement proposal was insufficient to support the CADE General Superintendence’s (GS) ongoing investigation. According to publicly available information, six other companies involved in the same investigation were able to enter into TCCs with CADE.

This particular case may signal that the current panel at CADE’s Tribunal is raising the bar in relation to TCC proposals that do not significantly contribute to ongoing investigations.

Leniency agreements lead CADE’s General Superintendence to launch new investigations focused on exchanges of sensitive information and the labor market

In July 2024, CADE’s General Superintendence (GS) opened an investigation into six German automakers (and related individuals) regarding alleged exchanges of competitively sensitive information in the international market for light passenger vehicles intended for use in Brazil (Administrative Proceeding No. 08700.000478/2024-30). According to the GS, documents and information provided via leniency agreement signatories demonstrated the automakers exchanged commercially and competitively sensitive information in order to coordinate research and development within thematic working groups that frequently met at the companies’ various headquarters. This investigation reinforces CADE’s attention specifically toward the exchange of sensitive information, rather than traditional cartel behavior such as price-fixing or market division.

In September 2024, the GS launched an investigation into 11 companies and related individuals for alleged anticompetitive practices in the Brazilian forklift market and its related labor market (Administrative Proceeding No. 08700.007061/2024-06). According to the GS, a leniency agreement provided evidence of anticompetitive agreements, cover proposals, systematic exchanges of competitively sensitive information, and a no-poach agreement.

The GS also opened two administrative proceedings in October to investigate alleged exchanges of sensitive information involving the labor market (such as salaries, benefits, bonuses, private pensions, and health insurance). These cases originated from leniency agreements, and more than 30 companies are being investigated in each probe (Administrative Proceeding No. 08700.000992/2024-75, involving the consumer products sector, and Administrative Proceeding No. 08700.001198/2024-49, involving multinationals from different sectors).

The new investigations suggest that exchanges of sensitive information and practices that may affect the labor market continue to be closely scrutinized by CADE. Companies should, therefore, pay special attention to this issue.

According to the most up-to-date data CADE has released, four leniency agreements have been signed so far in 2024. This surpasses the figures from recent years, with two agreements signed in 2023 and only one in 2022 (as reported in a previous edition of our bulletin).

In a similar vein, the GS established a working group in August in partnership with the Brazilian Institute of Studies on Competition, Consumer Affairs, and International Trade (IBRAC) to engage with lawyers, public servants, academics, and other stakeholders on the challenges faced before, during, and after leniency agreement negotiations with CADE. The group’s goal was to identify potential improvements to CADE’s leniency program, with meetings running until the end of October 2024. A revised version of the current Guidelines for CADE’s Antitrust Leniency Program is among the expected outcomes, and the resulting draft was recently submitted to a public consultation process.

For further information on these topics, please contact Mattos Filho’s Antitrust practice area.