Cade releases guidelines on cartel fine calculations

On September 27, 2023, the Administrative Council of Economic Defense (Cade) published its latest guidelines on cartel fine calculations (Guia de Dosimetria de Multas de Cartel). Based on an assessment of the fines Cade determined in cartel cases between January 2012 and December 2022, the guidelines aim to provide companies with greater transparency on the authority’s actions and decisions. Though the guidelines are not binding and do not alter Cade’s laws and regulations on the subject, they describe the methodology Cade’s Tribunal adopts in penalizing parties convicted of engaging in cartel practices. 

Cade’s guidelines outline the steps taken when calculating fines, namely: 

• Defining the calculation basis and the base rate for the fine;  
• Adjusting the rate in consideration of mitigating and aggravating factors and the length of time the cartel was in operation; and  
• Comparing the fine with the legal standards provided for in the Brazilian Competition Law (Law No. 12,529/2011). 

The fine calculation basis for companies is established by calculating the gross revenue that the company, group, or conglomerate registered in Brazil in the relevant line of business during the year prior to the beginning of the administrative proceeding. Cade Resolution No. 3/2012 contains a list of 144 lines of businesses. The guidelines suggest that the company’s revenue should generally be used – they suggest the group or conglomerate’s revenue can be used in exceptional circumstances.  

In the event a given line of business provided for in Cade Resolution No. 3/2012 is manifestly disproportionate, it can be adapted on a case-by-case analysis. Cade’s guidelines provide some examples of adapting lines of business, such as using a sub-segment or the affected market, or even adjusting the line of business to only encompass certain territories. 

As the law provides for, the usual fine calculation basis contemplates the gross revenue registered the year prior to the beginning of the administrative proceeding. However, the guidelines do state that the amount can be adapted if it is not possible to obtain accurate revenue data. The guidelines propose certain alternatives for these cases, including using revenue earned: 

• In the final year the conduct in question occurred; 
• In the year of the bid (for bid-rigging cartel cases); 
• In the line of business or the affected market in the final 12 months in which the conduct occurred; or 
• The average revenue in the line of business or the affected market during the period the conduct occurred.  

Cade’s guidelines also address international cartel cases regarding companies that earn no revenue in Brazil. One suggestion for this situation is to use ‘virtual revenue’ – an estimate of the revenue based on the extent to which the Brazilian market represents the total global volume of the market the company is active in. Alternatively, the guidelines also suggest using estimates of companies’ indirect sales in the local or affected market based on volume, average price, or import/export data.  

Once established, the revenue should be updated based on Brazil’s standard interest rate (known as the Selic rate). This is a common practice at Cade and is endorsed in its guidelines. 

 The next step in calculating a fine involves determining the base rate. In this regard, Cade’s guidelines recommend imposing a base fine of 17% (minimum 14%) for bid-rigging cartels, 15% (minimum 12%) for classic hardcore cartels, and 8% (minimum 5%) for soft cartels and other collusive conduct. The base fines mentioned in the guidelines can be adjusted considering the duration of the conduct, with the suggestion that longer-lasting conducts receive more severe penalties than sporadic or lateral or lateral ones. 

The base fines should also consider aggravating and mitigating factors. One of the aggravating factors mentioned in the guidelines that has been observed in Cade’s rulings concerns the severity of the infringement. This can be measured, for example, by the extent to which a defendant plays a leading role in the conduct. Legal entities may be framed as leaders when they play significant roles in the collusion – such as scheduling meetings and preparing documents with instructions on the conduct. As for individuals, Cade has already considered shareholders, administrators, or persons who hold other important company positions or who were instrumental in the conduct’s negotiations to be leaders in this sense.  

Other mitigating and aggravating factors outlined in Cade’s guidelines include:  

• Whether the defendant acted in good faith; 
• The advantage the defendant gained or sought; 
• Whether the offense was fully realized in practice;  
• The degree of harm or risk of harm to free competition, the Brazilian economy, consumers, or third parties; 
• Adverse effects on the market; 
• The defendant’s economic situation, which can be used as a mitigating factor if it can prove it is in financial distress (e.g., it has filed for bankruptcy or judicial reorganization); and  
• Recidivism – in this case, fines will be doubled. 

 Once the calculation basis and the fine base have been defined and aggravating and mitigating factors taken into account, Cade’s next step is to ensure that the calculated fine falls within the parameters set in Article 37 of the Brazilian Competition Law. 

Cade’s guidelines also revisit the authority’s previous decisions on cartels from when Law No. 8,884/1994 was in effect (prior to the enactment of the Brazilian Competition Law in 2011). In these cases, the law applied should be the one that is more favorable to the defendant. Typically, the parameters for conviction set out in the current law are more favorable to companies and individual administrators, whereas the parameters in Law No. 8,884/1994 are more favorable to legal entities that do not engage in business activities and to non-administrator individuals. Although this is the common view, defendants can argue and prove that one law or the other is more beneficial in their specific case. 

The guidelines also emphasize the importance of weighing up the effects of non-pecuniary sanctions provided in the Brazilian Competition Law to ensure the negative effects do not outweigh the positive effects. 

Although Cade’s guidelines are not binding and Cade’s decisions constantly evolve, their publication is an important step in making the process Cade’s Tribunal generally adopts for calculating cartel fines more visible. It also presents an overview of recent decisions, providing greater transparency and clarity. At the same time, experience suggests that the specifics and details of each case can still significantly impact the final penalties that apply to each situation. 

For more information on the subject, please contact Mattos Filho’s Antitrust practice.