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Memorandum to Clients - Antitrust | Cade discusses when alleged international cartel cases are deemed to have effects in Brazil

31Jan2017Jan31,2017
Antitrust

CADE’s Tribunal provided, during judgment sessions, further guidance for the assessment of international cartels, indicating when they are considered able to produce effects in Brazil, in breach of Brazilian competition law.

These decisions were issued in cases examining the market for certain electronic components,1 glass components for cathode ray tubes,2 plastic products3 and thermoplastic elastomers4 (“Cases”). In all these Cases, CADE entered into leniency agreements with the parties, which admitted to breaching Brazilian law and acknowledged CADE’s decisions.

In order to determine whether the alleged violations had effects in the Brazilian market, CADE, when reviewing the Cases, considered the following criteria: (i) evidence that Brazil (or Latin or South America) was an explicit target of the alleged cartel; (ii) evidence that the alleged cartel had a worldwide scope and included Brazil; (iii) whether the allegedly cartel products were directly exported to Brazil; and/or (iv) whether the allegedly cartel products were used as material for finished products exported to Brazil.

In cases when the alleged cartel had a clear regional scope and did not include Brazil, the fact
that the cartel members exported to Brazil did not induce CADE to rule against the companies
under investigation. This was precisely the position adopted by CADE in the plastic products and thermoplastic elastomers cases. In both cases, CADE ruled that the evidence presented in the case files indicated that the alleged coordination among competitors involved exclusively the Hong Kong and Chinese markets. CADE then concluded in these cases that the alleged cartel had no effect in Brazil and did not violate Brazilian competition law, despite sales of relevant products to Brazil.

In one of the Cases5, CADE’s General Attorney suggested that CADE should take into account only the effects that are “predictable, direct and material” when assessing whether an alleged international cartel is able to affect the Brazilian market. CADE’s Tribunal disagreed with this standard, declaring that it is irrelevant if the effects are predictable or whether they originate from direct or indirect sales to Brazil. According to the Tribunal, it is enough that the effects are material and may significantly affect the Brazilian market. In order to analyze the materiality of the effects, the Tribunal examined the volume of direct imports of the allegedly cartelized products into Brazil and their importance as materials for other finished products exported to Brazil, and concluded that the supposed cartel should be punished under Brazilian competition law.

The defendants fined by CADE in the above and similar investigations may resort to Brazilian courts to challenge CADE’s position on international cartels and their ability to generate effects in Brazil. As these challenges are filed, Brazilian courts will need to express their views with respect to such an important element of CADE’s anti-cartel enforcement.

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1 Administrative Proceeding No. 08012.005255/2010-11.
2 Administrative Proceeding No. 08012.005930/2009-79.
3 Administrative Proceeding No. 08012.000774/2011-74 and 08700.009161/2014-97.
4 Administrative Proceeding No. 08012.000773/2011-20.
5 Administrative Proceeding No. 08012.005255/2010-11.


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