The private antitrust enforcement in Brazil is still incipient. The importance of this topic has increased gradually since 2010 and it is in the spotlight of the Brazilian antitrust community after a judicial decision and new legislative proposals have been launched in 2016. The main question concerns the balance of the development of damages vis-a-vis the Brazilian competition public enforcement policy, as it will be further explained.
Article 47 of Law 12.529/2011 ("Brazilian Antitrust Law") sets forth the possibility of any injured party of anticompetitive conducts to seek compensation for damages. This provision was already in the former Brazilian antitrust law but, to date, the legal provision has not been sufficient to foster private actions in Brazil: "Up to 2011, the number of civil antitrust actions brought was slightly more than 21"1.
Among the possible obstacles to the development of antitrust civil claims, it is worth mentioning the lack of a culture of damage claims in Brazil, the difficulty in proving and assessing the harm, the uncertain of the statute of limitation applicable to damages, the lack of familiarity of judges with antitrust and the costly and time-consuming Brazilian Judiciary System.
The discussion of damages in the antitrust policy start to grow when in 2006, a steel distributor opened the first antitrust damage action in Brazil, after the Brazilian Competition Authority's ("CADE") decision to convict steel producers cartel in 2005.
The first relevant step taken by CADE to boost private actions was in 2010 in the industrial and hospital gases cartel2. At that time, CADE innovated and, among the penalties applied to the parties found guilty of cartel, it forwarded copy of the conviction decision to potential injured parties such as hospitals associations , the Companhia de Saneamento do Estado de São Paulo ("SABESP"), the National Industry Confederation, the Ministry of Health, among others. As consequence, customers, such as hospitals associations and SABESP brought damages claims against gases cartel members. CADE did the same on the cement cartel case3 in 2014 and forwarded its decision in which it found the cement producers guilty of cartel to the main customers and affected parties. Both cases are under judicial review where the case records are kept confidential. These two cases are among the highest fines ever imposed by CADE.
The civil action related to the compressors cartel4, brought by direct purchasers, was a milestone in the development of private actions. This lawsuit resulted in the Brazilian Superior Court of Justice ("STJ") ruling5 that the Leniency Agreement signed with CADE should become public after the issuance of CADE's General Superintendence opinion (the body's investigative unit) which happens before the case is forwarded to CADE's final ruling. The judicial decision touched a very sensitive issue. The compressors cartel investigation was based on a Leniency agreement. By ordering the disclosure of the investigation, the decision infringed the legal protection granted to the leniency Beneficiary's identity.
This decision may put important tools of public enforcement – the Leniency Agreement and Cease and Desist Order ("TCC") – at stake. The Brazilian public enforcement policy relies essentially on the Leniency and Settlement programs, being the main investigative tool used in almost 90% of the recent investigations by CADE. The Leniency grants criminal and administrative immunity, while the TCC awards a reduction up to 2/3 of the applicable fine in the pecuniary contribution obliged to settle. Nevertheless, in both cases, civil immunity is not guaranteed to the Beneficiaries/Signatories.
In order to sign a Leniency or the TCC in cartel cases, applicants must plead guilty and "effectively" collaborate with the investigation by providing information and documents related to the anticompetitive conduct. Based on those requirements, third parties could easily use those evidences to demonstrate the liability of Beneficiaries/Signatories in a civil action discovery.
The increased risk of condemnation in a civil action despite the administrative and criminal immunities (the latter in case of Leniency), in case of disclosure of the evidence voluntarily delivered to the competition authority and the guilty plea may discourage interested parties in settling with CADE.
In addition, under the Brazilian Civil Code and the Consumer Defense Code, defendants are jointly and severally liable for damages. Therefore, in case private enforcement/damage actions is established, there is a high risk that the leniency's Beneficiary or the TCC's Signatories become the only liable party held responsible for the full harm6.
The joint and several liability puts the Leniency Beneficiaries and the TCC's Signatories in a worse position than the parties that have not collaborated with the antitrust authority.
Considering the risk to the efficacy of the Leniency and TCC policies, the mentioned STJ's decision authorizing the disclosure of the Leniency Agreement's related documents has reignited the debate on the limits to private antitrust enforcement.
This controversial issue – Leniency and TCC vs. private actions – inspired a new draft resolution ("Resolution") launched by CADE in late 2016. This proposal received several comments from the society and it is still not in force. The purpose of the Resolution is to encourage private actions, balancing the impact of transparency on the incentives to the parties to render evidence to the authority. It focuses on the definition of rules of access to documents and information arising from Leniency and TCC.
The current discussions and the development of private antitrust enforcement in Brazil is in line with international practices. CADE's Resolution relies on a study about the private enforcement system in different jurisdictions and considered rules that are applied and tested internationally. The United States has the most successful and well-established private enforcement system. Other examples of jurisdictions that have recently turned their attention to encourage private actions are the European Commission, according to the Directive 2014/104 on Antitrust Damages Action, and the United Kingdom, through the recently established
voluntary redress scheme. The Resolution relies also on a study of the private enforcement system in such international jurisdiction by CADE.
On one hand, damage claims may benefit consumers harmed by anticompetitive strategies and, consequently, may be an additional deterrence mechanism against cartels, bid rigging and unilateral conducts.
On the other hand, important tools of public enforcement, such as the Leniency and Settlement policies may be discouraged due to the increased risk of damages actions. It is important to strike a balance between public and private enforcement that mat impact the competition policy as a whole.
Three core issues emerge from the interaction between public and private enforcement: (i) the scope of confidentiality of documents provided under Leniency and TCCs by the competition authority, which is the subject of the Resolution; (ii) the joint liability of cartel members (with no limitation to the Leniency's Beneficiaries and TCC's Signatories; and (iii) a clear definition of the statute of limitation applicable to such actions.
As regards the first issue, the general rule is that documents and information provided under a Leniency and TCC negotiations receive confidential treatment. The Resolution intends to bring more certainty on which type of documents will be disclosed to third parties and at each stage of the procedure.
One proposal is to create three type of records – a public version, a confidential version exclusively to damages claims and a confidential version restricted to authorities. The access to documents by third parties would vary depending on the stage of the process: the negotiation stage, the investigation/discovery phase and after a decision has been rendered by CADE. For example, under this proposal, documents such as the Infringement Report, which describes the conduct and the involvement of the parties and is attached to the leniency and the TCC, and all the sensitive and confidential information about the signatories will be kept in the version restricted to authorities only for an indefinite term even after CADE's decision.
A better regulation of the access to documents, in line with international best practices, is essential to guarantee the credibility of the Brazilian authority to sign agreements with foreign companies in international cartels. Otherwise, injured parties in an international cartel could try to obtain access to documents in Brazil to file damages claims in other jurisdictions.
CADE's Resolution also sets forth a reduction in the applicable fine and to the pecuniary contribution in settlement cases if the parties are able to prove that they have already compensated injured parties. It aims to encouraging parties to voluntarily compensate damages, therefore reducing time and judicial costs, benefiting injured parties.
In addition to the commented Resolution, another initiative to boost private actions is the Senate Bill no 283/2016 ("Bill"). The Bill's main provisions on the matter are the following: (i) the establishment of "double damages" for antitrust infringements, except for those parties who signed a Leniency or a TCC with CADE; (ii) the provision that signatories are not jointly liable in cartel cases, only for the damages they caused; and (iii) the definition that the statute of limitation for civil actions will count as from the final decision rendered by CADE.
Aligned with the Resolution, the Bill also aims to promote private actions and to protect the Leniency and TCC policies by rising consumers compensation through the double damages provision and, at the same time, by excluding leniency/TCC's signatories from a joint liability of it.
The definition of the statute of limitation brings legal certainty to civil actions and enable as well incentivize third parties to wait until CADE renders its final decision to seek damages. This measure reinforces CADE's competence over antitrust matters and reduces judicial questioning during CADE review of the case.
Considering the importance of striking a balance between public and private enforcement, CADE's Resolution approval is much awaited and it is expected to early 2018. The Bill's approval will also bring significant changes, but it may take longer to be enacted. In fact, these two proposals have enhanced the debate on private actions and on how to achieve a right balance between private and public enforcement, in order to strength the Brazilian competition policy in a whole.
- Study mentioned at CADE’s Opinion on the Public Consultation 5/2016. From the original “Estudo indica que, até 2011, pouco mais de vinte ARDC haviam sido ajuizadas no País”.
- Administrative Process no 08012.009888/2003-70.
- Administrative Process no 08012.011142/2006-79.
- Administrative Process no 08012.000820/2009-11.
- Brazilian Superior Court of Justice – Special Appeal no 1.554.986-SP (2015/0219111-7).
- According to the Brazilian Civil Code, the liable party is entitle to collect damages from the other parties, but on a separate action that may take years to have a decision rendered.