The Brazilian Competition Act (Law No. 12,529/2011) is the primary statute dealing with cartels in Brazil. The Brazilian Competition Authority – the Administrative Council for Economic Defense (“CADE”) – is responsible for enforcing the Competition Act. In practice, cartels are prohibited by Article 36 of the Competition Act and its paragraph 3, even though the law does not expressly provide for the word “cartel” in the list of antitrust violations:

“Art. 36. The acts which under any circumstance have as an objective or may have the following effects shall be considered violations to the economic order, regardless of fault, even if not achieved:

I – to limit, restrain or in any way injure free competition or free initiative;

II – to control the relevant market of goods or services;

III – to arbitrarily increase profits; and

IV – to exercise a dominant position abusively.

(…)

3 The following acts, among others, to the extent to which they conform to the principles set forth in the caput of this article and its clauses, shall characterize violations of the economic order:

I – to agree, join, manipulate or adjust with competitors, in any way:

a) the prices of goods or services individually offered;

b) the production or sale of a restricted or limited amount of goods or the provision of a limited or restricted number, volume or frequency of services;

c) the division of parts or segments of a potential or current market of goods or services by means of, among others, the distribution of customers, suppliers, regions or time periods;

d) prices, conditions, privileges or refusal to participate in public bidding;

II – to promote, obtain or influence the adoption of uniform or agreed business practices among competitors;

(…)” (convenience translation provided in CADE’s website¹)

Bid riggings may also constitute violations to the Anticorruption Act (Law No. 12,846/2013) and the Public Procurement Act (Law No. 14,133/2021). In addition, under a criminal law perspective, Law No. 8,137/1990 provides that cartel behaviour is also defined as a crime, with penalties varying from 2 to 5 years in prison and fines for individuals.

In general, there is no express industry exemption in the Brazilian Competition Act.

Footnote(s):

¹ Please refer to https://cdn.cade.gov.br/portal-ingles/topics/legislation/laws/LAW%20N%C2%BA%2012529%202011%20%28English%20version%20from%2018%2005%202012%29.pdf

Cartels are examined under a per se rule by CADE. Therefore, there is no need for a cartel to effectively produce effects to be considered a violation under an antitrust perspective in Brazil. This is reinforced by Article 36 of the Competition Act mentioned above, which establishes that potential effects are sufficient for the assessment of an antitrust violation.

The Brazilian Competition Act provides in its article 2 that the law is applicable to practices performed entirely or partially in Brazil or to practices that produce or that may produce effects in Brazil. Therefore, the law applies to conducts that occur outside Brazil and that produce or may produce effects in Brazil.

Under an antitrust perspective, CADE is responsible for investigating practices provided in the Competition Act in an administrative sphere. The Judiciary Branch may also apply the Competition Act if asked to by private or public entities (such as the Public Prosecutor’s Office, for example).

CADE’s General Superintendence (“SG/CADE”) is the entity responsible for launching and investigating antitrust violations at CADE. CADE’s Board may also adopt additional investigative measures whiling examining an administrative proceeding. The launching of a case by the SG/CADE may be initiated ex officio, by a claim in CADE’s reporting channel or via a formal complaint from a private or public entity. Depending on the supporting evidence, SG/CADE may launch a preparatory proceeding to examine whether the practice reported is subject to CADE’s jurisdiction; and/or an administrative inquiry to investigate violations to the Brazilian Competition Act. As a rule, the preparatory proceeding must be concluded by the SG/CADE within 30 days; and the administrative inquiry must be finalized within 180 days; but both terms may be extended by the SG/CADE with supporting reasons.

Depending on the results of the administrative inquiry, the SG/CADE may launch a formal administrative proceeding, in which penalties may be applied to the defendants (who may be, for example, legal entities, trade associations or individuals). The decision to launch a formal administrative proceeding must contain information on the names of the defendants, their conducts under investigation, information on legal basis for the launching, and the order to serve the defendants. After the last service receipt is filed to the case records, the defense term of 30 days is triggered and the defendants may file documents, request for additional production of evidence and appoint witnesses to be heard by CADE, in addition to filing the specific defense.

SG/CADE will examine the evidence produced by defendants, request for new evidence to be produced, if applicable, and may schedule hearings for the defendants and/or witnesses to provide their comments about the facts. SG/CADE will also grant the defendants with a 5-day term to present final arguments after the discovery phase is completed. SG/CADE will then produce a technical note recommending the shelving of the case to CADE’s Board or the conviction of the defendants.

The case will be assigned to a CADE Commissioner, who will request CADE’s General Attorney and the Public Prosecutor’s Office to draft their respective opinions about the case. The Reporting Commissioner may also determine additional evidence or investigative steps to be produced. After all investigative steps are taken, the Reporting Commissioner will include the case in CADE’s Board judgement docket to be examined by all seven Commissioners of CADE and the Board will decide by majority vote the case, whether to convict all/certain defendants or to shelve the case partially or totally. There is no mandatory term for the administrative proceeding to be finalized by CADE, but there are two statutes of limitations to be considered: (i) the interim statute of limitation of three years, in case no investigative steps are adopted by CADE (such as official letters requesting for information and technical notes); and (ii) the statute of limitations of 12 years for the practice to be sanctioned, which may be interrupted by any judicial or administrative act aiming at investigating cartels or by the service of the defendant.

Based on CADE’s Internal Rules, the SG/CADE may adopt the following investigative measures in cartel investigations: request for information and documents to any private legal entities or individuals and governmental bodies, treating as confidential information subject to confidentiality; request for hearings; request the Judicial Branch to authorize dawn raids to be conducted by CADE to inspect objects, documents, corporate books, computers and others; request for documents, case files and objects of criminal, civil or administrative proceedings from other entities, including those ongoing in the Judiciary Branch.

Legal privilege of attorney-client communications is protected by Article 7, item II, of Law No. 8,906/1994, which provides the rules for lawyers and the Brazilian Bar Association. Based on the legal wording, the office, the work instruments, the written, electronic, telephonic or telematics communications from lawyers in the exercise of their work are inviolable. Therefore, the Brazilian law is clear in prohibiting access to attorney-client communications. Exception to the inviolability of the work product of lawyers may occur in case there is evidence of crime performed by the lawyer directly. In any case, the attorney-client communication would remain protected.

The Brazilian Bar Association also published a specific regulation (207/2021) clarifying that legal privilege is also applicable to documents and communications produced by in-house counsel registered in the Brazilian Bar Association.

There are no emphatic rules for the attorney-client communication of lawyers qualified outside Brazil and the client, but, in theory, those communications should be also protected.

The possibility of applying for leniency is established in Article 86 of the Brazilian Competition Act. In order to qualify for leniency, applicants (legal entities and/or individuals) must comply with certain requirements, including the requirement of being the first one to apply.

The benefits of the leniency program are (i) full immunity to the applicant, including criminal immunity, in case CADE was unaware of the illegal practice; or (ii) discount of one third to up to two thirds of the applicable fine, in case CADE was already aware of the illegal practice, as well as criminal immunity. The leniency agreement does not provide for immunity against other potential measures and lawsuits that may be initiated as a result of the confession of the cartel behavior. Notably, leniency agreements do not provide for immunity against potential damages claims, against potential civil public lawsuits (ação civil pública) and against the consumer protection institutes (Procons) that may try to initiate an investigation in relation to the applicant.

In order enter into a leniency agreement, the applicant must comply with the following requirements:

1. leniency is available to the first applicant;
2. the applicant must completely cease its involvement in the practice;
3. the SG/CADE must not have sufficient evidence regarding the facts;
4. the applicant admits its participation in the practice and cooperates with the investigation, providing evidence (for example, emails, minutes of meetings, telephone messages, Excel files or any other documents and testimonies as supporting evidence); and
5. that the cooperation results in the identification of other legal entities and/or individuals participants of the practice.

Leniency is only available to the first applicant in Brazil – if the application is made by a company, its employees and executives may also benefit from the same application. Under Brazilian law, there is no possibility for applications from second or third entities/individuals as in other jurisdictions. In case a leniency is not available, all defendants in an antitrust investigation in Brazil may apply to the benefits of the settlement program.

According to CADE’s Internal Rules, the request for a marker may be made in writing or orally and, if available, a marker will be issued by the SG/CADE within five business days after the request is made. Markers may be obtained prior to presenting evidence of the violation in order to assure that a certain applicant is the first to qualify for leniency. However, once the marker is issued the leniency proposal shall be presented within a deadline to be established by the SG/CADE, which usually may be extended, providing the following:

1. the leniency applicant’s complete identification; II. details of the alleged violation or under investigation; III. the identification of the other participants of the violation reported or under investigation; IV. the products or services affected; V. the geographic area affected; VI. the estimated duration of the violation reported or under investigation; VII. a description of the information and the documents that will be submitted upon execution of the Leniency Agreement; VIII. information on other proposals of Leniency Agreements concerning the same practice submitted in other jurisdictions, as long as there is no prohibition on doing so by the foreign authority; IX. information on other proposals of Leniency Agreements concerning the same practice, submitted in other jurisdictions, as long as there is no prohibition on doing so by the foreign authority; X. that the leniency applicant has been advised to seek legal counsel; XI. that the leniency applicant is aware that failure to comply with the orders of SG/CADE will lead to the rejection of the Leniency Agreement proposal.

In order to obtain a marker, an immunity applicant must provide information about (i) the applicant itself; (ii) the other known participants of the violation; (iii) the products and/or services affected by the violation; (iv) the geographic scope of the violation; and (v) if possible, the duration of the violation.

The request for a marker is treated as strictly confidential by CADE. If a leniency application is not available, the applicant shall not be jeopardized for trying to obtain the marker. It will still have its right to full defense if an investigation is actually launched and the investigation may not be initiated solely based on such marker.

The negotiations will be then started and may or not lead to the execution of a formal leniency agreement.

One of the requirements for a leniency agreement to be accepted by CADE is the obligation of applicants to fully and permanently cooperate with the investigation and the administrative proceeding up to its final decision by CADE’s Board. Applicants must also appear at CADE at their own expense when requested to. In practice, this means that the applicant may be required to provide clarifications to documents provided, to provide CADE with labour information from its current or formal employees, to attend in hearings from CADE, among others, even though requests from CADE to leniency applicants are not frequent after they execute a leniency agreement.

The Brazilian Competition Act provides that one of the benefits from leniency is criminal immunity. That immunity is applied only in relation to individuals (regardless of their job positions), as, in general, there is no criminal liability to companies in Brazil (except for specific cases, such as environmental law).

There is the possibility of a “leniency plus” agreement (leniência plus) based on the Brazilian Competition Act. The leniency plus programme grants the applicant with a reduction of 1/3 of the penalty applicable. That would be possible if the applicant, although not being able to settle a leniency agreement in a case A and applies for a settlement agreement in that case A, could reach the leniency agreement in another cartel investigation (case B), by providing relevant information and complying with the other requirements of the leniency agreement. If that happens, the applicant would receive all the benefits of leniency in the second infraction (case B), besides a reduction of one third of the fine in the first investigation (case A).

Under the Brazilian Competition Act and CADE’s Internal Rules, defendants in administrative proceedings may request to enter into settlements with CADE before the decision of the administrative proceeding by CADE’s Board (therefore, it may be negotiated in the SG/CADE or in CADE’s Board). Settlements entered into with CADE in relation to a cartel infringement must contain the following clauses:

1. the obligation to cease the practice under investigation or its harmful effects;
2. acknowledgement of participation in the practice under investigation;
3. duty to cooperate with the investigation of the case: the cooperation may be implemented in several ways, including by providing documents, interpretation of documents and/or making individuals available for deposition; and
4. payment of a pecuniary contribution to the Diffuse Rights Protection Fund (Fundo de Defesa de Direitos Difusos).

Settlement proposals may be submitted only once, by a confidential request for a marker. After the receipt of a marker, the applicant must file a formal request for the settlement negotiation to the case files within five days. In case the company or individual lets the marker lapse, CADE must not use the marker request against the company or individual. The filing of the settlement request does not stay the investigation. Therefore, all steps of the related investigation, including the potential offering of evidence, shall continue normally.

After filing the request, the SG/CADE will determine a term for the settlement negotiation, which is usually of 60 days for the SG/CADE and 30 days for CADE’s Board, and the term may be extended. During the negotiation of the settlement agreement, the SG/CADE will be assisted by a negotiation committee.

The negotiations will be carried out with the negotiation committee, but the General Superintendent will have the final word in relation to each issue under discussion. Upon conclusion of the negotiation period, the General Superintendent will render a final substantiated non-binding report to CADE’s President with his recommendation for the approval or the rejection of the settlement agreement.

At the end of the negotiation period, the final version of the settlement agreement will be scheduled for judgment by CADE’s Board, which may only approve or reject the proposed settlement agreement. In case of approval, the case will be stayed in relation to the applicant until the final judgement of the administrative proceeding by CADE’s Board, which will confirm whether all obligations were met by the applicant and shelve the case in relation to the applicant, if this is the case.

The main favorable aspects of a settlement are the following: (a) predictability in relation to the value to be disbursed; (b) the possibility of avoiding other non-monetary penalties; (c) quick timing for resolution; (d) the avoidance of recidivism; and (e) reduction of the fine that would be paid in case of a conviction. On the payment of the pecuniary contribution to the Fund for the Defense of Collective Rights, the financial contribution is based on scenarios of potential fines that CADE may apply to the settlement applicant.

The definition of the pecuniary contribution follows a three steps process: (i) the definition of the basis for calculating the fine; (ii) the percentage of the potential fine that would be applicable (0.1% to 20% of the gross turnover of the company in the sector of activity); and (iii) definition of a percentage of discount. All steps are negotiated separately and the pecuniary contribution may not be lower than 0.1% of the gross turnover of the company in the sector of activity under investigation, in the year preceding the initiation of the investigation.

The pecuniary contribution to be paid by the settlement applicant will take into consideration the scope and usefulness of the cooperation of the applicant to the investigation, as well as the time in which the settlement proposal was filed. Whenever possible, the following parameters should be taken into consideration:

1. the first applicant to file for settlement will have to pay a pecuniary contribution equivalent to the expected fine, reduced by a percentage varying from 30% up to 50%;
2. the second applicant to file for settlement will have to pay a pecuniary contribution equivalent to the expected fine, reduced by a percentage varying from 25% up to 40% (the discount may not be higher than the discount granted to the first applicant);
3. the remaining applicants will have to pay a pecuniary contribution equivalent to the expected fine, reduced by a percentage of up to 25% (the discount may not be higher than the previous discounts granted by CADE to other defendants).

In case the settlement is negotiated in CADE’s Board, the maximum discount is 15%.

On the other hand, entering into a settlement with CADE may increase the exposure to potential civil claims, considering that the applicant will acknowledge its participation in illegal practices. In any case, Law No. 14,470/2022 has recently added to the Brazilian Competition Act that the signatories of leniency or settlement agreements with CADE will be held liable only for the damages that they caused to the injured parties and will not be held as joint liable with other participants of the conduct in relation to the damages the other participants caused.

Settlement agreements do not result in benefits in terms of criminal liability to individuals. However, if the party interested in signing an agreement with CADE also wishes to simultaneously negotiate a plea bargain agreement with the Public Prosecutor and/or the Federal Police (pursuant to Law No. 12,850/2013), CADE may help the proponents with such communication, based on CADE’s Guidelines for Settlement Agreements.

In general, CADE frequently interacts with other national or international authorities regarding competition matters. Based on CADE’s Annual Report of 2023, CADE has more than 50 agreements in force with other national authorities, such as the Public Prosecutor’s Office regarding sharing of information between authorities, and efforts to promote a competitive environmental in Brazil via courses, workshops, and others.

Under a worldwide perspective, CADE announced that it has cooperation initiatives with 40 countries and other international organizations related to benchmarking and analysis of cases. CADE also attends several international and national events on competition.

It is a practice that CADE considers documents and information shared by other authorities (national or international) in the analysis of the cases and is also attentive to publicly available information on investigations in other countries.

The Brazilian Competition Act provides for pecuniary and non-pecuniary sanctions for legal entities, trade associations or individuals that may be applied directly by CADE (without the need of approval by a Judicial Court) due to cartel activities.

The pecuniary sanctions are established by Article 37 of the Brazilian Competition Act, including fines (a) for companies of 0.1 to 20% of its gross turnover in the sector of activity in the year preceding the investigation; (b) for individuals: values of BRL 50,000 to BRL 2 million or fine of 1% to 20% of the fine applied to the company depending on the job position of the individual; and (c) other entities (such as trade associations), values of BRL 50,000 to BRL 2 million, as established below:

“I – in the case of a company, a fine of one tenth percent (0.1%) to twenty percent (20%) of the gross sales of the company, group or conglomerate, in the last fiscal year before the establishment of the administrative proceeding, in the field of the business activity in which the violation occurred, which will never be less than the advantage obtained, when possible the estimation thereof;

II – in the case of other individuals or public or private legal entities, as well as any association of persons or de facto or de jure legal entities, even if temporary, incorporated or unincorporated, which do not perform business activity, not being possible to use the gross sales criteria, the fine will be between fifty thousand reais (R$ 50,000.00) to two billion reais (R$ 2,000,000,000.00);

III – if the administrator is directly or indirectly responsible for the violation, when negligence or willful misconduct is proven, a fine of one percent (1%) to twenty percent (20%) of that applied to the company, in the case set forth in Item I of the caput of this article, or to legal entities, in the cases set forth in item II of the caput of this article.” (convenience translation provided in CADE’s website)

Non-pecuniary sanctions are established by Article 38 of the Brazilian Competition Act, including (i) publication, at the expense of the defendant, of a summary of CADE’s decision in a newspaper or in the website of the company, for example; (ii) debarment sanction of at least five years; (iii) registering the defendant in the National Registry of Consumer Defense, even though this Registry does not yet exist, the sanction has been applied by CADE; (iv) recommendation to entities with jurisdiction to apply a compulsory licence of intellectual property or to apply sanctions related to taxes (prohibition to pay taxes in instalments or cancelation of tax incentives); (v) structural sanctions related to splitting the legal entity, transferring corporate control, among others; (vi) director disqualification, that is, prohibiting an individual to exercise commerce on his/her own name or as representative of a legal entity for up to five years; and (vii) any other measure necessary to eliminate the harmful effects to the economic order.

In terms of criminal law liability, there is no criminal liability for companies for practices provided in the Brazilian Competition Act, but only for individuals. Law No. 8,137/1990 provides that cartel is also a crime, with penalties varying from 2 to 5 years in prison and fines.

CADE’s Board should take into account the following parameters to decide which penalties to apply against each defendant convicted in a specific case, based on Article 45 of the Competition Act: severity of the violation; good faith of the defendant; advantage obtained or envisaged by the defendant; whether the practice was consummated or not; the extent of damages or threatened damages to competition, national economy, consumers and third parties; the negative effects produced in the market; the economic situation of the defendant and recidivism.

CADE has recently published its guidelines on how to calculate fines in cartel cases. Considering the maximum rate of 20%, CADE provides the following recommendations in its Guidelines: (a) for bid rigging, that the rate for the fines varies from 14% to 17%; (b) for hardcore cartels, regardless of whether they are domestic or international: rate from 12% to 15%; and (c) other collusive practices: rate from 5% to 8%. Those ranges are usually considered by CADE in its decisions.

Article 33 of the Brazilian Competition Act provides that companies or entities belonging to the same economic group will be held joint liable when at least one of them engages in the practice of violation to the economic order. The legal wording does not expressly provide in relation to what the companies will be held joint liable and there are discussions in Brazil if the companies may be held as joint liable for the payment of fine or for the performance of the antitrust violation. In any case, it appears to be more acceptable to consider that the joint liability is related to the payment of fine under a competition law perspective.

Article 47 of the Brazilian Competition Act provides that private actions and/or class actions may be filed due to the infringement of the cartel rules, regardless of the existence of an investigation for the same facts by CADE. This means that private actions and/or class actions may be filed supported or not by an antitrust conviction by CADE (that is, follow-on or stand-alone lawsuits are allowed in Brazil).

As mentioned above, the Brazilian Competition Act was recently amended by Law No. 14,470/2022 with provisions on private actions. The Brazilian Competition Act now expressly provides that the statute of limitations to file a private claim for cartel damages is five years counted from the unequivocal knowledge of the illicit act and that the publication of CADE’s final decision about the violation to the Competition Act may be considered as the date of unequivocal knowledge of the illicit act.

Both moral and material damages may be claimed and recovered in private and/or class actions for cartel damages in Brazil. The methodology to estimate damages is not a common understanding in Brazil and may be argued in a case-by-case analysis before the Judiciary Branch.

In any case, Law No. 14,470/2022 mentioned above added to the Competition Act a provision that the injured claimants will have the right of double compensation for the damages suffered due to cartel practices.

After CADE’s Board decision is handed down, defendants may file motions within five days from the publication of the minutes of the judgement session. The motions may be filed only to clarify any obscurity in the decision, eliminate contradiction, clarify an omission, or rectify a material error. It is also possible to file a reappreciation request in very limited scenarios, in which the defendants are able to support the request on a new fact or document that would be able to result in a more favourable decision for the defendant.

Any CADE decision may be also challenged before the Brazilian Judiciary Branch. This is due to the constitutional principle of independency of the Judicial Branch, based on Article 5, item XXXV, of the Brazilian Federal Constitution, which sets forth that: “the law shall not exclude any injury or threat to a right from the consideration of the Judiciary Branch” (convenience translation).

Motions and the reappreciation request must be filed at CADE’s Board to examine the requests. On the Judicial Branch, a lawsuit must be filed in a judicial court for the case to be examined.

The main development regarding CADE is related to the change in CADE’s Board composition occurred at the end of 2023. Four out seven new Commissioners (that is, the majority) have taken office in December 2023 and January 2024: three of them have bachelor’s degree in law; and one new Commissioner is economist. Based on CADE’s official figures (“CADE em Números”), there are 37 cases (including administrative proceedings, concentration acts and others) under review by CADE’s Board² and the decisions to be handed down in those cases may be relevant to understand the position of the new Board in competition matters, mainly in cartels.

One topic that may arise in this context is related to a relevant discussion that occurred at CADE in 2020. It was discussed in Administrative Proceeding No. 08700.000066/2016-90 (related to electronic components for the telecom sector) which should be the penalties for managers and non-managers based on an interpretation of the Brazilian Competition Act. One of the Commissioners concluded at that time that the Competition Act does not allow the conviction of non-managers linked to companies under investigation and that non-managers should be only held liable in case they are not linked to any companies under investigation. The understanding of that Commissioner was not the leading vote, and the majority understanding is that non-managers may be sanctioned by CADE regardless of having a link with a company or not in the practice. This topic was not yet addressed by the new composition of CADE’s Board.

Another debate that may occur in the following years is related to the estimates regarding advantage obtained through the violation to calculate the fine to be applied. In 2021, CADE’s Board decided by majority vote in Administrative Proceeding No. 08700.008612/2012-15 that CADE should try to estimate the advantage obtained by the participants of a cartel whenever possible vis-à-vis the fine to be applied. In that case, a proxy of 20% of overprice was applied to estimate the advantage obtained in the alleged bid rigging in tenders for uniforms, bags, and school materials. It is possible that discussions on how to estimate advantage obtained by the cartelists appears at the new composition of CADE’s Board.

In terms of private claims for damages, there was a relevant development in the last years, which was the publication of Law No. 14,470/2022, which added provisions to the Brazilian Competition Act on opened questions at that time related private claims, such as the statute of limitations, double damages and the related aspects for leniency and settlement applicants, as detailed above.

Institutionally, CADE also appears to be producing more documents (such as guidelines and studies) regarding competition in Brazil. In 2023, CADE published three studies (on digital platforms, telecom sector and banks and insurance companies). CADE also published working papers on measuring benefits of CADE’s activities in 2022; bibliography analysis on market power and parameters of conduct; monitoring of antitrust remedies; methodology to evaluate advocacy actions; analysis of concentration act in the airline sector; theories of harm in conglomerate mergers; and national and international experiences in non-horizontal mergers. CADE also published its guidelines on how to calculate cartel fines in 2023. More recently, in April 2024, CADE published its guidelines on trustees.

In addition to the production of documents, CADE appears to continue to be engaged in cooperation with other authorities in Brazil and worldwide to promote competition.

Footnote(s):

² Based on publicly available information from 9 April 2024.

See answer to question 24.

See answer to question 24.