Global Investigations Review - The law and practice of international investigations

The Investigations Review of the Americas 2018

CADE's recent developments and challenges

Public Policy and Management Officer, CADE’s International Unit

Since May 2012, with the entry into force of the Brazilian competition law, Law 12,529/11, the Brazilian competition policy system has undergone significant changes. These changes resulted in a unified approach to the competition policy, leading to increased efficiency and bringing together the investigative and decision-making powers of competition enforcement and policy. They also allowed the Administrative Council for Economic Defence (CADE), the Brazilian antitrust authority, to focus on relevant antitrust cases and to consolidate predictability and legal certainty within the Brazilian competition community.

Furthermore, the decision-making process regarding mergers created important institutional efficiencies. As the majority of merger cases are concentrated at the General Superintendence - the authority's investigative body, CADE's Administrative Tribunal - its adjudicative body - is able to focus on its normative competences and on its decision-making in the more challenging and complex merger cases, cartels and other anticompetitive conduct cases. In other words, this institutional configuration allows the Tribunal to focus its resources on those cases that would most significantly affect the Brazilian competition environment.

In 2012, the pre-merger review system was implemented, engendering remarkable improvements in CADE's assessment of mergers. Since then, fast-track cases, which correspond to approximately 80 per cent of all merger cases reviewed by the authority, are decided in an average of 18 days, whereas ordinary cases are reviewed in an average of 76 days, and challenged mergers are analysed on average within 135 days.

In 2016, the authority reached a quantitative balance between new notifications and the conclusion of ongoing assessments. In addition, the average time for reviewing fast-track merger cases was reduced to 16 days. The authority assessed 390 merger cases, of which 360 were approved without restrictions, six were approved with remedies, and 19 were filed. In the same period, 384 mergers were notified at the authority. Several global mega-mergers were assessed within the period. Despite the fact that the complexity of their analyses demanded additional efforts and investigative tools, the assessment of mega-mergers did not impact the authority's promptness in rendering its decisions.

The efficiencies resulting from the changes to the merger evaluation regime and CADE's organisational setup have also benefited developments and achievements in the investigation and assessment of anticompetitive conducts. The internal organisation of the General Superintendence and, in particular, the implementation of a Screening Unit, responsible for receiving and assessing complaints, and a Leniency Unit, in charge of analysing leniency applications, have contributed to the detection and deterrence of anticompetitive cases, identifying and prioritising the most harmful ones. Regarding cartel detection, the implementation of an Intelligence Unit was also a crucial improvement. The Unit is in charge of ex officio cartel detection, particularly within public procurement. Regarding the fight against bid rigging, the Unit works with other public institutions that provide data on public procurements and is able, then, to apply screens and data-mining to identify conducts potentially harmful to the economic order.

Inter-institutional cooperation with other Brazilian authorities has also contributed to a more effective competition enforcement. CADE has signed eight technical cooperation agreements with criminal law enforcers, such as the Office of the Comptroller General and the Prosecution Services. CADE's collaboration with the Office of the Comptroller General aims at integrating and improving investigations on cases that involve both anticorruption and antitrust matters. For instance, the authority has taken a significant role in the ‘Car Wash' operation, which is investigating the largest corruption and cartel scheme in Brazilian history. In this context, CADE has opened administrative proceedings on alleged cartels in public bids and for the alleged manipulation of foreign exchange rates, both involving the state-owned oil company Petróleo Brasileiro (Petrobras). The investigated practices of bid rigging also related to public infrastructure works, health products and services, and subcontractors' services.

CADE has also signed a memorandum of understanding with the Federal Prosecution Service of the State of São Paulo (MPF/SP), which foresees joint negotiations and coordination for the signature of cease-and-desist agreements with CADE, and criminal leniency agreements, under the responsibility of MPF/SP. CADE has also collaborated with the Federal Prosecution Service of the State of Paraná regarding the signing of a leniency agreement within the scope of the ‘Car Wash' operation. This specific cooperation resulted in the disclosure of a cartel in the public bids for the concession to operate the Belo Monte hydroelectric power plant.

The permanent improvement of settlement programmes has been one of CADE's priorities in recent years. CADE's leniency programme and the cease-and-desist agreement policy have been important mechanisms for a quicker and more efficient detection of anticompetitive conducts and for the law enforcement against these practices. The continuous collaboration with other enforcers, such as the Prosecution Services, has resulted in an increasing number of leniency agreements and consent settlements signed over the past years. In fact, in 2016, applications for leniency agreements increased 510 per cent considering the request for markers. In the same year, the authority reached a record of 11 new leniency and six leniency plus agreements.

In 2016, CADE's Tribunal judged 31 proceedings related to anticompetitive conducts and condemned 19 of them. The imposed fines totalled 196.6 million reais. The pecuniary contributions resulting from settlement agreements - including the cease-and-desist agreements, judiciary agreements, merger control agreements and others - totalled almost 800 million reais. Along with imposed fines, CADE has reached a record in the collection of revenues, evidencing an effective competition enforcement that includes fight against bid rigging, domestic and international cartels, as well as unilateral and other anticompetitive conducts. Cease-and-desist agreements were crucial to the deterrence of anticompetitive conducts: 93 per cent of the pecuniary amount collected resulted from these settlements.

Furthermore, CADE has sought to strengthen the robustness of the Brazilian competition policy and to maintain its efficiency by providing normative guidance and by ensuring the predictability of the system. New guidelines have been published and several internal rules have been adopted. These documents relied on contributions from the competition community and underwent public consultations that fostered dialogue between the authority, stakeholders and the Brazilian society.

In 2016, CADE amended its Internal Regulation by means of the Resolution No. 15. The Resolution instituted (i) rules regarding the access of documents and information obtained by means of the signature of cease-and-desist agreements; (ii) ranges of fine reductions that may be granted to the signatories of these settlements; (iii) deadlines for leniency agreement applications; and (iv) procedures regarding the granting of markers for leniency applicants. In the same year, CADE approved Resolution No. 16, which sets out a deadline of 30 days for the assessment of fast-track merger proceedings. Resolution No. 17, also adopted in 2016, establishes the criteria concerning associative contracts' mandatory notification.

It is also worth mentioning the adoption of Resolution No. 11, in 2015. The Resolution implemented the Electronic Information System as the authority's official system for information management. This initiative aims at reducing the duration of the cases under analysis, contributing to public transparency and decreasing public expenses. Moreover, all citizens have online access to the public versions of CADE's files and documents. This feature is particularly appreciated by companies, lawyers and other users that have to notify or negotiate cases with the authority.

In recent years CADE has published guidelines related to several aspects of its competition policy in order to promote transparency and legal certainty and to provide guidance for stakeholders, businesses and the competition community. The published guidelines are on the authority's leniency programme, its cease-and-desist agreement policy, competition compliance programmes, horizontal merger analysis and the assessment of previously consummated merger transactions. All guidelines were submitted to public consultation and their final versions considered comments brought during the consultation period.

It is also worth mentioning the partnership between CADE and the Brazilian Institute of Studies on Competition, Consumption and International Trade (IBRAC), the most important Brazilian think tank working on competition matters. IBRAC has a working group that studies and discusses best practices on competition law and policy and that frequently contributes to CADE in order to continuously strengthen the Brazilian competition environment and to disseminate the competition culture among businesses and scholars.

CADE has also engaged advocacy efforts presenting contributions to some of federal government's key institutions, such as the Ministry of Mines and Energy (MME), the Secretariat of the Investment Partnership Program (PPI) and the Institute for Applied Economic Research (IPEA). As a result of its collaboration with the MME, a study will be carried out regarding the competition environment in the oil refining and fuel distribution markets. The second initiative focuses on recommendations to stimulate the competition environment in public bids. Finally, CADE's collaboration with the IPEA aims at developing an institutional partnership and a working plan with the institute.

International cooperation is also an important feature of competition law and policy in Brazil. CADE maintains a close dialogue with several foreign jurisdictions in order to make their work converge for the purpose of more effective competition enforcement, with regard to either the resolution of anticompetitive cases or merger assessment. In addition, the Brazilian competition authority is part of, and participates actively in, relevant international competition fora, such as the ICN, OECD and UNCTAD, which contributes to the development of best practices within the international competition community. Since May 2017, CADE has been co-chair of the ICN Cartel Working Group, along with the European Union Directorate-General for Competition and the South African Competition Commission. The authority is part of the leading team discussing the anti-cartel agenda within this international forum.

In 2016, CADE signed four new international cooperation agreements. These agreements were signed with the Competition Commission of South Africa, the Federal Antimonopoly Service of Russia, the Federal Economic Competition Commission of Mexico and the competition authorities of the BRICS countries. CADE has cooperated with foreign competition authorities regarding 27 merger cases and seven anticompetitive conduct cases. International fora and foreign antitrust agencies have also been consulted for the carrying out of benchmarking and other specific studies.

CADE's successful international engagement has been acknowledged on various occasions. In 2016, the authority's advocacy initia­tive related to disruptive innovation and the car rides' applications received an honourable mention at the 2015-2016 Competition Advocacy Contest, promoted by the ICN and the World Bank Group, at the 2016 International Competition Network Annual Conference, held in Singapore. In 2017, CADE was mentioned as one of the most efficient antitrust authorities in the world during the World Economic Forum, in Davos, and won two prestigious international awards. It was elected, for the third time, as the best antitrust authority in the Americas by Global Competition Review. The authority also received this accolade in 2011 and 2015. In addition, the Concurrences 2016 Antitrust Writing Awards granted CADE's guidelines on cease-and-desist agreements for cartel cases the prize of ‘most innovative soft law related to concerted practices'.

The recent developments and achievements of the Brazilian competition authority are considerable. Nevertheless, a few challenges are yet to be overcome. CADE's budget and workforce are comparatively small to other outstanding competition authorities. In 2016, CADE had a total budget of 36,248,219 reais (US$11,122,157) and a total staff of 203 people, of which 129 worked on competition enforcement. CADE staff's professional engagement and commitment is undeniable, but the authority's enforcement actions could have an even broader impact with a larger budget and personnel.

Another challenge relates to the disclosure of documents obtained by means of leniency agreements and cease-and-desist agreements. The disclosure of these types of documents also has an impact on private competition enforcement. In this regard, CADE recently submitted for public consultation a draft version of a resolution on the procedures for the disclosure of these documents and on the instruments that may promote antitrust damage actions. The resolution also aims at regulating the procedures related to the existence of several platforms for the negotiation of leniency agreements that are signed with CADE and other Brazilian enforcers.

Finally, it is worth mentioning that, in the global context, multi-jurisdictional cooperation related to the investigation of international cartels may also be a challenge. In fact, international cooperation and convergence related to global anticompetitive conducts have not evolved as fruitfully as cooperation on mergers and acquisitions. Strengthening the global competition enforcement system and the multi-jurisdictional cooperation on international cartel cases is a challenge that may demand engagement and efforts from the international competition community.

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