Today’s post is from Mauro Grinberg who is a partner at Grinberg Cordovil in Brazil. Mr. Grinberg is one of the leading competition lawyers in Brazil and is a former Commissioner of CADE, the Brazilian antitrust agency.
Cartels and Leniency in Brazil
Cartels have obviously been violations of the Brazilian Law but, due to low and unfruitful enforcement, most of the Brazilian businesses were not very worried about it. Moreover, the economic policies until the mid and late 90s were to call the members of a certain market and talk to them altogether in order to make them lower the prices of certain goods. It happened with cars, tires, milk, coffee, etc. Now we can see that most cartels were sort of “sponsored” by the Government.
Of course this has changed and a landmark decision was issued in 1999 by the Brazilian antitrust agency, Conselho Administrativo de Defesa Econômica (CADE) against the three producers of sheet steel. The scenario was so blurred at that time that the three CCOs of the companies traveled together from São Paulo to Brasília where they held a meeting with the authority in order to communicate that they have raised their prices due to the inflation rate. They intended to have the blessing by the authority, as it had always happened and they had no means to know it would be different this time. And it was. An investigation was opened and they were accused of conducting a cartel and convicted in 1999. Needless to say, the companies went to Court against such conviction but there is not a definitive decision after 15 years.
Since then, things have changed dramatically and now it is clear for the big business that cartels are against the law; usually they know quite well the “do´s” and “don´t’s” list. The fact that in most of the markets there are foreign companies, used to the antitrust law in their countries of origin, helps a lot. Also, these companies are keen to implement compliance programs which not only are educational tools but also help to detect violations of the law.
From here we go to the leniency program, where these violations can be uncovered and reported (and in most cases are). In the past it would be difficult to imagine the existence of whistleblowers in Brazil, due to some behavioral traditions. Not anymore, maybe because of the foreign business culture which has been inoculated in our culture but also because of the growing consciousness of the illegality. Of course the incentives play an important role.
However, it is so far very clear to the observer that the vast majority of the leniency agreements happens in markets that bear the participation of foreign companies. Brazilian business is still skeptical about leniency. But this also may change because the authorities are now going after middle markets and trade associations (including those joining doctors, dentists, real estate agents, etc.) in which apparently compliance programs are not even thought of. Gas stations, mainly in small towns, are facing cartel accusations, often with evidence showing that no one was very worried about being caught.
It is to think that both compliance and leniency programs will soon be used by these groups. Meanwhile, however, there has not been a strong awareness of the illegality of competitors acting together. A lot more of advocacy is needed to get to such point; in the meantime, conflicts are arising and will arise facing these groups and their illegal methods.
A remark about the role of Courts is important here. In Brazil any decision or act by the Public Administration (including the antitrust authorities can be taken to and questioned by the Courts. The antitrust authority tried to argue that the Courts could only review procedural matters but was not successful. Although Courts recognized that this is a Constitutional guarantee for the parties, we must understand that the system in Brazil is very slow, mainly when dealing with antitrust law, which is rather new in Brazil. We can understand that Judges are pretty much used to arguments related to the due process of law but not so much when it comes to antitrust law. It is, we hope, a question of time.