São Paulo 19.07.2018
Al. Santos, 787, 8th floor
São Paulo/SP - Brazil - 01419-001

Daniel Tobias Athias

The policy of cracking down and prosecuting cartels – classified as one of the most harmful violations to competition by the Organization of Economic Co-operation and Development – OECD – has been the main objective of antitrust authorities worldwide. Placing this objective as a priority arises from the damages caused by this conduct to the economy as a whole and the imposition of higher prices to consumers; it is estimated that cartels result in overpricing of approximately 10-20% in comparison to a competitive market³.

Antitrust authorities have been systematically searching for ways to make their policies more effective, including encouraging private suits by those who suffered damages from anticompetitive conducts. In CADE’s case, a higher degree of liability in the civil sphere is one of the authority’s explicit and reiterated objectives⁴, which has actively sought to incentivize reparations for private damages, including by means of forwarding administrative decisions to organs concerning consumer defense, Public Prosecutors and private agents who may have been affected.

In spite of the authority’s efforts, suits of this nature are still rare, which can be explained by the very nature of long term commercial relationships between companies. For example, in cases where one of the accused agents is still a supplier of a product there would not be an interest to file these types of claims and break up commercial relations. Or by the difficulties of a procedural/legal nature of civil liability concerning the need to prove an act, nexus and damages in court⁵.

No que concernem às dificuldades processuais, uma decisão recentemente proferida pelo Superior Tribunal de Justiça poderá servir para avançar o objetivo do CADE de maior utilização de ações de danos privados, facilitando o ingresso em juízo pelas partes afetadas; embora seja necessário também ponderar que a decisão poderá trazer consequências imprevistas que poderão afetar a política de combate a cartéis como um todo.

A Terceira Turma do STJ, em sede do Recurso Especial nº 1.554.986/SP, decidiu pela limitação da confidencialidade de dados de acordo de leniência firmado com o CADE, afirmando que “não se pode admitir sua [sigilo] protração indefinida no tempo, perdendo sentido sua manutenção após esgotada a fase de apuração da conduta (…)” de forma que competiria ao CADE “prestar informações e fornecer cópias dos autos dos procedimentos administrativos ao Poder Judiciário, quando requeridas para instruir ações judiciais (…)”.

In regards to the procedural difficulties, a recent decision handed down by Brazil’s Superior Court of Justice can serve to advance CADE’s objective to increase the use of suits concerning private damages, facilitating the filing of claims by affected parties; albeit it is necessary to ponder that the decision can bring about unforeseen consequences that may affect the policy of prosecuting cartels as a whole.

The Superior Court of Justice’s Third Group, in Special Appeal no. 1.554.986/SP, decided to limit the confidentiality of data from leniency agreements with CADE, affirming that “one cannot admit that [confidentiality] be extended indefinitely in time, this would lose sense after the phase of conduct investigation has ceased (…)”, where it would be up to CADE to “provide information and supply copies of the administrative case files to the Judiciary when requested to be attached to the judicial case files (…)”⁶.

This decision could be analyzed under various aspects, with many important points that merit direct attention. However, in this opportunity, focus will be directed to some of these points.

In the aforementioned matter, a legal suit was filed seeking reparations from damages caused by a cartel against the members who had been part of the conduct and subsequently entered into leniency and plea agreements with CADE, where the plaintiffs requested that Requests for Information be sent to CADE and to the SDE so that the documents of the Administrative Proceeding be presented.

The Judiciary Branch’s stance has been to accept the position of the antitrust authority regarding the confidentiality of documents, being that the Trial Court had affirmed that “the evidence collected by CADE and SDE concern the general protection of competition, defending free competition as a collective right, opposite to the private interest of the suit”.

Nevertheless, and presenting new understanding, the Third Group stated that the initial confidentiality of the agreements would be essential to encourage the collaboration with the antitrust authorities, but the general rule on administrative proceeding is of public disclosure. In regards to Law nº 12.529/11, it was affirmed that “by providing for confidentiality applicable to leniency agreements, the legislator was more emphatic, imposing this obligation with regards to proposed agreements. Therefore, it is deducted that, apart from the agreement proposal, the other acts and documents, even though related to the leniency agreement, are subject to the general rule, with exceptions allowed based on the collective interest. (…) the confidentiality extended exceptionally beyond the agreement proposal depends on solid circumstances based on collective interests (…)”.

The decision refers to the three stages of negotiation provided by CADE’s Internal bylaws (agreement proposal, negotiation stage and formalization of the agreement), being that, if an agreement was not reached/approved, the proposal would not be disclosed and the documents would be restored to the party. According to the Superior Court of Justice, the first two stages would be confidential until the conclusion of the preliminary discovery phase of the administrative proceeding — manifested in the presentation of the General Superintendence’s Opinion with its recommendation to the Court. Thereby, it was concluded that there were no obstacles to access by the Judiciary to the documents provided by the leniency agreements, where those who “contain industrial secrets, which obviously cannot be confused with documents that demonstrate exchange of information regarding price fixing, must be punctually analyzed by the competent judge”.

The most interesting point of the STJ’s decision, which will conduct the rest of this analysis, is the statement that “the ‘award’ for those who join the leniency program is restricted to the administrative and criminal spheres, with no legal mention of civil liability to parties eventually harmed by the conducts practiced against the market”, being appropriate to shed light on positive and negative aspects of this stance.

De outro lado, considerando que a autoridade antitruste exige das partes de um acordo a confissão expressa de sua participação na conduta colusiva, inclusive apresentando provas da conduta de forma a colaborar com as investigações em curso, uma disponibilização destas informações, que tornariam mais fáceis a propositura de ações de indenização, poderá reduzir o interesse das empresas neste tipo de acordo. Ressalta-se que as empresas avaliam a conveniência e oportunidade de assinarem estes acordos – às vezes essenciais para a condenação da prática pela autoridade – e as suas consequências colaterais, no que tange responsabilização em outras esferas.

One effect of this decision can be to encourage harmed agents to file suits claiming damages, which could imply major disbursements by the agents who practiced the collusive conduct, rendering the cartel activity more onerous by the effective liability in all spheres (administrative, civil and criminal). In other words, private enforcement would also have a public/collective nature of deterrence⁷.

Furthermore, granting access to these documents assists plaintiffs in overcoming the difficulty of burden of proof to prove the existence of the act and harm suffered (the extension of which, however, will continue to be difficult). In the words of the Reporting Superior Court Justice, “by impeding access, the companies prevent third parties eventually harmed from seeking reparations to the damage caused”⁸.

On the other hand, considering that the antitrust authority requires that the parties explicitly confess their participation in the collusive conduct, including by means of presenting evidence of the conduct in order to collaborate with ongoing investigations, disclosure of this information, which would make filing private damages suits easier, may decrease the interest of companies in this kind of agreement. It is worth emphasizing that companies evaluate if signing these agreements – which are sometimes essential for the authority to prosecute cartels – is opportune/appropriate, as well the collateral consequences regarding liability in other spheres.

The guarantee of confidentiality of the information and documents presented in regards to the conduct to the authority is an essential factor for companies, CADE itself, in answering a request for information submitted in the case files of the aforementioned legal suit, emphasized that “unrestricted access to the information/documents obtained from the leniency agreement can generate irreparable harm to the investigation of the cartel and the leniency program as a whole, as it creates a strong disincentive for companies to seek out this type of agreement, depriving Brazil’s prosecution of cartels from one of its most efficient tools”⁹ . In this sense, a suit for private damages could be more effective if filed against a leniency party, due to CADE’s requirement of an explicit confession, which can reduce incentives to enter into this type of agreement¹⁺.

Another issue being raised is the (im)possibility of filing private damage suits when the matter is still under discussion by the antitrust authority, due to procedural economy and timeliness; since the materiality and the participants of the conduct are being investigated by the specialized authority based on the same evidence. After CADE’s definitive decision, a party could present the same evidence and case files to the Judiciary, where, in this independent sphere of liability, the administrative decision can be considered or another analysis can be undertaken¹¹ . Likewise, the (im)possibility of filing private suites whilst a suite seeking annulment of the administrative decision is under analysis by the Judiciary. The same issue under discussion would determine the connection between suits or, at least, their dependency.

Private legal suits can have a central role in antitrust policy, although these are very incipient in Brazil, having a clear pedagogic and dissuasive effect on illegal conducts (US treble damages are worth mentioning, where the harmed parties will be compensated in triple from damages suffered by cartel violations). Nevertheless, it’s imperative that clear rules about the confidentiality of the documents¹² and information produced by the lenient or committed parties be put in place, under risk of harming an essential instrument for detection¹³ and prosecution of cartels.

¹Translation by Victor Tafaro.
²Pursuing a Master’s Degree in Law at USP. Lawyer at Grinberg e Cordovil Advogados.
³ CADE, in its administrative proceedings, usually presents a translation of the definition of “hardcore cartels” developed by the OCDE, which “(…) cause damages to the consumers and businesses that acquire their products, by increasing the price or restricting supply. As a result, some buyers decide to not buy the product in the price established by the cartel or buy it in a lesser quantity. Thereby, the buyers pay more for the amount they buy, which allows, even without their consent, the transfer of wealth to the cartel members. Besides that, cartels generate waste and inefficiencies. They protect the members from total exposure to the market, reducing the pressure to control costs and innovate, resulting in a loss of competitiveness by the national economy”.
⁴“The fine established by the Council does not repair material and moral damages caused to specific agents. The compensation for such damages should be pursued through the adequate legal measures. The most significant measure is the public civil suit. (…) Private suits filed by the victims of the cartel seeking compensation for damages causes also deserve to be mentioned. The utility of private suits for promoting competition has already been proven in foreign jurisdictions. In the United States, where the law establishes that people harmed by the cartel have the right to an amount equivalent to three times compensation (ordinarily) due, private litigation has been transformed into a key element of antitrust policy in the country. It’s one more factor of discouraging an infraction”. Decision by Commissioner Fernando Furlan in Administrative Proceeding nº 08012.009888/2003-70.
⁵One is aware of the possibility of adopting the procedural institute of inverting the burden of proof and the adoption, by the new Civil Procedure Code, of the dynamic distribution of the burden of the proof. Although, in the first case there is still the matter of which agents would be benefited by this mechanism and, in the second case, it is not yet known how this will be applied by the Courts.
⁶Comentando o uso do conectivo “ou” no atual art. 47 da Lei nº 12.529, Tercio Sampaio Ferraz Jr expõe que isso “significa que mesmo na defesa de seus interesses individuais a ação tem a ver com poder econômico abusivo e proteção de um bem com os olhos na atribuição de riscos prováveis. Tanto que os prejudicados individuais podem não só reclamar perdas e danos como também obter a cessação de práticas que constituam infração da ordem econômica”, ou seja, o enforcement privado estaria conectado ao interesse público, tendo eventual condenação efeito de indenizar a parte prejudicada, bem como caráter dissuasório ou repressivo. In. Direito da concorrência e enforcement privado na legislação brasileira. Revista de Defesa da Concorrência. nº 2, nov. 2013, o qual apresenta abordagem interessante sobre o tema.
⁷ Law nº 12.529: Art. 11. The Commissioners of the Tribunal shall: X – provide the Judiciary, whenever required, with information on the progress of the cases, and with copies of the records to be part of the legal case. Art. 13. The General Superintendence shall: provide the Judiciary, upon request, with information on the progress of investigations, being also allowed to provide copies of the records to instruct legal proceedings; and
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⁹According to the article published by Mlex, CADE’s current president, Vinícius Marques de Carvalho, affirmed that “confidentiality matters are important not only for the investigation per se, but also to preserve a later trial”.
¹⁺ By the way, it’s worth mentioning the conclusion of the case Pfleiderer AG v. Bundeskartellamt da European Court of Justice: “The provisions of European Union law on cartels, and in particular Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 101 TFEU and 102 TFEU, must be interpreted as not precluding a person who has been adversely affected by an infringement of European Union competition law and is seeking to obtain damages from being granted access to documents relating to a leniency procedure involving the perpetrator of that infringement. It is, however, for the courts and tribunals of the Member States, on the basis of their national law, to determine the conditions under which such access must be permitted or refused by weighing the interests protected by European Union law.”. In this case, the Advocate General affirms thay: “Where a national competition authority operates a leniency programme in order to ensure the effective application of Article 101 TFEU, parties adversely affected by a cartel may not, for the purpose of bringing civil-law claims, be given access to self-incriminating statements voluntarily provided by leniency applicants and in which the applicants effectively admit and describe to the authority their participation in an infringement of Article 101 TFEU as this could substantially reduce the attractiveness and thus the effectiveness of the authority’s leniency programme and in turn undermine the effective enforcement by the authority of Article 101 TFEU. While the denial of such access may create obstacles to or hinder to some extent an allegedly injured party’s fundamental right to an effective remedy and a fair trial guaranteed by Article 47, in conjunction with Article 51(1), of the Charter of Fundamental Rights of the European Union, the interference with that right is justified by the legitimate aim of ensuring the effective enforcement of Article 101 TFEU by national competition authorities and private interests in detecting and punishing cartels.”
¹¹Although the decision pertained to the administrative and criminal spheres, it’s worth mentioning the STJ’s conclusion in a habeas corpus: “(…) 4. Under the rule of law, due (fair) process imposes the temperance of the principle of independence of the administrative and criminal spheres, prohibiting the judge from its discretionary faculty of disregarding the conclusions of the state’s watchdogs about the inexistence of the fact defined as illegal, due to lack of being provided for as an offense, illegality or guiltiness, to criminally prosecute a citizen with the and applying restrictions to their liberty. 5. It is right that this independence also works as a guarantee that the violations to the laws will be evaluated and tried by the competent branches, with the indispensable freedom of the party; however, such autonomy shall not set itself as a dogma, stifling those whose interpret and apply the law, under risk of departing from the desire of truthfulness; as so, the situations in which the facts that permeate all the areas of law are considerable. (…) (HC 77.228/RS, Rel. Ministro NAPOLEÃO NUNES MAIA FILHO, QUINTA TURMA, julgado em 13/11/2007, DJ 07/02/2008, p. 343)
¹²The European Union, for example, approved Directive no. 2014/104, which deals with the access to evidences for compensation actions by violation to the competition. Florian Wagner-von Papp comments on the matter stating that this rule can seem ineffective “because they only enable national courts to order disclosure but do not mandate disclosure”; although, the “principle of effectiveness may require any national court ‘to use all procedures available to it under national law, including that of ordering the necessary measures of inquiry, in particular the production by one of the parties or a third party of a particular document’.” In Access to Evidence and Leniency Materials.
¹³ Commissioner João Paulo de Resende, in the trial of Administrative Proceeding no. 08012.001029/2007-66 and stipulation of fine for an anti-competitive conduct, applied a detection factor, mentioning OCDE’s study Report on the Nature and Impact of Hard Core Cartels and Sanctions Against Cartels, which says that: “It is widely agreed that an effective sanction against a cartel should take into account not only the amount of gain realized by the cartel but also the probability that any given cartel will be detected and prosecuted. Because not all cartels are detected, the financial sanction against one that is detected should exceed the gain actually realized by the cartel. Some believe that as few as one in six or seven cartels are detected and prosecuted, implying a multiple of at least six. A multiple of three is more commonly cited, however”.