The Supplementary Bill of Law No. 265/07, which aims at ending the longstanding conflict between the Brazilian Central Bank (BACEN) and the Administrative Council for Economic Defense (CADE), prevailed over one more obstacle last month: it has been preliminarily approved by the Brazilian House of Representatives’ Constitution, Justice and Citizenship Commission (CCJC). The conflict between BACEN and CADE revolves around the needed delimitation of which one of them is competent to monitor and decide on penalties to antitrust-related acts and conducts within the financial system. Both have been competing for this correspondent authority for more than 14 years. Despite both bodies having, a priori and mostly, different purposes in regards to their analysis (BACEN – systemic risk analysis, and CADE – competition issues), the current laws in force do not clearly allocate the competence between them. For instance, under Art. 18 of Law No. 4,595/1964 – which creates the National Financial System (SFN) –, BACEN is responsible for setting out the antitrust conditions among the financial institutions. On the other hand, Law No. 12,529/2011 – which structures the Antitrust Brazilian System (SBDC) – sets forth that SBDC (by means of CADE) is responsible for preventing and suppressing the infractions committed against the economic order (Art. 1st). It is worthy to mention that under the antitrust law no exception to this intervention is made, either within the banking system or in other economic sectors. From this legal uncertainty derives the current competence conflict between CADE and BACEN. In order to set said conflict aside, the Federal Attorney General’s Office issued a legal opinion in 2001 (Opinion AGU/LA-01/2001, attached to Opinion GM-020, on the exclusive authority of BACEN to analyze and approve of concentration acts which financial institutions were part of, as well as to regulate antitrust conditions among those institutions and to impose penalties, if applicable. This opinion was ratified by the Brazilian President on April 5th, 2001, and, under Article 40, § 1°, of Supplementary Law No. 73/1993, it bound the Federal Public Administration, including – theoretically – CADE. In this sense, a precedent of the Superior Court of Justice, which is still currently in force, establishes that operations analysis (structures control) are to be conducted by BACEN, confirming the binding nature of the aforesaid opinion, thus concluding that this system could be not subject to two regulatory bodies. It should be noted that, in this case, an appeal before the Brazilian Federal Supreme Court (STF) is still pending, although said Court has already preliminarily stated that the general repercussion requirement had not been fulfilled nor had it been derived from non-compliance with constitutional provisions. Thus, STJ’s decisions would likely prevail. Notwithstanding this fact, CADE’s case history – as recently confirmed by CADE under Administrative Proceeding No. 08700.005761/2015-67 against Banco Santander – could result in this opinion not binding the antitrust agency, considering that the ruling power of the President over the Public Administration shall be softened due to the latter’s associated principles of specialty and of decentralization (Art. 37 of CF/88). Therefore, the financial system would then be subject to antitrust laws and, accordingly, to CADE’s authority. As another conducive argument to the competence of the antitrust authority on conduct control, CADE states that both the opinion and the referred precedents are restricted to disputing the allocation of competition solely within the analysis of concentration acts, but not of conduct control. On that, CADE understands that it would be the most suitable body for monitoring these conducts, seeing that it is sufficiently empowered by the necessary background and means (search and seizure powers, execution of lenience agreements, TCC, and so on) to accomplish this task. In any event, each body should have a different approach/purpose when making such analysis, which, to the extent this scope is not disregarded, would be able to support each sphere. Apparently, after a preliminary analysis, the Supplementary Bill of Law is attentive to this parceling of expertise fields. Said Bill aims at revising Law No. 4,595/1964 and Law No. 12,529/2011, in order to clarify which bodies are competent in each case. Under this Bill, as for concentration acts, BACEN shall be responsible for deciding on the acts involving financial institutions and which affect the “reliability of SFN”. Thus, a transaction shall be firstly analyzed by BACEN. After that, if it finds that such act does not compromise the “reliability” of the sector, it shall be sent to CADE. Particularly within the financial sphere, this bill sets forth that the analysis by CADE of concentration acts involving financial institutions must end within 60 days; otherwise, said acts will necessarily come to pass. As to the conduct analysis, under this bill CADE shall be responsible for preventing and suppressing all violations to the economic order within the scope of SFN, whereas BACEN shall assess and impose ensuing penalties to financial institutions which conducts are harmful to the competition and are committed prior to the effectiveness of the Supplementary Law. In view of the fact that this proposal duly regards each authority’s particularities, one can conclude that it may be seen in a positive light, at least in a preliminary manner, since the associated legal uncertainty is detrimental to the market. In this sense, measure results from an allocation of competence based on the main focuses (systemic and antitrust ones) of each authority, so that both are able to interact in a concerted manner and smoothly. Nevertheless, the gray area of which concrete cases could actually affect “reliability” of the financial sphere still remains.
*Dipl.-Jur. Fabian Andreas Jägerhuber with Bachelor of Laws (LL.B) degree from Germany, research worker at Gleiss Lutz law office and a former exchange legal intern at GCA from July to September, 2015.Lawyer at the Menold Bezler law firm.