The Supreme Court of the United States has just confirmed that it has selected the Libor case for trial (remembering that the Supreme Court has the power to choose the cases it must judge). This is a landmark case, because a group of investors has accused many huge banks of manipulating the Libor tax (London Interbank Offered Rate) in their favor, which constitutes a violation of the free competition right that should exist among the banks. The first degree judge has understood it was a normal cooperation and his decision has been confirmed at the appellate level. The Supreme Court may start the hearings of the case in the second semester of 2015.
This mention in the Libor case shows the importance of the subject, regardless of the result of the Supreme Court’s decision: financial institutions may also practice acts against the free competition. Indeed, John Connor in his Working Paper nº 14-04 for the American Antitrust Institute, called “Big Bad Banks: Bid Rigging and Multilateral Market Manipulation”, shows the big amount of competition cases in which there are accusations against financial institutions. Obviously the value judgement (“big bad banks”) is not ours to make, but it is presented here in order to emphasize the importance of the matter. By the way, many financial and investment contracts are based on the Libor tax, which means the consequences of its eventual manipulation are comprehensible.
The same reasoning applies for Brazil, recalling that Minister Dias Toffoli, from the Federal Supreme Court (STF), has recently issued a first degree decision refusing an appeal from the Administrative Council for Economic Defense (CADE) against a decision from the Superior Court of Justice (STJ), which, on its turn, had understood that the Central Bank (BACEN) was competent to judge mergers of financial institutions, not the Administrative Council for Economic Defense. Although it is possible to appeal for the Superior Court of Justice’s Plenary, our purpose here is to verify how this decision influences or not the judgments of conducts – violations to the economic order – practiced by the financial institutions. Who is competent to judge them: BACEN or CADE?
Minister Dias Toffoli has refused the appeal simply because, in his vision, it was not a constitutional matter. Therefore, even with the threat of a contrary decision from the STF’s Plenary, we keep the STJ’s decision, in which the Reporting Minister Eliana Calmon has explicitly made reference “to the transactions involving the transfer of control of financial institutions”. It means that the present decision is limited to mergers, particularly when there is transfer of share control. So, we shall verify if the STJ’s decision can also be raised for judgments of violations to the economic order (as the Libor case, which processing has not been publicly mentioned in Brazil).
Minister Eliana Calmon’s vote mentions the Bank Law (Law 4595/64), saying that BACEN “will regulate the conditions of competition between financial institutions”. It has also mentioned, more generically, that the Bank Law in this plan was not repealed by the Antitrust Law (Law 8884/94, prevailing at that time). Thus, we have a decision whose operative part (it means its order, the decision itself) is only about mergers, but that also mentions the foundations covered by the violation.
The only certainty we have here is that the STJ’s decision does not cover the violations directly, which lead us to the conclusion that this matter is still open, in strictly justice terms. It is possible, if there is no prior agreement between BACEN and CADE and if no superior resolution arises, that, by now, both entities are competent to issue their decision and, afterwards, the Judiciary will have to decide. We could end this doubt, but we prefer to go further and say that, in a strictly practical view and by its experience, CADE is more prepared for such analysis; it is true that the systemic “risk argument” (possibility of races and prima facie to interventions of whom is unfamiliar with the market particularities), so important in concentration acts, cannot be alleged in violation cases. Therefore, we believe CADE is the competent body to judge violations to the economic order practiced by financial institutions.