1) Initiation of the Administrative Proceeding
The administrative proceeding that investigated an alleged cartel involving graphite electrodes was initiated by a Technical Note presented by the Secretariat for Economic Monitoring (“Secretaria de Acompanhamento Econômico” – SEAE), and forwarded to the Secretariat of Economic Law (“Secretaria de Direito Econômico” – SDE).
According to the SEAE, the investigated companies¹ were previously convicted by the US and the European Union antitrust authorities for price fixing and splitting the graphite electrodes’ global market between the years of 1992 and 1998. The SEAE conducted an investigation to verify the potential effects of the cartel in Brazil and concluded that Brazilian consumers were harmed by the practice, recommending that an administrative procedure be initiated by the SDE. The SEAE’s document was signed by the then General-Coordinator Mrs. Mariana Tavares de Araújo.
After the analysis of the documents forwarded by the SEAE, the SDE undertook an additional discovery phase and determined the commencement of the Administrative Proceeding n. 08012.009264/2002-71, through an order also signed by Mrs. Mariana Tavares de Araújo, who was the Secretary of Economic Law at the time.
2) The allegation of nullity and the legal opinions emitted by the authorities
Preliminarily, the Defendants claimed that the administrative proceeding was null due to a legal obstacle regarding the conduction of the proceeding by the Secretary of Economic Law, because she was responsible for the same procedure in the SEAE.
However, after the discovery phase of the process was carried out, CADE’s General Superintendence (“Superintendência-Geral do Conselho Administrativo de Defesa Econômica” – SG)² sent the case to Cade’s Tribunal, refusing the argument of nullity and recommending the conviction of the Defendants.
Similarly, Cade’s Attorney General (“Procuradoria Geral do CADE” – Procade) and the Federal Public Prosecutors (“Ministério Público Federal” – MPF) emitted legal opinions regarding the case. Procade defended the administrative proceeding’s formal-procedural regularity and alleged that there was no nullity during the proceedings. On the other hand, MPF argued the existence-characterization of the interim statute of limitations, since some of the acts practiced during the inquiry would not interrupt the limitation period, and then recommended the termination of the administrative proceeding.
3) The Settlement Agreement
After the pronouncement of the legal opinions mentioned above and due the likely scenario of the Defendants being condemned, the company Hydro Aluminium Deutschland Gmbh (“Hydro” – previously denominated Vaw), concluded a Settlement Agreement with CADE, in which it recognized its participation in the alleged cartel³ and paid a pecuniary contribution as well. In return, the suspension and termination of the administrative proceeding was agreed upon⁴.
Even if the administrative proceeding was suspended in relation to the party that celebrated the Settlement Agreement, the explicit acknowledgement of guilt may generate implications in other areas. In the criminal field, it could serve as a legal foundation of a criminal case, since the participation in a cartel is a crime in Brazil, as well as an administrative infringement. In the civil field, it could be used as a suit requesting damages, on account of harm suffered as a result of the cartel.
4) Cade’s decision and its challenges
On October 15th, 2015, Cade rendered a decision that surprised the Market: it accepted the preliminary argument of nullity of the administrative proceeding argued by the Defendants, stating that “the previous manifestation on the facts of the case prevents the same person from deliberating on the initiation of the Procedure”.
This is certainly a positive decision, because it demonstrates CADE’s utmost attention to important issues concerning due process and the right of defense. However, this decision creates some issues regarding the existence of a Settlement Agreement.
The first of these issues is related to the existence of a Settlement Agreement after the Administrative Proceeding that originated it was declared null. Should the Settlement Agreement be annulled as well or is its conservation not linked to the Administrative Proceeding? This issue should be discussed when defining if the Settlement Agreement is an instrument linked or independent to the process.
Also, should the pecuniary contribution be returned to the defendant? This does not seem to be a difficult issue to deal with. Considering that the pecuniary contribution is paid in exchange to the shelving of the proceeding regarding the interested party, it should not matter the reason why it was shelved in relation to the other defendants.
An issue that is not so simple is if the acknowledgement of guilt is still valid for civil suits requesting damages and in the criminal field. This seems to be the most critical topic. Nevertheless, considering the logic of CADE’s recent decisions, it is reasonable that the acknowledgment of guilt be maintained. After all, when joining the Settlement Agreement, the company recognizes to have practiced an action only in exchange for the shelving of the administrative proceeding. Any other implications that the acknowledgement of guilt could bring should not be expelled with the nullity of the Administrative Proceeding.
Finally, with regards to the evidence produced throughout the annulled administrative proceeding, it seems that they cannot be utilized. Because of the principle of due process of law, the nullity of the proceeding implies in the nullity of everything that was produced as a result of it.
These are issues that demand reflection by the authorities, scholars, the public in general, and mainly from the interested parties in entering into agreements as the Settlement Agreement. Anyhow, CADE’s decision deserves to be praised, since it contributed to the evolution of Competition Law in Brazil.
Article published previously on December 2nd, 2015, in the website Jota
¹ Graftech International Ltd. (denominated Ucar International at that time), SGL Carbon SE, Showa Denko K.K., Tokai Carbon Co. Ltd., Mitsubishi Corporation, SEC Carbon Limited, Nippon Carbon Co. Ltd., Carbide/Graphites Group e Vaw Aluminium AG.
² When Law 12.529/2011 went into force the SG took over the role of SDE, which was extinct.
³ Article 185. When dealing with an investigation of an agreement, combination, manipulation or adjustment between the competitors, the settlement agreement must contain recognition of the party’s participation in the practiced investigated. (Freehand translation).
⁴ The Administrative Proceeding n. 08012.009264/2002-71 was dismembered with regards to Hydro, generating the Administrative Proceeding n. 08700.007247/2014-85. However, for the elaboration of this paper, both will be considered as a sole proceeding, since they investigated the same events.