Feb 09, 2021
The 171st Ordinary Trial Session of the Court of the Administrative Council for Economic Defense (Cade), which took place last week, brought up a relevant discussion on the conviction of individuals. The topic was addressed during the judgment of Administrative Proceedings nº 08700.000066/2016-90 and nº 08700.009879/2015-64.
Commissioner Sérgio Ravagnani adopted an innovative interpretation of Article 37 of Law 12.529/2011, which defines the penalties imposed for breaching the economic order. In the Commissioner’s view, the fines established in art. 37 would not be applied to non-administrative individuals related to legal entities. This understanding goes against Cade’s jurisprudence. However, the interpretation suggested by the Commissioner would not exclude the application of the “Appearance Theory”, according to which any individual who is not formally an administrator could be considered as such and consequently penalized, if proven to have the power of decision and interference. For the Commissioner, it is necessary to delve deeper into the analysis and individualization of the conducts in these types of cases.
In order to reach this conclusion, the Commissioner analyzed the legislative history of the referred to article 37, thereby concluding that the legislator chose not to expressly include these people in the list of subjects to which article 37 applies. This would not mean that the law is not applicable to these individuals as a whole.
Moreover, when analyzing the legal text, the Commissioner concluded that item II of art. 37, when referring to “other persons”, refers to the text that precedes it and not to what succeeds it. In this way, item I of the same article refers to individual entrepreneurs or other individuals not related to legal entities. In the Commissioner’s view, there is a clear break in the logic followed by articles 36 and 37 starting from art. 37, III. While art. 36 and 37, I and II, adopt strict liability – the proof of authorship and materiality of the fact being sufficient for there to be condemnation, item III of art. 37 inaugurates the adoption of subjective liability, which is required to apply the penalty, as well as proof of the authorship and materiality of the fact, – proof of the subject’s guilt and intent. In this understanding, individuals who are not administrators would be subject to the financial penalties, according to article 37, based on item II. Thereby, they would be included in a regime of strict liability, seemingly unfair, in the Commissioner’s view.
The Commissioner mentioned precedents that resulted in the conviction of individuals with low incomes and without administrative power, in which they were subject to the payment of fines very similar to those the administrators, concluding that these distortions would reflect a misinterpretation of the Law. Commissioners Lenisa Prado and Paula Azevedo agreed with this understanding.
The Representatives of the Federal Prosecution Officer (MPF), Commissioner Hoffmann and President Alexandre Barreto, issued memorials and votes disagreeing with the new interpretation. The MPF pointed out that passive legitimacy before Cade would be regulated by art. 31 of Law 12.529/2011, which says the “Law applies to individuals or legal entities governed by public or private law.” This indicates that it would not be limited to administrators only. Besides this, art. 37 of Law 12.529/2011, in its item II, refers to “other individuals”, including “expressly and undoubtedly”, individuals who contribute to the practice of illegal activities, which should not be confused with the company’s administrators. However, being aware that individuals, as well as depersonalized entities or non-business companies, would not always have profitable revenues, the basis for calculating the fine applied to companies in general, the legislator would have opted to apply an alternative form of penalty, establishing the minimum and maximum amounts for the applicable fine. Therefore, there would be no obstacle to imposing a fine on subordinates, employees, or self-employed agents involved in violations of the economic order.
In the same way, Commissioner Luiz Hoffman concluded that the legislator did not want to exclude companies that are not administrators from applying competition law, but only to differentiate the amount of the fine imposed on them. Thus, in doing so, the judge would be adopting a more restrictive interpretation of the law, which would violate the principle of legality.
He also made mention of some other concerns, such as the risk of this understanding of competitive enforcement; the lack of consensus on the concept of an administrator, implying a risk of expanding the appearance theory, resulting in greater legal uncertainty; and the possibility of ensuring a greater scope in the criminal sphere, classifying cartel conduct as a crime, in relation to the administrative sphere, thus violating the principle of the last rationale of criminal law. President Alexandre Barreto aligned himself with Commissioner Luiz Hoffmann’s understanding, emphasizing that the fact of having extensive jurisprudence on the matter itself, would not prevent a review of the applied understanding, but that the inexistence of controversies regarding the applied understanding, is for good reasons.
By majority, the Tribunal dismissed the understanding defended by Commissioner Sergio Ravagnani in the judgment of PA No. 08700.000066/2016-90. Although, the judgment of PA 08700.009879/2015-64 has been suspended due to a request for viewing, and therefore, it has not yet been concluded.