Court votes to open new investigations into the fuel sector

Court votes to open new investigations into the fuel sector

During CADE’s 197th Ordinary Court Session, held on Wednesday May 25th, 2022, Commissioner Gustavo Augusto re-opened a preparatory procedure (“PP”) that had been filed by CADE’s General Superintendence (“SG/Cade”) the week before. The PP was originally initiated from a representation prepared by the Union of the Petroleum-Derived Retail Commerce of the State of Bahia (Sindicombustíveis Bahia), the Petrobras Engineers Association – Bahia Nucleus (AEPET-BA), the Brazilian Association of Political Amnesty of the Petrobras System, and other by State Companies against MC Brazil Downstream Participações S.A. (ACELEN), who acquired the Mataripe refinery in Bahia.

Under the terms of the representation, AELEN is accused of selling A-type gasoline and S10Diesel at higher prices in the state of Bahia, compared to other states where it supplies lower volumes with higher logistic costs. Price lists of all of Petrobras’ refineries and a price spreadsheet published by AELEN on its website were presented to support the allegations for the purpose of comparing prices of commercialized fuels. Thus, the representation alleged an arbitrary increase in profits and abuse of a dominant position.

The PP had originally been filed, due to insufficient evidence of a violation of the economic order.

When voting for the re-opening of the case, Commissioner Gustavo Augusto said that there was indeed a price discrepancy in what was charged compared to the performance of the new refinery and Petrobras, and that the higher-than-expected prices may be a sign of a violation of the economic order. Thus, it would be necessary to investigate the presence of the following three (3) factors:

  1. Arbitrary pricing;
  2. Market power; and
  3. Existence of at least one of the conducts foreseen in the antitrust legislation.

In view of the factual conditions, Commissioner Gustavo Augusto suggested the opening of two (2) administrative inquiries. And pointed out that the SG/CADE may include other defendants in the investigations:

  1. To investigate the possible price discrimination imposed to the purchasers of “Type-A Gasoline” and “S10 Diesel” produced at the Landulpho Alves Refinery (RLAM), also known as the Mataripe Refinery, apparently harming purchasers in the state of Bahia; and
  2. To investigate the possible practice of upstream price discrimination, specifically the investigation into whether the price of crude oil practiced by the supplier of the refinery in question (Petrobrás) is compatible with the sale prices of the commodity to the company’s own refineries, as well as if the amount is compatible with the sale made by the company in the exportation of the referred to commodity.

President-Commissioner Alexandre Cordeiro reiterated the terms of Commissioner Gustavo Augusto’s vote emphasizing that the investigation is relevant, since it is a structural measure to try to solve important issues in the market, as well as to bring light on any necessary advocacy work within the sectoral regulation.

Additionally, he emphasizes the necessity to ensure a healthy competitive environment in the upstream market of refineries, so that there is acquisition of raw materials, particularly crude oil, and that the refining can be done in Brazil under competitive conditions. It is essential to have options in the purchase of crude oil and that there is a tax dispute regarding the ANP (Regulatory Agency for the sector) reference price. He states that it is likely that there will be difficulty in acquiring raw materials, due to the way in which the market is organized. He then concludes by highlighting that the investigation can help to understand whether an adjustment in regulation is necessary or not.

The appeal was approved by the Court, and the case was sent to SG/Cade for further investigation. Written votes have not yet been made available.