On January 23rd, 2017, Cade convicted the companies Elegê Alimentos S.A., Thurmer & Leitzke Ltda. and Indústria de Laticínios Santa Silvana Ltda., the cooperatives Consulati and Coopal, the syndicate Sindilat and several individuals of cartel in the Type C pasteurized milk market in the Pelotas micro-region.
The Federal Police Department of Pelotas started to investigate the case in 2004, after they received a complaint made by a local milk producer. The Department counted with under covered cops to investigate this conduct.
This case is special because of the dynamics of the cartel. Elegê and Consulati, as market leaders, enforced the participation of other smaller companies in the cartel, by threatening them with predatory pricing, and used this tactic to ensure that they followed the prices imposed by them.
The Companies, in fact, kept their prices below the cost of production between June 2003 and early 2004, but Cade’s Commissioners did not agree if it characterizes predatory pricing or not, as well as its importance on the organization of the cartel, which existed from January/February of 2004. During the cartel, prices were set at around R$ 1,00, with smaller companies charging R$ 0,95.
Despite the divergence between the Commissioners, Cade’s Tribunal understood that the practice of predatory pricing is the price reduction in order to exclude competitors from the market, for the subsequent charge of monopoly prices. In other words, an exclusionary goal must exist. However, in the present case, the predatory pricing was used as a coercive and maintenance mechanism of the cartel.
The companies were only convicted of cartel practice. However, the divergence was extended to the calculation of the fine, with two Commissioners arguing that it should be based on the advantage received by the companies, while the majority agreed to base it on 2011 gross revenue.