Cartel leniency in Brazil: overview

A Q&A guide to cartel leniency law in Brazil.

The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.

To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.

This Q&A is part of the multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-mjg.

For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/competition-mjg.

Sérgio Varella Bruna and Patricia Agra Araujo, Lobo & de Rizzo Advogados
Contents

Regulation

1. What laws provide for a leniency programme and which regulatory authority administers it? Is there any published guidance?

Applicable laws and guidance

The Brazilian statute governing anti-trust matters is Law No. 12,529 of November 30, 2011 (Competition Act). This entered into force on 29 May 2012, replacing Law No. 8,884/1994. On the same date, the Brazilian anti-trust authority, the Council for Economic Defense (Conselho Administrativo de Defesa Econômica) (CADE) issued its own internal rules in Resolution No. 1/2012. These rules provide general guidance on Brazilian anti-trust law, especially in relation to procedural matters.

Regulatory authorities

The Brazilian anti-trust authority is the CADE (see box, The regulatory authorities). The CADE is an independent federal agency, which is composed of the following bodies:

  • CADE Tribunal (Tribunal). This is responsible for making final decisions on anti-trust infringement cases. The Tribunal is composed of seven commissioners, and the decisions are taken by majority vote. The commissioners are appointed by the President of Brazil and take office following approval from the Brazilian Senate. The commissioner's term is four years and during this time cannot be dismissed from office without good cause. This term cannot be extended.

  • Superintendency-General (SG). This is responsible for investigating anti-trust conduct. The office is headed by the Superintendent-General, who is appointed by the President of Brazil and takes office following approval from the Senate. The Superintendent-General is appointed for a term of two years, which can be extended once. During his term he cannot be dismissed without good cause.

  • Department of Economic Studies. This is responsible for the economic scrutiny of mergers and behavioural cases.

  • Attorney General Office. This is responsible for the legal support to the CADE, as well as execute CADE's decisions before the judiciary.

 

Scope of application

2. What infringements of competition law does the leniency programme cover?

The leniency programme covers:

  • Cartels and any type of collusion.

  • Bid rigging.

  • The crime of participating in a criminal organisation in connection with an anti-trust infringement (see Question 7, Circumstances).

A leniency agreement does not protect the beneficiary from civil liability for damages to third parties.

 

Recent cases

3. What notable recent cases have applied the leniency programme?

The first leniency agreement in Brazil was executed in 2003, in connection with an alleged cartel in the private security service market in the State of Rio Grande do Sul. A number of leniency agreements have followed, including applications relating to most of the main international cartel investigations (for example, electrical equipment, freight forwarding, marine hoses, electronic equipment, LCD technologies and electronic memory). At least one international chain of investigations was triggered by a Brazilian leniency application, in the refrigerating compressors case.

 

Availability of leniency

Administrative liability

4. Is full immunity from administrative penalties available? What conditions must be met for immunity to be granted?

Full immunity may be granted, although this will depend on whether the CADE has already initiated an investigation in relation to the reported collusive behaviour.

If the CADE has not initiated an investigation on the reported infringement, the applicant may be granted full immunity if the necessary requirements are met (see below). If the CADE has already initiated an investigation, it is possible for the applicable administrative penalty to be reduced by one-third to two-thirds, depending on the extent of the co-operation and good faith (see Question 5).

Immunity depends on effective co-operation with the authorities and compliance with the following requirements:

  • The applicant is the first to come forward and notify the practice.

  • The applicant completely ceases its involvement in the infringement as from the date of application.

  • The SG (see Question 1, Regulatory authorities) does not have enough evidence yet to ensure conviction of the offenders.

  • The applicant recognises his guilt in relation to his participation in the infringement, and fully co-operates with the investigation.

By effective co-operation, it is understood that the applicant must identify other participants in the infringement, and provide the CADE with information and documents able to be evidence of the offence.

A leniency agreement does not protect the beneficiary from civil liability for damages to third parties.

 
5. Is there a sliding scale of available leniency from administrative penalties?

If a company or individual is not eligible for full immunity (see Question 4) for not being the first to apply or because the SG already has prior notice of the infringement, a leniency applicant may still be granted a reduction of between one-third and two-thirds of the applicable fine, depending on the extent of its co-operation with the authorities. A company or individual that does not satisfy the conditions for leniency may still be granted a reduction by one-third of the fine if the applicant brings evidence of another offence and files for leniency (in relation to which the applicant will be entitled to full immunity (see Question 13)).

In either case, all other conditions mentioned in see Question 4, such as the need to cease involvement and recognition of guilt, must also be satisfied for the applicant to benefit from such partial immunity.

 
6. Is immunity or leniency for administrative penalties available to individuals? If so, what conditions apply?

Individuals can benefit from a leniency agreement, provided they are a party to the agreement. Further, individuals can apply for leniency even if the relevant company does not do so (although in this case the benefits will not be extended to the company).

Individuals benefit from a leniency agreement executed by their employer, provided the employee also executes the leniency agreement. Immunity will depend on whether the individual has fully ceased involvement in the infringement, recognised his guilt for his participation in the infringement, and fully co-operated with the investigation (see Question 4).

 

Criminal liability

7. Is immunity or leniency available for companies and/or its employees in relation to criminal prosecution? What are the implications for employees when an undertaking has been granted immunity or leniency?

Circumstances

The leniency programme covers criminal liability for:

  • Crimes against economic order (Law No. 8, 137/90) (cartels).

  • Bid-rigging (Law No. 8, 666/93).

  • Participating in a criminal organisation in connection with an anti-trust infringement (Article 288, Criminal Code).

The conditions that must be met are the same as those for immunity from administrative fines (see Question 4).

Proceedings against employees

Individuals can benefit from immunity from criminal prosecution provided they are also parties to the leniency agreement. Individuals can also apply for leniency even if the relevant company does not do so.

Employees' interests

Employees' interests can only be protected if they are parties to the leniency agreement, either together with their company or individually (see above, Proceedings against individuals).

 

Application proceedings

8. When should an application for leniency be made?

An application for leniency can be made at any time until the end of the investigative phase (with the remittance of the case for the Tribunal's judgment). However, only the first applicant is eligible for immunity.

 
9. What are the procedural rules for leniency applications?

Relevant authority

Applications must be submitted, orally or in writing, to the Chief of Staff of the SG.

Applicant

Applications can be made by:

  • The company or an individual solely or jointly.

  • The company or individual's legal advisors.

Informal/confidential guidance

Until the agreement is executed the entire negotiation is completely confidential. Applicants for leniency can request clarification on a hypothetical basis. Such an inquiry will not be considered an application, and will not guarantee a marker (see below, Markers).

Form of application

An application can be made either:

  • Orally, in a meeting with Chief of Staff of the Superintendent-General.

  • In writing, in an envelope sealed and marked "leniency application" and "confidential".

Oral applications can be helpful in multi-jurisdictional investigations, when discovery rules or co-operation commitments may require the applicant to submit copies of documents that they have in their possession in other jurisdictions (see Question 16).

Markers

An applicant can receive a marker to hold its position in the queue for leniency on providing the authorities with the required information and documents (see below, Information/evidence) within 30 days of the date of the application.

Information/evidence

Documents and information must be submitted that are deemed sufficient to allow the authority to pursue the conviction of the other participants in the offence. A written application must contain:

  • A brief description of the anti-competitive practice, including the products, markets and the geographic area affected by the conduct.

  • A full identification of the applicant, including its participation.

  • Identification of others involved in the practice, the market(s) affected, and the period during which the infringement has taken place.

Oral statements

Oral statements are usually accepted as evidence in investigations, but they have to be summarised in writing and signed by the applicant, after the signing of the leniency agreement.

Short-form applications

Not applicable.

 
10. What are the applicable procedures and timetable?

On filing of a leniency application, either orally or in writing, the applicant is granted with a marker (see Question 9, Markers) and an additional 30 days to comply with the conditions set out in Question 4. After all conditions are met, the leniency agreement is entered into by the applicant and the authority.

After signing the leniency agreement, the SG opens formal investigations and notifies other participants to submit their defence. The SG may carry out dawn raids (on obtaining a court warrant) before notifying the defendants. After collecting additional evidence deemed relevant, the SG prepares a report with its recommendations, and forwards the case to the Tribunal for a decision. There are no fixed deadlines and investigations usually take several years until conclusion. The grant of leniency is confirmed by a final decision of the Tribunal, provided the applicant has complied with the terms of the leniency agreement.

 

Withdrawal of leniency

11. In what circumstances and at what stage of the proceedings can leniency be withdrawn? What implications does the withdrawal of leniency from one company have for other applicants?

While it is still pending, the application can be withdrawn if applicants are not able to agree the terms of the commitments with the authority. In these circumstances, the application is not considered an admission of liability by the applicant. The proposal and negotiations are kept confidential, and all documents submitted are returned to the applicant and not admitted as evidence against the applicant.

During the negotiation stage, the authority is not bound to enter the leniency agreement. If the authorities decide not to do so, all evidence provided will be returned to the applicant, and cannot be used for prosecution purposes. The very existence of the application will remain confidential. The first position in the queue for leniency will also remain open.

Once the leniency agreement is signed, any withdrawal by the beneficiary is considered a breach of the leniency agreement. In this case, the applicant cannot apply for leniency for the following three years.

 

Scope of protection

12. What is the scope of leniency protection after it has been granted?

Leniency protection is only applicable to certain criminal and administrative liability (see Question 2). It does not protect the beneficiary from civil liability for damages to third parties.

 
13. Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market (leniency plus)?

An applicant that does not qualify for leniency in the first case will receive, on disclosing information and evidence about a second case and subject to meeting the leniency requirements (see Question 4), for this second case:

  • Full administrative and criminal immunity in the second case.

  • A one-third reduction in fines for the first case.

To receive this, the applicant must apply for leniency in the second case before the first case is sent to the Tribunal for judgment.

 
14. Does the grant of leniency affect a third party's ability to bring a follow-on damages action against a leniency applicant?

The grant of leniency does not protect the beneficiary from civil liability for damages to third parties.

 

Confidentiality and disclosure

15. What are the rules relating to confidentiality during a leniency application?

Identity disclosure

The identity of a leniency applicant is kept confidential. However, after the signing of the leniency agreement, other defendants will have full access to the evidence provided by the applicant.

Information disclosure

Other participants under investigation have full access to the documents and evidence provided by the applicant.

Confidentiality requests

Before signing the leniency agreement, the application, all related documents and the related negotiations are confidential. They become accessible to other defendants after they are notified to present their defence. However, the SG can grant confidentiality to the applicant's sensitive information or trade secrets, on request and under certain circumstances.

 
16. What are the rules concerning disclosure of statements made in support of a leniency application?

Domestic submissions and domestic discovery

According to procedural rules, defendants should only use documents submitted under a leniency agreement for their defence in SG proceedings. They should not use the documents in any other domestic or foreign proceedings. However, in the authors' view, these limitations lack legal authority, and defendants can challenge them to use the documents or information abroad or domestically, including in lawsuits against beneficiaries of leniency. Public prosecutors are entitled to use the same documents or information to present charges against other participants in the offence. Information submitted in Brazil can be made subject to discovery orders in the domestic courts.

Domestic submissions and foreign discovery

See above, Domestic submissions and domestic discovery.

Foreign submissions and domestic discovery

See above, Domestic submissions and domestic discovery.

The Brazilian authorities can require a beneficiary of leniency to co-operate with local investigations, by bringing into Brazil documents that have been produced in other jurisdictions. Information submitted in foreign jurisdictions can be made subject to discovery orders in the Brazilian courts.

 

Inter-agency co-operation

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities from other jurisdictions in relation to leniency? If so, what is the legal basis for and extent of co-operation?

There is co-operation between authorities for anti-trust enforcement in general. Exchange of information and documents is subject to domestic confidentiality rules, and can only be made on express authorisation by law, or as a result of a formal treaty ratified by the Brazilian Congress.

 

Proposals for reform

18. Are there any proposals for reform?

There are currently no proposals for reform.

 

Online resources

Council for Economic Defense (Conselho Administrativo de Defesa Econômica) (CADE)

W www.cade.gov.br

Description. This is the official website of the Council for Economic Defense.

Applicable law

W www.planalto.gov.br/ccivil_03/_Ato2011-2014/2011/Lei/L12529.htm (Portuguese version)

W www.cade.gov.br/upload/LAW%20N%C2%BA%2012529%202011%20%28English%20version%20from%2018%2005%202012%29.pdf (English version)

Description. The above websites provide Portuguese and English versions of the New Competition Act.

General information

W www.cade.gov.br/Default.aspx?9191939d62a063c79dbe95

W http://portal.mj.gov.br/sde/main.asp

Description. The above websites of the CADE and Brazilian government provide the applicable laws and general information on anti-trust legislation in Brazil.



The regulatory authorities

General Superintendence of the Council for Economic Defence (Superintendência-Geral do Conselho Administrativo de Defesa Econômica) (SG)

Head. Carlos Emmanuel Joppert Ragazzo

Contact details. Setor de Edifícios de Utilidade Pública Norte – SEPN, Entrequadra 515, Conjunto D, Lote 4, Edifício Carlos Taurisano – 2º andar. 
70770-504 - Brasília/DF
Brazil
T +55 61 3221 8445
E superintendencia@cade.gov.br
W www.cade.gov.br

Responsibilities. Investigations of anti-competitive practices, merger control and competition advocacy.

Person/department to apply to. Leniency applications must be filed with the Chief of Staff of the head of the SG.

Procedure for obtaining application documents. There is no fixed form for leniency applications. Applications can be made orally or in writing, in an envelope sealed and marked "leniency application" and "confidential".

Tribunal of the Council for Economic Defence (Conselho Administrativo de Defesa Econômica) (Tribunal)

Head. Vinicius Marques Carvalho

Contact details. Setor de Edifícios de Utilidade Pública Norte – SEPN, Entrequadra 515, Conjunto D, Lote 4, Edifício Carlos Taurisano – 4º andar. 
70770-504 - Brasília/DF
Brazil
T +55 61 3221 8524 / 8404
E cade@cade.gov.br and gab.presidencia@cade.gov.br
W www.cade.gov.br

Responsibilities. Adjudicating administrative proceedings for anti-competitive practices, imposing fines, final decision on merger filings and competition advocacy.

Person/department to apply to. Not applicable.

Procedure for obtaining application documents. Not applicable.



Contributor details

Sérgio Varella Bruna

Lobo & de Rizzo Advogados

T +55 11 3702 7004
F +55 11 3702 7001
E sergio.bruna@loboderizzo.com.br
W www.loboderizzo.com.br

Professional qualifications. Brazil, 1988

Areas of practice. Competition; regulation and infrastructure (concessions and public-private partnerships).

Patricia Agra Araujo

Lobo & de Rizzo Advogados

T +55 11 3702 7026
F +55 11 3702 7001
E patricia.agra@loboderizzo.com.br
W www.loboderizzo.com.br

Professional qualifications. Brazil, 1998

Areas of practice. Competition; regulation and infrastructure (concessions and public-private partnerships).


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