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CADE and PRF Carried out a Dawn Raid on Alleged Wheat Flour Cartel

Cartel

15 warrants were met in four capitals of the Northeast of Brazil
published: Apr 18, 2013 10:00 AM last modified: May 02, 2016 03:22 PM

On March 17th, the General Superintendence of the Administrative Council for Economic Defense - CADE carried out a dawn raid for documents to investigate an alleged cartel in the market of wheat flour in the Northeast of Brazil. The operation took place in the cities of Maceió (AL), Fortaleza (CE), Natal (RN) and Recife (PE), with the support of the Federal Highway Police (PRF for its acronym in Portuguese).

15 search warrants were done in six companies responsible for milling, in three wheat flour distributors and in one commercial association. The operation was initiated after CADE's request and authorized by the Federal Courts, based on allegations that there were frequent meetings between milling companies’ directors and distributors to negotiate prices, terms of sale and division of market shares.

According to the allegations, the distributors could not disobey the agreements signed - otherwise they could suffer sanctions. Traders that did not accept the agreement were sanctioned with cuts in the amount of product and price increase in the month after the breach.

A survey conducted by the Department of Economic Studies of CADE pointed out that the mills of the Northeast are responsible for about a quarter of the entire national production. The existence of a cartel in the sector could damage the country's economy as a whole. Besides being an important item of basic food, wheat flour is used in baking sector, which accounts for over 50% of the demand of the product, and also in the manufacture of pasta, sweets and biscuits.

It was also found that the price of wheat flour in the Northeast is approximately 20% higher than the average price in the Mid-South.

Operation ‘Mós’ - The task force that conducted the dawn raids was named Operation ‘Mós’, in reference to the stones used to grind the grains and reduce them into flour in the mills. The operation had the support of 28 bailiffs, 70 PRF officials, 16 experts from the Federal Police, 39 officials from Cade, 2 officials from the prosecutor’s office assisted by the CADE’s General Attorney’s Office and by the Federal Attorney’s Office from the 5th Region.

The documents obtained will be analyzed by Cade’s General Superintendence and if the evidence confirms the conducts of cartel, an administrative proceeding will be opened so that companies may present their defense and later be submitted to trial by the Tribunal of CADE.