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Questions on Violations against the Economic Order

by admin published May 07, 2016 07:39 AM, last modified Sep 01, 2016 06:36 PM

What is an anticompetitive conduct?

An anticompetitive conduct is any practice adopted by an economic agent that may, even if potentially, cause damages to free competition, even if the infringer has no intention to cause damages to the market.

Market power, by itself, is not considered as illegal, but when a company or a group of companies abuses such power by adopting a conduct that harms free competition, the practice constitutes abuse of economic power. Such abuse is not limited to a restricted set of specific practices since the analysis on the possibility of a conduct to cause damages to competition is complex and many are the factors analyzed to characterize a determined practice as abuse.

For this reason, the legislation is extensive, allowing CADE to suppress conducts that, after investigation, may be characterized as harmful to competition.

Which type of conduct can characterize violation against the economic order?

Article 36 of the Law No 12.529/11 outlines a few conducts that can characterize infringement to the economic order, to the extent that they are intended to or can produce anticompetitive effects (§3).

Such provision establishes an exemplifying and non-exhaustive list of examples of conducts that are likely to cause damages to competition. If such conducts truly have such effect when adopted, it is a matter to be analyzed on a case-by-case basis. Between the exemplifying conducts of Article 36, we may quote the following:

International cartel;
Bid rigging;
Influence of uniform conduct;
Predatory pricing;
Resale price maintenance;
Territorial and customer base restrictions;
Exclusivity agreements;
Tie-in sale; 
Abuse of dominant position;
Refusal to deal;
Sham Litigation; and
Creation of barriers to competitor.

When a conduct is considered a violation against the economic order?

According to Article 36 of Law No 12.529/11, a conduct is considered a violation against the economic order when its adoption has the intention to cause or may give rise to the following effects, even if potentially: to limit, mislead or otherwise harm free competition; to arbitrarily raise profits of the economic agent; to dominate a relevant market of goods or services; or when such conduct means that the economic agent is exercising its market power abusively.

What is a cartel?

Cartel is any agreement or concerted practice between competitors to fix prices, divide markets, establish production quotas or restrict production, adopt pre-arranged positions in public tenders or tenders targeted at any variable that is competitively sensitive. By engendering price increases, supply restrictions and no compensatory economic benefit, cartels cause serious damages to consumers, making goods and services completely unaffordable for some and unnecessarily overpriced for others.

It is important to stress that the mere verification of identical prices is not singly a sufficient indication of cartel existence. Besides economic data, there must have factual indications that there is or was some type of agreement or coordination between entrepreneurs of the sector to raise or fix the price of products or services offered. Some examples of evidence already used to characterize and punish cartels included minutes of meetings, wiretappings, messages exchanged between competitors, etc.

For this reason, such anticompetitive conduct is universally considered as the worst possible violation against the economic order. According to estimates from the Organization for Economic Co-operation and Development - OECD, cartels generate an overpricing estimated between 10% and 20% compared to prices in a competitive market.

What are the penalties applicable to cartels?

The cartel practice characterizes both an administrative illegal act, punishable by CADE, as set forth in Law No 12.529/2011, and a crime, punishable by Law No 8.137/90.

Within the administrative scope, the company condemned by CADE for cartel, may pay a fine ranging from 0.1% until 20% of the gross revenues of the company, group or conglomerate, of the company’s last exercise, prior to the opening of the administrative proceeding, in the corporate segment where the infringement occurred. In turn, the company's management, either directly or indirectly involved with the illegal practice, may be sentenced to pay a fine between 1% and 20% of the fine applied to the company. Other accessory penalties may be imposed, such as, the prohibition to contract with official financial institutions and to pay tax debts in installments, as well as to participate in bids conducted by the Federal, State and Municipal Public Administration over a period of no less than five years.

The cartel practice, besides being an illegal administrative act, is punishable with a sentence of 2 to 5 years of detention and fine, as set forth in Law No 8.137/90. To make sure that directors and managers are criminally sentenced, the inter agency cooperation is being strongly increased with Federal and State General Attorneys’ Offices and Federal and Civil Polices’ departments.

What was the first cartel punished by the Brazilian Competition Defense System – SBDC in its acronym in Portuguese?

The first cartel punished by the SBDC was the so-called “steel cartel”, in conformity with Law No 8.884/94. In 1999, the companies Companhia Siderúrgica Nacional – CSN, Cosipa and Usiminas were sentenced by CADE to pay a fine of more than BRL 50 million for cartel related to the common flat steel market. The parallel raise of prices and a meeting between competitors, prior to the effective price raise, were considered sufficient evidences for the condemnation.

Is it possible to punish international cartels in Brazil?

Yes, since the potentiality of the effects of the cartel on the Brazilian territory are confirmed.

International cartels, comprised of major multinational companies operating in numerous countries, are investigated and punished by competition authorities in many countries.

A classic case was the vitamin cartel. Between 1989 and 1999, the eight major vitamin manufacturers (including BASF, Hoffman-La Roche, Aventis and Solvay) divided the world in operating regions, artificially fixing the prices for vitamins A, B, C and E. After an investigation from the Secretariat for Economic Law – SDE in its acronym in Portuguese, CADE punished the conduct in 2007 in almost BRL 17 million. The same cartel was already sentenced to pay fines of more than US$ 2 billion in other countries.

Other international cartels with effect in Brazil are currently being investigated by CADE's General Superintendence and some others were already judged by CADE’s Administrative Tribunal.

What type of information can be exchanged within the scope of associations and unions?

Associations and unions can become cartel member meeting instruments; it is therefore important to ensure that they are licitly established.

Information relating to common concerns of tax or environmental nature or related to the security of a given product or service are examples of non-harmful information from the competition standpoint.

Recent and independent information related to price, sales condition and customer identification are commercially sensitive and may not be exchanged between competitors, under penalty of harming competition.

If the association consolidates the sector data on an annual basis, the data must be received by an independent agent that is not an employee of any of the associates, so as to ensure the confidentiality of independent information.

Can parties aggrieved by the cartel formation file indemnity actions for losses and damages?

Yes. Under article 47 of Law 12529/2011, the aggrieved parties, on their own account or on the account of the valid parties referred to in article 82 of Law 8078, of September 11, 1990, can file a claim so as to, in defense of their individual or homogeneous individual interests, obtain the interruption of practices that constitute infringement of the economic order, as well as the payment of indemnity for losses and damages incurred. Such action does not rely on the filing or outcome of administrative proceeding by the SBDC, which will not be suspended as a result of the filing of claim.

If a bakery combines sales prices with other bakeries in the neighborhood, would it be considered as cartel formation?

In general, bakeries are small companies, and most people believe that they could not adopt anti-competition conducts. However, if the relevant market of the products sold in bakeries is geographically limited to a neighborhood and all neighborhood bakeries reach an agreement to define homogenous prices, then they will be forming a cartel, subject to punishment.

Even if the cartel is temporary, because entry is easy, for example, competition will be restricted and consumers will incur losses. Since the cartel acts as a monopolist, the result will be the offer of smaller quantities at higher prices in the relevant market.

It must be stressed that every case has its particularities and, therefore, it must be carefully analyzed for the precise determination of the facts; this example and others mentioned herein are merely illustrative.

It is important to verify whether the agreement between the economic agents has the purpose or possibility of generating the effects set forth in article 36 of the Law for the Defense of Competition. Any conduct that restrains or can restrain competition must be repressed, it not being necessary to evidence the anti-competition effects arising there from.

Why is the fuel sector susceptible to cartels?

Cartels can be formed in the most varied economic sectors. However, there are some reasons for cartels to be formed with a certain frequency in the fuel sector, including the fact that prices were regulated by the federal government until mid-1990s. Hence, it was common for gas station owners to meet to discuss the prices that would be fixed by the government, and businessmen considered the discussion of prices among competitors as usual at that time, which can have contributed to the custom’s continuance even after the release of prices in 1996. Presently, upon release of prices by the federal government and in conformity with the Brazilian Law for the Defense of Competition, the price discussion between competitors can characterize cartel formation.

Since fuel is a homogeneous product (its price variation is not based on quality), it is natural that prices in this market are also similar. Moreover, the transparency required by ANP in the sense that all gas stations must visibly disclose prices to consumers (e.g., in displays), helps competitors to know each other’s prices. That is why, in the case of fuels, in addition to the mere parallelism of prices, other elements and signs are required to detect the existence of a cartel in the sector.

What characterizes bid rigging?

When competing companies, participating in a public bid, reach an agreement to define who will be the winning bidder, such practice is considered cartel formation. The companies that participate in such type of cartel can use various strategies to attain their goals, such as the joint definition of the bid amount, the drop in the number of bidders in the bid process, the submission of bids without the intention to win the bid, among others.

Such type of cartel inevitably results in the acquisition of products and contracting of services under more unfavorable conditions for the Public Administration, making public resources – the product of the taxes paid by citizens and companies – to be transferred to the cartel members, which obtain additional profits arising from the lack of effective competition in bid processes.

However, it is important to differentiate the cartel in public procurement from other frauds against the competitive nature of bids. There are numerous cases where CADE has no legal authority to conduct the investigation, which are subject to the supervisory bodies and the General Attorneys' Office. For example, when numerous bidding companies belong to the same owner, or when there are common managing partners between bidders, one would not be facing an agreement between competitors, since in both cases such companies would be part of the same economic group. There are also cases where a bid could be conducted, but the public administrator has illicitly included restrictive competition covenants in the invitation to bid or has even performed an illegal direct contracting. Such practices are also not under CADE’s responsibility, but rather subject to administrative control by the General Attorneys' Office and the Public Finance Courts.

How should a company act if it is invited or coerced by its competitors to join a cartel?

The coerced company must denounce the cartel. Under article 86 of Law 12529/11, the legal person and/or its employees that are part of a cartel can sign a Leniency Agreement with CADE, through the General Superintendence, if it effectively cooperates with the investigation and satisfies the requirements set forth in the aforementioned article of the Law for the Defense of Competition.

Upon execution of the Leniency Agreement, the legal and/or natural person comprising the denounced cartel will be granted administrative and criminal immunity, provided that its duty of cooperation is maintained and it has satisfied other requirements set forth in Law 12529/2011.

What is abuse of dominant position?

Abuse of dominant position takes place when a company, in a dominant position as set forth in Law 12529/11, adopts anticompetitive conducts, such as the refusal to contract or exclusivity agreement, to dominate the market of the goods or services in which it operates.

For additional information, see the definition of dominant position in general questions on defense of competition.

 What is predatory pricing?

Predatory pricing the deliberate practice of fixing prices below cost in order to eliminate competitors to exploit the market power arising from the predatory practice.

Since the sale of products below cost results in losses to the company that adopts the predatory pricing practice, from the economic standpoint, such practice only makes sense if the company can recover such loss subsequently, that is, if it can obtain profit in the medium/long term. The conduct occurs if such profit obtaining arises from the elimination of competitors.

Hence, the predatory pricing practice requires an in-depth analysis of the market situations and agent's conduct, not being restricted to the verification of a price below the company's average variable cost, but also analyzing, among other things, the possibility of recovery of the loss arising from the practice subsequently, and the verification of barriers to the entry of new economic agents that can restrain the exercise of the monopoly power, after elimination of competitors.

The confusion between predatory pricing and dumping is recurring. Dumping is a term used in foreign trade and takes place when an economic agent charges a price internally lower than that charged in the country of origin of the product. The investigations on the practice of dumping are conducted by DECOM/SECEX from the Ministry of Development, Industry and Foreign Trade (MDIC).

Can a storeowner make a clearance sale by selling below cost?

Every practice must be analyzed from the economic rationality standpoint. In general, a clearance sale is a regular, temporary and local commercial practice. Therefore, under such conditions (temporary and local), it tends not to be considered as an illegal conduct.

What if the competitor of a big company believes that its rival is adopting predatory pricing, what will prevent its maintenance in the market?

The aggrieved company must make the accusation to the antitrust agencies so that they can conduct investigations. Only a more detailed analysis of the prices, costs and other market conditions can determine whether it truly refers to predatory pricing or whether the accused company is only and solely more efficient than the other competitors and is adopting an aggressive pricing system, but legal.

What is resale price maintenance?

The producer establishes, through an agreement, the price to be charged by distributors/resellers. Price fixing can many times be abusive and limit competition between economic agents. Once again, the practice must be analyzed from its economic rationality standpoint and on the perspective of the positive and negative effects that such practice can have on competition.

Is it licit when a producer decides to sell a given product to the dealer only if it resells the product at the price fixed by the producer?

Such question refers to the practice of refusal of sale in case of non-adoption to the resale prices fixed by the producer. Although it involves clear pressure on the reseller, in Brazil, the practice is not considered as an illicit act, and must be analyzed on a case by case basis, according to the potential effects that such practice may cause, in conformity with the effects set forth in article 36 of the Law for the Defense of Competition. It is not enough to verify the practice, but it is also necessary to determine its consequences, which depend on the market power of the economic agent in the market under analysis.

What are territorial and customer base restrictions?

The producer establishes limitations with respect to the area of operation of distributors/resellers, restricting competition and entry in different regions. Such conduct, despite being a regular commercial practice, can be used as an instrument to form cartels and unilaterally increase the market power. Once again, the economic reasonableness of the conduct and the company’s market power must be analyzed, under the viewpoint of the effects to be restrained, as set forth in the article 36 of the Law for the Defense of Competition.

What about the distribution agreements that normally delimit an operating area for the distributor?

Many times, intra-brand restrictions (between same brand distributors) can be beneficial if they result in strengthening of competition between brands (competing brands). Once again, the prior observation must apply: the economic reasonableness of the conduct and the company’s market power must be analyzed, under the viewpoint of the effects to be restrained, as set forth in article 36 of the Law for the Defense of Competition.

What are exclusivity agreements?

The buyers of a given good or service agree to exclusively acquire it from a given seller (or vice versa), thus being prohibited from selling goods or services of competitors. Such agreements can bring harmful effects on free competition, and they must again be analyzed considering the economic reasonableness of the conduct and the company’s market power, under the standpoint of the effects to be restrained, as set forth in article 36 of the Law for the Defense of Competition.

What is tie-in sale?

The offer of a given product or service requires, for the sale, buyer to acquire another product or service. The most visible anticompetitive effect would be the attempt to boost the market power of one market to dominate another, thus eliminating competitors.

The most well-known example of tie-in sale is the lawsuit filed in the United States by the US antitrust agency, the FTC – Federal Trade Commission, against Microsoft, because the company sells its Internet program (Internet Explorer) included in Microsoft’s operating system package, the so-called Windows, where the consumer has no option to acquire Windows only.

However, the tie-in sale may involve efficiency-related aspects and, similarly to other practices, the economic reasonableness of the conduct and the company’s market power must be analyzed, under the viewpoint of the effects to be restrained, as set forth in article 36 of the Law for the Defense of Competition.

The tie-in sale practice is also contemplated in Law 8078/90 – Consumer Defense Code, using the same definition. In those cases, since it refers to a consumer relationship and there are no effects on the market competitive environment, the matter must be addressed within the scope of the consumer defense bodies, such as the PROCONs and the National Consumer Defense Department (SENACON) of the Ministry of Justice.

A newsstand can adopt a sale promotion that gives discount to any person who buys one newspaper and one magazine?

In this case, it would not be a tie-in sale, because there is no nature of imposition of double purchase. Moreover, the practice of giving discounts for higher-value purchases or “packages” is common in the market, involving economies of scale and scope that economically justify these promotions. However, the promotion can involve concealed predatory pricing if it is prolonged, if the related products have a significant market share and if there are few substitutes for such products.

What is price discrimination?

The producer uses its market power to fix different prices for the same product or service, differentiating between buyers, so as to appropriate the consumer’s excess portion and thus raise its profits.

There are cases where the practice of charging different prices for specific reasons is a legitimate business policy where different economic agents are treated differently (such as, for example, the practice of giving discounts based on the volume consumed or to a given consumer profile, such as discounts on movie tickets for students and elderly). But there are cases where it can be a way of sponsoring predatory strategy through cross subsides, and such practice must be suppressed.

What is influence of uniform conduct?

The influence of uniform conduct can be characterized as the implementation of measures to regulate the operation of competitors in a given market. The adoption of price lists for a given category, so as to standardize agents’ prices is an example of measure adopted with such purpose. The effects of such type of conduct are similar to those of a cartel and, therefore, when such price lists are directed to end consumers, their illegality is assumed, even if only suggested. Such practice is many times adopted through associations and unions.

What are abusive prices?

The excessive price or price increase per se cannot be considered as a practice harmful to competition; it will only be harmful to the extent that it arises from infringement, or if it is likely to cause an anticompetitive effect. CADE’s interpretation converges with the doctrinaire theory that distinguishes between two different categories of excessive price imposition: (i) merely excessive or exploitative prices, arising from the market power; and (ii) abusive prices, the so-called exclusionary abuse, adopted to exclude a competitor from the market (adopted by vertically integrated companies).

The antitrust authority’s work in the fight against exclusionary abusive prices is defended, so as to provide the conditions necessary for the market operation, by correcting possible failures, without substituting the market mechanisms or interfering with the private agent’s role in the decision-making process, including price fixing. That is, it is understood that the work of antitrust authorities must be performed in relation to the competitive process, to ensure that the dispute for market shares is a licit dispute, and that the possible market power arising therefrom can be legitimate.

Acknowledging the antitrust authority’s power to analyze the excessive price or arbitrary price raise practice, per se, would mean assigning to the authority the decision on the fair price, not abusive, which means concluding that the manager has knowledge of the market operation, the company’s cost structure, the investments made by the agent, which is not reasonable, in light of the natural asymmetry existing between the economic agent and the antitrust authority. Moreover, the mere order to drop prices does not ensure that competition will be reestablished in that market, and imposes on the authority the duty of constantly supervising the enforcement of its decision.

What characterizes the refusal to contract?

The refusal to contract takes place when an agent in the context of dominant position unreasonably refuses to sell a product or service within regular business parameters in the market.

What is Sham Litigation?

Sham litigation, or the anticompetitive abuse of the right of petition or predatory litigation is the conduct characterized by the abusive exercise of the right of petition, to harm the competitive environment.

What characterizes the creation of problems to the competitor?

The creation of problems to the competitor can be characterized as the practice to try to prevent competitor's operation using anticompetitive conducts. An example of such type of conduct is the execution of exclusivity agreements to close the market for an input critical to the operation of other agents in the market.

What is unfair competition?

Unfair competition is the business disagreement among parties, with no impact on the competitive environment; therefore, it refers to a private dispute, governed by Law 9279/96, does not constitute infringement of the economic order, and must be treated at a specific framework that is the Judiciary Branch.

Does CADE have authority to handle cases of breach of agreement?

Issues such as breach of agreements, discretional clauses in agreements, among others, are characterized as private relationships and, in general, even though they can cause losses to one of the parties, have no impact on the competitive environment. In those cases, the matter is not subject to CADE’s authority, since the Antitrust Act protects the collective nature of the infringements of the economic order, the holder of the legal asset protected is the collective and not the competitor/economic agent as individual party.

Does CADE have authority to handle cases of noncompliance with legal orders?

Tax evasion, failure to perform tax or social security obligations, infringement of intellectual property (piracy), and noncompliance with rules that govern the exercise of economic or professional activity (lack of registration with supervisory body or class entity), can result in an artificial drop in the costs of a company, or in a “competitive advantage” illegally obtained, which enables the development of such economic agent in detriment to competitors. Such situations are characterized by a legal irregularity delimited in time, so that they mirror exceptional cases that do not match legality. Hence, as from the moment in which the legal normality is reestablished, the usual competitive conditions are also reestablished.

The Law for the Protection and Defense of Competition aims at preventing and suppressing infringements of the economic order, based on the constitutional principles of freedom of initiative, free competition, social function of prosperity, consumer defense and suppression of the abuse of economic power. It is a rule of ordinary nature that aims at consummating values and principles recognized by the consumer as the milestones of the economic order. However, it cannot correct individual misrepresentations arising from acts performed at the edge of legality which, if legitimate, would preserve the competitive environment, and whose legality must be determined by another authority other than the antitrust bodies.

What are administrative investigations?

Administrative investigations, as prescribed by article 66 of Law 12529/11, are investigative proceedings of inquisitive nature, filed by the General Superintendence. They are intended to investigate infringements of the economic order.

Administrative investigations will be voluntarily filed based on the reasonable claim of any stakeholder, or because of informative documents, when the signs of infringement of the economic order are not sufficient to bring an administrative proceeding. The administrative investigation can also be opened upon filing with the National Congress, or any of its houses, as well as with SSEAE/Ministry of Finance, the regulatory agencies and the Attorney General’s Office.

The administrative investigation must be concluded within a period of 180 days, counted from the filing date, which shall be extended for a renewable period up to 60 days, when the fact and the circumstances of the case in justify such measure.

When is the administrative proceeding filed?

The administrative proceeding is filed when there are strong signs of harmful practices against the market identified by the administrative investigation.

The General Superintendence has up to 10 business days, counted from the conclusion date of the administrative investigation, to decide on the filing of the administrative proceeding or its dismissal.

Moreover, similarly to the administrative investigation, the administrative proceeding can also be opened upon filing with the National Congress, or any of its houses, as well as with SEAE, the regulatory agencies and the Attorney General’s Office.

What is the “step-by-step” of a conduct investigation proceeding and what must be investigated?

1) The General Superintendent specifies the facts to be investigated and notifies the defendant to file a defense within a period of thirty days;

2) The defendant must have full access to the case records so that its owner, directors, managers or attorneys may monitor the case properly;

3) The defendant that, even after notified, fails to file a defense within the legal term, shall be considered as in default, that is, it is assumed that it accepts the facts disclosed against it in the accusation;

4) After a lapse of the period to file a defense, the General Superintendence requests the adoption of procedures and taking of evidence in its interest. It is also possible to require information, clarifications or documents from the defendant, from any natural or legal persons and from the public administration’s entities

5) The defendant can submit evidence, attach documents and request witness testimonies. The request for evidence will be analyzed by the General Superintendence;

6) Upon conclusion of the cognizance phase, the defendant is notified to submit final allegations. After such stage, the General Superintendent issues an opinion and sends the case to CADE’s Administrative Tribunal for judgment, which will decide on the filing of the case records or the sentencing of those investigated, if the infringement of the economic order is characterized.

Is it possible to terminate an anticompetitive conduct investigation process?

Yes. Law 12529/2011 allows companies and individuals investigated for infringement of the economic order to suspend the administrative proceeding through execution of the so-called Instrument of Commitment of Interruption of Practice (TCC).

In the case of a cartel practice, the law establishes that a monetary contribution of no less than 0.1% of the gross revenues of the company, group or conglomerate in the year prior to the filing of the administrative proceeding, in the operating segment where the infringement has occurred, must be made. For individuals, the minimum amount corresponds 1% of the penalty applied to the company.

What is Leniency Program?

CADE’s Antitrust Leniency Program was introduced in Brazil in 2000 and allows a cartel member or any party involved in another anticompetitive practice to denounce the practice to the antitrust authority and cooperate with the investigations so as to receive administrative and criminal immunity, or reduction of the applicable penalties in exchange,. CADE’s General Superintendence is the competent authority to negotiate and execute the “Leniency Agreement”. The Leniency Program is set forth in article 86 of Law 12529/11 and articles 197 to 210 of CADE’s internal statute.

Please access CADE’s Leniency Antitrust Guide and see more information on the matter.

What are the requirements to execute a Leniency Agreement?

To execute an Antitrust Leniency Agreement, the General Superintendence must not have, upon drafting of the agreement,  sufficient evidence to assure the company’s and/or the individual’s sentencing, and that the company or individual:

(i) must be the first to appear before the General Superintendence with respect to the infringement and confess its participation in the illegal act; 
(ii) must fully cooperate with the investigations and the cooperation results in the identification of other cartel members and obtain the conduct evidence; and
(iii) fully cease its involvement with the infringement.

Please access CADE’s Leniency Antitrust Guidelines and see more information on the matter.

Which benefits can the Leniency Agreement provide to the company or person that enters into such agreement?

The Leniency agreement can provide full or partial administrative immunity depending on whether the General Superintendence has previous knowledge of the anticompetitive conduct when the party confesses the illegal act.

If the General Superintendence has no previous knowledge of the conduct, it shall receive administrative immunity. If the General Superintendence has prior knowledge of the conduct, but it does not have any evidence to assure the sentencing, the company or individual will be granted a reduction from one to two thirds of the applicable penalty, depending on the effective cooperation and good faith of the infringer in connection with the compliance with the Partial Leniency Agreement.

The Leniency Agreement also assures criminal immunity to the officers, directors and employees of the beneficiary company, provided that they execute the agreement and abide by the legal requirements.

Please access CADE’s Leniency Antitrust Guide and see more information on the matter.

What is the Cease and Desist Agreement (TCC)?

The Cease and Desist Agreement (TCC) can take place during the course of investigation of infringement of the economic order and refers to an agreement between the authority in charge of the administrative proceeding and the principal – natural or legal person – whose conduct is analyzed. The execution of the instrument of commitment of interruption is CADE’s discretionary procedure, whenever based on convenience and opportunity; it understands that it infringes the interests protected by the law (article 85 of Law 12529/11).

After the execution of the instrument of commitment of interruption, the investigation is suspended while the investigated party agrees to suspend the practices that generated the suspected infringement of the economic order, regardless of the acknowledgment of fault.

Please access the Cease and Desist Agreement for Cartel Cases and see more information on the matter.

What are the requirements to be eligible to the execution of the TCC?

The previous requirements to enter into a TCC are:

(i) the acknowledgement of participation in the conduct investigated, in cases of cartel.
(ii) the obligation not to perform the conduct investigated again; and
(iii) other possible measures, such as structural and/or behavioral measures that encourage and/or reestablish competition in the market, or also that repair the negative effects of the conduct.

How is the monetary contribution defined?

In order to quantify the monetary contribution, the company’s expected fine must be firstly calculated, which shall not be lower than the advantage obtained by it when participating in a cartel, when such calculation is possible. That is, whenever possible, the advantage obtained will be calculated.

It is worth noting in order to attract companies to enter into such agreements, the TCC fee must be lower than the fine amount, but it will not be necessarily lower than the amount of the advantage obtained.

Please access the Instrument of Commitment of Interruption for Cartel Cases and see more information on the matter.