Slide sem ttulo

1
Challenges of Setting up a Cartel Enforcement
Regime The Brazilian Experience
Kazan September 2009 Marcelo Calliari
2
Introduction

• ICN Zurich (Jun/2009) US DoJ cites Brazil as a
  success model to be followed by other countries
  in cartel enforcement
• Why
• Current Brazilian situation quick facts
• How
• Evolution of the Brazilian system slow progress
• What
• Case law
• Challenges

3
Current state of cartel enforcement

• 93 search warrants (dawn raids) executed in
  2008
• Over 250 cartel investigations under way today
• Corporate fines raised to 15 - 20 of turnover
  ( US 80 million)
• Individual fines of more than US 1 million
• Investigation of most international cartels with
  effects in Brazil
• Simultaneous dawn raids with US DOJ / EC

4
Current state of cartel enforcement

• Over 100 individuals currently facing criminal
  prosecution
• Almost 30 criminal convictions, including
  imposition of prison terms (up to the 5 year
  limit)
• 53 temporary arrests executed
• More than 15 leniency agreements
• Coordinated leniency and investigations with
  other countries
• waivers

5
Evolution

• Current situation result of long process of
  evolution
• Antitrust Legislation
• 1962
• Political and economic context
• 1991 / 1994
• Transformation of government
• Reforms privatization, liberalization, new
  regulation
• 2000s
• Creation of a modern competitive economy
• Priority to cartel enforcement

6
The Spread of Competition Laws
Countries with competition laws
Countries developing competition laws
7
Institutional Design

• Result of political compromise 3 authorities
• Secretariat of Economic Law / M.Justice SDE
• Investigative authority
• Secretariat of Economic Monitoring / M.Finance
  SEAE
• Economic analysis
• Conselho Administrativo de Defesa Econômica -
  CADE
• Independent Agency with adjudicatory powers
• 7 member commission appointed by the president
  and confirmed by the Senate, with 2 year terms
• Excessive bureaucracy x division of powers
• Bill in Congress to drastically simplify the
  system

8
Institutional Design
1962
1991
1994
9
Multiple spheres, authorities and penalties

• Administrative CADE
• Companies up to 30 of gross revenues
• Individuals up to 50 of amount imposed to
  company
• Cease and desist orders
• Other penalties, up to break-up of the company
• Criminal Law public prosecutors and criminal
  courts
• Imprisonment from 6 months up to 5 years
• Fines determined by the judge
• Civil Law civil courts
• Cease orders
• Awards for (single) damages

10
Procedure and Investigation

• Investigation launched by SDE
• based on complaint by third party
• by SDEs own initiative
• by notice of an international investigation
• SDE may
• Take testimony from competitors, suppliers and
  customers
• Tap telephone conversations
• Use court search and seizure orders (dawn raids)
• Request any information from anyone (subpoenas)
• Parties may
• Access files (non confidential parts)
• Present arguments, witnesses and documents
• Question any measure in court

11
Investigation Flowchart
Complaint to the Authority
SDE/MJ
Investigation and Opinion
Final Decision by CADE
12
Important Developments in Cartel Enforcement

• Leniency and dawn raids law - 2000
• Cartels declared priority by MJ - 2003
• Internal regulation simplifying leniency
  procedures - 2006
• Settlements in cartels law 2007
• Agreements with Federal and State Prosecutors /
  Federal Police - 2008
• Fight Against Cartel Day / Hotline/ Distribution
  of Pamphlets - 2008

Cartel
13
Cartel case law

• CSN / USIMINAS / COSIPA
• First cartel case limited investigative powers
• Parallelism plus
• Penalties
• CSN - R22.180.000,00
• USIMINAS - R16.180.000,00
• COSIPA - R13.150.000,00
• Publishing of the CADE decision in a large
  newspaper 2 days per week for 3 weeks

14
Case Law

• Crushed Stone Cartel
• First dawn raid anonymous tip
• Fines of 15-20 of turnover / trade association
  also punished
• Steel Cartel (Gerdau / Belgo-Mineira / Barra
  Mansa)
• Largest cartel fine so far, around US 150
  million
• Vitamins Cartel (Aventis / BASF / La Roche)
• First international cartel investigated in Brazil
• Private Security Companies
• First leniency agreement
• Fines of 15-20 of turnover / individuals and
  trade association also punished
• Several gasoline station cases around the country

15
Case Law

• Gasoline Stations Cartel (João Pessoa)
• Evolution of prices after the dawn raids

16
Case Law

• Other Cartel decisions
• Airline shuttle TAM / Varig / Transbrasil / Vasp
• Newspapers Globo / Jornal do Brasil / O Dia
• Pharmaceutical generics drugs
• Meat packing companies
• Sample of on-going investigations
• Air cargo
• GIS / AIS
• Marine hose
• Cement
• Orange juice
• Blood products

17
Challenges

• Need for clear statement of policy and adoption
  of consistent measures
• Many improvements, but many problems remain
• Criminal enforcement
• Coordination with prosecutors (federal and
  state), federal police, judges
• Agreements, training, events, creation of special
  groups
• International coordenation
• Cooperation agreements with other competition
  agencies
• Participation in international fora (ICN)
  informal contacts

18
Challenges

• Credible use of available instruments
• Strengthening of the leniency program certainty
  and predictability
• Definition of standards / requirements
• SDE executes agreements, but CADE confirms
  leniency - source of uncertainty (Private
  Security case a good sign)
• Frequent resort to dawn raids
• Progressive increase of fines on cartels - CADE
• Up to 15-20 of gross turnover
• Basis Brazilian turnover or relevant market
  turnover?
• Creation of consistent criteria predictability
• Settlements
• How to stimulate settlements without
  disincetivizing leniency
• Clear principles on availability, guilty pleas
  and amount of fines

19
Challenges

• Transparency / confidentiality
• Rights of defense and public interest in access
• Incentive to leniency and protection of sensitive
  information
• Difficult balance predictable and consistent
  criteria
• Avalanche of court appeals
• Slow definition of limits and standards
• Structure
• Ex SDE only 31 technical staff, low career
  incentives, high turnover - cases take too long
• Ensure and preserve independence

20
(No Transcript)