A newsletter from the Antitrust and Competition Law team at Advocacia José Del Chiaro
Changes in CADE’s leadership
Key changes in the leadership of Brazilian Antitrust Agency (CADE) took place in July. Former Chairman Alexandre Barreto’s mandate ended on June 21. General Superintendent Alexandre Cordeiro was nominated his replacement and took office as Chairman in July (with a four-year mandate). As General Superintendent, Cordeiro was the chief investigator for the past years and now moves back to the Commission as Chairman.
In turn, former Chairman Alexandre Barreto was nominated General Superintendent (chief investigator). His nomination is still subject to confirmation by the Senate.
Finally, the mandate of Commissioner Maia ended and a new nominee – Gustavo de Lima – is still subject to confirmation by the Senate. Gustavo de Lima currently works as the Economic Policy Deputy Secretary Assistant in the Office of Legal Matters of the President’s General-Secretariat. Since 2006, Lima has worked as a federal litigator with the Office of the Federal Attorney General (AGU).
CADE confirms that recommended resale prices are lawful; indicates good practices towards use of algorithms
Fuel distributor Ipiranga submitted a Business Review Request regarding the implementation of a dynamic maximum price suggestion policy based on the use of algorithms[1] .
According to CADE, a maximum recommended price policy is lawful provided that:
• The system was developed unilaterally by the supplier rather than in reaction to demands from resellers; and
• Prices are merely suggested/recommended and not imposed by the supplier – if resellers receive incentives or sanctions and are constantly monitored by the supplier to promote compliance with the policy, CADE would consider the policy as standard resale price maintenance (which is subject to lengthier scrutiny).
Furthermore, in this specific case, because Ipiranga planned to suggest maximum prices with the goal of reducing resellers’ prices, CADE indicated that:
• price suggestions should be lower than resellers’ original resale prices;
• price suggestions should be specific to each fuel station, given its location and profile.
Ipiranga’s recommended price policy would be dynamic, constantly changing based on an algorithm. CADE highlighted that “the increasing use of intelligent pricing systems involving algorithms, artificial intelligence, and other mechanisms, has been challenging competition authorities because of the positive and negative impacts they can have on competition”. As a result, CADE held that Ipiranga can implement a dynamic maximum price suggestion policy based on algorithms as long as it does not share both the algorithms and the data used as inputs for the algorithms with rivals.
Parameters of fines in case of buyers’ cartel
CADE’s Tribunal approved four Consent Decrees[2] with defendants in a buyers’ cartel investigation in the market for the purchase of animal waste (i.e. processing and related cargo transportation) in the Brazilian state of Rio Grande do Sul [3].
Commissioners debated how to calculate fines for buyers’ cartels. Brazilian Competition Law (Law no. 12,529/2011) provides that fines should be calculated based on a percentage (ranging from 0.1 to 20%) of the turnover obtained by the defendant in the business area impacted by the violation in the year before CADE initiates a formal investigation.
The majority of Commissioners, however, held that fines should be calculated as a percentage of the resources spent by defendants to purchase animal waste. Because buyers’ cartels harm suppliers rather than customers of colluding firms, fines should be based on the amounts spent to purchase from suppliers rather than the turnover obtained with sales. As part of the Consent Decrees, defendants agreed to pay a total of around BRL 19 Million (c. USD 3.5 Million) in financial contributions.
CADE initiates a formal investigation against Globo for volume rebates
CADE’s investigatory unit (General Superintendence – SG) initiated a formal investigation[4] against Globo, Brazil’s biggest media group, for alleged anticompetitive volume rebates in contracts signed with advertising agencies. In brief, Globo (and other TV broadcasters in Brazil) pays bonuses based on the volume of ads aired on its TV channels to incentivize agencies to advise their customers to sign contracts with Globo.
According to the SG, because rival TV broadcasters are forced to mirror Globo’s rebates to attract ad agencies, Globo’s dominance in the market for TV broadcasting allows the company to artificially raise the costs of rivals by paying significant bonuses to ad agencies. As stated by the SG, this behavior could raise barriers to entry to TV broadcasters and exclude rivals from this space. Thus, the SG started a formal investigation into Globo’s volume rebates and their impact on competition.
About Advocacia Del Chiaro
Advocacia Del Chiaro is a leading Brazilian law firm working in Competition/Antitrust and Commercial Litigation. For almost three decades we have advised major national and multinational companies and worked closely with several international law firms, handling some of the country’s most complex competition cases.
With offices in São Paulo and Brasilia, we have a highly specialized team with vast experience in a wide range of matters and industries. Our practice has been recognized as top tier in Brazil by sources like Legal 500, Chambers and Global Competition.
If you have questions, please contact the heads of our competition department:
José Del Chiaro Ferreira da Rosa
Phone: + 55 11 30309000
E-mail: jdc@ajdc.com.br
Ademir Antonio Pereira Jr
Phone: + 55 11 30309007
E-mail: apj@ajdc.com.br
NOTES
[1] Business Review Request no. 08700.002055/2021-10.
[2] Application no. 08700.004894/2020-83, Application no. 08700.001488/2021-40, Application no. 08700.001976/2021-57 and Application no. 08700.002321/2021-04.
[3] Formal Investigation no. 08700.004404/2016-62.
[4] Formal Investigation no. 08700.006173/2020-16.