A newsletter from the Antitrust and Competition Law team at Advocacia José Del Chiaro
Alexandre Cordeiro presides his first meeting as Chairman
On August 4, Alexandre Cordeiro Macedo presided over CADE’s first public meeting during his mandate. At the beginning of the meeting, Chairman Cordeiro made a speech to highlight the importance of CADE to Brazil’s economic recovery in the context of the Covid-19 pandemic. In several interviews over the past few weeks, Cordeiro indicated that CADE should be careful and selective in enforcement actions, claiming he will maintain a mainstream/orthodox approach as opposed to a more interventionist wave observed in the US and Europe.
CADE imposes cartel fines calculated based on “estimated benefits”
CADE’s Tribunal fined ten companies and five individuals for collusion in public bids conducted by certain cities in the Brazilian state of Pernambuco for the procurement of office and school supplies.[1] Reporting Commissioner Luiz Hoffmann held that cartelists entered into agreements to allocate customers, fix prices and exchange sensitive information.
While this is a rather ordinary matter, it involves yet another chapter in the discussion of the appropriate method to calculate fines in cartel cases. On one side, Reporting Commissioner Hoffmann and Chairman Cordeiro held that fines should be calculated based on a percentage of the turnover obtained by defendants in the business area impacted by the cartel in the year before CADE initiated the formal investigation. CADE consolidated the use of this method over the past several years to calculate fines for cartel (fines normally vary between 10-15% of the turnover obtained by the defendants depending on the impacts caused by the cartel).
Based on a literal interpretation of the statutory provision in the Competition Law, Commissioner Sérgio Ravagnani presented a separate vote arguing that fines should be based on a calculation of “estimated benefits” generated by the cartel. To estimate the benefits generated by the cartel, he applied a 20% rate (presumption of overcharges caused by the cartel) over the value of contracts obtained by each defendant during the cartel period. Most Commissioners joined Commissioner Ravagnani in applying a fine based on “estimated benefits”.
While a debate among Commissioners as to whether to employ the “estimated benefits” method to calculate fines has been ongoing since 2016, this is only the second case with a majority in this direction. For the past years, most Commissioners had rejected employing the “estimated benefits” method due to concerns that it may create legal uncertainty and increase judicial challenges against CADE’s decisions. However, changes in CADE’s Commissioners have reshaped the balance towards the “estimated benefits” method.
CADE initiates an informal investigation against SAP Brasil after complaint by rival Waterfy
CADE’s investigatory unit (“SG”) initiated a preliminary investigation into SAP Brasil Ltda. (“SAP Brasil”) after Waterfy Partners Participações S/A (“Waterfy”) filed a complaint alleging that SAP Brasil has abused its dominant position in the market for back-office software.[2]
Waterfy develops and licenses customizable computer programs for the sanitation industry (a type of front-office software). SAP Brasil, well-known for a successful ERP software used for experience management, data analysis and business intelligence (a type of back-office software), also markets a front-office software to players in the sanitation industry. In its complaint, Waterfy claims that SAP Brasil is abusing its dominant position in the market for back-office software in order to limit competition in the market for front-office software, harming Waterfy and other rivals.
In brief, Waterfy argues that SAP Brasil has been informing customers of its back-office software that it would not be possible to integrate their databases with competing front-office systems, so that clients need to drop rival solutions and purchase SAP’s front-office product. According to Waterfy, this information is likely false given several customers have used SAP Brasil’s back-office software with Waterfy’s software without any difficulty. In any event, according to the complaint, if SAP Brasil’s software cannot be integrated with rival solutions, this would be an anticompetitive strategy of refusal of interoperability.
Based on these two alternative claims, Waterfy asked CADE to initiate an administrative inquiry into SAP Brasil and issue an administrative injunction against SAP. CADE initiated an informal investigation and sent an RFI to SAP Brasil asking for clarifications.
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] Administrative Proceeding no. 08700.004455/2016-94.
[2] Informal Investigation no. 08700.003048/2021-27.