Cartel leniency in Brazil: overview

A Q&A guide to cartel leniency law in Brazil.

The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.

To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-guide.

For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/mergercontrol-guide and www.practicallaw.com/restraintsoftrade-guide.

Contents

Regulation

1. What laws provide for a leniency programme and which regulatory authority administers it? Is there any published guidance?

Applicable laws and guidance

The Brazilian leniency programme is set out in Law No. 12,529, of 30 November 2011 (Brazilian Competition Law). Additionally, Resolution No. 01/2012 of the Administrative Council for Economic Defence (Conselho Administrativo de Defesa Econômica) (CADE), which sets forth CADE's internal rules, contains procedural rules applicable to the leniency application process.

Regulatory authority

The Brazilian anti-trust authority is CADE.

 

Scope of application

2. What infringements of competition law does the leniency programme cover?

There are no express provisions on what infringements are covered by the Brazilian leniency programme under the Brazilian Competition Law. However, as applications for leniency requires the identification of co-participants, it can be assumed that the leniency programme only covers conducts executed by more than one agent. Leniency for criminal liability is specifically limited to cartel cases.

 

Recent cases

3. What notable recent cases have applied the leniency programme?

According to the Council for Economic Defence's (CADE's) official statistics, CADE has signed more than 40 leniency agreements since 2003 (when the programme was introduced in Brazil). Some of the most notable recent cases include the following:

  • Constructors' cartel (Lava Jato): leniency agreement signed by Setal.

  • Electro-nuclear cartel: leniency agreement signed by Camargo Correa (leniency plus following the Lava Jato case).

  • Subway and trains cartel: leniency agreement signed by Siemens.

  • Forex cartel: leniency agreement signed by UBS.

  • Marine hose cartel: leniency agreement signed by The Yokohama Rubber Co. Ltd.

  • Freight forwarding cartel: leniency agreement signed by DHL.

 

Availability of leniency

Administrative liability

4. Is full immunity from administrative penalties available? What conditions must be met for immunity to be granted?

Under the Brazilian Competition Law, full immunity is available when the Council for Economic Defence (CADE) has no knowledge of the reported conduct.

If CADE has knowledge of the anti-competitive conduct, but not sufficient evidence to convict the participants, the applicant can obtain a one-third or two-thirds reduction of the applicable penalty.

To qualify for leniency, the applicant must meet the following conditions, which are examined by CADE:

  • Be the first to report the conduct to CADE.

  • Recognise its involvement in the infringement.

  • Fully co-operate with the investigation.

  • Identify all co-participants.

  • Provide information and documents that prove the reported conduct.

  • Completely cease its involvement in the infringement.

In addition, an applicant that does not qualify for the leniency programme in connection to an infringement can apply for leniency in relation to a new infringement, in exchange for a reduction of fine in the first case and full immunity in the new case (leniency plus). Leniency plus is only available when CADE has no knowledge of the new infringement. See also Question 13.

 
5. Is there a sliding scale of available leniency from administrative penalties?

Under the Brazilian Competition Law, only one leniency application can be made for a specific conduct. Although the level of leniency can vary according to the information that the Council for Economic Defence (CADE) had before the application (see Question 4), it is not possible to submit a second leniency application in relation to a single conduct/infringement.

However, under Brazilian Competition Law, any defendant can apply for a commitment to cease and desist (Termo de Compromisso de Cessação) (TCC) during the investigation when the leniency programme is no longer available. To qualify for a TCC, an applicant must meet the following conditions:

  • Recognise its participation in the investigated conduct.

  • Commit to co-operate with the investigation.

  • Pay a pecuniary contribution.

The value of the contribution will depend on when the TCC is applied for and on the reduction of the expected fine ("second-in system"). If the investigation is being carried out by the General-Superintendence (which is the first body to investigate the conduct):

  • The first applicant can benefit from a 30% to 50% reduction of the expected fine.

  • The second applicant can benefit from a 25% to 40% reduction of the expected fine.

  • The other applicants can benefit from reductions of up to 25% of the expected fine.

If the investigation is being analysed by CADE's Tribunal, TCC applicants can only benefit from reductions of up to 15% of the expected fine.

 
6. Is immunity or leniency for administrative penalties available to individuals? If so, what conditions apply?

Individuals can apply for leniency solely or jointly with undertakings. The conditions applicable to individuals are the same as for undertakings (see Question 4).

Managers and employees are not automatically granted immunity when the undertaking involved in the conduct applies for leniency. The benefits granted to the undertaking are only extended to individuals who co-sign the leniency agreement with the Council for Economic Defence.

 

Criminal liability

7. Is immunity or leniency available for companies and/or its employees in relation to criminal prosecution? What are the implications for employees when an undertaking has been granted immunity or leniency?

Circumstances

In Brazil, only individuals are criminally liable for anti-trust violations. Individuals covered by the leniency programme can receive full immunity from criminal prosecution in all cases.

If an undertaking is applying for the leniency programme, immunity from criminal prosecution is only granted to those employees who co-sign the leniency agreement. Employees who are involved in the reported conduct, but are not signatories of the leniency agreement, are subject to administrative and criminal prosecution.

Proceedings against employees

Employees or managers who are signatories of the leniency agreement are granted administrative and criminal immunity. Those who are not signatories are not automatically granted immunity and can be subject to administrative and criminal prosecution.

The leniency programme allows companies to later include employees and former employees in their leniency application. However, such decision is at the discretion of the company, which can leave any of its former or current employees unprotected.

Employees' interests

Once a company decides to apply for leniency, employees and managers can only obtain immunity if they apply jointly with the company, or join the application later. If they do not apply for leniency together with the company, they cannot obtain immunity from administrative and criminal prosecution.

The inclusion of several employees and managers in the leniency application may carry certain risks in relation to a company's compliance with its obligation to co-operate with the investigations. If an employee refuses to co-operate, the immunity granted to the company may be jeopardized.

 

Application proceedings

8. When should an application for leniency be made?

Leniency applications can be made at any time, but should be made as soon as possible to ensure full immunity. Full immunity will only be available to the first applicant and if the Council for Economic Defence had no knowledge of the reported conduct (see Question 4).

 
9. What are the procedural rules for leniency applications?

Relevant authority

Leniency applications must be submitted to the Council for Economic Defence's (CADE's) General Superintendent.

Applicant

A leniency application can be submitted directly by undertakings and/or individuals, with or without the assistance of legal advisers. However, CADE recommends that leniency applicants be advised by legal counsellors.

Informal/confidential guidance

Before submitting a formal leniency application or requesting a marker, it is possible to contact CADE for guidance, on a confidential basis, on whether leniency is available in a particular case.

Form of application

An initial leniency application can be made orally or in writing; in a sealed envelope.

The leniency application must include both:

  • The leniency agreement to be signed by the authorities and the leniency applicants, which sets outs the rules and benefits under the leniency programme.

  • A report containing a detailed description of the infringement.

Markers

A leniency applicant can obtain a marker to secure its position in case it does not meet all the conditions to apply for leniency (that is, it needs to collect further evidence and information). The marker will be valid for 30 days after its issuance.

Although the legislation does not provide for an extension of the 30-day term, CADE has been renewing markers when:

  • It considers that the applicant is making an effort to collect further information and documents to submit its final application.

  • There are no other applicants.

Information/evidence

A leniency applicant must recognise its participation in the reported infringement and submit sufficient evidence to prove the existence of the infringement ( see Question 4). The applicant must also identify the co-authors of the infringement and submit evidence of their participation.

The application must contain a full and detailed description of the infringement, (including identification of all other participants, relevant market and duration) along with a list of all the documents and additional information that will be submitted to CADE with the leniency agreement.

Oral statements

Oral statements are accepted in leniency applications.

Short-form applications

Not applicable.

 
10. What are the applicable procedures and timetable?

The first step to apply for leniency in Brazil is to contact the Council for Economic Defence's (CADE's) General Superintendent confidentially, to determine whether a marker is available in the specific case.

If a marker is available, the next step is to submit a request for a marker. CADE has three days to issue the marker or to dismiss the request.

The marker is valid for 30 days. However, CADE has been renewing markers, giving applicants additional time to prepare their application (see Question 9, Markers).

There is an initial six-month negotiation period. This period can be extended, however the whole negotiation must not exceed one year.

After the signature of the leniency agreement, an investigation and formal administrative procedure will be initiated to investigate the reported conduct. The benefits agreed with CADE under the leniency agreement will only be granted after CADE's final decision on the investigation, and if it considers that the applicants have fully complied with the agreement. There is no term within which CADE must conclude the investigations.

 

Withdrawal of leniency

11. In what circumstances and at what stage of the proceedings can leniency be withdrawn? What implications does the withdrawal of leniency from one company have for other applicants?

The leniency applicant can withdraw its application at any time before the signature of the leniency agreement.

The leniency application can also be rejected by the Council for Economic Defence (CADE) for failure to comply with the minimum leniency requirements (for example, if the applicant refuses to admit its participation in the reported infringement or does not submit sufficient evidence) (see Question 4).

In both cases, all documents provided to the authorities will be returned and the information provided by the applicant will not be used. This does not mean that the company and/or individual cannot be included in future investigations of that specific conduct based on other sources of information and documents.

The applicants that hold the next marker are eligible for full immunity if CADE has not yet started an investigation on the alleged infringement. Brazilian law requires CADE to return all information and documents received in the course of an unsuccessful leniency negotiation. Therefore, previous negotiations have no impact on the benefits available to subsequent applicants.

After the signature of the leniency agreement, it is not possible to withdraw the leniency application. An applicant that does not comply with the terms of the leniency agreement will:

  • Lose immunity (that is, it will be subject to the penalties set out in the Brazilian Competition Law).

  • Be prohibited from applying for leniency for three years from CADE's decision.

 

Scope of protection

12. What is the scope of leniency protection after it has been granted?

Leniency protection covers the conduct described by the applicant in the leniency application (which refers to a specific product, market, clients, competitors, area, and so on). If the Council for Economic Defence collects evidence of another infringement, the applicant will not be protected.

 
13. Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market (leniency plus)?

Under the Brazilian Competition Law, an applicant that does not qualify for leniency in connection to one infringement can apply for leniency in relation to a new infringement (leniency plus). The applicant can receive full immunity in the second case, and receive a one-third reduction of the fine in the first case.

Leniency plus is only available if the following conditions are met:

  • The Council for Economic Defence (CADE) has no knowledge of the new infringement.

  • The leniency plus application is made before the first case is sent to CADE's Tribunal for judgment.

 
14. Does the grant of leniency affect a third party's ability to bring a follow-on damages action against a leniency applicant?

The leniency programme does not protect a leniency applicant from civil liability. Therefore, after the signature of a leniency agreement, the applicant is exposed to damages claims in Brazil.

 

Confidentiality and disclosure

15. What are the rules relating to confidentiality during a leniency application?

Identity disclosure

The identity of a leniency applicant is undisclosed to third parties (that is, the general public) until the Council for Economic Defence reaches its final decision. However, the applicant can waive its right and allow the agreement to be publicised.

Information disclosure

Other undertakings and individuals under investigation have access to the leniency application (and therefore to the identity of the applicant), in order to fully exercise their right of defence. However, they cannot misuse information and documents related to the application.

Confidentiality requests

During the investigation, all information and documents provided by the applicant will not be disclosed to third parties (that is, the public in general). Other undertakings and individuals under investigation must have access to the leniency application in order to fully exercise their right of defence. However, the leniency applicant can request confidentiality in relation to certain information and documents, such as business secrets and financial information.

 
16. What are the rules concerning disclosure of statements made in support of a leniency application?

Domestic submissions and domestic discovery

In principle, confidential information included in a leniency application can only be used for administrative and criminal prosecution. However, other domestic courts (for example, civil courts) can subject such information to discovery.

Domestic submissions and foreign discovery

In principle, confidential information submitted in a leniency application can only be used by the Brazilian authorities. However, under co-operation agreements, the Council for Economic Defence (CADE) can provide public information related to investigations to foreign authorities. The competition authority can only disclose confidential information with a waiver of the applicant.

Foreign submissions and domestic discovery

Based on co-operation agreements, CADE may request public information from foreign competition authorities. However, co-operation agreements are limited to the provision of publicly available information.

 

Inter-agency co-operation

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities from other jurisdictions in relation to leniency? If so, what is the legal basis for and extent of co-operation?

The Council for Economic Defence (CADE) co-operates with other regulatory authorities based on bilateral agreements. It also exchanges information on forums such as the International Competition Network (ICN).

The scope of co-operation agreements includes the exchange of publicly available information. In all cases, co-operation will only include the exchange of confidential information (for example, the identity of leniency applicants) and classified documents subject to a waiver of the applicants.

 

Proposals for reform

18. Are there any proposals for reform?

There are currently no proposals for reform. The current legislation has been in force since May 2012. Some rules relating to the leniency programme have been modified in March 2013. The Council for Economic Defence is expected to issue guidelines about the leniency programme in 2016.

 

Online resources

Council for Economic Defence (Conselho Administrativo de Defesa Econômica) (CADE)

W www.cade.gov.br/Default.aspx?72b275bb40de21390a4a

Description. This is the official website of CADE. It is up-to-date and mostly available in Portuguese. The website provides access to translations for certain relevant regulations (for guidance only).



The regulatory authority

General Superintendence of the Council for Economic Defence (Conselho Administrativo de Defesa Econômica) (CADE)

Head. Eduardo Frade Rodrigues
Contact details. Setor de Edifícios de Utilidade Pública Norte – SEPN, Entrequadra 515, Conjunto D, Lote 4, Edifício Carlos Taurisano - 70770-504, Brasília/DF - Brazil
T + 55 (61) 3221-8445
E superintendencia@cade.gov.br
W www.cade.gov.br

Responsibilities. With regards to leniency applications, CADE's General Superintendent is responsible for granting markers, negotiating and signing leniency agreements.

Person/department to apply to. Application must be submitted to CADE's General Superintendent at CADE's General Superintendence.

Procedure for obtaining application documents. Contact CADE's General Superintendence to obtain the marker. Other documents must be provided by the leniency applicant or produced during the oral statement.



Contributor profiles

Fabíola Cammarota de Abreu, Partner

Souza, Cescon, Barrieu & Flesch Advogados

T +55 11 3089 6514
F +55 11 3089 6565
E fabiola.cammarota@souzacescon.com.br
W www.souzacescon.com.br

Professional qualifications. Brazil, Lawyer

Areas of practice. Competition law and anti-trust; anti-corruption law; corporate law.

Non-professional qualifications. Law Degree, PUC/SP, 1996; Postgraduate Degree in Comparative Law, Anglia Polytechnic University, Cambridge, England, 1998; Master of Laws in Comparative Civil Law; PUC/SP; MBA candidate, Manchester Business School, 2016

Recent transactions

  • Acting for Niely Cosmetics in the filing related to its acquisition by L'Oreal.
  • Acting for BC-10 Petróleo (BPL) (Shell Group) in the sale of 23% of its shares to Qatar Petroleum.
  • Acting for Goiás Verde in the merger investigation (APAC) to assess whether the acquisition of its rival Brasfrigo should have been submitted to CADE's prior approval.
  • Acting for Bematech in the filing related to its incorporation by TOTVS.

Joyce Midori Honda, Partner

Souza, Cescon, Barrieu & Flesch Advogados

T +55 11 3089 6139
F +55 11 3089 6565
E joyce.honda@souzacescon.com.br
W www.souzacescon.com.br

Professional qualifications. Brazil, Lawyer

Areas of practice. Competition law and anti-trust; regulated industries.

Non-professional qualifications. Law Degree, PUC/SP, 2001; Extension in Corporate Finance, Business School of the University of São Paulo, 2003; Postgraduate Degree in Economic Law, Fundação Getúlio Vargas, 2006; Master of Laws (LLM), London School of Economics and Political Science (LSE), London, 2007; Participation to a capacity-building programme for lawyers, Brazilian Permanent Mission to the World Trade Organization (WTO), Geneva, 2007

Recent transactions

  • Acting for Niely Cosmetics in the filing related to its acquisition by L'Oreal.
  • Acting for BC-10 Petróleo (BPL) (Shell Group) in the sale of 23% of its shares to Qatar Petroleum.
  • Acting for Goiás Verde in the merger investigation (APAC) to assess whether the acquisition of its rival Brasfrigo should have been submitted to CADE's prior approval.
  • Acting for Bematech in the filing related to its incorporation by TOTVS.

Ricardo Gaillard, Partner

Souza, Cescon, Barrieu e Flesch Advogados

T +55 11 3089 6648
F +55 11 3089 6565
E ricardo.gaillard@scbf.com.br
W www.souzacescon.com.br

Professional qualifications. Brazil, Lawyer

Areas of practice. Competition law and anti-trust; anti-corruption law; regulated industries.

Non-professional qualifications. Law Degree, PUC/SP, 2005; Master of Laws in Corporate Law, Ibmec São Paulo, 2010

Recent transactions

  • Acting for Niely Cosmetics in the filing related to its acquisition by L'Oreal.
  • Acting for BC-10 Petróleo (BPL) (Shell Group) in the sale of 23% of its shares to Qatar Petroleum.
  • Acting for Goiás Verde in the merger investigation (APAC) to assess whether the acquisition of its rival Brasfrigo should have been submitted to CADE's prior approval.
  • Acting for Bematech in the filing related to its incorporation by TOTVS.

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