quinta-feira, 10 de fevereiro de 2011

Private Antitrust Actions in Brazil


Bruno Lanna Peixoto


Brazil has been in the spotlight in recent years due to enhanced public enforcement of antitrust laws and especially the surge in anti-cartel enforcement. Authorities have boasted about the numbers of dawn raids conducted this year (30), criminal actions already filed (100+), and cartel investigations in progress (200+). Much less has been said about the substantial recent developments in private enforcement, such as the first court decisions and major antitrust collective actions. In fact, another boost in antitrust enforcement is taking place, although now before state and federal courts. At least ten private actions have been successfully filed in the country, resulting in settlements or significant (though not final yet) decisions.


Article 29 of Law º 8.884 of 1994 (the Brazilian Antitrust Act) explicitly grants standing for injured parties to seek – either by themselves or through adequate representatives – damages, including lost profits, as well as injunctive relief against anticompetitive practices. It provides for follow-on and stand-alone antitrust actions.




Although the antitrust law was enacted in 1994, the first private actions were filed more than a decade later, following one of the major cartel rulings by the Administrative Council for Economic Defense (CADE). In 2005 CADE fined steel producers ArcelorMittar, Barra Mansa, and Gerdau for customer allocation, resale price maintenance, and collusion for fixing prices of steel rebars used in the civil construction industry for concrete reinforcement. In 2006 steel distributors filed the first private actions claiming that they were allocated amongst the producers and injured by (i) a price squeeze resulting from the combination of cartel prices in upstream markets and resale price maintenance in downstream markets, and (ii) boycotts and price discrimination after defendants established their own distribution systems. In a landmark decision, a state judge granted preliminary injunctive relief, ordering defendants to sell steel rebars either for the precartel prices, adjusted for inflation (status quo ante), or the prices the firm sold to its controlled distributors. On appeal, the Court of Justice of Minas Gerais considered the opinions of CADE and the Secretariat of Economic Law (SDE) to be "unequivocal evidence" that the vertical restraints were aimed at sustaining the collusive scheme and, therefore, unanimously upheld the preliminary injunction. Several similar actions by steel distributors followed.


In addition, associations of construction companies have filed a collective action against the steel producers seeking damages and lost profits as well as injunctive relief against allegedly ongoing market division and overcharge practices.


A second major collective action for cartel damages and injunctive relief was brought recently by associations of hospitals against suppliers of medical gases, following a CADE ruling imposing record fines of more than USD 1.3 billion for price-fixing and market division. In a very recent decision, a state judge issued a preliminary injunction to prevent the further imposition of cartel overcharges, ordering defendants to sell medical gases, including oxygen, carbon dioxide, and nitrogen to plaintiff hospitals for competitive prices as established before the court by means of expert opinions and specific data.




In 2008 CSN, a leading steel company sued Vale, the world’s largest iron ore mining company, for refusal to deal. CSN claimed that Vale – allegedly a quasi-monopolist firm in the national iron ore pellets market – had unilaterally terminated a long-term commercial relationship, halting the supply of iron ore pellets, an essential input for producing pig iron, impairing CSN’s ability to effectively compete in that market. The state judge of first instance granted injunctive relief, ordering Vale to sell the quantities of pellets demanded by CSN. In an appeal filed by Vale, the Court of Justice of Rio de Janeiro issued a preliminary decision limiting the compulsory sale of iron ore pellets to 56,229 tons per month based on past dealings. The parties subsequently reached a settlement.


It is relevant to ask why a company would prefer to file a stand-alone antitrust action before a general court rather than a claim before the SDE. There are at least three compelling reasons. The first is the possibility of reaching a private settlement – a strategic consideration when suing suppliers or customers and a clear advantage over claimants’ lack of control over public enforcement.


The second and less obvious reason is that, when dealing with agencies with scarce resources and a shortage of personnel, which is the case in Brazil, it might not be easy to predict how high your case will be placed on the agency’s list of priorities, considering all the requests for leniency, cases jointly pursued with other authorities, and the common political choices to prioritize specific markets. Conversely, when filing a private action, plaintiffs are not only sure that their request for preliminary injunction will be examined in due time, but also, if their request is denied in the first instance, that they will be able to appeal to the Court of Appeals and to the Superior Court of Justice if necessary.


Third, while the point could be made that a private action might take up to a decade to be resolved if it goes all the way up to the Supreme Court, the same may be true for a high-profile claim filed before the SDE. A complex case often takes more than five years to be concluded and sent to CADE for adjudication, especially in highly litigated proceedings in which investigated parties challenge SDE’s decisions before the federal courts. In addition, further review by CADE’s Commissioners might take one or even two additional years. On top of that, almost every recent CADE ruling has been challenged, thus, ending up in the courts anyway. As a matter of law, agencies’ decisions are always subject to comprehensive judicial review. Courts may review the administration’s findings of fact and law pursuant to Article 5 (XXXV) of the Brazilian Constitution. Consequently, there is a clear case for initiating and conducting an antitrust action before the judiciary at once, where plaintiffs may rely on expert opinions and request that CADE intervene on their behalf.




Two types of collective actions may be filed to halt or remedy anticompetitive practices: (i) public civil actions; and (ii) collective actions for the defence of "homogeneous individual rights". The former aims at halting and/or remedying illegal conduct that affects "diffuse interests" and is often brought by the Public Prosecutor’s Office (PPO) or consumer associations.


The latter aims at obtaining monetary damages and/or injunctive relief for a class of plaintiffs and are often brought by trade associations, but may be also filed by consumer or other associations, the PPO, the Union, the States, Municipalities, the Federal District, and administrative agencies. Following the filing, courts publish a notice in the official gazette to allow interested parties to intervene and join the plaintiffs. In such actions for damages, courts first issue a general and broad ruling establishing that defendants must pay monetary damages (e.g. for the overcharges imposed) to injured parties according to the extent of the injury individually suffered which will be subsequently calculated and recovered through the specific procedure of liquidation.




Damages reflect the actual extent of the injury caused by defendant’s antitrust violations (i.e. single damages) and are calculated by means of expert opinions. Plaintiffs may claim damages for (i) past and present actual losses (e.g. overcharges), (ii) reasonable lost profits according to a “pre-post” approach, including projected sales and estimated growth, and (iii) injury to the firm’s reputation, goodwill and image. In addition, successful plaintiffs are awarded court costs, statutory attorneys’ fees, interest on actual damages and post-judgment interest.




There is no statutory provision or judicial decision barring defendants from asserting passing-on defenses, despite the arguably positive effects that such a restriction would have on deterrence and consumer welfare, when combined with a ban on indirect purchasers’ actions. Pursuant to the rule established by the Code of Civil Procedure, defendants bear the burden of proving facts that "impede, alter, or extinguish" a plaintiff’s claimed right and therefore, in order to successfully assert a passing-on defense, must prove that plaintiffs effectively passed on the claimed overcharges.


As there is no provision barring indirect purchasers from filing recovery actions either, defendants might face simultaneous actions from direct and indirect purchasers. In such cases, the actions will be consolidated and analyzed by the same judge, who must apportion damages between classes to avoid undue multiple compensation.




Plaintiffs suing for injunctive relief must demonstrate a violation or threat of a violation of the law (tutela inibitória). In order to grant a preliminary injunction, judges must weigh the alleged facts and presented evidence, and find a probable violation or threat of a continuous or recurrent violation of the law (antecipação da tutela inibitória). In at least two major cases, preliminary injunctions have been issued by judges and upheld by Courts of Justice, ordering defendants to deal with plaintiffs on a non-discriminatory basis.




Brazilian courts have started to develop case law and enhance both legal certainty and parties’ confidence in their ability to assess expert opinions and properly enforce antitrust laws. As the number of actions increases and firms internalize their costs, private enforcement will substantially enhance deterrence. It seems to be the dawn of a second revolution in antitrust enforcement in Brazil.


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