Brazil: President Enacts Law that Changes the Brazilian Competition Law during the COVID-19 Crisis

Antitrust

On June 10, 2020, the Brazilian President enacted Law No. 14,010, which suspends certain articles of the Brazilian Competition Law (Law No. 12,529/2011):

1. Until October 31, 2020, or while the pandemic lasts, the mandatory notification of collaborative contracts, joint ventures and consortia shall be suspended;
2. In the same period, CADE shall be prevented from investigating and deciding on cases resulting from (i) the sale of goods and services at below cost prices (predatory price), and (ii) the closing or partial termination of business activities without cause; and
3. Antitrust violations shall be assessed by CADE considering “the extraordinary circumstances resulting from the pandemic.”

We take the opportunity to inform you about some facts and trends related to the application of the competition law in Brazil:

• CADE’s personnel continue to work remotely, dealing with cases and holding meetings through video and audio conferences;
• Only certain procedural deadlines for defendants in formal investigations are suspended, most deadlines continue to run;
• Merger control analysis has been prioritized, but we see delays due to the difficulty in obtaining data from companies;
• Partnerships among companies specifically aiming to deal with the crisis need to be clearly structured to avoid scrutiny; and
• Companies are already being investigated for alleged abusive pricing, and price increases especially in sensitive areas should be carefully considered.

CADE’s Activities

In the beginning of the crisis, the President of CADE released a statement reinforcing the agency’s commitment to continue its activities, adapting to the health restrictions in place. Most of the agency’s staff is working remotely, which has made video and audio conferences a routine.

The agency amended its Internal Regulations to make it possible to carry out online sessions, provided they comply with information security requirements, ensure transparency and publicity, and allow full participation of interested parties. Five online hearing sessions have occurred so far.

Procedural Deadlines

After the enactment of Provisional Measure No. 928 by the Brazilian President, which included in the list of exceptional measures to fight COVID-19 “the suspension of procedural deadlines imposed on defendants in administrative proceedings for as long as the state of calamity remains,” CADE clarified that:

• Deadlines imposed on defendants in the following proceedings are suspended: (i) proceedings with formal charges that can result in fines (cartel and unilateral conduct investigations); (ii) proceedings to investigate failure to comply with merger control rules (APAC); and (iii) proceedings that can result in fines for breach of incidental procedural rules.

• There are no changes to the deadlines in the following proceedings: (i) merger control cases; (ii) preliminary investigations; (iii) leniency agreements negotiations; (iv) settlement agreements and merger control agreements negotiations and compliance; and (v) consultations.

Impacts on Merger Control Cases

CADE is prioritizing the analysis of merger control cases. The purpose is to maintain the 2019 average time of analysis (17 and 90 days for fast track and regular proceedings, respectively).

However, in practice the terms have been extended for several reasons, such as problems arising from remote work, difficulty in obtaining information by the companies, or delays caused by third parties in responding to questionnaires sent by CADE. Filings should be made with all information and documents necessary for their approval without additional questioning by CADE in order to avoid delays.

Finally, three developments are expected to occur during the crisis:

1. Increase in the volume of filings involving mergers and acquisitions of companies with financial difficulties or in bankruptcy;
2. Increase in requests for the faster preliminary (“precarious”) authorization in transactions, provided the deal can be reversed in the case of a subsequent prohibition; and
3. Greater scrutiny of clauses for maintenance of the regular course of business between signing and closing, as well as actions taken by companies in this period, avoiding the occurrence of gun jumping.

Caution with Cooperation between Competitors

CADE is paying special attention to companies’ activities during the Covid-19 crisis to prevent anticompetitive practices (see below information on CADE’s investigation regarding excessive pricing). In particular, contacts among competitors are expected to be under the authority’s intense scrutiny.

It is important to be very cautious in any interaction of this nature, either directly or through trade associations. Conducts such as price fixing, customer or geographic allocation and bid rigging will continue to be targeted by the authority.

Potential associations with competitors specifically aiming to deal with aspects of the crisis must be entered into in a very transparent way, with the adoption of antitrust protocols and other measures to preserve the independence of the businesses involved.

So far, CADE has reviewed an association between breweries and drinks companies (Coca-Cola, InBev, Heineken, Pepsi, Nestle etc.) to finance and provide assistance to points of sales during the crisis. Even though this cooperation was not subject to antitrust merger control rules, the parties decided to submit it for CADE review to avoid future scrutiny.

Investigation on Abusive Pricing Increase

During the crisis, it is likely that companies – especially those active in sectors considered “essential” – are questioned about price increases that may be considered abusive. On March 18, 2020, CADE launched a preliminary investigation on alleged abusive price increases by companies in the health sector such as hospitals, laboratories, drug stores, surgical masks, alcohol-based hand sanitizers, and Covid-19 treatment drugs distributors and manufacturers. Up to date, more than 50 requests for information have been sent.

TozziniFreire Advogados attorneys are available to assist you with these and other workplace issues. For more information, please contact Mihoko Sirley Kimura (Partner) of TozziniFreire Advogados at Msk@tozzinifreire.com.br or visit www.tozzinifreire.com.br.

For more information please contact Joseph Granato, Communications Manager at L&E Global at joseph.granato@leglobal.org.