The Administrative Council for Economic Defense (Cade) submitted to public consultation a preliminary version of the Cartel Fine Calculation Guidelines, which is intended to clarify the criteria used in the application of the fines established in the Competition Law (Law No. 12,529/11). For legal entities, these fines may vary from 0.1% to 20% of the gross revenue of the company or of its economic group or conglomerate, in the sector of business activity affected by the violation.
The guidelines are based on the agency's decision-making practice in cartel investigations from 2012 to July, 2019 and, therefore, does not consider the decisions held by the current composition of Cade’s Administrative Tribunal.
According to the Competition Law, the calculation basis of the fine is the annual gross revenue in the sector of business activity (as defined in Cade Resolution No. 3/2012) in the year prior to the launch of the administrative proceeding. The use of the revenue in the "sector of business activity", a concept that does not necessarily correspond to the market affected by the cartel, was widely criticized after the enactment of the law and debated in some precedents. The guidelines suggest that, when the application of the revenue in the sector of business activity results in calculation basis that is disproportionate or unreasonable, Cade should instead take into account the revenue in the market affected by the conduct.
The guidelines also clarify that the revenue to be considered is, in principle, that generated by the company involved in the wrongdoing (the use of the revenue of the economic group to which it belongs would be an exception, for example to avoid maneuvers aimed at deliberately reducing the calculation basis) in the year prior to the launch of the administrative proceeding, and updated per the Selic rate until the month prior to Cade’s decision. When it is not possible to obtain the revenue in the year prior to the launch of the administrative proceeding (if the company has, for example, ceased its activities) or the amount reported by the company is not considered appropriate (if the company has experienced significant growth), the guide proposes to alternatively consider, for example, the year prior to Cade’s decision, the year of the public bidding subject of the investigation, or even the highest revenue obtained during the period the cartel was active or the average revenue obtained in the referred period.
The document also provides for the possibility of adjusting the calculation basis when the revenue encompasses a geographic area wider than that affected by the cartel. In these cases, Cade may alternatively consider a projection of the revenue the company would virtually obtain, taking into consideration how much the affected area represented from the wider geographic market, or use estimates of indirect sales as the calculation basis.
Regarding the reference fine rate, the guidelines recommend the use of the fine rates that have already been adopted by Cade in its decisions:
- 17% (with a minimum of 14%) for cartels in public bidding;
- 15% (with a minimum of 12%) for hardcore cartels, that is, agreements or exchanges of information related to prices, or to shares, clients or geographical area allocation, , with mechanisms for monitoring/punishing deviation and for ensuring perpetuity; and
- 8% (with a minimum of 5%) for other types of concerted practices (e.g. sporadic or non-systematic exchanges of information, unilateral disclosure of information, price fixing, etc.).
However, the fine rate to be applied in each specific case may be higher or lower than the reference fine rate, depending on the Cade's discretionary assessment of the aggravating and mitigating circumstances provided for by the law:
- seriousness of the violation (its role in the conduct, for example being the cartel leader or making use of coercion);
- good faith of the offender (awareness of illegality of the conduct, whether the affected market comprised essential services/products, cooperation with the investigation);
- benefit gained or sought by the offender (if it can be estimated);
- consummation or not of the violation;
- degree of harm, or of the threat of harm to free competition, to the Brazilian economy, to consumers, or to third parties (by type of conduct, for example);
- negative economic effects to the market (compensation of cartel victims before Cade’s decision on the cartel, for example, could mitigate the fine);
- economic situation of the offender (mitigating factor for those under proven compromised financial capacity); and