ANTITRUST & COMPETITION
CADE sets 247 million reais fine for abuse of dominant position
On Nov. 03rd, 2021, the Tribunal of the Administrative Council for Economic Defense (“CADE”) imposed a 247 million reais fine against a major logistic company for allegedly abusing its dominant position in the railway transport market and foreclosing its competitor’s access to the sugar cane distribution market.
According to CADE’s investigation, the company allegedly closed a yard in Santa Adélia city (São Paulo state), then essential to its rival’s activities, arguing that the place offered safety hazards and, as consequence, making it impossible for the rival to provide services to customers during the off-season period. Supposedly, the company also attributed the responsibility for the yard maintenance to its rival, which, according to Brazilian National Agency of Land Transportation, was the investigated company’s own responsibility.
The Reporting Commissioner Paula Azevedo, who was unanimously accompanied by the other Tribunal members, also emphasized that the company’s practice significantly damaged its rival, that lost clients due to the uncertainty of its operations and withdrew from the market in 2017.
CADE initiates international cartel probe against pharmaceutical companies
On Nov. 18th, 2021, CADE’s General Superintendence (“SG”) initiated an Administrative Proceeding against seven pharmaceutical companies and eleven individuals to investigate an alleged international cartel in the market of Scopolamine-n-ButylBromide (“SnBB”), an ingredient used to produce antispasmodic medications.
According to the SG, the practices occurred from 1990 to 2019 and involved agreements to fix SnBB’s production levels and sales, price fixing, and exchange of competitively sensitive information between competing companies.
Acquistion of Unidas by Localiza is conditionally approved by CADE
On Dec. 15th, 2021, CADE’s Tribunal approved the acquisition of the car rental company Unidas by its competitor Localiza. The approval is conditioned on full compliance with the commitments agreed on by CADE and the parties as per their Merger Control Agreement (“MCC”).
According to CADE’s analysis, the transaction would lead to high combined market shares, raising competitive concerns in the markets of fleet management and car rental, in which entry or rivalry conditions would not be able to prevent a likely exercise of market power. Led by the Reporting Commissioner Lenisa Prado, the majority of CADE’s Tribunal decided to conditionally approve the transaction pursuant to the commitments set forth in an MCC. Among other behavioral and structural remedies, the MCC established the sale of the brand “Unidas”, divestments in the car rental segment, as well as the parties’ commitment to refrain from performing new acquisitions in the car rental market in Brazil for the next three years.
Discordantly, Commissioner Paula Azevedo, who was followed by Commissioner Sergio Ravagnani, found that the proposed remedies were insufficient to address the anticompetitive effects of a “merger to monopoly” and voted to block the transaction.
CADE authorizes MSC to exercise corporate rights over Log-In before the transaction’s approval
On Dec. 15th, 2021, CADE’s Tribunal unanimously authorized SAS (a subsidiary of the MSC group) to exercise political rights over Log-In before the antitrust approval of the company’s acquisition through public action. The closing of transactions involving public offerings don’t depend on CADE’s pre-merger review; however, as a rule, the investor can only exercise “political” rights over the target company (which allows the shareholders the right to appoint members to the Board of Directors and participate in the target’s decision-making process) after CADE clears the deal.
The exceptional authorization had been requested by SAS under the statement that, after the acquisition and until CADE’s approval, Log-In would have no controlling shareholder and that minority shareholders and even the company’s directors could eventually control the company and make decisions that might not be aligned with the interests of the new to-be controlling shareholder and/or the current reference shareholder. Thus, according to SAS, the early exercise of the political rights would be essential to “protect the investment value”, and to ensure the normal course of the Log-In’s businesses, and the reversibility of the transaction.
CADE’s Tribunal, led by the Reporting Commissioner Luiz Hoffmann, authorized SAS to exercise some political rights. Among them, SAS is allowed to call an extraordinary general shareholders’ meeting to appoint a representative in Log-In’s board of directors, who must meet certain requirements and have his/her performance monitored by CADE. Moreover, SAS is allowed to call for and vote in general meetings to deliberate upon subjects that might change the normal conduction of Log-In’s business and/or would affect the investment value.
CADE presumes unlawfulness in minimum price policy
On Dec. 15th, 2021, CADE’s Tribunal found that the minimum advertised price policy proposed by the tires manufacturer Michelin was presumedly illegal under the competition law. According to Michelin, who submitted the proposed policy for CADE’s approval beforehand, the policy intended to impose minimum prices to be announced by the brand dealers, safeguarding the company’s business model in Brazil.
Previously, on Oct. 20, 2021, the Reporting Commissioner Paula Azevedo voted for the antitrust conformity of the policy, provided that it would not be applied to e-commerce. Similarly, on Dec. 15th, 2021, CADE’s President Alexandre Cordeiro and the Commissioner Lenisa Prado also found that the policy was lawful and defended that their understating was supported by CADE’s precedents – specifically, a similar consultation submitted by a Michelin’ competitor that was assessed in 2018.
However, the majority of the Tribunal followed Commissioner Luis Braido’s dissent and found that the policy should not be deemed lawful. According to the Commissioner, minimal price policies are presumedly unlawful due to its potential anticompetitive effects. Lastly, the Commissioner added that the policy would not create efficiencies to be passed on to the consumers
SECEX initiates investigation to verify possible dumping practice regarding hard gelatin capsules
The Secretariat of Foreign Trade (“SECEX”), by means of the SECEX Circular nº 77/2021, has initiated an investigation to verify the existence of a potential dumping practice concerning exports from USA and Mexico to Brazil of hard gelatin capsules, commonly classified under the NCM code 9602.00.10. The case shall be conducted by the Subsecretariat of Commercial Defense and Public Interest (“SDCOM”) during the following months, in order to verify the factuality of the alleged dumping practices, as well as the asserted domestic injury resulting from the investigated conduct.
Executive Branch publishes new Decree on Subsidies and Countervailing Measures
On Nov. 19th, 2021, the Executive Branch published the Decree n. 10839/2021, which will govern the Brazilian investigations on subsidies and countervailing measures, replacing the Decree n. 1751 of 1995. The granting of subsidies by a foreign country, when contingent on export performance or on the use of domestic over imported goods, or when causing injury to the domestic industry, might lead to an investigation to apply countervailing measures. In this context, the new legislation aims to modernize the investigations, in line with international practices, in addition to harmonizing them with the current antidumping investigation regulation. Of note among the innovations, are the preliminary determinations to new investigations and the establishment of a timetable for the phases of the investigation.
Gecex determines the decrease of the Import Duty to 87% of the traded goods
The Executive Committee (“Gecex”) of the Brazilian Foreign Trade Chamber (“Camex”) determined the reduction, by 10%, of the Import Duties applied to over 87% of the tariff lines that are part of the Mercosul Common Nomenclature (“NCM”). The reduction, in effect until December 31, 2022, was implemented by the Gecex Resolution nº 269/2021, published on November 5, 2021, aiming to relieve the widespread increase of prices in the national economy due to the Covid-19 pandemic. Besides that, the decision aims to contribute to opening the country’s market in order to increase competition and foster economic development.
WTO panel releases favorable report to Brazil in sugar subsidies case against India
The World Trade Organization (“WTO”) released this month the final reports of the Panel initiated by Brazil, Australia and Guatemala in 2019 regarding India’s support for the sugar sector.
The Panel concluded that, from 2014-2015 to 2018-2019, India provided domestic support to sugarcane producers in excess of the permitted level under the WTO’s Agreement on Agriculture. Furthermore, the Panel decided that the multiple assistance schemes implemented by India were subsides contingent upon export performance, thus inconsistent with the WTO Agreement on Subsidies and Countervailing Measures.
The Panel recommended that India withdraws the measures at issue in 120 days from the adoption of the reports by the WTO’s Dispute Settlement Body (“DSB”). However, if India appeals from the decision, a final decision is unlikely anytime soon as the DSB is lacking a functional Appellate Body since 2019, with no solution in sight.
Nathalie Tiba Sato