Antitrust Litigation 2021

Last Updated September 16, 2021

Brazil

Law and Practice

Authors



Araújo e Policastro Advogados is a full-service law firm founded in 1962 with headquarters in the city of São Paulo, Latin America’s main business and financial hub. The field of private antitrust litigation in Brazil started to develop after partner Bruno Peixoto elaborated and filed the first recovery action for antitrust damages in the country as well as the first follow-on collective action for cartel damages. Bruno Peixoto was also the first lawyer in Brazil to devise and conduct an international litigation strategy for recovering cartel damages derived from a global cartel on behalf of corporate clients. Bruno has devised and implemented global strategies which have included parallel and concomitant legal actions in several jurisdictions, including the USA, the Netherlands, the UK and Brazil. Since then, the Antitrust and Competition team has furthered the debate on the development of legal and procedural tools to encourage injured parties to claim damages for anti-competitive practices.

Antitrust litigation is a hot topic in Brazil. Infringement decisions from Brazil’s antitrust authority (Conselho Administrativo de Defesa Econômica or CADE) are increasingly being followed by multiple private actions for damages, especially in cases of collusive behaviour. It is estimated that there are more than seventy active antitrust litigation cases in Brazil, including both individual and collective actions, mainly claiming damages arising from cartels.

Although the statutory basis for private actions for damages stemming from anti-competitive practices has been established since 1994, the awareness concerning this right has increased substantially in both the legal and business communities in the last few years, particularly in light of the most recent Competition Law (Federal Law No 12.529/11) and recent developments and decisions issued by Brazilian courts.

In the wake of the implementation of the European Union Directive on Damages Actions, CADE decided to adopt measures to promote private antitrust enforcement as well. Accordingly, in 2018, CADE issued a regulation concerning disclosure and access to evidence from its investigations files. Pursuant to Regulation No 21 of 2018, apart from sensible evidence related to leniency agreements and settlements, such as history of conduct and information related to trade secrets, tax and banking secrecy, documents gathered in the course of administrative proceedings may be disclosed by CADE after it issues a final decision.

Indeed, CADE has included references to injured parties in its infringement decisions and has even sent notices to injured parties concerning infringement decisions. Despite this important milestone for private antitrust litigation, under the justification of balancing both public and private enforcement, it was also established in Regulation No 21 that documents such as the record of infringement and information related to industrial and trade secrets, banking and tax issues, etc, will remain confidential even after CADE’s final decision.

Bill No 11,275 of 2018

Intense debate on the increasing relevance of private antitrust actions has given rise to a proposal to amend the Brazilian Competition Law to foster private litigation. To date, Bill No 11,275 of 2018 is one step away from being approved and coming into force. Recently approved by Brazil’s Senate, it advances private antitrust enforcement by:

  • introducing double damages; 
  • introducing alternative dispute resolution; and
  • codifying developed case law on issues such as limitation and the passing-on defence.

Double damages

If Bill 11,275 is approved by the House of Representatives as well, double damages will apply to recovery actions for antitrust damages but only against parties that have neither executed a leniency agreement nor subsequently settled with CADE. The goal of these provisions is to heighten the deterrence effects of private enforcement.

Arbitration

To significantly reduce the duration of follow-on recovery proceedings, the Bill also establishes that parties interested in settling investigations with CADE will agree to submit private disputes on antitrust damages to arbitration provided that a claimant agrees or requests it. This requirement does not apply to parties that have executed leniency agreements with CADE. 

The new provision only solidifies arbitration as an alternative way of resolving private antitrust claims. Therefore, if the aggrieved parties still prefer to submit their claims to a Brazilian court, they will be allowed to resort to this for the resolution of their dispute.

Codification of established case law

Finally, the Bill codifies the established case law from Brazil’s high courts on limitation and on the passing-on defence and the defendant’s burden to prove it providing specific evidence and effectively demonstrating that the claimants passed on the overcharge in the settings and circumstances of each individual case. According to this Bill, the statute of limitations period starts only after the victim is unequivocally aware of the infringement, including its consequences, and the burden of proving the passing-on lies with the defendant (see 2.4 Burden and Standard of Proof and 4.3 Limitation Periods for a description of the precedents).

Indeed, the aforementioned bill of law is perceived as an important incentive to the development of private antitrust litigation in Brazil, enshrining an efficient regime to seek compensation for competition damages. 

Digital Transformation of Brazilian Courts

The COVID-19 pandemic has contributed to a digital transformation of the Brazilian court in the following ways:

  • Brazilian courts have focused on digitising their remaining paper records to avoid suspending paper-based proceedings;
  • contact with judges to discuss proceedings has become easier through the use of virtual platforms; and
  • it has become easier to follow the adjudication sessions of the Superior Court of Justice (Superior Tribunal de Justiça or STJ) and the Supreme Court, as they have adopted virtual sessions.

All the changes mentioned above contribute to making the adjudication of private antitrust actions in Brazil faster and more efficient.

There are clear statutory bases for claiming damages from competition infringements in Brazil. The Federal Constitution provides the grounds for the right to redress. Concerning damages for anti-competitive conduct, the Competition Law (Federal Law No 12,529 of 2011), the Civil Code (Federal Law No 10,406 of 2002), and the Consumer Protection Code (Federal Law No 8,078 of 1990) apply and regulate related matters.

Federal Constitution

According to Article 5 (v) of the Federal Constitution, the right to redress is a fundamental right under the Brazilian legal system. In other words, that it is an absolute right shall be a principle guiding the enforcement of the law.

The Federal Constitution also sets forth in Article 170 that the principles of free enterprise and free competition shall guide domestic economic relations and the economic environment. The abuse of a dominant position shown in conduct to dominate markets, eliminate competition and arbitrarily increase profits is expressly prohibited in Article 173 (iv). While the Federal Constitution sets forth broad provisions applied to competition between market players, the Competition Law regulates this area more comprehensively. 

Article 36 of Brazil’s Competition Law (Federal Law No 12,529 of 2011) sets out conduct that, regardless of fault, constitutes an infringement of the economic order. Article 47, in turn, provides that parties injured by anti-competitive conduct are entitled to seek full redress for their losses as well as injunctive relief. 

Brazil’s former competition law (Federal Law No 8,884 of 1994) included exactly the same provisions and already provided grounds for both follow-on and standalone claims for damages and injunctive relief. The enactment of the new Competition Law was a milestone for private antitrust enforcement, since it redesigned the Brazilian System for Competition Defence, boosting the detection of cartels and competition infringements.

Civil Code

Article 927 of the Civil Code is also applicable as a general provision concerning the right to compensation for losses from unlawful conduct.

Consumer Protection Code

Lastly, with regard to actions brought by consumers – defined as individuals or undertakings who purchased a product or service as the ultimate beneficiary – the Consumer Protection Code (Law No 8,078 from 1990) also applies. Notably, consumers may sue for double damages pursuant to the Consumer Protection Code. 

Although there has been some debate over whether specialist courts should be created to adjudicate competition litigation cases, the state courts presently have jurisdiction to hear private antitrust actions. However, when a federal agency is a party to the litigation, a federal court will have jurisdiction to adjudicate the case. 

Regarding territorial jurisdiction, claimants may opt for the legal venue where the injury occurred or where one of the defendants is domiciled. 

In this context, the debate on whether competition litigation cases should be allocated to specialist judges and courts has gained traction in the states of São Paulo and Rio de Janeiro. In the state of São Paulo specifically, there has been substantial discussion on creating specialist courts of first instance and specialist panels at the Court of Appeals to adjudicate antitrust law disputes as well as international trade litigation.

The State of São Paulo Court of Appeals has had a very successful experience with the creation of specialist Courts of First Instance and a specific chamber for the enforcement of arbitral awards as well as for the adjudication of complex corporate law issues. The Court of Appeal created such a specialised chamber in 2011 to rule on corporate disputes and appeals in matters such as industrial property claims and unfair competition cases regulated by the Industrial Property Law. The establishment of both the lower courts and the chamber within the Court of Appeals enhanced the quality of decisions and discussions, and also decreased the length of proceedings related to such matters.

Accordingly, similar results are expected with the implementation of specialist Courts of First Instance and chambers to rule on antitrust law and trade disputes. 

Evidentiary Value of CADE’s Decision

CADE’s decision as "unequivocal evidence"

The Brazilian courts have ruled that claimants may rely on CADE’s decision to prove an infringement. The courts have ruled that CADE’s decision represents "unequivocal evidence" of an antitrust infringement (eg, AHMG v Air Products Brasil Ltda, Court of Appeals of the State of Minas Gerais, Interlocutory Appeal No 1.0024.09.709934-5/006, 13th Civil Chamber, adjudicated on 26 April 2012). Consequently, to rebut CADE’s ruling in follow-on actions for damages, defendants would first need to successfully challenge CADE’s decision on procedural grounds and have it vacated before a competent Brazilian federal court.

This position of the Brazilian courts is based on the high degree of specialisation of the antitrust authority, which has jurisdiction to investigate and punish anti-competitive conduct, as well as rulings on the principles of judicial economy and the reasonable duration of proceedings.

In addition, the aforementioned Bill No 11,275 of 2018, when approved, promises to establish that CADE’s decisions will be sufficient grounds to grant judicial relief, allowing courts to issue a preliminary injunction in private actions to terminate the effects of anti-competitive practices.

Deference to CADE’s findings of fact

Furthermore, Brazil’s Supreme Court has recently issued a decision stating that courts should defer to CADE’s findings of fact, given CADE’s expertise and ability to determine whether investigated conduct produced anti-competitive effects in the domestic market. As a consequence, Brazilian courts should not revisit CADE’s findings on the merits of the anti-competitive nature of the conduct and its detrimental impact on the market (eg, Comal Combustíveis Automotivos v CADE, Supreme Court, Regimental Appeal on Extraordinary Appeal No 1.083.955/DF, adjudicated on 28 June 2019).

CADE shall be notified by the courts of every action filed for antitrust damages and is allowed to intervene. 

Evidentiary Value of CADE’s Settlements

According to CADE’s internal regulation, to execute a leniency agreement or to settle a cartel investigation (ie, through a consent decree) with CADE, the investigated party is obliged to:

  • confess and acknowledge participation in the unlawful conduct; and
  • provide substantial evidence of that unlawful conduct (eg, documents and reports containing information that might help CADE to identify other participants).

The Brazilian courts have upheld the legality of the requirement to acknowledge participation in the infringement since this constitutes an essential condition to settle with CADE (eg, Posto Oliveira v CADE, 6th Panel, Interlocutory Appeal No 007598-57.2013.4.01.000 – Federal District, judge-rapporteur Jirair Aram Meguerian, adjudicated on 4 February 2014).

Claimants

Claimants shall present evidence demonstrating the:

  • existence of anti-competitive conduct;
  • individual damage; and
  • causation. 

Claimants usually rely on expert reports (i) to corroborate the existence of anti-competitive conduct, as well as (ii) to demonstrate the existence of individual damage and its extent. In this sense, a judge cannot deny a request for the production of such evidence and dismiss an action because the claimant did not substantiate its claim, as this would constitute a clear violation of due process (see EIT – Empresa Industrial Técnica S.A. v Votorantim and others, TJSP, Appeal 1049928-98.2017.8.26.0100, 25th Private Law Chamber, Rapporteur Judge Leila Hassem da Ponte, adjudicated on 23 April 2021).

Also, as mentioned in 2.1 Legal Basis for a Claim, the Competition Law establishes strict liability in cases of anti-competitive conduct. Additionally, under the Civil Code, employers and companies are strictly, jointly and severally liable for redressing losses caused by their employees or executives.

Defendants

Under the Civil Procedure Code, defendants must produce evidence to refute the alleged claim. Defendants bear the burden of proving facts that hamper, modify or extinguish claimants’ right to compensation. Passing on, therefore, is a matter for defendants to prove, as recently affirmed by the Court of Appeal of São Paulo. 

Ruling on a private action following a CADE decision imposing fines on the cement industry, the Court of Appeal decided that defendants bear the burden of providing specific evidence and effectively proving alleged passing on, and courts should impose this burden on them from the start of the proceedings (see Paez de Lima Construções e Comércio Ltda e outros v Votorantim Cimentos S/A e Lafargeholcim (Brasil) SA, TJ-SP, Appeal No 1050035-45.2017.8.26.0100, 19th Private Law Chamber, adjudicated on 28 August 2019).

Courts regularly adopt a preponderance-of-evidence standard, although there is no generally applicable standard of proof and judges may rely on their analysis and assessment of the evidence produced by the parties during the proceeding. 

The right of action for damages is broadly conferred by the Competition Law on every factually injured party, without distinguishing between direct and indirect purchasers. However, indirect-purchaser claims face substantial obstacles as, in principle, they bear the burden of proving causation and individual damages. 

Therefore, indirect purchasers are also entitled to claim compensation for any damage they may have suffered. Courts require, however, that claimants prove the causal relationship between the losses and the infringement before awarding them damages.

Although the duration varies according to the specific features of each case, in complex antitrust litigation, it may take three to five years for a Court of First Instance to reach a decision. A decision from a Court of Appeal may take one to two additional years. Moreover, when it is possible to appeal to the STJ or the Supreme Court, it takes at least two additional years.

A bill of law recently approved by the Senate seeks to address the length of private antitrust actions for damages by fostering alternative dispute resolution. According to its provisions, it will be a requirement when settling investigations with CADE, that applicants agree to submit damages claims resulting from the investigated conduct to arbitration (provided that the claimants agree to and request it). 

Under Brazilian Law, claimants may bring two types of collective proceedings: class action for defence of "homogeneous individual rights" and public civil actions. These proceedings are also regulated by provisions of the Competitive Law, the Brazilian Consumer Protection Code, the Collective Public Actions Act, and the Brazilian Civil Procedure Code.

Class Action

Collective action for defence of homogeneous individual rights is a hybrid of representative and opt-out class actions. It is brought by adequate representatives – frequently trade or consumer associations that meet certain requirements. It aims to obtain damages or injunctive relief for a class of claimants. 

Injured parties may opt out to file an individual action. Conversely, parties that filed individual actions before the class action have the option to request that their actions be stayed until a final decision concerning the collective claim is adjudicated, which will be binding with regard to their claims only if it is decided in favour of the claimants. 

Representatives seek a broad declaratory decision establishing that defendants must pay damages to a class. Subsequently, the injury suffered by each member of the class is collectively or individually quantified and collected through liquidation and enforcement proceedings. 

Public Civil Action

Public civil actions aim to prevent or remedy conduct that affects collective or diffuse interests not specifically individualised, and although theyt may also be brought by associations, are more often brought by a public prosecutor’s office, seeking payment of compensation to a public fund. 

In cases of anti-competitive conduct, both actions may be brought as either follow-on or standalone actions. 

Parallel Collective Actions

It is not uncommon for the two types of collective actions to be brought in parallel. For instance, while a federal or state public prosecutor's office may bring a public civil action against an alleged cartel seeking injunctive relief and payment of a sum to a public fund to remedy societal losses, a trade association may initiate a collective action seeking individual damages for a class of local or domestic purchasers. 

Recently, the Supreme Court declared Article 16 of the Collective Public Actions Act unconstitutional; as a result, the effectiveness of the res judicata of collective action is no longer limited to the territorial jurisdiction of the court that rendered the decision (see STF, Extraordinary Appeal 1.101.937/SP, Rapporteur Minister Alexandre de Moraes, Plenary, adjudicated on 13 April 2021). This decision has produced erga omnes effects, and aggrieved parties domiciled in another state or subject to different federal courts therefore now have the standing to liquidate individual damages and enforce declaratory decisions.

In this context, in the case of multiple collective actions of national or regional scope being filed, the court that first receives one of them will be responsible for adjudicating all similar or connected claims in the country.

Brazilian law provides standing to file collective actions to adequate representatives, such as trade or consumer associations that meet certain requirements and the public prosecutor’s office. See 3.1 Availability for further details. 

There is no certification process under the Brazilian legal system, although representatives must meet certain criteria and may face scrutiny from the courts over whether they have the legitimacy to represent a class of claimants and the interests at stake. 

There are several ongoing collective proceedings in Brazil. The first collective action for cartel damages dates from 2008. Following a CADE decision, the Associations of Construction Companies of Minas Gerais and Goiás states went to court to claim damages arising from the "long-steel cartel".  

Similarly, the Associations of Hospitals of the states of Minas Gerais, Paraná and São Paulo also filed collective actions against the "medical gases cartel". The plaintiffs are claiming injunctive relief and due redress of injuries caused to hospitals and other health entities they represent.  

Out-of-court collective settlements do not require judicial authorisation but may require approval from a public prosecutor’s office, especially in cases of public civil actions. 

Strikeout and summary judgment decisions may be adjudicated on procedural grounds, such as lack of standing to sue, absence of legal interest or unlawfulness of a claim. Those grounds concern general requirements for every judicial action under the rules of civil procedure.

According to the Civil Procedure Code, Brazilian courts may have jurisdiction in cases where:

  • a party is domiciled in Brazil or has a subsidiary in Brazil; or 
  • relevant facts or acts giving rise to the claim occurred or were performed in Brazil; or
  • a legal obligation shall be fulfilled in Brazil.

In cases with multiple defendants domiciled in different places, plaintiffs may select one of these places. If a public entity takes part in the lawsuit, a federal court will have jurisdiction to hear the claim.

With regard to the applicable law, Brazil’s Competition Law applies to actions concerning anti-competitive conduct that produced, or had the potential to produce, direct or indirect effects on the domestic market. 

Under the Brazilian Civil Code, a three-year limitation period applies to individual actions, and a five-year limitation period applies to public civil actions and class actions.

When Does the Limitation Period Begin?

"Unequivocal knowledge" standard

Brazilian courts have construed the statute-of-limitation provisions in the sense that the limitation period starts to run when the aggrieved party obtains "unequivocal knowledge" of:

  • the act of tort;
  • the identity of the offender;
  • the existence of the damage; and
  • the causal relationship between the unlawful act and the damage.

This rule has become established case law.

Case law from Brazil’s STJ has indeed established that the limitation period for damages actions cannot start to run before a claimant has become "unequivocally aware" of both the infringement and its consequences, namely the impact of the unlawful conduct on its individual rights. 

Infringements against the economic order, such as the formation of cartels, are usually kept secret so that their participants can maintain uninterrupted temporal control over them, and so the aggrieved parties are usually at a disadvantage in terms of access to information.

CADE infringement decision

Applying the case law from the STJ mentioned above, the Court of Appeal of São Paulo, for instance, ruled in follow-on damages actions that the limitation period cannot start to run before CADE issues a final infringement decision (Cia de Cimento Itambé v Mendes Júnior Engenharia SA, Interlocutory Appeal No 2103889-09.2018.8.06.000, 32nd Private Law Chamber, adjudicated on 14 February 2019).  It is at this point that conduct is recognised as violating of the Brazilian Competition Law. Claimants are presumed to be aware of the illegal nature of the conduct at this point, when they become able to seek redress. 

Criminal investigations

Under the Brazilian Civil Code, a criminal investigation suspends the limitation period for initiating private antitrust actions. Claimants can also rely on a decision held in a criminal proceeding to bring an action for damages against an undertaking and its executives who participated in anti-competitive conduct, especially considering that under the Civil Code, employers are jointly and severally liable for redressing losses caused by their employees. 

Disclosure of documents is court-supervised and available to a reasonable extent.

Regarding early discovery proceedings, claimants may initiate a court proceeding for primary or immediate production of evidence, provided that: 

  • there is reasonable concern that it may become impossible or difficult to obtain evidence or prove specific facts during the damages action itself;
  • the evidence sought is relevant for triggering a settlement agreement; or 
  • prior production of evidence may make it possible to avoid filing an action. 

Claimants may also request access to CADE’s files. The Brazilian Federal Constitution enshrines the fundamental right to access administration files, and the principles of transparency and publicity guide the public administration, which includes the Brazilian antitrust watchdog. 

Considering this provision, the STJ recently imposed on CADE the duty to disclose an executed leniency agreement and consent decrees to support a damages claim brought against a cartel in the industry of compressors for refrigeration (Electrolux do Brasil SA v Whirlpool SA, Special Appeal No 1.554.986-SP, Third Panel, adjudicated on 8 March 2016). 

This precedent triggered a debate on the balance of public and private antitrust enforcement. In 2018, the Brazilian antitrust authority created a disclosure policy, through Regulation No 21/2018. According to this policy, documents gathered in the course of administrative proceedings may be – either proactively or by request – disclosed by CADE after it issues a final decision. Aggrieved parties may rely on them to substantiate their claims. 

The regulation, however, does not allow for release of claimants’ statements related to leniency agreements and settlements. As this regulation ended up narrowing the scope of the STJ’s decision, it is expected to face scrutiny from the federal courts.

Although there are very few precedents from CADE on the application of this Regulation, the understanding is that the provision is not applicable retroactively, that is, it does not affect documents and information from settlements reached with CADE before its enactment (Proceeding No 08700.004073/2016-61, and Order No 44/2019, 13 November 2019).

Legal professional privilege encompasses any communications and files related to an attorney-client relationship. Counsel may lawfully refuse to provide the courts with documents and to testify about facts protected by legal privilege.

In order to encourage the filing of private antitrust claims, CADE has issued Regulation No 21/2018, introducing a disclosure regime for its investigation files. According to this regulation, CADE will proactively disclose part of its files upon issuing a final decision. However, documents that will remain sealed under the regulation include:

  • pieces of evidence related to leniency agreements and settlements, and notable statements provided by applicants on the history of the unlawful conduct; and
  • documents concerning trade secrets and confidential and unrelated business information. 

As mentioned in 5.1 Disclosure/Discovery Procedure, a precedent from the STJ has established that CADE must disclose to claimants pieces of evidence gathered during its investigations, including information provided by beneficiaries of leniency agreements and settling parties, provided that CADE has concluded its investigation and issued a definitive decision (Electrolux do Brasil SA v Whirlpool SA, Special Appeal No 1.554.986-SP, Third Panel, adjudicated on 8 March 2016).

According to the precedent, such documents are not allowed, under the Federal Constitution, to remain perpetually sealed given their relevance to the public. CADE’s legal duty of confidentiality is exhausted after the CADE tribunal issues its final decision, at which point, the duty to provide information and documents to the judiciary branch is imposed by the Federal Constitution.

Parties may employ witness testimonies to prove facts. Witness evidence is given orally, and cross-examination is allowed to a certain extent. Witness hearings are supervised by the judge presiding over the case, who may filter or bar certain questions. Witnesses may be compelled to testify (provided that their constitutional rights are safeguarded).

Claimants regularly rely on expert witness reports to prove the effects of anti-competitive conduct such as cartel overcharging and individual damages resulting from this. 

Expert evidence is normally produced by a court-appointed expert upon request of one or more parties, who typically also submit their own experts’ reports. 

Judges are also allowed to rule based solely on the reports from the parties’ experts and documents submitted by the parties, but producing joint statements and "hot-tubbing" are not common practices.

In 2018, the Brazilian Secretariat for Promotion of Productivity and Competition Advocacy (Secretaria de Promoção da Produtividade e Advocacia da Concorrência or Seprac) issued guidelines detailing econometric methodologies for calculating cartel damages to facilitate private antitrust actions. This document is guiding courts in the production of expert evidence.

As already pointed out in 2.4 Burden and Standard of Proof, courts and claimants rely on sophisticated econometric calculations. In this sense, a judge cannot deny a request for the production of such evidence and dismiss the action on the grounds that the claimant did not substantiate its claim, as this would characterise a clear violation of due process (see EIT – Empresa Industrial Técnica S.A. v Votorantim and others, TJSP, Appeal 1049928-98.2017.8.26.0100, 25th Private Law Chamber, Rapporteur Judge Leila Hassem da Ponte, adjudicated on 23 April 2021).

Scope of Compensation

As a consequence of unlawful behaviour, injured parties may claim compensation for:

  • actual losses; 
  • lost profits; and 
  • damage to a company’s "image" and "moral damage". 

Actual losses

The actual losses consist of the effective and immediate decrease in the victim’s assets due to the illegal act. In a claim for cartel damages, the actual losses are attributable to the cartel overcharge.

Lost profits

Lost profits consist of the loss of income the aggrieved party would have achieved had it not been affected by the unlawful conduct. 

Moral damage

Under Brazilian law, moral damage is awarded for a violation either of personal rights in relation to a person’s honour, or of the reputation, image and goodwill of a company or other legal entity. Likewise, the STJ’s Binding Precedent No 227 establishes that corporate entities have the standing to claim moral damages. Therefore, moral damages are awarded to corporate entities whenever the infringement affects the off-balance sheet value of a company, including its name, reputation, credit, and tradition within that market.

Furthermore, the STJ’s Binding Precedent No 37 sets forth the possibility of cumulative monetary and moral damages derived from the same fact.

Double Damages

Double damages may be awarded for claims brought by consumers under the Consumer Protection Code. 

Bill No 11,275

A bill of law currently under consideration before the House of Representatives is likely to expand the scope of double damages to other recoveries against cartels (see 1.2 Other Developments).

The passing-on defence is available, and under the Civil Procedure Code, defendants bear the burden of proving it. 

See 2.4 Burden and Standard of Proof.

The Court of Appeals of the State of São Paulo recently decided that it is not possible to assume that a cartel victim passed on the cartel overcharge. Passing-on must effectively be proved by defendants (Paez de Lima Construções e Comércio Ltda e outros v Votorantim Cimentos S/A e Lafargeholcim (Brasil) SA, TJ-SP, Appeal No 1050035-45.2017.8.26.0100, 19th Private Law Chamber, adjudicated on 28 August 2019).

Statutory interest is payable on damages which must also be adjusted for inflation under the Civil Code. 

Pre-judgment interest applies in cases of torts and it accrues from the date the unlawful conduct occurred, according to precedents of the STJ. Post-judgment interest is also applied, for example, while a party appeals.

Tortfeasors are jointly and severally liable for damages derived from unlawful practices as a general rule under the Civil Code. 

Furthermore, the Competition Law also provides for joint and several liability among undertakings of the same economic group, establishing, therefore, joint and several liability beyond classical parental liability. In addition, the Competition Law establishes that companies are jointly and severally liable with their officers for anti-competitive conduct. Pursuant to the Competition Law, these rules apply to both public and private enforcement.

It is important to note that regarding cartel damages claims, all the different cartel members are jointly and severally liable for all the damages inflicted on the injured parties, regardless of whether the infringers have a contractual relationship with the claimant. Brazilian courts have ruled that cartel formation is a permanent, uninterrupted single crime, composed of a set of practices. Therefore, its participants are liable for all performed conduct and advantages obtained therefrom.

Under the Brazilian Civil Code, defendants are entitled to seek contributions from other co-debtors or co-defendants in cases where one of them is obliged to pay claimants the entire amount of the awarded damages.

Granting interim remedies or preliminary injunctive relief requires that a claimant provide evidence of:

  • the lawfulness of the alleged claim (fumus boni iuris); and
  • a risk to the usefulness of the lawsuit’s outcome (periculum in mora). 

The courts may also grant injunctions when a claimant has produced prima facie evidence supporting the claim, and the defendant does not produce evidence raising reasonable doubt.

Before the filing of a response and the statement of defence, judges must encourage the parties to settle the case during a conciliatory or mediation hearing that precedes the next step of the proceedings. 

Arbitration is available when parties expressly agree to submit the claim to an arbitration panel or sole arbitrator. 

The referral of the dispute to an arbitration panel may result from the establishment of an arbitration submission agreement or an arbitration clause. The former consists of a bilateral agreement whereby the parties undertake to submit the current conflict to an arbitration panel. The second entails the existence of a contract, in which the parties undertook to submit disputes arising from that contract to an arbitral tribunal.

Bill No 11,275 of 2018, which is currently before the House of Representatives, provides that as a requirement for settling investigations with CADE, applicants must agree to submit damages claims resulting from the investigated conduct to arbitration provided that the claimants agree to and request it. 

Litigation funding is rapidly growing in Brazil as the Civil Code allows for its implementation through different forms.

The Brazilian STJ has held that the assignment of a right under dispute does not modify the standing to sue. This understanding is applicable when the assignment of credit occurs between the filing of a claim and the summoning of the defendant. 

After the service of process, the assignee can only replace the assignor in an ongoing private action with the defendant’s consent. Alternatively, the assignee may join the case as joint plaintiff or intervene as assignor’s assistant.

Contingency fees are also available and may be assigned. The same applies to statutory attorney's fees paid by the losing party in the amount of 10–20% of the amount under dispute. 

Court Costs

A court award imposes on the losing party the obligation to reimburse the prevailing party for the costs and expenses advanced – in general, limited to administrative costs of court proceedings, compensation for travel expenses, fees of retained experts and travel expenses of witnesses.

However, claimants in collective proceedings receive a waiver both from anticipated legal costs (including expert witness fees and the expenses of pleadings), and paying attorneys’ fees and court costs if they lose.

Attorney’s Fees

In individual claims, the losing party will bear the statutory attorney’s fees of the prevailing party, but not contractual fees. The statutory attorney’s fees must be stipulated as 10–20% of the value of the award or claim’s value, adjusted for inflation pursuant to the Civil Procedure Code. 

There are two main reasons for the existence of statutory attorney’s fees:

  • to discourage unnecessary litigation; and
  • to prevent people from being harmed by the expenses they incurred in pleading their rights or defending themselves against a lawsuit brought against them.

Appeals to the State or Federal Court of Appeals on both points of law and factual findings are available following interlocutory and final rulings by the Courts of First Instance. 

In a Court of Appeals, a judge will report the case, and a panel of judges will hold an adjudication session on that appeal in which a ruling is issued. In the case of interlocutory decisions issued by the judge-rapporteur, motion for clarification and internal appeal are available. 

After a ruling from a Court of Appeal, parties may seek to appeal further – solely on the points of law – to the STJ when the Court of Appeal’s decision breaches a federal law and, to the extent that there is a constitutional issue involved, to the Supreme Court. At this stage of the proceedings, appeals on the facts are not available, and those courts will not analyse the case from a factual perspective. Internal appeals and motions for clarification are, however, available at this stage of the proceedings. 

Araujo e Policastro Advogados

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Trends and Developments


Authors



Araújo e Policastro Advogados is a full-service law firm founded in 1962 with headquarters in the city of São Paulo, Latin America’s main business and financial hub. The field of private antitrust litigation in Brazil started to develop after partner Bruno Peixoto elaborated and filed the first recovery action for antitrust damages in the country as well as the first follow-on collective action for cartel damages. Bruno Peixoto was also the first lawyer in Brazil to devise and conduct an international litigation strategy for recovering cartel damages derived from a global cartel on behalf of corporate clients. Bruno has devised and implemented global strategies which have included parallel and concomitant legal actions in several jurisdictions, including the USA, the Netherlands, the UK and Brazil. Since then, the Antitrust and Competition team has furthered the debate on the development of legal and procedural tools to encourage injured parties to claim damages for anti-competitive practices.

Private antitrust litigation in Brazil is a thriving field of practice and research. Recent court decisions as well as a host of initiatives emanating from both the public and private sectors have produced significant advances in private enforcement of antitrust law.

This article will:

  • describe cutting-edge recovery actions for antitrust damages;
  • review recent rulings from high courts that have paved the way for private antitrust litigation;
  • describe a bill of law recently passed by Brazil’s Senate and currently under review before the House of Representatives that aims at creating further incentives for private enforcement, namely double damages and alternate dispute resolution;
  • discuss advocacy initiatives from the Federal Government;
  • consider further developments arising from the antitrust bar and private sector, namely multi-jurisdictional litigation and litigation funding; and
  • conclude with an examination of the positive outlook on the interplay between antitrust litigation in Brazil and developments in private antitrust enforcement in the global arena.

Ground-Breaking Recovery Actions for Antitrust Damages

Although Brazil’s Competition Law first established the possibility of claiming competition damages in 1994, it was only in 2006 that the first actions for recovering cartel damages were brought, following an infringement decision by the Administrative Council for Economic Defence (CADE). After CADE fined leading companies for a collusive scheme in the long steel industry, steel distributors filed recovery actions for damages derived from cartel overcharge and vertical restraints and a civil construction association filed the first ever collective action for cartel damages.

Other cartel damages actions followed subsequently, such as collective actions from associations of hospitals seeking compensation for damages derived from collusion in the medical gases industry. Those trailblazing proceedings also stimulated other victims to claim cartel damages, substantially increasing the number of lawsuits.

Accordingly, domestic courts of law have rendered important decisions on contentious issues related to antitrust damage claims over recent years and aggrieved parties have relied on such precedents to substantiate their claims.

Major Court Rulings

CADE’s infringement decisions and Brazilian courts

Plaintiffs in follow-on actions have relied on CADE’s findings to prove the existence of antitrust infringement and courts of appeal have reaffirmed that CADE’s rulings represent "unequivocal evidence" of an antitrust violation, see, for instance, Association of Hospitals of Minas Gerais v Air Products Brasil Ltda (2012).

In an important development in the past year, the Supreme Court reinforced the relevance of an infringement decision from CADE. In Comal Combustíveis Automotivos v CADE (2019), Justice Luiz Fux from the Supreme Court affirmed that Brazilian courts shall defer to CADE’s findings of fact regarding anticompetitive conduct and its effects on the Brazilian market. Court deference to CADE’s decision, reasoned Justice Fux, arises from the fact that only CADE has the ability to detect and the expertise to verify competition infringements given the powers granted by Congress to the agency. As a consequence, Brazilian courts shall not revisit CADE’s findings on the merits of the anti-competitive nature of conduct and its detrimental effects on the market, although courts of law may still review questions of due process of law and a procedural nature concerning CADE’s administrative adjudicatory proceedings. By further strengthening the evidentiary value of CADE’s findings, this ruling may expedite the handling of follow-on private antitrust actions.

In addition, courts have ruled that if a CADE decision is annulled as a result of a violation of the due process of law or procedural issues related to CADE’s administrative proceedings, it does not invalidate the right of an aggrieved party to seek compensation in court. Claimants may rely on further evidence to substantiate their right to be redressed.

Disclosure of documents and information produced in CADE’s proceedings

Furthermore, the Superior Court of Justice (Superior Tribunal de Justiça or STJ), Brazil’s highest court for non-constitutional matters, has ruled that CADE has a legal duty to provide courts adjudicating follow-on actions for damages, with documents and information obtained during its investigations. On this occasion, the STJ pointed out that CADE’s duty of confidentiality ceases when CADE issues a final (infringement) decision. This decision, in Electrolux do Brasil SA v Whirlpool SA (2016), has made it possible for injured parties to request and access confidential documents and data from the administrative investigation to substantiate their claims for damages.

Following the ruling from the STJ, CADE has issued a regulation to determine what pieces of evidence it will proactively release after its final infringement decision. According to CADE’s new disclosure policy, the antitrust authority will release documentary evidence to promote recovery of antitrust damages, except for documents concerning consent decrees or leniency agreements, notably leniency applicant’s or settling parties’ statements describing the history of the unlawful conduct, which will remain sealed. As this regulation has rather narrowed the scope of the STJ’s decision, it will certainly face scrutiny from federal courts. Nonetheless, it can be seen as an important development for private antitrust litigation in Brazil, where victims have historically struggled to access CADE’s files and gather pieces of evidence to bring recovery actions.

Statute of limitation concerning private antitrust actions

Regarding the statute of limitations period for bringing private actions, the STJ has also reaffirmed its precedents in the sense that the limitation period applicable to tort liability starts to run from the moment the aggrieved party obtains "unequivocal knowledge" about (i) the unlawful conduct, (iii) the identity of tortfeasors, (iii) the existence of individual damages, and (iv) the causal relationship between the unlawful conduct and the damages. The STJ has issued several rulings recently such as:

  • Oi S.A. v Augustin Anibal Tonelotto (2020), STJ. REsp 1.785.771/RS (2020);
  • Lidia Zaratini Gonçalves and others v Maria Angela Gonçalves Cotta (2020);
  • Maria Ilza Vieira da Silva v Consorcio Estreito Energia – CESTE (2020);
  • Eva Araujo Reis Brito v Consorcio Estreito Energia – CESTE (2020);
  • Delaminas Comercio e Exportacao Ltda v Dwane Mitchell Toebe (2019);
  • Gilberto Alves de Almeida v Consórcio Estreito Energia – CESTE (2019);
  • Dilson Ferreira de Lucena v João Marques das Neves (2019); and
  • Cenpar Comunicação S/C Ltda. v Wilson Casari Romualdo (2019).

Indeed, when it comes to follow-on cartel damages claims, aggrieved parties only obtain the necessary knowledge of the infringement, its characteristics and the losses caused after an infringement decision. The Court of Appeal of the State of Sao Paulo issued a decision, in Cimento Itambé v Mendes Junior Engenharia S.A. (2019), stating that CADE’s final ruling shall be considered as the starting point or triggering event to assess the limitation period, since it is only at this moment that a claimant shall be deemed to be aware of the infringement and the extent of its consequences (principle of subjective actio nata).

Finally, when assessing the starting point of the statute of limitation of a private claim, the existence of a criminal investigation regarding the same offence(s) must also be taken into consideration. Under the Brazilian Civil Code, this fact prevents the limitation period from running.

Increased relevance of production of expert evidence

With the growth of private antitrust actions before the Brazilian courts, judges have begun to realise the complexity of such cases. The Court of Justice of the State of São Paulo has already decided on several occasions that the production of expert reports is essential for the outcome of these cases, as these reports contribute to demonstrating the existence of individual damages.

In this sense, a judge cannot dismiss a lawsuit on the grounds that the aggrieved party has not substantiated the claim without providing the claimant the opportunity to produce expert evidence, to do so would be a violation of due process (vide Paez de Lima Construções Comércio e Empreendimentos Ltda e outros v Votorantim Cimentos S/A e Lafargeholcim (Brasil) (2019) and EIT – Empresa Industrial Técnica S/A v Votorantim Cimentos S/A e outros (2021)).

Passing-on cannot be presumed and the burden of proving it lies on the defendant

Defendants often rely on the pass-on defence to seek the exclusion of their liability to redress. However, passing the overcharge on cannot be assumed for several reasons. For instance, the Court of Justice of the State of São Paulo ruled, in Paez de Lima Construções Comércio e Empreendimentos Ltda e outros v Votorantim Cimentos S/A e Lafargeholcim (Brasil) (2019), that the pass-on can only be properly verified through an expert report. In addition, the Court has reaffirmed that, under the Brazilian Civil Code, the burden of proving the passing-on defence lies with the defendants.

Expansion of the effectiveness of the collective res judicata

Recently, the Supreme Court rendered a decision in Brazilian Consumer Defence Institute v Caixa Econômica Federal and others (2021) which declared unconstitutional a law that limited the scope of collective actions to the territorial jurisdiction of a state court. The Supreme Court affirmed that the law that collective action rulings must encompass all injured parties in the country.

Further Incentives: Double Damages and Arbitration

In the legislative sphere, a bill recently passed by the Senate and under review by the House of Representatives (Bill of Law No 11,275) aims at significantly enhancing private enforcement of antitrust laws. The bill provides that aggrieved parties will be entitled to double damages from infringers that have not executed a leniency agreement or entered into consent decrees with CADE.

Furthermore, the bill also fosters alternative dispute resolution in private antitrust litigation, specifically arbitration, which will expedite such proceedings and heighten their level of effectiveness. Under the bill, consent decrees executed with CADE shall contain a mandatory provision stating that the settling party will agree to submit damages claims to arbitration provided that the claimant requests and/or agrees to submit these to arbitration. This obligation, however, does not apply to the party that enters into a first-in leniency agreement with CADE.

Additionally, the bill codifies established case law from Brazil’s high courts on limitation and the defendant’s burden to assert and prove passing-on. Concerning the statute of limitations period, the bill reinforces that the limitation period shall only start to run after CADE’s final ruling, while in standalone actions the starting point is the moment when the aggrieved party has obtained "unequivocal knowledge" of the unlawful conduct and individual damages. Fittingly, the bill introduces a specific provision according to which CADE’s administrative proceedings toll the limitation period applied to follow-on damage claims and proposes to extend the limitation period to five years.

Regarding the passing-on defence, the bill, reflecting established case law, sets outs that courts shall not presume that claimants passed the overcharge onto the next level of the supply chain and, therefore, defendants bear the burden of demonstrating the passing-on during the evidentiary stage of the proceeding.

Lastly, the Bill amends the Brazilian Antitrust Law to provide that CADE’s infringement decisions shall be considered sufficient grounds for granting of judicial relief, allowing judges to issue injunctions to cease anti-competitive conduct.

Advocacy from the Federal Government

The federal governmental has also pushed for the development of private antitrust enforcement in Brazil. Considering the complexity of measuring cartel damages, the Ministry of Economy and its Secretariat for Promotion of Productivity and Defence of Competition (Seprac) has issued detailed guidelines on the econometric methodologies for assessing cartel overcharge and resulting damages. The guide aims at providing technical support to public and private parties interested in obtaining redress. According to the Brazilian Civil Code, injured parties must be compensated for the full extent of their losses, adjusted for inflation and statutory interest.

Additionally, CADE has reaffirmed its commitment to provide information to allow injured parties to gather the information and evidence necessary to bring follow-on actions. CADE has included reference to injured parties and specific evidence of damages derived from anti-competitive conduct in its infringement decisions and has even sent notices to injured parties concerning infringement decisions.

Multi-jurisdictional Litigation

The Antitrust Law explicitly embraces the effects doctrine and sets out that foreign companies are subject to Brazilian jurisdiction when anti-competitive practices produce effects in Brazil. Therefore, injured companies can bring recovery actions claiming damages from anticompetitive conduct that produce effects on the Brazilian market, such as exclusionary practices or market allocation. In the latter case, injured parties have initiated, for instance, recovery actions for damages in Brazil and abroad seeking application of the Brazilian Antitrust Law to purchases made in or from Brazil and subjected to cartel prices.

Furthermore, in cases of international cartels where damages suffered by Brazilian subsidiaries of multinational corporations might not be redressed through foreign courts due to jurisdictional limitations, bringing an action in Brazil may add value to aggregated claims and global settlements, especially given the applicable interest rate. Under Brazilian law, a pre-judgment statutory interest rate applies to claims arising from unlawful conduct on top of adjustment for inflation. Interest accrues from the date of the unlawful conduct and is also applied post-judgment, for instance while a party appeals. Indeed, rates applicable to pre and post-interest are among the main reasons why defendants negotiate settlement agreements concerning Brazilian damages actions. Furthermore, Brazilian courts have demonstrated a willingness to grant injured parties access to investigation files as described above, under Disclosure of documents and information produced in CADE’s proceedings.

Under the Civil Procedure Code, Brazilian courts have jurisdiction either when conduct (cause of action) occurred in part in the country, or when a defendant is domiciled in Brazil. Importantly, Brazilian law embraces a broad interpretation of domicile: foreign companies are deemed to be domiciled in Brazil, and thus subject to Brazilian jurisdiction, if they have a subsidiary or agent in the country.

Third-Party Funding

The litigation funding industry is developing rapidly in Brazil and provides solutions for financing collective or expensive individual claims. Under the Civil Code, creditors may assign to a third party their right to claim compensation (provided that the nature of the obligation, the relevant law, or an agreement with the debtor does not preclude such assignment). 

Regarding collective claims, Brazilian law provides standing to civil associations to seek damages as representatives, for instance, of a class of purchasers in cartel cases. Given that these claims are highly complex and might take several years, third-party funding is an alternative for financing the costs of the proceedings.

Brazil as Part of the Global Arena

CADE has earned an international reputation as an effective and leading antitrust enforcement agency. Brazil has been considered a go-to jurisdiction for leniency applicants because of its enhanced enforcement and high-profile investigations. As CADE strengthens its position as a key player on the public enforcement front in the global arena, the number of follow-on actions has increased accordingly.

Importantly, substantial recent developments in other civil law jurisdictions – especially those in the European Union such as Germany, the Netherlands, Portugal, and France – are also likely to have an impact as Brazilian courts continue to construe the legal framework already in place to further improve the antitrust legal regime. Effectiveness is also a fundamental tenet of legal interpretation under Brazilian law – not to mention that corrective justice is a pillar of civil law regimes.

There has also been increased awareness about the role of private enforcement in deterring antitrust violation. Since fines are limited to 20% of the infringer’s revenues during a single year and thus may be easily offset by illicit profits when infringement lasts for many years, private enforcement provides a solution for the issues of both deterrence and reparation.

In conclusion, the private antitrust litigation field has advanced considerably over recent years in Brazil. Because of the recent developments discussed in this article, it has the potential to become one of the most promising fields of litigation in the country.

Araújo e Policastro Advogados

758 Leopoldo Couto de Magalhaes Junior
4th Floor
Itaim Bibi
São Paulo
Brazil

+55 11 3049 5700

+55 11 3078 6120

bpeixoto@araujopolicastro.com.br www.araujopolicastro.com.br
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Law and Practice

Authors



Araújo e Policastro Advogados is a full-service law firm founded in 1962 with headquarters in the city of São Paulo, Latin America’s main business and financial hub. The field of private antitrust litigation in Brazil started to develop after partner Bruno Peixoto elaborated and filed the first recovery action for antitrust damages in the country as well as the first follow-on collective action for cartel damages. Bruno Peixoto was also the first lawyer in Brazil to devise and conduct an international litigation strategy for recovering cartel damages derived from a global cartel on behalf of corporate clients. Bruno has devised and implemented global strategies which have included parallel and concomitant legal actions in several jurisdictions, including the USA, the Netherlands, the UK and Brazil. Since then, the Antitrust and Competition team has furthered the debate on the development of legal and procedural tools to encourage injured parties to claim damages for anti-competitive practices.

Trends and Development

Authors



Araújo e Policastro Advogados is a full-service law firm founded in 1962 with headquarters in the city of São Paulo, Latin America’s main business and financial hub. The field of private antitrust litigation in Brazil started to develop after partner Bruno Peixoto elaborated and filed the first recovery action for antitrust damages in the country as well as the first follow-on collective action for cartel damages. Bruno Peixoto was also the first lawyer in Brazil to devise and conduct an international litigation strategy for recovering cartel damages derived from a global cartel on behalf of corporate clients. Bruno has devised and implemented global strategies which have included parallel and concomitant legal actions in several jurisdictions, including the USA, the Netherlands, the UK and Brazil. Since then, the Antitrust and Competition team has furthered the debate on the development of legal and procedural tools to encourage injured parties to claim damages for anti-competitive practices.

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