Fighting Corruption and Promoting Competition in Brazil

International Cooperationand Competition Enforcement

International Cooperationand Competition EnforcementBrazilian and European Experiences

from the Enforcers’ Perspective

Edited by

Vinicius Marques de Carvalho

Carlos Emmanuel Joppert Ragazzo

Paulo Burnier da Silveira

Published by:Kluwer Law InternationalPO Box 3162400 AH Alphen aan den RijnThe NetherlandsWebsite: www.kluwerlaw.com

Sold and distributed in North, Central and South America by:Aspen Publishers, Inc.7201 McKinney CircleFrederick, MD 21704United States of AmericaEmail: [email protected]

Sold and distributed in all other countries by:Turpin Distribution Services LtdStratton Business ParkPegasus Drive, BiggleswadeBedfordshire SG18 8TQUnited KingdomEmail: [email protected]

Printed on acid-free paper.

ISBN 978-90-411-5145-2

© 2014 Kluwer Law International BV, The Netherlands

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying, recording, orotherwise, without written permission from the publisher.

Permission to use this content must be obtained from the copyright owner. Please apply to:Permissions Department, Wolters Kluwer Legal, 76 Ninth Avenue, 7th Floor, New York, NY10011-5201, USA. Email: [email protected]

Printed and Bound by CPI Group (UK) Ltd, Croydon, CR0 4YY.

List of Editors and Contributors

Camila Pires- Alves is former head of CADE’s Economics Department and Professor atthe Economics Institute of the Federal University of Rio de Janeiro. She holds a DoctorDegree in Economics from Federal University of Rio de Janeiro.

Ingrid Breit has been with the European Commission since 1998. She holds a degreein law from the University in Vienna (1992), an LL.M in European Law from theCatholic University of Leuven and a Ph.D. from the University in Vienna.

Jeroen Capiau joined the Directorate General for Competition of the EuropeanCommission in 2009. He is a policy advisor in the ECN unit. Mr Capiau holds a degreein Law and in advanced studies in European Law from the University of Ghent.

Ticiana Nogueira da Cruz Lima is a Ph.D. candidate on Economic Law at theUniversity of São Paulo Law School. Former senior advisor at CADE, she holds a LL.M.from Harvard Law School, and a Master degree in Public Law from the University ofSão Paulo Law School.

Gilvandro Vasconcelos Coelho de Araújo is currently a Commissioner of CADE, afterhaving served as its Attorney General for two consecutive mandates (2010-2014). Heholds a Diplôme d’Etudes Approfondies - DEA in Public Law from the Univeristy ofMontpellier and a Post Graduate degree in Competition Law from Fundação GetúlioVargas (2009). He Graduated in Law from the Catholic University of Pernambuco(1998). He is now Ph.D. student in law at the University of Paris II.

Dorothe Dalheimer works in the ECN unit in the Directorate-General for Competitionof the European Commission since 1997.

Ana Carolina Lopes de Carvalho is a senior advisor at CADE. She holds a PostGraduate degree in Constitutional Law from the Law School of the University ofBrasília.

Julia Mendes de Carvalho is an advisor of CADE’s International Unit. She holds a PostGraduate Degree in Strategic Management of Public Organizations, and a degree inInternational Relations at the IESB University Center.

v

Vinicius Marques de Carvalho is the President of CADE. Mr Carvalho holds a graduatedegree in law and a Ph.D. in Commercial Law from the University of São Paulo and inCompared Economic Law from the University Paris I (Panthéon-Sorbonne).

Ricardo Medeiros de Castro is head of CADE’s Merger and Antitrust Unit #1. He holdsa Master degree in International Relations, specialization in International Law and inCompetition Law.

Virgínia de Melo Dantas is Deputy Head of CADE’s International Unit. She holds aPost Graduate Degree in International Relations from the University of Brasilia, and alaw degree from the Federal University of Rio Grande do Norte.

Natalie Harsdorf is Deputy Managing Director of the Austrian Federal CompetitionAuthority. Previously she worked as a case handler at the Authority. After her studiesat the Universities of Vienna and Dublin Ms. Harsdorf specialized in European Law atthe College of Europe in Bruges.

Alexander Italianer is Director General of the European Commission’s DirectorateGeneral for Competition since 2010. He previously held the position of DeputySecretary General of the European Commission, in charge of the Better RegulationAgenda, and was Chairman of the Impact Assessment Board. Prior to that, Dr Italianerworked in the cabinets of Presidents Barroso and Santer, and Commissioners Verheu-gen and Telicka. He was also Director for International Economic and Financial Affairsbetween 2002 and 2004. He holds a graduate degree in econometrics and a Ph.D. ineconomics from the University of Groningen (the Netherlands), and was a researchassociate at the Catholic University of Leuven before joining the European Commissionin 1985.

Vita Jukneviciute is attached to the European Competition Network Unit at theDirectorate-General for Competition of the European Commission.

Bruno Lassere is a member of the Conseil d’État, the French supreme administrativecourt, which he joined in 1978 after graduating from the École Nationaled’Administration (ENA), the French national school for civil service. After serving asMember of the board of the Conseil de la concurrence (1998-2004), he was appointedPresident in July 2004, and in this capacity pushed through a major reform thattransformed it into the Autorité de la concurrence, responsible for merger review andcompetition advocacy in addition to antitrust enforcement. He has been chairing theAutorité since then. He is currently also Vice-Chair of the International CompetitionNetwork (ICN).

Tainá Leandro is the Deputy Chief Economist at CADE’s Economics Department. Sheholds a Master degree and is a Ph.D. student in Economics at the University ofBrasilia.Ph.D.

Andreas Mundt has been President of the German Bundeskartellamt (Federal CartelOffice) since December 2009. Since 2010 he is a Member of the Bureau of the OECDCompetiton Committee. He has also been appointed Chairman of the International


vi

Competition Network (2013). Prior to his appointment he was Director of the GeneralPolicy Division of the Bundeskartellamt. From 1991 to 1993 he worked in the FederalMinistry of Economics. He then was a member of staff of the Liberal Democrats in theGerman Parliament from 1993 to 2000, responsible for labour and social law. In 2000he joined the Bundeskartellamt as rapporteur. In addition to this function in variousdecision divisions he was Head of the International Section from 2001 to 2005.

Andrew Pickering has worked in the International team at the Competition andMarkets Authority (and its predecessor, the Office of Fair Trading) since 2010. MrPickering is a specialist in competition law and policy, market regulation and interna-tional economic cooperation. Mr Pickering holds a graduate degree in History andPolitics and a master’s degree in International Political Economy from the University ofSheffield, and a Postgraduate Diploma in EU Competition Law from King’s CollegeLondon.

Pierre M. Horna is the Chief of the COMPAL Programme at the United NationsConference on Trade and Development (UNCTAD). Mr Horna is a qualified lawyer andBachelor of Laws graduated by the University of Lima, Peru. Master of Laws inInternational Business Law from Leiden University, The Netherlands.

Mirta Kapural is a lawyer and holds Ph.D. in Competition Law from the University ofZagreb, Croatia and Master in ‘Contemporary European Studies’ from the University ofSussex, Sussex European Institute, United Kingdom. She works as a deputy Head of theInternational Cooperation Department of the Croatian Competition Agency where shehas been employed since 2004. Ms Kapural is also a lecturer of competition law for civilservants, judges and students and a guest lecturer of Company Law and Contract lawat the Faculty of Economy in Zagreb.

Petra Krenz has been with the Directorate-General for Competition of the EuropeanCommission since 1992. Ms. Krenz graduated in interpreting and translating fromHeriot-Watt University in Edinburgh and is registered as a sworn interpreter at thecourt of Landshut, Germany. She also holds a degree in legal administration obtainedfrom a College in Herrsching, Germany, as well as an additional degree as interpreterand translator obtained from a College in Munich, Germany.

Nitish Monebhurrun holds a Ph.D. in International Law from the Law School ofSorbonne, Paris. He acts as a United Nations Consultant for the Brazilian CompetitionAuthority and is an Associate Professor and Postdoctoral fellow at the UniversityCentre of Brasília.

Evelyne Rikkers is attached to the European Competition Network Unit at theDirectorate-General for Competition of the European Commission.

Eduardo Frade Rodrigues is Deputy Superintendent of CADE. He holds degrees inLaw, International Relations and Competition Policy.

Carlos Emmanuel Joppert Ragazzo is the General Superintendent of CADE. MrRagazzo holds a graduate degree in Law from the Catholic University of Rio de Janeiro,a Master degree in Law in Trade Regulation and Competition Policy from the New York


vii

School of Law (NYU), a Master and a Ph.D. in Law from the State University of Rio deJaneiro.

Ewoud C. Sakkers is currently Policy and Strategy Advisor at the European Commis-sion’s Directorate General for Competition. Mr Sakkers holds a law degree from theUniversity of Utrecht and a LL.M in European Law from the College of Europe. He hasbeen with the DG-Competition since 1997.

Barbara Seelos is a case handler at the Austrian Competition Authority (BWB). Ms.Seelos has studied law at the University of Innsbruck (Austria) and Taipei and is agraduate from the Diplomatic Academy of Vienna. She has worked as an associate inthe field of competition law at the law firm Binder Grösswang Rechtsanwälte GmbH inVienna.

Tineke Serlie-Stolze is a head of unit within Authority for Consumers and Markets’Competition Department. She holds an MSc from Nyenrode Business University, anMBA from Webster University, St. Louis, USA, and she has a Post-Graduate Diploma inEU Competition Law from King’s College, University of London.

Ailsa Sinclair has been with the Directorate-General for Competition of the EuropeanCommission since 2003. Ailsa graduated in law from the University of Aberdeen. Shealso has a LL.M from the University of Brussels and is qualified as a solicitor in Scotlandand England, as well as being admitted to the New York Bar.

Marta Skrobisz has been working in the Office of Competition and ConsumerProtection since 2007, currently on the position of the Head of Unit in the InternationalRelations and Communication Department. Graduated from law at the EuropeanSchool of Law and Administration in Warsaw. Currently a legal advisor trainee at theWarsaw Bar of Legal Advisors.

Paulo Burnier da Silveira is head of CADE’s International Unit. He holds a Ph.D. inInternational Law from the University of Paris II and the University of São Paulo, aLL.M from the Catholic University of Lisbon and a law degree from the CatholicUniversity of Rio de Janeiro. He also teaches at the Law School of the University ofBrasilia.

Priscilla Tardelli Tollini is an intern at CADE. She is currently a law student at the LawSchool of the University of Brasilia.


viii

Summary of Contents

List of Editors and Contributors v

ForewordOn the Way to More CooperationAndreas Mundt xxiii

ForewordInternational Cooperation: A Multifaceted RealityBruno Lassere xxvii

ForewordPresentation: International Cooperation at a GlanceVinicius Marques de Carvalho & Carlos Emmanuel Joppert Ragazzo xxxi

PrefaceA Move Forward on International CoooperationAlexander Italianer xxxv

CHAPTER 1Keep Calm and Carry On: Institutional Reform and International Cooperationin the United KingdomAndrew Pickering 1

CHAPTER 2Competition Policy and the Role of the Chief Economist’s Office:The Use of Economic Evidences, the International Practices, and theBrazilian ExperienceCamila Pires-Alves & Tainá Leandro 17

ix

CHAPTER 3Regional Cooperation in Antitrust Enforcement: The European CompetitionNetwork and the Main Pillars on Which It Is BuiltEwoud Sakkers 29

CHAPTER 4Developments in and around the European Competition Networkand Cooperation in Competition Enforcement in the EU: An UpdateIngrid Breit, Jeroen Capiau, Dorothe Dalheimer, Vita Jukneviciute,Petra Krenz, Evelyne Rikkers & Ailsa Sinclair 33

CHAPTER 5International Cooperation in the Field of Competition Enforcement:Overview of the Polish Office of Competition and Consumer Protection’sExperienceMarta Skrobisz 55

CHAPTER 6Competition Law and Policy in Austria: The Merits of InternationalCooperation for Young Competition Agencies at the Example of AustriaNatalie Harsdorf & Barbara Seelos 69

CHAPTER 7Fighting Corruption and Promoting Competition in BrazilNitish Monebhurrun 81

CHAPTER 8The Working Group on Trade and Competition Policies (WGTC)in Latin America and the Caribbean: Fostering Cooperation andRegional Integration of MarketsPierre M. Horna 91

CHAPTER 9Merger Notification Policies towards Minority ShareholdingsEduardo Frade Rodrigues 103

CHAPTER 10Brazilian Recent Experience on Cross-Border Merger RemediesVirgínia de Melo Dantas & Julia Mendes de Carvalho 115

CHAPTER 11Transactions at the Fringe: A Discussion about the Scope of MergerControl Review in BrazilTiciana Nogueira da Cruz Lima 121

Summary of Contents

x

CHAPTER 12The Judicial Analysis of Cade’s Decisions Convicting the CompaniesXerox and White Martins for Abuse of Dominant PositionGilvandro Vasconcelos Coelho de Araujo 137

CHAPTER 13Protection of Confidentiality of Leniency Applications before JudiciaryMirta Kapural 145

CHAPTER 14International Cartels in Brazil: An Overview and a Look ForwardPaulo Burnier da Silveira & Priscilla Tardelli Tollini 169

CHAPTER 15The Use of International Experience in Anticompetitive UnilateralConduct Investigations in Brazil: The SKF’s Resale Price MaintenanceDebateRicardo Medeiros de Castro 183

CHAPTER 16Antitrust Enforcement in the Brazilian Financial Sector: The Principles ofCompetitive Neutrality Applied to State Commercial BanksAna Carolina Lopes de Carvalho 199

CHAPTER 17License to (Co)operate: Proactive and Differentiated CompetitionEnforcement in the Dutch Health Care SectorTineke Serlie-Stolze 211

Summary of Contents

xi

Table of Contents

List of Editors and Contributors v

ForewordOn the Way to More CooperationAndreas Mundt xxiii

ForewordInternational Cooperation: A Multifaceted RealityBruno Lassere xxvii

ForewordPresentation: International Cooperation at a GlanceVinicius Marques de Carvalho & Carlos Emmanuel Joppert Ragazzo xxxi

PrefaceA Move Forward on International CoooperationAlexander Italianer xxxv

CHAPTER 1Keep Calm and Carry On: Institutional Reform and International Cooperationin the United KingdomAndrew Pickering 1

§1.01 Introduction 1§1.02 Overview of the Pre-April 2014 Regime 2§1.03 The UK and the International Competition Community 3§1.04 April 2014 Reforms to the UK System 9§1.05 Prospects for the International Role of the CMA from 2014 12

xiii

CHAPTER 2Competition Policy and the Role of the Chief Economist’s Office: The Useof Economic Evidences, the International Practices, and the BrazilianExperienceCamila Pires-Alves & Tainá Leandro 17

§2.01 Introduction 17§2.02 The Competition Policy under a Systemic Perspective and the Use

of Economic Evidence 18§2.03 The Role of Economists and Chief Economist’s Office in Competition

Policy 20§2.04 The Department of Economic Studies in CADE: origin and history 23§2.05 Conclusions 25

CHAPTER 3Regional Cooperation in Antitrust Enforcement: The European CompetitionNetwork and the Main Pillars on Which It Is BuiltEwoud Sakkers 29

CHAPTER 4Developments in and around the European Competition Networkand Cooperation in Competition Enforcement in the EU: An UpdateIngrid Breit, Jeroen Capiau, Dorothe Dalheimer, Vita Jukneviciute,Petra Krenz, Evelyne Rikkers & Ailsa Sinclair 33

§4.01 Introduction 33§4.02 The ECN and Its Members 34

[A] Structures of NCAs in the ECN: Recent Evolution 35[B] Portfolios of NCAs: Combining or Separating Competition

Enforcement and Other Functions 36[C] Recent Case Law: Principle of Effectiveness and Fundamental

Rights 36§4.03 General Aspects of Enforcement by EU Competition Authorities 38

[A] Obligation to Apply EU Competition Rules: Effect on Trade 38[B] Work-Sharing between Enforcers: Ne bis in idem 40[C] Tools for Cooperation between Enforcers: Cross-Border

Assistance in Investigations 41[D] Decisional Powers of NCAs: ‘Negative’ Decisions 42

§4.04 Ensuring the Coherent Application of EU Competition Rules inPractice: Case Enforcement by the Authorities and Role of the Courts 43[A] Cooperation Fora of the ECN: Comprehensive Reports on Sectors 44[B] Cooperation in Individual Cases: Sustained High Levels of Activity 45

Table of Contents

xiv

[C] Interaction with National Courts and Preliminary Rulings of theEuropean Court of Justice: Coherent Application through theCourts 46

§4.05 Convergence of Enforcement Tools 48[A] No Obligation to Harmonize Procedures and Sanctions but

Increasing Convergence 48[B] Voluntary Convergence I: The Example of Leniency 49[C] Voluntary Convergence II: Need for Action in Other Areas? 51

§4.06 Conclusion 52

CHAPTER 5International Cooperation in the Field of Competition Enforcement:Overview of the Polish Office of Competition and Consumer Protection’sExperienceMarta Skrobisz 55

§5.01 Introduction 55§5.02 General Remarks on the Polish Competition Law Evolution and the

Activities of the Office of Competition and Consumer Protection 56[A] Brief History of the Office 56[B] Organizational Framework 57[C] Synergy: Bringing Competition and Consumer under one

Umbrella 57[D] UOKiK’s Activity in Numbers 58

§5.03 International Cooperation of UOKiK: Key Tool to IncreasingEffectiveness of National Competition Enforcement 58[A] Regional Cooperation in Europe 59

[1] European Cooperation in the Scope of Antitrust Matters 60[2] European Cooperation in the Scope of Merger Control 62

[B] Bilateral Cooperation of the Office of Competition and ConsumerProtection 64

[C] Multilateral Forms of Cooperation 65§5.04 Conclusions 66

CHAPTER 6Competition Law and Policy in Austria: The Merits of InternationalCooperation for Young Competition Agencies at the Example of AustriaNatalie Harsdorf & Barbara Seelos 69

§6.01 Introduction 69§6.02 From ‘European’s China’ to a Modern Member State of the EU 70§6.03 Towards a Modern Enforcement Framework for Competition Law 71§6.04 Current Examples of the Ongoing Competition Cooperation Process

in and beyond Europe 73

Table of Contents

xv

[A] European Competition Network 74[B] Marchfeld Competition Forum 77[C] Euro-Mediterranean Competition Forum 77[D] Cooperation Regarding Fuel Prices 78[E] Bilateral Cooperation 78[F] BRICS 79


CHAPTER 7Fighting Corruption and Promoting Competition in BrazilNitish Monebhurrun 81

§7.01 Introduction 81§7.02 The Anti-corruption Context in Brazil and Its Interaction with the

Competition Field 82[A] The Legal Context: How Competition Law Techniques Inspire

Anti-corruption Law 83[B] The Institutional Context 84

§7.03 Institutional Cooperation between CADE and the Office of theComptroller General 86[A] The Cooperation’s Framework 86[B] The Cooperation’s Implementation 86

ANNEX: 1 PUBLIC SPENDING OBSERVATORY - ODP (OBSERVATÓRIO DADESPESA PÚBLICA): A TOOL AGAINST BID RIGGING 88

CHAPTER 8The Working Group on Trade and Competition Policies (WGTC) in LatinAmerica and the Caribbean: Fostering Cooperation and Regional Integrationof MarketsPierre M. Horna 91

§8.01 Introduction 91§8.02 Collective Actions Needed to Fight Cross-Border Anti-competitive

Business Practices: Information Cooperation Is Crucial for LatinAmerican and Caribbean Countries 92

§8.03 Promoting Research and Studies at Regional Level on Issues of Interestto Trade and Competition Authorities: Fostering Knowledge of Sectorswith Value-Added Chains to Increase Intra-regional Trade andIntegration 95

§8.04 Sharing Information and Experiences as Regards Trade andCompetition: The UNCTAD Database 99

§8.05 Final Remarks 101

Table of Contents

xvi

CHAPTER 9Merger Notification Policies towards Minority ShareholdingsEduardo Frade Rodrigues 103

§9.01 Introduction 103§9.02 The Antitrust Concerns Behind Minority Structural Links 104§9.03 Merger Notification Regulations Comprising Minority Shareholdings 106§9.04 Pros and Cons Related to Merger Review Policies towards Minority

Shareholding 108§9.05 The Possible Extension of EU’s Merger Regulation to the Acquisition

of Minority Shareholdings 110§9.06 Comments on Merger Notification Policies towards Minority

Shareholdings 112

CHAPTER 10Brazilian Recent Experience on Cross-Border Merger RemediesVirgínia de Melo Dantas & Julia Mendes de Carvalho 115

§10.01 Introduction 115§10.02 Fomenting Collaboration 116§10.03 Case Analyses 117

[A] Purchase of Mach of Luxembourg by Syniverse of the US 117[B] Merger between the Swedish Company Munksjö AB and the

Finish Ahlstrom Corporation 119§10.04 Conclusion 120

CHAPTER 11Transactions at the Fringe: A Discussion about the Scope of MergerControl Review in BrazilTiciana Nogueira da Cruz Lima 121

§11.01 Introduction: Diversity as an Important Part of the GlobalCompetition Agenda 121

§11.02 Recent Developments around the Definition of Merger Transactionin Brazil: Appointments about an Ongoing Debate 124

§11.03 Defining Merger Transactions: A Strategic Decision 127§11.04 Acquisition of Non-controlling Minority Interests: Theoretical

Justifications for Their Suitability for Merger Review 128§11.05 The Competitive Environment in Brazil 130

[A] The Effects of Corporate Law on Competition in Brazil 131[B] The Brazilian Capitalism of Ties 132


Table of Contents

xvii

CHAPTER 12The Judicial Analysis of Cade’s Decisions Convicting the Companies Xeroxand White Martins for Abuse of Dominant PositionGilvandro Vasconcelos Coelho de Araujo 137

§12.01 Introduction 137§12.02 An Approach to the Abuse of a Dominant Position 138§12.03 CADE Case Analysis: Xerox and White Martins 139§12.04 1st Degree Judicial Decisions – Reporting Judge 141§12.05 2nd Degree Judicial Decisions – Revising Body 143§12.06 Conclusion 144

CHAPTER 13Protection of Confidentiality of Leniency Applications before JudiciaryMirta Kapural 145

§13.01 Introduction 145§13.02 EU: In Quest for Legal Guidance 146

[A] Current Legal Framework 146[B] First EU Legislative Proposal-Directive on Damages Claims 150[C] Diverging Practice in the EU 153[D] Relevant Case Law of the EU Courts 154

[1] Pfleiderer-Missed Opportunity 155[2] National Grid-Contrary National Position 156[3] Hydrogene Peroxide-Positive Direction for the Rights

of the Claimants 157[4] ENBW-Liberal Approach/No Special Privilege for

Competition 158[5] Donau Chemie-No Absolute Protection for Cartel

Case Files 161[E] Related Issues 162

§13.03 National Position of New EU Member State-Croatia 162§13.04 Possible Solutions 165

[A] Firm Guidance for Courts in Legislation and in Solid Case Law 165[B] Absolute Protection of at least Leniency Statements 165[C] Discretion for Courts’ Decisions on Other Documents Related to

Leniency Procedure, Such as Pre-existing Documents 166[D] Waivers Useful Primarily in International Cartel Cases 166


CHAPTER 14International Cartels in Brazil: An Overview and a Look ForwardPaulo Burnier da Silveira & Priscilla Tardelli Tollini 169

§14.01 Introduction 169§14.02 Effects Theory 170

Table of Contents

xviii

§14.03 An Overview of International Cartel Cases in Brazil 171[A] Concluded International Cartels Cases 171

[1] Vitamins Cartel 172[2] Lysines Cartel 172[3] Peroxide Cartel 173[4] Compressors Cartel 174[5] Air Cargo Cartel 174

[B] Ongoing Investigations of Alleged International Cartels 175[1] Fertilizers 175[2] Marine Hoses 176[3] Graphite Electrodes 176[4] TFT-LCD Panels 177

§14.04 A Look Forward on International Cooperation 177[A] New Legal Provisions for Agency-to-Agency Cooperation 178[B] Importance of Leniency Policy for Competition Enforcement 180

§14.05 New Settlements Policy for Cartel Investigations 181§14.06 Conclusion 182

CHAPTER 15The Use of International Experience in Anticompetitive UnilateralConduct Investigations in Brazil: The SKF’s Resale Price Maintenance DebateRicardo Medeiros de Castro 183

§15.01 Introduction 183§15.02 International Cooperation Regarding Unilateral Anticompetitive

Conducts 184§15.03 SKF’s RPM Case 186

[A] SKF’s Defence 187[B] SDE, MPF and ProCADE Opinions 187[C] CADE’s decision 188

[1] Cesar Mattos’ Opinion, Presented on 11 November 2009 188[2] Vinícius Marques de Carvalho´s opinion, presented

on 19 January 2010 189[3] Ricardo Machado Ruiz´s opinion, presented on

23 February 2011 194[4] Olavo Zago Chinaglia’s Opinion, Presented on 31 August

2011 194[5] Fernando de Magalhães Furlan’s Opinion, Presented

on 14 December 2011 194[6] Marcos Paulo Veríssimo’s Opinion and Eduardo

Pontual’s Opinion, Presented on 30 January 2013 195§15.04 Final Remarks 197

Table of Contents

xix

CHAPTER 16Antitrust Enforcement in the Brazilian Financial Sector: The Principlesof Competitive Neutrality Applied to State Commercial BanksAna Carolina Lopes de Carvalho 199

§16.01 Introduction: Regulation, Competition and Financial Crisis 199§16.02 The Relationship between Financial Regulation and Competition

Policy after the Crisis of 2008: Some Comments on the BrazilianExperience 201

§16.03 The Role of Brazilian State Commercial Banks after the FinancialCrisis of 2008: A New Challenge for Competition? 204

§16.04 Competitive Neutrality and Antitrust Enforcement: CADE’s RecentDecisions Related to State Commercial Banks 205


CHAPTER 17License to (Co)operate: Proactive and Differentiated CompetitionEnforcement in the Dutch Health Care SectorTineke Serlie-Stolze 211

§17.01 ACM’s Strategy and Oversight Philosophy 211[A] ACM’s Strategy 211[B] ACM’s Oversight Philosophy 212

§17.02 The Dutch Health Care System in a Nutshell 212§17.03 ACM’s Oversight Efforts in Health Care 214

[A] ACM’s Interventions in Health Care: The Past 215[1] Merger Control 215[2] Cartel Prohibition 215[3] Proactive Guidance 216

[B] Relevant Potential Problems in Healthcare: The Near Future 216[1] Impediments That Prevent Markets from Functioning

Properly as a Result of Which Health Care ExpendituresAre Too High 217

(a) Monitoring of the Functioning of theHealth Insurance Market 218

(b) Unnecessarily Expensive Drugs 218[2] Reducing Opportunities and Options for Health Care

Providers and Consumers 218[C] Need for Proactive, Differentiated Approach in Health Care 219

§17.04 Case Example: Sense of Urgency with Regard to Hospital Sector 220[A] Reasons for a Proactive Differentiated Approach 220

[1] Policy Changes: More Incentives for Health Insurers 220[2] The Hospital Sector Called for Transparency in Advance 221[3] Definite Answer Needed about Assessments of

Collaborations and Mergers 221

Table of Contents

xx

[B] Guideline: ‘Assessing Mergers and Collaborations in HospitalCare’ 222[1] Key Aspects of ACM’s Assessments 222[2] Differences between Assessments of Mergers and

Collaborations 223[3] What Does This Mean for Arrangements as Part of

Collaborations? 223[4] Hospitals 223[5] Insurers and Patient Organizations 224[6] What Does This Mean for Mergers? 224[7] Hospitals 224[8] Insurers and Patient Organizations 225


Table of Contents

xxi

ForewordOn the Way to More Cooperation

by Andreas Mundt

President of the German Bundeskartellamt

Chairman of the International Competition Network (ICN)

In a world where more and more countries adopt competition laws and where theimportance of international trade is continuously growing, international cooperationbetween competition authorities is of key importance to successfully respond to thesedevelopments. I am therefore delighted to contribute to CADE’s publication oncompetition enforcement and international cooperation. This topic has always been ofthe greatest relevance to me as President of the Bundeskartellamt, the GermanCompetition Authority, and has demanded my attention even more since I was electedto be Chairman of the International Competition Network (ICN). This unique organi-zation gives competition authorities a platform to build consensus and convergencetowards sound competition policy principles across the global antitrust community.

It is the ICN’s mission amongst other things to seek to facilitate effectiveinternational cooperation to the benefit of member agencies, consumers and econo-mies worldwide. Together with the support of my dear colleagues President ViniciusMarques de Carvalho from CADE and President Bruno Lasserre of the French Autoritéde la Concurrence as Vice-Chairs, I attach great importance to fostering cooperationboth between the ICN Members and with other international players. For this reason inApril 2012, in collaboration with the OECD, the ICN engaged in an ongoing project oninternational enforcement cooperation.

In 2012, both organizations surveyed their members on the status quo ofinternational cooperation in their work. They asked their members questions such ashow much they relied on international cooperation in their daily work, what were thelegal frameworks and regulations for this cooperation, what had worked well andwhere was room for improvement. The survey also sought to establish what furtheractions might be needed. Accordingly, it was decided that the OECD should focus on itsspecific strengths and that it was well placed to deal with obstacles to effective

xxiii

cooperation, in particular those of a national legal nature, while the benefit of the ICNlies in promoting international cooperation and sharing practical experiences. Nearlyall respondents also stressed the importance of the ICN as a platform for interaction andexchange. A majority of respondents indicated that they were in favour of additionalwork products on cooperation in cartel and merger cases; significantly fewer respon-dents wished to prioritize cooperation on unilateral conduct at that stage. Morespecifically, a majority of respondents wished for the ICN to develop new recom-mended practices or other guidance documents on cooperation. Several of the ICN’sWorking Groups have therefore included projects relating to international cooperationinto their work plans.

The Vice-Chairs and I believe that international cooperation is a key element forconvergence and for the future success of the ICN. We have described our ideas and asuggested approach for our term until the Annual Conference 2015 in a joint roadmap.To foster international cooperation and ensure the ongoing success of the ICN, wethink it is essential to concentrate on three major aspects which are focus, inclusive-ness and implementation. This will help us to ensure not only that we choose the topicsthat matter most to the fast-growing membership and that we set the right priorities,but also that as many ICN members as possible are involved in the work of the ICN,producing and using the various tools the ICN has to offer.

For more than a decade already the ICN has served as a unique platform forcompetition authorities around the world to exchange views and learn from oneanother while facilitating soft convergence. A large body of written work products andguidance papers provides an invaluable resource for both mature and young authori-ties. By trying to include as many ICN members as possible in the drafting process, wemake sure that our work products represent the views of a large membership andreceive as much attention and commitment as possible. This in turn facilitatesimplementation of the work products and ensures that the most benefit is derived fromthe resources invested into creating them. Conferences, workshops, telephone callsand teleseminars are important elements of cooperation between ICN members inpractice. The drafting of a common handbook chapter between authorities from threeor four different continents can be an achievement in itself, building mutual trust andunderstanding.

The inclusiveness the ICN strives for means on the one hand including all ICNmember authorities and in particular new and young authorities with their diverseexperience and needs, while at the same time remaining open and attractive topotential new members. On the other hand it is also about the participation ofnongovernmental advisors (NGAs), who provide extremely valuable input to all of ourwork products and make sure that the views of the business community, practitionersand academics are equally represented. Their active involvement is most welcome. Inaddition, the ICN will continue to reach out to other international organisations like theOECD, UNCTAD, WTO and World Bank to ensure that our activities complement oneanother in the best possible way. Last but not least regional organizations will remainwelcome partners also in our future efforts. They can be well placed to identifycommon interests and needs of authorities from the same region.

Andreas Mundt

xxiv

The ICN builds on various approaches to inclusiveness and implementation butalso welcomes new ideas. Already today many different tools are used to promoteimplementation. Examples are the presentation of work products in teleseminars, theuse of work products at workshops or internal training classes, and the advocacy workof ICN members. For the future, the ICN members will continue to support each otherin their implementation efforts. While President Bruno Lasserre will continue hisoutreach efforts to members and NGAs, President Vinicius Marques de Carvalho andCADE will play an important role to promote implementation not only but in particularin South America. The Steering Group will support their efforts and will strive to keepthe whole organization together and on the right path to achieve its goals for its seconddecade.

I am confident that together we will be able to foster international cooperationand will help ensure that the ICN remains a key player in competition policy.

Foreword

xxv

ForewordInternational Cooperation:A Multifaceted Reality

by Bruno Lassere

President of the Autorité de la Concurrence

Vice-chair of the International Competition Network (ICN)

Since my tenure in 2004 at the head of the Autorité de la concurrence, I haveexperienced two major trends: the acceleration of the “globalization” of competitionlaw - spurred by competitiveness concerns, but also reputational objectives in thecontext of the negotiation of trade agreements - and the fast growing and remarkabledevelopment of cooperation and convergence in antitrust and merger competitionpolicy, especially with ever closer relationships between competition agencies them-selves. This second trend is a distinctive feature of the early 2000s, whereby peers canexchange directly with each other, and networks have taken shape that go well beyondformal exchanges at government level and complement existing international organi-zations such as the Organisation for Economic Co-operation and Development (OECD).

In Europe, the European Competition Network (ECN), born in 2004, is aleading-edge cooperation system. It includes the European Commission and the 28national competition authorities of the European Union Member States and relies ondistinctive features: all members apply the same substantive law, defined directly bythe European treaties, and all of them share a common history as well as commonvalues on procedural aspects, thanks to the European Convention of Human Rights. Inthis specific context, the ECN provides operational means to ensure the effective andconsistent application of European competition rules throughout the Member States.This is done through two-way consultation mechanisms (when new cases are filed orenforcement decisions envisaged) and cooperation methods (exchange and use ofconfidential information and joint investigations).

The situation is of course very different with the ICN, which will be the focus ofmy comments here. The reason is obvious: the ICN is a worldwide network regrouping

xxvii

126 members from 111 different jurisdictions, which represents a rich melting pot ofenforcement regimes, older or newer, drawing from a different history and differentinstitutional landscapes.

Back in October 2001, the ICN was founded to address transatlantic antitrustissues. It has now become the epitome of antitrust globalization, covering all regions ofthe globe. This diversity and vast number of members is the very strength of the ICN.It is an almost universal network, which provides a unique platform to build solidaritybetween its members, consensus and convergence towards sound competition policyprinciples across the global antitrust community, in a number of ways.

One of the immediate key benefits of the ICN is the way in which it fosters directpersonal relationships between competition enforcers, including at the level of agencyheads, through Steering Group meetings, “Town Hall” conference-call meetings andparticularly during the much-anticipated annual conferences, where all leaders gathertogether for three days. This direct contact extends to the working level on acontinuous basis, with workshops and several weekly Working Groups’ conferencecalls. They provide a venue for agencies’ staff to share their experience and goodpractice, as well as a forum to discuss ways of strengthening international cooperation.Overall, these relationships develop mutual trust, which in turn facilitates bilateral ormultilateral cooperation among competition agencies.

Beyond this invaluable outcome, the ICN has also produced sound materials anda treasure trove of work products that serve as a reference to all its members. Aftermore than 12 years of operation, the ICN has adopted consensus-based recommenda-tions on key aspects of competition policy, such as recommended practices or goodpractices, as well as other ad hoc formats of guidance (manuals, training programs).This impressive body of work products supports and facilitates anti-cartel fight, butalso cooperation in multijurisdictional mergers and an effects-based approach tounilateral practices and mergers.

While we will pay an increased attention to the effective dissemination andownership of those work products, we will explore new areas where recommendedpractices can reap low-hanging fruits. This is especially the case regarding advocacy:measuring the competition impact of draft and existing legislation is a fundamentalcomponent of competition regulation and a pillar for domestic competitiveness andinternational trade. This is why the French and Mexican competition authorities willpresent Recommended Practices for competition assessment to be adopted at the 2014Marrakech Annual Conference. They will cover both process issues (i.e., how to berecognized by the government and the legislature as a source of expertise, how totrigger advocacy on legislation and how to maximize the impact of competitionassessment) and substantive practices (i.e., the analytical criteria agencies may use toanalyze legislation, alternative and mitigation measures).

As a result of its extraordinary expansion, the ICN has also undertaken to addressthe issue of member engagement. Growing from a handful of 15 members into a globalnetwork of more than 120 members brings new challenges to the ICN, especially itscapacity to get everyone involved and foster cooperation among an even larger numberof agencies to achieve global convergence.

Bruno Lassere

xxviii

Making sure that every member is actively engaged and fully included istherefore a crucial goal of the ICN. Andreas Mundt, ICN Chair, rightly recognized theimportance of inclusiveness in its Vision Statement and made it one of the threepriorities of his chairmanship. The implementation of work products, entrusted toVinicius Marques de Carvalho, ICN Vice Chair for implementation, and a special focuson the number of projects undertaken and relevance of topics chosen by the ICN, havealso been identified as key areas by the Chair.

Building on several initiatives I had launched in my capacity of ICN Vice Chair forenhanced member and NGA engagement and outreach, I have proposed flexible andpractical tools to enhance member engagement for the coming years, which will pavethe way for further initiatives.

A step by step guide, called the Welcome Track, was specifically designed fornewer and less active members to help them get involved in the ICN. It offers a numberof tools such as the assistance of a welcoming guide to serve as an initial contact point,the possibility of having rendez-vous calls with the welcoming guide to ensurecontinued support, and the designation of one of the three co-chairs of each WorkingGroup to be tasked with member engagement as an additional resource.

With the objective to increase the current level of participation and encouragelong term participation, a Greater Engagement Trial initiative will soon be imple-mented to offer volunteering agencies willing to step up their participation in the ICNextra and customized support. The support provided will primarily be based on thetools of the Welcome Track and possibly on other innovative means, which will betested along the way.

To succeed in the endeavour of greater member engagement, it is essential for theICN to sustain its efforts by also acting at the regional level. The language barrierexperienced by a number of members is indeed a major hindrance to their effectiveparticipation in the ICN. To overcome these difficulties, agencies have stepped in tooffer to translate core ICN work products in Spanish, Portuguese and French.

In the perspective of the 2014 Annual Conference hosted by the MoroccanConseil de la concurrence in Marrakech, where French will be used in addition toEnglish for the first time in an ICN event, the ICN approved a Mapping project to reachout in particular to French-speaking jurisdictions, as well as jurisdictions in whichFrench is widely used as a working language. The primary aim of this project is to getthe agencies on board familiar with the ICN, by guiding them through the manifoldactivities and work products of the ICN, and encourage them to take on an active roleduring the Marrakech Annual Conference, as a first step to fuller immersion in the ICN.

Of course, this effort toward greater engagement of ICN members goes togetherwith a continued attention to the active participation of Non Governmental Advisors(NGAs), who represent business and consumer groups, academia and the legal andeconomic professions.

The ICN provides a distinctive process of enabling agencies and NGAs to worktogether. NGAs typically volunteer to participate in the development of the ICN’s workproducts and take part in discussions and programs. This collaboration betweenagencies and NGAs and the communication among NGAs from all around the worldalso largely contribute to advance international cooperation.

Foreword

xxix

In my role of NGA Liaison, I have tried to promote NGA involvement throughdifferent types of initiatives.

An NGA Toolkit was specifically produced to guide NGAs and members on therole of an NGA, the benefits of being an NGA, how to become an NGA and how toengage NGAs.

To further support NGA engagement, and since the 2011 Annual Conference inThe Hague, a dedicated breakout session on NGAs is organized on the occasion of eachICN Annual Conference. This venue gives NGAs an opportunity to interact amongthemselves, as well as with agencies, and to showcase their contribution to the work ofthe ICN.

Following up on the NGA breakout session of the 2012 Annual Conference in Rio,it was decided to put a greater focus on academic NGAs - perhaps less represented inthe NGA community – to promote their equally important input into the ICN. Theinitiative, called the Academic Hubs project, builds on the fact that academic hubs arenatural focal points for cooperation with the ICN and consists - under the leadership ofWilliam Kovacic, Professor of Law at George Washington University - in mapping outall academic hubs specialized in competition law and policy in the world. The list ofacademic contact points that will result from the project will be a tremendous resourcefor the ICN, and an additional way for the network to foster international cooperation.

Drawing from the achievements attained in the field of cooperation over the pastyears and taking its efforts a step further, the ICN has recently been involved in a jointproject with the OECD on International Enforcement Cooperation with a view tofacilitate even more direct cooperation on concrete cases. The project leaders coordi-nated their efforts to draft a questionnaire on international enforcement cooperation toassess the needs of the competition enforcement community. Based on the responsesprovided, and conscious of avoiding any duplication, both organizations are in theprocess of identifying the topics which would be best dealt with by each one dependingon their nature (governmental organization vs. agency network) and their member-ship. The concrete output is therefore still to be discussed, but may take various forms:updating existing recommendations, general guidance, concrete standard tools forbilateral cooperation (e.g., waiver forms), or even key principles for cooperationagreements or model agreements.

Overall, these various projects and initiatives illustrate how international coop-eration is a multifaceted reality, and remains at the heart of the ICN’s mission androadmap for the future.

As the ICN enthusiastically moves forward, I am confident that its second decadewill be as successful as its first one, based on a keen sense of community, strongercooperation, constant work and dedication of all its members and NGAs.

Bruno Lassere

xxx

ForewordPresentation: International Cooperationat a Glance

by Vinicius Marques de Carvalho

President of the Brazilian Administrative Council for Economic Defense (CADE)

Vice-Chair of the International Competition Network (ICN)

&

Carlos Emmanuel Joppert Ragazzo

General Superintendent of the Brazilian Administrative Council for EconomicDefense(CADE)

The current globalized economy imposes new challenges for competition enforcement.Considering that companies have transnational strategies, countries need to remainvigilant about the practices that occur abroad, in particular those that may have ananticompetitive impact in its territory. In this context, it is important that competitionauthorities adopt pro-active and co-operative approaches vis-à-vis its sister agencies inorder to tackle these new challenges.

A book on competition enforcement and international cooperation fits thispurpose and highlights the importance that the Brazilian and the European jurisdic-tions play nowadays. It gathers several articles from Brazilian and European officialswith the main purpose of sending a message to the global business world: competitionauthorities are talking to each other. These talks may take different forms, such asinformal and formal channels, depending on timing, strategic and legal issues in-volved. They intend to enhance the enforcement of competition laws worldwide, thatmeans in a more efficient and effective way.

The preliminary articles presented by the well-known European enforcers –Alexander Italianer, Andreas Mundt and Bruno Lasserre – are the highest signal of theimportance that international cooperation plays today for competition enforcement.

xxxi

Each one of them underlines the benefits of cooperation between competition authori-ties from national, regional and global perspectives. The International CompetitionNetwork (ICN) is the ultimate example of these efforts as well as the success ofpromoting convergence.

As the sixth largest economy in the world and one of the major emergingconsumer markets, Brazil plays a leading role globally with great importance given tonatural resources and an industry sector on the rise. For this reason, the BrazilianCompetition Authority faces an everyday struggle to be on the forefront of pro-competition works, techniques and theories that fit the contingencies of our thrivingeconomy.

In order to respond to the new reality accordingly, the Brazilian CompetitionSystem went through a makeover in 2012. The new Brazilian Administrative Councilfor Economic Defence (CADE) unfolds the need to promote the coordination ofenforcement mechanisms and joint efforts. The new legislation places CADE in thefront line of competition protection in the world alongside competition agencies fromdeveloped countries, such as France, Germany, UK and the USA.

The new Competition Law took effect in Brazil on 29 May 2012 (Law nº 12,529of 30 November 2011). The new legislation significantly changed the structure of thegovernmental agencies responsible for the enforcement of competition law, whichincludes merger control, unilateral conduct and antitrust sanctions. One of the mostrelevant advances of the new Law concerns the adoption of a pre-merger controlregime in Brazil. This means that CADE has a deadline to analyze mergers that fallunder the legal thresholds for notification. If this time period elapses without CADEpublishing a decision, the transaction will be considered as automatically approved.

CADE went through a wide transition process, in order to adapt to the newlegislation, while it handled a large backlog of cases from the former Law. Added tothat there is moving and accommodating the entire body to new facilities, adding to ourhuman resources, all with a moderate budget addition. Such a process was a hugechallenge as well as a golden opportunity to bring the required changes to an effectivecompetition enforcement policy. To mention a single example of the success of thetransition: the average time for fast-track merger review is around 20 days – which iscomparable to few competition agencies worldwide.

Another meaningful development introduced by the new Law concerns theunification of all competition enforcement attributions into one single authority. Thenew legislation also conveyed a staff and budget increase and newer and biggerfacilities. All was done to adapt to a needed expansion of the Brazilian cartelenforcement and merger analysis efforts.

Since the enactment of the new Law, CADE has made an effort to improve itsinternational cooperation initiatives both for merger reviews and to conduct cases. Inthis vein, CADE has recently analyzed two international mergers with intense coop-eration with DG-Competition, which are detailed in one of the articles of this book. Thisis a concrete example of the benefits of international cooperation for competitionenforcement.

Due to its new legislation, in particular its new pre-merger system, CADEenvisaged the opportunity to exchange views and coordinate measures with many

Vinicius Marques de Carvalho & Carlos Emanuel Joppert Ragazzo

xxxii

competition authorities worldwide. In view of this innovation and trying to prepare forsuch, CADE has invited 12 European officials from different jurisdictions to discusscooperation with its own officials in a three-day Workshop that took place in May 2013,in Brasilia. The event brought participant jurisdictions closer to CADE by fosteringinternational cooperation, particularly in the field of merger control, and by promotingmutual trust and the exchange of ideas between Brazilian and European officials.

In addition, CADE has welcomed and encouraged a series of institutional visitsfrom a variety of countries with the aim of promoting collaboration and experienceexchange between our officials. In the first couple of years, CADE has welcomed visitsfrom: the Chinese Ministry of Commerce and the State Administration of Industry andCommerce, signing a Memorandum of Understanding with the last and negotiating onewith the first; a Mercosur delegation, interested in fomenting competition protection inother countries of the group; officials from American Federal Trade Commission (FTC)and British Office of Fair Trading; and from neighbouring countries such as Ecuador,with whom a memorandum of understanding was signed in November 2013.

During those institutional visits, CADE’s officials had a chance to understandforeign work and experiences. At the same time, visitors were introduced CADE’s newfacilities, to our personnel and most importantly they were able to improve a trustfulrelationship with the Council and its brand new legislation.

Aside from the initiatives mentioned above, CADE has established agreementswith a variety of competition agencies in the world with the focus on fomentingcooperation and exchanging experiences in the field of Competition Defence. Thecomplete list of CADE’s agreements is available on its website.

In a nutshell, international cooperation has proven to be an extremely effectiveinstrument for competition enforcement worldwide and should, thus, be stronglypromoted. This justifies institutional efforts to keep improving techniques towardsglobal convergence as well as trust building relationship with other stakeholders. Thishas been the path chosen by CADE in Brazil, in order to keep it amongst the topcompetition authorities worldwide.

Foreword

xxxiii

PrefaceA Move Forward on InternationalCooperation

by Alexander Italianer

Director General of the EU DG-Competition

The dramatic increase in the number of competition agencies in the last few years, inthe context of a globalised economy, has made international cooperation a coreelement of competition enforcement. More and more mergers, cartels and unilateralrestrictive business practises have a cross-border dimension. Cooperation betweencompetition agencies in these multijurisdictional cases helps achieve effective andcoherent enforcement. Also the common work of competition enforcers in the frame-work of several international organizations fosters increasing convergence of compe-tition regimes worldwide.

There are various tools we can employ to foster cooperation between antitrustenforcers: we might share information and expertise as well as coordinate our cartelinvestigations and remedies imposed in merger cases. Over the last couple of years, theEuropean Commission has worked with other enforcers in about one third of thedecisions it took on mergers, 40% of cartel cases, and half of its antitrust decisions. Inthe vast majority of cases, cooperation has proved efficient due to remarkable efforts ofthe antitrust enforcers all around the world. A large consensus has grown amongcompetition agencies from around the world that their performance is improved byparticipating in international activities. We share similar concerns that are manifestedin the economic models we use and the legal standards we apply. Efficient cooperationamong agencies in multijurisdictional cases can prove to be a win-win both for theagencies and parties involved.

Brazil has become a key player on the economic world scene, and the cooperationbetween the European Commission and Brazilian antitrust enforcers is an integral andvery important part of both agencies enforcement activity. In 2009 we signed theMemorandum of Understanding between the European Union Directorate-General for

xxxv

Competition and the Brazilian competition agencies which laid the fundament forsubsequent cooperation. In the memorandum we acknowledged that is in our mutualinterest to exchange information, experiences and views. Our agencies are in regularcontact and discuss the most pressing antitrust issues. The workshop on “CompetitionEnforcement and International Cooperation” organized jointly by DG Competition andthe Brazilian Administrative Council for Economic Defence (CADE) in May 2013 is anexample of such cooperation. Cooperation with Brazil is also on-going in the interna-tional fora such as the International Competition Network (ICN). As a witness toBrazil’s increasingly central role in the ICN, CADE organized a successful ICN AnnualConference in Rio de Janeiro in 2012, bringing together competition enforcers fromaround most parts of the world.

It is increasingly accepted that international cooperation can be made moreefficient in a context of greater international convergence achieved at multilateral level.This is why the EU has reinforced its presence and efforts in multilateral fora such asthe ICN, the Organisation for Economic Co-operation and Development (OECD),and the United Nations Conference on Trade and Development (UNCTAD). Particu-larly, the ICN has turned out to be a useful forum where various competition agenciescan work together on a voluntary basis and agree on best practices for competitionenforcement. The cooperation within the ICN has already brought successful results,notably in the field of merger review and cartel investigation.

In Europe, the convergence process has obtained a new dimension since thecreation of the European Competition Network (ECN) in 2004. Through the ECN wehave set up a procedure for allocating cases between the European Commission and thecompetition authorities of the 28 EU Member States while applying the same compe-tition law for substantive cases throughout the EU. We have introduced instruments toaddress potential conflicts and we have reduced burdens for businesses by introducing‘one stop shop’ system for mergers.

From our perspective, we also welcomed the recent reform of the Braziliancompetition law system. The introduction of ex ante merger control regime willexpedite merger review proceedings, increase legal certainty for companies and allowfor even closer international cooperation in merger cases. Additionally, consolidatingcompetences to enforce Brazilian competition law in the hands of CADE will increasethe efficiency of the antitrust enforcement in Brazil. I am confident that the newBrazilian competition law will allow Brazil to grow in pace with the size of its economyand its new role on the international scene.

The European Commission looks forward to continuing its cooperation withCADE in all fields of competition enforcement contributing together to building a closercommunity of competition agencies.

Alexander Italianer

xxxvi

CHAPTER 7

Fighting Corruption and PromotingCompetition in BrazilNitish Monebhurrun

§7.01 INTRODUCTION

On the 1 August 2013 was adopted the new Brazilian Anti-corruption law1 in line withthe State’s policies to combat this scourge by harnessing the private and public sectorunder strict scrutiny.2 The law innovates by sanctioning private companies forcorruption practices against the public administration and civil servants.3 Any advan-tage, sponsor, financial or material benefits granted by a private entity to a public agentis explicitly condemned by the new law4; under the previous regime, only the publicagents were administratively penalized in such cases.5 There now exists an adminis-trative legal framework capable of sanctioning both public and private actors for acts ofcorruption.

The Anti-corruption law contains a special provision on the fraudulent practiceswhich could hinder the competitive nature of public bidding procedures.6 Suchprocedures often act as the fermenting area of corruption outbreaks, the result being an

1. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration.

2. CAMPBELL, Stuart Vincent, ‘Perception is not Reality: The FCPA, Brazil, and the Mismeasure-ment of Corruption’, The Minnesota Journal of International Law, vol.22, no.1, 2013, p. 261.

3. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration, Arts 2 and 3.

4. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration, Art. 5.

5. FRANCO, Isabel, ‘Lei Anticorrupção e acordos de leniência’, O Estado de São Paulo (25/11/2013).6. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for the

commission of acts against national or foreign public administration, Art. 5 (IV) (a).

81

inefficient allocation and use of national resources,7 and at the same time, a viciouscircle further inciting private and public agents to give way to fraudulent practices – thelatter becoming with time a customary practice and to a certain extent, an obligatoryprocess to participate in bidding procedures. The new Statute was purposefully framedto regulate private companies’ behaviour8: under the empire of the previous law, theywere often immunized in corruption cases where they had played an active role toderive benefits by bribing the public administration; in this process of ‘patrimonial’management of public resources characterized by the blurred limits between theprivate and the public sphere,9 many potential private competitors were left on thebench. Such acts of corruption obviously infringed the competitive environment;accordingly, the new anti-corruption law aims not only at promoting but also atprotecting competition. It completes the Brazilian competition legal framework andwill work hand-in-hand with the latter, for instance, in cartel cases. For a continent-sizeState like Brazil, a legal and institutional pluralism is sometimes sine qua non for thepromotion of voted policies and for the protection of common values. In the fightagainst corruption, competition law and policy have been used; in the promotion andprotection of competition, anti-corruption measures have been adopted. A reciprocalfertilization exists between these two fields but their effective dialogue for efficient andpractical results depends on the techniques used to build a common language.Corruption is an obvious and undeniable problem in Brazil10; this contribution will notreaffirm these open secrets but will rather explain how competition and anti-corruptionlegislation and institutions interact to fight against the dissemination of this socialcalamity.

In line with the anti-corruption context and its interaction with the competitionfield (I), the Brazilian State has opted for institutional cooperation between theBrazilian Competition Authority and other public bodies in charge of corruptionconundrums (II).

§7.02 THE ANTI-CORRUPTION CONTEXT IN BRAZIL AND ITSINTERACTION WITH THE COMPETITION FIELD

Corruption is fought by the close institutional and legal interaction and dialogue. Brazilrelies on a consolidated anti-corruption legal framework which, in a dialogical spirit,

7. DE CASTRO, Luciano, ‘Combate à corrupção em licitações públicas’, Working Paper – Univer-sity Carlos III of Madrid, Economic Series, April 2007, p. 2.

8. It can be read simultaneously with Law no.12.813 of the 16 May 2013 on the Conflict of Interestsin the exercise of the Federal Executive Power.

9. See for example: BUARQUE DE HOLANDA, Sérgio, Raízes do Brasil, São Paulo, Companhia dasLetras, 1995, PP.145–146; FILGUEIRAS, Fernando, ‘A tolerância à corrupção no Brasil: umaantinomia entre normas morais e prática social’, Opinião Pública, vol.15, no.2, November 2009,PP.389–390.

10. ANTUNES, Anderson, ‘The Cost of Corruption in Brazil Could be Up to $53 billion Just ThisYear’. Forbes, 28 Nov. 2013 (online edition); CAMPBELL, Stuart Vincent, ‘Perception is notReality: The FCPA, Brazil, and the Mismeasurement of Corruption’, The Minnesota Journal ofInternational Law, vol.22, no.1, 2013, pp. 264–266.

Nitish Monebhurrun§7.02

82

sometimes borrows legal techniques from competition law §7.02[A] and it also hasspecialized institutions for such purposes §7.02[B].

[A] The Legal Context: How Competition Law Techniques InspireAnti-corruption Law

The Brazilian Constitution of 1988 states that the public administration has anobligation to act under legality with impersonality, morality, transparency and effi-ciency.11 It also provides that public construction projects, services, public acquisitionsand disposals must be done following a public bidding procedure which guarantees theequal treatment of all participants.12 An important statute – Law no. 8.666/1993 – wasadopted in 1993 in order to apply the constitutional provision. The statute regulatesbidding procedures through fundamental principles like free competition, publicity,strict observance of the terms of the tender notification, objective judgment andcompulsory awarding.13 Public-private contracts and partnerships are put under closescrutiny under this law. This is in line with Brazil’s efforts and will to foment a newcontractual culture which rests on a competitive spirit and transparency: all publictenders must adhere to such principles to be legally valid – and to serve the publicinterest. Such efforts are further corroborated by the statute voted – Law no. 12.462/2011 – on 4 August 2011 on differentiated contractual regimes in the context of theWorld Cup 2014 and of the Olympic Games 2016.14 These principles are also enshrinedin international conventions signed and ratified by the Brazilian State, for instance, theOECD Convention on Combating Bribery of Foreign Public Officials in InternationalBusiness Transactions of 21 November 1997, the Inter-American Convention againstCorruption of 29 March 1996 and the United Nations Convention against Corruption of31 October 2003.

More recently and as aforesaid in the introductory part, a brand new anti-corruption law was adopted in Brazil in August 2013.15 The new statute provides forthe administrative and civil responsibility of private entities for anti-competitive acts ofbribery during public bidding procedures. Competence is here namely granted to TheBrazilian Comptroller General (Controladoria Geral da União – CGU16) to initiateadministrative proceedings against private entities in cases where their responsibility ispresumed. The influence of competition law in the drafting of the anti-corruption lawis worthy and interesting in that it confirms the dialogue between the two fields.Indeed, the 2013 anti-corruption law enables public bodies to enter into leniencyagreements with private entities responsible for anti-corruption acts provided for in the

11. Article 37 of the Brazilian Constitution.12. Article 37, para. XXI.13. Law no. 8.666/1993 (21/06/1993), Art. 22.14. Law no. 12.462/2011 (04/08/2011), Art. 1 (I), para. 1.15. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for the

commission of acts against national or foreign public administration.16. See infra.

Chapter 7: Fighting Corruption and Promoting Competition in Brazil §7.02[A]

83

said statute.17 Like in competition law proceedings, the anti-corruption legal regimeenables private companies to collaborate with the public administration to helpidentify other companies involved in a given corruption case and to readily obtaininformation and documents proving the illicit act.18 The leniency agreement has tofulfil some conditions to be effective: the private entity must take the initiative of thecollaboration and express an initial interest for such a procedure; the private entitymust stop any involvement in the illicit act as soon as a leniency agreement isproposed; it must admit its participation in the illicit enterprise and accept a completeand permanent collaboration with the investigators, ready to participate in all proceed-ings at its own expense as long as they last.19 Abiding to the leniency agreement canreduce the fine due to be paid by the participant20 and enable him to continuebenefitting from public subsidies.21 A legal tool – the leniency program –, originallypertaining to the competition law sphere, has thus been used as a model and its logicand spirit have been efficiently transposed to the anti-corruption field where they areexpected to be enforced for a double positive effect: combating corruption andprotecting competition. It appears as an extension of competition law in another relatedlaw field and the logic here is a complementary and not a conflicting one.

This dialogue also brightly exists in the Brazilian institutional anti-corruptioncontext.

[B] The Institutional Context

The Brazilian Competition Authority does not, in itself, have jurisdiction for corruptionmatters. This is institutionally normal: a competition authority is specialized incompetition questions and is expected to deliver learned opinions within this ambit.

Corruption and anti-corruption issues fall under the competence of other publicbodies, the main ones being the Comptroller General (Controladoria Geral da União –CGU), the Federal Court of Auditors (Tribunal de Contas da União – TCU) and thenational and federal Public Prosecutors; the Ministry of Planning is also engaged incombating corruption.

The Comptroller General controls and audits the expenses of the Federal Execu-tive; it acts as the Brazilian anti-corruption agency. The Federal Court of Auditors isresponsible for the auditing of the public administration’s accounts; it supervises thepublic treasury. The Ministry of Planning organizes the information technology systemfor public procurement and have, accordingly, developed software tools to betterdetect potential shades of corruption acts during public bidding processes.

17. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration, Art. 16.

18. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration, Art. 16 (I), (II).

19. Law no. 12.846/13 on the administrative and civil responsibility of legal entities for thecommission of acts against national or foreign public administration, Art. 16, paras 1 (I), (II),(III).

20. Law no. 12.846/13, Art. 16, para. 2.21. Law no. 12.846/13, Art. 19 (IV).

Nitish Monebhurrun§7.02[B]

84

The Brazilian Competition Authority has established close working links witheach of these bodies.22 It has been working hand-in-hand with the Ministry of Planningin order to have access to data on public tenders and procurement following itsobjective of identifying and scrutinizing bid riggings. Accordingly, the BrazilianCompetition Authority has been granted access to the Ministry’s database of publicacquisitions: the Authority can thus follow the implementation of suspicious biddingprocedures and have direct access to any data relevant for its inquiries.

As far as cartels are concerned, the Brazilian Competition Authority also coop-erates with the Public Prosecutors and with the Federal Police; cartel constitution is acrime under Brazilian law. In such mutual exchanges, the Authority informs itspartners on the competition law approach to tackle cartels and bid rigging procedures.The aim is to provide a complete picture of the procedural and substantial legalquestions that characterize these offences through competition law and criminal lawexpertise. The Competition Authority has similarly established working links with theFederal Police, especially in investigating bid riggings. They collaborated, for instance,in a dawn raid in 2009 in an information technology services case.

On the basis of the close ties between competition and corruption, the Competi-tion Authority has been called to participate in inter-ministerial working groups, theaim being to enlighten the Government and its anti-corruption fighting policies with itstechnical competences. It has, for example been invited to integrate the NationalStrategy to Fight Corruption and Money Laundering in which 70 executive, legislativeand judicial bodies collaborate with the assistance of the Federal Prosecutor, theComptroller General and the Audit Court. The Group focuses on issues like moneylaundering, corruption, bribery and collusion in public procurement. It has recentlybeen working on bidding procedure conundrums and outsourcing contracts related tothe forthcoming World Cup and Olympic Games.

In the same vein, the Brazilian Competition Authority has signed a cooperationagreement with the Federal Court of Auditors in 200823: the cooperation is a useful oneto detect and investigate collusive practices in the particular field of outsourcingcontracts which are sometimes corrupted. The Authority has – alongside – signed acooperation agreement with the Comptroller General in 2009.24 The latter being themain anti-corruption body in Brazil, this agreement shall be used as a means toillustrate how the Competition Authority conducts an institutional cooperation withthis organ.

22. OECD, Collusion and Corruption in Public Procurement, Policy Round Tables, 2010, pp. 72–74.23. Cooperation Agreement between the Brazilian Competition Authority and the Federal Court of

Auditors (12/03/2009).24. Cooperation Agreement between the Brazilian Competition Authority and the Comptroller

General’s Office (28/07/2009).

Chapter 7: Fighting Corruption and Promoting Competition in Brazil §7.02[B]

85

§7.03 INSTITUTIONAL COOPERATION BETWEEN CADE AND THEOFFICE OF THE COMPTROLLER GENERAL

The cooperation’s framework must be presented priorly §7.03[A] in order to explain itsimplementation §7.03[B].

[A] The Cooperation’s Framework

The cooperation between the Brazilian Competition Authority and the ComptrollerGeneral’s office rests on a series of principles anchored in the cooperation agreement’spreambulary part. The cooperation indeed aims at fighting any form of active orpassive corruption in public procurement in order to allocate the State’s scarceresources towards productive ends. This, the agreement claims, can be done bycombating illegal transfers of public funds to private persons or entities. Such acts ofcorruption whereby one private entity obtains illegal advantages or privileges inexchange of money transferred or payments of any other nature made to the publicadministration are not isolated ones and require a tentacular institutional intervention.The scourge is a national one and does not only pertain to the micro level; but also forthis reason, the question is of a Federal nature and importance –, and depends on theactive participation of Federal organs.

The cooperation agreement therefore provides for the creation and adoption ofspecific and tailored mechanisms and techniques to strengthen the dialogue betweenthe anti-corruption authority (The Comptroller General25) and the Competition Author-ity which are expected to act preventively and repressively. Their close collaboration isthe main tool for the agreement to be implemented efficiently, with expected short runand long run effects and results.

[B] The Cooperation’s Implementation

Mutual education is what is expected from the concerned authorities in their anti-corruption and competition promotion task. Cooperation through mutual educationobviously enters into the Brazilian Competition Authority’s advocacy policies: com-bating corruption to safeguard the economy’s competitive health.

Consequently, the Competition Authority is expected to transfer any relevantinformation on potential fraudulent activities obtained during its administrative pro-cedures to the Secretary for the Prevention of Corruption and for Strategic Informationof the Comptroller General’s office; the Secretary must accordingly reciprocate when itis made aware of useful data on competition and corruption.26 In a similar logic, bothauthorities have accepted to offer technical assistance to each other and to provide

25. The latter has a special internal body called the Secretary for the Prevention of Corruption andfor Strategic Information.

26. See Art. 2 of the Cooperation Agreement between the Competition Authority and the Comptrol-ler General.

Nitish Monebhurrun§7.03[B]

86

technical advice in given cases which are of their potential mutual interest.27 They can,for such purposes, require that an expert from the other authority be present duringspecific audiences.28 Both authorities can also decide to set up joint working groups –eventually with other public bodies – in order to investigate violations of the Brazilianeconomic order.29

One important aspect of this institutional collaboration is the expected mutualand permanent education. The agreement states it clearly: an educational cooperationis a tool to prevent and fight against economic unhealthy practices. The CompetitionAuthority hence agreed to continually share and discuss their best practices, technicaland operational know-how in the field of competition law and tender draftingprocedures in order to improve and sharpen their tools in combating cartels andcorruption.30 For so doing, they have planned to organize mixed and joint seminars,courses and exchange programs on technical aspects of conducting legal dawn raids.31

The Brazilian Competition Authority has, consequently, also been granted accessto the Comptroller General’s Public Expenditure Observatory32 (called the Observatórioda depesa Pública – ODP). The data therein available can be used, through a trackingsystem, to identify fraudulent acts in bidding procedures. By relying on this electronicdevice and its sophisticated resources, the Competition Authority can thus conductadvanced investigations in the field of public procurement. Hereinafter is an annexexplaining how and why the Public Expenditure Observatory is an efficient tool againstbid rigging.

27. See Art. 4 of the Cooperation Agreement between the Competition Authority and the Comptrol-ler General.

28. Ibid., Art. 4.1.29. Ibid., Arts 4.2, 4.3.30. Ibid., Art. 4.4.31. Ibid., Art. 4.5.32. OECD, Collusion and Corruption in Public Procurement, Policy Round Tables, 2010, p. 73.

Chapter 7: Fighting Corruption and Promoting Competition in Brazil §7.04[B]

87

ANNEX 1 : PUBLIC SPENDING OBSERVATORY - ODP (OBSERVATÓRIO DADESPESA PÚBLICA): A TOOL AGAINST BID RIGGING33

1. In the last years, the Brazilian Federal Government has invested in newtechnologies to identify suspicious patterns of illegal behaviour in the contextof public expenditure which were, at first glance, not perceived and, therefore,hidden. These tools have been developed and used to reveal cases of corrup-tion, fraud and collusion in public procurement. The major focus of thisinitiative is on the Public Spending Observatory – ODP (acronym from thePortuguese Observatório da Despesa Pública), a newly created unit within theOffice of the Comptroller-General – CGU (Controladoria-Geral da União).

2. The Office of the Comptroller-General (CGU) is a federal agency responsiblefor assisting directly and immediately the President of the Republic regardingmatters related to the defence of public assets as well as increasing thetransparency of administration. CGU’s main focus is internal control throughauditing and disciplinary actions against civil servants. In addition, CGU alsodevotes efforts to research and develop new techniques to prevent and fightcorruption in Brazil.

3. This challenge requires CGU to monitor and detect potential frauds in relationto the use of federal public resources by devising solutions in order not only toexpose current corruption cases, but also to prevent future events.

4. In 2008, CGU established the Public Spending Observatory – ODP, a perma-nent unit of intelligence, based on a modern and innovative concept: combinethe practical knowledge and experiences of auditors with the use of advancedtools of information technology to speedily process an enormous volume ofdata.

5. The main goal of the ODP is to foresee fraud-risk situations. This knowledge-building exercise is quite useful in designing public policies aimed at prevent-ing and combating corruption. Based on systematic information and periodicupdates, the ODP provides CGU and some other government agencies withelaborated knowledge, analytical statements about the quantity and quality ofpublic spending as well as with indications of sensitive areas of publicspending, in terms of corruption risk.

6. The novelty of the ODP derives from the fact that it consolidates all theavailable public expenditure information – fragmented in several computer-ized systems from different bodies and constructed in a variety of technologyplatforms, from the oldest to the latest – in only one database. As a conse-quence, ODP transforms these disaggregated data into knowledge of highadded value, contributing to the efficient management of public resources as itmay help the authorities to identify, prosecute and prevent cases of misappro-priation and other frauds.

33. Annex I was prepared by the Office of the Comptroller-General.

Nitish MonebhurrunAnnex 1

88

7. ODP is built around a multidisciplinary environment composed by auditorsand IT staff. In addition, specific task forces are formed depending on thematter to be investigated, which might include other authorities other thanCGU officials.

8. As an important example of the capabilities of the Observatory, it isnoteworthy the use of its analysis tools to fight cartels and collusionschemes in public procurements.

9. Originally, the basic elements of a bidding process and its bidders werealready available in a federal database. ODP processes and compares thisinformation with other comprehensive databases maintained by otheragencies, such as: tax administration system provides information aboutthe corporate structure of bidder companies and its partners; familyrelationships and jobs are known by the social security service, andmultiple databases register addresses.

10. Crossing these data, the ODP identifies ‘trails’ indicating atypical situa-tions, which do not a priori constitute evidence of misappropriation orirregularities, but do require further attention, such as: the participation ofcompanies with common shareholders in the same procurement proce-dures, different bidders with the same address, family bonds and past andpresent employer–employee relationship between partners and directors ofthe bidder companies. Internal analysis of the procurement databases mayalso indicate suspicious patterns of bid-rotation and market division amongcompetitors by sector, geographic area or time, which might indicate thatbidders are acting in a collusive scheme.

11. Those ‘trails’ are automatically followed in a daily basis, resulting in ‘red’or ‘orange’ warnings to the administrative or criminal authorities or even tothe federal agency responsible for the problematic procurement process.Once detected a suspicious pattern, it is loaded in an OLAP (OnlineAnalytical Processing) tool which results in reports and managementreview panels. The main objective is to analyse the distribution of biddingprocesses of a product or service by geographic area, government agency,amount of resources involved, per year during a certain period of time.

12. It is noteworthy that the work of the ODP has already been used incooperation with the Secretariat of Economic Law (SDE) of the Ministry ofJustice in some concrete cases still under investigation regarding allegedcartels in public procurement.

13. The joint work between CGU and SDE is presenting some quite positiveresults, especially concerning the exchange of valuable information andexpertise in public procurement. Corruption prevention and fighting cartelsare too complex and too broad to be dealt in a single front. The protectionof public treasury cannot be separated of the discussion of efficiency andefficient purchases in public procurements. Bid rigging schemes makegovernment spends more money than it should be necessary if the compe-tition in public procurement was effective. Additionally, in some cases, thecartel may sponsor the corruption scheme. Consequently, if the authorities

Chapter 7: Fighting Corruption and Promoting Competition in Brazil Annex 1

89

tackle the corruption, but not the cartel, the next procurement official oragency, for example, may be negatively influenced by the cartel.

14. Criminal punishment of corruption cases is quite important, but it is notenough. To deal with corruption in a modern way, comprehensive tech-niques are required, as long as a broad comprehension of this phenom-enon. To this extent, the activities performed by state control agencies, likeCGU, and competition authorities, like SDE, are essential to fighting cartelsand corruption efficiently. Due to the impossibility of continuous humanpresence and overseeing on all fronts, modern technologies and initiativesto maximize the capabilities of these bodies, as the ODP, shall also be ofparamount importance in this way.

Nitish MonebhurrunAnnex 1

90

Fighting Corruption and Promoting Competition in Brazil

Documents

Transcript of Fighting Corruption and Promoting Competition in Brazil