Legal Update of Competition Law: 147th and 148th judgement session

The Administrative Council of Economic Defense (“CADE”) held on October 16 and 30, 2019 its 147th and 148th trials. Those were the first trials conducted by the newly inducted Commissioners Sergio Ravagnani, Lenisa Prado and Luiz Hofmann.

We highlight two cases decided on the period.

1. The charging of a “safety fee” on customs storage market.

Investigation No. 08700.005418/2017-84

Defendant: Tecon Suape S.A.

Reporting Commissioner: Paulo Burnier da Silveira

The claim is related to an alleged abuse of dominant position by the Defendant, a Terminal Operator in the Port of SUAPE, Pernambuco, and provides services, as a monopolist, on discharge and horizontal transportation of containers, and on storage facilities in container terminals, where it competes with other players, as Bonded Warehouses of the same port.

On a contractual basis, an importer commissions the discharge and horizontal transportation and the storage services separately, even if bundled on a single package. Thus, no contractual relation is stablished between Defendant and complaining companies.

The anticompetitive practice consists on a “safety fee” charged by the Defendant as consideration for cargo clearance for storage in the complaining companies’ facilities. The fee represents the costs incurred by the Defendant, as terminal operator, when implementing the ISPS Code, which are then passed on to the Plaintiffs.

The Defendant claims that ANTAQ, the Brazilian regulatory agency for waterway transportation, allows non-Box Rate prices, as the “safety fee” to be freely stipulated between parties. Therefore, it could be charged directly from Bonded Warehouses.

Defendant holds a dominant position, since it provides an essential infrastructure for the Plaintiffs (i.e., container discharge and horizontal transportation for further storage). By charging only Bonded Warehouse that are not part of its economic group, the Plaintiff acts on a price squeeze strategy and takes advantage of its corporate structure. Thus, it consists of an artificial increase of prices, instead of synergies from vertical integration.

Commissioner Paulo Burnier’s dissenting opinion, however, stated that there was no sufficient evidence for sustaining price discrimination, even if done so through the horizontal transportation fees.

Nonetheless, the Tribunal decided that the “safety fee” represents a cost of a service provided indistinctively to all users and clients of the terminal. Therefore, it would be included in the Box Rate and charged directly from importers, as implied by ANTAQ’s regulation at the time.

Only if the service originates from an extraordinary demand, as a special request from the importer, or a sanitary, customs or environmental restriction, a Terminal Operator could charge the Bonded Warehouses directly.

Thus, as expressed on the votes by Commissioner Mauricio Oscar and Chairman Alexandre Barreto de Souza, aligned with Commissioner Pala Azevedo, the Tribunal sentenced the Defendant to pay a penalty, refrain from charging the “safety fee” and from stipulating any other fee derived from costs of implementing the ISPS Code.

Additionally, we highlight the debate regarding the submission of the decision to the Department of Competition Advocacy, an advisory entity in the Brazilian antitrust enforcement system, for stablishing a precedent for future cases. The Tribunal expressed that it has no intend to do so, since ANTAQ’s new regulation (Resolução Normativa No. 34, of August 19, 2019) shares the same understating as CADE, and thus further competition advocacy would be needless.

2. Evidence evaluation on cartel cases.

Investigation No. 08700.009167/2015-45

Defendants: Adler Assessoramento Empresarial Ltda., Alsar Tecnologia Em Redes Ltda., Cdt Comunicação de Dados Ltda., Netway Datacom Comércio de Sistemas para Informática Ltda., Rhox Comunicação de Dados Ltda., Tellus S.A. Informática e Telecomunicações, Vertax Redes e Telecomunicações Ltda., Cristiane dos Santos Costa, Emílio Timo, Fábio de Azevedo Montoro, Margareth Brixi Tony de Souza, Paulo de Assis Gomes, Rochely Maria Moura Leal Lima, Rômulo Silva Nogueira, Ronato Batista de Oliveira, Ronei Souza Machado e Wellington da Rocha Mello Júnior.

Reporting Commissioner: Mauricio Oscar Bandeira Maia

The claim is related to an alleged cartel articulated public procurement procedures from public entities and companies between 2005 and 2008 regarding information technology services in the Distrito Federal.

The anticompetitive practice consisted on price fixing agreement arrangements made by the Defendants in order to set winning bids and thus restraint trade on bidding procedures (bid rigging).

The evidence gathered during investigation, mainly emails, shows price arrangements and predefined bids, which were later implemented on bidding procedures.

We highlight the opinion of Reporting Commissioner’s Mauricio Oscar Bandeira Maia, that addressed CADE’s evidence evaluation on cartel cases.

He expressed that a mere economic / behavior-related evidence may not be sufficient to confirm a violation to the economic order. In other words, this kind of evidence shall be complemented by interactions between players regarding sensitive data and coordinated practice.

Sensitive data sharing was also considered insufficient in that regard.

Under this premise, practices performed by Defendant Adler Assessoramento Empresarial Ltda. (currently R.E. Engenharia Ltda.) were not deemed as violations to the economic order, even though evidence had shown that it shared information with the other Defendants, which might suggest coordinated practice.

The Defendants have also challenged the relevance of messages with references to undertakings in the context of an antitrust violation as evidence. This issue was also addressed by Commissioner Luiz Hoffman on the previous session (147th judgement session), in connection with Investigation No. 08700.007938/2016-41.

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