Debate on fine calculations creates challenges for companies seeking to settle
17 February 2017. By Ana Paula Candil.
Disagreements at the Brazilian antitrust authority about fine calculations are complicating the efforts of companies to negotiate settlements, MLex has learned.
Because members of the agency's ruling Tribunal lack unanimity on the proper criteria for fines, companies need to either negotiate with the agency's investigators or shop a settlement offer to the Tribunal as a whole. Negotiating with the individual councilor handling a case can be risky, especially when that councilor holds a minority view of how fines should be calculated.
The Tribunal of the Administrative Council for Economic Defense, or CADE, currently has five members. Three of them see no need to change the agency's practice of basing fines on a percentage of a company's revenue.
However, Councilors João Paulo Resende and Cristiane Alkmin Junqueira Schmidt propose basing fines on the amount gained from a cartel. They argue that CADE's current practice fails to account for the benefits gained by companies or the damage done to the market.
Calculating damages caused by a cartel can give companies a tool to argue that their conduct didn't harm the market, or that their participation in a cartel was less than that of other defendants. On the other hand, the proposed changes would require more staff — a problem for an agency that has been working with smaller budgets.
Opponents of a change also argue that it would reduce the predictability of CADE's leniency program, which is seen as one of the agency's great assets.
The split on the Tribunal is causing lawyers to be more careful strategists when submitting settlement proposals.
On Feb. 1, CADE rejected settlements proposed by three medical associations targeted in a cartel probe in a case led by Alkmin because fine calculation differed from CADE's past practice. Interim President Gilvandro Vasconcelos de Araújo said he won't ratify deals that would create a new precedent (see previous coverage here).
Participants in the process are finding that the safest way to structure a settlement is do it while the case is under investigation by the regulator's Superintendence, which has the authority to sign accords and which closely follows the agency's regulatory framework. Those agreements are then sent to the Tribunal for final approval.
Given the three-member majority that is satisfied with the current guidelines, approval of Superintendence decisions is near-guaranteed.
Companies are finding it unwise, when cases that reach the Tribunal without a settlement, to negotiate a settlement solely through Resende or Alkmin, as would be customary when those councilors are named to be in a charge of a case.
When that happens, companies better have in mind that they need to sit with each of the other four members of the Tribunal and check their views on the proposed settlement.
Whistleblowers, MLex has learned, are finding that they need to meticulously calculate their gain from a cartel, but also tailor a settlement to comply with CADE's rules regarding the calculation of fines.
CADE's Tribunal will ultimately have to decide how this conflict is resolved. Councilors are able to change the agency's governing rules for how fines are calculated.
Today, a minority favors that change, and the resulting confusion is damaging one of CADE's key assets: the predictability of its whistleblower program.
* Additional reporting by Carolina Guerra