Disputes among CADE Tribunal members may impact agency rulings, Superintendence's performance

Heated debates between the Brazilian competition authority's Tribunal members over the powers of a councilor and a president have exposed a lack of internal dialogue between its members, which could impact rulings and also have consequences for other agency units — especially the Superintendence — that depend on clear guidance about the agency's direction to operate effectively.

Since Alexandre Cordeiro joined the Tribunal of the Administrative Council for Economic Defense, or CADE, as president in July, debates have arisen on the legitimacy of certain decisions made singularly by the Presidency. Councilors argue that Cordeiro and his predecessor, Alexandre Barreto, should have consulted them on a series of decisions, as was usually done by former agency presidents.

The most recent debate occurred during an Oct. 6 session and concerned Cordeiro's decision to cancel the Sept. 15 ruling session without Tribunal approval. There was only an appeal against a CADE decision in a cartel case on the agenda of the cancelled session, but it was enough to start a long discussion about the president's conduct.

Councilors said Cordeiro had no authority to cancel that session without approval from the Tribunal and that his unilateral decision, if repeated, may affect cases when there are mergers scheduled for ruling.

"Cancellation is worrisome if a merger is scheduled for ruling. It would be prudent to seek [Tribunal] approval of presidential decisions like this one," Councilor Luis Henrique Bertolino Braido said at the Oct. 6 session, addressing his remarks to Cordeiro. "Your interpretation of the power of a president and of the Tribunal doesn't help. You represent the Tribunal, you are entitled to work with us and you must be recognized as someone who has legitimacy within the agency. We can’t shy away from debating certain issues.”

Councilor Paula Farani de Azevedo Silveira said a CADE session was canceled only once before. It was in 2013, under the presidency of Vinicius Marques de Carvalho and he consulted the Tribunal before canceling it, she said.

"This is one more matter in which we disagree regarding the interpretation of the law. We must work together to find a way to settle our differences," Azevedo said, adding that "When it comes to changing the [competition] law, the whole Tribunal must decide."

“We must improve our internal dialogue and the place to do this is in our [weekly] internal meetings and they have not been as rich as they could be," Braido concluded.

Cordeiro argued that it wouldn’t be “efficient” to open a session to rule on a single appeal in a cartel case, which wasn’t even time-sensitive. He also said it was the first time that only an appeal was included in the agenda of a ruling session and that councilors should spend more time working on cases instead of debating session cancellations.

"I think we have a lot to discuss, we have a lot to evolve on this. But for now, we need to discuss what really matters, not details of regulation,” Cordeiro said. “We have several cases to be ruled on and we need to do that. It was the first time in CADE's history that only one case was [included] in the agenda, and it was actually an appeal!"

Councilors repeatedly proposed a review of the agency’s rules to better define the powers of Tribunal members. Cordeiro agreed to begin internal talks, but said other agency units and authorities must join the conversation.

Presidential decisions

Other presidential decisions were also questioned by councilors for not being submitted for Tribunal approval.

On Aug. 4, Cordeiro rejected an appeal from soybean producers association Aprosoja against a decision approving a joint venture between biotech giants Monsanto, DuPont, Dow AgroSciences, BASF and Syngenta. He submitted the appeal for Tribunal approval only after councilors requested it, and he emphasized that he was making an exception.

In June, then-CADE President Alexandre Barreto signed a cooperation agreement with the National Waterway Transport Agency “to define common opinions” about the imposition of port fees by port operators. The accord was criticized by Tribunal councilors for being signed unilaterally by Barreto and for trying to establish agency precedent for the matter.

Councilors brought up the topic for debate in a public session on Sept. 1, when Cordeiro had already assumed the presidency, but he refused to include the matter in the session agenda for a vote. Cordeiro argued that the accord brings legal certainty to companies that operate in the sector.

CADE is understood to have then queried the Federal Prosecution Service, the Ministry of Infrastructure, as well as CADE’s economics department and legal unit about the matter.

Still in June, then-President Barreto asked the Superintendence for a new review of the Nestlé-Garoto merger following a controversial court decision. Some Tribunal councilors, including Lenisa Rodrigues Prado, argued that Barreto couldn’t have issued such a decision without consulting them. Prado said the legal decision wasn't final and the court hadn't even asked CADE to review the deal again, but merely an appeal by the parties against a CADE decision blocking the transaction in 2004.

Pros and cons

The lack of dialogue between members of the Tribunal makes it harder for companies that need to negotiate remedies to get approval for their mergers, and for cartelists who want to sign settlement agreements but are not clear about the agency’s basis for calculating cartel fines.

The fact that the legitimacy of the CADE president's singular decisions have been questioned by Tribunal councilors could also lead to more appeals against agency decisions and, therefore, a reduction in enforcement.

Despite his diplomatic profile, Cordeiro has not been able to form alliances in the Tribunal, which has likely led him to take some of those unilateral decisions. His initiative, however, has been greeted with relief by some members of the antitrust community, given that the Tribunal is heterogeneous and it’s been difficult to predict agency decisions.

Cartel settlements and mergers

Tribunal members have also disagreed on cartel fine calculations, which directly affects the agency’s settlement agreements considering that settlement payments are based on the “expected fine” — that is, the fine amount that would have been imposed on a cartelist who decided to settle.

In a recently formed majority, most Tribunal councilors have been voting for calculating cartel fines based on how much companies gained from a cartel, and not based on the company’s revenues the year before the CADE probe began, which is CADE’s traditional method.

The slight majority is formed by Sergio Costa Ravagnani, Paula Farani Azevedo Silveira, Lenisa Rodrigues Prado and Luis Henrique Bertolino Braido.

CADE’s Superintendence is responsible for negotiating settlement agreements with cartelists that are then approved by the Tribunal. But the Tribunal hasn't necessarily agreed on a specific calculation method based on how much a company gained with a cartel, which increases risks for companies of having their settlements rejected when they reach the Tribunal.

The Superintendence is also responsible for starting remedy negotiations with companies involved in a deal and, because of that, it's crucial the Tribunal flags which types of remedies better satisfy them so that the merger review process continues to be clear, quick and effective – a task that's particularly difficult in a heterogeneous Tribunal.

Near future

Numerous changes are expected soon at the agency, generating uncertainty about the agency direction in the coming years.

Former Councilor Mauricio Oscar Bandeira Maia left the agency in July at the end of his term, and his post hasn’t yet been filled. Azevedo's term will end Feb. 23.

Additionally, CADE has operated with an acting superintendent — Diego Thomson de Andrade — since June. Barreto was appointed by President Jair Bolsonaro as superintendent, but the Senate hasn't yet voted on his nomination.

The important position of head of CADE`s legal team, ProCADE, will be vacant Oct. 15, when the term of Walter de Agra Junior ends. No appointment to replace De Agra Junior has been made by Bolsonaro.

Local newspapers recently reported that Cordeiro is being considered for two different positions outside the agency: one as judge of the Superior Court of Justice, and the other as justice of the Supreme Court. If that's the case, Cordeiro may not complete his term as CADE president, meaning a new president will have to step into the fray.