Brazil’s Best Counsel 2022 - Chapter Opening: Cartel Damage Claims

Cartel Damage Claims In Brazil

Brazil has experienced an increase in the number of recovery actions for cartel damages in recent years due to several important developments in the field of private antitrust litigation. Recent court rulings have further clarified relevant issues regarding (i) the moment that the statute of limitations period of individual recovery actions starts to run; (ii) the effect of a finding of infringement by the Administrative Council for Economic Defense (CADE, the Brazilian antitrust authority); (iii) the disclosure of information and access to files related to CADE’s investigations; (iv) the relevance of expert evidence for demonstrating individual damages; and (v) the fact that the pass-on defence cannot be presumed and defendants carry the burden of proving it. In addition, a proposal to amend the Brazilian Antitrust Law (Law No. 12,529/11), which aims to provide more incentives for aggrieved parties to seek compensation for damages arising from antitrust infringements, is under final review at the House of Representatives after being approved by the Senate. Moreover, further approaches to fostering private antitrust litigation are gaining traction, such as third-party financing. Finally, the Covid-19 pandemic made the Brazilian courts undergo a digital transformation, resulting in a greater efficiency and speedier proceedings.

The first follow-on action for cartel damages was filed in 2006, after the Brazilian antitrust authority fined participants of a cartel in the longsteel market. This case was a turning point for private antitrust litigation, inspiring other victims and class associations to seek damages against other cartels. The enactment of the current Antitrust Law in 2011 was also a milestone for private antitrust enforcement since the new law has played an important role in promoting cartel detection through an effective leniency program and, consequently, enhanced anti-cartel enforcement.

Recent rulings from Brazil’s high courts have substantially contributed to advancing private actions for cartel damages

Antitrust enforcement in Brazil, however, was primarily focused on public enforcement conducted by CADE, that employed all of its efforts and resources in developing cartel prosecution tools. Thus, private enforcement has been overlooked. Several initiatives have more recently, therefore, emerged in order to remedy such imbalances between public and private enforcement.

Initiatives from the federal government (and CADE itself), congress and the private sector have significantly contributed to promoting private antitrust enforcement. The House of Representatives Bill of Law No. 11,275, for instance, addresses some of the perceived hurdles for enhanced private enforcement and creates further incentives for bringing cartel damage claims. The bill advances private enforcement by (i) proposing the creation of a double damages system; (ii) establishing a mandatory provision stating that the the party that wishes to celebrate a consent decree with CADE should agree to submit damages claims to arbitration if the aggrieved party requests and/or agrees to initiate an arbitration proceeding to adjudicate damages claims; (iii) establishing a statute of limitation of 5 years, starting from the publication of CADE’s final decision; and (iv) stipulating that CADE’s final infringement decision is able to susbtatiate the granting of preliminary injunction.

Brazil has experienced an increase in the number of recovery actions for cartel damages in recent years

Recent rulings from Brazil’s high courts have also substantially contributed to advancing private actions for cartel damages. Concerning the triggering event of the statute of the limitation period to bring damages actions, the Superior Court of Justice (STJ) has consistently ruled that the statute of limitation period only starts to run from the moment the claimant has ‘unequivocal knowledge’ about the tort and its consequences, i.e., awareness of (i) the existence of an infringement, (ii) the identity of the wrongdoers, (iii) the existence of losses and (iv) the causal relationship between the infringement and the losses (e.g., Oi S.A. v Augustin Anibal Tonelotto (2020)).

Applying the STJ’s abovementioned understanding, the Court of Appeals of the State of São Paulo has recently issued decisions ruling that CADE’s final decision on the merits triggers the statute of the limitation period for follow-on claiming damages (eg, Construtora Itamaracá Ltda. vs. Lafargeholcim Brasil S/A and others  (2019)). Indeed, it is only after CADE’s infringement decision that the aggrieved party may be considered aware of the infringement, the extent of its consequences, and therefore, its right to seek compensation.

When it comes to the effect of CADE’s decisions, follow-on claimants may rely on CADE’s findings to demonstrate antitrust infringement, since Brazilian courts have reaffirmed that CADE’s ruling represents unequivocal evidence of its existence (eg., Association of Hospitals of Minas Gerais vs Air Products Brasil Ltda (2012)). Recently, Brazil’s Supreme Court issued an important ruling reinforcing the relevance of an infringement decision from CADE. In Comal Combustíveis Automotivos v. CADE (2019), the STF decided that courts of law shall defer to CADE’s findings of fact considering the agency’s expertise and resources to find whether an investigated conduct produced anticompetitive effects on the Brazilian market. However, this ruling applies only to findings on the merits, and therefore, courts of law may still review questions related to due process of law and issues of procedural nature concerning CADE’s proceedings.

Also, in Electrolux do Brasil SA v Whirlpool SA (2016), the STJ has ordered CADE to disclose documents and information obtained during its investigations to support a follow-on damages action. This ruling led CADE to issue Normative Resolution No. 21 of 2018 regulating the disclosure and access to evidence from its investigations’ files following an intense debate regarding the balance between public and private enforcement. According to this Regulation, part of the documents gathered in the course of administrative proceedings are disclosed after CADE issues a final decision, except for pieces of evidence provided by beneficiaries of leniency agreements and consent decrees (e.g., history of unlawful conduct), documents concerning trade secrets and confidential and unrelated business information, which also remain sealed.

The Court of Appeal of São Paulo has also increasingly stressed the importance of producing expert evidence in private antitrust claims. Such complexity of this type of claim requires econometric models and calculations to demonstrate the occurrence of individual damages. Moreover, the Court of Appeal has been establishing that passing-on ought to be proven by means of specific economic evidence prepared based on data and documents that demonstrate the methods used by the injured company to set the price of the final product for sale to its costumers, and that the burden of proving the pass-on defense falls on the defendants (eg., Paez de Lima Construções Comércio vs. Votorantim Cimentos and others (2019)).

Furthermore, third-party litigation funding in Brazil has been swiftly developing. The Brazilian Civil Code allows aggrieved parties to assign to a third party the right to claim compensation. Given the complexity of private antitrust claims, and therefore, the amount of time it can take a court to issue a decision, litigation funding may provide an alternative solution for financing both collective and individual claims.

It should also be noted that the Covid-19 pandemic contributed to the development of private antitrust actions. In order to avoid halting the proceedings, Brazilian courts have made a collective effort to transform the system digitally, for instance, through the digitalization of their remaining paper records to avoid the suspension of paper-based proceedings.

In conclusion, key recent developments have advanced cartel damage claims and are expected to continue having positive repercussions on the private antitrust litigation field.

About the Authors:

Bruno L. Peixoto

Partner Bruno L. Peixoto leads a practice focused on representing claimants in antitrust litigation before Brazilian courts and coordinating global strategies for the recovery of antitrust damages in international cases. Bruno was previously an attorney at the Ministry of Justice and earned his LL.M. from the University of Chicago.

E-mail: bpeixoto@araujopolicastro.com.br
Phone: +55 11 3049 5789

Carolina Pagotto Trevizo

Carolina Trevizo is an associate at Araújo e Policastro Advogados and focuses on competition law and litigation, particularly the private enforcement of antitrust law. Carolina graduated from the University of São Paulo in 2019, is currently pursuing a postgraduate degree in economics and competition law at Fundação Getúlio Vargas, and is in the process of completing her double degree (Licence en Droit), granted by the University Jean Moulin Lyon.

E-mail: ctrevizo@araujopolicastro.com.br
Phone: +55 11 3049 5758