On 26 July 2023, investigators executed 24 search warrants in three states of the north-eastern region of Brazil.
The Administrative Council for Economic Defense of Brazil (CADE) and the Prosecution Services of Rio Grande do Norte (MPRN) conducted the investigation named Operation Scoliosis on 26 July in three states of the north-eastern region of Brazil. The objective is to investigate the alleged existence of a cartel operating in the sector of orthoses, prostheses, and medical devices used in orthopedic surgeries. Two lawyers and an orthopedic doctor, as well as partners and employees in medical supply companies, are accused of participating in the cartel.
Operation Scoliosis executed 24 search warrants in the cities of Natal (Rio Grande do Norte), Recife (Pernambuco), João Pessoa (Paraíba), and Campina Grande (Paraíba). CADE and MPRN collaborated with the Prosecution Services of Paraíba and Pernambuco and the investigative and non-investigative police forces of these states. The operation involved 30 CADE servants, 19 prosecutors, 56 civil servants of the Prosecution Services and more than 100 investigative and non-investigative police officers.
Investigations began in early 2019. The MPRN found out that the group participated in coordinated actions, filing lawsuits targeting emergency surgery for scoliosis. During the prosecution's case, they obtained an illicit advantage by overpricing orthoses, prostheses, and medical devices used in orthopedic surgeries harming the government.
Initially, the two lawyers filed at least 46 lawsuits against the government - including a request for an injunction - totalling around BRL 7.4 million in orthopedic surgeries paid by the state of Rio Grande do Norte. 42 of the 46 lawsuits resulted in favour of the clinic of the doctor under investigation.
According to the investigations, the lawyers submitted price quotes from health centres and hospitals that could provide the surgery and supply medical devices to grant an injunction against the government. A group of suppliers submitted these proposals favouring the doctors under investigation and certain companies in the sector.
As initially found, the supplying companies agreed on price quotes submitted by the lawyers. Instead of competing, they would define which one of them would win the procurement, while others would submit a market price survey and cover biddings. The alleged bid rotation would influence supply agreements and result in higher prices to the government.
Evidence shows that at least 21 partners and employees of the supplying companies obtained advantages to the detriment of the Treasury. These companies also abused economic power aiming at market domination and market foreclosure.
MPRN blocked and restricted the use of bank accounts, properties, and vehicles of involved parties. The seized material will be analyzed to determine whether any additional individuals or companies participated in the alleged cartel.
The parties may face penalties for antitrust violations as established by the Brazilian Competition Law, economic crimes, criminal association, and other offenses that may be revealed during the investigation.
CADE is a government agency linked to the Ministry of Justice and Public Security that aims to ensure free competition in the market and promote and spread the culture of free competition with jurisdiction over competition matters (including final appeals) in the scope of the executive branch.
The Tribunal of CADE can fine companies involved in a cartel up to 20% of the turnover they earned in the field of activity affected by the cartel in the year before the proceedings were initiated. Meanwhile, the agency can fine employees up to 20% of the value of the penalty imposed on their companies.
Source: CADE
