The Controversial proposal gains attention following Carlos Jacques’ vote in a case involving the cement industry.
Brazil’s Administrative Council for Economic Defense (CADE) has reignited the debate on whether individuals should be exempt from punishment for participating in cartels—agreements between competitors to fix prices. This proposal stems from concerns that the antitrust agency has been slow to penalize corporate executives and third parties, compounded by the fact that fines are often not paid. Under this view, responsibility for punishing individuals could shift solely to the justice system in criminal proceedings.
The issue gained renewed attention following a vote by board member Carlos Jacques in a case concerning a cartel in the cement industry, where three individuals were accused.
Despite two of the defendants being convicted, one benefitted from the statute of limitations, as the case dated back to 2006 and 2007, with the investigation starting in 2014 and the trial taking place this year—nearly 20 years after the facts occurred.
“I believe that further reflection is needed on the costs involved in prosecuting individuals involved in cartels and their potential gains, including, above all, the dissuasive power of the competition defense authority,”
Mr. Jacques said in his vote.
He argued that this case called for CADE to reflect on whether investigating and convicting individuals truly made sense, or if such matters should be left to the criminal justice system.
“Changes to the law’s wording would benefit not only the better allocation of the competition authority’s resources but also help avoid long discussions about bis in idem [the issue of punishing the same conduct twice] and the incompatibility of administrative and criminal decisions,”
Mr. Jacques added.
Mr. Jacques told Valor that his vote initiated a critical reflection, acknowledging that a legislative change would be necessary. He also emphasized that, should the law change, the Public Prosecutor’s Office should focus on holding individuals accountable.
The concept of punishing only legal entities within CADE emerged a few years ago, spearheaded by former Economic Law Secretary Ana Paula Martinez, now a partner at the competition practice of Levy & Salomão. Ms. Martinez believes this approach would enhance the agency’s proceedings’ efficiency and speed while maintaining the regulations’ deterrent effect.
In an interview with Valor, Ms. Martinez emphasized that changing the legislation is necessary, as it currently mandates that CADE investigate and, if necessary, punish individuals involved in cartel activities. According to Law No. 8137 of 1990, the criminal justice system can also address the issue, operating independently from the administrative sphere.
Ms. Martinez highlighted the potential risks of double jeopardy and conflicting rulings, especially in cases where CADE investigates individuals.
“It’s not uncommon for cartel investigations to involve more than fifty people, including individuals and companies. Particularly in international cases with an impact on Brazil, it is difficult to identify the individuals involved, which slows down the process,”
she explained.
She also pointed out that in many high-profile cases, “child cases” emerge—offshoots of the main investigation that occur due to the difficulty of summoning those involved. Some of the most complex cases have taken 15 to 20 years to resolve.
Ms. Martinez contrasted these lengthy cases with the “crushed stone cartel,” in which CADE investigated only legal entities. That case, which ran from 2003 to 2005, was concluded in just two years, with individuals facing only criminal investigations.
Another challenge, she noted, is collecting fines imposed by CADE, ensuring that companies—not individuals—ultimately bear the financial responsibility. This, she argued, diminishes the deterrent effect of the penalties. Recently, Valor reported that CADE is drafting a rule that would offer favorable conditions for extending the payment period for fines imposed on individuals.
Despite the legal provisions, Ms. Martinez reminded us that CADE retains discretion over its investigations and makes decisions to hold individuals accountable in the administrative sphere.
“The General Superintendence and the Court are both mindful of the need to refine the criteria for including individuals in liability,”
she said.
In 2020, CADE commissioners debated whether the law should apply only to company directors. However, the majority of commissioners concluded that the law applies to all individuals without distinction.
Behind the scenes, members of the antitrust authority acknowledge the complexity of the issue but recognize that, in certain cases, it is possible to establish their own filters for investigating individuals. An ongoing administrative proceeding involving more than 50 multinational companies is a recent example of this. This investigation concerns alleged violations of the economic order in the labor market, specifically the illicit sharing of sensitive information about employee benefits.
Public records show that, in this case, no individuals have been accused, only the companies involved.
“This case reflects a commendable effort by the agency to rationalize the system,” said Ms. Martinez. “However, only legislative change would provide the legal certainty needed to address this issue definitively.”
Ana Frazão, a former CADE adviser, professor at the University of Brasília (UNB), and founding partner of the law firm that bears her name, disagrees with Ms. Martinez’s position. Ms. Frazão argues that individuals involved in antitrust violations can and should be held accountable within the administrative sphere, primarily because, in her view, “criminal prosecution is often ineffective.”
“That said, I think it is reasonable, given CADE’s limited resources and the complications that arise from including individuals in investigations, for the prosecution of legal entities to be prioritized for pragmatic reasons,”
she added.
Ms. Frazão also believes there is no need for a legislative change to prevent the prosecution of individuals, as CADE already has the authority to decide when and if it is appropriate to hold individuals accountable.
“As the law stands, CADE has the institutional autonomy and the tools to make this decision, including prioritizing prosecution only against legal entities,”
she explained.
Ticiana Lima, a partner at VMCA Advogados, supports the idea of prioritizing legal entities to expedite decisions. “From the perspective of speeding up the decision-making process, this makes perfect sense,” she said. “Some proceedings at CADE can take months, or even years, just to summon individuals, especially in cases involving numerous defendants.”
However, Ms. Lima also cautioned that the justice system’s effectiveness in investigating cartel crimes is a significant concern. “We need to be aware of the challenges in ensuring that the justice system can effectively handle these investigations,” she noted.
Given the high fines that CADE imposes, Ms. Lima believes that the possibility of individual accountability could motivate people to come forward and collaborate in leniency agreements.
“Individuals may feel more inclined to report cartels and cooperate with CADE in exchange for avoiding hefty fines,”
she said.
Source: Valor International
