The battle for competition

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By ALESSANDRO OCTAVIANI*

Competition Defense in the Judiciary: slow steps on broad paths.

The Brazilian Judiciary has been called upon to play an important role in implementing the constitutional command that determines the existence of a healthy competition process. Judges have (i) decided on anti-competitive conduct or structures and their indemnification consequences and (ii) acted as reviewers of administrative decisions by CADE and other bodies with competence to watch over competition.

In the fight against economic conduct that is harmful to the community, the Judiciary can, for example, (i) be the first battle arena or, (ii) later, the loci in which the aggrieved people who came to know themselves as victims – after investigation by CADE or other authorities – enter in search of becoming indemnified, armed with (iii) proof with extremely high robustness and legitimacy or (iv) declarations in a system of agreements which, objectively, due to Public Order, mean assumption of the investigated conducts, leading directly to indemnity obligations.

Such articulation between the administrative and judicial spheres does not exist only in Brazil, as can be seen in the European and American experience, whose main objective is to modulate the legal discipline of the markets in order to remove and severely punish predatory behavior.

Europe and the US lower the probative costs of victims – administrative decision in the Judiciary: “irrefutable proof”, “full reparation” and “triple reimbursement”

In the United States, since 1914, with the clayton act, the right to petition and indemnity claims is guaranteed to any subject of law who suffers, due to conduct prohibited by antitrust discipline, damage to his business or property, articulating a long-standing tradition of “triple compensation”, the treble damages, historically a powerful instrument to discourage abusive behavior in the market. Given this tradition – more than one hundred years old in the US –, the Judiciary is often the victims' first option.

The European experience showed an evolution in which, given the need to remove competitive delinquency, the administrative and judicial spheres were intensely articulated: if economic delinquents are caught by the administrative authority, the way to be forced to compensate the victims will be very short, with numerous presumptions in favor of the injured parties and contrary to the perpetrators of illicit acts. In 2008, the European Commission issued the “White Paper on actions for compensation for non-compliance with community rules in the field of antitrust"[1], in which it explains that “any citizen or company that suffers damage as a result of non-compliance with community rules in the field of antitrust (Articles 81 and 82 of the EC Treaty) must be able to claim compensation from the person who caused the damage”.

Once the infringement has been verified by the European Commission, victims may, “by virtue of consistent case law and Article 1(16) of Regulation (EC) No. 1/2003, rely on this decision as irrefutable proof in the context of a civil action for damages”. Healthy competition is an asset of the highest public interest, and practitioners of the illicit act, as a rule, have a great capacity to simultaneously harm such interest (severely damaging other market participants) and sustain their defenses with competent and numerous teams of lawyers, economists and other specialists, for a long time. In order to (i) bring some balance between victims and illegal predators and (ii) also issue an adequate lesson, with dissuasive capacity for the future, so that (iii) the offense is not repeated or (iv) third parties do not think of doing somewhat analogous, the decision of the administrative authority gains enormous weight with the Judiciary, defining that, in each of the national States that are part of the Union, the decisions of the national competition authorities also constitute “irrefutable evidence of the infraction in civil actions of subsequent compensation for breach of the rules antitrust".

In 2014, in the well-known “Damage Directive”[2], a long cycle of maturation was completed in which it was established that “natural or legal persons who suffer damages caused by infringements of competition law can request and obtain full compensation for these damages”, understood as “complete compensation” as that which “ places the injured party in the position he would have been in if the infringement of competition law had not been committed”.

In these two legal experiences, the European and the American, the aim is (i) unity and complementarity between the judicial and administrative spheres, (ii) in which administrative supervision serves as “constantly vigilant eyes”, (iii) effectively instrumentalizing judicial protection, greatly shortening deadlines, procedures and probative costs, always in defense of the community, the victims, and contrary to economic offenders. The Economic Public Order is not something abstract, outside the life of companies or individuals. It is something that orders private life and that, therefore, materializes concretely in such legal assets, determining paths to be followed and sanctions for those who deviate from them. Accelerating and guaranteeing the receipt of compensation to the private party harmed by breach of Public Order is one of the guarantee facets of that Order itself, and not merely a “private matter”.

Judiciary and Competition Defense in Brazil: legal discipline and recent numbers

The Brazilian Constitutional Economic Order (i) establishes “objectives” and “purposes” for the economic fabric, (ii) for which the competitive process must be an instrument, (iii) thus generating institutional allocations to the Judiciary in order to that disciplines the markets with regard to the adjustment of indemnities, (iv) with a clear pedagogical and dissuasive potential.

The junction of the constitutional diction of art. 173, paragraph 4 (“the law will repress the abuse of economic power aimed at dominating markets, eliminating competition and arbitrarily increasing profits”), with art. 5, item XXXV (“the law shall not exclude injury or threat to the right from the Judiciary Power”), gained in concrete form with Law nº 12.529/2011 (“Law for the Defense of Competition”), art. 1, sole paragraph, which defines as holder of guardianship the collectivity itself, thus dealing with competition as a matter of Economic Public Order. The consolidation of the legality of a guardianship with such dignity becomes feasible only with a well-built and effective indemnity system, under penalty of erosion of the interests of the community and, in specific cases, of the individuals who, simultaneously, express and integrate it . Affirm that (i) the holder of the right is the community and, simultaneously, (ii) not provide for the members of the community to have their assets protected or (iii) not allow them to participate in the defense of the Public Order itself, helping to persecute violators , (iv) means eroding the very sense of collectivity, (v) making abstract, artificial and dormant something that is concrete, organic and vibrant.

Therefore, art. 47 of Law 12.529/2011 authorizes those harmed by violations of the Economic Order to file a lawsuit “in order, in defense of their individual or homogeneous individual interests, to obtain the cessation of practices that constitute a violation of the economic order, as well as the receipt of compensation for losses and damages suffered, regardless of the investigation or administrative proceeding, which will not be suspended due to the filing of an action”. The injured party becomes, when a contender against the practitioners of an unlawful act before the Economic Order, defender of the Public Order itself – which should not have been attacked –, from which several legal commands derive, such as those contained in arts. 11, X, and 13, XVII, according to which it is incumbent upon CADE's Court Counselors and CADE's General Superintendence to “provide the Judiciary, whenever requested, with all information on the progress of proceedings, and may even provide copies of the files to instruct lawsuits” (which also includes information on lawsuits in which Cade is a party – plaintiff or defendant – before other competences of the Judiciary Power other than the one requesting the information, which must be done through its Public Prosecutor’s Office , in court).

The system for protecting competitors and victims and combating predators is completed with commands such as (i) those in art. 93, which assigns the nature of extrajudicial executive order to the decisions of CADE's Court, (ii) those of art. 85, §8, which attributes to the terms of commitment to cease (TCCs) the nature of an extrajudicial enforceable title, or (iii) those of art. 95, §2, according to which indemnities for losses and damages, caused by infractions to the economic order, will be made without prejudice to fines.

However, the numbers referring to judicial measures for compensation for anti-competitive acts in Brazil are still timid, as pointed out by Cade's General Superintendence when analyzing the “articulation between public and private prosecutions of anti-competitive conduct”, in Technical Note SG n° 24/ 2016[3].

In a recent study, approximately 50 actions to repair competitive damages were mapped, between the effective date of Law 8.884/94 and August 30, 2020, of which approximately 70% would have been filed before the State Court of Justice from Sao Paulo[4]. Administrative supervision is at a much more advanced stage, given that, between 2018 and now alone, around 80 (eighty) administrative proceedings and 100 (one hundred) TCC requests were judged[5].

The reasons for this small number of judicial measures are several, and range from, for example, (i) the lack of culture in this type of litigation to (ii) interpretations by the antitrust authority that have made it difficult to access evidence that would make actions much more solid and manageable.

Improving the judicial protection of the Economic Public Order and guaranteeing the right to compensation against violators: Beginning of the statute of limitations and Evidence value of the TCC

The constitutional implementation of the defense of competition demands that numerous institutes gain interpretation related to their effectiveness, spreading to the economic fabric the determinations and guarantees of Public Order, which can be particularly exemplified (i) in the determination of the dies a quo for damages for damages against competition and (ii) the cogent proving effect of the Term of Cessation of Conduct – TCC signed before Cade.

The statute of limitations for remedial actions follows the commands of the Civil Code, being three years for non-contractual liability (CC, art. 206) and ten years (CC, art. 205) for contractual liability. Given the absolutely commonplace reality that victims only find out that they are victims of such sophisticated illicit acts at the time of conclusion of Cade's investigation, with the administrative conviction of the offenders or their disclosure by the press, the legal discipline of the start date of the deadline, to purposes of protecting the Public Order and not the offender, as postulated by Pontes de Miranda, must integrate and submit the Civil Code, article 189, to the Constitution. The dictation of the command (“violated the right, the claim arises for the holder, which is extinguished, by prescription, within the terms referred to in articles 205 and 206”) must be read with its wise lens, when, long ago, , stated that “the foundation of prescription is to protect what is not a debtor and may no longer have proof of the non-existence of the debt; and not protecting what was a debtor and trusted in the non-existence of the debt”[6].

For this reason – for reasons of Economic Public Order – anti-competitive offenses – many times real machinations manufactured to deliberately remain secret, or which require a notable effort by public authority to be unveiled – place the “violation of law” at the moment of “awareness of the violation of such right”. The initial term of prescription in cases involving rules of Economic Public Order or trans-individual rights is also enshrined (i) in the Consumer Defense Code, article 27 (“It prescribes in five years the claim to repair for damages caused by the fact that the product or service provided for in Section II of this Chapter, starting the counting of the period from the knowledge of the damage and its authorship"), or (ii) in the source of decisions on protection of environmental law of the Superior Court of Justice, which recognize the application of actio cream subjective[7].

The prescription rule for competitive damage repair actions, for example, in the European Union, harmonized by the aforementioned “Damage Directive”, from 2014[8], has exactly the same legislative option. The counting of deadlines starts only when there is a conjunction of certain factors, accepting the theory of actio cream, “of cognitive clearance”: (i) the cessation of the infraction, (ii) knowledge by the injured party about the occurrence of the unlawful act(s) and its characterization as a competitive offense, (iii) knowledge about the occurrence of damages and (iv) knowledge about the identity of the offender (offender).

In Brazil, the jurisprudence of the Court of Justice of the State of São Paulo has rightly stated that the deadline starts to run after Cade's decision, as exemplified in Interlocutory Appeal 2086289-72.2018.8.26.0000, by the Judge's Rapporteur Caio Marcelo Mendes de Oliveira (32nd Chamber of Private Law; Judged on 11/10/2018; Registration Date: 11/10/2018). The instrument through which the final decision of the administrative authority is expressed (whether it is a decision to condemn, to file the case – due to compliance with the Term of Cessation Commitment or Leniency Agreement – ​​or on declaratory embargoes clarifying such decisions, for example) it can be varied, but it is from the final decision that, logically, sufficient cognition is considered formed about what the administrative authority considered harmful to the Public Order, giving rise to the reparation system of Law 12.529/11.

In the same way that, as seen above, international experiences encourage judicial measures of indemnity, seeking to implement the desired behaviors for the Public Order (which, thus, is widespread and implemented capillarly), in Brazil there are several instruments to fulfill this function, as the tool of the Term of Commitment of Conduct - TCC and its cogent probative effects, disciplined, among others, by Law nº 12.529/11, art. 85.

Using the Term of Commitment to Cessation of Conduct – TCC, Cade has the competence to “take from the person represented a commitment to cessation da practice under investigation or their harmful effects”. Without mincing words, anyone who assumes this commitment “to cease their practice” or “cease the harmful effects of their practice” is obligatorily, objectively, assuming that their practice was illegal, since the State could never force someone to stop doing something lawful or to cease virtuous effects.

The legal discipline of the TCC, of ​​Economic Public Order, determines that it is compulsory, also under the terms of the Internal Regulation of the autarchy, art. 225, the recognition of the wrongdoing, given that, for the signing of the agreement, one must “necessarily contain recognition of participation in the conduct investigated by the committing party”. Conduct (i) investigated, (ii) recognized and which (iii) must necessarily be stopped, will obviously never be lawful conduct, because it would be ignominious for the rule of law to investigate and demand recognition and cessation of lawful conduct. The Brazilian order is not that of the Nazi regime or the former USSR, where such horizons were possible. The State has the power-duty to prevent the continuation of the illicit, not the licit. If it has the power-duty to stop certain conduct, it is because it was, logically, illicit.

Therefore, through the free exercise of the power to enter the system of agreements for the cessation of illicit practices, the TCC signatories, by unilateral declaration of will, create a legal situation in which others (those damaged by the illicit practice, which the predators agreed to cease) are directly interested, and such damaged parties have incorporated, in their legal assets, such declaration of the perpetrators of the offense, which, automatically and objectively, with cogent effects of Public Order, (i) authorizes the damaged parties to claim compensation and (ii) obliges the Judiciary to grant, in a similar regime, for example, to formative or potestative rights.

Given (i) the use of verb tenses such as the future tense and the abuse of conditionals (“could”, “would have done”, etc.) in the essays of some TCCs, (ii) many of the investigated women who (iii) recognized the participation in the conduct for which they were being investigated and (iv) committed themselves to ceasing such conduct, (v) when questioned in court they have stated (vi) that “they did not recognize the offense”, (vii) which would lead to an unusual situation, as , (viii) if they did not recognize the practice of the investigated conduct and agreed to cease it, (ix) there was simply no lawful agreement with the administrative authority, (x) the TCC has not satisfied its conditions of existence, validity and effectiveness and, (xi) therefore, its process is still pending before Cade, (xii) which was not extinguished due to the lack of an essential and indispensable perfect legal act.

The limit of interpretation is the absurd, as we know. Entering a system full of objective assumptions, in one sphere, and then claiming, in another, that such objective assumptions were never fulfilled, comes up against this limit. It is, in fact, before noticed come against factum proprium.

A good measure of defense of the Public Order, for Cade, would be to bar, at the moment of conclusion of the TCCs, editorial choices that propitiate winding and sibylline defenses in Court by the investigated ones, being direct, explicit and as simple as possible in its clauses ; for the Judiciary, in cases where, after having entered into a system of agreements in which they are obliged to cease the offense, they claim that they never committed it, it suffices, even and simply, to apply the law and the logic of the rule of law.

* Alessandro Octaviani Professor of Economic Law at the USP Law School and former member of CADE's Tribunal. Author, among other books, of Studies, Opinions and Votes on Economic Law (singular ed.).

Originally published on the website of Legal Adviser.

Notes


[1] Available in: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A52008DC0165.

[2] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014.

[3] Administrative Council for Economic Defense. Technical Note No. 24/2016/BOSS GAB-SG/SG/CADE. Process No. 08700.007888/2016-00. Articulation between public and private prosecutions of anticompetitive conduct: study of the international and Brazilian experience and regulatory, legislative and regulatory proposals advocacy regarding Actions for Reparation for Competitive Damages (ARDC) and access to leniency agreement documents and terms of termination commitment (TCC) in Brazil.

[4] FERNANDES, Luana Graziela Alves. Passing on defense: current Brazilian jurisprudence in cartel damage repair actions. IBRAC Magazine, No. 1, 2021, p. 23-4.

[5] Available in . Accessed on 04 Jun. 2021.

[6] BRIDGES OF MIRANDA, Francisco Cavalcanti. Private Law Treaty. Volume VI. Updated by Tilman Quarch, Jefferson Carús Guedes, Otavio Luiz Rodrigues Junior. São Paulo: Editora Revista dos Tribunais, 2013, p. 219.

[7] Cf., among many: Superior Court of Justice. REsp 1346489/RS. Rapporteur: Minister Ricardo Villas Bôas Cueva. Third Class. Judged on 11/06/2013. DJe 26/08/2013.

[8]“Damage Directive” (Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014), Article 10.

 

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