Immunity, Sanctions & Settlements 2018

Author:Mr Alexandre Ditzel Faraco, Ana Paula Martinez and Mariana Tavares De Araujo
Profession:Levy & Salomao Advogados
 
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IMMUNITY OR A 100 PER CENT REDUCTION IN SANCTIONS

1 What benefits are available to the first applicant to qualify?

Article 86 of Brazil's Antitrust Law (Law No. 12,529/11) authorises the Director General (DG) of Brazil's antitrust authority (CADE) to enter into leniency agreements under which individuals and corporations, in return for their cooperation in prosecuting a case, are excused from some or all of the administrative penalties for the illegal conduct under the law. Such benefits are confirmed at the time the case is adjudicated by CADE's Tribunal (article 86, paragraph 4, of Law No. 12,529/2011).

Brazil's Leniency Programme provides for a winner-takes-all approach: the first applicant to qualify will be entitled to full or partial administrative immunity depending on whether the DG was previously aware of the illegal activity being reported. If the DG was unaware, the party may be entitled to a waiver from any penalties. If the DG was previously aware, the applicable penalty can be reduced by one to two-thirds, depending on the effectiveness of the cooperation and good faith of the party in complying with the leniency letter. In the leniency letter, the DG generally states whether it was previously aware of the illegal activity being reported or not. The leniency letter is not subject to CADE's Tribunal review or approval, which, however, must verify whether the applicant fully complied with its obligations when it issues the final ruling on the case.

A successful fulfilment of a leniency agreement also protects cooperating individuals from criminal prosecution under Brazil's Economic Crimes Law (Law No. 8,137/90) and related crimes. Pursuant to Law No. 12,529/11, by signing the leniency agreement, the statute of limitations is suspended and the Public Prosecutor's Office will be prevented from filing a criminal suit against the individuals that are party to the leniency agreement. Once CADE verifies that the leniency applicant has fulfilled with its obligations, criminal immunity is also confirmed and the ability to sanction the abovementioned crimes is automatically extinguished (article 87 of Law No. 12,529/2011).

2 Do the protections extend to current and former officers, directors and employees?

If a company qualifies for leniency, directors, officers and current and former employees of the company who admit their involvement in the cartel as part of the corporate admission may receive leniency in the same form as the corporation. To benefit from the Leniency Programme, individuals have to sign the agreement along with the company (not necessarily at the same time), and agree to cooperate with the authorities throughout the investigation.

Protection may also be extended to other companies pertaining to the same economic group, as long as they cooperate with the investigation and sign the leniency letter.

Employees and former employees may also apply for leniency on its own, in which case protection is not extended to the company.

3 Is immunity available after an investigation begins?

Yes. If the DG was previously aware of the illegal activity being reported, partial immunity for administrative liability may be available - the applicable penalty can be reduced by one to two-thirds, depending on the effectiveness of the cooperation and good faith of the party in complying with the leniency letter. Criminal immunity would still be available in those cases.

According to CADE's Guidelines for Leniency Agreements, it can be considered that the DG was previously aware of the illegal activity if there is an ongoing administrative proceeding with reasonable evidence of the anticompetitive conduct at the time that the marker is requested by the leniency applicant.

4 What are the eligibility requirements before an investigation begins?

The requirements are:

The applicant is the first to come forward and confesses its participation in an antitrust violation; the applicant ceases its involvement in the antitrust violation; the applicant agrees to provide full, continuing and complete cooperation to the authorities throughout the investigation; the cooperation results in the identification of other members of the conspiracy, and in the obtaining of documents that evidence the antitrust violation; and at the time the leniency applicant comes forward, CADE has not received sufficient information about the illegal activity to ensure the imposition of sanctions against the applicant. 5 What are the eligibility requirements after an investigation begins?

The requirements are the same as for when the investigation has not yet begun.

6 Will the applicant have to admit to a violation of law?

Yes.

7 Are ringleaders or initiators of the conduct eligible?

Law No. 12,529/11 eliminated the rule that leniency was not available to a leader of the cartel. This change will not necessarily result in the authority disregarding the roles played by each cartel participant when deciding whether to grant leniency or not − article 86 of Law No. 12,529/11 provides that CADE may grant leniency if the programme requirements are fulfilled. Therefore, while the authority is no longer required to address arguments that an applicant must be disqualified for having been a leader in a conspiracy, this most likely will not be followed by policy changes resulting in immunity from sanctions being available regardless of the role played by each participant.

8 When must the applicant terminate its involvement in the conduct?

The applicant must terminate its involvement in the conduct as a condition to apply for leniency (article 86, paragraph 1, II, of Law No. 12,529/11).

9 What constitutes termination of the conduct?

This is not explicitly provided for in the law. As a matter of practice, if a cartel is ongoing, CADE encourages leniency applicants to approach it before making it known to its co-conspirators that it has ceased its involvement in the conduct. Upon celebration of a leniency agreement, the agency usually asks the leniency applicant not to disclose its awareness of the cartel to the other participants until the investigation is made public.

10 Will the applicant be required to make restitution to victims?

Not in the leniency letter. However, pursuant to article 47 of Law No. 12,529/11, victims of anticompetitive conduct may recover losses sustained as a result of a violation. A general provision in the Brazil Civil Code also establishes that one that causes losses to third parties shall indemnify the injuries suffered (article 927). Plaintiffs may seek compensation of pecuniary damages (actual damages and lost earnings) and moral damages.

11 Can more than one applicant qualify for immunity?

No. Brazil adopts a winner-takes-all approach and only the first to qualify may be entitled to benefits. However, in the case of a company, directors, officers, and current and former employees of the company applying to the leniency, they may sign the agreement along with the company (not necessarily at the same time), as well as other companies that are part of the same economic group.

12 Can an applicant qualify if one of its employees reports the conduct to the authority first?

No. Please refer to question 2.

13 Does the afforded protection extend to any non-antitrust infringements?

Article 87 of Law No. 12,529/11 provides that successful fulfilment of a leniency agreement insulates cooperating parties from criminal liability for cartel offences under Brazil's Economic Crimes Law (Law No...

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