This country-specific Q&A provides an overview to competition litigation laws and regulations that may occur in Brazil.
This Q&A is part of the global guide to Competition Litigation. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/competition-litigation/
What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?
Article 47 of the Brazilian Competition Law (Law No. 12,529, 2011 – “BCL”) establishes the right to file private civil actions against third parties to recover damages resulting from any conduct described under Article 36 as a violation to the economic order - which includes any conduct that has the object or is able to produce the following anticompetitive effects, even if such effects are not achieved: (i) to limit, hinder or restrain competition, (ii) to dominate a relevant market, (iii) to arbitrarily increase profits, or (iv) to abusively exercise a dominant position.
Moreover, the Brazilian Public Class Action Law (Law No. 7.347/1985 – “BPCAL”) establishes that the Public Prosecutor’s Office (State´s Attorney´s Office) and private entities focused on the protection of free competition may initiate class actions aiming at the redress of damages originated from illegalities.
What is required (e.g. in terms of procedural formalities and standard of pleading) in order to commence a competition damages claim?
There are two requirements to commence a competition damages claim: (i) legal interest – i.e. judicial intervention is a requirement to achieve the claimant's purpose of action, and the law allows the claimant to pursue such purpose by bringing a claim; and (ii) legal standing – i.e. the claimant is an injured party, which has suffered damages and is entitled to seek redress.
With regards to damages, it is necessary to show that an infringement of law occurred, that damages were sustained (actual loss or forfeited profits), and that there is a causal link between the damages and such infringement. In other words, there must be evidence supporting the existence of an anticompetitive conduct that resulted in specific and quantifiable damages suffered by the claimant.
What remedies are available to claimants in competition damages claims?
According to Article 47 of the BCL, those injured by an anticompetitive conduct may sue to seek an (i) injunction to cease the anticompetitive practice, and/or (ii) to recover damages.
With regards to injunctions and interim relief, the claimant must show irreparable harm looms, unless the relief is granted, that the remedy is necessary to protect the claimant’s rights and that the effects of such relief are reversible if the claims are eventually defeated.
What is the measure of damages? To what extent is joint and several liability recognised in competition damages claims? Are there any exceptions (e.g. for leniency applicants)?
Quantification of competition damages is one of the most challenging aspects of a competition damages claim. That is because damages must be demonstrated by the claimant through evidence and relate to either an actual loss or forfeited profits. Following such evidence, the judge may either determine the amount of damages to be awarded or order the quantification of damages in separate proceeding – case in which the court may seek for an expert to determine the amount to be paid.
In case of multiple defendants having contributed to the anticompetitive conduct, liability is joint and several without apportionment – i.e. each cartel member may be held liable for the entire cartel-related damage, including leniency applicants (articles 186, 927 and 942, sole paragraph, of the Civil Code). However, in this case a defendant may bring an action against the other defendants seeking reimbursement of the amount paid for damages she did not cause. Moreover, as detailed on question 25, a Senate´s Bill is proposing exemption for the offender who is party to a cease-and-desist or leniency agreement from the payment of damages caused by other members of the cartel.
What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?
The BCL does not define a limitation period for private competition damages claims and there is no settled case law on the matter. As a result, courts have applied different limitation periods to private competition damages claims, as: (i) the 3-year limitation period established by the Brazilian Civil Code (Article 206, paragraph 3, item V) to civil redress; (ii) the 5-year limitation period defined by the Consumer Protection Code (Article 27); (iii) the 10-year general limitation period, applicable where no specific law establishes a shorter term.
For public class actions seeking competition damages, the limitation period is five years, as per the Superior Court of Justice, based on Article 21 of the BPCAL.
Moreover, it is not explicitly settled when the limitation period is triggered; therefore, this is also open to a case by case interpretation.
The limitation period can be suspended or interrupted, but it cannot be extended. The statute of limitation term can be interrupted once, when there is an administrative or judicial act aiming at assessing or investigating the alleged anticompetitive conduct. As regards private actions, the limitation period is usually interrupted when claimants file a specific action, “protesting” the relevant conduct. In this case, the term is interrupted when the judge in charge issues an order receiving the action and notifying the defendants. The statute of limitation restarts from the date the judge's order to notify the parties is issued.
Which local courts and/or tribunals deal with competition damages claims?
State courts have general subject matter jurisdiction over civil competition claims. However, as per Article 109, paragraph I of the Brazilian Federal Constitution, the jurisdiction of federal courts applies to cases in which the Federal Government, federal agencies or federal state-owned companies figure as the plaintiff, defendant or intervenes on the matter, which includes the Brazilian competition authority, CADE.
The decision in state and federal courts is made by a single judge, and it can be appealed to the State Court of Appeals (or Federal Court of Appeals, in case of a federal court), which has jurisdiction to review both matters of fact and matters of law.
Furthermore, an additional appeal to a higher court is possible to question points of law only. In case of non-constitutional questions, the appeal is heard by the Superior Court of Justice; on the other hand, if the appeal is made on constitutional grounds, it is subject to the Brazilian Federal Supreme Court’s assessment.
How does the court determine whether it has jurisdiction over a competition damages claim?
A court has jurisdiction over a competition damages claim if located (i) where the plaintiff is domiciled or (ii) where the anticompetitive practice took place, as established by the Brazilian Superior Court (REsp 1708704).
How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?
As a general rule, Brazilian Courts will apply Brazilian law.
The applicable standard of proof is the same as to most civil claims: preponderance of evidence, in which the proof must be clear and convincing and must lead to a conclusion that the allegations raised are more probable true than not. In this sense, the plaintiff makes the original allegations in a complaint and bears the initial burden. The defendants, by their turn, file a response denying the plaintiff’s allegations, and at this point the burden shifts to them to prove their defence.
To what extent are local courts bound by the infringement decisions of (domestic or foreign) competition authorities?
A prior infringement decision by CADE is not required to bring a judicial claim. Indeed, judicial claims can be brought even where no CADE´s investigation into the conduct in question has been initiated.
Moreover, CADE´s decision does not bind the Brazilian courts. But, CADE´s decision and the evidence relied upon by CADE (except for confidential ones) may be a trigger, and a source of evidence for damages claims.
As regards foreign decisions, courts usually take them into consideration, despite their non-binding character. However, when a final judgement has been rendered in a foreign court, it may be enforced in Brazil upon prior submission to the Superior Court Justice for Homologation. Such court will determine whether the foreign judgment breaches any Brazilian provision of public order, and if such decision binds the parties in Brazil.
To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?
Private lawsuits can be brought regardless of the existence of a decision on the public enforcement action, and even be brought before the public enforcement action is opened.
What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold criteria have to be met?
Based on the Article 129, item III of the Brazilian Federal Constitution, the Public Prosecutor’s Office (State´s Attorney´s Office) can file a class action on behalf of consumers or undertakings harmed by anticompetitive conducts. Moreover, class actions can also be brought by the Public Defender’s Office, the Union, States, municipalities, agencies, public companies, foundations, semi-public corporations or duly organized associations, on behalf of their members. Specifically on duly organized associations, they must be at least one year old before filing class actions.
These class actions are motivated by public interest objectives such as the protection of collective rights.
As public civil actions brought by the Public Prosecutor´s Office and the entities mentioned above are not part of the normal framework for private actions, the injured parties themselves will not be directly involved in the litigation. Damages for injury of collective interests will be directed to a public fund for protection of such interests. On the other hand, damages sustained by individuals and acknowledged by the judicial award are subject to separate and independent enforcement proceedings initiated by each individual. Such proceedings aim both at defining the amount due and enforcing the judicial award.
Finally, on State or Federal Courts of Appeals or the Superior Court of Justice, cases with similar discussions in the same point of law, may be united on a single proceeding named “Incident of Multiple Claims”. This proceeding will stay individual claims until a decision is reached on the Incident, which will bind all cases.
Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?
Legislation does not provide for any limitation concerning which defences can be raised in a private action. Therefore, in theory the parties are free to submit any allegations they choose to eliminate liability, including a “passing-on” defence.
As a rule, the burden of proof is born by the Claimant. The claimant must prove the facts that support the claim - which includes providing sufficient evidence supporting (i) the existence of an anticompetitive conduct, (ii) that resulted in specific damages (iii) suffered by the claimant. The defendant, by its turn, must prove the facts that impede, modify or extinguish the claimant's claim, as raised. However, considering the particular needs of a specific case – and particularly the access of parties to evidence –, the Court may shift the burden of proof completely or partially to the defendant.
Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the court or the parties and what duties do they owe?
Parties can request (and the judge can order on his/her own initiative) a wide range of means of proof, including the use of experts. Under the Civil Procedure Code, expert witnesses will present report on their findings, and respond to specific inquiries presented by the parties and by the court.
Describe the trial process. Who is the decision-maker at trial? How is evidence dealt with? Is it written or oral, and what are the rules on cross-examination?
Private damages actions are heard by judges without a jury. The decision in State and Federal courts is made by a single judge, and it can be appealed to the State Court of Appeals (or Federal Court of Appeals, in case of federal jurisdiction). As a rule, all evidence is subject to cross-examination. Although rare, courts may enjoin a pre-trial hearing for the discussion of evidence to be presented. The court may also determine another hearing, for the presentation of evidence and trial, although this is more common in non-complex cases. As regards the form, usually evidences are presented to the court in written. Witnesses are cross-examined in specifically set hearings. All parties may question the witness through direct questioning, and the judge may also question the witness.
How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?
As explained above, civil competition damages claims are brought before single judges in state courts or federal courts. Parties may appeal to the State Court of Appeals and in federal courts to Federal Court of Appeals, which have jurisdiction to review both matters of fact and matters of law.
An additional appeal to a higher court is possible to question points of law only. In case of non-constitutional questions, the appeal is heard by the Superior Court of Justice; on the other hand, if the appeal is made on constitutional grounds, it is subject to the Brazilian Federal Supreme Court’s assessment.
Litigation in Brazil can last for a very long time. As regards a single judge decision, in general, the case lasts roughly two years, depending on the complexity of the matter. After all appeals, the total length of litigation can exceed 5 years, depending on the complexity of the matter and which State or Federal Court has jurisdiction on the matter.
Do leniency recipients receive any benefit in the damages litigation context?
Leniency agreements do not reach the civil sphere, focusing instead on the criminal and administrative spheres. As a result, successful leniency applicants are not exempt from liability in civil claims.
Nonetheless, the Bill 11.275/2018, which is currently being processed under the Brazilian House of Representatives, proposes certain changes regarding the award of civil compensation from cartel damages. One of these proposals is the introduction of double damages for those harmed by a cartel infringement. In case such Bill is approved, leniency recipients will benefit from being excluded from the double damages obligation.
How does the court approach the assessment of loss in competition damages cases? Are “umbrella effects” recognised? Is any particular economic methodology favoured by the court? How is interest calculated?
Damages competition claims are not usual in Brazil; notwithstanding, they are increasingly growing. Moreover, such claims are relatively new and, as such, there are no settled case law on issues such as damages calculation.
Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?
The claimant can choose to bring the claim against all co-conspirators or just one or more of them, since wrongdoing related to cartel gives rise to joint and several liability.
In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?
Private competition claims may be settled through private-held negotiation. Moreover, it is possible for a defendant to obtain a summary judgment if the claimant lacks standing or the claim is defective. Actions filed by the Public Prosecution (or any Public Entity) may not be settled in matters involving public interest.
What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?
Settlement of claims filed by the Public Prosecutor take the form of a Conduct Adjustment Term (“Termo de Ajustamento de Conduta”, in Portuguese). Settlements on a pending judicial case must be approved by the judge, but revision of the terms of the settlement is unlikely to occur.
What procedures, if any, are available to protect confidential or proprietary information disclosed during the court process? What are the rules for disclosure of documents (including documents from the competition authority file or from other third parties)? Are there any exceptions (e.g. on grounds of privilege or confidentiality, or in respect of leniency or settlement materials)?
As a general rule, all actions must be public, and copies are available to third parties, as established by the Civil Procedure Code. Exceptions allow actions to be confidential when involving: (i) public or social interest; (ii) family matters, such as divorce, marriage, alimony, custody, etc.; (iii) information protected by the constitutional right to intimacy; (iv) other cases of confidentiality set forth by specific laws, for example industrial secrets, among others.
Parties can also request specific documents, or even the entire content of the case files, to be treated as confidential, by classifying them under a category where such confidentiality is granted, as explained above. If such request is not granted, then the public can access any document from the case files. If the confidentiality request is granted, then the specific document, or case files, will not be available to third parties - they will be filed in separate files, labelled as confidential, and access will be granted only to legal representatives of the parties and the court.
As regards documents from the competition authority file, when private claims are being formulated in parallel to CADE proceedings, the possibility to obtain evidence from CADE is a matter of on-going debate. Private claimants are currently only able to access case documents once a final decision is made available by CADE, and subject to standard disclosure limitations regarding, for instance, leniency agreements.
In fact, with respect to leniency applications, there are numerous restrictions on the availability of evidence for private actions. CADE’s Guidelines stipulate that no documents submitted will be disclosed except in case of a court order or express authorisation from the leniency applicant. Where a court orders a leniency applicant to disclose materials related to its leniency application in a related civil proceeding, CADE has intervened in favour of protecting the confidentiality of these documents while the investigation is ongoing. Further, once the investigation is completed, CADE can also intervene in civil proceedings to ensure that the release of leniency material is reasonable, proportional and legitimately related to the plaintiff’s claim.
Finally, in general, any communication between attorneys and their clients is protected and not subject to seizure or inspection.
Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how are costs calculated, and are there any circumstances in which costs recovery can be limited?
Court fees are paid by the claimant, and the amount varies from court to court. Expert fees are paid by the party that requested the evidence. Moreover, the defeated party must reimburse the prevailing one as to all the fees spent during proceedings.
Attorney fees must be paid by the defeated party. Fees vary from 10% to 20% of the amount requested by the claimant or granted by the court and are paid to the attorney of the prevailing party.
Exceptionally, courts may dismiss a party, entity or individual, from paying litigation costs if there is evidence on lack of financial resources.
Are third parties permitted to fund competition litigation? If so, are there any restrictions on this, and can third party funders be made liable for the other party’s costs? Are lawyers permitted to act on a contingency or conditional fee basis?
Third-party funding is not regulated in Brazil; thus, the parties are free to negotiate the terms and restrictions of the financing. Moreover, it is common for lawyers to work on a contingency or conditional fee basis.
What, in your opinion, are the main obstacles to litigating competition damages claims?
Currently, claimants face a significant difficulty in obtaining evidence (i) to prove the existence of an anticompetitive conduct, and that they were victims of such conduct, and especially (ii) to quantify the damages suffered, which is a requirement to the compensation award.
What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?
Significant changes affecting competition litigation are expected in the near future, as a result of the discussions regarding a number of bills aiming at fostering private competition litigation in Brazil.
The most relevant one is the Bill 11.275, 2018, which is currently being processed under the Brazilian House of Representatives, having already been approved by the Senate.
The main changes proposed by such Bill are: (i) double damages for those harmed by a cartel infringement - except the lenient and the committing party of a Cease and Desist Agreement; (ii) exemption for the offender who is party to a cease-and-desist or leniency agreement from the payment of damages caused by other members of the cartel; (iii) no presumption to passing-on of overcharges, which must be proven by defendants; (iv) application of a 5-year limitation statute, counted from acknowledgment by the claimant of the infringement or damage suffered, which is presumed to occur when CADE issues a final decision on the case; (v) CADE’s decision can give grounds for evidentiary relief, and base a request for injunction by the claimant.