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Brazilian Antitrust Agency fines gas cartel in US$ 1.8 billion

9 septiembre, 2010

After 16 years of antitrust enforcement, the Brazilian authorities are approaching their European and American colleagues when it comes to setting fines for cartels.

On the 1st September 2010, the Administrative Council of Economic Defense (CADE), the Brazilian antitrust agency, fined five companies (Linde Gases, White Martins Gases Industriales, Air Products Brasil, Air Liquide Brasil and Industria Brasiliera de Gases – IBG) as well as six of their executives, 2.9 billion reais (US$1.8 billion) for cartelization in the gas market.

The collusive activities would have started in 1998 and would consist of practices as customer allocation, bid rigging and price fixing. Considering the companies’ products are mostly used in the health care industry, it is likely that many hospitals and businesses have been affected by the cartel along the years. The investigation was started in 2003 by the Secretariat for Economic Law (SDE) and included telephone wiretaps and dawn raids for seizing relevant documents to be used as evidence in the process.

White Martin, a major company in the sector, were fined 2.2 billion reais, the heaviest in Brazilian history, a value correspondent to 50% of its turnover in the fiscal year prior to the investigation beginning. The high percentage, above to the legal limit of 30%, derives from a particular aggravating circumstance: recidivism  was taken into consideration, because White Martins had already been condemned for cartel activity in 1997. Other companies received lower fines: Air Liquide was fined 249 million reais, Linde was fined 238 million reais, Air Products was fined 226 million reais and IBG was fined 8 million reais.

The convicted officers were fine proportionally to their companies’ fines. A White Martins executive was fined 4.5 million reais, a Linde executive, an Air Liquide executive and three Air Products executives were fined around 500,000 reais each, and an IBG executive was fined 85,000 reais.

The defendants have already publicly challenged formal and material aspects of CADE’s decision and are expected to go to courts to overrule the administrative decision.

I will have to come back to the decision in further posts, since it has many controversial aspects. For instance, CADE considered the fact that the defendants filed more than 30 judicial suits to postpone the trial and nulify certain administrative acts was an evidence of lack of collaboration with the antitrust authorities and such behaviour could be seen as an aggravating circumstance. On the other hands, critics argue that, differently from the USA, there is the privilege of non self-incrimination. Besides that, not collaborating with the antitrust authorities is not listed as an aggravating circumstance.

Definitively, the courts will have the last word in the various legal issues raised in the case.

For the full content of the decision, click here.

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