Featured In: Rating Enforcement 2009
In November 2008, Brazil's senate finally approved Arthur Badin as president of the country's Council for Economic Defence (CADE), following substantial wrangling between the authority, politicians and several high-profile companies. It was a controversial appointment. He was previously CADE's attorney general, and had spent the past few years ruffling the feathers of some of Brazil's biggest businesses - not least Vale, the world's second-largest mining company.
Star Rating: ***
Head of Agency: Arthur Badin
In his early thirties, Badin is young and, some argued, inexperienced. He also has the unenviable task of filling the shoes of Elizabeth Farina, his popular predecessor. But many believe he did an excellent job in his previous role: "Badin was the first person that really forced the capabilities of the legal department and upheld CADE's decisions," one Brazilian lawyer told GCR shortly after Badin's appointment.
Badin has also made clear his intention to drive through reforms to Brazil's competition regime that have been in political limbo for years. If he manages to do that, Brazil's three competition agencies will be consolidated into one authority, which will be an enormous improvement on the current system.
At the moment, however, Brazil's competition agencies and the private sector are at loggerheads over many of the details of the bill, with lawyers accusing the agencies of trying to "steamroll" through the reforms without addressing numerous significant problems.
Coming in at the end of the year, there are few decisions that Badin presided over in 2008. Most of CADE's notable work last year was at the behest of Elizabeth Farina.
CADE says it had an important victory (notably, one that was argued by Badin) before Brazil's Supreme Court in the dispute of a merger decision granted by CADE against the Brazilian mining company Vale.
Following the announcement of the Itaú/Unibanco banking merger in early November, CADE also successfully negotiated with the Central Bank of Brazil the right to analyse mergers in financial markets. The bank had previously been entirely responsible for deciding on such matters, but CADE persuaded it that it too should have a say on deals in the sector.
CADE also finally approved the break-up of petrochemicals company Ipiranga. Various parts of the companies were to be sold off with the intention of turning several other Brazilian companies into national champions, but CADE objected to the original terms of the deal in 2007. Despite giving the buyers some apparently significant market shares, CADE approved the deal in July 2008, subject to some alterations to the original terms of the deal.
In general, CADE scores highly for its merger work among Brazil's competition lawyers. In 2008 the authority received 638 merger filings - a considerable amount for a relatively small and financially overstretched organisation. Twenty-eight per cent of these deals were sent for in-depth review, although most went through without being challenged.
"Although simpler mergers are analysed swiftly, complex mergers and cases involving anti-competitive behaviour still take a long time to be judged by CADE, thus improvement in this area is needed," says one practitioner.
Indeed, lawyers are generally satisfied with CADE's approach to mergers: most of the problems are related to timeliness and stem from the authority's woeful lack of human and financial resources. This has also an impact on CADE's behavioural matters. While the authority imposed cartel fines totalling e22 million in 2008, lawyers complain that it still takes far too long to complete cases. Consistency in its decision making in all areas could also be better, say some lawyers, as could its economic analysis.
Although CADE has 185 competition staff, just 26 per cent of them are specialists - the lowest proportion of any country surveyed here. What's more, 28 of its specialists left last year - meaning attrition of 58 per cent of its non-administrative competition staff, the worst figure in Rating Enforcement.
But CADE is praised for its improvements to staff accountability and accessibility, and most practitioners say it remains independent, managing to largely resist government pressure on politically sensitive cases. CADE's policy and advocacy work have also gone from strength to strength, with practitioners praising the authority's efforts at both the national and international levels.
Head of agency: Arthur Badin
Previous employment: Chief attorney at CADE
Mandate expires: 2010
Total staff: 185
Staff working on competition enforcement: 185
Percentage focused on competition: 100%
Non-administrative staff: 48
Percentage who are lawyers: 63%
Percentage who are economists: 17%
Percentage who are others: 20%
Other areas of focus: Competition advocacy, international affairs, institutional affairs and public affairs
Stand-alone bureau of economics: No (though one is being created)
No. with PhDs in economics: 4
Name of chief economist: Sérgio Aquino (since Jan 2009)
Average age of staff: 34
Average tenure: 3 years
Budget: €3.9 million
Amount spent on salary: €1.8 million (includes money from government budget)
Percentage of budget spent on salary: n/a
No. of staff who left: 28
No. of staff who retired: 0
No. of staff who remained in civil service: 20
No. of staff who joined from the civil service: 20
No. of staff who joined in 2008: 28
Number who have spent at least 5 years in private practice: n/a
Percentage of staff who left: 58%
Percentage who retired: 0%
Percentage who remained in civil service: 71%
Percentage who joined from civil service: 71%
Percentage who joined in 2008: 58%
No. of staff working on mergers: n/a*
No. of staff working on other matters: n/a*
Percentage of staff working on mergers: n/a*
Percentage of staff working on other matters: n/a*
Sectoral priorities in 2008:
As a competition tribunal, CADE does not establish sectoral priorities, but rather analyses and decides cases initiated before the two other Brazilian competition authorities, the SDE and the SEAE, which determine their respective sectoral priorities
Sectoral priorities for 2009: See previous answer
Performance assessment: No
No. of mergers filed: 638
No. of filed mergers that led to in-depth review: 182
No. of filed mergers challenged: 59
No. of challenged mergers blocked: 1
No. of challenged mergers resolved with remedies: 58
Percentage of filed mergers that led to in-depth review: 29%
Percentage of filed mergers challenged: 9%
Percentage of challenged mergers blocked: 2%
Percentage of challenged mergers resolved with remedies: 98%
No. of leniency applications: n/a
No. of dawn raids: n/a
No. of cartel decisions: 4
Total fines in 2008: €22 million
Average fine per cartel: €11 million
Average length of cartel investigation: 22 months
Fines collected by: CADE
Fines go to: Federal Fund for the Defence of Collective Rights
Abuse of dominance
Highest No. of abuse of dominance cases under way in 2008: n/a*
No. of abuse of dominance investigations launched in 2008: n/a*
No. rolled over: n/a*
No. of files closed: n/a*
Average length of investigation: n/a*
Longest-running investigation: n/a*
Explanation for its duration: n/a*
Structural change: No
Arthur Badin, president of CADE and commissioners Fernando Furlan, Vinícius Carvalho, Olavo Chinaglia, Carlos Ragazzo and César Mattos were nominated in 2008. The sixth commissioner of CADE, Paulo Furquim, began his second two-year mandate in January 2008
New powers: No
Budget change: Increased by €200,000
Setting goals and priorities:
The president meets with the commissioners to discuss the authority's goals and priorities. A strategic planning for 2009 and 2010 has been elaborated by the current president and submitted to the commissioners for an in-depth discussion. As a result, areas for improvement in the authority have been identified or confirmed, initiatives to promote this improvement have been discussed, priority areas and coordination of the initiatives has been determined, and, finally, deadlines for the adoption of said initiatives have been scheduled
Allocation of resources:
As CADE has limited resources, it has undertaken several initiatives to become more efficient while at the same time increasing the quality and excellence of its activities. In 2008 the allocation of resources was rationalised with the creation of technical working groups in four areas of relevance for CADE: regulated markets, economics, international affairs, and settlement negotiations. Constant capacity building is being offered by CADE to these groups. In this regard, CADE has provided financial support for technical training for the civil servants participating in the working groups both in Brazil and abroad
Long-term strategy and training
Annually, CADE publishes its management report, which is mandatory by law. The annual reports provide both an overall and detailed picture of the achievements of the year, as well as a comparison with previous years. Questionnaires submitted by international organisations and foreign institutes have been useful self-evaluation instruments, highlighting CADE's institutional strengths and weaknesses. Furthermore, the active participation of CADE in relevant international forums, such as the OECD, ICN and UNCTAD, among others, provides a very useful debate and lessons to be learned from the experience of other agencies. CADE's efforts to develop and maintain a close and positive interaction with some major foreign competition authorities also helps the development of joint projects for capacity building and exchange of experiences. In 2008, for example, CADE hosted three officials from both the US FTC and DoJ for a seminar on pre-merger notifications. CADE also financially supported capacity-building initiatives to its technical staff before the Canadian competition authority, the FTC and the DoJ, and booked a course in microeconomics from the London School of Economics, which took place at CADE's headquarters
Institutional memory has been addressed by various initiatives. CADE has hired civil servants specialised in public policy and government management, with the intention of creating a group of permanent and qualified staff. In order to both increase technical expertise and create incentives for its staff to stay at the authority. CADE is constantly supporting and promoting capacity building both abroad and in Brazil. Also, CADE's technical and administrative decisions are available on the intranet and internet of CADE. This helps to establish an institutional memory. The same can be said about the issuance of Súmulas (understanding briefs, the repeated precedent system) by CADE, as they contribute to the consolidation of jurisprudence and increase stability and predictability in the implementation of the Brazilian competition law and policy. In addition, peer reviews, papers, reports and other documents produced in international forums contribute to the institutional memory
The key achievements in 2008 were:
• The approval of Bill 06/2009 before the Brazilian House of Representatives in December 2008
• CADE had an important victory before the Brazilian Supreme Court in the dispute of a merger decision granted by CADE against the Brazilian mining company Vale: the judicial review of the case prevented the company from becoming a monopolist in the Brazilian market for iron ore and was completed quickly by Brazilian standards
• Further increase in the implementation, and therefore the effectiveness, of CADE's decisions before the Brazilian courts. The vigorous enforcement of CADE's decisions by the Attorney General Office, together with the implementation of cease-and-desist commitments by CADE, was responsible for a significant increase in the amount of fines collected by CADE
• The negotiation of an agreement with the Central Bank of Brazil (BACEN) determining the competences of CADE and BACEN in the analysis of mergers in financial markets
• The creation of working groups specialised in different areas of interest for CADE
• The elaboration of strategic planning for 2009 to 2010
From 2000 to 2006 there was an increase in the number of court appeals against CADE's decisions, from 161 to 196, while the number of CADE's decisions decreased from 135 to 40 cases. Nevertheless, 58.3% of CADE's decisions were upheld by the judiciary in 2008, while 2.8% of CADE's decisions where partially upheld and 38.9% were reversed in the same year. *The SDE is Brazil's investigative body for competition matters
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Brazil's competition regime (BCPS) has seen major improvements in the past years. As a result of an increase in efficiency at the SDE and other organisations, there has been a qualitative and quantitative change in the cases brought for the analysis of CADE: between 1994 and 2002, 80% of the violations condemned by CADE related to the imposition of price lists by medical associations, or the imposition of an exclusivity clause by health plans to providers of medical service. During the same period, only two hard-core cartels were condemned by CADE.
Between 2003 and 2006, however, cartels acting in strategic markets have been dismantled (such as industrial gas, medicaments, civil construction and services) and 22 cartels have been condemned by CADE. Furthermore, Brazil's leniency programme, created in 2003, is already one of the most active among developing countries. We have also introduced quantitative methods and econometric studies, which increased the quality of its economic analysis.
Since 2003, there has been a significant decrease in merger review times by the BCPS, as a result of the development of a "fast track" procedure by SDE and SEAE for simpler merger cases, a joint procedure for merger review by the aforementioned agencies in 2004, and a fast-track procedure by CADE to grant decisions in merger cases.
As a result, although the number of merger cases submitted to CADE has increased, there has been a decrease in the total time of merger analysis.
Furthermore, CADE's decisions have increasingly been subject to appeals since 2003. Between 2003 and 2007, 1,243 law suits that involved CADE were filed. The significant number of injunctions granted by courts to suspend the effects of CADE's decisions until their final analysis contributed to the existence of a low level of enforcement of CADE's decisions until 2005.
Since 2006, the CADE Attorney General Office has focused on results, with the goal of maximising the enforcement of CADE's decisions. As a result, there has been a significant increase in the collection of fines by CADE.
CADE has also obtained important victories before the Brazilian Supreme Court. For example, in the judicial dispute of a merger decision granted by CADE against the Brazilian mining company Vale, the judicial review of the case prevented the company from becoming a monopolist in the Brazilian market for iron ore and has been completed in a short time period by Brazilian standards.
In sum, there have been consistent improvements in the past years, which have contributed to the good reputation of the BCPS, both in Brazil and abroad. As stated in the 2005 OECD Competition Law and Policy Peer Review of Brazil, "particular strengths of the BCPS include a strong institutional dedication to high standards of integrity, autonomy, sound policy, and fair procedure; an excellent leadership cadre; and a supportive business community".
However, CADE is aware that it is necessary to overcome the limitations resulting from its current structure and restricted human and financial resources, in order to continue to meet the growing demand for the analysis of competition cases, as well as to make it possible for CADE to achieve the goal of further increasing the efficiency and excellence of its activities.
For this reason, it is necessary to implement reforms of the Brazilian competition law and system, as provided for in Bill 06/2009, currently pending approval before the Senate. Among other provisions, the bill establishes a pre-merger notification system, creates a chief economist office within CADE, consolidates the investigative, prosecutorial and adjudicative functions into a single competition agency and creates career and permanent positions at CADE, while also promoting a significant increase in the number of technical staff. CADE is making all efforts to obtain approval of the bill before the end of 2009.
- Arthur Badin