The Current issue regarding the lack of quorum in CADE's court
The Administrative Council of Economic Defense (“CADE”) is a federal agency linked to the Ministry of Justice, and is the body responsible for authorizing the merger and acquisition of large companies and for punishing predatory pricing practices, abusive pricing, tie-in sales and especially cartel formations.
The Autarchy is made up of three main institutions: Administrative Court, General Superintendence (“SG”) and Department of Economic Studies (“DEE”). The Administrative Court is CADE’s main institution, which is responsible for judging the competitive matter of proceedings forwarded by the General Superintendence. It is formed by the president and six counselors, each with a four (4) year mandate. The SG is responsible for instructing conducts control procedures and evaluating merger acts in the market. In addition, the DEE is the body that develops economic analysis to support the Administrative Court and the SG
CADE is currently ruled by Law No. 12.529 of November 30th, 2011 (“CADE Law”), which in addition to define CADE´s internal structure, also establishes criteria for merger acts submission to CADE and procedural rules on administrative proceedings related to investigation economic order and control of merger act´s violations.
Thus, nowadays there is a situation involving CADE’ Administrative Court: the lack of counselor’s quorum. The counselors Mauricio Oscar Bandeira Maia and Paula Farani de Azevedo Silveira, under the command of President Alexandre Barreto de Souza, currently compose the agency. However, in accordance with CADE Law, the Court’s decisions must be taken by its majority, with the presence of at least four (4) members of the Court. For almost a month the Court has a number of counselors below the number established by Law, which resulted in the suspension of the proceedings under the Court's demand.
To undertake the position of CADE's counselor, individuals must be nominated and approved by the Senate. The minister of Justice, Sérgio Moro, and the minister of Economy, Paulo Guedes, appointed nominees to compose the Court, but the lack of compliance to the necessary procedures by the President of the House, Davi Alcolumbre, stopped the process.
The lack of quorum and the suspension of the deadlines established by Law was confirmed in an official statement issued by the agency on July 17, 2019, and this may directly affect the Brazilian economy, as several cases cannot be analyzed and/or approved. An example is the global merger of Red Hat by IBM, involving R$134 billion, which had its approval revoked by the Court on June 26th, as the Court understands that there is a risk that IBM will unduly restraint the market through the degradation of interoperability of their products with its competitors' products and the tie-in sales of its own software.
The agenda is also blocked for the analysis of fuel cartels involving the companies Raízen (Shell's association with Cosan) and Liquigás, which, if condemned for the practice of cartel, can be convicted to penalties of 0.1% to 20% of the gross turnover of the company, group or conglomerate, in the last financial year prior to the opening of the administrative proceeding, in the business activity in which the infringement occurred.
The minimum quorum issue is expected to be resolved yet in August, enabling the return of the trial sessions of the CADE’ Tribunal and the analysis and judgment of important cases to the Brazilian market. Among the names for possible nomination is CADE’s chief economist Guilherme Rezende, who served as a competitive advisor during the President Jair Bolsonaro's election campaign. As the Brazilian economy seems to be moving more strongly this second half of the year, CADE awaits new cases and antitrust challenges.