Private enforcement of competition laws in Brazil: the class action as a method of claiming damages arising from anticompetitive practices
Gláucia Coelho
Machado Meyer Sendacz e Opice Advogados, São Paulo
Débora Chaves Martines Fernandes
Machado Meyer Sendacz e Opice Advogados, São Paulo
Vitória Garbin
Machado Meyer Sendacz e Opice Advogados, São Paulo
When it comes to the enforcement of competition laws, lawsuits filed by private parties seeking damages related to anticompetitive practices (private enforcement) serve as an important supplement to the system of public enforcement of such laws. The possibility of being held liable for individual and collective damages, in addition to the payment of fines imposed by governmental agencies, such as the Brazilian Administrative Council for Economic Defense (CADE), aims to increase the deterrence effect of competition rules. Therefore, procedural mechanisms to adjudicate such damages claims – and their efficiency – are paramount in these dynamics.
In this context, under section 47 of the law that regulates defense of competition in Brazil (Act No 12,529/2011), class actions are one of the most powerful mechanisms to bring collective (against the economic order) and individual claims for damages arising from anticompetitive conduct to court, including small claims which, when brought alone, would not justify the costs of litigation.
Nevertheless, this kind of lawsuit is still unusual in Brazil. The gap in private enforcement may be due to the difficulty plaintiffs have in matching the time CADE takes to investigate and assert the existence of an anticompetitive practice and the statute of limitations. But a recent change to this legal context through the enactment of Act No 14,470/2022, which defines a clearer start and expiry date for the statute of limitations for damages claims related to anticompetitive practices investigated by CADE, can change the landscape for these Class Actions in Brazil.
Before this law came into force, the courts applied the general three-year statute of limitations provided in section 206, §3, V, of the Brazilian Civil Code covering claims for non-contractual damages. The term started running from the moment the claimant became aware of the potential violation of rights, which could be interpreted as the beginning of any investigation before CADE, the execution of a leniency agreement, or even news regarding anticompetitive conduct in the media.
As CADE usually takes more than three years to conclude an administrative proceeding identifying a practice as illegal, many lawsuits were filed before conclusion of the investigation and final decision by CADE, leading to a high level of uncertainty as to whether the anti-competitive practice occurred and who took part on it. This ambiguity led to poorly supported claims asserted against the wrong defendants and to various cases being dismissed due to a time-bar, discouraging private enforcement.
So much so that research conducted by the Getúlio Vargas Foundation School of Law found that out of 118 class actions filed by the Public Prosecutor’s Office seeking compensation for damages caused by cartels in the fuel market, 101 were dismissed due to lack of evidence sufficient to establish unlawful competition.[i]
Act No 14,470/22 is highly relevant because it expressly provides that the statute of limitations for filing of these Class Actions is five years from the publication of CADE’s decision regarding the anticompetitive practice. This new rule settles a divergence that has been litigated for decades before Brazilian courts and the possibility to awaiting CADE’s decision to support the filing of lawsuits seeking damages will most likely foster private enforcement and use of the class actions to this end.
On the other hand, considering the time CADE usually takes to decide administrative proceedings, it is expected that class actions for damages will be filed a long time after the facts, raising concern regarding the preservation of evidence of such damages. This scenario may encourage the filing of lawsuits aiming to produce this evidence in advance and increase the chances of success in a future lawsuit seeking damages if CADE finds for the existence of anticompetitive conduct.
For the reasons set out above, class actions seeking compensation for anticompetitive conduct may become a trend in Brazil in the coming years.
[i] RAGAZZO, Carlos; VELOSO, Isabel. Ações de Reparação de Danos Concorrenciais no Brasil: Obstáculos e Sugestões. Rio de Janeiro, Ed. Dos Autores [livro eletrônico], available at https://repositorio.fgv.br/items/48d7801b-55cf-4100-ac03-88d77b491f90