Put Christian Fernandes Rosa and Beatriz Wehby – 28/05/2020

In accordance with the legislative measures that have been adopted in the context of the coronavirus pandemic (Covid-19), Bill No. 1,179/2020 was approved in the Senate, which aims to establish emergency and transitory rules for Private Law legal relationships.

Although it is intended to regulate private relations in the context of the health emergency, it is true that it also ends up changing rules typically associated with Public Law, especially in the field of Economic Law, related to the antitrust system.

In this regard, we highlight that the PL intends to suspend the application of some rules included in items XV and XVII, both of §3, of article 36, and item IV of article 90, all of Law No. 12,529/2011, while the state of public calamity, recognized by an act of the National Congress, continues.

Remember that Law No. 12,529 restructured the Brazilian Competition Defense System and provides for conducts classified as violations of the economic order. According to article 36 of the Competition Defense Law:

Art. 36. The following acts constitute an infraction of the economic order, regardless of fault, any acts manifested in any form, which have as their object or may produce the following effects, even if they are not achieved: I – limiting, distorting or in any way harming free competition or free enterprise; II – dominating a relevant market for goods or services; III – arbitrarily increasing profits; and IV – abusively exercising a dominant position. […] § 3 The following conduct, in addition to others, to the extent that they constitute a hypothesis provided for in the caput of this article and its subparagraphs, constitute an infraction of the economic order.: […] XV – selling goods or providing services unjustifiably below cost price; […] XVII – partially or totally cease the company’s activities without proven just cause;

The illegality of these conducts will be suspended by article 14 of Bill No. 1179/2020 if the project is converted into law. The obligation to submit to CADE (Administrative Council for Economic Defense) those acts of entering into an associative contract, consortium or joint venture by two or more companies (business activity characterized as act of concentration which could not be carried out without prior analysis by the local authority).

Given the special circumstances of national markets, the legislator decided to stop classifying as illegal the practice of pricing below cost, which is generally considered predatory and, as such, offensive to a competitive environment. In the same sense, with the aim of enabling companies to engage in tackling the health emergency and socioeconomic crisis, the Competition Defense Law will no longer prohibit the sale of goods or provision of services below their cost. Likewise, recognizing that the private sector must make an effort to contribute to social isolation, to the extent necessary and desirable according to widely publicized technical-scientific criteria. Therefore, it was understood that the classification of the interruption of business activities as a potential anticompetitive offense should be suspended.

In any case, it should be considered that the suspension given – if approved – does not eliminate the possibility of subsequent analysis of this act of concentration nor even the investigation of any violation of the economic order in fact, if an undue exercise of market power by economic agents is configured.

The Public Law & Compliance team at Mazzucco & Mello Advogados has extensive experience in Competition Law and is available to provide any clarification regarding the new measures.