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22 de November de 2022

Law No. 14,470: will there be new incentives for the dissemination of damage repair by anticompetitive practices?

Last Thursday, 17/11/2022, Law No. 14,470 was enacted, which brings important changes to the Competition Defense Law (Law No. 12,529/2011), regarding the possibility of compensation for damages by individuals and legal entities who are harmed by illegal agreements adopted by competitors. We will present below a brief summary of the changes contained in the new legislation and, at the end, our comments on the future envisaged for lawsuits to redress competitive damages.

Among the changes brought by the new law, it is worth mentioning the right to double damages, regardless of the application of administrative sanctions that may be imposed by the Brazilian antitrust authority, the Administrative Council of Economic Defense (“CADE”), or even criminal sanctions, in the event of criminal investigation by cartel practice. In order to maintain incentives to the leniency program and settlement agreements currently in force, the new law maintained the duty to compensate for the amount of the damage caused only, not applying double damages to signatories of settlement agreements with CADE. Joint and several liability, provided for in Article 942 of the Civil Code, as a general rule in case of co-authorship, are neither applicable to parties who settle with CADE.

Another innovation brought by Law No. 14,470 concerns proof passing on to consumers any existing overpricing as a result of an unlawful agreement between competitors. Prior to the new law, passing on to consumers of the overpricing resulting from the cartel practice was presumed and there was no legal provision regulating the subject. Therefore, the existing indemnity actions were based on the assumption of harm, and the parties were limited to discuss the amount of the alleged amount of damage. Neither there was a legal provision about burden of proof. The new law provides that this presumption of overpricing ceases to exist and must be proven by the party who claims it in its defense.  The Law also provides that the decision taken by the CADE Plenary may justify the granting of preliminary injunctions.

One last major change brought about by the new law concerns the statute of limitation. The Law increases from 03 to 05 years the deadline for lodging a damages lawsuit. If before there was no specific provision on the dies a quo for the counting the statute of limitation period, Law No. 14,470 provides that this period should be counted as from the unequivocal science of the illicit (i.e., the “publication of the final judgment of the administrative process by CADE”). It also establishes that the statute of limitation period does not apply during investigations conducted by CADE.

Despite the undeniable advances to improve the enforcement of private damages for antitrust violations brought by Law No. 14,470, the main challenges to the effectiveness of private enforcement still exist. Firstly, the difficulties in individualizing and quantifying the damage, which often requires the production of expert evidence from accounting documents older than 5 years and that may have already been discarded by the companies convicted by CADE. Moreover, despite CADE’s advances in the calculation of the advantage obtained from anticompetitive practices, proof of passing on that advantage to consumers is not simple and, in most cases, involve a (relative) presumption to justify CADE’s conviction. These challenges can mean an untimely or, in the worst-case scenario, incomplete judicial provision. Finally, the benefits applied to signatories of agreements with CADE imply the reduction of incentives to private enforcement, to the extent that it implies a decrease in the amounts to be paid as compensation for damages.

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