Brazil: STJ Restricts The Confidentiality Extension Granted To Leniency Agreement Provisions Entered Into By CADE

In April, a decision addressing Special Appeal No. 1.554.986 was published in the Official Gazette of the Superior Court of Justice ("STJ")¹, whereby the Court's 3rd Panel limited the extension of confidentiality granted to Leniency Agreements entered into by the Administrative Council for Economic Defense ("CADE") up until the publication of the conclusive Technical Opinion prepared by CADE's Superintendence General.

In 2013, Electrolux do Brasil S.A ("Electrolux") lodged a damages lawsuit against Whirlpool S.A ("Whirlpool") and Brasmotors S.A ("Brasmotors")² due to losses resulting from the acquisition of compressors purchased under artificially high prices as a result of the defendant's participation in an alleged cartel³. Whirpool and Brasmotors claimed in their Special Appeal that it was impossible to attach copies of the Leniency Agreement signed by a third undertaking⁴ to the lawsuit's record, in addition to other documents which justified the initiation of the cartel investigation.

According to Justice Marco Aurélio Bellizze, Rapporteur of the Special Appeal before the STJ, the confidentiality initially granted by Leniency Agreements plays a crucial role in effectively enforcing its provisions, both in relation to incentives for collaboration by coauthors and the success of the investigations triggered by the agreement.

However, once the Leniency Agreement is accepted and formalized, the confidentiality extension would only be justified in favor of the investigation or with regard to specific documents whose confidentiality should be maintained to preserve competition. Therefore, even if the confidentiality term is extended, it cannot be extended indefinitely. According to the Rapporteur, it would become unreasonable to keep confidentiality after the discovery phase, which happens when the conclusive Technical Opinion issued by the General Superintendence is presented to CADE's Tribunal – the collegiate body responsible for issuing a verdict on Administrative Proceedings.

Thus, the limitation of the confidentiality of Leniency Agreements aims to avoid guaranteeing the leniency applicant an advantage that is not provided by law, since the applicable immunities are restricted to the administrative and criminal spheres, without any legal reference to civil liability derived from anticompetitive practices. The disclosure of the information is also intended to ensure that the damage caused to third parties is not perpetuated, as the indefinite limitation of free public access to the content of the agreement and its documents would be a disproportional measure which would restrain third parties possibly affected by the investigated conduct to seek indemnification of losses.

Despite the position described above, it is important to bear in mind that the necessity of limiting access to portions of documents (such as those that leniency applicants claim to be industrial secrets) should not be compared with the documents that constitute evidence of the cartel agreement without any confidential content. This assessment, according to the decision under analysis, should be made by the court responsible for the appreciation of the damages lawsuit.

It is worth noting that the application of such judicial precedent may affect the reach of art. 207 of CADE's Internal Regulations, which sets forth that the identity of leniency applicants will be kept confidential until a final ruling on the case is made by CADE's Tribunal.

Footnotes

1 The full content of the decision is available at https://ww2.stj.jus.br/processo/revista/documento/mediado/?componente=ITA&sequencial=1494823&num_registro=201502191117&data=20160405&formato=PDF

2 Damages lawsuit No. 2034855-20.2013.8.26.0000, ongoing before the São Paulo State Court of Justice.

3 The Administrative Proceeding referring to the Compressors Cartel was given the following number before CADE : 08012.000820/2009-11.

4 The Leniency Agreement referring to the Compressors Cartel was entered into by Tecumseh Group (Tecumseh do Brasil Ltda., Tecumseh Products Company, Tecumseh Products Company of Canada Ltd., Tecumseh Europe S.A., Tecumseh Products India Private Ltd., Mr. Dagoberto Sanchez Darezzo, Mr. José Celso Lunardelli Furchi, Mr. Januário Domingos Soligon and Mr. Michel Jorge Geraissate Filhof), CADE and Federal Public Ministry.

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