Developments in criminal investigations of cartels

1. Introduction

In Brazil, the cartel is punished autonomously in the administrative and criminal spheres. The criminal investigation is conducted by the Public Prosecutor’s Office, individually or jointly with the Police. There is no pre-established deadline for the conclusion of the investigation and its ultimate purpose is to gather evidence to confirm the existence of cartel and the identification of its perpetrators, enabling the Public Prosecutor’s Office to file criminal proceedings against individuals. As a rule, the crime of formation of cartels, when involving other States or countries, is investigated by the Public Prosecutor’s Office acting in the Federal Court. In the investigative phase, Brazilian law grants to suspects the right to non-self-incrimination and silence, whereas only the witnesses have an obligation to speak the truth.

There are two separate crimes violating the anticompetitive agreement of competitors. The agreement between companies to eliminate competition or to control the market, by means of price adjustment, regional control of the market or distribution network or of suppliers, is a crime provided for in Law No. 8.137/1990, punished with a penalty of 2 to 5 years in prison. However, if the agreement between competitors aims at defrauding free competition specifically in a public bidding, another offense is identified, which is known as cartel in bidding, punished by Law No. 8.666/1993 with a penalty of 2 to 4 years in prison. In recent years, these two types of cartel crime have the leniency agreement as the main investigative source. This agreement, entered intowith the Administrative Council for Economic Defense – CADE, provides for the mitigation of administrative penalty and offers, as a benefit, immunity of criminals for individuals implicated in the offense. The lenient company is required to submit evidence of the cartel, and such evidence is shared with the Public Prosecutor’s Office, guiding the criminal investigation. Normally, during the investigation, the Public Prosecutor’s Office carries out dawn raids on companies indicted by the lenient company to gather new evidence on the cartel, in addition to interrogating suspects and inquiring witnesses.

2. Progress in processing electronic evidence

Recently, the criminal investigation of cartels has benefited from the improvement of the digital evidence processing infrastructure of government agencies. For many years, there was enormous inefficiency at the technical agencies analyzing the electronic evidence gathered in dawn raids. Sometimes, the experts were unable to analyze, adequately or satisfactorily, the data collected from computers and other electronic media.

Nowadays, the Public Prosecutor’s Office and the Police are supported by expert laboratories with high capacity in electronic data detection and analysis. The main criminal investigation in the history of Brazil, known as Operação Lava Jato (Operation Car Wash, in Portuguese), instituted in 2014 and still ongoing to this date, is responsible for successfully investigating several cartels in public bids.

This investigation was conducted with the decisive support of the enormous improvement in the electronic evidence processing infrastructure. Immediately and efficiently, the Brazilian criminal investigations began to obtain results that were previously not possible or which took years to gather, quickly decrypting encrypted data, retrieving deleted data, crossing and analyzing information, tracking people’s location by means of mobile phone records, among other analyses. The use of technology as a proactive tool for identifying cartels is a novelty with low practical application for the time being. In a still developing manner, state agencies are using new data mining tools and applying economic filters to detect cartels in public bids. In 2018, a specific CADE sector known as “Brain Project”, through screening filters and data mining techniques, detected companies with similar patterns of involvement in bids, among other behaviors deemed suspicious. These data, together with other circumstantial evidence, led to a joint investigation with the federal police to examine alleged cartel in outsourcing contract bids. Although, nowadays, only a few cartels are discovered with the use of data processing technology, the tendency is to increase the use of this technique.

3. Extended use of agreements

Negotiating agreements are increasingly being used as methods for the investigation of cartels in Brazil. The leniency agreement, entered into with CADE and allowing criminal immunity only for the first individual to denounce and confess participation in the practice of anticompetitive conduct, remains the main agreement for the restraint of cartels. However, the Public Prosecutor’s Office has expressed na increasing interest in entering into other types of agreements with the other cartel members, even in cases where the investigation was initiated by a leniency agreement. Largely used in the Operation Car Wash, the plea bargain agreement, provided for in Law No. 12.850/2013 (Article 4), is accepted by the Public Prosecutor’s Office in cartel cases, even in investigations for which a leniency agreement was already entered into with CADE. In this agreement, the defendant is granted a reduced sentence in Exchange for his or her substantiated contribution to the investigation. In particular, plea bargaining allows the application of benefits to those who confess to the practice of the crime of government agent corruption, an offense that is often practiced concurrently with the cartel in the bidding process. Finally, a third agreement that has recently been widely used is the confession qualified by the plea bargaining, under the terms of Law No. 8.137/90 (Article 16), a legal transaction that is not applicable to cartel crime in public bids. In this type of agreement, the suspect may be granted a reduced sentence in one to two thirds and there is no express obligation to present new evidence.

4. Conclusion

In recent years, there has been a significant increase in the investigative capacity of state agencies involved in the criminal prosecution of cartels in Brazil, leading to a huge leap in efficiency in investigations. Simultaneously, there was an increase in the use of negotiation agreements by the Public Prosecutor’s Office, providing to the crime of cartel formation the possibility of entering into three different types of agreements. The greater investigative capacity of the State functions as a stimulus for the suspect to enter into negotiation agreements, creating an environment favorable to the improved evidence standard and increased number of Brazilian investigations on cartel crime.

Originally published in Conducts Enforcement in Brazil – Frequently Asked Questions by the The Brazilian Institute of Studies of Competition, Consumer Affairs and International Trade (Ibrac).