Companies that sell consumer products worldwide should note the growing convergence between Brazil and the United States for the use of anticompetitive practices laws to prosecute price gouging.  The Brazilian Competition Law (Law No. 12,529/2011) prohibits a non-exhaustive list of anticompetitive practices, including engaging in acts that “arbitrarily increase profits.”  Brazil’s antitrust authority, Conselho Administrativo de Defesa Econômica (“CADE”), however, has not traditionally investigated claims of price gouging as a standalone theory of harm, recognizing the difficulty of demonstrating that a price increase was “arbitrary” as opposed to a legitimate reaction to market developments.  Instead, CADE typically has enforced the prohibition against price gouging as part of broader proceedings involving other anticompetitive practices.

Following the onset of the COVID-19 pandemic, CADE began taking steps to investigate price increases due to concerns about price gouging.  This approach is significant to all businesses that sell products intended to reach consumers, and especially those businesses that manufacturer or sell products that have seen increased demand due to the virus.

Ongoing Investigation

On March 18, 2020, CADE initiated a preliminary investigation involving companies in the pharmaceutical and medical industries, targeting prices charged to customers for laboratory tests, alcohol-based hand sanitizers and surgical masks.  The authority’s top investigator, Alexandre Cordeiro, indicated that CADE “did research” and “figured out that prices for some products have increased in a non-reasonable and disproportionate way in relation to the demand.”  In response, and “[i]n view of the situation of high demand for medical-pharmaceutical products due to the need for emergency care motivated by the increase in cases related to COVID-19,” CADE announced that it would be investigating whether “companies in the health care sector may be increasing prices and profits arbitrarily and abusively,” making it necessary for CADE to take action “to ensure that such abuses, if effectively verified, are punished[.]”

As part of its investigation, the agency reports that it has contacted at least 80 hospitals, health insurance companies, pharmacy chains, and suppliers and manufacturers of surgical masks, hand sanitizers, and medicines used to treat COVID-19.  In its effort to collect data and track price changes, CADE asked for their invoices dating from November 2019 through July 2020.  CADE has also requested similar pricing information from certain regional Departments of Health, to assess pricing changes in the public sector.  (Note that the preparatory proceedings are public and files can be accessed at this link).

The matter is ongoing, and the result may set an important precedent.  If the authority ultimately decides to press charges of “arbitrarily increasing profits” against the companies under scrutiny, this action could signal a broader change in CADE’s stance on price gouging that companies operating in Brazil should take heed of.

Penalties

Violations of the competition law may result in administrative and criminal penalties.  For the investigation noted above, failure to comply with CADE’s requests constitutes a violation punishable by a daily fine of BRL 5,000 to 100,000 (approximately USD 1,000 to 20,000).

Importantly, private plaintiffs can also bring suit and seek damages as well as injunctive relief.  If the plaintiff is a consumer, the Consumer Protection Code (Law No. 8,078/1990) also potentially may apply, which shifts the burden of proof to the business.  In effect, once a plaintiff has stated the facts in support of their reasonable claim, defendants bear the burden of proving those facts are incorrect.

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This international spotlight series will unpack country-specific laws that may be of particular interest.  Watch for additional overviews of price gouging restrictions applied in markets that are important to our readers.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and…

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions or joint ventures.

John is a senior counsel at the Firm, advising on the full range of antitrust matters in diverse industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services and health care, among others.  His practice focuses on the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger notification requirements. John has extensive experience with the legal, practical, and technical requirements of merger clearance and is regularly invited to participate in Federal Trade Commission and bar association meetings regarding Hart-Scott-Rodino practice issues.

Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as…

Kelly Landers Hawthorne is an associate in the Litigation Department.

While at Columbia, she served as an articles editor of the Columbia Journal of Law & the Arts and was involved with the Lawyering in the Digital Age Clinic.  She also worked as a judicial intern for the Honorable Sandra Townes of the United States District Court for the Eastern District of New York.

Kelly is a Teach For America alumnus and taught middle school special education and math in Washington, D.C. prior to law school.

Photo of Jennifer Tarr Jennifer Tarr

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including…

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including issues pertaining to antitrust, team relocation, league governance, contract disputes, sponsorship and fan-league relationships.

In addition to sports antitrust work, Jennifer also has experience counseling and defending clients on issues related to mergers and acquisitions, claims related to unlawful conspiracy and anticompetitive agreements, monopolization claims, and price fixing claims. Jennifer is also a member of the firm’s price gouging team.

In 2019, she was a panelist on the Environmental Law Institute’s Managing Private Sector Environmental Initiatives panel, where she spoke about the Antitrust Implications of Corporate Environmental Collaborations.

Jennifer maintains an active pro bono practice and is a member of the Firm’s Pro Bono Committee. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2018 and 2019.

Prior to joining Proskauer, Jennifer clerked for the Honorable Lorna G. Schofield on the United States District Court for the Southern District of New York. She also was a Staff Attorney at the Environmental Law & Policy Center, where she represented clients as lead counsel in litigation before multiple federal district and appellate courts and in federal mediation.

While in law school, Jennifer was a member of the Harvard Legal Aid Bureau, one of three honors societies at the law school and the nation’s oldest student-run legal services center. In that capacity, she argued and won a case of first impression before the Massachusetts Supreme Judicial Court. She also argued over 20 motions in state trial court and successfully represented clients in federal mediation and before federal administrative tribunals.