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.

Follow this space

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.

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Photo of Kelly Landers Hawthorne Kelly Landers Hawthorne

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and…

Kelly Landers Hawthorne is an associate in the Litigation Department and a member of the Antitrust and Product Liability groups. She represents clients in litigations and due diligence across a range of industries, including consumer products, life sciences, healthcare, education, hospitality, sports and entertainment.

Kelly also maintains a diverse pro bono practice. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2019.

She is a frequent contributor to Proskauer’s Minding Your Business blog, where she authors articles related to price gouging issues.

Kelly is also a member of the Proskauer Women’s Alliance Steering Committee, where she serves on subcommittees focused on highlighting and providing professional development opportunities for women at the firm.

Prior to her legal career, Kelly was a Teach For America corps member and taught middle school in Washington, DC.

While at Columbia Law School, Kelly served as an articles editor of the Columbia Journal of Law & the Arts and interned for the Honorable Sandra Townes of the U.S. District Court for the Eastern District of New York.

Photo of John R. Ingrassia John R. Ingrassia

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John 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, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.

Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels…

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels on antitrust compliance. Chris is also the founder and leader of the firm’s Price Gouging Practice, and is one of the key thought leaders in this space.

Chris handles antitrust matters for clients in a number of industries, including food and agriculture, financial services, media, telecom, technology, e-commerce, consumer products, natural resources, oil and gas, chemicals, and pharmaceuticals.  He also serves as outside counsel to a large number of industry groups, including trade associations and cooperatives.

Chris has been recognized as a leading antitrust practitioner by Chambers, noting that clients describe him as “our primary thought partner – he’s very good at explaining the complex issues and making them easy to understand” and praising “his strong advocacy skills”; by The National Law Review as a “Go To Thought Leader 2020”; by Acritas as a “Star” in multiple years; by Benchmark Litigation as a National Litigation Star 2021; and by The Legal 500 United States for Antitrust: Civil Litigation/Class Actions.