The impact of the review of antitrust decisions by Federal Courts
November 10, 2017

by Roberto Rodrigues The Federal Court of Appeals for the 1st Circuit affirmed a District Court decision setting aside charges by the Administrative Council for Economic Defense (CADE) against several pharmaceutical companies due to alleged cartel activities. CADE started an antitrust investigation over alleged cartel activities after the Regional Pharmacy Council of the Federal District filed a complaint in 1999. The Pharmacy Council alleged that 20 pharmaceutical companies had held a meeting in July 1999 to discuss possible actions to prevent the entry of generic drugs in the market. The complaint was filed together with the minutes of the July meeting, thereby highlighting the potential antitrust impacts of the discussions. Brazil had only recently enacted the Generic Statute (Statute #9,787/99), that regulates the abbreviated proceedings for approval of generic copies of pharmaceutical products. According to the Pharmacy Council, the meeting in July 1999 was a conspiracy with the purpose to discuss and implement barriers against new competitors. In 2005, years after the commencement of the investigation (Proceeding #08012.009088/1999-48), CADE used the minutes of the meeting provided by the Pharmacy Council and the language contained therein as the main evidence of wrongdoing by the pharmaceutical companies. Each company was convicted and sentenced by CADE to pay a fine of a figure between 1 to 2 per cent of gross revenue in the year prior to the beginning of the investigation. A number of the pharmaceutical companies involved challenged CADE’s decision before Brazilian Federal Courts (Lawsuit #2007.34.00.044314¬6). In 2011, the 4th Federal District Court of Brasilia set aside CADE’s decision to charge the companies. Federal judge Itagiba Catta Neto found that a simple meeting between the pharmaceutical companies to discuss the impacts of the new Generic Statute (Statute #9,787/99) was not sufficient evidence for a cartel conviction. In addition, Hon. Catta Neto severely criticized CADE’s reasoning and conclusions since they amounted to an excessive interpretation of the minutes of the meeting, and had no resemblance to the reality of the situation. The Judge showed complete disagreement with certain aspects of how CADE was conducting its investigation and condemning the companies involved. The judge specifically criticized the manner of CADE’s actions, when it affirmed that ‘a reasonable line of evidence is already able to support a conviction’. CADE thereafter filed an appeal challenging the decision before the Federal Court of Appeals for the 1st Circuit. On March 30 2015, the 6th Panel of the Court of Appeals unanimously upheld the earlier district court decision. The Court of Appeals found that CADE had failed to demonstrate that the meeting between the companies imposed any hurdle to generic competition in the pharmaceutical market. In addition, the Court of Appeals expressed the same concerns as those raised by the District Court regarding the strength of the evidence supporting some of the CADE’s crucial findings. The review of CADE’s decision by the Federal Courts represents an important event for companies facing antitrust investigation. There are currently at least seven complex active investigations related to alleged anti-competitive practices that involve the enforcement of Intellectual Property Rights and sham litigation in the pharmaceutical sector. If the outcome of those investigations before CADE is unfavorable, the companies involved will have the chance of recourse before the courts. While it is difficult to prevail in court against CADE (according to a report published by CADE in 2013, the authority wins 80% of the cases challenging its decisions), the above precedent shows that it is possible to successfully challenge unfavorable charges in similar investigations. It appears that most of CADE’s victories in courts were rendered in cases focusing on bureaucratic issues related to mergers and acquisitions denials. On the other hand, there is no case law favoring CADE in courts in cases related to sham litigation and IP enforcement. Also, the apparent weakness of the evidence supporting CADE’s reasoning and conclusions considerably raises the chances of cases being reviewed by the Federal Courts. Federal Judges have generally shown a willingness to review administrative decisions if the plaintiff is able to show errors in the reasoning of the authority. For instance, both the Brazilian Patent Office (INPI) and the Brazilian Food and Drug Agency (ANVISA) have had their decisions challenged and reviewed by Federal Courts on several occasions. CADE’s position is no different, as can be seen from the case decided in March 2015 by the Court of Appeals for the 1st Circuit. If you have any questions or need additional information, please contact us at prevail@localhost/licks/site.

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