The National Consumer Secretariat of the Ministry of Justice of Brazil (Secretaria Nacional do Consumidor (SENACON)) has prepared a guide — the “Practical Guide for the Analysis of Price Increases of Products and Services” — focusing on guiding the authorities’ actions on the identification and characterization of abusive price increases for products and services and what measures should be taken in this case.
The guide aims to provide more legal certainty for the decisions of consumer protection and defense agencies (Fundação de Proteção e Defesa do Consumidor (PROCONs)) that are part of the National Consumer Defense System (Sistema Nacional de Defesa do Consumidor (SNDC)). With this document, basic guidelines are provided for the authorities in the event of an alleged increase, without just cause, in the price of products or services by suppliers.
The guide presents guidelines drafted and approved within the scope of the National Consumer Defense Council (Conselho Nacional de Defesa do Consumidor (CNDC)) and consolidated by SENACON.
Briefly, instructions and a script are provided for the evaluation of products and services that are offered at apparently abusive prices.
The document provides a summary of the role of the authorities responsible for the case. The guide highlights that, in addition to sanctioning procedures, consumer protection authorities have other public policy instruments to carry out the tasks assigned to them; thus, they may opt against a sanctioning administrative procedure, and instead, select other instruments and supervisory measures, through a motivated act.
For the evaluation of a possible abusive practice, the planned script lists four phases:
(i) Identifying/registering possible signs of abusive behavior by economic agents, by consulting the inflation indexes, and the identification of the type of market, whether it is a regulated or nonregulated sector
(ii) Forwarding the information according to the identified sector; for the regulated sector, the sectorial and antitrust regulatory authorities and for the nonregulated sector, it is necessary to evaluate shocks of demand or market offers and practices being identified as anticompetitive, forwarding information or filing a complaint to the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica (CADE)) or to the Secretariat for Advocacy for Competition and Competitiveness of the Ministry of Economy (Secretaria de Advocacia da Concorrência e Competitividade (SEAE-SEPEC))
(iii) Verifying the existence of some specificity, such as an emergency or calamity context, and the undue speculation on prices by suppliers
(iv) Applying economic legal analysis, taking into account technical and objective criteria to verify the causes of the observed increases and possible market failures
Through numerous points, the guide emphasizes that Brazil is a market economy, in which there is freedom for companies to set their prices, keeping in mind that, in the past, unorthodox attempts to establish artificial restrictions on such freedom were not successful in the control of inflation.
With this, the guide’s goals are to establish a more accurate method for the identification of illegal conduct. Based on this method, it is possible for the authority to identify causes and phenomena that provide objective explanations for price increases, which justify the lack of application of any penalty. The guide, therefore, recommends cautious action by PROCONs, thus avoiding penalizing companies in situations where their increases are fully justifiable.
It is important to highlight that this cautious position recommended by SENACON is echoed through the actions of CADE, the Brazilian antitrust authority. Although many investigations related to “excessive prices” or “arbitrary increase in prices” have already happened, they have not resulted in the application of sanctions so far, except when such conduct is capable of excluding a competitor in the market (for example, by squeezing margins due to rising input prices).
Our antitrust and consumer law teams are available for further clarification.