23/7/2024
At the 230th Trial Session (‘SOJ’) of the Brazilian Antitrust Authority (‘CADE’), held on 22 May 2024, Orders n. 55/2024 and 56/2024 were submitted to approve amendments to the Cease and Desist Orders (‘TCCs’) in the Gas and Refining markets, signed with Petrobras, both in 2019.
The Gas TCC was signed by Petrobrás as part of an investigation of anticompetitive behavior in the natural gas market. Through this agreement, Petrobrás was obliged to sell its stake in three transport companies and in distributors, as well as to publish a public notice for the lease of a regasification terminal.
The Gas TCC had already been amended previously and, to date, the obligation to sell the Transportadora Brasileira Gasoduto Bolívia Brasil S.A. (‘TBG’) is still pending.
In the Gas TCC review, CADE in view of the evidence presented by Petrobrás and the reports issued by the trustee appointed to monitor the disinvestments, found no evidence of noncompliance with the TCC, including recognizing that Petrobrás had made its best efforts to sell TBG, which was allegedly not occurred due to the absence of a proposal compatible with the asset’s valuation.
Petrobras requested changes in the agreement with CADE alleging changes in the natural gas market, including: “(i) the decrease in the availability of natural gas offered by Bolívia and the consequent change in the relevance of TBG’s performance in guaranteeing supply; and (ii) the changes introduced by the New Gas Law to the regulatory framework applicable to the industry, promoting the expansion of the participation of third parties in the loading, import and commercialization of natural gas in the country” (free translation).
Based on these arguments, the new amendment to the Gas TCC proposed by Petrobrás provided for the implementation of governance devices (independent directors and board) to inhibit undue interference by Petrobrás in TBG.
The Refining TCC was a response to an investigated abuse of a dominant position in the domestic oil refining market. On that occasion, Petrobrás commited to sell 8 refineries and their respective transportation assets: Refinaria Abreu e Lima (‘RNEST’), Unidade de Industrialização de Xisto (‘SIX’), Refinaria Landulpho Alves (‘RLAM’), Refinaria Gabriel Passos, Refinaria Presidente Getúlio Vargas, Refinaria Alberto Pasqualini, Refinaria Isaac Sabbá (‘REMAN’), Lubrificantes e Derivados de Petróleo do Nordeste (‘Lubnor’).
The Refining TCC had already been amended on five occasions, but only three of the eight refineries had been sold (RLAM, in Bahia, REMAN, in Amazonas, and SIX, in Paraná).
Unlike the previous five amendments, the new amendment to the Refining TCC, was presented under the argument to improving CADE’s monitoring of Petrobrás to prevent possible abuses of dominant position. In addition, it was argued that the new amendment would reduce the costs of investigating possible conducts.
The President of CADE, Alexandre Cordeiro, acting as the reporting authority for the amendments, pointed out that the TCCs aim to be clear and fair for the applicants and, in these cases specifically, to guarantee competitive prices and the supply of natural gas and oil to national refineries.
He also recalled that the focus of the investigation set up at the time, regarding the Refining TCC, was to reduce the asymmetry of information from Petrobrás and improve the speed of CADE’s abuse of a dominant position investigation.
CADE considers the market structure at the moment of negotiating TCCs. As such, upon significant changes in the market, there may be conditions for reviewing orders to achieve the effectiveness of the benefits initially agreed upon, as a way of keeping the agreement consistent with market profile.
The Tribunal decision generated heated discussions in the antitrust community, especially due to the legal uncertainty generated by the review of TCCs signed in such short period, especially considering that the refining market requires a long time to mature, and accusations of possible political influence on CADE, since the government had already signaled that it had no interest in selling the refineries.
Coauthored by: Patricia Agra Araújo, João Pedro Marques, Laura Silva Oliveira e Mateus Rodrigues Batista.
