Compliance Credit is available in Brazil, but there are specific requirements to be met
Multinational companies active in Brazil should review their compliance programs to ensure they are eligible for compliance credit in case of antitrust or anti-corruption probes – meaning the reduction in penalties (or settlement amounts) in connection with such probes. The review is recommended since Brazilian authorities have recently issued guidelines on how to evaluate compliance programs and are expected to increase the grant of compliance credits in future cases.
The guidelines and first cases of grant of compliance credit improve legal certainty on how compliance programs can benefit investigated parties and reduce the discretion over the weight the authorities may give to such programs when setting fines or negotiating settlement agreements.
The adoption of both antitrust and anti-corruption compliance programs has recently emerged in Brazil as a defense argument in probes opened by CADE, the Brazilian Antitrust Authority, and CGU, the Federal Controller’s Office, in charge of investigating corruption at the federal level. Compliance has also become a relevant item to calculate a settlement amount when companies decide to pursue a negotiated solution for such probes.
CADE published Compliance Programs Guidelines in 2016 outlining the characteristics a robust antitrust compliance program should feature. The guidelines provide for the possibility of reducing penalties for antitrust violations to defendants whose programs meet those characteristics. In that same year, CADE also published settlement guidelines that provided for the existence of a compliance program as a mitigating circumstance when calculating the settlement amount.
In November 2018 CADE for the first time granted a significant reduction in a settlement sum in an antitrust probe because the settling party had implemented an effective compliance program following the Car Wash Operation.
CGU, by its turn, also published guidelines for the calculation of fines in anti-corruption probes, which provide for the possibility that a compliance program could reduce by up to 4 percentage points the relevant fine (which may reach 20% of a company’s annual gross turnover). The rules were published a few months after CGU released its own guidelines on how to evaluate a companies’ compliance program. In 2018, it granted discounts to five investigated companies that implemented compliance programs, after thoroughly screening and evaluating them.
The new regulation will certainly stimulate companies active in Brazil to set up a compliance program. However, even companies that already have a solid program should review and adapt it to comply with the authorities’ expectations. Even the most comprehensive compliance program will not entitle the relevant company to compliance credit if it does not meet the specific requirements of the Brazilian authorities set forth in the above-mentioned guidelines.
Both CGU and CADE make reference to key compliance milestones that are common in most well-structured programs, such as tone at the top, appropriate human and financial resources, autonomy and independence of the compliance officer from the management team, specific risk analysis and mitigation and permanent review. CGU, however, goes beyond CADE and sets specific and more complex requirements related to: 1) the creation of an organizational culture of integrity within the company; 2) setting integrity policies, instruments and procedures; and 3) how a company should react to identified wrongdoings.
These requirements are constantly evolving, as the CGU unit in charge of reviewing companies’ compliance programs gains additional knowledge on potential compliance measures adopted by investigated companies. CADE, in turn, is expected to issue additional guidance soon on how to evaluate such programs.
Also, increasing interaction between CADE and CGU, as a result of a cooperation agreement signed in June 2018, is expected to result in the convergence of criteria in the evaluation of compliance programs.
Given the increasing relevance of the evaluation of compliance programs, it is essential that companies, especially those that already have one, revisit the adequacy of their programs against the guidelines and rules to ensure effective benefits in potential probes.
On this issue | April 2019