CADE’s General Superintendence initiates administrative proceeding to investigate a cartel in the market of orthoses, prostheses and special medical supplies

The General Superintendence of the Administrative Council for Economic Defense (CADE) initiated, on 20 June 2017, two administrative proceedings to investigate a cartel in the market of orthoses, prostheses and special medical supplies (OPME in its acronym in Portuguese). The orders were published in the Federal Official Gazette on 21 June 2017.

The first administrative proceeding investigates an infringement in the market of implantable cardiac pacemaker devices (implantable cardioverter defibrillator – CDI in its acronym in Portuguese -, resynchronizer and pacemaker) and accessory items that include electrodes, sets of introducers and catheters under Administratrive Proceeding nº 08700.003699/2017-31.

Four companies that are responsible for the supply of all implantable cardiac pacemakers in Brazil are under investigation. . Twenty-nine individuals, linked to the companies, and two industry associations: Associação Brasileira da Indústria de Artigos e Equipamentos Médicos e Odontológicos – ABIMO and Associação Brasileira da Indústria de Alta Tecnologia de Produtos para Saúde –  ABIMED are also under investigation.

According to the opinion of the General Superintendence, strong evidence exists of exchanges of price information, bid advantages, customer allocation between the competitors, supply agreements and prices to be implemented. In addition, monitoring mechanisms had been put in place and those who did not comply with the cartel were retaliated against. The industry associations (ABIMO and ABIMED)   are accused of facilitating and promoting the adoption of anticompetitive conduct by serving as forums for the exchange of  sensitive competitive Information, , enabling the monitoring of agreed deals  and the maintenance of price tables.

The practices are alleged to have occurred between, at least, 2004 and 2015.

The investigation includes a partial leniency agreement signed between Medtronic and the General Superintendence which is now public.

The second Administrative Proceeding initiated on 20 June 2017, investigates a cartel in the national market for the distribution of OPME, that includes implantable and non-implantable products (Administratrive Proceeding nº 08700.003709/2017-38).

In this case, 46 companies, 80 individuals and the industry association Associação Brasileira de Importadores e Distribuidores de Implantes (ABRAIDI) are under investigation.

The General Superintendence has found strong evidence of collusive agreements for price fixing, market sharing and adjusting conditions and advantages in public bids of medical devices. In addition, the association may have facilitated and promoted the adoption of these anticompetitive conducts. The practices are alleged to have occurred, at least, between 2007 and 2015.

Among the main anticompetitive strategies, the investigation observed the use of fictional or cover bids, the frequent sharing of sensitive commercial information, through meetings and e-mail-exchanges between directors and employees of the companies, and potential bid rigging. The presence of various monitoring and retaliation mechanisms has been also verified. 

Both Administrative Proceedings are derived from the Administrative Inquiry 08001.000005/2015-29, initiated in November 2015 after the representation of the Ministry of Justice to investigate the OPME market.

After gathering initial evidence, CADE’s General Superintendence, supported by the Federal Police, unleashed the Operation “Mercador de Veneza”, with dawn raids that collected evidence, which is being used in the current investigation. In addition to traditional methods of evidence gathering, new methods were also used to analyze evidence by utilizing algorithms of behavioral patterns to detect collusive characteristics in bids. 

The use of algorithms as an investigation device forms part of the system known as “Cérebro”, developed by the General Superintendence in 2015.  Besides the initiation of the two administrative proceedings, the inquiry will remain open for additional investigation regarding other companies. 

After the initiation of the administrative proceeding, the defendants will be notified in order to present their defenses. Once the procedural instruction is concluded, the General Superintendence will issue an opinion and forward the case to CADE’s Tribunal, responsible for the final decision.