CADE probes into LCD and CRT segments expose challenges facing Brazilian enforcement

This article is provided to FT.com readers by PaRR (Policy and Regulatory Report)— a newly launched product of The Mergermarket Group providing proprietary intelligence and research on competition law and sector-specific regulatory changes around the world. www.parr-global.com

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Brazil’s antitrust agency, CADE, is facing many challenges as it investigates groups of multinational manufacturers of liquid crystal display (LCD) panels and cathode ray tubes (CRT) accused of price fixing, sources familiar with the Brazilian proceedings told PaRR.

The cases have much in common, as companies involved in the respective investigations are collaborating with CADE under leniency programs and enforcement officers are trying to collect evidence and serve defendants in multiple jurisdictions, the sources told PaRR.

The leniency applicant in the CRT investigation is a unit of South Korea’s Samsung, and not Taiwan’s Chunghwa Picture Tubes, which was the lenient party in a European CRT cartel probe, according to three sources familiar with the matter. Chunghwa is also implicated in the Brazilian LCD cartel investigation, according to public case filings. Chunghwa is not participating with the Brazilian leniency program as the company may have failed to gather enough evidence on the cartel activities of other companies, one of the sources said.

Taiwan’s Chimei Innolux is benefiting under a “partial” leniency program in the Brazilian investigation of LCD manufacturers, according to one of the sources. Chimei’s involvement in the local price-fixing probe only occurred one year after CADE opened the case on 17 December 2008, according to public case records. However, as this information is not public the records do not name Chimei as the lenient party.

Unlike the European CRT investigation begun in March 2009, which was launched after Samsung entered into a leniency agreement, the Brazilian LCD case was sparked by a US Department of Justice probe that resulted in combined fines of USD 585m for Sharp, Chunghwa Picture Tubes, LG Display, and LG Display America. Subsequently, Chimei Innolux struck a deal with US authorities and paid a USD 220m fine and became a defendant in Brazil, according to CADE filings.

One of the main hindrances to CADE’s international investigative work stems from its difficulty with serving the implicated firms and their executives abroad. The problem is particularly pronounced with regard to Asian companies, according to the sources.

The most precarious jurisdiction is Taiwan, where Brazil does not have an embassy, two of the sources said.

But serving companies in South Korea and Japan is not much easier, according to a second source familiar with CADE’s LCD investigation.

Apart from the procedural issues, proving that alleged cartel violations impacted Brazilian consumers will be difficult in both the LCD and CRT cases. The first source noted that CRT televisions are not widely distributed anymore, and the second source said LCD panels were not being imported into Brazil when the cartels allegedly ended abroad in late 2005.

In Brazil, the LCD case is slightly more advanced than the CRT one, as at least one Taiwanese company has been served, said the first source. But the deadline for companies to present their defenses only starts after all companies and individuals have been served, the three sources said. In international cases, it may take two or three months before case records formalize notice that a party was served, the sources said.

One factor that is another obstacle for CADE is that the administrative proceeding targets companies as well as individuals in an investigation, said a third source familiar with proceedings in Brazil. The source said he is not aware of any other jurisdiction where individuals face “double charges” – a probe by an administrative body such as CADE and another by a criminal law enforcer.

At one point in the LCD investigation, there were 139 “suspects”, including 14 companies and 125 individuals, according to public filings pertaining to the case. All of the individuals lived abroad and locating them could make the case drag on for years, according to the sources.

It is possible to investigate the companies and the individuals separately to expedite the cases, said the third source. But any defense lawyer would challenge an attempt to separate the cases, the third source said.

According to CADE’s website and a fourth source familiar with the matter, the companies being investigated in the CRT case include Chunghwa Pictures, LG Electronics, LP Displays International, Royal Philips Electronics, Philips Do Brasil, Samsung SDI (Malaysia), Samsung SDI Brasil, Samsung SDI, Shenzhen Samsung SDI and Tianjin Samsung SDI.

Apart from Chimei Innolux and Chunghwa Picture Tubes, Au Optronics, Epson Imaging Devices, Hannstar Display, Havix, Hitachi Displays, and LG Display are among the companies implicated in the LCD investigation, according to CADE’s website.

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