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» Competition Behavior Code of Petróleo Brasileiro S.A. - PETROBRAS
It is the policy of Petróleo Brasileiro S.A. – PETROBRAS to take corporate decisions in the best interest of the Company, in a manner completely independent in relation to its competitors, and in compliance with the antitrust and competition rules.
This document, approved by the Executive Board of Officers of PETROBRAS, on
January 15, 2004, contains a summary of the applicable legislation to be used as
general guidelines to the Company’s administrators and employees – without
prejudice of the due legal counseling in concrete situations – and also provides for
the procedures of internal control aimed at assuring the respect to the established
rules and principles.
PETROBRAS is confident that the respect to the antitrust or competition legislation is fundamental for the economic and social objectives and principles of the National Energy Policy, under Law no. 9.478, dated as of August 6, 1997 – Petroleum Law to be preserved and broadened.
I. Content and Scope
II. Overview
III. Competition Legislation
IV. Legal Couseling and Periodical Review
V. Relationship with the Competitors
VI. Relationship with Companies’ Associations, Unions, Federations and Confederations
VII. Relationship with Clients and Suppliers
VIII. Relationship with Subsidiary, Controlled and Affiliated Companies
IX. Antitrust Investigation and Information Requirements
X. Improper Behavior, Documents and Internal Audit
XI. Confidential Communication
XII. Miscellaneous
XIII. Alterations to the Competition Policy
Translation of the Bidding Code of Conduct for print out (PDF - 149 KB)
I. Content and Scope
The present Code serves as grounds for the commitment of PETROBRAS with the
strict compliance of the Brazilian antitrust or competition legislation and of the foreign jurisdictions in which the PETROBRAS does businesses.
All PETROBRAS’ administrators and employees and persons contracted by the
Company are individually obliged to comply with the provisions of this Competition
Behavior Code.
Any breach to this Code and to the guidelines contained herein shall be subject to
the relevant disciplinary and legal sanctions, which can even lead to the removal of
administrators and the dismissal of the employees implied.
The purpose of this Code is giving PETROBRAS’ administrators and employees a
general knowledge of the relevant legislation in order to avoid the risk that any
concrete situations, which would demand preventive or corrective actions, are not
timely spotted or are taken too late to the awareness of the Legal Department, for
the adoption of any steps deemed necessary.
Particularly concrete situations that may demand the analysis of any antitrust
repercussion involving the markets in which PETROBRAS holds a dominant
position, as the antitrust legislation imposes some strict behavior standards to the
companies holding a dominant position in services or products markets. In Brazil, a
dominant position is assumed in case the company has 20% or more of market
share, although any evidence to the contrary is allowed.
Therefore, without prejudice to the legal and statutory attributions of the Board of
Directors, the Executive Board of Officers and the responsible managers shall
monitor and keep themselves informed as to the competitive strategies of
PETROBRAS and their implementation in the markets in which it holds a dominant
position.
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II. Overview
A. Objectives of the Competition Legislation and Policy
Although Brazil has had a competition legislation since 1962, the policies of
governmental intervention in the economy of several sectors, such as the petroleum industry, particularly in relation to the practices of price control, made inapplicable the rules of protection of the free market, which were after all under governmental control.
With the actions of deregulation and liberalization of the services and assets markets from the 1990’ onwards, which allowed the institution of a price freedom system, and specially after the issuance of Law no. 8884, dated as of June 11, 1994, competition has become one of the fundamental basis of the Economic Policy, along with the Tax, Monetary and Exchange Policies.
The market of petroleum and derived products has also gone through such changes with the enactment of the Constitution Amendment no. 6, dated as of August 15, 1995, and the issuance of the Petroleum Law, which has promoted a progressive liberalization of the prices and the institution of an antitrust system in this sector of the economy.
In accordance with its article 1, Law no. 8.884/94 provides for the prevention and
repression against any violation to the economic order, guided by the constitutional
provisions of free enterprise, competition, social function of the property, defense of the consumers, and repression against the abuse of the economic power.
B. Responsibility for Violations
Any competition dispute may cause a big waste of time and resources for the
companies. Any violation to the antitrust legal provisions may subject the company to administrative liability for any violation to the economic order, which provides, among other legal sanctions, for the application of heavy penalties, and civil liability for losses and damages.
The administrators and employees involved may be held individually responsible
both under administrative and civil terms, and, depending on the violation practiced, also under a criminal scope.
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III. Competition Legislation
A. Scope and Institutional Aspects
In Brazil, the antitrust legislation is mainly represented by Law no. 8884/94, as
amended from time to time. The following authorities are in charge of the
administrative application of this Law: Secretaria de Direito Econômico – SDE
(“Secretariat of Economic Law”), of the Ministry of Justice, Secretaria de
Acompanhamento Econômico – SEAE (“Secretariat of Economic Monitoring”), of the Ministry of Finances, and Conselho Administrativo de Defesa Econômica – CADE (“Administrative Council of Economic Defense”), of the Ministry of Justice.
Generally speaking, SDE and SEAE, within the scope of their respective jurisdiction, perform evidence production and investigation duties, whereas CADE is the authority of the so-called Sistema Brasileiro de Defesa da Concorrência – SBDC (“Brazilian System of Competition Defense”).
Under article 10 of the Petroleum Law, with the wording given by Law no. 10.202,
dated as of February 20, 2001, the Agência Nacional do Petróleo – ANP (“National
Petroleum Agency”), upon performing its attributions and becoming aware of any fact that may configure any sign of breach to the economic order, shall promptly
communicate it to CADE and SDE, so that they can adopt the applicable measures, within the scope of the relevant legislation.
The same legal rule sets forth, in its sole paragraph, that regardless of the
mentioned communication, CADE shall notify ANP of the contents of the decision
applying any sanction for breach of the economic order commited by any company
or individual while exercising the activities related to the national supply of fuels,
within no later than twenty-four hours as of the publication of the relevant decision,
so that it can adopt the legal measures within its jurisdiction. Among the legal
consequences arising out of a judgement against a breach of the economic order is the loss of authorization to work issued by ANP.
The Brazillian law also provides for the criminalization of several types of antitrust
violation, under Law no. 8.137, dated as of December 27, 1990, which defines,
among others, the crimes against the economic order. Its application is made
through the action of the Federal and State Departments of Justice, in accordance
with their respective set of actions, within the scope of the Judiciary.
Recently, we have been noticing that several cases of formation of cartel, specially in the retail of automobile fuels, have been object of criminal prosecution.
It is also important to point out that Law no. 8.884/94, in accordance with its article
15, applies to the private or public individual or entities, as well as any association of entities or individuals, legally or not incorporated, even if temporarily, with or without the character of a legal entity, and even if they perform activities under the system of legal monopoly. In the Brazilian law, there is no provision for antitrust immunity for any sector of the economy.
The Law also contemplates the joint liability of the company and its managers or
administrators (art.16), of the companies or entities legally or not members of any
economic group (art. 17), as well as the disregard of the legal entity for any breach to the economic order (art. 18). The repression of the violations to the economic order does not exclude the punishment of other unlawful acts provided for under the law (art. 19).
In the sectors under the jurisdiction of the regulatory agencies, the Competition Law
is also applicable, although subsidiarily, except when the antitrust rule conflicts in any way with the regulatory provisions, in which case the latter shall prevail. It is what usually happens in the cases of regulation of prices, quantities or conditions to enter the regulated market.
B. Concentration Acts
From the point of view of the substantive rules, Law no. 8.884/94 has instituted, for
the first time in Brazil, a preventive system for the control of economic concentrations (“concentration acts”) basically consisted of mergers, acquisitions and joint ventures among companies that fulfill the established requirements of compulsory notice (art.54). Namely, the acts that results in a relevant market share of 20% (or more), or executed by entities that belong to other companies or group of companies which have registered an annual gross revenue in the last balance equivalent to R$ 400 million.
Under paragraph 1 of art. 54 of Law no. 8.884/94, CADE may authorize the
concentration acts that can restrict competition, provided that they comply with the
following conditions: I - have the purpose of, in an accumulated or alternative
manner: a) increase productivity; b) improve the quality of the assets or services; or c) make feasible the efficiency and the economic or technological development; II - the consequent benefits are equally distributed among the participating companies, on one hand, and the consumers or final users, on the other hand; III - do not cause the elimination of the competition of a material part of the assets and services relevant market; IV - the limits strictly necessary to accomplish the expected goals are complied with.
In accordance with paragraph 2 of the same article, the acts complying with at least three of the conditions provided for in the aforementioned paragraph 1 may also be considered lawful, whenever they are necessary for predominant reasons of the national economy and commonwealthy, and providing they do not bring any damage to the consumer or final user.
The Guideline for the Economic Analysis of Horizontal Concentration Acts, approved by the Joint Ordinance SEAE / SDE no. 50, dated as of August 1st, 2001, is the basic reference for the procedure of application of the concentration control system of Law no. 8.884/94.
C. Violations to the Economic Order
Art. 20 of Law no. 8.884/94 specifies the ways of violation to the economic order, as follows:
I - limit, forge or in any way damage the competition or free enterprise;
II - control relevant market of assets or services;
III - arbitrarily increase the profits;
IV - exercise a dominant position in an abusive manner.
The same article points out that the achievement of a market resultant from a natural process based on the greatest efficiency of any economic agent in relation to its competitors do not characterize the unlawful act set forth in item II (paragraph 1). In other words, the simple fact of a company being dominant, due to internal or organic increase do not characterize any violation.
The dominant position occurs when a company or group of companies controls a
material portion of a relevant market, as supplier, intermediate party, acquiror or
financer of a product, service or technology related thereto (paragraph 2).
The dominant position is assumed when the company or group of companies
controls twenty percent (20%) of a relevant market, and such percentage can be
altered by CADE for specific economic sectors. (paragraph 3)
On the other hand, art. 21 of the same Law describes, in a list of examples, the types of behavior that characterize violations of the economic order, provided that they cause any case of breach provided for in art. 20.
Among the list of types of behavior described in art. 21, are, for example, the
horizontal practices related to the formation of cartel, such as price fixing, market
sharing or establishment of shares in agreement with the competitor, obtaining or
influencing the adoption of an uniform commercial behavior among competitors and
previously establish prices or set advantages in a public bid, as well as vertical
practices, such as the establishment of resale prices, restrictions of territory or client base, exclusivity agreements, refusal of negotiation, combined sales, price
discrimination, predatory prices and imposition of excessive prices.
D. Reasonability Principle or Rule of Reason
Usually, in order to have any violations to the economic order characterized, it is
assumed that the breaching company holds a dominant position in the relevant
market duly specified. In fact, if there is no dominance, there will be no possibility of competition damage, and the antitrust legislation will not apply.
The relevant market can be defined as the set of products and services and the
geographic area to which the sale of such products or services is economically
feasible. In accordance with the so-called “hyphotethical monopolist” test, the
relevant market is defined as the smallest group of products or services and the
smallest geographic area necessary for the supposed monopolist to be in conditions of imposing a “small, though material and not temporary” increase in the prices.
With the exception of the cases of classic cartels – described in items I, II, III and VIII of art. 21 of Law no. 8.884/94 – a certain practice can only be deemed as being anticompetitive after its reasonability is analyzed within the economic context in which it is inserted, so that one can examine whether such behavior had the purpose or effect to prejudice the competition relationships held in the affected market, producing, even potentially, one of the effects of art. 20.
As per its definition, the behavior that damages the competition relationships is the
one in which the balance of its negative and positive impacts over competition (net
effect) is negative, reducing the efficiency and the economic well-being (see
Guideline for the Economic Analysis of Horizontal Concentration Acts, approved by
Ordinance SEAE / SDE no. 50, dated as of August 1st, 2001).
Following this understanding, the reasonability principle or the rule of reason, which instructs the application of Law no. 8.884/94 in matters of behavior and control of economic concentrations, involves a complex analysis of costs and benefits of the practices restricting the competition. The practices, even anti-competitive, that generate compensatory efficiencies, promoting the general economic well-being, are acceptable. Note that the criteria established in paragraphs 1 and 2 of art. 54 of this Law (in accordance with item B above) for the analysis of the concentration acts are applicable, through analogy, for the analysis of costs and benefits of the types of behavior specified in art. 21, which can characterize a violation to the economic order or not.
It is worth mentioning the Resolution CADE no. 20, dated as of June 9, 1999, which
clarifies the criteria for the application of the Competition Law in matters involving
violations against the economic order, and is a guideline for the evaluation of the
legality of commercial practices subject to the referred rule.
E. Dominant Position
The antitrust legislation imposes certain strict behavior standards to the companies
occupying a dominant position in service and product markets. In Brazil, as already
seen, it is assumed that there is a dominant position if the company holds 20% or
more of market share, any evidence to the contrary being admitted.
Notwithstanding the fact that it is PETROBRAS’ policy to lead its businesses in
accordance with the highest ethical standards, in situations of dominance in the
market, it is particularly important that PETROBRAS avoids any practice that may be considered as leading to an unlawfully exclusion or elimination of any competitor.
It is important to point out, however, that, under the competition legislation, the
condition of dominance that may be experienced by PETROBRAS in some markets does not restrict its right to adopt lawful competitive strategies and to be an effective rival of its current or potential competitors.
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IV. Legal Couseling and Periodical Review
In face of the complexity of the antitrust analysis, PETROBRAS shall obtain previous legal counseling whenever its commercial practices or policies may characterize any of the cases foreseen as violation to the economic order, specially, but not limited to, in the cases specified herein.
Furthermore, PETROBRAS shall review, from time to time – and at least every two
years – the commercial practices and policies in force for its several markets in light of the antitrust legislation.
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V. Relationship with Competitors
A. Contacts and Prohibited Agreements
There shall be no discussion or exchange of information with any representative of acompetitor of PETROBRAS in relation to past, current and future prices, price
policies, discounts and promotions, royalties, sales terms and conditions, costs,
choice of clients, territorial markets, production shares, division of markets or clients.
Consequently, no agreement is allowed to be executed concerning such matters.
This includes not only oral and written agreements, but also “gentlemen’s
agreements” or understandings of any nature.
No administrator or employee of PETROBRAS shall attend any invitation or remain
in meetings concerning such matters and they shall keep distance from such
discussions whenever they are raised by third parties.
It is contrary to PETROBRAS’ policy to send or receive any kind of information on
prices from or to competitors, except if the price list, independently developed, has
been published and circulated in the market for the clients in accordance with the
usual mechanisms of the Company or its competitor, as the case may be.
When a competitor is a client or supplier of PETROBRAS, it is allowed to discuss
and agree on the prices relative to the products that will be purchased or sold by the competitor.
However, it is not allowed to discuss and agree with the competitor on any price
related to other products on the operations of PETROBRAS or of the competitor with third parties. It is also not allowed to discuss or agree on resale prices with the
competitor.
B. Commercial and Price Policies
The commercial and price policies practiced by PETROBRAS shall be established in an independant manner, taking into account the costs of the Company, the
conditions of the national or international market, as the case may be, and the competition character of the prices.
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VI. Relationships with Companies’ Associations, Unions, Federations and
Confederations
As a rule, the companies’ associations, unions, federations and confederations play a lawful and relevant role for the industry. Notwithstanding this fact, as they gather competitors, such entities represent a potential risk of antitrust liability. That is why the involvement of PETROBRAS within the scope of such entities shall be
surrounded by due care.
PETROBRAS’ membership in such entities depends on the previous approval of the Executive Board of Officers. It shall be taken into account the type of entity, its
objectives, members, rules for admission, background, activities and working
methods.
From time to time, the Executive Board of Officers shall analyze PETROBRAS’
membership in the referred entities, making the Board of Directors aware of such
reevaluation.
The responsible administrators or managers shall analyze the pertinence of their
participation or of employees of PETROBRAS in meetings of any of the entities
above, the agenda of which shall be defined in advance. Also, the remittance of any data of the Company to such entities shall be object of a careful previous evaluation, being prohibited the remittance of any information on prices or amount of products manufactured or commercialized by the Company, except with the favorable opinion of the Legal Department.
PETROBRAS shall keep, for the legal term, the files related to each one of the
entities in which it participates, and the matters discussed, specially in the meetings attended by the Company’s staff.
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VII. Relationship with Clients and Suppliers
A. Independent Performance
Subject to any restrictions arising out of the Brazilian antitrust or competition
legislation and of the foreign jurisdictions in which it operates, as the case may be,
PETROBRAS is free to choose its clients and suppliers, and shall make it in an
independent manner.
Any understanding or agreement with a party, whether written or oral, that has the
purpose of making or not making businesses with any third party, is contrary to this
Code. Exception is made to the exclusivity agreements or any other arrangements of similar nature that are consistent with the antitrust legislation, in accordance with a specific analysis for each case.
The involvement of PETROBRAS in the intermediation of commercial disputes
among clients is prohibited – exception made to the exercise of its own rights – or in any discussion or private plan to restrict competition, regardless of the market in
question.
B. Refusal to Negotiate
PETROBRAS is usually free to refuse any businesses that are contrary to lawful
commercial interests, such as, for example, for its protection against credit risk,
environmental risk, risks to the commercial reputation, among others.
However, there are certain cases in which the antitrust legislation imposes a
compulsory negotiation. That is why the Legal Department shall be consulted prior to any decision of the Company to refuse to negotiate with a client or potential client, except in the cases in which some instructions have already been previously defined.
C. New Distributions or Supply Agreements
In order to minimize antitrust risks, it is mandatory that the Legal Department be
consulted before the execution, by the Company, of distribution or supply
agreements different from the ones approved as standard.
D. Sale of Products
PETROBRAS shall adopt, independently, commercial and price policies for the
products offered by it.
No product of PETROBRAS shall have its sale conditioned to the purchase of
another product of the Company, or to the “non-acquisition” of any product of a
certain competitor, unless in the cases of consistency with the competition
legislation, to be examined on a case to case basis.
E. Resale Prices and Conditions
As a general rule, the Company is prohibited to suggest to the clients resale prices,
discounts, payment conditions, minimum or maximum quantities, margin of profits or any other marketing conditions related to their businesses with third parties.
The cases in which practices of this nature may be admitted under the antitrust
legislation shall be previously examined by the Legal Department.
F. PETROBRAS’ Purchases
It is prohibited to subject the purchase of products from a certain supplier to the
condition that it acquires products of the Company, except in the cases of
consistency with the antitrust legislation, to be object of specific analysis by the Legal Department.
G. Discrimination of Prices and Sale Conditions
The antitrust legislation establishes that the discrimination of acquirors or suppliers of assets or services, by means of the differentiated establishment of prices or of
operational conditions for sales or service performance, may constitute a violation of the economic order.
Although a differenciated price or discount may be admitted under the antitrust
legislation in certain cases, as for example to compete with a certain offer of other
competitors or to reflect any cost savings, such situations require a specific analysis.
The Company’s price policies for its several products, as amended from time to time, shall be previously revised by the Legal Department, including as to any discounts and promotions.
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VIII. Relationships with Subsidiary, Controlled and Affiliated Companies
PETROBRAS shall not grant any undue privileges to its subsidiary, controlled and
affiliated companies, regarding prices, discounts or any other benefit that cannot be justified based on the provisions of the antitrust legislation, without prejudice to the other applicable rules.
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IX. Antitrust Investigations and Information Requirements
It is PETROBRAS’ policy to cooperate with the investigations led by national and
foreign antitrust authorities. However, this shall not cause the waiving of any rights,
actions or claims of the Company to protect its interests and rights.
The requirement of information made to the Company by any antitrust authority or
any other shall be responded after the consultation of the Legal Department.
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X. Improper Behavior, Documents and Internal Audit
In the compliance of this Code, it is important to avoid not only potential violations to the antitrust legislation, but also any behavior that may be deemed as improper,
suggesting any failure to comply with this legislation.
Following such understanding, the administrators and employees of the Company
shall avoid to be present or involved in any improper discussions that conflict with the principles and rules set forth in the Competition Behavior Code, and shall promptly and clearly keep distance from such discussions.
Without prejudice to the preservation of PETROBRAS’ secrets, no communication or correspondance shall be treated obscurely by the administrators and employees of the Company, nor shall they be conducted furtively or contain any language that can be misunderstood by third parties that may become aware of the content thereof.
The source of information on competition and regarding the corporate decisions of
the Company shall be consistently documented, in accordance with the internal rules in force. Any misunderstanding shall be avoided and corrected when necessary.
PETROBRAS shall assure that its files are true and do not use any ambiguous
words that can have unwished meanings, and the regular and extraordinary works of the internal audit shall guarantee the compliance with the mentioned rules and the remaining provisions of this Code.
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XI. Confidential Communication
Any breach to the provisions hereof shall be communicated, at the criteria of the
interested party, to the immediate chief, superior or directly to the Legal Department, the confidentiality of the communication being always assured, as provided for under the law.
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XII. Miscellaneous
The Executive Board of Officers is in charge of fulfilling and causing the fulfillment
the provisions of this Competition Behavior Code, being responsible for approving
the regulations, complementary guidelines and procedures of internal control and
training necessary for the full compliance thereof.
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XIII. Alterations to the Competition Behavior Code
The Executive Board of Officers of the Company shall approve any alteration to thisCode.
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