Cade condemns companies and individuals for a cartel in the prepaid phones reload market

The Tribunal of the Administrative Council for Economic Defense (CADE) condemned the companies Check Express and Rede Digital Comércio e Serviços and six individuals for cartel practices in the market of distribution of electronic reload for prepaid phones. The imposed fines sum up to BRL 1.6 million.

The investigation was initiated from a leniency agreement signed by the company Telecom Net, an individual related to the company, CADE and Federal Prosecution Service of the Brazilian state of São Paulo. During the evidentiary stage, it was verified that the parties held meetings to fix prices, divide market and exchange sensitive information amongst themselves.

The anticompetitive practices would have lasted, at least, from 2007 - when the prepaid phones reload market had an economic impact of BRL 3.5 billion - and 2009.

The members of the Administrative Tribunal followed the vote of the reporting commissioner, Ms. Cristiane Alkmin J. Schmidt, in its merit. Nonetheless, regarding the dosimetry of the imposed fines applied, the majority of the Administrative Tribunal followed the vote presented by commissioner Mauricio Bandeira Maia.

Cartel operation

When the anticompetitive practices occurred, prepaid phones users could acquire credit to make calls by two methods: physically, in direct contact with the phone carrier, or electronically, through portable payment machines or software available at a point of sale (POS).

In this second manner, distributors intermediated a share of the sale of credit reload, buying a certain quantity of credits for reload with a discount from the carrier and reselling it with a lesser discount to retailers, such as newsstands, bakeries, and drugstores. Regardless of the discounts offered along the chain, the final price paid by the prepaid phone owner was always defined by the carrier.

The condemned companies in the administrative proceeding took part of a group of distributors and, according to the Administrative Tribunal, practiced cartel by promoting regular contacts, through emails and meetings, aiming to fix the maximum discounts to be applied in the points of sale (POSs).

By means of the collusion, the distributors also combined not to dispute POSs that already had established commercial relations with competitors and exchanged sensitive information regarding POSs and market conditions in general. According to CADE, the illicit practices affected the relationship between the second and the third links of the chain (electronic distributors and points of sale, respectively).

"The conducts under analysis are unable to generate any social benefits (efficiency gains, increase in the number of amenities to the customer, etc.). Their only usage was to the participants of the collusive practice that could illicitly appropriate most of the customers (in this case, the points of sale) surplus", considered the reporting commissioner.

Though mostly located in São Paulo, the distributors had branches in other Brazilian states of the and operated with POSs throughout Brazil.

Leniency, TCCs, and Filing

Regarding the parties that signed the leniency agreement (the company Telecom Net and an individual), CADE's Administrative Tribunal decided to grant the extinguishment of administrative and criminal sanctions, since they have fully complied with the terms of the agreement.

Concerning the companies Getnet Tecnologia em Captura e Processamento de Transações, Rede Transações Eletrônicas, and six individuals related to them, the Administrative Tribunal determined the filing of the administrative proceeding due to the compliance of the terms of the cease and desist agreement (TCC in its acronym in Portuguese) signed with CADE.

In relation to the companies Beira Mar Participações and RV Tecnologia, and three individuals, the Administrative Tribunal decided to suspend the administrative proceeding up to the full compliance of the obligations stated in the TCC.

Ultimately, the Administrative Tribunal filed the proceeding regarding the company Rede Ponto Certo Tecnologia e Serviços and two individuals, for lack of indications of infractions to the economic order.

Access the Administrative Proceeding 08012.002812/2010-42 .