CADE convicts Rumo-ALL for abuse of dominant position in the market of rail transport logistics

On 3 November 2021, the Tribunal of the Administrative Council for Economic Defense (CADE) convicted the merged companies Rumo Logística Multimodal Operator (Rumo) and América Latina Logística (ALL) for abusing their dominant position and hindering a rival company from operating in the market of logistics for exporting sugar via rail transportation. The applied fine sums BRL 247.1 million.

The investigation started in 2016 based on a complaint from Agrovia, a company provider of integrated logistics services via rail for sugar exportation. Agrovia claimed it depended on the use of a railway network managed by Rumo-ALL to transport sugar to the port of Santos in the state of São Paulo. According to the company, Rumo-ALL was hindering its operation to the point it had to terminate its activities.

Later, a communication sent to CADE by the Brazilian Land Transport Agency (ANTT) corroborated the complaint. The regulatory agency found evidence of antitrust violations in one of its proceedings involving the same companies.

According to investigations, Rumo-ALL closed a rail yard in the city of Santa Adélia, in the state of São Paulo. The rail yard was essential to Agrovia’s activities, and Rumo-ALL was making it impossible for the company to provide its services to customers in the off-season period. In its defence, Rumo-ALL alleged the rail yard posed a safety risk as it lacked maintenance and repair. However, the defendant itself was responsible for the maintenance of the cargo station.

The Tribunal of CADE found evidence that Rumo-ALL argued about the responsibility of the railroad yard maintenance and repair with Agrovia, impeding the access of Agrovia to the cargo station for at least four months. Thus, Rumo-ALL behaviour was characterised as anticompetitive conduct.

According to the rapporteur of the case, Commissioner Paula Azevedo, the merged companies’ behaviour prevented Agrovia from accessing the equipment and the distribution channels necessary for its main activity of sugar transportation, creating unreasonable obstacles for the competitor’s operation and development.

Hence, CADE understood suspending activities during that period raised barriers to Agrovia. In this scenario, at first, the company was forced to provide transport via road, and eventually, it was unable to sign contracts for the 2016/2017 harvest due to the uncertainty of operating in Santa Adélia again.

The investigation revealed Agrovia was unable to stay operational and left the market in 2016 when the contract of rail transportation terminated. This favoured Rumo-ALL since a considerable part of the demand of Agrovia was reallocated to them.

Penalties

In addition to paying a BRL 247.1 million fine, within 15 days of CADE’s adjudication, Rumo-ALL is to disclose the content of the decision on its official website and directly inform customers about it.

Moreover, amongst other measures, the Tribunal determined the decision be sent to the Office of the Attorney General at CADE for assessing whether Rumo-ALL was also non-compliant with the terms provided for in the merger control agreement signed with the authority when it cleared the merging of the companies.

Access Case no. 08700.005778/2016-03.