Bribery and corruption in the private sector

Free competition is amply protected in Brazil by rules that limit the market power of economic agents, prevent the practice of economic abuse (which can result in market dominance and be prejudicial to consumers), and protect competitive fairness against illicit behaviour.

Generally, competition in the business environment produces extremely advantageous results for society. However, unscrupulous economic agents often use unlawful expedients that can alter the equality of competition. In those cases, we have what may be called dishonest, prohibited, or unfair competition.

The prevention and punishment of unfair competition not only concerns the interests of the competitors directly affected by the dishonest conduct, but also the guarantee of market efficiency and consumer protection. Therefore, the protection of free competition and the prohibition of restrictive practices are complementary: free competition implies that the broadening of the client base by an economic agent should occur only due to the quality of the goods or services marketed.

The legal position

In Brazil, acts of unfair competition are classified as crimes by Article 195 of Federal Law No. 9,279/96, the Brazilian Industrial Property Law (BIPL). The range of conduct and practices enumerated by the BIPL is significantly wide and includes diverse behaviour such as the publication of false information about a competitor and the unlawful appropriation of industrial and trade secrets.

Corruption in the private sector is also prohibited by Article 195. In this sense, items ix and x state that a crime of unfair competition is committed by whoever:

• ix: Gives or promises money or any other advantage to the employee of a competitor in order to obtain an advantage, by inducing the employee to neglect his working duties; and/or

• x: Receives money or any other advantage, or accepts a promise of payment or reward for neglecting his duties as an employee, in order to bestow an advantage upon his employer’s competitor.

Item ix of Article 195 defines ‘active’ corruption, sanctioning the conduct of whoever gives or promises any form of benefit (“money or any other advantage”) to an employee of a competitor, with the specific purpose that the employee, in exchange, provides him/her with a certain advantage.

Analogously, item x defines ‘passive’ corruption, sanctioning the conduct of the employee who effectively receives or accepts a promise to receive from the employer’s competitor an unlawful benefit (“money or any other advantage”) to provide a competitive advantage in exchange.

For a definition of the crime of active corruption, the normative element “to neglect his working duties” imposes the simultaneous occurrence of the offering of a benefit to an employee of a competitor with the specific purpose of obtaining an advantage, and the requirement that the advantage desired by the briber can be provided by the bribed employee in violation of his duties as an employee.

Similarly, for the configuration of passive corruption, the employee should receive or accept to receive the benefit with the specific purpose of providing an advantage to the competitor of his employer, in violation of his working duties.

Therefore, it can be seen that the crimes under analysis seek, in fact, to prevent the violation of the professional duty of the bribed employee. In this context, some Brazilian scholars classify the crimes under items ix and x of Article 195 as “acts against the employment relationship”.

By defining corruption in the private sector under items ix and x of Article 195 (which, in fact, deal with “employee corruption”), the legislator opted to eminently protect private interests, far from the protection of free competition and the regular and fair market. It is an approximation of the model adopted in France and in the Netherlands. However, in our opinion—which is supported by the recommendation set forth by Article 21 of the UN Convention against Corruption—Brazilian law should not be so restrictive.

A new perspective

This article proposes that the crime defined under item iii of Article 195 of the BIPL could be used in the repression of some other acts of corruption in the private sector. The item states that a crime of unfair competition is committed by whoever:

• iii: Uses fraudulent means to divert another person’s clientele, for his own benefit or for the benefit of someone else.

In our understanding, the “fraudulent means” to which the item refers should be understood as the use of any expedient that infringes the legal and ethical provisions of Brazilian legislation, even if these provisions have a non-criminal nature. The concept then includes any unfair behaviour that constitutes violation of a legal obligation or, depending on the case, violation of professional instructions or rules that are applicable to the professional activity in which the agent’s conduct takes place.

Therefore, there is no obstacle to considering as a fraudulent means the offering or the request, by an economic agent, of a pecuniary advantage (the bribe in the strict sense), or of any benefits, gratifications or satisfactions of a non-monetary nature. It is sufficient that the solicitation or the offering are not appropriate to the customs and habits of the economic sector in which the offending activity takes place.

"it can be seen that the crimes under analysis seek, in fact, to prevent the violation of the professional duty of the bribed employee."

From this perspective, private corruption would be characterised as being based on the use (the “employment”) of a means considered “fraudulent” (the delivery, the offering, the solicitation or the receipt of benefits or advantages that do not correspond with the idea of a just and harmonious market), with the specific purpose of producing anti-competitive effects (the illegitimate diversion of the clientele).

All the essential constituent characteristics of private corruption are present:

• An individual who seeks to divert clientele through the offering of advantages (monetary or not) to another individual who is capable of influencing the decisions of marketing goods or services;

• An individual who, in the position of decision maker, is the recipient of advantages (monetary or not) that were offered to him or were requested or accepted by him, so that, in exchange, he adopts a decision of marketing goods and services in contrary to his duties, ie, disrespecting the ethical, legal, regulatory or disciplinary rules that influence his activity; and

• The existence of a normative system that binds both individuals, constituted by the set of normative provisions that discipline the free market and free competition.

It is even possible that the clientele the briber seeks to divert is the actual company for which the bribed (the decision maker) works. In this situation, the decision maker receives, requests or accepts a dishonest benefit (money, property, travel, distinctions, promotions, etc) in order to, by taking advantage of his position, prefer a competitor (who gave or promised the benefit) to the detriment of other competitors.

This characterises the well-known practice of payment of commissions, by which the choice of suppliers or service providers by a specific company is manipulated, corrupted or perverted, to the prejudice of other competitors that do not participate in the unlawful agreement.

Conclusion

Traditionally, the acts of unfair competition sanctioned by Brazilian law are those that affect industrial property (perhaps due to the fact of the insertion of these crimes in Brazil having occurred after the ratification of the Paris Convention). Indeed, this justifies the inclusion of the crimes of unfair competition under Article 195 of the BIPL, which evidences the political and criminal choice of the legislator: the acts of unfair competition are the object of criminal sanction only when they offend specific proprietary interests of other competitors.

Exactly for this reason, the crimes under items ix and x of Article 195 of the BIPL are better defined as “corruption of employees”, in accordance with the incrimination model adopted by France and by the Netherlands, in which the interests protected are understood as being only of a private nature.

On the other hand, in Germany—the country whose model of criminalisation of private corruption via the protection of fair competition is held as being paradigmatic—it is understood that the criminalisation of private corruption should simultaneously protect proprietary interests (of a private nature) and supra-individual interests.

We believe that it is in this context that our new perspective for the analysis of the crime classified under item iii of Article 195 of the BIPL allows protection against acts of corruption that simultaneously offend the interests of the competitor, the victim of the offending conduct—which can have its clientele illegitimately diverted; of the consumer—which can have its autonomy of choice in the market perverted by fraudulent expedients used by unfair competitors; and of the actual market (the abstractly considered competition)—which can have the performance of its competitors altered by factors that are extraneous to the prices and the quality of the products and services marketed.

George Mendonça de Lucena is a partner of Daniel Advogados. He can be contacted at: george.lucena@daniel.adv.br