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Brazil's watchdog: Tecon Suape abused dominant position, will pay $1.7 million fine

Christian Fernsby |
In the judgment session, the Administrative Council for Economic Defense (Cade) condemned the company Tecon Suape for abuse of dominance in the container warehouse market at the Suape Port, in the state of Pernambuco, Brazil.

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The case began in 2017 with a complaint filed by SUATA (acronym that stands for Unified Warehousing and Bonded Terminal Service, in Portuguese) and Atlântico Terminais. The companies accused Tecon Suape of anticompetitive conduct for imposing, beyond the basic box rate, an additional fee known as ISPS (International Ship and Port Facility Security), for recovering investments and equipment maintenance required by the International ISPS Code.

Tecon acts on a monopoly regime in the Suape Port operations. Additionally, it offers bonded warehousing services to importers and exporters. This activity competes directly with the warehouse companies outside of the port zone, such as Suata and Atlântico.

According to the complaint, it would be Tecon's responsibility, as a port operator, to bear the costs of adapting to the ISPS Code, since security is an essential condition for cargo handling. Therefore, according to the complaining companies, the separate fee cannot be justified as a new service, since it could benefit the operator.

In a review vote, commissioner Mauricio Oscar Bandeira Maia pointed that charging the ISPS fee as Tecon Suape currently does artificially raises the costs of bonded warehousing, generating harm to competition in that market. According to the commissioner, the expenses generated by the ISPS are regular and ordinary, and should be demanded from ship-owners (which unload and handle containers between the ship and the terminal gates) as part of the box rate, instead of the bonded warehouses.

"By charging the ISPS from bonded warehouses, the accused party transfers to those agents the costs of security, which befalls upon the service provided to ship-owners. Thus, Tecon Suape obtains, in due its monopolistic performance, the power to make compensations and discounts in storage to importers, artificially unbalancing the competition conditions on the warehouse market," he claimed.

Cade’s president, Alexandre Barreto, followed his opinion and highlighted that the fee also generates negative effects for generating legal uncertainty. In that sense, he followed the commissioner‘s decision on condemning Tecon, determining the termination of the practice and sending a copy of CADE’s decision to the Brazilian Waterway Transportation Agency (ANTAQ).

"Cade is fully interested in working synergistically with ANTAQ to achieve this goal," he said.

For its anticompetitive conduct, the Tribunal condemned Tecon Suape to pay a BRL 7.1 million ($1.7 million) fine. It was also determined that the port operator must abstain from charging costs of adapting and fulfilling the ISPS Code obligations from bonded warehouses and from importers who store cargo. Furthermore, Tecon Suape shall not create any new charge with that intent.

Besides Barreto and Bandeira Maia, the Commissioner Paula Azevedo and the former commissioner João Paulo de Rezende had already voted for conviction. The former commissioners Paulo Burnier (rapporteur of the case) and Polyanna Vilanova voted for filing the proceeding.

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