Investor Presentaiton
(i) Civil class action - Violation of economic order
In January 2012, the State Public Ministry of Rio Grande do Norte (MPE/
RN) filed a Public Civil Action (ACP) against the subsidiary VCSA, five other
cement companies and entities representing the cement and concrete
industry, for alleged violation of Brazilian competition law, based on a tech-
nical note from the Secretariat of Economic Law (SDE) of 2011.
MPE/RN made the following generic requests: (1) collective pain and suffe-
ring of R$5,600 (corrected until January 2012), with solidarity between the
defendants, to the National Fund for Diffuse Rights; (2) homogeneous in-
dividual property damage to consumers equivalent to 10% of the amounts
paid for cement or concrete purchased by consumers of brands negotiated
by the defendants between 2002 and 2006, for settlement and individual
collection by each consumer; (3) a fine of 1% to 30% of the gross income
of the last fiscal year, not less than the supposed benefits (art. 23, 1, Law no
8,884/1994); and (4) other requests, including: (4.i) prohibition, for a period
of at least five years, from obtaining financing from governmental financial
institutions or from participating in bidding processes by the federal, state
or municipal, government entities or agencies; and (4.ii) determination not
to grant federal taxes in installments and cancellation of tax incentives or
public subsidies.
In September 2021, the preliminaries raised by the defendants were re-
jected. The production of expertise was also determined, establishing that
the burden of proving the damage is on the MPE/RN. At the moment, the
appeals against the decision that rejected the preliminaries are awaiting
judgment. There has not yet been an appointment of a judicial expert.
(ii) Administrative Proceedings by SDE, currently CADE (Brazilian
antitrust agency)
In 2006, SDE initiated an investigation that culminated in the initiation of
an administrative proceeding (PA) against several companies in the cement
sector in Brazil, including the subsidiary VCSA, based on alleged anti-com-
petitive practices, including the formation of a cartel with other compa-
nies to fix prices and quantities of products. In January 2011, a technical
note was issued by SDE and after the investigation phase was completed,
in July 2015, CADE reached the final terms of its decision, determining
the following sanctions, among others, to the subsidiary VCSA: (1) fine of
approximately BRL 1,564 (20% of gross annual sales in 2016, based on
Law No. 12,529/11); (2) several structural penalties, in short: (2.i) sale of
all its equity interests in other cement companies and concrete companies
in Brazil, (2.ii) sale of 20% of its installed capacity of concreting services in
the Brazil, in relevant markets where subsidiary VCSA has more than one
concrete plant and (2.iii) sale of a specific cement asset, which, in CADE's
opinion, was directly related to the alleged anti-competitive practice; (3)
other penalties which, in summary, include: (3.i) the prohibition of carrying
out acts of concentration for a period of five years in the cement (among
the convicted companies) and concrete (any act) markets and association
(among the condemned companies) for greenfield projects in the cement,
slag and concrete sectors; (3.ii) the prohibition of contracting with official
financial institutions in the case of lines of credit subsidized by public pro-
grams or resources; (3.iii) recommendation to the Federal Revenue not to
grant federal tax installments or cancel, in whole or in part, tax incentives or
public subsidies already granted.
In October 2015, the subsidiary VCSA filed an ordinary action to annul
(annulment action) the decision under the PA or, at least, to reduce the
penalties applied. At the end of November 2015, an injunction was granted
to suspend the effects of the decision in the PA, preventing CADE from
demanding compliance with the obligations until judgment on the merits
of the annulment action. CADE was summoned and presented its defense,
while the subsidiary VCSA presented its reply in November 2016. Expert
economic evidence was granted and, in May 2021, the judicial expert's re-
port was presented.
In November 2021, the parties presented their manifestation and technical
opinion in relation to the expert report. At the moment, the decision of the
court of first degree is awaited. The subsidiary VCSA classified the probabi-
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