Report from Latin America - Brazil Chapter
Mariana Tavares de Araujo and Alexandre Faraco contributed to the AJCCL’s publication Report from Latin America, which maps recent trends on digital markets and addresses some ancillary developments on what is happing in the region. Check out the complete Brazil’s report:
For the past five years or so, Brazil’s Antitrust Authority (CADE) listed unilateral conduct cases, including those in digital markets, as one of its enforcement priorities. Other recent policy developments have also raised the expectation of relevant developments, but the number and the status of digital cases are yet to match the statement. In parallel, proposed regulations for digital markets have emerged or progressed during this time in the Brazilian Congress.
CADE initiated at least 21 unilateral conduct investigations in digital markets between 1995 and 20221. No guilty finding has been issued so far2. Resource limitations and the challenge to build cases with substantial evidence and sophisticated economic and legal analysis largely explain the long investigative timelines. In June 2022, CADE’s investigative arm, the General Superintendence (GS/CADE), announced the creation of a separate unit to focus exclusively on unilateral conduct cases, which over the past year shelved numerous complaints found to have not submitted enough evidence of a violation. The unit is investigating all digital cases ongoing before CADE, including the ones discussed in this section3.
In September 2020, Rappi, a Colombian food delivery platform, filed a complaint claiming that iFood, Brazil’s largest player, abused its dominant position, engaged in market foreclosure, imposed vertical restraints, and had no plausible justification for the exclusivity required from key restaurants. In December 2020, the Brazilian Association of Bars and Restaurants filed a similar complaint, which was incorporated into the same case.
In March 2021, GS/CADE issued an injunction fully or partially prohibiting the exclusivity required from restaurants, and in February 2023 iFood agreed to limit the use of exclusivity clauses as well as not to include Most Favoured Nation (MFN) clauses in its agreements with restaurants4. The settlement is valid for four years and six months, during which CADE will monitor compliance.
A second case against iFood and its subsidiary that offers food vouchers, follows a complaint filed in March 2022 by the Brazilian Association of Workers’ Benefit Companies, claiming that iFood engaged in exclusionary practices against benefit voucher competitors and favoured its subsidiary, iFood Benefícios, on the platform5. In October 2022, GS/CADE recommended the investigation to be dismissed due to lack of evidence. In January 2023, the investigation was reopened by a decision of CADE’s Tribunal and the case was remanded to GS/CADE.
In September 2022, GS/CADE opened an administrative inquiry against Facebook and Google6 in relation to the Jedi Blue Deal, an agreement that allegedly carved up part of the online advertising market, based on news of investigations in the United States, the European Union, and Great Britain. Then, in December 2022, GS/CADE opened an administrative inquiry against Apple7 based on a complaint by Mercado Livre, one of the leading digital marketplaces in Brazil. Mercado Livre argued that Apple abuses its dominant position in the app distribution market for iOS devices by imposing the use of Apple’s own payment processing system and prohibiting the distribution of third-party digital goods and services through its app.
In May 2023, CADE opened a preliminary investigation against Google, Facebook (Meta), and Telegram8 for alleged abuse of dominant position. The decision was based on complaints that Google and Meta used Google, Youtube, Facebook, and Instagram platforms to lead a campaign against Bill No 2630/2020, known as the Fake News Bill, which aims to prevent the dissemination of fake news and hold digital platforms responsible for monitoring published content. Although the relevant market definition and the theory of harm are not entirely clear in the complaint sent by Congress, the allegation is of anti-competitive conduct.
More generally this case seems to the reflect view of the current administration, which seeks to regulate and bring greater accountability to Big Tech, and it underlines the view that these companies abuse their market power in several different ways. However, the political component that underlines the investigation could turn the competition discussion secondary to an extent. In fact, Google’s campaign against the Fake News Bill is also being investigated by the Supreme Court in Brazil.
CADE has also been seeking to intensify international co-operation with the European Union on digital cases9. In March 2023, CADE and the European Commission officials met to discuss the regulation of digital platforms and explore opportunities for enhancing international co-operation on the topic.
In parallel to CADE’s enforcement, the Brazilian Congress is reviewing at least two proposals to regulate digital markets.
The Fake News Bill referred to above proposes the introduction of standards, guidelines, and transparency mechanisms for social networks and messaging applications with over two million registered users in Brazil. Under the Bill, application service providers (ASP) will be responsible for actively taking measures to protect society against the spread of misinformation, which include banning inauthentic or automated accounts, keeping track of massively sent messages, and labeling fake news content. To enhance transparency, ASP is also required to make public on their websites updated data related to removed or suspended posts and accounts, containing the motivation, location, and methodology used to detect irregularities. The Senate approved the Bill, which is now pending approval in the House of Representatives.
Bill 2768/2022 is inspired by the European Union’s Digital Markets Act 2022 and introduces ex-ante regulation and monitoring of digital platforms considered “gatekeepers”, which the Bill establishes as players with Brazilian revenues of at least BRL 70 million. At this stage of the review, ANATEL (Brazilian National Telecommunications Agency) will be the sector regulator, and CADE will remain responsible for merger review and imposition of sanctions for anti-competitive conduct in the digital market.
Such a proposal for an ex-ante regulation as it stands raises some concern, particularly because many of its terms are ambiguous and it sets forth controversial criteria such as the definition of gatekeepers based on revenues. Some also take the view that it offers minimal additional value to the existing Brazilian legislation, as the defined obligations and violations are generic and could be already addressed under the Antitrust Law.
Expected Developments and Challenges
CADE’s approach to cases in the digital markets is not different from those of other jurisdictions, which is reassuring since the types of competitive issues that appear before antitrust agencies are similar.
The agency’s decision to establish a separate unit to investigate unilateral conduct and its statement10 that investigations in the digital markets require revised and/or more flexible analytical tools, encourage the view that the authority was moving towards more active enforcement in the area11. The pace has been slow, though, which is at least partially explained by the complexity involved in many of these cases.
The level of awareness and debate concerning the issues posed by digital markets is unique, and its social and economic relevance is increasingly high. This leads to the filing of complaints from different players and to a greater expectation for effective responses from CADE. It also inevitably led to Congress’ involvement in the discussion on the need for ex-ante regulation.
1. See CADE, Digital Platforms Market (2021) 102–105 <https://cdn.cade.gov.br/Portal/centrais-de-conteudo/publicacoes/estudos-economicos/cadernos-do-cade/plataformas-digitais.pdf>. According to CADE’s Department of Economic Studies, there have been at least 16 investigations between 1995 and 2020 (p. 102). In our research, we have identified at least other 5 investigations opened during 2020 and 2022. See Administrative Inquiries No. 08700.004136/2020-65, 08700.004588/2020-47, 08700.006751/2022-78, 08700.001797/2022-09 e 08700.009531/2022-04.
2. The Administrative Inquiry No 08700.005679/2016-13 was concluded with a nolo contendere settlement in which the parties agreed to cease the use of Most-Favored Nation Clauses by Online Travel Agencies. So far, CADE closed four investigations against Google due to lack of evidence (Administrative Proceedings No 08012.010483/2011-94, 08700.005694/2013-19 and 08700.009082/2013-03 in June 2019 and Administrative Inquiry No. 08700.003211/2016-94 in September 2022). Four other cases are still ongoing (Administrative Inquiries No 08700.003498/2019-03, 08700.002940/2019-76 and 08700.006751/2022-78, and Preliminary Proceeding No. 08700.003089/2023-85). In 2020, CADE sent Requests for Information to all GAFAM (Google[Alphabet], Apple, Facebook[Meta], Amazon and Microsoft) and other players in the digital markets to assess if any of its transactions in the past 10 years were reportable and/or should be reviewed in Brazil even if these fell outside the mandatory filing thresholds (Market Monitoring No 08700.002785/2020-21). The investigation aims to monitor digital markets broadly. Under Merger Case Investigation No. 08700.002871/2020-34, CADE issued an injunction, revoked a week later, suspending WhatsApp/Facebook’s payment and transfer service in Brazil, in the context of an of its assessment of a partnership with one of the main Brazilian payment service providers, Cielo. In January 2023, GS/CADE found that the partnership was not subject to mandatory notification and dismissed the investigation.
3. See Administrative Inquiry No 08700.004588/2020-47.
4. See Settlement Request No. 08700.005597/2022-17.
5. See Administrative Inquiry No 08700.001797/2022-09.
6. See Administrative Inquiry No. 08700.006751/2022-78.
7. See Administrative Inquiry No. 08700.009531/2022-04.
8. See Preliminary Proceeding No. 08700.003089/2023-85.
9. See Cade and European Commission Discuss Collaboration on Digital Market Agenda <https://www.gov.br/cade/pt-br/assuntos/noticias/cade-e-comissao-europeia-discutem-colaboracao-sobre-agenda-de-mercado-digital>.
10. See BRICS in the Digital Chemical <https://cdn.cade.gov.br/Portal/Not%C3%ADcias/2019/Cade%20lan%C3%A7a%20relat%C3%B3rio%20sobre%20economia%20digital%20em%20reuni%C3%A3o%20do%20BRICS__brics_report.pdf>.
11. See BRICS in the Digital Economy: Competition Policy in Practice <https://www.cade.gov.br/acesso-a-informacao/publicacoes-institucionais/brics_report.pdf>.