Competition in digital markets: relevant enforcement and policy developments in Brazil
Digital markets have increasingly become the focus of CADE’s investigations and policy documents during the past two years. This article describes recent developments that illustrate this trend and discusses challenges for CADE going forward, and possible repercussions for other competition agencies in Latin America.
Investigations. The number of recent investigations by CADE in this sector is noteworthy. At least 8 investigations on anticompetitive unilateral behavior in digital markets were initiated over the past few years, 6 of which involved Google. As of yet, no guilty finding was issued.
In June 2019 a preliminary investigation was launched regarding restrictions imposed on Android device manufacturers and mobile network operators allegedly aimed at consolidating Google’s dominant position in general internet search. The investigation is based on a similar case by the European Commission that led to a €4.34 billion fine. Now CADE is investigating whether this practice had any adverse effects in Brazil.
In 2020, CADE initiated two investigations involving Big Tech companies. In connection with the first one, CADE sent RFIs to 19 players including Google, Facebook, Apple, Amazon and Microsoft, inquiring about their transactions in the past 10 years. The aim is to determine whether any of these transactions were reportable to CADE and/or whether they should be reviewed by the authority even if they fall outside the mandatory filing thresholds. The investigation, which is currently confidential, is ongoing.
In June 2020, CADE issued an Interim Order suspending WhatsApp’s payment and transfer service in Brazil, in the context of an investigation on whether the partnership between WhatsApp/Facebook and one of Brazil’s main payment service providers, Cielo, was reportable in Brazil. The Interim Order was revoked a week later after the companies submitted information that CADE found addressed its competition concerns.
Also in the context of the WhatsApp/Facebook Pay investigation, CADE opened a preliminary investigation targeting payment acquirers and other vertically related payment schemes for alleged market foreclosure. The investigation was initiated following a complaint filed by the Brazilian Association of Online to Offline Businesses, which is led by sub-acquirers. The complaint argued that acquirers and large Brazilian banks have changed the payment scheme rules in order to make it more difficult for sub-acquirers to obtain credit using its receivables as a collateral, thus making competition between acquirers and sub-acquirers more difficult.
Policy documents. In August 2020, CADE’s Department of Economic Studies published a study on “Competition in digital markets”, which is a compilation of the relevant resources that are currently guiding CADE in its investigations.
The report notes the difficulties in defining the scope of relevant markets in cases involving digital markets. The study also cites a German Working Paper on market power concluding that “when companies compete to attract consumers exclusively to their ecosystem (that is, there is no relevant multi-homing), it is important to analyze these markets separately”. The study suggests that “antitrust authorities focus their analysis on evidence of market power, theories of harm or the identification of anticompetitive strategies; and less in the definition of relevant markets themselves”.
In June 2021, CADE’s Department of Economic Studies published a study on “International benchmarking regarding competition and data protection agencies”. The study maps the interplay between competition and data protection agencies in Brazil and in twelve other countries. Together with the study, CADE announced the execution of a cooperation agreement between the competition authority and ANPD.
In August 2021, CADE published a study on “Digital platform markets” compiling CADE’s case law in merger and conduct investigations involving online services, such as social networks, digital music, VoD, travel services and food delivery apps.
Expected developments & challenges. Global competition law trends have had uneven impact in enforcement activities within the Latin America region over the years. This is the result of the asymmetry in laws and institutions, but also of the very nature of the markets targeted in such activities. Conversely, relevant players in digital markets are broadly present in Latin America. Although some, like Amazon, have limited or no presence in certain countries, in general digital markets have a high social and economic relevance throughout the region and the types of competitive issues that appear are similar in all countries. Likewise, the level of awareness and debate concerning the issues posed by digital markets is unique, which leads to more pressure and complaints from different players across the region.
While this is expected to increase the likelihood of investigations, it can also represent a challenge to enforcers. Enforcement in digital markets involves not only dealing with novel issues that require the use of different analytical approaches, such as relevant market definition – which is a challenge in itself. But also in dealing with matters in which competition law concerns are commingled with other important contemporary issues, such as privacy and labor law issues. Therefore, the same factors that will assure preeminence for competition law enforcement in digital markets also raise the question of what its role should be. This may push CADE and other authorities to tackle matters that go beyond their traditional roles and make enforcement less predictable.
In sum, there are enough reasons to believe that digital markets will remain high on the list of enforcement priorities for CADE and other Latin American agencies. At the same time, it poses new challenges and may require improved analytical tools.