Ministry of Finance proposes changes to Competition Law to deal with digital markets

This morning, the Ministry of Finance published a report and held a press conference to discuss innovations in competition law applicable to digital platforms.

The report is the result of a public consultation (Call for Contributions SRE/MF No. 01/2024) carried out by the Ministry of FInance in the beginning of the year.

The Ministry highlighted that contributions to the public consultation were generally in agreement regarding the role of the Administrative Council of Economic Defense (CADE) in leading the antitrust regulation of digital markets but emphasized the Brazilian Telecommunications Agency’s (Anatel) important role in developing this new institutional design.

The public consultation received 301 contributions from 72 participants, including several companies and foreign authorities.

Some of the respondents stressed that the current competition legislation is insufficient to deal with issues involving digital markets, including the difficulties of monitoring the competition remedies applied by CADE.

CADE, in turn, has acknowledged the need to adjust competition legislation to address the situation. Among the competition concerns specified are exclusivity and self-preferencing practices, charging abusive prices to enter digital ecosystems, excessive prices charged due to a monopolistic position, killer acquisitions, and leverage practices, among others.

In an environment in which the digital economy continues to gain significance worldwide, more particularly, in Brazil, the introduction of new legal instruments to better regulate the digital economy is a welcome step forward, according to the Ministry of Finance. However, in order for these legal instruments to be truly beneficial, it is necessary to balance the need for regulation that is capable of addressing these competitive concernswithout excessive burden and intrusion for digital platforms.

To this end, a number of regulatory changes have been proposed, which will require further debate and detail. According to the Ministry of Finance, the proposals would be fairly balanced, with criteria so high as to cover no more than a dozen major platforms.

The proposed measures are divided into two groups: 

Group 1 – New instrument to foster competition among systemically relevant platforms for digital markets

1. Establishing a procedure for CADE to designate digital platforms as systemically relevant.
   • The law will establish a list of qualitative criteria: presence in multi-sided markets; market power associated with network effects; vertical integrations in related markets, access to large volumes of relevant personal and commercial data; offering of multiple digital services; and a significant number of users.
   • The law will establish minimum revenue criteria, both globally and in Brazil. Companies whose revenue is lower than the established amounts will be exempt from being designated as systemically relevant digital platforms.
2. Introducing procedure and transparency obligations that may be imposed on designated platforms from the moment of designation, at CADE’s discretion.
   • Prior notification of mergers.
   • Transparency rules for end users and professionals regarding commercial information relevant to the use and offer of services and products.
   • Duty to inform end users and professionals of changes to the terms of use or service offered.
3. Establishing a procedure for CADE to investigate designated platforms and define, on a case-by-case basis and to the extent necessary, specific substantive obligations for these companies.
   • The law will establish a list of obligations that may be imposed by CADE, providing flexibility for each case.
   • Scope of obligations can be specified in relation to specific products and services.
   • Inversion of the burden of proof: proof with objective justification falls on the designated agent.
4. A specialized unit at CADE will be responsible for implementing the new pro-competitive tool.
   • The new specialized unit will be responsible for monitoring digital markets, appointing economic agents, establishing and monitoring obligations and investigating possible violations.
   • Appointment procedures and the definition of obligations will be submitted to CADE’s Tribunal.
5. Implementing substantive obligations in cooperation with regulators such as Anatel and the Brazilian National Data Protection Authority (ANPD), when necessary, due to specific technical and sectoral aspects.
   • Regulators such as Anatel and the ANPD may be involved in the design, implementation and monitoring of the specific obligations defined after investigation by the appointed agents, when necessary.
6. Strengthening CADE’s powers to carry out market studies, enabling it to request information and analyze a given sector or industry.
   • The tool will enable CADE to carry out a proactive analysis of competitive dynamics in various sectors, allowing it to identify and address systemic competition concerns.
   • The results will inform CADE’s work in the classic antitrust functions, competition advocacy and the new platform mandate.
7. Creating a forum for inter-institutional cooperation between CADE and other federal bodies (e.g. Anatel, ANPD, National Consumer Department – Senacon) on issues related to digital markets.
   • Forum for the exchange of information among federal agencies, enabling faster responses and saving resources.

Group 2 – Adjustments in the enforcement of antitrust tools to platforms in general

1. Updating antitrust analysis tools to continuously improve the analytical framework used by CADE to identify and assess competitive risks, including new theories of harm.
   • The inclusion of network and ecosystem analysis in their research tools would be fundamental, as it enables them to assess the interdependence among agents in multi-sided markets and the importance of network effects in defining relevant markets and market power.
   • This update aims to develop theories of harm that better capture the nuances of the competitive dynamics present on digital platforms.
2. Revising CADE’s merger notification form, including specific questions on digital platform business models.
   • The questions will enable the collection of relevant data for the identification of network effects and the evaluation of theories of harm specific to digital platforms, such as data on the number of users, interoperability between platforms and the types of data collected and their use for the purposes of differentiating products or services, among others.
3. Considering adopting the ordinary proceeding for mergers involving large digital platforms with a high number of users, when they meet the gross revenue criteria established in the law for mandatory prior notification.
   • Considering the ordinary proceeding for mergers involving large digital platforms, when necessary, based on an assessment of the information received through the notification form.
   • An in-depth analysis of the cases, to better understand the particularities of the competitive dynamics involving digital platforms.
4. Exploiting, when necessary, the flexibility provided for in article 88, paragraph 7 of Law No. 12,529/2011, to request the submission of mergers that, despite not fitting the formal notification criteria, may present competition risks.
   • Transactions involving platforms that do not fit the criteria for mandatory prior notification, nor the designation criteria provided for in the new specific instrument, but may have a significant impact on competition.
   • This is especially important in cases involving vertical integration among digital platforms or increased access to data relevant to the competition.
5. Updating the revenue amounts used as criteria to define whether a merger is notifiable according to items I and II of the head paragraph of article 88 of Law No. 12,529/2011.
   • Updating the revenue figures for prior notification of mergers, allowing CADE to focus its efforts on analyzing transactions with greater potential to impact competition.

Our Competition team is following these discussions and the next steps in the regulatory proposals and is available to provide further information and clarifications.