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WEDNESDAY, JUNE 5, 2019

Brazilian Government publishes Executive Order of Economic Freedom

On April 30th, the Brazilian President issued a Declaration of the Rights of Economic Freedom — by means of Executive Order nº 881/2019. Executive Orders are legislative acts through which the Presidency can enact legislation that comes into force immediately, without the previous approval of the National Congress. However, before becoming permanent, the orders must be endorsed by Congress — which means the current text may be rejected, revisited or even voided by Congress.

With the broad aim of strengthening free enterprise in the country, the Executive Order has at least two main features.

On one side, it establishes general rights and rules of interpretation derived from the constitutional protection of free enterprise. For example, it states that prices and products outside regulated sectors of the economy must be freely set by the market — unless when provided otherwise by the Competition Law. With multiple other similar directives, this is a more symbolic part of the Executive Order.

This part of the text regards rules largely featured in the Brazilian legal framework — with the prominent intention of enhancing the importance of this values. Experts have criticized this point, because instead of aggregating new attributes to the legal scenario, it may create confusion. For example, the Executive Order provides that every proposed alteration of norms which interest economic agents should be scrutinized by means of a regulatory impact analysis. However important and useful impact analysis may be, the provision has been criticized for being too broad. Specialists have been highlighting that not every single government measure is deserving of this analysis.

On the other side, the act alters the Civil Code and other legal institutes – with significant changes associated with contractual and tax matters. For instance, the Executive Order intervenes in the norms applicable to the abuse of corporate form and veil-piercing, providing what counts as “misuse” and patrimonial confusion. Also, it establishes a new definition and determines the regulation of investment funds.

If the Executive Order is indeed approved, given the range of the topics covered by the text, it is difficult to anticipate its effects in private relations and state regulation.

Brazilian Supreme Court strikes down municipal laws prohibiting individual transport apps

On a recent ruling, the Supreme Federal Court (STF) declared the unconstitutionality of municipal bans on the operation of individual transport apps — such as Uber and Lyft. The decision was taken by the Court's Plenary regarding laws from Fortaleza (CE) and São Paulo (SP), which restricted the activity of these applications.

According to the Justices, the acts violated the principles of free enterprise and free competition. Also, they state the laws had a formal defect of competence, as the regulation of private transportation of passengers by means of mobile applications is part of the National Policy on Urban Mobility (Law No. 12.587/2012). Therefore, the Union would be the competent entity to regulate on the topic and municipalities should conform to the limits of federal legislation and not prohibit or disproportionately restrict them. The full decision has not been released yet.

However, this ruling will not cease the debate of mobility applications in the Court. In mid-April, the Brazilian Association of Land Passenger Transport Companies (Abrati) challenged before the Court the operation of an application which provides intermediation to bus services (Buser). The company questions the constitutionality of judicial rulings that allowed the app to operate.

Although it has not arrived at the Supreme Court yet, another sharing economy controversy spreading through municipalities is the regulation of dockless bike and scooter sharing. In the following months, we should see debates about the legality of this activity and the limits to a potential municipal regulation on these topics.

Presidency sends names of new nominees to CADE’s Tribunal

On May 20, the Presidency nominated two new Commissioners to fill upcoming vacancies at CADE’s Tribunal: Leonardo Bandeira Rezende and Vinicius Klein should replace Commissioners Polyanna Vilanova and João Paulo Resende — whose terms end on July 8 and 14, respectively. To take office, both must be approved by the Senate.

Leonardo Bandeira Rezende is Professor of Economics at Pontifical Catholic University of Rio de Janeiro (PUC-RJ), responsible for teaching disciplines about industrial organization and microeconomic theory, as well as an expert in the area. His latest publications on Competition Law were two studies: the first, published in 2013 in the Journal of Money, Credit and Banking, about the competition between public banks and private banks, with evidence from the Brazilian market that the presence of a public bank does not affect the behaviour of private banks. The later was published by the International Journal of Industrial Organization, regarding the competitiveness of "flex" cars in the gasoline resale market. According to the article, given the change in demand, such innovations tend to benefit all consumers, even those who do not opt for flex cars.

Vinicius Klein is State Attorney of the State of Paraná and holds PhDs in Law and in Economics, and Professor at the Federal University of Paraná (UFPR) in both disciplines. His researches the relationship between contract law and economics, observing the economic effect of long-term contractual relations. In the area of competition law, he published the article The Formation of the Competitive Market of Private Higher Education, linking the private sector's participation in higher education to the arrival of foreign capital and its transformation into a highly profitable business.

Overall, the two appointments were welcomed by the Brazilian antitrust community, which considered them “technical nominations”.

Two further vacancies remain pending in CADE: former Commissioner Cristiane Alckmin left the agency before the end of her term to become the Secretary of Economy of the state of Goiás earlier this year and Commissioner Paulo Burnier’s term ends on July 16. Also, the terms of Alexandre Cordeiro, CADE’s General Superintendent, and Walter de Agra Junior, CADE’s chief attorney, end later this year, in October.

Brazil’s Congress clears the Executive Order which creates the National Data Protection Authority

On May 29, Brazil’s National Congress has approved the Executive Order n. 869/2018 — which creates the National Data Protection Authority. As previously mentioned in our newsletter last month, this represents an important step for the effectiveness of the Brazilian General Data Protection Law.

Now, the Presidency has fifteen business days to either endorse or veto the Executive Order. The Executive Order should come into force immediately after the President’s scrutiny.

NEWS AND EVENTS

Vinicius Marques de Carvalho discusses organizational design and digital economy at 2019 ICN Annual Conference

VMCA founding partner Vinicius Marques de Carvalho spoke last month at the 2019 International Competition Network (ICN) Annual Conference, hosted by the Colombian Superintendence of Industry and Commerce between May 15th and 17th in Cartagena.

Vinicius was one of the panelist at the breakout session (BOS) “Organizational design — Getting in shape for the digital economy”, which discussed how Competition authorities around the world are taking different approaches to their staffing and structure to ensure that they are well placed to face the competition […] Read more.

 

Ticket/Itau: third-party UNECS’s appeal seeks to notify CADE of broader financial sector concerns

VMCA associate Anna Binotto talked to PaRR about a Itaú/Ticket deal currently under Cade’s analysis.

“The third party seems to be suggesting that, since the banking market is very concentrated and there are many vertically integrated players in the financial sector, the mere increase in Itaú’s economic power or its expansion into a related market should prompt CADE’s intervention, even though there is no causal link between the transaction and a significant market share increase, Binotto said. “CADE has never bought into such a thesis,” she said, adding that the leveraging theory of harm is usually viewed with […] Read more.

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