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THURSDAY, JULY 4, 2019

Cade dismisses three Google cases

The discussion about the role of Antitrust in the digital economy is a hot topic. Some groups advocate that there should be more government intervention upon "tech giants" and, from the enforcement perspective, the European Commission has been taking the lead in this process. Commanded by Margrethe Vestager, the European Commission has already imposed three million-dollar fines on Google for abuse of dominant position. Such convictions are controversial. Some academics and officials say regulators should be wary of the dynamism of digital markets and avoid imposing certain remedies, at the risk of discouraging innovation.

In this scenario, one main question arises: what is the appropriate level of enforcement against tech companies? In Brazil, until last month, CADE had four different ongoing investigations against Google. In the past weeks, three of such cases were dismissed — providing clues about where the Brazilian antitrust authority stands in this debate.

The first case was an investigation initiated in 2013, regarding the practice of scraping, in which Google was suspected of appropriating content from other price comparison websites to make them available on its own product (Google Shopping). CADE indicated that Google had the potential to harm competition, as there would be incentives to leverage its dominant position in the market for general search into its price comparison service (thematic search market) by scraping ads from other price seekers. Thus, CADE understood that there was anti-competitive rationality in the conduct. However, CADE also concluded that there was not enough evidence that scraping practices did indeed take place. Therefore, the Commissioners unanimously dismissed the case.

The second case regarded Google's possible abuse of dominant position through Google AdWords’ API Terms and Conditions (T&Cs) (that is, the site-related programming interface), and its potential to impose restriction clauses on advertisers, preventing them from using competing search platforms (namely, from multi-roaming).

CADE requested information from dozens of Google AdWords’ customers and, after reviewing 106 responses, concluded that there was no evidence that the T&C clauses hindered multi-roaming, and that customers were pleased with the options for doing so. Thus, CADE concluded that there were no anticompetitive effects (neither concrete nor potential) and the case was closed unanimously.

Lastly, CADE Tribunal dismissed the Google Shopping case. Out of the three cases, this was the most controversial. CADE’s Economic Studies Department had prepared a report about the conduct and its potential anticompetitive effects. The Commissioners disagreed over their interpretations of such data: whilst some of them concluded that the potential anticompetitive effects entailed an anticompetitive conduct, others deemed the potential effects did not surmount the pro-consumers innovations Google provided in those years. The voting tied (3-3). According to CADE’s internal rules, whenever there is a tie the President’s vote prevails. Therefore, with the smallest of margins, Google escaped conviction.

Cade and Petrobras sign agreement to open the refining market

The historic agreement sets the stage for the disposal of refineries, which together represent 50% of Petrobras' refining capacity, and the consequent opening of the national refining market. The agreement derives from an Administrative Inquiry, which had the purpose of investigating alleged abuse of dominant position by Petrobras in the oil refining market in Brazil. The probe was based on a technical opinion prepared by the Economic Studies Department of CADE, within the framework of a working group established with the National Petroleum Agency (ANP).

The divestment project has determined that potentially competing refineries will be sold to different economic groups. This measure is in line with the guidelines of Resolution 9 of the National Energy Policy Council (CNPE), which seeks to address concerns related to the creation of regional monopolies in refining.

Commissioners João Paulo de Resende and Paula Farani de Azevedo voted against the agreement, understanding that the probe was in a preliminary stage and did not have a clear scope. As a result, according to the Commissioners, CADE would not have the capacity to sign an agreement to promote structural changes in the sector, since the agency's repressive action should be directed towards clearly defined anticompetitive behavior which constitutes abuse of economic power.

Despite the criticisms, the other members of the Tribunal were in favor of the agreement. After the vote, there was a symbolic signing ceremony, attended by officials such as Petrobras President Roberto Castello Branco, Brazilian Minister of Mines and Energy, Bento Albuquerque, Executive Secretary of the Minister of Economy, Marcelo Pacheco dos Guaranys, and the Director General of the ANP, Décio Oddone.

The agreement represents a new step in the process of opening up the Brazilian fuel industry, which initiated in the 1990s with legislative changes. However, the industry will likely take some time to adapt to the changes brought by the agreement.

One year after the historic 2018 Brazil truck drivers' strike, which sparked a series of proposals to change the fuel sector, it is now clear that increasing the competition in this market also depends on other major challenges, such as the expansion of investments in infrastructure, the restructuring of the Brazilian tax system, as well as the fight against fraudulent practices and persistent tax evasion.

Regulatory turmoil in the financial sector

The Brazilian financial sector has been going through a busy period from a regulatory perspective. Among other proposals currently on the table, the Central Bank of Brazil has expressed its intention to implement a new regulatory model for innovation, known as "sandbox", and is also considering the adoption of policies to regulate open banking. Both measures aim to boost competition and develop the sector.

On June 13, the Special Finance Secretariat of the Ministry of Economy announced, together with the Central Bank, the Securities and Exchange Commission (CVM), and the Superintendence of Private Insurance (Susep), the intention of adopting the “sandbox model”. The term, borrowed from computer language, refers to a type of regulation that seeks to create a legal environment capable of reconciling the flexibility needed to develop disruptive technologies with the indispensable guarantee of safety and measures against systemic risk.

More specifically, it aims to promote controlled flexibility so that new emerging configurations of services and products offered in the financial, security and capital markets remain in line with the regulatory rules of each segment, regardless of their form. As a concrete example, the announcement refers to the possibility of granting temporary authorizations as well as exceptionally and justifiably exempting the compliance of certain rules for specific regulated activities, if the pre-established material and temporal limits are observed. The initiative is part of a broader context of fostering competition by reducing regulatory barriers that hinder the entry of new players.

With the implementation of this measure — already adopted in jurisdictions such as the UK — the use of technologies such as distributed ledger technology (DLT), blockchain, roboadvisors and artificial intelligence are expected to grow in these markets. The ultimate intention is to ensure regulators will simultaneously guarantee freedom for the development of these innovations and closely monitor their externalities, envisioning better ways to regulate them in the long-term.

Regarding the second project, the Central Bank has announced that it will release to public consultation a proposal for regulation of open banking in the second half of this year. Open banking relates to the implementation of a technological system in which financial data — such as registration information, bank extracts and financial products — can be accessed by third parties, provided that there is consent by the data holder. It is therefore established that financial data belongs to customers, not to the financial institutions to which they are linked to.

In this sense, once authorized by the account holder, the institutions will be able to share data of products and services among themselves, based on the integration of platforms and technological infrastructures. The Central Bank expects that, with greater access to data, market agents will be able to offer more product and service alternatives, intensifying the competition and stimulating innovation. The integration of platforms is also relevant for facilitating data and customer portability.

Although some details have already been released by the regulator, there are many doubts and obstacles on the way. The main challenges posed are bank secrecy and guaranteeing the security of the information, as well as compliance with the provisions of the Brazilian General Data Protection Law (LGPD, Law 13709/2018).

NEWS AND EVENTS

Brazil Supreme Court to rule on WhatsApp message searches

Partner Marcela Mattiuzzo talked to Global Data Review (GDR) about Brazil’s Supreme Court analysis on whether using evidence obtained from WhatsApp messages without user permission would violate the constitutional right to confidentiality of communication.

Full article available here.

Petrobras agrees to sell eight oil refineries

To address concerns over Petrobras’s alleged monopoly power in the Brazilian oil refinery market, the state-controlled oil conglomerate has agreed to sell eight of its 13 refineries, tells Global Competition Review (GCR). According to partner Eduardo Frade, “this will still be an industry subject to antitrust concerns, as others, but this change evidently gives room to more competition”.

Full article available here.

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