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17 de May de 2024

CADE and the Regulation of Digital Platforms

Continuing our series on competition and regulation of digital markets and Artificial Intelligence, we present five initial impressions on the contributions of the Administrative Council for Economic Defense (CADE) to the Request for Information conducted by the Ministry of Finance for the regulation of Digital Platforms.

In summary (spoiler alert!), CADE positions itself as the most suitable agency in Brazil to lead the regulation of digital platforms, suggesting the need for legislative and institutional adjustments.

  1. CADE proposes the implementation of “ex ante” regulation for digital markets, through the enactment of legislation that complements the Competition Defense Act (Law No. 12.529/2011).
  2. In its contributions, CADE indicates that it has been acting in an “ex post” manner in digital markets. However, it highlights that characteristics of this market, such as network externalities and monopoly tendencies, might limit the effectiveness of this type of intervention, described as “residual,” “occasional,” and “reactive.” It also emphasizes that investigations of dominant positions in digital markets can extend over many years, and that the formulation of behavioral or structural remedies becomes complicated due to rapid changes in market conditions and technology.
  3. Instead of creating a new regulatory body, CADE suggests expanding its competencies, including a specific unit for digital markets. This approach would avoid high costs, extensive learning curves, and delays in the creation and stabilization of a new agency. CADE emphasizes its experience in analyzing competitive issues in digital markets and its cross-sectoral activity, unlike sector-specific regulatory agencies.
  4. According to CADE, certain characteristics of digital markets favor higher levels of concentration, such as economies of scale and scope, practices of cross-subsidization, intensive collection and use of user data, switching costs, network externalities, and the competition dynamics of “winner takes all” or “winner takes most.” These are markets where the economic power of a platform stems not only from its participation in an isolated market but mainly from its role as “orchestrators” of vast ecosystems or “gatekeepers,” theoretically controlling third-party access to data, users, and essential resources for innovation and competition.
  5. Most jurisdictions that have regulated or are seeking to regulate digital markets have opted for an “ex ante” legislation system, such as the European Union, United Kingdom, United States, India, and Germany. In addition, CADE advocates for the creation of an asymmetric regulation model (similar to the Digital Markets Act of the European Union), where “ex ante” obligations apply only to a set of platforms classified as “gatekeepers.”

CGM will remain attentive to the next steps of the Public Consultation and the issuance of the respective report by the Ministry of Finance.

This bulletin is for information purposes only and should not be relied upon to obtain legal advice on any of the topics dealt with here. For additional information, please contact the leaders of the Antitrust, Administrative, and Anti-Corruption Law team. team.

CGM Advogados. All rights reserved.

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