In 2017, the BRICS Competition Authorities Working Group on Digital Economy was created during the V BRICS Competition Conference, in Brasilia. The purpose of the working group is to stimulate the cooperation among the BRICS’ countries (Brazil, Russia, India, China and South Africa) regarding competition policies involving digital markets. This cooperation is essential due to the borderless nature of the digital markets.
The starting point of the project was a questionnaire prepared to highlight the main practices and challenges faced by antitrust authorities. The report’s goal was not to develop a homogeneous plan of action for the enforcement of competition policy among the BRICS, but to establish a solid base for cooperation following countries’ different perspectives and experiences in the digital economy. The working group had its first results published in September.
In the report, the Brazilian Competition Authority (CADE) emphasized its concerns regarding the challenges of the dynamic character of digital markets. The Brazilian antitrust authority argued that in such markets, while the intervention is necessary in order to protect competition and consumers, it is also important to be cautions not to barrier innovations or to accidentally create exclusionary effects. There is also a concern regarding long-term effects of enforcing antitrust policies in digital markets, especially in high- tech market in which innovation is even more dynamic. The example given by the report is the difficulty to predict whether a company will continue to be encouraged to innovate after the approval of a merger or acquisition.
According to the report, the dynamic competition is associated with the idea that competitive and efficient markets result on the innovation of products and of manufacturing processes. That is the reason why antitrust authorities aim to guarantee to keep innovation channels widely opened. Furthermore, as the business and the technology evolve, there is a continuous debate whether the dynamic competition must be included in the antitrust analysis, either in the context of anticompetitive conducts and merger reviews.
. Despite the antitrust authority’s use of traditional analysis tools in the definition of market power in the digital economy, when it comes to multi-sided markets, CADE has been considering some particularities, such as the interdependence of consumer groups. One example of such analysis, in the merger between Buscapé and Bondfaro, the reporting commissioner argued that, as a result of the dynamic nature of the multi-sided digital markets, the case should be reviewed considering the particularities of the market and of the players involved within the specific context in order to fully establish the competitive restrictions and the substitutability pattern, applicable to each case. This approach lead CADE in the case at comment to divide the relevant markets in (i) the national market of online advisement and (ii) the national search and prices’ comparison market.
Another preeminent case is the merger review involving Itaú Unibanco S.A. and XP Investimentos S.A [1]. According to the Brazilian competition authority, XP’s acquisition by Itaú could lead to an attempt by Itau to protect its market of traditional banks. Competitiveness in general could be reduces through the acquisition of a disruptive [2] and innovative which was constantly increasing its market share. The case is important to demonstrate CADE’s concerns in allowing the appearance of new markets originated from innovation, without incumbents barring it.
The publication of this report is the starting point for the development of the subject. The report is of great significance, as it reflects the joint efforts to better comprehend the challenges of the digital economy. Additionally, since the concerns with the relation between digital economy and competition policy is common to all antitrust authorities, the report can offer insights to support new challenges yet to come.
[1] Merger Review n° 08700.004431/2017-16
[2] A disruptive player is the one that stablishes a new markeet or invest in markets which have not received attention by market incumbentes. Disruptive players also turn non-consumers into consumers of new markets. – “What is Disruptive Inovation” December 2015 issue (pp.44–53) of Harvard Business Review.
