Competition Policy in Brazil

• Competition Policy versus Competition Law• Brazilian legal framework (Federal Constitution

and Federal Law 8.884/94)• Legal framework is adapted through caselaw +

legal analysis + antitrust authority priorities to shape Competition Policy

• A market economy should have competition as one of its pillars – Political Economy of Competition

Daniel Krepel Goldberg

Competition Policy in Brazil

• What should be the goals of competition policy?

• Apparent consensus: allocative efficiency and consumer welfare

• There are however, other goals (equity)

• Should we prioritize goals?

Competition Policy in Brazil

• Prioritizing efficiency implies decisions taken by antitrust authority should be within a “Pareto-optimal arch”

• What about efficiency-neutral decisions (i.e. bid-rigging)?

Competition Policy in Brazil

• Considering several principles for competition policy, should there be an optimal mix?

• Competition policy for developing countries: some remarks

Competition Policy in Brazil

• Does competition policy work as tool for growth?

• Two competing views: the Darwinian view and the Schumpeterian view

• The Darwinian view: “Competition drives enterprises to better adapt /or at least selects the fittest”

Competition Policy in Brazil

• Does competition policy work as tool for growth?

• Two competing views: the Darwinian view and the Shumpeterian view

• The Darwinian view: “Competition drives enterprises to better adapt /or at least selects the fittest”; therefore it fosters productivity

Competition Policy in Brazil

• The Shumpeterian view: “While atomistic firms operating in a competitive market may be a perfect vehicle for static resource allocation, large firms with substantial market power are the most powerful engine of innovation and output expansion”

• According to this view there is a trade-off between growth and competition.

Competition Policy in Brazil

• Empirical evidence: Schumpeterian view sustains that “beginning with a monopoly, competition enhances efficiency up to a certain level of market concentration”.

• This is called the “Inverted U-Shape” hypothesis - intense competition hampers innovation.

Competition Policy in Brazil

• Empirical evidence favors the Darwinian hypothesis - intense competition is positively correlated with growth and it fosters innovation, productivity and growth.

Competition Policy in Brazil

• Now that we have established ‘competition is worth it’, we should make it work!

• Competition policy in developing countries should have (i) a sound legal framework; (ii) enforcement priorities and above all (iii) an advocacy component.

Competition Policy in a Multilateral Framework

• Trade-offs and complementarities arising from multilateral competition policy for developing countries

• Does competition policy encourage trade?

Competition Policy in a Multilateral Framework

• Possibilities for a multilateral competition framework:– national competition law and enforcement

regime; and/or– modalities of voluntary international

cooperation.

• Multilateral merger rules or hard-core cartel investigations

Competition Policy in a Multilateral Framework

• Core principles– Transparency– Non-Discrimination: de jure or de facto– Procedural fairness

• Multilateral enforcement

• Cooperation: technical assistance and peer review

Competition Policy in a Multilateral Framework

• Core principles– Transparency – transparency means that laws,

regulations and guidelines of general application should be published in a timely manner.

– This could or could not include exemptions and decisions.

– Transparency has a number of positive externalities (cooperation, legitimacy etc.)

– Above all, Transparency facilitates advocacy.

Competition Policy in a Multilateral Framework

• Core principles– Non-discrimination – Non-discrimination (de jure)

implies competition law regimes should not prescribe discriminatory treatment based on nationality of agents or firms.

– The problem of national champions (i.e. blockage of mergers by foreign companies) – again, trade-offs with so-called industrial policy.

– De facto discrimination could raise complex issues within a multilateral setting.

Competition Policy in a Multilateral Framework

• Core principles– Procedural fairness – there should be some

procedural guarantees (rights of defence) under which private parties have access to competition authorities - here special care should be taken, since there is a multitude of possible institutional arrangements (e.g. Brazil).

Competition Policy in a Multilateral Framework

• Core principles– Procedural fairness – there should be some

procedural guarantees (rights of defence) under which private parties have access to competition authorities - here special care should be taken, since there is a multitude of possible institutional arrangements (e.g. Brazil).

Competition Policy in a Multilateral Framework

• Conclusions - There are benefits derived from the adoption of a

multilateral framework. - However, international cooperation should be an

important (maybe more important) goal - International cooperation should prioritize (i)

international hard-core cartels, (ii) technical assistance and capacity building in competition advocacy (the biggest challenge seems to be in regulated sectors). Priority (ii) should yield benefits to trade.