Below, we have provided the full transcript of the interview with Alexandre Cordeiro Macedo, President of Brazil’s Administrative Council for Economic Defense (CADE), recorded on October 21, 2021.
This is part of a series of videos that CPI is producing where we will interview the heads of various NCAs all around the world.
Thank you, Mr. Macedo, for sharing your time for this interview with CPI.
A video of the complete interview is available HERE.
Hi, everyone, and thanks for tuning in today, for one of our exclusive talks with the headS of Competition Authorities from around the world. Today, we have the pleasure to speak with Alexandre Cordeiro Macedo, President of the Administrative Tribunal for Economic Defense (CADE), the Brazilian Competition Authority. Good afternoon, Alexandre and thanks so much for being with us today.
Alexandre CORDEIRO MACEDO:
Thank you, Esteban. It’s a pleasure for me and it’s also a pleasure to see you again, my friend.
A pleasure for me, too. Thank you very much, and I would like to start off today by asking, how has your authority specifically dealt with the challenge of the pandemic? Are there learnings that have emerged from the experience of the pandemic and the resulting antitrust enforcement challenges?
Yes, thank you, Esteban.
At the beginning of the COVID-19 pandemic there was an expectation about how the competition authorities would act to keep their enforcement on markets. One of the main points brought to light was the physical restriction imposed by the pandemic, and CADE operated effectively for the continuity of the investigation procedures that had to be carried out electronically, collaborating with other competition authorities to deal with this issue and a number of others.
One example of this collaboration that I can mention is a conversation we had with our colleagues from Mexico at the beginning of the pandemic crisis about our cooperation on benchmarking investigations, which had to be taken in electronic format. Thus, the conversation involved the management of electronic documents, gathering of evidence, term counting, as well as virtual court sessions.
Another example of challenge faced during the pandemic was when CADE decided to authorize the collaboration among a group of rival companies as a measure to minimize the effects of the crisis in the retail sector of consumer goods, such as beverages, food, and personal care products. At the time, CADE relied on international recommendations from the OECD and the ICN.
After that decision, CADE released a provisional informative note concerning the collaboration among companies to face the crisis generated by the Covid-19 pandemic, which provided guidance on recommended parameters in the elaboration of strategies to fight against the pandemic. This initiative was aligned with the measures taken by other competition authorities to address the new challenges faced during that period.
That said and, considering CADE’s internal experience with the technical and management challenges posed by the Covid-19 pandemic, I can say that It definitely required a great deal of adaptation and innovation, based on the premise of promoting a competitive environment as healthy and promptly as possible.
In a more external panorama, CADE has also attended several webinars promoted by international forums in order to share some of the measures taken during the pandemic and to learn with other authorities experience. The ICN Merger Working Group, of which CADE is a co-chair, organized a series of regional webinars to promote discussions on the impact of the COVID-19 pandemic on merger review procedures. In this scope, CADE hosted the South American Regional Webinar and had the pleasure of having a representative from the Chilean Competition Agency attending it.
After more than a year and a half into the pandemic – as the first Covid-19 cases in Brazil were registered in March 2020 – we can observe several effects of the crisis in the country, especially in the economy. However, it is too early to indisputably determine the consequences of the pandemic for the economic markets, considering that most of them are taking place and being verified nowadays, and many of the rumor’s that emerged at the beginning of last year have not concretized at the expected extent.
To sum up, we have to consider that market response is not usually immediate, and it is necessary to wait longer to determine more precise conclusions on the actual consequences of the pandemic, at least for the Brazilian scenario. Thus, a cautious performance by the antitrust authority is the safest path at the moment, in order to avoid excesses and opportunistic behavior. Finally, the pandemic context also forced CADE to adopt a new way of working with people working from home. As I believe it happened in most places, this was a big challenge in terms of having to provide the work tools and develop internal organizational rules. This ended up resulting in greater productivity for CADE, as the need for the physical presence of the public servant was replaced by more objective metrics.
Thank you, Alexandre is really impressive to see that this crisis didn’t stop your agency’s activity and to stress all these capacities of flexibility with silence, and in this context, do you have any particular achievement that you would like to underline or mention recent enforcement achievements?
Esteban, over the past few years, CADE has increased its efforts on artificial and human intelligence services to develop investigative tools and techniques capable of detecting cartels and other anticompetitive conducts without an exclusive dependence on leniency instruments.
Thus, CADE has a specific Intelligence Unit responsible for, despite other duties, processing and analyzing digital evidence, using artificial intelligence techniques to collect information for ongoing investigations and coordinating the activities of the Project Cerebro. This project is the most relevant information technology tool that was developed by CADE’s officials and it is under operation since 2013, and it is mostly focused on fighting bid rigging.
Thus, the platform currently integrates government procurement databases and uses data mining tools and economic filters to analyze a significant amount of data on procurement procedures. In this context, it allows CADE’s officials to identify suspicious patterns of behavior, such as identical bids that may indicate simulated competition or other signs of anticompetitive practices in government public procurements.
It also allows CADE’s officials to monitor markets that are historically problematic, gather relevant information for ongoing investigations in a faster and easier way and analyze high volume of digital evidence gathered in inspections or search and seizures operations.
That was a focal point for CADE in recent years, with the agency investing resources and effort in developing tools and proactive approaches to detect bid rigging, since fighting this conduct is a priority for the autarchy since the year of 2007. Then, the Project Cerebro computerized some work previously done by case handlers, which increased CADE’s efficiency in many investigation activities and resulted in an increasing of the number of investigation on bid rigging.
Once this project is a priority for CADE, it receives continuous investment in research and development, and during the past few years, as the tools and techniques were improved, the team responsible for the project noticed that some tools, originally intended for investigative purposes might be adapted for digital evidence analysis, by preselecting digital evidence more likely to contain information relevant for the investigation. This tool is still in the early stages of development, but it seems very promising for cartel investigations that have a high volume of digital evidence to be analyzed.
Thank you, Alexandre, is really remarkable this brain project and I remember when you told us about this in Argentina, when you were here and this and other tool that you mentioned has to do with technology and digital tools. So I wonder, what is your view on the challenges posed by the technology sector? And do you think there is a need for reforms?
Esteban, technology sector is a hot topic nowadays, both nationally and internationally, mostly considering that big tech companies generated great discussions about the role of competition authorities. CADE has a different and conservative approach to this matter in comparison to other competition authorities from Europe and United States, which are usually imposing heavy fines to big tech companies, such as Amazon, Google and Facebook, besides imposing constrictive measures to reduce their market share.
I believe that intervention in the natural flow of markets is a complex issue that requires parsimony and self-restraint to perform the duties of the antitrust authorities within the limits of our responsibilities. Protecting a competitive environment entails restricting practices aimed solely at maintaining monopolistic positions without providing any sort of benefit related to efficiency, but it also entails encouraging free initiative and creativity. We understand that measures to regulate digital markets may reduce investments and stifle innovation – and efficient and innovative companies are important to the development of the market.
An effective control of concentrations goes beyond intervention or regulation, and CADE is giving special attention to the dynamics of competition in digital markets. Business models are varied and constantly replaced, and companies use several means to serve their consumers. At times, consumers themselves show companies the way to go, so in such complex environments, an intervention aimed at solving an issue might end up causing many more.
We understand the matter is not the size or the efficiency of the big tech companies, but what these companies are doing with their market power, which may result in abuse of dominant position. Actually, we are concerned about anticompetitive practices, abuse of dominant position that may harm competition.
In Brazil, we understand that traditional antitrust tools should not be given up, since antitrust enforcement is flexible enough to provide the guidelines and basis for protecting competition. However, they need to be adapted to the new challenges, in order to prevent unnecessary and excessive interventions that could discourage innovation and, consequently, the dynamic competition so intrinsic to digital markets. In addition, ex-post evaluation plays a crucial rule in informing decision making.
Thank you for your meaningful thoughts about this. In your view, aside technology sector, what are other industries that enforcement and attention or scrutiny?
Esteban, given the current economic context, CADE made significant efforts to elaborate several technical opinions on relevant issues related to the pandemic concerning legislative proposals, regulatory framework or thematic review related to different sectors, such as healthcare industry, oil, gas, educational services, and transport services.
The ports and civil aviation sectors have market failures that often affect the competitive environment, and both sectors have been object of several works conducted by CADE, given their economic relevance and the respective competition concerns.
CADE, for example, played an important role in the debates concerning the baggage allowance and Avianca’s remaining slots in the civil aviation market and in the discussions concerning the THC-2 charge in the ports sector, aiming to stimulate competition in these sectors.
In Brazil, the civil aviation sector has enough characteristics to spark competition concerns. This is because a number of conditions in the sector limit competition: strong growth movements, legal barriers to entry, coordinated airport infrastructure barriers, and high levels of investment for operation, all of which together make the market very concentrated and tend to be oligopolistic.
The same is true in the ports sector. The new Ports Law established a number of guidelines for the operation of ports, including stimulating competition, encouraging private sector participation, and allowing broad access to facilities and services. The need to increase the efficiency of the sector was the central point of the regulatory reform in 2012, but we still have a long way to go to improve competitiveness in this sector.
In partnership with the OECD and other national organizations, we are implementing the Project on Competition Assessment in Port and Civil Airport Sectors, which aims to discuss the importance of competition and regulation for economic development in both sectors. The OECD’s Competition Checklist is based on a series of simple questions to assess and identify laws and regulations that unnecessarily restrict competition. This will help foster the development of less restrictive public policies that favor competition and thus promote greater market access, international competitiveness, and long-term growth.
Thank you, alright. Really impressive, the quality and the scope of CADE’s activity and I think it’s really inspiring for all practitioners in this Latin American region. So this brings us to the last question that, what do you think will be the future direction for antitrust enforcement, both domestically and internationally?
Esteban, antitrust goes from one extreme to other: sometimes society demands regulators to go beyond conventional ideas and sometimes they go back to basics. Now we are heading to before the 80’s, before the Chicago School, when regulators tried to be in charge of everything. In my opinion, we will soon see this will not work out and return to a more technical and specific analysis.
I am averse to any kind of activism that diverts our antitrust body from what I believe to be its primary mission: to look after the welfare of consumers. CADE tends to be more orthodox in its analysis – that is, we still guide our actions according to welfare standards. We do not bring social, environmental, and tax issues to our reviews. We are concerned with consumer welfare and economic efficiency.
I am not saying social, environmental, and labor matters are negligible. I just think they are not under the scope of antitrust law. I do not think the competition authority should be concerned with them, at least in Brazil, where CADE has the well-set role of looking after competition only. This is even so the case, because if we increase our scope to address all these topics we will open up a Pandora’s Box. Then, we will not be analyzing mergers under an antitrust perspective any longer; we will be discussing social matters – which undermines enforcement.
At first, people can think this would make CADE’s enforcement stronger, as our decisions would embrace much more, taking in other fields. However, from medium to long term it would have the opposite effect. In addition, in this scenario, other authorities would certainly try to limit our jurisdiction. That is why we prefer to focus on anticompetitive conduct that can damage competition, not social matters.