The relationship between the regulatory and competition bodies The Brazilian Experience Cleveland Prates Teixeira Commissioner of the Brazilian Administrative Council for Economic Defense (CADE)

Main Topics Recent Developments Competition and Regulation Institutions in Brazil Relationship between Competition and Regulation in Brazil Case Studies Final Remarks

Recent Developments in Brazilian Economic Environment Since the 1990s Brazil has experienced an important improvement in the macro and microeconomic fronts: Trade liberalization; Inflation under control; Privatization process.

Regulation and Competition “The following tasks could be assigned either to a regulator, to the competition agency, or to both: –ensuring non-discriminatory access to necessary inputs, especially ‘essential facility’ networks ; –monitoring other anticompetitive behavior, and reviewing mergers ; –technical regulation ; –economic regulation ; –periodically reassessing the scope and degree of remaining market power.” (OECD, 1999)

Antitrust Bodies in Brazil The Brazilian System for Economic Defense (SBDC) is composed by three bodies: Secretariat of Economic Monitoring (Seae) at the Ministry of Finance; Secretariat of Economic Law Enforcement (SDE) at the Ministry of Justice; Administrative Council for Economic Defense (CADE) - Ministry of Justice.

Regulatory Agencies in Brazil There are currently eight regulatory agencies in Brazil; The creation of the agencies in Brazil can be classified in three phases: Infrastructure and energy Phase I (1996 and 1997): Aneel, Anatel and ANP; Health and environment (1999 and 2000): ANS, Anvisa and ANA; Infrastructure Phase II (2001): ANTT and Antaq.

Regulatory Agencies in Brazil – Legal Framework Brazilian Electricity Regulatory Agency - Aneel Created by Law nº 9,427, from 12/26/1996, and Decree nº 2,335, from 10/06/1997. Regulatory framework for the sector: Laws nº 9,074/95 (concessions) and nº 9,648/98 (Wholesale Electricity Market). Brazilian Telecommunications Regulatory Agency – Anatel Created by Law nº 9,472, from 07/16/1997 and Decree nº 2,338, from 10/07/1997. Regulatory framework for the sector: Law nº 9,472/97 (“General Law of Telecommunications”).

Brazilian Petroleum Regulatory Agency – ANP Created by Law nº 9,478, from 08/06/1997, and Decree nº 2,455, from 01/14/1998. Regulatory framework for the sector: Law nº 9,478/97 (“Petroleum Law”). Brazilian Complementary Health Regulatory Agency -ANS Created by Law nº 9,961, from 01/28/2000, modified by Provisional Measure mº 2,177-44, from 08/24/2001. Regulatory framework for the sector: Law nº 9,656/98. Regulatory Agencies in Brazil – Legal Framework

Brazilian Sanitary Surveillance Agency – Anvisa Created by Law nº 9,782, from 01/26/1999. Regulatory framework for the sector: Law nº 9,782/99. Brazilian Water Agency – ANA Created by Law nº 9,984, from 07/17/2000 and Decree 3,692, from 12/19/2000. Regulatory framework for the sector: Law nº 9,433/97. Regulatory Agencies in Brazil – Legal Framework

Brazilian Road and Rail Transportation Agency – ANTT Created by Law nº 10,233, from 06/05/2001, and Decree nº 4,130, from 02/13/2002. Regulatory framework for the sector: Law nº 10,233/2001. Brazilian Water Transportation Agency – Antaq Created by Law nº 10,233, from 06/05/2001, and Decree nº 4,122, from 02/13/2002. Regulatory framework for the sector: Law nº 10,233/2001. Regulatory Agencies in Brazil – Legal Framework

Relationship between Regulation and Competition in Brazil Positive aspects: Legal framework of regulated sectors establishing the relationship between the regulatory agencies and the antitrust authorities; Several regulatory agencies forming competition departments to deal specially with competition issues; Cooperation agreements have been signed between regulatory agencies and Seae, SDE and CADE.

Negative aspects: A closer relationship is still needed in order to improve the analysis of mergers and anticompetitive practices ; Legal conflict regarding the financial system. Relationship between Regulation and Competition in Brazil

An example of the need to a closer interaction between the regulation and competition authority was the preliminary injuction determined by CADE regarding the allegations of anticompetitive practices by a telecom operator; According to one of the petitioners, the case was presented to CADE due to the long delays of the regulatory agency Anatel in analyzing it. Case Studies – The Telecommunications Sector

CADE decided to apply a provisional measure taking into account the elements presented and the competition risks of the supposed anticompetitive practice; The decision was an important step towards a closer relationship between CADE and Anatel. Case Studies – The Telecommunications Sector

As the regulator of the financial system in Brazil, the Central Bank (Bacen) was considered by the Federal General Attorney (AGU) as the body in charge to exclusively analyze competition concerns in this sector; According to CADE, there is no exemption in the Brazilian Competition Law (Law nº 8,884/94) regarding the financial sector; In order to eliminate this controversy, advanced negotiations between Bacen and CADE produced a draft law regarding the distribution of competences. Case Studies – The financial system

The proposed solution was to leave the Central Bank solely with the analysis of mergers involving systemic risk to the financial system; On the other hand, CADE would be in charge of the remaining mergers and the anticompetitive practices; This draft law is under way at Congress now. Case Studies – The financial system

In the last years a closer interaction between the competition and regulatory authorities in Brazil is noteworthy; But there is, however, room to a better formal and informal cooperation between these bodies; and A constant competition advocacy role is needed. Final Remarks

THE END Cleveland Prates Teixeira - Commissioner Phone number: +55 (61) Fax number: +55 (61)