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.