Legal and regulatory landscape
CADE’s Department of Economic Studies publishes report on competition in digital markets
In August, CADE’s Department of Economic Studies (DEE) released a report named Competition in digital markets: a review of specialized reports, which presents a review of 21 studies, reports and white papers produced by competition agencies of foreign jurisdictions and international research centers on competition in digital markets.
The report’s goal is to assist CADE in improving its knowledge of digital markets and the debates going on around the world. While the report does not present CADE’s own views of competition in digital markets, it provides a summary of discussions related to the following topics:
(i) overview of the dynamics of digital markets, challenges related to relevant market definition, the role of data as an input, considerations about pricing, behavioral economics as key to understanding competitive dynamics and general conclusions on the market power of digital platforms;
(ii) review of benefits generated by digital markets;
(iii) review of potential problems generated by digital markets;
(iv) overview of solutions to address potential problems, such as abandoning the consumer welfare standard, changing the standards of burden of proof, data portability and interoperability, new thresholds for mandatory merger notification;
(v) screening of matters the DEE understands still require further examination, such as the criteria to characterize predatory practices in digital markets and the need for high investments in innovation.
CADE releases guidance on cooperation among rivals during the Covid-19 crisis
In July, CADE released a non-binding Temporary Informative Note (“Note”) addressing how rivals may cooperate in the context of the Covid-19 crisis. The Note comprises CADE’s recommendations on the design of cooperation agreements that minimize risks of antitrust infringements and guidance on the channels that companies may use to obtain statements from CADE on their cooperation strategies.
The Note makes clear that agreements to fix prices and commercial conditions and exchanging commercially sensitive information remain unlawful despite the pandemic, so companies cooperating with rivals must take precautions not to commit such infringements. To minimize risks of antitrust infringements in the context of cooperation agreements among rivals, the Note provides the following guidelines:
(i) Scope: the scope of the cooperation must be specific and directed at addressing issues caused by the Covid-19 pandemic or its effects;
(ii) Duration: the cooperation must have duration strictly limited to the period necessary to address issues caused by the Covid-19 pandemic or its effects;
(iii) Territory: the geographic scope of the cooperation must also be limited to the territories where it is necessary to address issues caused by the Covid-19 pandemic or its effects;
(iv) Governance, transparency and good-faith: cooperation among rivals must be implemented in accordance with strict parameters of governance and compliance – for instance, in case rivals need to share sensitive information, they should adopt measures to limit access to information to a clean team. Furthermore, companies must be transparent and present all relevant documents and information in case they want to obtain clearance from CADE on their cooperation strategies.
Fix-it-first remedies important for swift clearance of mergers resulting in high market concentration
In July, CADE’s Tribunal cleared the acquisition, by pharmaceutical Hypera, of Boehringer Ingelheim International’s business of development, production, sale, marketing and distribution of “Buscopan” drugs in Brazil . The clearance was conditioned on Hypera selling its business of “Neocopan Composto” drugs in Brazil to a rival. In September, CADE’s Tribunal cleared the acquisition, by retailer Supermercados BH, of 14 stores and 3 gas stations previously owned by Comércio e Distribuição Sales. The clearance was conditioned to Supermercados BH divesting its supermarket unit in the city of Carandaí to a rival .
What these mergers have in common is that both would result in high market concentration, and fix-it-first remedies were important for the swift clearance obtained by the parties involved.
In the Hypera-Boehringer deal, CADE’s Superintendence identified that the transaction would significantly increase concentration in the markets for antispasmodic combined with analgesic drugs and antispasmodic drugs in general. The parties then negotiated a divestiture with CADE’s Superintendence, and Hypera quickly found a buyer for the divested business (pharmaceutical União Química). Hypera was able to complete the divestiture before CADE’s Tribunal started the review of the first acquisition (the Tribunal was then able to swiftly rule on the case and clear it; in total, CADE took roughly four months to review the deal).
Similarly, in the Supermercados BH-Sales deal, CADE’s Superintendence identified that it would result in a combined market share of 80%-90% in a certain city. Parties then negotiated the sale of one of Supermercado BH’s unit in this city, found a buyer and submitted the divesture deal to CADE. The Tribunal was able to swiftly clear the deal after that (in total, CADE took close to four months to clear the deal).
CADE reaffirms its rigid stance over exclusivity agreements employed by dominant firms
In August, CADE’s Tribunal fined car alarms manufacturer PST Eletrônica S.A. (Positron) BRL 8 million (c. USD 1.4 million) for harming competition by entering into exclusivity agreements with distributors in the aftermarket. 
The investigation began in 2010, after rival H-Buster filed a complaint accusing Positron of sham litigation and market foreclosure via exclusivity agreements. While the sham litigation claim was dismissed, CADE reaffirmed its tough stance on exclusivity agreements by dominant firms.
According to CADE, Positron’s exclusivity agreements foreclosed a substantial part of the market and harmed the ability of rivals to compete effectively. First, Positron held a dominant position in the market for car alarms, with shares ranging from 60-70% to 70-80% in revenues and from 40-50% to 60-70% in sales volume during the period from 2010 to 2018. Second, distributors were the main and most efficient sales channel in this market, accounting for 57% of total sales in the segment between 2010 and 2018. During the course of the conduct, exclusivity agreements enabled Positron to foreclose between 20-30% and 30-40% of distributors in terms of volume, and between 20-30% and 40-50% in terms of revenue.
Moreover, CADE pointed out that certain elements associated with Positron’s exclusivity agreements increased their potential to harm competition:
(a) Distributors that signed exclusivity agreements with Positron were the only ones with national presence;
(b) The agreements had been in force for several years (some since 2001);
(c) The agreements’ terms were almost identical;
(d) Positron was the only manufacturer of car alarms to sign exclusivity agreements with distributors.
Considering Positron’s market dominance and the fact that it entered into exclusivity agreements with a relevant portion of distributors, CADE held that there was enough evidence to fine Positron for harming competition in the car alarms market. Note that CADE did not carry out any test of whether competitors were unable to effectively compete by selling their products to distributors that didn’t enter into exclusivity agreements with Positron, and merely presumed that anticompetitive effects were produced.
 Merger no. 08700.001226/2020-02.
 Merger no. 08700.002592/2020-71.
 Administrative Proceeding no. 08012.005009/2010-60.
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