An analysis of the (in)compatibility between the exercise of regulatory leverage and CADE’s role in the defense of competition in Brazil

Abstract

Background: Regulatory agencies and competition authorities have a position of power in relation to the regulated and economic agents, since they have the power to control access to a specific market, change behaviors, grant concessions, etc. It is observed the exploitation of this leverage to achieve other objectives/obtain advantages, within or outside its competence of action, which perhaps would be unfeasible or would require resorting to other more expensive or risky tools, if it were not for the use of this influence.

Objective: To analyze to what extent the exercise of regulatory leverage by CADE is compatible with its role of promoting the antitrust enforcement in Brazil.

Method: The research analyzed the use (or attempt) of CADE's leveraging through its gatekeeper powers associated to its attribution, specifically through the fulfillment of the requirements of competence and purpose of the administrative act.

Results: Three (3) cases were identified in which CADE used (or tried to use) its gatekeeper powers, inherent to its preventive and repressive functions, to obtain additional or broader objectives. In 1 (one) of the cases, the autarchy overstepped the competence of another authority when trying to use the gatekeeper power by imposing unilateral restrictions, with the sole objective of operationalizing an unfeasible merger – despite having acted to maximize an objective inherent in the defense of the free competition. In the other 2 (two) cases, the use of regulatory leverage by CADE seems to have been used correctly, as the autarchy entered into agreements in the legitimate exercise of its competence, and imposed a broader obligation than the one attributed to the execution of a cease-and-desist by the competition law in a manner consistent with the purposes of the Brazilian antitrust.

Conclusions: As the institute of regulatory leverage is unregulated, its ungoverned use can turn CADE into a secondary enforcer of a potentially large set of other laws. Therefore, for the time being, its exercise must stick to the objectives of Brazilian antitrust law (even if the objectives are diffuse) and the scope of action of the autarchy in accordance with its attributions, under penalty of incurring in some type of abuse of power. If there is an interest in expanding its use beyond the authority's area of operation, or in order to achieve objectives that are unrelated to those enshrined in the antitrust legislation, it is fundamental that its legitimation be given expressly.