The Relationship between Competition Policy, Regulation and Trade Policy in the Brazilian Economy

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Ministry of Finance - Brazil
Secretariat for Economic Monitoring

• The Relationship between Competition Policy,
  Regulation and Trade Policy in the Brazilian
  Economy

Claudio Considera May, 2002
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OECDs Recommendation Regarding Regulatory
Reform The Importance of an Effective
Competition Policy

• OECD has recently recommended its members to
  adopt maket opening and competition enhancing
  regulatory reform, with more effective
  application of competition law.
• OECD Report on Regulatory Reform (1997) mentions

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• Reform economic regulations in all sectors to
  stimulate competition, and eliminate them except
  where clear evidence demonstrates that they are
  the best way to serve broad public interests
• Review and strengthen where necessary the scope,
  effectiveness and enforcement of competition
  policy.

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The Division of Tasks between Competition
Agencies and Regulators

• The introduction of competition into regulated
  sectors brings up for discussion the proper
  relationship - who does what - between
  economy-wide competition agencies and
  sector-specific regulators.
• In spite of institutional and historical
  differences from country to country, OECDs
  studies (The Relationship between Competion and
  Regulatory Authorities, 1999) indicate that

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The Competition Agencies are Better Suited to be
in Charge of the Competition Protection Function
in Regulated Sectors

• Competition agencies have a comparative advantage
  when it comes to antitrust analysis, ensuring
  that anti-competitive conducts and merger review
  process do not undo the benefits from introducing
  greater competition into regulated sectors.

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• Competition agencies are better suited by their
  accumulated expertise, experience and
  institutional characteristics antitrust
  analysis is their core function
• The institutional cultural differences between
  the competition agencies and the sector-specific
  regulators tend to produce different approaches
  regarding competition protection. Trying to
  change or mix institutional cultures could
  compromise abilities to perform core functions

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• Better allocation of resources antitrust
  analysis does not differ very much from one
  sector to the other. Creating antitrust units
  inside the regulators requires the unnecessary
  expenditure of (scarce) financial and human
  resources
• Integrity of the national competition policy and
  legal certainty
• Economy-wide competition agencies tend to be more
  immune to capture than sector-specific
  regulators.

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The Sector-specific Regulators are Better Suited
to be in Charge of the Technical and Economic
Regulation

• Sector-specific regulators have a comparative
  advantage in taking care of both the technical
  and the economic regulation
• Both require on-going monitoring and the
  application of sector-specific expertise.

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The Importance of Cooperation between
Competition-Agencies and Sector-specific
Regulators

• Due to the synergies that arise from the
  regulatory and competition functions, competition
  agencies and sector-specific regulators must
  cooperate closely.
• In order to avoid inconsistent and investment
  discouraging application of the policies
• In order to avoid resource duplication and to
  ensure that technical regulators take proper
  account of the ways in which the adoption of
  technical standards can be used to restrict
  competition

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The Relationship between Competition Authorities
and Regulators in Brazil Today

• The Secretariat for Economic Monitoring -Seae
  (Ministry of Finance), the Secretariat for
  Economic Law-SDE (Ministry of Justice) and the
  Administrative Council for Economic Defence-Cade
  (independent body linked to the Ministry of
  Justice) are the brazilian antitrust authorities.
  
• SEAE and SDE have analytical and investigative
  functions and prepare instruction reports to
  CADE, which is an administrative tribunal.
  CADEs decisions can only be reviewed by the
  courts.

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The Relationship between Competition Authorities
and Regulators in Brazil Today

• There are no specific exemptions from the
  competition law for any of the regulated sectors.
  Law n. 8.884/94 applies fully to them and also to
  privatizations
• In most cases, the bodies in charge of the
  instruction phase (Seae and SDE) work in
  cooperation with the sector-specific regulators
  involved (the regulatory agencies).
• CADE(administrative competition tribunal) decides
  all competition questions regarding the regulated
  sectors.

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The Relationship between Competition Authorities
and Regulators in Brazil Today

• SPECIFIC SITUATIONS
• Telecommunications Seae and SDE are not in
  charge of the instruction phase. Only ANATEL(the
  sector-specific regulator) prepares a instruction
  report to Cade
• Pharmaceuticals and Health equipment, components,
  primary goods and services ANVISA (the
  sector-specific regulator) has na overlapping
  function regarding the instruction phase of some
  anti-competitive conducts cases

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The Relationship between Competition Authorities
and Regulators in Brazil Today

• Financial Sector Although there are no specific
  exemptions regarding this sector in Law nº
  8.884/94, this has always been a controversial
  issue (Central Bank vs. Competition Authorities)
• A draft-bill is being prepared to solve this
  competence-conflict question, by which
• Merger Cases The Central Bank will have the
  final word regarding the merger review of cases
  which involve systemic risk, while the
  Competition Authorities will have the final word
  regarding the cases that dont.
• Anti-competitive Conducts the Competition
  Authorities will have the final word concerning
  the decision of anti-competitive conducts.

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The National Competition Agency (ANC)

• Nothing is supposed to change with the creation
  of ANC the competition law will apply fully to
  regulated sectors, the competition authority (now
  only ANC) will be in charge of its enforcement
  and will work in cooperation with the regulatory
  agencies
• Since ANC will include Seae, SDE and CADE, it
  will be granted that the Competition Agency will
  be in charge of both the instruction phase and
  the decision of competition cases regarding all
  regulated sectors.

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Thank You for Your Attention.

• Claudio Considera
• Secretary for Economic Monitoring
• Ministry of Finance - Brazil
• Telephone number 55-61 4122360
• Fax number 55-61 2250971
• E-mail consider_at_fazenda.gov.br