Brazil opens public consultation on digital platforms

On January 19, 2024, the Brazilian Ministry of Finance’s Department of Economic Reform (SRE-MF) opened a public consultation concerning how digital platforms are regulated in the country. The consultation seeks to assess whether there is a need to amend the Brazilian Competition Law (Law No. 12,529/2011). The consultation period will run until May 2, 2024.

Beyond issues of fake news, enhancing transparency, content moderation, and ensuring fair compensation for journalistic content on digital platforms (all of which have been debated extensively in Brazil’s Congress), the SRE-MF has also emphasized the importance of discussing the economic and competition aspects of digital platform activities. A key challenge lies in accurately defining what constitutes a digital platform, as this remains unclear. According to the SRE-MF, digital platforms rely on digital infrastructure and operate via business models that differ from traditional markets – one example concerns how digital platforms incorporate search engines, instant messaging services, social media, and online marketplaces.

Many of these platforms operate as ‘two-sided’ marketplaces, where both customers and service providers interact with the platform. They also need to process significant volumes of data, including that concerning consumer habits, preferences, relationship networks, and purchase histories.

In its explanation of the need for public contributions, the SRE-MF underscored that interdependent relationships are more complex in the digital realm and require attention. For example, a company may own several interconnected digital platforms that cross-promote their respective uses. These attributes maximize the network effects of such platforms – the more loyal users a given platform has, the more valuable it becomes.

There is also a growing concern that traditional antitrust tools and regulations may be unable to adequately address the competitive dynamics of digital platforms, meaning that important antitrust issues could go unnoticed by the Brazilian Antitrust Authority (CADE). In light of this and the need for a thorough discussion on regulatory challenges and limitations, the SRE-MF has introduced 16 questions to steer the debate, which are divided into four sections:

• Objectives and regulatory rationale;
• The sufficiency and appropriateness of the current regulatory/antitrust framework;
• The design of a regulatory framework that is competition-friendly; and
• Institutional arrangements for regulation and supervision.

The first section of questions considers the economic and competitive aspects that would justify further regulation. It looks to assess whether different types of platforms require different regulatory approaches and to what extent the Brazilian context differs from other jurisdictions with similar regulations.

The second section focuses on whether Brazil’s current legal framework (particularly the Brazilian Competition Law) is appropriate for regulating digital platforms. It contains questions on whether the current criteria for presuming dominance are suitable, on the specific behaviors that could pose competition risks (such as algorithm bias, interoperability issues, excessive use of personal data, and product leveraging), and on the adaptation of the thresholds for filing and reviewing mergers.

The third section considers a potential new regulatory model and asks whether Brazil should adopt a preventive (ex-ante), corrective (ex-post), or even a hybrid approach to prevent anticompetitive practices. It also explores whether regulations should be uniform for all players in digital markets, or whether they should be asymmetrical (imposing specific obligations on a select few).

Finally, the fourth section considers whether a dedicated regulatory authority would be necessary. If so, it considers two alternatives: establishing an entirely new regulatory body or expanding the powers of existing ones.

There are also other ongoing initiatives that consider this topic. Bill No. 2,768/2022 (currently being reviewed in Congress) seeks to define, assess, and validate platforms that offer services in Brazil. The bill encompasses various products and services, including search engines, social media, video streaming platforms, and cloud storage services.

Since 2020, CADE has had a monitoring process in place for transactions carried out in digital markets over the last decade. Eighteen local and international players – such as Google, Facebook, Twitter, Amazon, Microsoft, Apple, and Uber – have been contacted to provide information on their transactions between 2010 and 2019. The process awaits a technical opinion from CADE’s Department of Economic Studies.

Such initiatives – together with certain other bills that have been submitted to Congress – illustrate how digital platforms are garnering increased attention from Brazilian authorities, consistent with trends observed worldwide.

For further information on competition law matters in Brazil, please contact Mattos Filho’s Antitrust practice area.