*This is an AI-powered machine translation of the original text in Portuguese.

**The image used in this article was created by a generative artificial intelligence.

*** Originally published in Conjur.

Tools and digital services are part of everyday life in Brazil. Companies providing them have come under scrutiny due to their size and concerns about their impact on competition and society. This scrutiny has led to regulatory initiatives in Brazil and around the world.

However, as regulations cannot explicitly name the leaders in providing these digital services to avoid violating the impartiality of the law, there is an effort to legislate by abstracting the characteristics of these large companies or traits of their services. This often leads to paradoxical situations. A typical example is Bill 2768/22, which aims to regulate "digital markets" without first presenting an economic impact assessment. It takes inspiration from the European Union's Digital Markets Act (DMA), which, according to local criticisms, was approved at an unprecedented speed [1] and prematurely, considering the novelty of the concepts and topics being regulated. [2]

The European initiative

The European legislative movement was based on investigations by the European Commission, which deemed certain practices of large digital platforms, such as discrimination in search results exposure or access, tying and refusal to sell, as anti-competitive. Critics argued that the interventions by European authorities were late and with ineffective remedies. Some also claimed difficulties in analyzing market structure and assessing competition damage regarding digital services.

It was equally challenging to determine if such behaviors would bring efficiencies, i.e., more efficient products or benefits capable of offsetting potential competition harms. These difficulties led the Europeans from a contextual analysis (case by case) of the reasonableness (rule of reason) of already conducted behaviors (ex-post) in repressive processes to a proactive regulatory initiative (ex-ante) through the DMA. This initiative includes general obligations and prohibitions on behaviors (per se), disregarding the evaluation of their reasonableness or the potential generation of compensatory economic efficiencies that could improve the product or service and benefit users and end consumers.

European law and competitive analysis

European documents analyzing the impact of regulation [3] point out the existence of a "competition problem," resulting from the type of service provided or the size of the leaders. Regulation, they argue, would increase contestability—allowing competitors to challenge the power of certain platforms—and also bring more fairness in business relations with them.

Thus, despite starting from investigations of conduct by European antitrust authorities, European legislation is based on concepts unfamiliar to competition analysis. It imposes per se and ex-ante obligations on so-called "gatekeepers" (selected companies based on size) providing core platform services (digital services) with the aim of achieving contestability and fairness—terms not well defined.

The term "digital markets" itself is unclear, as it encompasses different companies providing distinct services that do not constitute a "market" in the technical antitrust sense. However, despite this, the law assigns the power of supervision and enforcement to the European competition authority.

The Brazilian Bill

On the other hand, Brazilian Bill 2,768/22 uses a clear competitive language. The notion of a "gatekeeper" is translated as "essential access control power," which refers to the concepts of "market power" and "essential infrastructure," typical of antitrust methodology. Among the guiding principles in Article 4 are free competition, free enterprise, and repression of economic power abuse.

The central point, however, is in Article 10, which brings vague obligations of market conduct, such as equality and access to platforms. Apparently, these are per se rules, but Article 11 obscures this reading by introducing considerations and reservations to those obligations, such as proportional intervention to risks, impact assessment, costs and benefits analysis of conduct (would this be an efficiency analysis?), and the level of competition (would this be a rivalry analysis?).

Comparing the documents

While both the Brazilian and European documents regulate through imposing obligations, the motivation for intervention is different. Despite referring to investigated and condemned conduct, the European diagnosis insists on the existence of a structural problem to justify a new intervention tool.

In other words, for the Europeans, the characteristics of digital services, combined with the size of some platforms, are already a threat to competition, hence ex-ante prohibitions on certain behaviors, regardless of the context of their occurrence. On the Brazilian side, there is no publicly disclosed diagnosis, but the language of the law does not indicate a structural problem, seemingly assuming that the issue is simply to combat practices carried out by platforms that may occupy dominant positions.

From paradox to dilemma

Thus, the Brazilian Bill takes an approach more aligned with competitive analysis and, as seen, with some notes of contextual analysis (Article 11). Paradoxically, it assigns regulatory and enforcement powers to the National Telecommunications Agency (Anatel). We would then have, in Europe, a new regulatory instrument applied by the competition authority, and in Brazil, a special competitive regime for "digital platforms," exercised by Anatel and not by the Administrative Council for Economic Defense (Cade).

From this paradox arises a dilemma. Either the obligations in the Bill are per se, and there is no room for the analysis of reasonableness, rivalry, and efficiency, or the Bill brings only a special antitrust analysis regime for digital services. In both cases, there are problems.

Firstly, if we are dealing with a special regime to address anticompetitive conduct, then the proposed Bill would bring overlap with antitrust legislation (Law No. 12,529/11), foreseeing legal uncertainty and institutional conflicts. There would also be a legitimacy problem, considering that, unlike in Europe, Cade did not condemn the so-called "Big Techs," even though it judged the same conduct examined there.

It does not seem reasonable for the Bill to propose the legal revision of decisions made by Cade. If that were truly the intention, it would be sufficient to propose procedural adjustments to antitrust legislation (e.g., to expedite the analysis of digital services) or even to review elements of the methodology without legal changes.

Now, if the Bill indeed brings per se obligations, a detailed impact assessment is important, pointing out what the competition problem would be, justifying specific regulation, different from the normative basis legitimizing Cade's repressive power, and demonstrating the appropriateness and benefits of the proposed remedies.

Risk of transplant rejection

In any case, it is necessary to rethink the scope of the project, particularly regarding the imposed obligations, which, being too generic, would include restrictions on behaviors already accepted by Cade's jurisprudence. For example, the refusal of access by a marketplace to a digital seller for legitimate business reasons (such as a history of fraud or incompatibility with the chosen profile) accepted by Cade could not be carried out. The per se prohibition based on European law would also end up overlooking that digital services can compete fiercely with physical services and that the characteristics of each market in Brazil and Europe are distinct.

The risk here is that of rejecting a poorly executed transplant. There are concerns about digital services to be debated and addressed, but the path of "one-size-fits-all" regulation through abstractions of characteristics of certain companies or their services does not seem to be the most suitable.

The importation of foreign models is not recommended when the Brazilian market has specific characteristics and Cade's jurisprudence has its own understandings. Before embarking on a European geopolitical agenda, it is crucial to clearly diagnose the problem so that any state intervention finds the appropriate remedies without threatening the development and national competitiveness in the digital environment.

[1] Belloso, N.M. e Petit, N. The EU Digital Markets Act: a competition Hand in a Regulatory Glove, European Law Review, August, 2023.

[2] Colomo, P.I. The Draft Digital Markets Act: A Legal and Institutional Analysis” (2021) 12 Journal of European Competition Law & Practice 561, 572.

[3] European Commission, “Inception Impact Assessment: Digital Services Act package: Ex ante regulatory instrument for large online platforms with significant network effects acting as gate-keepers in the European Union’s internal market” (2 June 2020) Ares(2020)2877647.