*Originally published in Valor Econômico.

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

The Ministry of Finance recently published a report analyzing the competitive challenges in so-called “digital markets,” a somewhat vague concept that encompasses various types of online services, such as search engines, marketplaces, and social media. These markets have been the subject of debate due to market concentration and the role of major digital platforms, known as big techs, in the competitive dynamics.

The debate revolves around whether there is a need to establish restrictions on big techs' activities within their respective markets, potentially creating a special competition regime for these companies. This regime would aim to stimulate competitive behavior from new entrants, thereby increasing the contestability of these markets. Beyond fostering competition, there is also a focus on addressing what is referred to as an “ecosystem failure,” which concerns a fairer distribution of gains among various agents providing complementary services around large digital platforms.

In reviewing international regulatory initiatives, the Ministry of Finance made an important observation: there is no consensus. Some countries have chosen to leave antitrust legislation unchanged, others have opted for procedural improvements to streamline or specialize in ex-post (contextual) analyses of conduct, while others have imposed ex-ante prohibitions on certain practices, albeit with varying approaches and levels of detail. Among these options, the Ministry of Finance suggests a model similar to the UK’s, where CADE (Brazil’s Administrative Council for Economic Defense) would be empowered to impose conduct prohibitions on platforms identified as dominant in specific services. This would aim to increase contestability, enabling competitors or new entrants to exert competitive pressure and promote market rivalry.

The Ministry of Finance, wisely, advocates caution by proposing a new legislative debate, distinct from Bill (PL) No. 2768/22, which is currently under consideration in the Chamber of Deputies. The bill resembles the European Digital Markets Act, imposing ex-ante prohibitions at the legislative level on discriminatory practices, denial or obstruction of access to digital platforms, and inadequate handling of personal data that could confer competitive advantages.

This caution is prudent, as ex-ante prohibitions could stifle business practices capable of generating compensatory efficiencies. While such practices may create competitive advantages for the companies that implement them, they can ultimately benefit users. It is important to note that antitrust law does not aim to combat market concentration per se but to protect investments in differentiation and innovation, providing more options and benefits to end consumers—an essential aspect of the online services landscape.

In Brazil’s antitrust legislation, only cartel formation was explicitly prohibited ex-ante, through a law passed in 2011. This was due to CADE’s track record over the previous 12 years, during which it condemned all detected cartels without finding any economic justification for the practice in the 52 cases analyzed. In contrast, over the past decade, commercial discrimination—a current regulatory debate focus—resulted in condemnations in only 27% of detected cases by CADE, none of which involved the digital sector. The remaining cases were justified by contextual commercial reasons or by providing compensatory efficiencies to consumers.

Therefore, the Ministry of Finance’s initial suggestion may place CADE in a dilemma between error and triviality. If no successive precedents exist for condemning specific practices in a given digital service, CADE’s ex-ante prohibition could, in addition to generating uncertainty, risk sacrificing potential efficiencies and innovation, ultimately harming consumers. On the other hand, if there is solid jurisprudence indicating that a particular digital market practice has no prospect of generating efficiencies or innovation but only harms the market, a prohibitive statement from CADE would have little impact, merely synthesizing precedents without the binding force of law.

Wouldn’t it be better to equip CADE with procedural legislative amendments—some of which the Ministry of Finance has already suggested—and then wait for firm antitrust precedents to legally prohibit anticompetitive online practices that, based on observed experience, have no potential to deliver economic efficiencies or user benefits? This would be a regulatory approach grounded in evidence.

Regulatory efforts in this area, across different jurisdictions, have largely been retrospective, addressing the historical concentration of big techs. However, all regulation should be prospective. If we focus on this forward-looking perspective, the most striking current evidence is the rise of generative artificial intelligence, which has created new markets and introduced robust new economic players to the digital landscape, such as OpenAI. This development has intensified rivalry among platforms, spurring a frenetic race of investments, partnerships, and AI integration across various services. Such a scenario seemed unthinkable just a few years ago, at the start of discussions and proposals for digital platform regulation.

The debate proposed by the Ministry of Finance is valid and should advance based on studies and evidence. Nevertheless, it is always worth remembering that the State’s efforts to foster competition may once again be surpassed by the creative forces underpinning the invisible dynamics of competition itself.