This presentation by Guilherme Mendes Resende from CADE Brazil was made during the discussion on Practical approaches to assessing digital platform markets for competition law enforcement at the 2019 edition of the OECD-IDB Latin American and Caribbean Competition Forum held in San Pedro Sula, Honduras on 24-25 September 2019. Find all related materials at the forum website http://oe.cd/laccf.

1. LATIN AMERICAN AND CARIBBEAN
COMPETITION FORUM
Session III: Practical approaches to assessing digital
platform markets for competition law enforcement
Guilherme Mendes Resende
Chief Economist - CADE
Brazil
25 September 2019, San Pedro Sula, Honduras

2. Contribution from Brazil
 The Brazilian competition experience in digital markets
 Mergers
 Anticompetitive conducts
 Market studies in the digital markets

3. Anticompetitive conducts
 In 2016, CADE received a complaint claiming that Uber had facilitated a
cartel by fixing prices for affiliated drivers.
 CADE initiated an investigation to assess whether this ridesharing app had
incentives to adopt this uniform comercial conduct (Preparatory
Procedure nº 08700.008318/2016-29).
 Since there was insufficient evidence of collusive agreements among
drivers, CADE concluded the investigation and decided to dismiss the
complaint.
 A maket study of the Department of Economic Studies (DEE) of CADE supports
that there are pro-competitive effects of Uber’s entry in Brazil

4. Market studies in Digital Markets
 CADE recently published a number of studies concerning Uber’s entry in
the Brazilian ride-hailing sector:
 “The market for individual passenger transportation: regulation,
externalities and urban balance” (Working Paper 01/2015)
 “Post entry rivalry - The immediate impact of Uber's app on taxi rides”
(Working Paper 03/2015)
 “Competition effects of the sharing economy in Brazil: Has Uber’s entry
affected the cab-hailing app market from 2014 to 2016?” (Working Paper
01/2018)
 Also published in the Journal of Competition Law & Economics, Volume 14, Issue
4, 2018, Pages 608–637. Available at: https://doi.org/10.1093/joclec/nhz005

5. Market studies in Digital Markets:
Competition effects of the sharing economy in Brazil: Has Uber’s entry affected
the cab-hailing app market from 2014 to 2016?
 This study aimed to assess the competitive impacts of Uber’s entry into the
Brazilian market over the number of rides and the fare paid per kilometre in cab-
hailing app rides.
 How the study was conducted:
 Review of the literature
 Description of the individual passenger transport sector in Brazil
 The information* was requested directly to companies (EasyTaxi, 99Taxis, Uber and
Cabify) by the Department of Economic Studies (DEE) of CADE - *Only apps
 Dataset of 590 municipalities and 36 months, covering the period from 2014 to 2016
 Empirical strategy: Fixed-effects regression model with panel data (Difference-in-
Difference model for multiple periods)

6. Market studies in Digital Markets:
Competition effects of the sharing economy in Brazil: Has Uber’s entry affected
the cab-hailing app market from 2014 to 2016?
 Main Findings:
 By comparing the markets of two groups of capitals, the study showed that there
is important spatial heterogeneity in the competitive effects of the platform.
 This may be explained, to some extent, by the moment of entry of the platform in
these regions.
Group of
capitals of the
South,
Southeast, and
Central West
regions
The entries began in May 2014
(more than two years)
Group of
capitals of the
North and
Northeast
regions
Entry between March 2016 and
December2016 (less than a year)

7. Market studies in Digital Markets:
Competition effects of the sharing economy in Brazil: Has Uber’s entry affected
the cab-hailing app market from 2014 to 2016?
 Main Findings: Group of
capitals of
the South,
Southeast,
and Central
West
regions
The entries began in May 2014
(more than two years)
Group of
capitals of
the North and
Northeast
regions
Entry between March 2016 and
December 2016 (less than a year)
Number of
cab-hailing app rides :
Fare paid per kilometre
in cab-hailing app rides:
No effect
 Yes
26.1% 42.7%
12.1%

8. Market studies in Digital Markets:
Competition effects of the sharing economy in Brazil: Has Uber’s entry affected
the cab-hailing app market from 2014 to 2016?
 Main Findings:
 # rides: Uber’s entry in a municipality may have a strong initial effect,
reducing substantially the number of cab-hailing app rides, but there is a
gradual recovery in the number of rides of the incumbent sector over
time.
 Fare paid: the cab-hailing apps reacted via discounts in their fares after a
longer period of exposure to a competitive environment.
 It is possible to verify a rising rivalry between the two types of apps,
where Uber’s entry provokes a reduction in the number of cab-hailing app
rides, reactions via price reductions, and, finally, a recovery in the
number of cab-hailing app rides.

9. Merger
Itaú - XP
 Itaú Unibanco (Itaú): the biggest Brazilian private bank
 XP Investimentos (XP): a leading investment platform
 Itaú acquired 49.9% in XP Investimentos total capital (including 30.1% of its voting shares)
 XP functioned as a multi-sided platform, connecting consumers searching for investments
to those offering investment services
 When reviewing this merger, CADE considered XP Investimentos to be a disruptive
company (maverick firm)
 XP was one of the main independent platforms that provided financial services to
consumers

10. Merger
Itaú - XP
 XP introduced a new model that disrupted the market and increased
competition:
 by allowing competition between many different financial products issued by
different institutions under the same platform;
 promoting competition between such open platforms and the traditional banks; and
 reducing the entry barriers to the market
 Decision:
 CADE decided to clear the transaction with behavioural remedies aimed at:
 limiting Itaú to interfere in XP’s activities,
 preventing the adoption of clauses that could have anticompetitive effects on
other competing platforms.

11. Unilateral Conduct
OTAs - Booking, Expedia and Decolar
 Use of price parity clauses (MFN clauses) by online travel agencies (OTAs) in
Brazil
 The case was initiated following a complaint by an association of hotels,
claiming that theses agencies were imposing "wide" price parity clauses .
 By doing so, the hotels were not able to offer better deals to its clients in their
own sales channels or neither in rival platforms.
 During the investigation, CADE has reached to the conclusion that this practice
had both a positive and a negative effect to the competition environment.
 CADE concluded that, although ‘wide’ parity clauses would be abusive,
‘narrow’ clauses were acceptable under Brazilian law.
 Settlements between CADE and the OTAs.

12. Unilateral Conduct
GOOGLE SEARCH BIAS
 Case of abuse of dominance as a search engine
 Case closed in tight voting
 Three Commissioners for condemnation
 Three Commisioners for closing

13. Unilateral Conduct
GOOGLE SEARCH BIAS
 Definition of relevant Market in multi-sided platforms
 Understanding of the business model
 Collection of relevant data
 What is the adequate remedies design?
 Remedies harmony accross countries?

14. Merger
NASPERS – DELIVERY HERO

15. Merger
NASPERS – DELIVERY HERO
Online food delivery

16. Platform
Food
Consumers
Restaurants
Multi-sided platform
with cross network effects

17. Merger
NASPERS – DELIVERY HERO

• Perspective of growth in the market in the
coming years
• Low domestic rivalry, but expectation of
increased future competition
• Recent entries of important global players

18. Merger
NASPERS – DELIVERY HERO
 Even with network effects and high concentration, if markets remain
open, dominance can be contested
 Exclusive agreements as a way to prevent competitors from achieving
critical mass (entry barriers)
 However, potential competition concerns. Acquisition of small players
to be monitored
 Use of prerogative to request filing of transactions that do not reach
notification thresholds

19. Collusion
ALGORITHMS & PRICING
 One of the main concerns involving algorithms is
related to collusion by artificial intelligence.
 Could smart, self-learning price-setting algorithms
facilitate or even cause collusive behavior in
oligopolistic market?

20. Collusion
ALGORITHMS & PRICING
 The literature generally assumes that algorithmic
collusion is indeed possible and in fact very easy.
 New paper: Ulrich Schwalbe. ALGORITHMS, MACHINE
LEARNING, AND COLLUSION, Journal of Competition Law
& Economics, Volume 14, Issue 4, 2018, Pages 568–
607, https://doi.org/10.1093/joclec/nhz004
 Schwalbe (2018) argues that algorithmic collusion is currently
much more difficult to achieve than often assumed in the legal
literature.

21. Collusion
ALGORITHMS & PRICING
 Economics literature – some collusion with 2 firms, while 3-firm
oligopolies tend to produce competitive outputs and 4+ oligopolies
never reach a collusive outcome (Huck et al., 2001; confirmed in the
meta-analysis of Horstmann et al., 2016).
 Algorithms may have to learn to communicate with each other to
achieve a collusive outcome, particularly in markets with several
participants.
 More effort is needed to detect and monitor these self-learning price-
setting algorithms, but competition authorities should balance how
much (the limited) resources will be devoted to this topic (at least in
the short-time) and other pressing problems (e.g. abuse of dominance
by large online-platforms and/or screens for detecting bid-rigging
cartels).

22. THANK YOU
guilherme.resende@cade.gov.br