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

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

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  1. 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

  2. OECD’s 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:

  3. “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.”

  4. 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, OECD’s studies (The Relationship between Competion and Regulatory Authorities, 1999) indicate that:

  5. 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.

  6. 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;

  7. 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.

  8. 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.

  9. 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;

  10. 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. CADE’s decisions can only be reviewed by the courts.

  11. 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.

  12. 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;

  13. 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 don’t. • Anti-competitive Conducts: the Competition Authorities will have the final word concerning the decision of anti-competitive conducts.

  14. 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.

  15. 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@fazenda.gov.br

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