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Alternative means of Cartel detection: the use of screening in Brazil

Alternative means of Cartel detection: the use of screening in Brazil. Carlos Ragazzo General Superintendent Brazilian Council for Economic Defense (CADE) ICN Cartel Working Group Workshop Cape Town, October 2013. Summary. Past efforts Screens in the Brazilian Gas Retail Market

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Alternative means of Cartel detection: the use of screening in Brazil

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  1. Alternative means of Cartel detection:the use of screening in Brazil Carlos Ragazzo General Superintendent Brazilian Council for Economic Defense (CADE) ICN Cartel Working Group Workshop Cape Town, October 2013

  2. Summary • Past efforts • Screens in the Brazilian Gas Retail Market • Diagnosis of current trends • Leniency applications from international cartels • Need for alternative means for detection of domestic cartels • Looking forward • Brainstorming • Benchmarking • Implementation

  3. Gas Retail Market in Brazil • Prices were regulated until late 1990s • With deregulation, large number of complaints became a problem • 2007-2009: 15% of cartel cases prosecuted by CADE • 2010: 23% of all antitrust investigations • Until 2012: only 8 investigations resulted in convictions • Equal prices do not always mean cartelized market

  4. Gas Retail Market in Brazil • Use of available data to evaluate possible collusion • National Petroleum Agency (price monitoring) • Statistical tests were created to evaluate elementsthatindicated cartel formation • Such as: retailmarginrelativelystableorontherise • Use of screens as grounds, together with other evidence, for judicial decisions granting dawn raids or wiretappings

  5. Gas Retail Market in Brazil • Means to evaluate whether the cost of opportunity of pursuing an investigation was justifiable or not • Fewer Cartel Complaints (complaints analyzed in less than a month) • Faster dismissal of groundless cases • Better allocation of governmental resources • New tool for obtaining direct evidence

  6. Diagnosis • Leniency applications from international cartels • Lack of leniency applications from domestic cartels (i.e. bid-rigging) • Seek of alternative methods to detect cartels: the use of screens

  7. Looking forward: screening • Concept: statistical econometric studies based on available data in order to identify sectors or companies where competition problems exist. • Goal: to identify abnormal or atypical patterns within the available data • Relevant Data: prices, public bids, costs, market shares • Cartel detection • Case evidence • Prioritization technique

  8. Looking forward: organization chart General Superintendent Deputy Superintendent 1 Deputy Superintendent 2 Screening Unit • Intelligence Division • Prioritization • Leniency Cartel Unit 1 Cartel Unit 2 Cartel Unit 3 Merger Screening Unit Merger & Antitrust Differentiated Goods and Farm related products Merger & Antitrust Services Merger & Antitrust Industry Merger & Antitrust Regulated Markets Hierarchy Cartel work flow Merger work flow Unilateral conducts

  9. Brainstorming:the search for Big Data

  10. Public procurement • Federal Government’s Electronic Procurement System • - Subcontracts as reward for stepping-down of public bids • Market division • Indirect evidence (i.e. identical errors in bid offers) • Abnormalities in prices • Relation between group of bidders and prices # bid-rigging! #

  11. Judiciary • Brazilian Judiciary Branch • Files are public (few exceptions) • Labor Courts: possible lenient beneficiaries or informants • Agreements between competitors • Producers Associations to restrain market entry # collusions! #

  12. Regulatory Agencies and Commercial Registries Health Surveillance Agency National Industrial Property Institute Commercial Registries • Deadline for expiration of patents • Requests for commercialization of generic products • List of active ingredients • Economic players • Agreements between competitors

  13. International Benchmarking Korea Colombia Mexico Canada USA Netherlands United Kingdom Germany Austria Italy European Union • Most frequent • Fuel sector • Bid-rigging

  14. National Benchmarking • Office of the ComtrolerGeneral (“CGU”) • - Public Expenses Observatory • Federal Court of Accounts (“TCU”) • - Office for the Management of Strategic Information • Department of Assets Recovery and International Legal Cooperation (“DRCI”) • - Laboratory against Money Laundry. • Parquet from the state of Paraíba(“MP”) • Council for Financial Activities Control (“COAF”)

  15. Implementation:the use of Big Data • Adaptation to Brazilian reality • Differencesofculture, legal framework, markets, etc. • Screening as evidence of “good cases” • Technique to open investigations • Screening as evidence of “bad cases” • Technique for closing cases • Prioritization agenda • Human and financial resources limitation • Greater public spending • Sectors with social impact (i.e. health and education)

  16. Thankyou! Carlos Ragazzo General Superintendent Brazilian Council for Economic Defense (CADE)

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