This presentation by Priscila Brolio Gonçalves, Owner, Brolio Gonçalves Advogados (BGA), was made during the discussion “Efficiency Analysis in Vertical Restraints” held at the 19th meeting of the OECD-IDB Latin American and Caribbean Competition Forum on 21 September 2021. More papers and presentations on the topic can be found out at oe.cd/laccf.

1. September 21, 2021
Latin American and Caribbean Competition Forum
SESSION 2 – EFFICIENCY ANALYSIS ON VERTICAL
RESTRAINTS
PRISCILA BROLIO GONÇALVES
Non-governamental advisor – Brazil

2. 2
OVERVIEW OF THE BRAZILIAN ANTITRUST LAW REGARDING UNLAWFUL BEHAVIOR
“The law shall repress the abuse of economic power that aims at the domination of markets,
the elimination of competition and the arbitrary increase of profits” (Brazilian Federal Constitution.
Article 173. Paragraph 4).
Regarding antitrust violations, Law 12.529/2011 (the current Brazilian Antitrust Law) sets forth:
The acts which under any circumstance have as object or may have the following effects, even if not achieved,
shall be considered violations to the economic order, regardless of fault: I - to limit, restrain or in any way injure
free competition or free initiative; II - to control the relevant market of goods or services; III – to arbitrarily
increase profits; IV - to exercise a dominant position abusively (Article 36).
§ 1 The conquer of a relevant market resulting from a natural process based on an economic agent being the
most EFFICIENT among to competitors does not characterize the unlawful behavior set forth in item II above.
§ 2 A dominant position is assumed when a company or group of companies is able to unilaterally or jointly
change market conditions or when it controls 20% (twenty percent) or more of the relevant market, such
percentage may be modified by Cade for specific sectors of the economy.
Note: the excerpts of the Brazilian Antitrust Law has been freely translated. The translation of the Federal Constitutional is official, available at:
http://www2.senado.leg.br/bdsf/handle/id/243334

3. CADE
DEFENDANT
BOTH
GUIDELINES FOR ASSESSMENT OF RESTRICTIVE PRACTICES (BACKGROUND)
CRITERIA PROVIDED BY RESOLUTION N. 20/1999 (NO LONGER IN FORCE)
MARKET DEFINITION
ANALYSIS OF HARM
(TO CONSUMERS/END
USERS)
EXAMINATION OF ECONOMIC
EFFICIENCIES/OTHER BENEFITS
BALANCING
HARM x BENEFITS
CONVICTION
SHELVING
BEHAVIOR
IS THERE
ENOUGH EVIDENCE
OF THE BEHAVIOR?
ACTIVITIES/BURDEN OF PROOF:
ANALYSIS OF
DOMINANCE
MARKET
SHARES AND
SEVERAL OTHER
ASPECTS

4. 4
Efficency analysis on CADE’s precedents
Vertical restraints are usually analyzed under the rule of reason. A few cases of vertical price
restraints are exemptions – SKF; Shell; Bematech’s agreement with CADE – indicating a bias
against minimal resale price restrictions;
Balancing harm and efficiencies to verify net effects is the final step of the antitrust analysis,
according to the ‘1999 Guidelines’ (the only guidelines including vertical restraints issued by
CADE until today, never officially rejected), but has never been actually adopted in decisions
(how can one measure if benefits surpass harms?);
The examination of efficiencies by CADE is usually equivalent to a justification/rationality
analysis (the reason why a certain restriction has been adopted in the first place) and include a
proportionality test:
Efficiencies should be specific (case by case analysis) and beneficial to end users. They are
usually theoretically acknowledged by CADE’s decisions, but if the agent is clearly dominant and
the harm to consumers is evident, even specific efficiencies (to the case) are hardly admitted;
Indispensability: to what extent are restrictions necessary?
Strict adequation (means versus ends): could benefits have been reached with a less restrictive behavior?

5. 5
Efficency analysis on CADE’s precedents: Ambev and Unilever’s convictions
Case “Ambev/Tô Contigo” (beer retail market): theorical efficiencies typically associated with
exclusive dealing and fidelity discounts (leading to “de facto” exclusivity) have not been identified
by CADE. The Defendant has not demonstrated specific efficiencies in the case records, according
to the Reporting Commissioner. Conviction, followed by lawsuit (fine paid by the company).
Case “Unilever/Nestlé” (ice cream retail market): the justification for freezer exclusivity and, to
some extent, volume (quantity) clauses has been accepted by CADE (protection of investments in
the retail stores regarded as “reasonable economic justification”), but the explanation for
bonifications/ incentives policies (leading to “de facto” exclusivity) has not.
“potential harm surpasses the economic rationale for the behavior (...). [Bonification] measures do not
revert in benefits to consumers nor increase the added value of scarce resources, especially because
there is no requirement that bonification amounts are invested in the improvement of the point of sale”
(Commissioner Paula Farani de Azevedo).
“[even if there was such requirement] “it could not be regarded as an efficiency, because the amount
would have been split between the manufacturer and the reseller, transferred from one agent to another.
Consumers would not pay reduced prices and competitors would not have the same condition to
negotiate their entry in the point of sale (Commissioner João Paulo de Rezende).
Nestlé was acquitted due to the “lack of a dominant position” (cumulative effects not considered).

6. THANK YOU FOR YOUR ATTENTION!
priscila@bgalegal.com.br
http://bgalegal.com.br/

7. 7
Efficiency analysis on CADE’s precedents: iFood’s Preliminary Injunction
[For further discussion]
Preliminary injunction against iFood for exclusive dealing (case has not been analyzed by the
Tribunal);
Peculiarities of digital markets (delivery apps/platforms – food); however, efficiency debate is not
new or particularly challenging;
The decision that resulted in the preliminary injunction includes an interesting examination of
efficiencies (=justifications), which have been partially admitted by CADE’s General
Superintendency, considering that iFood was allowed to maintain part of the exclusive
arrangements with restaurants (prohibition limited to new contracts and renewals for more
than 1 year of existing ones);
Multiple complaints (competitors, restaurant associations) question the efficacy of the
preliminary injunction, which has not been appealed by iFood: injunction is allegedly “timid”
(granting “legitimacy” to iFood’s restrictive behavior) and difficult to monitor;
Some Complainants (Rappi, Uber) admitted to the same behavior, but are not under investigation
(low market shares): collective dominance and cumulative effects not discussed so far.