Welcome to the Latin Antitrust Chronicles – a series covering some of the most relevant developments in competition law in the region. Our comprehensive coverage will include decisions by authorities as well as relevant bills, advocacy efforts, and other initiatives pertinent to the debate. Our contributors alternating each quarter include Marcela Mattiuzzo, former Advisor and Chief of Staff at the Administrative Council for Economic Defense (CADE) in Brazil and current partner at VMCA, Carlos Ragazzo, former general superintendent at CADE and currently Professor at FGV Law School, and Bruna Cataldo, PhD in Economics and Consultant at RGZ. We trust you will find it an engaging read!
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Automotive Cartel Investigation: CADE Focuses on Exchange of Sensitive Information
Facts
CADE is currently investigating prominent automakers–Audi AG, BMW AG, Porsche AG, Mercedes-Benz Group AG, and Volkswagen AG– who are accused of engaging in anticompetitive behavior in the international market for light passenger vehicles. The alleged conduct, which the authority claims may have spanned from the mid-1990s to 2017, involved the systematic exchange of competitively sensitive information among these companies. These exchanges allegedly occurred during thematic working group meetings held at the companies’ headquarters, rotating among participants without a fixed schedule. These meetings were convened as issues arose, leading to frequent, albeit informal, exchanges of commercially significant data.
The individuals involved included high-level executives and managers responsible for key areas such as production, pricing, and technological development. Over 23 individuals from these firms participated in the exchanges, which took place both in group settings and through bilateral communications. CADE’s report indicates that these meetings focused not on general industry-wide discussions but on sharing detailed, non-public information about each company’s strategic decisions, such as production costs, pricing models, capacity planning, and customer relationships.
Although these thematic working groups were structured to discuss various operational and strategic challenges in the automotive sector, CADE asserts that the nature of the information shared went beyond typical industry collaboration. Instead, it involved data that could provide a competitive advantage by revealing market strategies. CADE raised concerns that this exchange of sensitive information reduced uncertainty and risk inherent in competitive markets, potentially leading to tacit coordination among these automakers.
Conduct Under Investigation and CADE’s Understanding
CADE’s report highlights that exchanging competitively sensitive information can be as harmful as explicit cartel agreements. Sharing recent, specific, and non-public data–such as pricing policies, production plans, or customer lists–diminishes the competitive tension in the market by allowing companies to anticipate and counter each other’s actions.
According to CADE’s gun-jumping guidelines, sensitive information is any data that provides insights into a company’s strategic operations and decision-making. Key examples include production costs, pricing strategies, supplier relationships, and procurement terms, and technological and innovation strategies. This type of information is highly sensitive because it directly influences how companies position themselves in the market. When shared among competitors, this data can reduce the uncertainty that drives competitive behavior.
The key issue in the case is whether these information exchanges were instrumental in fostering coordination. Under Brazilian competition law, the sharing of competitively sensitive information can be considered an infringement of the economic order, as outlined in Article 36 of Law No. 12.529/2011. This article prohibits any conduct that limits or distorts competition, even if no direct agreements between competitors exist. CADE is examining whether the exchanges fall under this category of violation, known as a standalone offense. In other words, it discusses whether the conduct can be harmful even if a traditional collusive practice is not in place.
Possible impacts on antitrust analysis in Brazil
CADE’s decision to initiate administrative proceedings against the companies and individuals involved could lead to heavy fines and behavioral remedies, if it determines that the information exchanges between the automotive companies facilitated anti-competitive behavior. The case is part of a broader set of investigations, starting with the MedTech case, which aim to establish whether exchanging competitively sensitive information can indeed be considered a standalone violation.
CADE’s final decision will have broader implications for antitrust enforcement in digital markets and other industries where data exchanges between competitors are becoming increasingly common. As Brazil’s economy continues to embrace digital and platform-based business models, clear boundaries on what constitutes harmful information sharing be essential to ensure that competition remains robust.
Constitutional Reform in Mexico and the potential extinction of COFECE
Between late 2023 and early 2024, Mexican President Andrés Manuel López Obrador (AMLO) proposed a package of 20 constitutional reforms, including the elimination of several autonomous agencies, including its competition authority, the Federal Economic Competition Commission (COFECE). AMLO argued that these agencies protect individual interests over the public interest.
The proposed reform would eliminate these agencies, transferring their functions to government ministries, as summarized in the table below:
Reform of Autonomous Agencies: Who would take over their jurisdiction?
| Autonomous Agency | Who would take over their tasks |
| Federal Economic Competition Commission (Cofece) | Ministry of Economy |
| Federal Telecommunications Institute (IFT) | Ministry of Infrastructure, Communications, and Transport |
| National Council for the Evaluation of Social Development Policy (Coneval) | National Institute of Statistics and Geography (Inegi) |
| National Institute of Transparency, Access to Information, and Protection of Personal Data (INAI) | Ministry of Public Administration |
| National Hydrocarbons Commission (CNH) | Ministry of Energy |
| Energy Regulatory Commission (CRE) | Ministry of Energy |
| National Commission for the Continuous Improvement of Education (Mejoredu) | Ministry of Public Education |
Source: El economista – free translation
The competition authority responded by issuing a statement emphasizing its role in discussing the proposed constitutional reform on competition policy. It argued that economic competition is crucial for improving living standards by ensuring access to better services and products. Moreover, COFECE pointed out that, with its constitutional autonomy, it has effectively influenced markets and addressed anticompetitive practices, benefiting the Mexican population.
COFECE concluded by committing to participating in the legislative process to advocate for a competition policy that prioritizes public welfare. COFECE also called for the inclusion of evidence and diverse perspectives in the parliamentary debate to ensure it serves the best interests of the population. Since then, a heavy debate has started, both in Mexico and within the global competition community.
Mexican experts criticize the proposal
Mexican experts have expressed concern regarding the proposal to extinguish COFECE and move its tasks to the Ministry of Economy.1See: https://www.eleconomista.com.mx/empresas/Sin-Cofece-e-IFT-crece-el-riesgo-de-que-el-Estado-ponga-trabas-a-la-competencia-expertos-20240209-0071.html Javier Núñez, director of Ockham Economic Consulting, highlights the risk of losing technical rigor in regulatory actions. He explained that the current selection process for officials at COFECE ensures impartiality and technical expertise, with candidates being vetted by the Bank of Mexico and the National Institute of Statistics and Geography (INEGI), followed by Senate ratification. The reform would, however, eliminate these safeguards, allowing the executive branch to appoint officials directly, risking political influence in regulatory decisions.
Núñez also warns of the risk of conflicts of interest if COFECE loses its autonomy. Currently, the authority can independently review and critique regulations, laws, and barriers to competition, including those that originate from the government itself.
Former Mexican official Santiago Levy Algazi, now a senior non-resident fellow at The Brookings Institution, also weighed in, saying that dissolving COFECE would represent a setback for consumers and productivity. Levy, who led Mexico’s antitrust commission from 1993 to 1994, emphasized that competition is a fundamental element for the effective functioning of economies and argued that rolling back the reforms to enhance competitiveness would hinder efforts to improve productivity.
The reform proposal moved forward in August and led to a new wave of reactions
In late August, with 22 votes in favor and 7 against, the Congressional Commission approved a general resolution aimed at dissolving the autonomous bodies under the framework of organizational simplification, which includes COFECE, moving forward with AMLO’s initial proposition. The president of the Constitutional Commission stated that the resolution seeks to return key administrative functions to the Executive branch, emphasizing that the changes streamline bureaucratic structures, integrate certain agencies, and grant the Executive more control, while claiming that workers’ rights will not be affected.
This generated a new wave of reactions. The competition authority reacted by issuing another statement expressing concern over the approval of the reform, signaling that it had urged for an inclusive debate before the final vote and stressing the importance of preserving and strengthening economic competition policies in Mexico. The competition authority highlighted its achievements, including imposing fines totaling over 13 billion pesos on large companies for abusing market power and generating consumer savings of at least 36 billion pesos on essential goods like LP gas, transportation, and food products. The organization also noted that its actions have led to job growth and wage increases, with every peso invested in COFECE yielding 152 pesos in consumer benefits.
While acknowledging that more needs to be done to achieve fair economic practices in Mexico, COFECE emphasized its continued commitment to using all available tools to promote a balanced economy and enforce competition laws.
In addition to COFECE, Mexico’s Business Coordinating Council (Coparmex) also reacted to the vote by expressing concern that the measure threatened democratic stability and the balance of power. Coparmex highlighted that the autonomous bodies at risk account for only around 0.05% of the federal budget for 2024. It also highlighted that they were created to ensure transparency and government accountability, meaning their dissolution could lead to a return to a system where the Executive holds excessive power, as was seen in Mexico’s past, characterized by corruption and a lack of checks and balances. Coparmex also highlighted that COFECE and other autonomous bodies facing dissolution play a fundamental role in ensuring fair economic competition and protecting consumer welfare, with their autonomy allowing for operation without political influence.
The International Chamber of Commerce also demonstrated its worries through its Mexican branch. According to Miguel Flores Bernés, its president, the approval of the reform worried investors with uncertainty leading many to reconsider their investments in the country, particularly as the details of how their functions will be absorbed by federal ministries remain unclear. Flores Bernés also emphasized that the reform could jeopardize Mexico’s ability to meet its commitments under the US-Mexico-Canada Agreement (T-MEC) during the 2026 review. Without clear regulatory structures and continuity in technical expertise, Mexico risks being unable to effectively enforce competition laws, potentially threatening the country’s position in international trade agreements.
The reform to dissolute COFECE was initially presented to Congress, which forwarded the text to the relevant internal committees, such as the Constitutional Committee. After the committees drafted their opinion, the text was sent to the Plenary of the Chamber of Deputies where it was discussed and voted on.
The next step involves Senate review, which will follow the same process of analysis, discussion, and approval. If the Senate approves the reform, the text will then be forwarded to the State Legislatures. For the reform to come into effect, at least 17 of the 32 states need to ratify the decision. After state ratification, the President must sanction it, bringing the changes into effect, meaning COFECE’s fate is still undetermined and up for debate.
Artificial Intelligence at CADE
In recent months, the Brazilian competition authority has increased its focus on investigations related to artificial intelligence (AI). First, it initiated an investigation into Meta’s generative AI models to assess whether the company was unduly collecting users’ personal data to train these models. The case is simultaneously under investigation by Brazil’s data protection authority, the ANPD, after a complaint by the civil society organization IDEC, which specializes in consumer law.
The proceeding is in its very initial stages, and Meta responded that the alleged conduct is not a competition law issue. The relevant authority, ANPD, is already carefully investigating the practice, and there is no coherent claim that the training of generative AI models has prevented other players from entering the market or limited their ability to compete.
Not long after, CADE decided to issue requests for information (RFIs) to Amazon, Google, and Microsoft, inquiring about partnerships and acquisitions made by such companies, all focused on AI–the acquisition of Anthropic, Character AI, and Mistral AI, respectively. The investigations are similar to those of the Competition and Markets Authority (CMA) in the UK, focusing on some of the same agreements.
Up until now, CADE has requested that companies provide more information and clarify why the acquisitions have not been notified to the authority. It remains to be seen whether it will pursue the analysis of the cases, even if none fall within mandatory notification thresholds–CADE does have the prerogative to require notification of transactions that do not meet the turnover thresholds for a period of 12 months.
In any instance, the actions have been seen as an attempt by the authority to further establish its jurisdiction over digital markets. With other regulators attempting to gain ground on the matter, notably the National Telecommunications Agency, the antitrust watchdog may feel the need to show that it already can, and effectively does, investigate such matters.
Moreover, the CADE presented its contributions to the Bill of Law that aims to regulate artificial intelligence. Bill 2338 is currently being discussed in Congress, and the Senate created a temporary commission to debate the topic. Broadly, CADE aimed to focus its proposals on strengthening cooperation mechanisms among authorities, given that one of the main discussions now is establishing who will be in charge of concentrating regulatory oversight. The latest proposal is to create a national system of AI regulation and governance, headed by the Brazilian data protection authority, with the participation of several other regulators. CADE’s goal is to make sure that such a system will actively engage with the competition defense system and forward any concerns to the authorities so matters can be duly investigated.
The bill still needs to be approved by the Senate and then moved to the House of Representatives for a second round of analysis. The temporary commission is expected to conclude its work by the end of 2024.
Marcela Mattiuzzo, Carlos Ragazzo and Bruna Cataldo
| Citation: Marcela Mattiuzzo, Carlos Ragazzo and Bruna Cataldo, Latin Antitrust Chronicles: July – September 2024, Network Law Review, Autumn 2024. |
