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The antitrust law and AMBEV - an analysis under the rule of reason


The antitrust law and AMBEV - an analysis under the rule of reason

"Those politicians, professors and union bosses who curse big business are fighting for a lower standard of living". [1]

1. Introduction

On July 22, 2009, CADE opted for the imposition of the largest fine ever enforced in the history of the institution: in current values, R$ 352,693,696.58 (three hundred fifty-two million, six hundred ninety-three thousand, six hundred ninety six reais and fifty-eight cents), against American Beverage Company (AmBev).

The represented party was penalized due to a fidelity and bonus program named "Tô Contigo" ("I'm with you") and that, as far as the institution is concerned, would amount to a non-linear discount plan, which demanded from retailers, as a compensation, "the exclusivity or the purchase of a minimum AmBev share of 90% of the total, in a selective, non-systematic fashion".

The legal framework was built by the violation of articles 20, I and IV c/c art. 21, IV, V and VI of Law 8.884/94, and the administrative sanction was applied with, as basis, article 23, I, with the aggravating circumstances foreseen by article 27, II (bad faith) and III (advantage intended), besides obliging the company to publish the abstract of the decision text, at its own cost, in a high-profile newspaper, in a half-page announcement, for two straight days in three weeks in a row, and that it gets enrolled in the "National Registry of Consumer Defense to inform consumers about the practices perpetrated and their negative effects".

In English, the word "trust" designates the agreement between companies so that one of them, usually the one that holds a central position in the production process, holds the management power over the others, so as to promote rationalization and lessening of costs, and, thus, become more competitive. Under the juridical culture aspect, it denominates ways that are similar to these agreements, and that became prohibited by the American law, the first of them being the "Sherman Act", in 1890, the entry of which was adapted to Portuguese, with the same meaning.

However, "trust" also means, in its more common Anglo-Saxon usage, "confidence", and, very appropriately, we shall demonstrate, in the following lines, why antitrust legislation is, above all, "anti-confidence" legislation.

The text that follows will surely be long, yet not terminative, and, although it discusses legal text and its legality at times, it does not entail a strictly legal examination. A lot remains to be said about law 8.884/94, the "anti-confidence" legislation, and we shall demonstrate here why this law is unfair and must not only go through some stopgap measures, but be eliminated forever from the judicial system in the country, along, as a consequence, with the organ responsible for its application, which is the Administrative Council for Economic Defense - CADE (Conselho Administrativo de Defesa Econômica).

2. How did antitrust legislation emerge in Brazil?

I still remember the TV news broadcasting the statements of Brazilian congressmen, but, if there is something I do not recall about the time, during the period in which the debates occurred on the pulpits, is there being any epistemological explanation about the need to implement an antitrust law in our homeland.

I am referring to case studies and technical demonstrations that would come to show that certain commercial practices ended up (factually) or would end up (theoretically) dominating the market, and, cumulatively, harming the consumers.

No, not at all. What every congressman was talking about was simply the need of Brazil having antitrust legislation, just like, for instance, a teenager seeks to convince his father of the serious need to buy him a new tennis shoe. The matter of the antitrust, therefore, was but a fad that, even though no one could objectively inform where or how it came to be as an idea that could form legislative initiative, suddenly took over the Congress and newspapers like a fever, and like a trophy for congressmen and senators that, famished for the limelight, rose to prominence when embracing this idea.

Possibly, someone that can offer us a response to this query is professor Dominick Armentano, in his book Antitrust - the case for a repeal [2], which explains how the organized campaign worked, from the United States, so that similar laws were promulgated in several other countries:

Investigations and efforts in executions were also expanded during the Clinton administration, under Assistant Attorney General Anne K. Bingaman and her successor in Justice, Joel Klein. Besides the acute increase in corporative criminal fines applied for alleged price fixing, Clinton's trust-hunters (Including FTC) dramatically expanded the number of investigations about fusions, filed questionable lawsuits addressed to vertical integration issues, provided support for the internationalization of the antitrust combat, and produced voluminous dossiers with incriminations against companies such as Staples, Intel, and, of course, Microsoft. 

Not coincidentally, the Brazilian law is a mere transliteration of legal concepts imported from American law, with the usage of the same diaphanous terms such as "relevant market", "dominant position", "discriminatory prices" and others about which we will perform an effective analysis further on. 

3. Considerations about the framework by art. 20

As informed, the company was found to be in violation of articles 20, I and IV c/c art. 21, IV, V and VI of Law 8.884/94. Here, for convenience, and so that we can comment on the content of the legal text, we reproduce it in the following:

Art. 20. The following constitute infraction of the economic order, regardless of culpability, the acts, manifested in any form, that have as their object or may produce the following effects, even if they are not reached: I - limiting, falsifying, or in any way harming free competition or freedom of initiative; (...) IV - exert a dominant position in an abusive fashion. § 2nd A dominant position occurs when a company or group of companies controls a substantial share of the relevant market, as a provider, middleman, buyer or financer of a product, service or technology related to it.

§ 3rd The dominant position to which the previous paragraph alludes is presumed when the company or group of companies controls 20% (twenty percent) of the relevant market; this percentage may be altered by Cade in specific sectors of the economy. (Wording given by Law nº 9.069, of 6.29.95)

3.1. Vagueness and Anti-Legality

The first thing that must be commented about the extreme lack of legality contained in the head of art. 20, which is, as far as I see it, absolutely incompatible with the rule of law. Good doctrine teaches us that the law must establish to the administered party a negative conduct (they must abstain from the act, such as "killing someone") or positive (they must produce the act, such as "voting" in countries in which it is mandatory). The passage that has the infraction not depending on culpability is also bizarre. After all, an infraction would have to be committed with either malice or malpractice. With malice, if it was committed on purpose, or if the agent knew the potential effects of their act and disregarded them when performing it; with malpractice if the act was committed due to lack of skill, lack of care, or neglect.

Therefore, accusing someone regardless of guilt, considering that the agent was prudent and careful so that, as far as possible, the situation foreseen in the law did not come to be, means stating, as per the final instance of pure logic, that the person did not act towards its existence!

But then we have a problem confronting us: if the person (natural person or legal entity) did not act negligently, which would be malpractice, then it acted diligently, namely: prevented, foresaw and avoided, within reason, the situation the legislator denominates "acts manifested in any form", which reduces these acts, in fact, to mere factual situations.

Now, let us see the expression "that have as their object or may produce the following effects". The sentence "that have as their object" denounces the will of the accused to produce the effects, which might bring us back to malice, but the expression that follows "or may produce the following effects", already revokes it, making it irrelevant. That means the citizen may be indicted both without "intending" and without "foreseeing" that the effects may be produced. It also puts the "effects" in the realm of mere possibility, when it establishes that the acts "may" come to be produced, here authorizing CADE to accuse someone due to a mere economic "thesis", stressing this disposition with the last part: "even if they are not reached" (as they never were indeed, as we shall see later on!).

The article pointed out, literally, authorizes that a company is indicted for a situation for which it did not contribute; did not intend to contribute; did not foresee it might happen; its effects did not come about; but could - theoretically - happen! Again: a given businessman can be indicted due to a factual situation (the so-called "act manifested in any form"), even if he did not contribute at all to it, even if he did not hope for the effects, even if he did not anticipate them at all, and even if he had not been negligent on foreseeing it, if that were the case, so as to avoid it, and even if no harm had happened to the legal asset allegedly to be protected, such harm "might" come to pass, that is, hypothetically and potentially, of course, on the discretion of CADE!

I believe not even Nazi Germany ever became so creative in its oppression of the Jewish people! Due to the absurd abstraction and lack of a definition of art. 20 of the law 8.884/94, I believe it is unconstitutional, due to conflicting with art. 5th, clause XXXIX (there is no crime without a precious law that defines it, nor a penalty without previous legal commination) and clauses LIV (no one shall be denied their freedom or their assets without due process of law) and LV (litigators, in a judicial or administrative lawsuit, and the accused in general, are assured the adversary system and full defense, with the means and resources inherent to it).

Besides, the article also violates the "spirit of the Constitution", so to speak, or its "invisible principles". What Constitution is this, after all, that allows the state to indict someone for harming a judicial asset "theoretically"? Indeed, our Constitution stipulates that it is not enough for the law to exist: the crime must be "defined".

Additionally, the agent's behavior must be anti-juridical, that is, either he must act in a conscious way or he does not act regarding precautions he had the duty to take, which would reveal, at least, his culpability.  The object of the law demands concreteness, so as to provide the citizen with the ability to know it and follow it; otherwise, there would be no room for the adversary system and full defense.

3.2. Castration of the Entrepreneurial Nature

Considering, as such, that a company may be accused both for acting and for not acting, only one behavior is left for it: acting "negatively", that is, emasculating its entrepreneurial nature of seeking to produce more and better so it can establish for itself a market participation limit. That is precisely what General Motors [3] did from the year of 1937 to 1956, a decision which made it lose a grievous amount of space to German and Japanese car manufacturers from the 70s to the 80s.

As we know better today, this company does not exist as a purely private endeavor anymore, and can barely hold onto 19.1% of the American domestic market. Without having control over the strategies of its competitors, and even less about the preferences of consumers, such anti-natural behavior as the one adopted by GM could only result in "not so attractive" cars or "not so advantageous" prices, or, in other words, punish its best professionals and disregard its true judges, the consumers.

3.3. Regarding the typification of the behavior under the norm per se

Now comes the time for us to reflect upon the last pillar of the legal command being commented that still stands: does the expression "may produce the following effects, even if they are not reached" have at least some actual potentiality?

I call the reader's attention here to the ideology that emerges to establish the normative disposition: when it foresees no need for the effects to be reached, it acknowledges, previously and empirically, that there was never a case in all history of an actual monopoly that lasted through time - and that, cumulatively (!) harmed the consumer, whether by establishing majored prices or by technological stagnation, or even by restricting production.

Therefore, the legislator opted to separate the acts from their effects in the realm of economic reality to pay heed to the theory of acknowledging the rule per se, more apt to forensics, relegating to the gutter the spirit of the rule of reason, which would lead to an economic investigation about the materiality of the facts and effects.

Translation: confronting the practice of the act with the hypothesis of consubstantiated incidence in the legal text so as to proceed to the examination of the merit matters more to the judge, who is frequently ignorant regarding economy (in which he is tended to by the legislator). Thus the classification becomes easier, but, especially, the allegation is immunized from the possibility of the effects against a verity exam regarding the actual possibility of them occurring.

We had already had a foreword in the previous paragraph about the historical inexistence of some "actual" monopoly that lasted through time and that - here is the purpose or at least the excuse of the antitrust ideology - dominated the market, harming the consumer with an insufficient amount of products, stagnated technology or "abusively" increased prices.

A famous case was Microsoft, which had, for almost a decade, a world leadership position in the field of softwares, but never ceased to be acknowledged by the public as the holder of the best products, which, instead of getting more expensive, became cheaper, more universalized and more evolved. As we know today, only due to the development of the market, this computer giant suffers with the bold competition of Google, which has even, recently, created its own internet browser, as well as Yahoo and several other competitors, which always had the right to access the market untouched, with the competitiveness of the leader as the only barrier.

In Antitrust and Monopoly - Anatomy of a Policy Failure [4], in which a broad knowledge can be obtained about the prosecution against Bill Gates' company, as well as against other fifty-four cases of companies that were indicted only due to being more efficient, innovative and competitive, professor Armentano also elucidates in the realm of theory about the extreme difficulty of a monopoly actually managing to keep itself hegemonically, such as, for instance, in the following excerpt [5]:

Establishing a monopoly in a free market would demand a perfect capacity of business foresight, both in the short term and in the long term, regarding the consumers' demand, technology, localization, supplies and prices, and thousands of other uncertain variables; it would also require an unambiguous definition of the relevant market. Few companies, if any, in economic history, before or after antitrust, have at any point reached such an inerrant perfection, and, alone, did this for long stretches of time. The so-called "bonanza" monopolists are reputed to enjoy in the free market is, as we shall find below, part of the folklore of the antitrust history.

Professor John R. Lott [6] also makes a statement in these terms:

Contrary to the popular opinion, monopolies are rare and hard to keep, and the few real monopoly situations that exist benefit consumers; in some cases, such as what happens with pharmaceutical companies, they literally save lives. But, most importantly, the type of scheme of allegedly unrighteous price fixing that monopolies employ - such as discriminatory prices - frequently increase the availability of products or services and promote innovation.

Regarding the economic basis of the neoclassical school, however, namely, the theory of isolated perfect competition models, responsible for the foundation of antitrust legislation, we find solace in Armentano, again [7], so we can cast some serious suspicion on the potentiality of effects assumed as aprioristic by law 8.884/94: 

The perfect competition theory is both illogical and irrelevant. Besides, it simply assumes that there must be conditions that necessarily result in equilibrium. Commercial competition, on the other hand, is always a process in which entrepreneurs, with imperfect information, try to make adjustments to the conditions of the market so that a closer coordination between the fields of supply and demand is reached.


Antitrust policy in the United States has been frequently associated with that vision of competition inherent to a perfect competitive equilibrium.


If perfect competition is illogical and irrelevant, then the structures of the market, or the changes in the structure of the markets, do not reveal anything a priori with relation to competition or well-being.

That there is a representative tendency by illustrious economists to demonstrate their thesis both in rhetorical and factual bases, to state categorically that such potential effects will not come to pass, at least not in a lasting fashion that is capable of imposing conditions to the consumers, and taking as a base the mere assumption that they "may" be right, then the potentiality represented by the text of the head of art. 20 shatters completely, due to a lack of credibility, undeniably obliterating the antitrust ratio legis.

That is, how can we accuse someone for an act they are not guilty of, they did not foresee, did not want, and the effects of which, that could materialize, although they did not, may well never happen?

3.4. What is a "relevant market"?

What can be considered a "relevant market"?

This expression, as concrete as the atmosphere in the Andes, deserves some minimum care, considering its limitations are the borders towards which the company may think about expanding. The stricter the concept, the more careful it must be. Maybe this question needs to be taken apart, for a more accurate analysis.

To which market does the law refer? Is there a geographical limit? Will it encompass the local market, the regional one, the national one? Do imported products count? What about the type of commerce? So we can stay in AMBEV's case: would only bars be included or would also distributors and supermarkets count?

One needs to be careful here, as bars frequently have an interest in the sponsorship of manufacturers, who offer them a deal in furnishing, provide freezers, tables, chairs, napkin rings, decorated tulips and coasters, which we can all agree is a lot of help, especially for establishments with little capital. However, distributors and especially supermarkets don't need any of it, and, indeed, in such companies the offer of only one brand of beer or other product is not seen.

(For the record, only to mention my case, I usually get 90% of my beer in supermarkets, which puts any dominance position in the amount of a tenth of the participation they may occupy.)

But, regarding products, would only beers count or also mineral waters and soft drinks also count? For the record, what would be the amount of consumers that, due to the high prices of beer that would come when monopoly, at last, managed to succeed, started choosing, let's say, liquor, wine or even... coconut water? Who would be able to foresee with any amount of exactitude this decision, which belongs to each of the millions of consumers? To what relevance does the law refer?

If, only so we can define commerce, a concept CADE calls upon itself, unilaterally, we have already met a complex problem, never mind defining "relevant". What is relevant? Would it be a market with large value? Or maybe a market with wide consumption by all income levels of the population? Or maybe something considered as being highly essential? The market of yachts, surely, has a formidable economic expression, but it exists for select few citizens... The production of needles and other sewing implements is used by practically the entire population, but is it expressive in value? Beer itself is consumed by all social classes, but is it an essential good? How can a businessman know beforehand if his product and his target public constitute a relevant market, so he has the means to avoid committing an infraction?

3.5. What does exerting a dominant position mean?

Someone can argue that we are, here, willing to make a digression move, playing with words. Our answer to these people is a resounding "no". For there is a difference between occupying a leadership position and exerting domination. What domination, therefore, can a company exert within a free market, in which decisions are made, in the end, by consumers? Domination is imposed. How can a company impose anything to the consumer if he considers that its competitor offers him a more advantageous product, by any criteria? Let us see what Mary Bennet Peterson [8] says about this:

Who actually put the village blacksmith out of business, or, more recently, did it to the ice salesman, or, still more recently, the candy man on the corner? Many may be inclined to say these entrepreneurs of bygone ages were economically beaten by the giants in Detroit, great (domestic) utilities Westinghouse and General Electric, food chains A&P, Safeway, Grand Union and other large conglomerates.  I would, instead, argue that the true executioner of the ice salesman was the consumer - the person that bought an electric or gas refrigerator.

Besides, we ask: what is the economic basis that authorizes the determination that someone has a dominant position when they participate with 20% of a "relevant market"?  Why wouldn't they exert it with 19.9% or 50.1%? Considering, a priori, that a monopoly, by a logical definition, means to occupy 100% of a market, the smaller percentages obtained reflect a theory about the elasticity companies have so they can increase their prices to the breaking point, namely, the moment in which consumers stop buying them.

This elasticity is sought through economic formulas obtained from static models with controlled variables, and may even be convenient for the companies themselves to use them as a compass to define sales strategies. However, the linear determination from a government institution will always end up equalizing by force something that is - and should be - different by nature: the internal structure of each of the companies, which includes their organization, logistics, localization, innovation ability, etc.

Besides, it will disregard several competitive factors not clearly expressed in terms of price. For instance, two shampoos may be chemically equal, however, one of them may carry the picture of a character or pop-star that is, or suddenly became, famous; this is an extremely subjective piece of data, the success of which no one can determine for certain, let alone CADE through some ordinance or resolution.

In this case, what can it do - if it even should - to prevent people from wanting to buy the more expensive shampoo that has such a distinction, without disappointing them? Professor Armentano [9] explains thus:

There are serious methodological difficulties regarding the attempt to measure competition this way, or to infer anything of significance regarding an efficient allocation of resources. The most serious difficulty is that any cross elasticity test at the time would inevitably mistake a change in sales due to a price change for a change in sales due to any other factors. As long as other things are not constant in an actual situation, there will never be any assurance that any of them is, in fact, testifying some cross elasticity, whatever it may be.

3.6. Dominant Position x Relevant Market

Given the conceptual and/or methodological difficulties inherent to each of the terms we studied, why don't we complicate it a bit more? Assuming that the geographical delimitation of the market is an issue for which CADE is authorized to define on a case-by-case basis, how to deal with the problem that, in a regional market, not all competitors are regional companies?

Suppose, for instance, that, in the regional market occupied by the states of Pará and Amapá a given brewery, that we, here, will name Regional Brewery Ltd, exerts a dominant position, and that, due to it, it is indicted for abusing this given position. However, the beer market in the capital of Pará, Belém, is not only made up by local and regional competitors, but also by national competitors. These, on the other hand, may exert a national dominant position. 

In that case, although they are not expressive within that area, they are fully able to allocate resources there, and compete even from a stronger position. In fact, for this end, they don't even have to occupy any relative dominance position; it is enough for them to be bigger conglomerates than Regional Brewery Ltd.

3.7. Would AMBEV be limiting free competition?

Assuming the "Tô Contigo" discounts and bonuses program consists only of contractual agreements, that is, that it did not encompass effectively criminal practices, such as physical threats, sabotage or complicity with public employees, all practices adopted by AMBEV are natural and legal. It bears noticing that this kind of agreement is similar to a franchising contract, if more precarious.

After all, how many stores are there, that exclusively sell products of only one manufacturer? Shopping malls are packed with agreements like this! But there's more to it than that.  Our Constitution preaches that we are all equal before the law. Or aren't we? If that's so, why do all gas stations sell products of only one brand? And why do auto dealerships do the same? It is certain that the agreement between the manufacturer and the bar has as its object to exclude, at that point of sale, the competitors. However, the ones that should decide this, in the end, are the consumers. If they don't want to reward this initiative - and beer drinkers do tend to do that - such a scheme goes down the drain.

Regardless, competing makers would not have been cast aside. The agreements AMBEV kept with the bars were not definite; instead, they had a provisional relation, since bars could revoke them at any time (if respecting the contractual conditions), and would certainly do so if they got better offers - that is a free market!

Besides, such a program did not have the intent to exhaust all bars and points of sale. AMBEV does not have the power to create an ordinance prohibiting the founding of new bars. These bars, in their turn, always crop up here and vanish there, for any reasons that often do not have anything to do with the dispute between beer makers. Indeed, under that point of view, it is really interesting to think that the AMBEV program might have the ability to open more market inasmuch as it helped opening more bars, which could not, in any way, shape or form, be mistaken by "restricting" competition.

Besides, unlike arrangements made with the state, such as subsidies, differentiated financing or market reserving, AMBEV paid a cost that would either translate in the final price of the product, or in a smaller profit margin per unit sold. That would have generated, for the competitors, a comparative advantage and an opportunity to offer a marketing differential.

3.8. Do non-linear discounts qualify as a predatory practice?

Let us see how CADE positioned itself, according to a note released in its site [10]:

Cade considered that the evidence present in the records of the Administrative Lawsuit prove that the so-called "Tô Contigo" fidelity and bonus program demanded in exchange for the entry of the points of sale the exclusivity or the purchase of AmBev shares of at least 90% of the total, in a selective and non-systematic fashion. As such, Cade concluded that it is a non-linear discount program, carried out by a company with a dominant position in the beer market. Therefore, the Chamber determined that the "Tô Contigo" Program has a potential to weaken the competition, closing down the market and artificially inflate the costs of other competitors.

In the entire antitrust culture, there isn't a more nonsensical theory than the one intended as the basis of prohibiting differentiated prices, or, in a more Orwellian language, "discriminatory prices".

Differentiated prices are considered harmful to the population, as it is claimed that they are practiced due to the quality of the buyers, a distinction that would not have to take place, since they do not influence in any way the actual costs of production.

In order for us to have a reference as a basis, the State is the first one to practice differentiated prices. It does so through the Mail, with the "social letter", and also with providers of water and power, with the "social taxes". It also sells medication below cost, with the "popular drugstore" and even ready-to-eat meals with "popular restaurants".

In short, it is a long list, and I believe anyone can verify it. Still, there is yet another even more curious case of differentiated price practice, done by private entities, that the state applauds: public tender, especially the bidding systems.

Here, I ask the reader not to get confused: there is no problem if the winner of a public tender, say, though a bidding system, in which the end price is obtained through verbal bidding, is on equal footing with other competitors. That is not our point of concern. The question is: once a provider wins a bidding process, does he have to lower the price of the product to the population in general to the same level it did to the government?

If the arguments to show that the criminalization of price differentiation is absurd have not been convincing enough, we invite the reader to look up in Freedomnomics, by John R. Lott, several cases of price discrimination that always result in a rational economic criteria, which, most of the time, benefits the population. He justifies himself thusly [11]:

So this is necessarily something bad? Price discrimination frequently allows companies to produce more and increase the general welfare of society. This holds especially true for monopolies that make great investments on research and development or on infrastructure; if they did not have the permission to discriminate prices, they would simply have to charge a high, uniform price so they could recover their costs with R & D. This would put their products out of range for the poor that cannot afford the high price.

A noteworthy highlight that Lott points out for the issue of discriminatory prices is the case of the drug industry, that charges Americans the highest prices - precisely because only to them are the costs with research and development computed (the Japanese also do this with electronic products) - while Africans are charged more accessible prices and some value between these two extremes is charged from intermediate countries. 

In the case of AmBev's Tô Contigo program, there is a whole rational economic calculation, based on scale gains, partnerships with bars (providing equipment and accessories), and sales safety, which translate into better planning.

3.9. Abuse of the Dominant Position and Reputation

If there is something no governmental institution will ever be able to measure through economic models, it is called reputation. That is, however, a valuable good, that cannot be recorded. Reputation is a determining factor for a bar to decide to sell a product from a single manufacturer. After all, its clients can always visit his establishment knowing that their favorite product is there. The owner of the bar, thus, does not fear to disappoint his customers.

It is known that, in certain establishments, fraud is practiced, such as, for instance, exchanging labels. That is done by keeping the bottles in ice water, so that the labels get loose. Thus, the waiter can serve a bottle of a cheaper beer than the one ordered by the customer, when he is a bit tipsy.

Reputation is what allows a manufacturer to demand a better price for its product, and that has nothing, absolutely nothing to do with production prices. The current economic theory, with its objectivistic influence, is terribly flawed on that matter. A price is established through subjectivity, which is the acceptance of the consumer and his willingness to pay more for a good. In one of the most ridiculous clauses of the antitrust law, it forbids companies from increasing their profits "arbitrarily", as if, in a free market, all prices were defined by the government, when they are measured by companies not in relation to costs, but due to the acceptance they expect to obtain from their clientele. 

4. Considerations about the framework under art. 21. 

Art. 21. The following behaviors, besides others, as long as they result in the hypothesis foreseen in art. 20 and its clauses, are an infraction of the economic order;

(...)IV - limiting or preventing the access of new companies to the market;

V - creating difficulties to the constitution, operation or development of a company that competes with the provider, purchaser or financer of goods or services;

VI - preventing the access of a competitor to sources of supplies, raw material, equipment or technology, as well as distribution channels.

The clauses chosen to define the transgression are simply preposterous. The only material way to the represented party to be able to limit or prevent the access of new companies into the market would be through some conspiracy with the government that would prevent such through the concession of a monopoly or oligopoly.

That is precisely what the state does with electricity, telephone, services of water and sewage, urban bus lines, licenses for television channels, and several other activities.

The difficulty of someone entering a market that, in and of itself, is competitive should not be mistaken for it. Manufacturers of black-and-white television sets may even try, and there is nothing at all that prevents them from setting up a company, exposing their products and selling them. Whether or not someone will buy them is a different matter. The same holds true for makers of VHS devices or typewriters. Practically the same can be said about clause V.

The only material way through which it would be possible to make it harder for a company to be built, operate or develop is by having decision power over it, which could only be obtained with a little help from the state. If this company has all the freedom it needs to be built, organize and define its strategies, there is nothing to be said about creating difficulties, which cannot be mistaken for the pure and competitive market.

Finally, clause VI falls apart due to complete lack of sense. Who said the representatives had the access "prevented", in this case, to the distribution channels? This clause can only be read with a forced interpretation in the sense of "that have as their object or may produce the following effects, even if they are not reached", in the head of art. 20, a broad wording that must be repudiated, since such hermeneutics is totally opposite to the good practice of law.  

5. The Dolly Case

There is a case that has been widely reported, about a complaint made by the manufacturer of the Dolly soft drinks, against Coca-Cola.  Using only assumptions as a base, without entering the merits, since the investigations and the lawsuit are ongoing, for the sake of a case study only, we can find here, if the accusations are true, real acts of restricting the constitution, operation and development of a competitor, with access limitation to sources of raw material, suppliers and buyers. 

In the case, there were accusations of surveillance statism, accusations which are being investigated through the Brazilian Federal Revenue Office Internal Affairs. There was also the charge that Coca Cola had obtained from the Federal Revenue Office the edition of a regulation that would make manufacturers of PET bottles to state their list of clients - which would make it easier for Coca-Cola to exert pressure on them, so as to prevent them from selling bottles for competitors. There was even a death threat accusation, with the release of recorded evidence.

All of these actions, if they are true, are actual aggressions to the right to property and competition, and, it bears noticing, there is always some fingerprint of this gentleman, the state. 

6. Considerations about the penalty applied

Regarding the penalty applied, namely, a fine of about three hundred fifty million reais, something is worth mentioning, for which we shall make a comparison with foreign trade: when a country goes to the WTO to make a complaint against another one, when the plaintiff wins the lawsuit, the punishment is usually one that allows the other to get compensation for the imposition of import taxes, or quotas. Without delving too much into the matter, the important thing is the advantage goes to the offended competitor. 

The same happens in traffic, when two vehicles are involved in an accident. Investigators go to the location to determine the guilty party, who has to repay the victim.

But what happens with the antitrust law? All the plaintiff got was the determination to the represented party that it stopped the practice, but the cash - and what a load of cash it is!  - went entirely to the state! Why? Even if we assume we acknowledge the validity of this horrid law, it could determine, for instance, the reduction of the production of the represented party through a quota, or something else with the same effects.

Foreseeing the collection of millions in fines is opening the doors to the interested prosecution of companies; is starting the hunting season, be it for practical reasons (collecting money), be it for ideological reasons (destroying the normal operation of the market) or both. 

7. Conclusion

Once again, we reiterate if the program of the represented party did not involve common crimes - threats, extortions, sabotage, complicity with politicians or government agents, and so on - a fidelity program with an exclusivity clause has nothing anti-commercial about it.

From the point of view of bars, they do the same the government does when it promotes public tenders: they seek advantages, and do so in a permanent, though more informal, fashion, as it is natural for private enterprise to have this liberty to seek what is best for it.

At every moment, these bars were open to receive more advantageous proposals from the competitors, and the result of such a war would be wonderful for the population. The market of bars was never a closed market in which their universe was circumscribed to a certain number; quite the opposite: bars open at every moment, and it is quite possible that the program the represented party had in place was responsible for opening the market.

Opening the market isn't restricting it. On the other hand, the law 8.884/94 was quite... opportunistic, regarding the administering of penalties. 

Finally, we extended ourselves more than what we expected to make a reasoned analysis about the AMBEV case. Commenting the whole text of the law would demand a more extensive care, which we will yet apply, like this, homeopathically. However, the important part here was made clear: we don't need to talk about punctual, administrative, cosmetic reforms. Both CADE and the antitrust law must be thoroughly extinct from the judicial and administrative system.

This law was based on unfounded economic theories that were never revealed as truthful, and serves as a real disincentive to the honest development of free enterprise, innovation and efficiency. As Dr. Patterson rightly said, it was created not to protect competition, but to protect the weaker and more incompetent competitors, that seek political means as a way to create hurdles to the competitiveness of entrepreneurs that know more about how to cater to the wishes of the population.

They act, I would say, like the player that tackles his opponent in basketball, counting on the friendship of the referee.




[1] MISES, Ludwig von. Theory and History. P.147.

[2] ARMENTANO Dominck. Antitrust - the case for repeal. 2nd ed. Ludwig von Mises Institute, Auburn, Alabama, USA, 2007 - p.xvi.

[3] DI LORENZO, Thomas J. Anti-trust, Anti-truth (article). General Motors was never prosecuted, but because of the company's fear of antitrust it was official company policy from 1937 until 1956 to never let its market share top 45 percent, for any reason. This fear of antitrust prosecution contributed to the industry's dramatic losses in market share to the Japanese and German automakers during the 1970s and '80s.

[4] ARMENTANO, Dominick. Antitrust and monopoly. Anatomy of a policy failure. 2nd ed. The Independent Institute, Oakland, California, 1999.

[5] ARMENTANO, Dominick. Antitrust and monopoly. Anatomy of a policy failure. 2nd ed. p. 43. The Independent Institute, Oakland, California, 1999.  

[6] LOTT, John R.. Freedomnomics. Why the free market works and other half-baked theories don't. p.22 Regnery Publishing, Inc. Washington, DC. 2007.

[7] ARMENTANO, Dominick. Antitrust and monopoly. Anatomy of a policy failure. 2nd ed. p. 32-33. The Independent Institute, Oakland, California, 1999.

[8] PETERSON, Mary Bennett. The regulated consumer. The Ludwig von Mises Institute, Auburn Alabama, 2007. 

[9] ARMENTANO, Dominick. Antitrust and monopoly. Anatomy of a policy failure. 2nd ed. p. 34-35. 

[10] (accessed in August 3rd, 2009).

[11] LOTT, John R.. Freedomnomics. Why the free market works and other half-baked theories don't. p. 23 Regnery Publishing, Inc. Washington, DC. 2007.


Sobre o autor

Klauber Cristofen Pires

Bacharel em Ciências Náuticas no Centro de Instrução Almirante Braz de Aguiar, em Belém, PA. TÉcnico da Receita Federal

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