Daniel Tobias Athias
TAn issue that still incites extensive academic and theoretical debates, and, therefore, affects the practice and institutional role of the Administrative Council for Economic Defense – CADE, is the role/goal of antitrust policy when analyzing a concentration act. In other words, when examining a concentration act, what would be the guiding principles of the analysis, in order to result in a decision approving or rejecting it? Which(what) value(s) guide(s) (or should guide) the decision-making process?
A concentration act, among the many goals it might aim to achieve, has a close connection to a desire to increase productive and allocative efficiencies of economic agents, as well as to reduce company costs, mainly optimizing asset utilization. Naturally, one of the direct consequences of a concentration act might be the reduction of the new company’s staff, since the new agent will want to seize the synergies and efficiencies attained, and, in order to reduce operational costs, may reduce its number of employees.
Nevertheless, in CADE’s analysis, the focus given to the operation is not limited to private efficiencies to be obtained exclusively by the new firm, but also involves a contextual analysis of the many implications arising from this change to market structure.
The Brazilian antitrust policy does not aim to protect specific competitors (or economic agents) of a certain market, but rather to protect the competitive environment that emerges from an operation. That means to analyze whether the market’s conditions, in the post-merger scenario, will allow for entry of a new agent, and/or whether there will be the possibility of abuse resulting from increasing market power. Furthermore, a factor that directly constitutes this analysis is the distribution of eventual efficiencies gained to consumers, whether it is in the final product itself or in other economic agents who are part of the chain of production.
Although there are doctrinal divergences as to who would be the final recipient of the antitrust laws, the fact is that the analysis is not restricted to private efficiencies to be internally seized, but its confrontation with the effects to the whole market (competitors, suppliers, future potential agents, etc.)²
CADE itself has manifested this understanding, albeit under the previous law, n. 8.884/94 (which was replaced by law 12.529/2011), since its “Guidelines for Economic Analysis of Concentration Acts”⁴ determines as a basic criteria for approval of an operation the finding of a “non-negative net effects over [society’s] economic well-being”. It is clear therefore that overall analysis involves an evaluation of public effects. Nevertheless, this contextual evaluation must also observe limitations, since CADE may not be the most appropriate agency to evaluate questions that might surpass its jurisdiction and expertise, such as environmental and labor matters, the latter being the focus of the present analysis.
Recently, labor matters have regained the agency’s attention when “Sindicato dos Bancários de Curitiba e Região” (Trade Union of Bank Workers of Curitiba and region) was admitted as an interested third party⁵ in a Concentration Act between HSBC and Bradesco, which is still under review at CADE’s General Superintendence⁶.
The Union’s intervention aims to “define restrictions referring to an obligation to maintain all current employees of both HSBC and Bradesco, as appropriate, by creating programs of training and replacement, as a condition to approve the act”, or “alternatively, establish restrictions referring to an obligation to ensure HSBC’s administrative headquarters in the city of Curitiba, with full preservation of its current workplaces”, or, if neither of those can be achieved, “create an obligation according to information given by the claimants to formally ensure that all administrative activities related to the IT area will be fully maintained, without dismissal of any employees”.
This means that although CADE might not be the agency primarily responsible for labor law, it has occasionally incorporated this matter in its analysis.
The Union’s goal to protect its workplaces – and its institutional role – is valid; however, this matter must be properly balanced with CADE’s role/aim in its analysis and with the operation’s goals. It should be noted that, in this case, one of the claimants is not interested to continue operating in Brazil. Therefore, would imposing to a company the obligation of maintaining its operations in a country in order to protect workplaces be possible?
Free enterprise is one of economy’s founding principles, and, in the private sphere, the agents have the freedom to choose whether or not to endeavor. Hence, it is not possible to impose to an agent the obligation to maintain certain activities that are no longer in its interest. In any case, this private aspect would have to be weighed against a company’s social function and the means of production. This is due to the fact that economic activities are not intertwined only with private interests, but also with public ones, as they, for instance, deal with thousands of employment positions and might have deep socioeconomic and socio-environmental implications.
CADE’s role as an agency responsible for public interests comes once again into play, since it is concerned with the whole competitive environment than with only one specific competitor. Would it be the most appropriate agency to protect workplaces while it conducts its analysis of competitive matters? Likewise, is this public interest, in CADE’s sphere of action, necessarily protection of labor, or does its social function correspond to the protection and maintenance of a healthy competitive environment?
In cases previously evaluated by the antitrust authority, these issues were considered. Nevertheless, this does not mean that there is a prohibition per se of any staff reduction by those who require approval of a concentration act, but rather a requirement that those reductions be connected to the alleged efficiencies created. In its petition, the Trade Union refers to the Gol/Webjet and Ambev cases, as examples of cases in which labor issues were evaluated more in-depth by CADE. However, in the first case’s Performance Commitment Term (TCD)⁷, signed between the parties and the agency, there was no imposition of an obligation to maintain existing workplaces; and, in the second one, the signed TCD did not establish an obligation to maintain current employment levels as a consequence of the company’s restructuration, but did condition the reduction to the implementation of retraining and replacement programs.
Although labor issues are delicate and extremely important, it seems, at least in a preliminary analysis, that CADE, as the agency responsible for a healthy competitive environment, is not the most adequate primary agent to uphold employment maintenance. It would be appropriate, in such cases, to establish an institutional dialogue with the Ministry of Labor as a way of finding answers and solutions together with the economic agents involved, allowing, as a result, for greater attention to work posts and objectives of the operation.
It is possible for CADE to impose obligations related to employment when it analyses the approval of concentration acts, which has been done in some cases. Nonetheless, could a labor issue be reason enough to, for instance, deny approval of an operation? Emphasis should again be put on the fact that CADE’s main goal is to protect competition under a public standpoint (e. g. competitive environment), and not to defend employment.
¹ Translation by Julia Krein.
² Master’s Degree candidate at Universidade de São Paulo. Lawyer at Grinberg & Cordovil Advogados.
³ Calixto Salomão Filho states that “worker’s interest was explicitly established by law 8.884/1994 as a concern to be taken in account when formulating a performance compromise”, and that “we must reject, from the start, simplistic analysis’ which tend to reduce both the interest of the consumer protected by the competition order and the interest of the competition order itself to a mere issue of prices” in Direito Concorrencial. São Paulo: Malheiros, 2013, p.119/119. Furthermore, it is valid to mention Justice Douglas, of the US Supreme Court, in United States v. Columbia Steel Co. 1948: “We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace — both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace –because of its control of prices. Control of prices in the steel industry is powerful leverage on our economy. For the price of steel determines the price of hundreds of other articles. Our price level determines in large measure whether we have prosperity or depression — an economy of abundance or scarcity. Size in steel should therefore be jealously watched. In final analysis, size in steel is the measure of the power of a handful of men over our economy. That power can be utilized with lightning speed. It can be benign, or it can be dangerous. The philosophy of the Sherman Act is that it should not exist. For all power tends to develop into a government in itself. Power that controls the economy should be in the hands of elected representatives of the people, not in the hands of an industrial oligarchy. Industrial power should be decentralized. It should be scattered into many hands, so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men. The fact that they are not vicious men, but respectable and social-minded, is irrelevant. That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it.”
⁵ Law n. 12.529/2011. Art. 50. The General Superintendence or the Reporting Counselor might admit the intervention of the following as an interested third party in the administrative proceeding: I – third parties entitled to rights or interests that might be affected by the decision to be made; or II – those standing to sue in a civil class action by lines III and IV of art. 82 of law n. 8.078, dated September 11, 1990.
⁶ Concentration Act n. 08700.010790/2015-41
⁷ There was such an obligation in the Agreement to Preserve the Operation’s Reversibity, but this clause is standardly a part of these kinds of agreements, as it aims to maintain both parties’ operations unharmed in case the agency did not approve the operation in its ex post analysis. This was in place before the new law that imposed ex ante analysis.