A recent Agreement aims to encourage competition in the electric power generation, distribution, transmission and commercialization markets in Brazil. On July 21, 2010, the members of SBDC, the Brazilian Antitrust System comprising the Administrative Council for Economic Defense (CADE), the Secretariat of Economic Law of the Ministry of Justice (SDE) and the Secretariat for Economic Monitoring of the Ministry of Finance SEAE), and ANEEL, the Brazilian Electricity Regulatory Agency, executed a Cooperation Agreement aimed at preventing anticompetitive conduct in the electricity.
The Agreement reflects the agencies' interest in eliminating conflicts, setting standards and increasing synergies and information exchange in order to establish a solid base for decisions regarding antitrust and competition issues in connection with the Brazilian electricity sector. This Agreement also sets forth possibilities to enforce the antitrust law in cases involving abuse by market players.
The agencies will develop studies, projects and activities of common interest, as well as proposals for industry-related seminars. The Agreement also provides for exchanging information about SBDC's administrative proceedings and the contribution of ANEEL during the analysis.
Under the Agreement, (i) SDE will request that ANEEL issue an opinion within 30 days about potential evidence of unlawful anticompetitive conducts in the electricity sector, (ii) ANEEL will provide such evidence to SDE for analysis, and (iii) after a preliminary defense by the party under investigation, SDE will send ANEEL a copy of the administrative procedure for issuance of the opinion within 30 days.
In connection with merger reviews, SDE will send ANEEL a copy of the transaction documents within 15 days and ANEEL will issue an opinion about the transaction and will send it to SDE within 30 days.
Cooperation Between the Brazilian Antitrust System and the Brazilian Electricity Regulatory Agency
ANEEL will also disclose to the antitrust authorities the final results of the index adjustments and/or tariff revisions approved by the agency, in order to assist studies and projections of the economic impact on the inflation rates. In return, ANEEL will be informed about the results of these studies and projections before public disclosure.
The agencies will appoint individuals who will be responsible for ensuring compliance with the Agreement; these individuals will be authorized to attend meetings and share documents and information necessary to achieve the stated goals. The term of the Agreement is two years from the date of its publication in the Brazilian Official Gazette.
In order to encourage competition between the players and to prevent economic concentration in the services and activities of electric energy, ANEEL already has the power to establish "restrictions, limitations or conditions to companies, economic groups and shareholders, in connection with the obtainment or assignment of concessions, permissions and authorizations, to a concentrated economic group or the business between economic groups" and to "ensure the fulfilment of the antitrust law, monitoring markets plays in the electricity sector."1
Under such legal attribution, ANEEL issued Ruling no. 378, from November 10, 2009,2 which sets forth the analysis procedures for transactions and economic violations in the electricity sector. It is important to highlight that ANEEL already had a synergy with antitrust authorities, even before this Agreement, because Ruling no. 378/2009 establishes that if ANEEL identifies a case of anticompetitive conduct, it must report it to SDE.
Ruling 378/2009 provides that ANEEL shall exercise its authority in identifying the following: (i) the relevant market players; (ii) any influence exercised by those market players on the exchange of electric energy between the sub-markets in which the parties operate, observing the transmission limits and alterations to those limits; (iii) any possible influenceon the energy prices in all sub-markets, in order to analyze market power; (iv) the parties' participation in the generation, transmission, distribution and commercialization of electric energy in the sub-markets, through source and/or type of fuel, when applicable; and (v) in case of distributors of electric energy, the demonstration of efficiency gains that will be addressed in the tax revision process.
The Ruling also makes clear that SBDC is responsible for instruction, analysis and judgment on antitrust issues, while ANEEL is responsible for the issuance of non-binding opinions about technical and regulatory matters which can assist the antitrust authorities. The Agreement also seeks to clarify the synergies between ANEEL, CADE, SDE and SEAE, in order to achieve greater consistency in SBDC decision-making.
1 Under article 3, VIII and IX of Law no. 9.427, of December 26, 1996, amended by Law.no 9.648, of May, 27 1998.
2 Ruling no. 378/2009 completely revoked Ruling no. 278, of July 19, 2000, which had been partially revoked by Rulings no. 252, of February 06, 2007 and no 299, of January 8, 2008. Ruling no. 278/2000 establishes percentages in the eletric energy generation, distribution and commercialization markets.
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