Competition authorities and policymakers around the world have devoted a growing proportion of their time and resources over the last decade to digital markets. Typically, this attention has been accompanied by vocal antipathy toward large digital platforms, as regulators and lawmakers invoke the need to “rein in digital monopolies” that allegedly cause a broad array of social harms.
As I detail in a new International Center for Law & Economics (ICLE) white paper, Latin America has been no exception to this trend. Competition authorities in Latin America have targeted digital markets by initiating cases, investigations, and studies similar to those in Europe and the United States. At the same time, the region’s competition agencies have come under harsh criticism for allegedly being “too technocratic” and “too narrowly focused” on consumer welfare. Some populists have attacked competition agencies for being “neoliberal institutions,” with calls to curb their powers or take away their independence.
As I argue in the ICLE white paper, Latin American agencies should resist these pressures and use their scarce enforcement resources to address behavior that truly hurts consumers and distorts competition. Toward that end, digital markets need not (and likely should not) be their primary concern.
Competition Enforcement Resources and Priorities in Latin America
To be sure, it is not the case that any competition intervention in digital markets is without merit or that any effort to understand or study these markets is futile. Legitimate cases may arise and, by all means, agencies should do what they can to study new markets and acquire new expertise. Digital markets are important for education, entertainment, communications, and productivity throughout the economy. If competition is being distorted in these markets, it is important to address those issues.
But this does not justify a policy that allocates excessive enforcement resources to these markets, particularly where there is insufficient evidence of harm to consumers or to competition. As Herbert Hovenkamp has explained:
With Big Tech, we’re looking at probably the most productive part of the economy. The rate of innovation is high. They spend a lot of money on R&D. They are among the largest patent holders. There’s very little evidence of collusion. They seem to be competing with each other quite strongly. They pay their workers relatively well and have fairly educated workforces. None of this is a sign that these are industries we should be pursuing. That doesn’t mean they don’t do some anti-competitive things. But the whole idea that we should be targeting Big Tech strikes me as fundamentally wrong-headed.
Much the same can be said of initiatives across Latin America to promulgate new ex-ante regulations in digital markets, which I cover extensively in the ICLE white paper. The evidence finds that most digital markets are highly competitive, even in Latin America, and do not present the kinds of “market failures” that warrant regulation. Moreover, as I have argued elsewhere:
Before considering new regulations, Latin American countries should think carefully about what we want. Do we really need to “tame” big internet companies? Are they somehow a constraint on growth and innovation? Are they creating inefficiencies or inequities? That is hardly the case. If anything, we need more access and use of digital platforms to enable our citizens to get access to education and expanded markets.
This is not to say that competition enforcers should ignore digital markets entirely. But rather than open ex-officio investigations or create special enforcement units for digital markets, Latin American competition agencies should invest in generating the human capital and knowledge needed to better understand them. With this, they could better understand the obstacles that prevent greater deployment of internet services in Latin America, such as regulatory barriers that prevent the expansion of telecommunications infrastructure—a critical input for online services.
And when it comes to actual competition enforcement, merger control in digital markets should be implemented with the same rules, thresholds, and procedures that apply in every other market. Enforcers can also rely on private enforcement—all competition laws in Latin America allow private parties to file complaints targeting alleged anticompetitive conduct—to deter monopolization, thereby enabling enforcers to focus on other, more pressing enforcement priorities.
The Institutional Structure of Latin American Competition Authorities
Most competition agencies in Latin America are already sailing through rough waters. As a recent World Bank report notes:
… institutions promoting competition continue to be weak, on average, and cartel activity and market concentration continue to be pervasive in LAC. To ensure the effectiveness of competition agencies, their independence and commitment mechanisms limiting their discretion in decision-making are essential. However, in most LAC countries, the competition agency is part of the executive branch, and the president has the authority to replace its head at will. Moreover, LAC competition agencies are understaffed and underfunded compared to peers in other regions, suggesting their relatively weak positioning within governmental policy priorities. Perhaps as a result, LAC competition agencies tend to launch fewer investigations on their own and are less likely to use leniency programs to encourage cartel members to cooperate with investigations. They also conduct fewer unannounced inspections to investigate infringements and impose lower average fines.
To make matters worse, various “political icebergs” threaten the proper functioning of the region’s competition authorities. These threats vary in degree and form, but some are grave, even existential.
Mexico, for example, has dismantled COFECE, which used to have its independence enshrined in the Mexican Constitution. Responsibility for the enforcement of antitrust laws will now be moved to a new body, apparently within the Commerce Ministry (the details to be defined in forthcoming legislation). COFECE may not be perfect, but it is an internationally regarded agency, with independent and highly qualified officials. The proposed changes risk throwing the baby out with the bathwater.
In Colombia, President Gustavo Petro left the Industry and Commerce Superintendency (SIC, after its Spanish acronym) without a leader for months. He then appointed a new leader, only to remove that person after a few months in order to appoint a close ally who lacks experience in competition law.
In Argentina, an independent competition agency (Autoridad Nacional de la Competencia or ANC) has yet to be formed, seven years after Act No. 27.442 of 2018 mandated its creation. In the meantime, antitrust laws are enforced by the Comisión Nacional de Defensa de la Competencia (CNDC), a body dependent on the secretary of commerce and, as such, subject to political pressure.
Note, for instance, this press release from President Javier Milei’s office concerning Telecom’s acquisition of Telefónica’s assets in Argentina. Among other things, Milei declares that “the national government will take all measures to guarantee users’ right to choose, free competition, and accessibility to telecommunications services.” In other words, there is undeniable pressure for the CNDC to “do something” about the merger.
In Peru, the Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual (INDECOPI) has faced an institutional crisis for months, as it could not appoint a full complement of commissioners to its decisionmaking bodies, therefore blocking or delaying decisions in key competition cases. On top of that, INDECOPI has faced budgetary restrictions that have prevented both the Commission and the National Directorate of Investigation and Promotion of Free Competition (the “Directorate,” which acts as prosecutor in anticompetitive-behavior cases and also provides general support to the Commission) from being proactive in prosecuting anticompetitive conduct.
Conclusion
The overwhelming priority for Latin American competition authorities in the current environment should be to marshall all their political capital to counteract these attacks on their institutional structure and/or proper functioning. Initiating superfluous cases against “Big Tech” platforms just to emulate enforcers in Europe or the United States, or promoting legislation to expand their powers with new regulations specifically crafted for digital markets, would amount to rearranging the deck chairs, rather than dodging the political iceberg in front of them.
A reasonable counterpoint is that Latin American competition authorities are targeting digital markets and AI because it would give them political capital to spend elsewhere. But Latin America is not Europe, and it certainly is not the United States. The political context that has created antipathy toward large internet platforms in developed countries is not the same in Latin America, where citizens face much more pressing issues (unemployment, weak institutions, and poverty, among others).
Given this, competition authorities hampered by limited resources should prioritize prosecuting conduct that causes the greatest harms to consumers (such as cartels) and focusing on competition concerns in markets that could otherwise be growth multipliers, like transportation and logistics. As the World Bank has emphasized:
While there are many ways to promote competition, tackling cartels can yield immediate and tangible benefits, especially for poor households, with little risks of unintended consequences for the business environment. Worldwide, much of the recent policy dialogue on competition issues has focused on information technology, especially social networks and online commerce platforms, as well as the broader rise of global corporate market power. Policies designed to address the potential anticompetitive impacts of these developments are complex and risk undermining the business environment by weakening incentives for firms to innovate and grow. By contrast, cartels can be identified and eliminated, or prevented from forming, through relatively simple, well-established policies and enforcement mechanisms. (emphasis added).
Sound enforcement of existing antitrust law in markets that really need it, and communicating with the general public about these actions and their positive impact, is the right way for competition agencies to enhance their credibility and legitimacy. In turn, authorities with better credibility and legitimacy will be in a much better position to navigate the political icebergs that lie ahead.
