New regulations for marketplaces and other digital platforms: latest updates in Argentina, Brazil and Mexico
Monday 26 February 2024
Verónica Volman
RCTZZ Abogados, Buenos Aires, Argentina
volman@rctzz.com.ar
Damián Navarro
RCTZZ Abogados, Buenos Aires, Argentina
navarro@rctzz.com.ar
Lisandro Frene
RCTZZ Abogados, Buenos Aires, Argentina
frene@rctzz.com.ar
This article reviews the latest legal updates regarding regulation and scrutiny of marketplaces and other digital platforms operations in Argentina, Brazil and Mexico from an antitrust, data privacy and consumer protection standpoint, and their relationship with recent European regulations such as the Digital Services Act (DSA) and the Digital Markets Act (DMA).
Mexico
The Investigative Authority (IA) of the Mexican Federal Economic Competition Commission (‘Cofece’) preliminarily determined that there are no conditions of effective competition in the retail e-commerce market in Mexico, affecting both sellers and buyers who transact through the main marketplaces operating in the country: Amazon and Mercado Libre.
The IA considered that there are no conditions of effective competition because these markets: (a) are highly concentrated with only a small number participants each having great market power (and which have systems for collecting and processing large volumes of data); (b) the companies with high market power have the ability to set prices; and (c) there are entry barriers linked with (i) the network effect characteristic of these markets, since each ‘side’ of the marketplace platform benefits if there are more users on the other side (for example, a seller will want to offer their services in the marketplace that is most popular with buyers) and (ii) the high investments which are required for the development of this type of platform, the need for technological tools, investments in advertising, marketing and public relations.
Given the above, the IA determined that there are three possible barriers to competition that could affect the operation of this market: (i) artificiality in some components of the loyalty programmes, not directly linked to the marketplace transactions (for example, the offering of streaming services) that affect consumer behaviour; (ii) lack of transparency in the operation of offer management within the marketplace, since algorithms select and highlight particular offers as the top-ranked, without specifying the criteria for making such a choice; and (iii) preferences for own logistic solutions – reflecting the vertical integration of the marketplace – preventing sellers from freely choosing which logistics company to use.
To eliminate these barriers, an opinion considering a series of corrective measures to restore effective competition conditions in this market was preliminary proposed. These measures consist mainly of:
- dissociating streaming service memberships and preventing the promotion of these services within the marketplace;
- creating a section in the portal that informs sellers of the criteria that the offer management algorithm takes into consideration when choosing the highlighted offer; thus, providing transparency and certainty;
- modifying the criteria of the offer management algorithm so that being able to hire a logistic solution with a specific economic agent is not considered as a variable; and
- transparency in the standards considered appropriate for providing the logistics service thus enabling interested logistics companies to integrate these into their platforms.
Before the Plenum of Cofece issues a definitive resolution, this preliminary opinion is currently open for the presentation of arguments and observations by the economic agents involved. In any case, the opinion demonstrates the interest of competition defence authorities in scrutinising the practices of these large digital platforms, which have shown exponential growth in recent years.[1]
Brazil
In a similar direction, the Government of Brazil has initiated a two-month public consultation, aimed at society, market actors and academic specialists, regarding the economic and competition conditions of digital platforms, including search engines, instant messaging services, social networks and marketplaces. Currently, there are no legislative or regulatory projects, but the Government is conducting a questionnaire comprising 16 open questions. This consultation may result in substantial modifications in competition policy, and in a new regulatory framework that impacts companies operating in the digital economy market.
Brazil also has certain legislative projects and recent regulations in terms of the regulation of internet service providers, although these are not strictly related to competition regulation. The first, which already has been half sanctioned, is the bill on Freedom, Responsibility, and Transparency on the Internet[2] that regulates internet application providers with more than two million registered users and promotes the veracity of content, including sponsored material, seeking to deter potential abuse or manipulation of individual or collective harm. This project foresees the adoption of good practices by the obligated subjects to protect their users from misinformation, in addition to imposing transparency obligations and assessing the systemic risks that emanate from their design, use and operation, the adoption of mitigation measures regarding those risks, and the duty to act ‘with diligence and in a timely and sufficient manner, to prevent and mitigate unlawful practices within the scope of their service’. In this sense, the project incorporates several of the provisions of the recently enacted Digital Services Act (DSA) applicable in the EU.
On the other hand, last year’s Resolution 351/2023, by which the activity of ‘social network platforms’ was framed in consumer law, placed the control of compliance with the ‘general duty of safety and care’ in relation to the dissemination of ‘illegal, harmful, and noxious’ content on the consumer authority (SENACOM).
Argentina
In Argentina, there have also been advances in the scrutiny of the practices of large digital platforms. Specifically, in recent years, the National Commission for the Defense of Competition (CNDC) has shown signs of reviewing these markets. The first was the ex officio investigation conducted by the CNDC on the terms imposed on users by WhatsApp Inc, which led to a precautionary measure ordering the company – part of the Meta group – to refrain from updating the terms and conditions of its service, as well as prohibiting the exchange of data with other companies in the group (eg, Facebook). The CNDC considered that the treatment and exchange of user data could constitute an abuse of WhatsApp Inc’s dominant position. Thus, this can be viewed as a valuable precedent as the competition authority analysed the behaviour based on the use and treatment of data, which is an essential input in these types of markets. This precedent aligns with one of the prohibitions imposed on gatekeepers in the recent Digital Markets Act (DMA) applicable in the EU.[3]
Moreover, last year, the CNDC regulated summary procedures (PROSUM), which constitute a simplified mechanism for notifying economic concentrations before the antitrust authority. In Disposition 62/2023,[4] the CNDC established that, even if an operation does not represent a significant market concentration, cases are excluded from this procedure when ‘a company already established in a market intends to acquire a small but highly innovative company – even without reaching its technological peak – either to use its technology or deactivate it’. Thus, the CNDC addresses the cases of so-called ‘killer acquisitions’ or acquisitions that impede innovation, which are also characteristic of these highly innovative markets.
As we can see, the antitrust analysis of the practices of large digital platforms has not lagged. In 2023, CNDC also created the Research and Work Group on Digital Markets. It is a multidisciplinary and cross-sectional group dedicated to the research of the different markets that make up the digital economy, with the aim of refining the approach that CNDC professionals take on cases involving these markets. Although the group has not yet issued publicly accessible documents, the regulatory trend at the regional level and the cross-border characteristics of digital markets may impact the approach of future decisions by the Argentine competition authority.
Regarding specific regulatory projects, on the other hand, a Bill on the Regulation of Online Intermediation Digital Services for the Defense of Competition and Consumers has recently been filed, ‘with the aim of preventing commercial practices that harm or pose a risk to competition, user and consumer rights, or cause distortions in the market’.[5] This law covers digital intermediaries and covers many varied issues including, regulating the duties of registration before the enforcing authority, the prohibition of setting abusive clauses to suppliers, transparency in reputation systems, the prohibition of imposing payment channels, the setting of display rules and the creation of a tax on digital services. This law adopts part of what the European regulations (Digital Services Act and Digital Market Act) and the regional regulations begin to regulate, and it will be important to monitor closely its legislative treatment. Additionally, in the absence – for the time being – of specific regulation regarding the supervision of these platforms, different judicial criteria have emerged in terms of the liability of digital intermediaries, either considering consumer protection legislation[6] – understanding the intermediary as part of the marketing chain[7] – which are based on the Civil and Commercial Code of the Nation (ie subjective liability).