Measures Against Monopoly and The Ease of Opening Companies

May 12, 2021


Competition law, also known as "anti-trust law" in some countries, hasemergedtoensurethatthereisanenvironmentwhereallcompaniescanworkwith fair competition, avoiding trustor cartel practices. The firstoccurswhencompaniesthatalreadyholdthemajorityof a market merge toensuremarketcontroloragreetomaintain high pricestoachieve a higherprofitmargintothedetrimentofconsumerwell-being. The second, in turn, ischaracterizedbytheagreementbetweencompetingcompaniesto set prices, divide customersandthemarket in whichtheyoperateorcarry out coordinatedactionbetweenparticipantseliminatingcompetition.

Further, competition law world wide aims to avoid monopoly, the situation in which there is only one supplier of a certain good or service. When this happens, thecompanycanpurposelyreduce its productiontoraisepricesup, reaching the point where the quantity produced, multiplied by the price practiced, generates the maximum profit for the company. This situation makes it more difficult for innovations and development to emerge. On the other hand, with competition, prices tend to remain lower and services efficient in order to keep the clients, in addition to innovations in products, which is good for consumers, and by maintaining a reasonable market, it also benefits small traders and micro entrepreneurs

   Still, the Brazilian Administrative Council for Economic Defense claims some companies have market power, that is, they can set their prices above the competitive level and still retain their customers. Usually, this practice is not considered illegal, only in cases where economic power abuse is practiced, for example, when a company or group uses its power to harm free competition through anti-competitive conduct.

   Even though competition laws have been around for a long time worldwide, there are still companies being fined billionaire for illegal monopoly practices. As is the case with Google, accused again in October 2020 of having an unfair monopoly on search-related advertising. According to the official document, "The company pays billions of dollars each year to distributors to guarantee the status of its search engine and, in many cases, to prohibit as its counterparties from trading with competition specifically." This was not the first complaint against them. In 2011, the Federal Trade Commission published a similar analysis. Still, it gave up on the accusation after making a deal with the defendant, probably much more profitable than the prosecution would be to Federal Trade Co. In 2019, the European Union also initiated a lawsuit. The official statement says "Google has totaled its domain in online search advertising and has protected itself from competition by imposing anti-reject contractual restrictions on other sites. This is illegal under the European Union's antitrust rules.". The defendant argued that people use the service only because they want to, because they could change the platform.

   The fines set for Google has already exceed $ 9.6 billion. The company, that has an annual turnover of about 100 billion dollars according to data reported by Alphabet Co, has contested them all. This fact highlights the flaws in the world's competition laws in a pragmatic context.

1- Competition Law in India

   Competition law in India is still going through improvements. In the past, the rules were cited by the MRTP Act, implemented in June 1970 and inspired by laws in more developed countries like the United States, Canada and England.

   In 1984, amendments were made to its text, consecrating the Supreme Federal Court's principles regarding the restriction to agreements such as negotiation, area restriction, and maintenance of the resale price. This Law mainly referred to the concentration of the economy and monopolistic behavior. Still, after the market changes and the economy it was no longer enough for all common issues. In this scenario, the Raghavan committee was created to recommend an appropriate legislative framework and parliament enacted the "Competition Act, 2002" to protect consumer interests and guarantee free trade in India's markets. Among its objectives, the following stand out: Prohibit agreements or practices that restrict free trade and also competition between two business entities; Ban the abusive situation of market monopoly; Offer the entrepreneur an opportunity to compete in the market; Prevent anti-competitive practices and promote fair and healthy competition in the market.

Under Indian law, companies, persons or associations cannot enter into agreements in relation to the production, supply, distribution control goods that could have a significant adverse impact on competition, iftheydid, the agreement would be considered null and void.

   The law establishes in its sections 7 and 8 the Competition Commission of India (CCI) whichhasthedutiestoprotectsuchinterestsandtoprohibitagreementsandpracticesthatmayhaveappreciable adverse effectoncompetition in a certainmarketandthe abuse of a dominant position. According to Section 4, abuse of a dominant position occurs when a company imposes, directly or indirectly, unfair or discriminatory condition in purchase or sale of goods/services; orprice in purchase or sale (including predatory price).

   According to section 8 of the same document, the Commission shall consist of a Chairperson and not less than two and not more than six other Members appointed by the Central Government. And section 18 discusses its duties to promote and sustain free competition, protect the interests of consumers and guarantee freedom of trade in the country's markets. To deal with cross-border issues, the commission may enter into any memorandum of understanding or agreement with any foreign agency in any foreign country as long as there is prior approval from the central government.

AnyonewhofeelsharmedbyanorderfromtheCommissioncanrequest a review oftheorderwithin 30 daysfromthe date of communication oftheorder. Or, they can appeal to the Supreme Court within 60 days.

   In 2019, the CCI completed a decade since the enforcement provisions were implemented. However, in its report on "Market Study on E-commerce in India", referring to market trends and fundamental issues of competition, an imbalance of negotiation power and information asymmetry was observed between the platforms of the e-commerce market and its users. According to the document, participants in this trade school implement a framework to define the necessary conditions for platform contracts. Online travel agencies, such as MakeMyTrip and Oyo, are also being investigated for allegedly imposing vertical restrictions and domain abuse, denying market access. The sports sector has also undergone several corrections from sports bodies, consistent with the practices followed by anti-curator regulators.

   In January 2020, theIndian legal personresponsible for antitrustorderedaninvestigationintoallegedviolationsofcompetitionlawby IncandWalmart'sFlipkart. This investigation is the latest disadvantage for Amazon and Walmart's Flipkart, thatIndiantradersclaimtoviolatethecountry'sforeigninvestmentrules.

2- Competition Law in Brazil

Brazil is one of the most bureaucratic countries in the world. According to the new competition law, if a steelcompanybuys a super market it will benecessary to present 58 documentstotheresponsibleagency, while in Germany, for the same acquisition, it would be enough to send a letter.

   Under the old Anti-Trust Law (Law 8,884) created in 1994, the Brazilian Competition Defense system was formed by 3 parts: Secretariat of Economic Law, Secretariat for Economic Monitoring and Administrative Council for Economic Defense (Consel ho Administrativo de Defesa Econômica-CADE), a structure that made the process of analysis too slow. In order to solve this problem, it was replaced in 2011 by Law 12,529, which changed the system by concentrating all three functions in just one body, CADE, for this reason also known as SUPERCADE, a federal autarchy of national scope. Another change was the prior approval of CADE for the acquisitions, to avoid inconsistencies as occurred previously in the purchase of Garoto by Nestlé, which has been waiting to be made official for 18 years now, as the agency did not agree with the purchase.

   The new competition law was discussed over a decade by economists and lawyers and, as seen in the new Indian law, it was also inspired by laws in more developed countries. However, even if passed almost unanimously, it facedresistancefromcompaniesthatannouncedmergersandacquisitionsbeforethelawwentintoeffect. About 20 transactions were recorded a few days after its announcement.

   According to article 3 of the new Law (12,529 / 2011), the Brazilian Consumer Protection System is formed by the Administrative Council for Economic Defense (CADE) and by the Economic Monitoring Secretariat of the Ministry of Finance. Similarly, to the Competition Commission of India (CCI), the Administrative Council for Economic Defense has the function of analyzing and approving or disapproving acts of economic concentration, investigating conduct harmful to free competition and punishing lawbreakers when necessary.

However, monopolies are still observed in the country. During  his campaign, the current President of the   Republic, Jair Bolsonaro, promised that he would end Taurus' trust in the arms market. In his words, "I don't want to go bank   Taurus, I just  want to open the market. This will allow the population to have more access to weapons. Today, this market is elitist because of the price of weapons." In fact, now a  days there are space for imports, but the market is still closed to foreign  manufacturers in the Brazil.

3- Comparison Under Report "Doing Business (2019)"

   The doing business report presents world economies rated 1-190 in terms of ease of doing business. A position closer to 1 means that regulations in the business environment are more conducive to the opening and activities of local companies. The rankings are determined based on the average between the scores of 10 different ones with the same weight. On the other hand, The Ease of Doing Business Score (EODB Score) helps assess the absolute level of regulatory performance over time. It captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005.

According to the 2019 report, India, the seventh largest economy that year, was ranked 77 in the DB Rank and received a score of 67, while Brazil, the eighth largest, occupied position 109 and received 60 points. The difference between the two countries in the ranking was 32 positions. However, the two showed improvements compared to the previous year, India rose 23 places and Brazil, 16.

In the specific topic "starting a business", very important to guarantee the existence of competing companies in the market, the Indian score was 136 and the Brazilian, 138, representing a small difference between the two countries, which shows a more incredible bureaucracy in the Indian process that year, which is close to the low Brazilian score. Brazil made starting a business easier by launching online systems for company registration, licensing and employment notifications, however, made registering property more expensive by increasing the municipal property transfer tax. India made it easier by fully integrating many application forms into a general incorporation form. India also replaced the value added tax with the GST (Goods and Services Tax) for which the registration process is faster.

According to Companies Act 2013 (Section 3-4; 7-8) and Brazilian Civil Code 2002 (article 966-1.000), some of the primary documents required to open a company in these countries are shown in the table below:




 Personal documents of those responsible for the company

Personal documents of those responsible for the company

 Corporate identity number

Corporate identity number

 Certificate of Incorporation

Certificate of Incorporation

 Proof of business address

Proof of business address

 Digital certification for the use of e-invoices

Digital Signature Certificate (DSC)

 Inspection certificated by the fire department

Director Information Number (DIN)

 State Registration

Registration on the MCA portal

 Social Contract

Original copy of formal letter issued by ROC regarding availability of Company name

 Copy of Urban Property and Land Tax

Goods and Service tax registration number

 Legal Entity registration

 Health Surveillance license

  Social Security registration

It shows us Brazil is more demanding than India when it comes to starting a business. This analysis is critical because the environment must be favorable to compliance with competition laws. The country is responsible for providing adequate conditions to stimulate potential entrepreneurs. It also needs to guarantee a calm environment for them, so, this way it is possible for the new companies to maintain active in the market. The requirement for many documents, as well as the slowness of the process to start a new business and the difficulty of staying active in the market ends up discouraging potential entrepreneurs, then, the market becomes formed only by large companies, since there are not enough adequate politics to help the small business to compete with them. According to Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística - IBGE), In Brazil, half of the companies close their doors before completing the fourth year of existence. In this scenario, it is difficult for new companies to emerge and compete with the most influential companies, already stable in the market, and the smallest businesses end up being swallowed up by the largest ones.

4- Requirements for Foreign Companies

Foreign company is an organization constituted and organized according to the legislation of its country of origin, in which it has its administrative headquarters. However, the taxation of a foreign company subsidiary in the country is identical to the one for local company.

In India, section 379 of the Companies Act, 2013 provides information for the application of the Law to foreign companies, where not less than fifty per cent. of the paid-up share capital, whether equity or preference or partly equity and partly choice, of a foreign company is held by one or more citizens of India or by one or more companies or bodies corporate incorporated in India, or by one or more citizens of India and one or more companies or bodies corporate incorporated in India, whether singly or in the aggregate.

According to section 2 (42) foreign company means any company or body corporate incorporated outside India which a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and b) conducts any business activity in India in any other manner. Among the requirements foreseen in sections 379-380 for the installation of the foreign company in the country and documents to be delivered to the Registrar by foreign companies are: a) a certified copy of the company statute or memorandum and articles, such as an association memorandum (MoA), report of association (AoA) and certificate of incorporation - all in English; b) full address of the company's registered office or principal; c) list of the directors and secretary of the company containing the data that can be prescribed; d) name and address of one or more persons residing in India authorized to accept on behalf of the company process services; e) the full address of the company's headquarters in India; f) details of opening and closing a business location in India on a previous occasion; and g) statement that none of the company's directors or authorized representative in India has ever been convicted or prevented from forming companies and management in India or abroad. Note that when any change is made or in the documents delivered to the Registrar, the foreign company must, within thirty days after such modification, return to the Registrar a declaration containing the data of the change in the form provided. In addition, to register the Indian subsidiary of a foreign company, an authorized representative must be appointed by the company, who will be responsible for the registration process and for all communication with MCA in this regard. Finally, only upon obtaining a license from the Reserve Bank of India (RBI) subsidiary does the foreign company have permission to start operations.

In Brazil, foreign companies are regulated by the Civil Code in articles 1,134 to 1,141 and by Normative Instruction No. 81, of January 5, 1999, which provides for authorization requests for nationalization or installation of a branch in the country.

According to article 1.134 of Civil Code, the foreign company interested in settling in Brazil must obtain authorization from the Brazilian Executive Power, for that purpose it must prepare an application addressed to the Ministry of State for Industry, Commerce and Tourism, filed in the Department National Registry of Commerce. Once the installation and operation authorization has been granted, the foreign company must file with the Commercial Registry of the federative unit where the branch is located, which will be considered as its headquarters: I - proof that the company is in accordance with the laws of its country; II - full content of the contract or statute; III - list of members of all management bodies of the company, with name, nationality, profession, domicile and the value of each shareholding in the capital of the company; IV - copy of the act that authorized the operation in Brazil and fixed the money destined for operations in the national territory; V - proof of appointment of the representative in Brazil, with express the reasonable possibility to accept the conditions required; and VI - the company's last balance sheet. In accordance with article 1,135, the needs being taken, the Executive Branch will issue an authorization decree, which will contain the amount of capital allocated to operations in the country. Once these documents are filed, the registration will be made in a proper book for foreign companies, and in it will include: I - name, object, duration and headquarters of the company; II - location of the branch, branch or agency, in the country; III - date and number of the authorization decree; IV - capital allocated to operations in the country; V - identification of its permanent representative in Brazil. It is also necessary to list all partners or shareholders, accompanied by names, professions, domiciles and number of shares or shares. Once legally authorized to operate in the country, the company will be subject to Brazilian laws and courts regarding the acts or operations that it practices in Brazil. In addition, any changes that the authorized foreign company makes to its contract or statute, to take effect in Brazilian territory, will depend on the approval of the Federal Government.

Therefore, there is a similarity of some essential data for requesting authorization from foreign companies to operate in the countries, such as the information of the company's components, the address of the place of operation in the country, the name and knowledge of the responsible local representative for responding to the company's legal issues and proof that the company is in compliance with the laws of your country. In both cases, foreign companies with a branch in the country are subject to local laws and courts after being duly licensed.


Having highlighted the importance of competition laws, we note their regulatory role in the market, guaranteeing a favorable environment for consumers, who will have a more generous offer of goods and services and for small business owners, who will have an environment calm to free competition. In addition, with competition between companies, it is possible to develop the economy by generating innovations in goods and services. Although these laws are an ancient creation, they are not 100% effective yet, therefore, improvements are needed, as shown by the monopoly complaints in recent years. Not to mention practices that have not been reported, such as the habit of some giant companies to buy their smaller competitors in order to take them out of the market. In this scenario, the only way to ensure a beneficial environment for competition is through laws and policies for new companies in the countries, making the process faster and less bureaucratic, as well as encouraging and supporting new companies. It can be a way out to make the market less wild. In the two countries studied, Brazil and India, the process is still slow and requires many documents, which does not occur in more developed countries such as Germany, for example. This may explain the fact that many monopoly complaints in different sectors has happened in the past years, also, the position below 50th in the Doing Business ranking on ease of doing business. However, it is essential to mention the two countries are gradually improving, the situation today, even with its defects, is better than it used to be. In India, the substitution of the MRTP Act by the Competition Act (2002) meant a significant advance, just as happened in Brazil after the replacement of the old anti-trust Law (Law 8.884) by the new one, Law 12.529. Now, the two countries, with similar systems, must improve their policies in order to establish a right business environment, which in addition to increasing their positions in the ranking would also strengthen their economies and attract foreign investors and companies. Both countries have excellent growth potential, need to develop it.