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Cade blocks transaction between Facebook and Cielo aimed at enabling payment by WhatsApp

Decision

An injunction was issued this Tuesday (23 June) to mitigate potential harm to competition
published: Jun 24, 2020 12:01 PM last modified: Jun 24, 2020 12:02 PM
by International Unit

The Administrative Council for Economic Defense (CADE) issued an injunction to block the transaction between Facebook and Cielo in Brazil. The companies intend to enable payment to be done via the WhatsApp messaging application. The measure was taken as part of administrative proceedings launched this Tuesday by the General Superintendence of CADE to assess the impacts of the partnership.

The transaction, announced on 15 June, consists of an association between Cielo and Facebook to offer accredited businesses the option of receiving payment via the WhatsApp Business platform. One of the sectors affected by the transaction is the payment certification, in which Cielo operates, a market constantly analysed by CADE.

According to the assessment by CADE’s General Superintendence, Cielo has a high market share in the Brazilian market of payment certification. Besides, WhatsApp has millions of users in Brazil, which ensures significant market power upon its entry.

“Such user base would be difficult to create or replicate by Cielo’s competitors, especially should the partnership under investigation involve exclusivity between the parties. In any case, it is evident that WhatsApp’s user base provides great possibilities for transactions which Cielo could be the only one exploring, depending on how the transaction was designed,” the Superintendence declared.

CADE’s Superintendence also stated there is no indication the transaction would be previously reported to CADE, hence the need to issue an injunction immediately. For the Superintendence, the transaction has an offensive potential that, should it have immediate effects on the market, could result in competitive constraints for competitors, and even a significant deviation of demand culminating in less competition, with repercussions for consumers.

“Despite the investigation on this transaction still being in its initial stage, there is already considerable potential harm to competition which must be mitigated or prevented by this Council as these effects might be a consequence of this transaction and could cause irreparable or very difficult to reverse damage to the affected markets. Even though the result is not certain, the duty of care requires that actions be taken to protect society from possible negative effects,” the document concluded.