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CADE files investigation in the market of paid individual transportation

Administrative Proceeding

There was no sufficient evidence that justified the imposition of penalties to the parties involved
published: Jul 10, 2018 04:28 PM last modified: Jul 10, 2018 04:28 PM

The Administrative Council for Economic Defense (CADE, in its acronym in Portuguese) has filed an administrative proceeding that probed the practice of alleged infractions by taxi drivers and their representatives. They were accused of using abusive means to exclude and block the entrance of Uber in the market of paid individual transportation.

The decision was taken in the judgment session that took place on 4 July. The Administrative Tribunal understood there was not enough evidence regarding the materiality and authorship of the conducts reported to CADE that sustained the condemnation of the parties represented in the administrative proceeding.

The investigation was initiated from a representation jointly submitted by the company Uber do Brasil Tecnologia Ltda., by the Central Directory of Students of the University of Brasília (DCE, in its acronym in Portuguese) and by the Central Directory of Students of the University Center of Brasília (DCE-Uniceub, in its acronym in Portuguese.

According to the complaint, representatives of the taxi drivers would have abused the right of petition with the proposition of various legal and administrative proceedings, which presented identical or similar arguments, in the attempt to prevent Uber from acting in the market - a conduct internationally known as sham litigation. They would also have employed, in a coordinated way, violence and heavy threats against Uber drivers and their clients.

Regarding the sham litigation practice, the reporting commissioner, Mauricio Oscar Bandeira Maia, pointed out that it was not possible to verify enough evidence of the abusive practice of the right of petition. At the time of the events, the representatives of the taxi drivers thought they were victimized by having their rights harmed with the emergence of a new kind of service that, at the time of the practices, was not submitted to regulations.

"Given the innovation that the companies of transportation network represented to the market, and the uncertainty over the development of the paid individual transportation market, the demand of the taxi drivers claiming a prohibition of the individual transportation apps does not seem to be without basis, even recognizing the benefits that the new services bring to the market and to competition," he stated.

Regarding the employment of threats and violence, the reporting commissioner concluded that the elements presented in the case file are reasonable to presume that there was a potential threat that could harm competition.

Nevertheless, according to Mr. Bandeira Maia, there is a great difficulty in pointing a competition infraction in the case. "Considering its private liaison, apparently decentralized, it becomes hard to distinguish the authorship of the conducts in the antitrust scope", he said. Besides, the analysis of the proceeding revealed that the probative material (constituted by, e.g., pieces published by the press) is not sufficient to generate condemnation.

Economic study

In April, CADE's Department of Economic Studies (DEE, in its acronym in Portuguese) published a Working Paper pointing out the increasing rivalry between Uber and the taxi apps throughout the time.

The study assessed the competition impacts of the emergence of the company in the market of 590 Brazilian municipalities, supported by data gathered between 2014 and 2016.

In short, the analysis shows that the entrance of Uber in the market has initially caused a decrease in the number of taxi rides. However, after a period of exposure to a competitive environment, there were reactions of taxi applications through fare reductions, which resulted in the recovery of the number of taxi rides.