BRICS antitrust authorities turned against Covantis
At the 3rd BRICS+ (Brazil, Russia, India, China, South Africa, Egypt, Iran, UAE, Ethiopia+ partners) Digital Competition Forum, BRICS Center for Competition Law and Policy (www.BRICSCompetition.org) proposes a new approach to analyzing and regulating food markets, taking into account the accelerating digitalization of food markets. Specific instruments being developed within the BRICS framework were also announced. One of the targeted tools will be food markets and restrictions on the activities of monopolies such as Covantis.
Alexey Ivanov, Director, BRICS Center for Competition Law and PolicyThe emphasis on digitalization increases the global power of large enterprises, thus posing a threat to market monopoly. He urged BRICS antitrust regulators to pay close attention to a similar example of increasing market power through digitalization – the blockchain platform Covantis. The platform aims to digitize the entire agribusiness trading process, from contract management to final transportation. Covantis, founded by ABCCD Group (ADM, Bunge, Cargill, Louis Dreyfus and COFCO), the largest agricultural traders and Viterra, has avoided antitrust scrutiny because of its structure. At the same time, the platform collects valuable business information about production from farmers and agricultural traders. The platform has become a dominant player in grain trade. In Brazil, for example, 76% of grain exports pass through the platform. In 2023, 53% of the US, 34% of Canada and 51% of Argentina’s grain exports will pass through the Covantis platform. At the same time, the owners of the platform do not allow entry to most of the big local players. In essence, it is an exclusive platform, a quasi-cartel.
“Global food prices have reached their highest level in the past year and a half. Almost all BRICS countries are currently under antitrust investigation into the egg and chicken markets. Competition agencies must adopt new approaches to regulate the food industry, not only joint analysis The global food chain must also be analyzed taking into account all the impacts of digitalization. This is how we can address food security. The only way to solve the problem, which is particularly serious for BRICS and partner countries, is that traders can use the Covantis platform to share confidential information and put vertical pressure on farmers. Of course, Covantis’s exclusionary behavior towards local players. This is important. This should be the focus of our national competition authorities,” Ivanov explained.
On the basis of the developed and fairly organized trade of commodities and commodity derivatives within the framework of the BRICS countries, it is proposed to solve the problems of insufficient market concentration and insufficient consideration of the interests of small and medium-sized enterprises and large enterprises. This will help solve the violations of financial market entities and The issue of balancing the interests of producers and consumers in the real sector.
It is recommended that within the BRICS framework, based on representative samples of actual transactions, representative foreign exchange quotation indicators and over-the-counter transaction price indexes be established to reflect the competitive composition of buyers and sellers and ensure the universality of the delivery method of traded goods. The new approach will help eliminate unproductive intermediaries and increase the stability of global commodity markets.
The development of derivatives markets based on reliable exchanges and over-the-counter spot commodity prices will create opportunities for BRICS economies to manage risks and pool resources, have a positive impact on businesses and society, strengthen cooperation, and stimulate economic growth. Targeted subsidies and exchange mechanisms will improve fiscal policy and infrastructure development.
Earlier this year, the BRICS Competition Law and Policy Center (BRICS Center) signed a long-term cooperation memorandum under the leadership of the Competition Policy and Assessment Center of the State Administration for Market Regulation, announcing the launch and development of the Russia-China Exchange and Assessment Center. The consumer goods and bulk commodity trading platform will become the basis for the further development of a common exchange platform among BRICS countries.
“If Russian and Chinese entrepreneurs cooperate directly through modern exchange mechanisms, this will not only establish direct long-term ties, but also reduce the price of goods for final consumers, since it will eliminate the use of intermediary schemes. Experts and researchers in this regard The task is to develop a system of organizational, legal and economic measures and to analyze the necessary conditions for establishing exchange platforms and developing exchange trade, including the BRICS model” – Fu Hongwei, director of the Competition Policy and Assessment Center of the State Administration for Market Regulation; explained.
Distributed by APO Group on behalf of the BRICS Center for Competition Law and Policy.
About the 3rd BRICS+ Digital Competition Forum:
This year’s BRICS+ (Brazil, Russia, India, China, South Africa, Egypt, Iran, United Arab Emirates, Ethiopia+ partners) Digital Competition Forum is being held During this year’s G20 Summit, heads and representatives of competition authorities from all BRICS countries and partners, as well as researchers and visionaries in the field of digital regulation from around the world, gathered together. The forum includes the BRICS Digital Market Competition Research Working Group. Key topics this year include the regulation of digital ecosystems, the challenges and opportunities artificial intelligence brings to antitrust law, and the digitization of the global food chain.
The forum is co-organized by the BRICS Competition Law and Policy Center of HSE University and the Faculty of Law of FGV University (Getulio Vargas Foundation), and is supported by the Brazilian Competition Authority (CADE).
