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Regulatory Agencies: Between Markets and Government - The Case of Brazilian Antitrust Regulatory Agency

Rodrigo Brandão
Independent Researcher
Rodrigo Brandão
Independent Researcher
Open Panel

Abstract

The main goal of this current work is to understand how the politics of Brazilian regulatory agencies appointments is structured. More precisely, it attempts to analyze whether, or not, the regulated companies play a significant role when the Executive branch nominates new regulators. Based on the revolving-door literature, the paper assumes that regulators who have previous working experience in the regulated companies are potential links between these companies and the regulatory agencies. According to this literature, regulators that come from the regulated companies could rise the risks of regulatory capture, since they could face the “state of the sector” as the companies do, once they were “socialized” among them. In this sense, the current work attempts to clarify why regulators who have this kind of professional profile were chosen by the Executive branch. On the one hand, choosing regulators that come from the regulated companies is a strategy to reduce asymmetric information between companies and government. On the other, choosing this kind of professional could be an outcome of companies’ pressure on the Executive branch. In order to test these assumptions, the current work analyzes CADE, the Brazilian antitrust regulatory agency. CADE is a perfect case study because, differently from other Brazilian regulatory agencies – e.g. petroleum regulatory agency and telecommunications regulatory agency –, it regulates many economic sectors. For this reason, it is expected that its staff comprehends individuals with different professional backgrounds. If the majority of its staff is originated from the same economic sector, it can be assumed that the Executive branch has chosen individuals with previous working experience in the regulated companies not as a strategy to diminish asymmetric information. In this case, it will get stronger the possibility that the politics of appointments was based on pressures made by specific companies of the private sector.