The Administrative Council for Economic Defense (Cade) initiated this Tuesday, 28th, an administrative proceeding to investigate possible anti-competitive conduct in the Brazilian domestic passenger air transport market, involving Gol and Latam. The investigation will continue to examine signs of possible price alignment on routes of high commercial relevance.
The General Superintendency (SG) began the investigations in 2023, after representation from the Federal Public Ministry with Cade (MPF/Cade), which received a letter from the Public Prosecutor’s Office in Rio de Janeiro (MPF/RJ) communicating a “huge similarity” in the amounts charged by the companies Gol and Latam for tickets on the Rio de Janeiro-São Paulo air bridge (sections SDU-CGH and CGH-SDU). Subsequently, an administrative investigation was launched, which was extended a few times.
The SG identified “robust evidence” of a violation of the economic order, which led to the understanding of the need to deepen the investigation, with the initiation of administrative proceedings.
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In the technical analysis, algorithmic coordination was identified based on the artificial reduction of uncertainty through tools that, by processing the same available flight inventory data (free seats per route) and passenger demand (reservation and occupancy patterns), can stabilize high price equilibria that would not be sustainable under a scenario of full rivalry.
According to the investigation, Gol and Latam signed contracts with the same pricing company, resulting in a potential reduction in effective competition between airlines, as sophisticated computer algorithms are capable of allowing instantaneous (or almost instantaneous) adjustment of fares. Furthermore, the air passenger market is marked by price hyper-transparency. “From a competition point of view, such mechanisms increase the risk of aligning commercial strategies”, says the report.
“In an almost duopoly market, one of the possible results of these mechanisms is the reaching and stabilization of prices above the competitive level (even predicted by computational experiments, as mentioned previously)”, adds the technical team.
When contacted, Gol and Latam did not comment.
Next steps
Now, airlines will be notified to present their defense within 30 days, being able to produce evidence and indicate up to three witnesses to be heard by Cade. The final decision will be made by the antitrust body’s court.
