What is CADE
CADE is the acronym of the Administrative Council for Economic Defense, being an autarchy created in 1962 under the government of João Goulart. Its creation was made with the objective of fighting crime against the popular economy and carrying out price controls in the period that there was a freeze, due to the increase in inflation.
After a few years, in 1994, a law was created that started to link CADE to the Ministry of Economy. In this way, CADE would also aim to control companies that were abusing power, whether in monopoly or oligopoly cases.
In addition, in 2011, CADE began to inspect all companies that seek to buy other organizations to expand, and thus, which may affect the market negatively. From this, CADE obtains greater control of the market and avoids a negative effect on the economy.
Understanding abuse of power | Monopoly and Oligopoly
Abuse of power is when a particular company starts to buy other organizations that operate in the same niche as it. From this, it has a larger share of the market.
When that happens, it manages to force other organizations to lower their prices. Thus, it causes other companies to close and it starts to dominate the market even more.
This type of situation is called a monopoly, which is when the market is concentrated in just one company.
In another situation, it may also happen that the market is dominated by a few companies that are part of the same niche. That way, they can match the price of the product and make other organizations do the same thing. We call this situation an oligopoly.
So that you can understand even more how this works, here’s an example that we’ve separated:
Suppose there is a company X operating in niche Y. However, this company does not have as much space in the market and, as a result, as it grows it starts to buy other organizations.
After this process, this company starts to occupy 80% of the market in relation to all the other companies that also work with niche Y. From that, it can influence other organizations to lower their prices, thus, making them have losses and may even close the doors.
How it operates in the Brazilian economy
Currently, CADE carries out some inspections in large companies that have a good percentage in the market.
To carry out these procedures, CADE is divided into three bodies that are responsible for a specific type of inspection. See below each of these bodies :.
- Department of Economic Studies– This body is responsible for the analyzes that will demonstrate whether there is market concentration in a given company.
- Administrative Court of Economic Defense– Responsible for judging the cases that are highlighted by CADE.
- General Superintendence– The last body is responsible for the application of the processes and their control.