- BRICS Competitive Agencies are set to develop a new approach to food markets regulation.
- One of the largest global blockchain platforms on commodities, Covantis, may be the first to fall under restrictions.
- Founded by the largest agro-traders of the ABCCD group and Viterra, Covantis avoids antitrust scrutiny due to its structure.
Antitrust authorities drawn from BRICS member countries are set to establish a unified system to monitor and control food markets regulation, in a move that is poised to put Covantis, one of the giant platforms on commodities under close check.
In a statement released during a meeting on the sidelines of the 3rd BRICS + (Brazil, Russia, India, China, South Africa, Egypt, Iran, United Arab Emirates, Ethiopia + partners) Digital Competition Forum in Rio De Janeiro, the BRICS Competition Law and Policy Centre tabled a fresh approach to monitoring markets.
According to BRICS, the fresh system offers a new methodological approach to analyzing and regulating food markets that takes into account their accelerating digitalization. A key focus of their joint effort will be the food market and restrictions on the activities of monopolists like Covantis, an update from the meeting stated.
BRICS Digital Competition Forum
“Virtually all BRICS countries are currently undergoing antitrust investigations into the egg and chicken meat markets. Competitive agencies must take a new approach to regulating the food industry, not just by jointly analysing global food chains, but by analysing them taking into account all the implications of digitalization. This is the only way we will be able to tackle food security, which is particularly acute for the BRICS and partner countries,” explained Alexey Ivanov, Director of the BRICS Competition Law and Policy Centre.
“For example, the Covantis platform can be used by traders to share confidential information and vertical pressure on farmers. And of course the exclusionary behaviour of Covantis towards local players is of utmost importance. This should be the focus of attention of our countries’ competition authorities,” Ivanov noted.
He highlighted that digitalization strengthens the global power of large corporations, which, as a result, poses a threat to market monopolization. He urged BRICS antitrust regulators to pay close attention to a similar example of increasing market power through digitalization — the blockchain platform Covantis.
BRICS Digital Competition Forum, which is being held this year on the margins of the G20 Summit, has drawn the heads and representatives of competition authorities from all BRICS countries and partners.
Other delegates in attendance are researchers and visionaries in the field of digital regulation from around the world. The Forum also includes the BRICS Working Group on the Study of Competition Issues in Digital Markets.
This year’s main topics include regulation of digital ecosystems, the challenges and opportunities that artificial intelligence brings to antitrust law, and the digitalization of global food chains.
Understanding Covantis and why BRICS antitrust agencies are on high alert
Founded by the largest agro-traders of the ABCCD group (ADM, Bunge, Cargill, and Louis Dreyfus and COFCO) and Viterra, Covantis avoids antitrust scrutiny due to its structure. The platform aims to digitize the entire agribusiness trade process, from contract management to final shipping.
At the same time, the platform collects valuable commercial information about production from farmers and agricultural traders across the value chain. Covantis has already become a dominant player in grain trade. For example, in Brazil, 76 per cent of grain exports go through the platform. Last year, 53 per cent of grain exports from the US, 34 per cent from Canada and 51 per cent from Argentina went through the Covantis platform.
At the same time, the owners of the platform do not allow most of the local big players to enter. In essence, it is an exclusive platform, a quasi-cartel, the BRICS forum observed.
Based on the developed fair organized (exchange) trade in commodities and commodity derivatives within the BRICS framework, it is proposed to solve the problems related to market concentration and, as a consequence, insufficient consideration of the interests of small, medium and large enterprises, which will help to resolve issues related to the violation of the balance of interests of financial market players and producers and consumers of the real sector.
It is proposed to create within the BRICS framework representative indicators of exchange quotations and price indices for OTC transactions based on representative samples of actual transactions, reflecting the competitive composition of sellers and buyers and ensuring the use of universal means of delivery of traded goods.
New approaches will contribute to the elimination of unproductive intermediation and increase stability in global commodity markets.
The development of a derivatives market based on reliable exchange and OTC cash commodity prices will create opportunities for BRICS economies to manage risks and pool resources, lead to positive consequences for business and society, strengthen cooperation and stimulate economic growth. Targeted subsidies and exchange mechanism will improve fiscal policy and infrastructure development.
Earlier this year, BRICS Competition Law and Policy Centre (BRICS Center) with the leadership of the Competition Policy and Assessment Center of the State Administration of Market signed a memorandum on long-term cooperation announced the launch and development of the Russian-Chinese exchange and trade platform in consumer goods and commodities which will become a basis for the further development of the universal exchange platform for all BRICS member-countries.
“If entrepreneurs of Russia and China work directly, through modern exchange mechanisms, which will not only allow to establish direct long-term ties, but also reduce prices for goods for end consumers, as it will eliminate the use of intermediary schemes. The task of experts and researchers in this regard is to develop a system of organizational, legal and economic measures and analyze the necessary conditions for the creation of exchange platforms and the development of exchange trade, including in the BRICS format,” noted Fu Hongwei, Director, Competition Policy and Assessment Center, SAMR.
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