A government-run delivery app was built to fight a tech monopoly in Brazil. So why was it banned?

When the Rio de Janeiro government announced it was developing an app to compete with last-mile delivery services, councilman Pedro Duarte grew suspicious. As the president of the city council’s science and technology commission, Duarte follows the app business closely. As a member of the libertarian Partido Novo, he also has a political interest in promoting his party’s free-market position in what he called the “ongoing and intense debate” surrounding the regulation of service apps. So, when he heard that the local government was planning to launch its own last-mile delivery app named Valeu, Duarte expected to receive some sort of project proposal from the mayor. But none came, he told Rest of World. The app just appeared one day.

Across Brazil, the company that has come closest to controlling the market is iFoodiiFoodFounded in Brazil in 2011, iFood is one of the country’s leading last-mile food delivery platforms.READ MORE. This last-mile delivery behemoth is Latin America’s biggest delivery app, which controls more than 80% of the market share in Brazil. It was Valeu’s main target.

In a self-proclaimed attempt to bust the monopoly of privately owned last-mile delivery apps, Rio de Janeiro’s government created its own app to compete in the market rather than attempt regulating private apps. Critics of the initiative claimed that the app, with its lower fees and fixed-rate pay for delivery workers, created unfair competition with privately owned apps.

iFood wrote to Rest of World through a spokesperson who pointed to a study stating that 84% of small businesses selling their goods online use WhatsApp rather than last-mile delivery apps. The same study said that only 6% of small businesses use apps like iFood, Rappi, and Uber Eats. iFood, however, did not respond to questions about whether its app was specifically monopolizing the last-mile delivery marketplace in Brazil.

Pedro Paulo, former secretary of the city’s finance and planning department, who was involved in the development of the app, told Rest of World that Valeu was created in response to the unfair terms imposed by private delivery apps on restaurants and delivery workers. “These apps have marketplace flaws, such as the exploitation of labor, and the fact that they are exempt from regulation,” Paulo said. “A publicly owned app could address these issues.”

When asked whether a government-run delivery app might be allowed to skirt government regulations of these same apps, Paulo remarked that there was no real regulation to speak of. “It is part of the problem,” he said. “We do not define app rules in general. In fact, the judiciary has repeatedly prevented the government from regulating and taxing intermediary services,” like delivery apps.

Valeu is Rio’s second attempt at a city-run service app. The delivery app comes just months after the government created its own taxi app to compete against ride-hailing companies. Other local governments worldwide, like in South Korea’s Gyeonggi province, have dabbled in private-public alliances to break delivery app monopolies in their regions, but few have been as militant in their interference with the app market as Rio de Janeiro.

“Apps are not neutral in simply connecting people. They dictate how we relate to each other, how we live, how we buy, and therefore, they should be regulated to comply with public interest,” Victor Barcellos, a senior researcher at the Institute for Technology and Society of Rio de Janeiro (ITS Rio), told Rest of World. He added that “one of the main characteristics of apps is the tendency to monopolize.” 

Yet, there is no reason that trends applying to private apps wouldn’t also apply to those that are government-led. “Of course apps are unhappy about [Valeu]. It’s understandable that they will claim it’s unfair competition, because the state has the power to create a monopoly,”  said Barcellos.

Duarte does recognize that iFood has a virtual monopoly over the delivery business in Brazil. To him, though, the issue is whether a publicly owned delivery app is the solution. He added  that beyond the unfair advantage of government subsidies, the delivery app industry does not fall within the state’s purview, unlike the taxi business in Brazil which is already controlled by the government.

“We should be asking ourselves why so many customers choose a single company,” he said, suggesting that the answer to resolving iFood’s monopoly lay in regulating its technology, broad access to financing, and lobbying apparatus. 

Soon after the local government launched Valeu, Duarte moved for it to be banned through a “public petition,” a tool used by Brazilian legislators when they wish to dispute executive decisions. Three months after its launch, a judge in the municipal court conceded a temporary ban on the government’s app until the case goes to trial.

Valeu’s privacy policies, which are still available online, are reminiscent of private delivery services’ terms and conditions. They state that the app reserves the right to hand over users’ data to third parties, including “but not limited to marketing agencies, database and service providers, disaster recovery, and backup service providers, email service providers, payment processors and others.”

The municipal attorney’s office is fighting Duarte’s petition. Currently, evidence is being gathered to be presented in court. Paulo, the ex-official who helped develop the app, hopes that an upcoming decision by a special court will unblock the app, after the attorney presents evidence that the Valeu app is a net positive for Rio de Janeiro. “We want to use the success of the app as an argument, along with exposing the limitations of apps like iFood and [Colombian last-mile delivery app] Rappi,” Paulo told Rest of World.

Brazilian legal expert Isaura Silva, a lawyer at Licks Attorneys who has been following the case closely, told Rest of World that, as the case stands, it is too soon to say which way the court will swing.

To many others, though, whether the government gets to keep its delivery app or not is a moot point. Ralf Alexandre Campos Elisiario, who has worked as a delivery person for every app in the market since 2018, and who is more widely known as Ralf MT on his YouTube channel dedicated to delivery workers’ rights, told Rest of World that city officials should be focusing on creating rules and passing laws to regulate the apps.

“The apps set their own prices, pay a pittance, and nobody says anything. It’s a matter worse than slavery, delivery workers suffer more than slaves,” he said. “The authorities need to make laws, they need to develop rules because, as it stands, it’s a mess.”