Agreements limiting the number of competitors on the tortilla-production market in Yucatan

MEXICO, 2001


In the investigation on the market for producing, distributing and commercializing cornmeal for human consumption, the FCC found that the company Harinera de Yucatan, SA de CV (Harinera de Yucatan) a subsidiary of Grupo Industrial Maseca, SA de CV (Gimsa), and the associations of millers and tortilla shops from two municipalities in the state of Yucatan, undertook agreements in the year 2000, establishing that tortilla producers should be located at a certain distance one from the other. In these agreements, Harinera promised to not sell machinery or flour to tortilla shops not complying with the location agreements. The FLEC prohibits these agreements because they limit the number of competitors on a market and, consequently, competition as to price, quality and service, and restricts the customer� choices.

Harinera de Yucatan argued that the agreements had not taken effect. However, the FLEC stipulates that agreements are to be sanctioned because of their object (per se), even when they have not taken effect. The FCC ruled that the relevant market was the production, distribution and commercialization of cornmeal and nixtamalized corn dough. To reduce distribution costs, cornmeal firms operate regional plants from which they distribute the product to consumers located within that region. Therefore, the FCC considered the market has a local geographical dimension. Harinera de Yucatan had a large share of the relevant market and its own distribution channels constituted a major entry barrier to that market. Although Harinera de Yucatan faced competitors such as Minsa and nixtamal mills, the market share of each of them in the region is less than half that of Harinera de Yucatan. Despite the fact that corn is produced throughout Mexico, nixtamal mills, as buyers of relatively small amounts of corn, could be subject to fluctuations in supply, price and corn quality, which would place them at a disadvantage vis-a-vis a cornmeal producer. In addition, corn imports from the U.S. and Canada are limited by the high duties levied on them.

Therefore, Harinera de Yucatan has substantial power in the relevant market, and is responsible for a monopolistic practice regarding the establishment of exclusive distribution of goods or services on the basis of geographical situation. When setting the amount of the fine, the FCC took, as a mitigating circumstance, the fact that Harinera de Yucatan presented a commitment promising not to exercise any legal action whatsoever deriving from the agreements cited and would not deny the sale of its products for any cause contravening the FLEC. Harinera de Yucatan filed an appeal for review objecting the fine. The FCC considered the argument partially founded and reduced the fine.