Mexico
REVISED AND IMPROVED FORMAT GUIDELINES (DRAFT)
a) A description of the competition policy framework, covering policy objectives
and instruments for promoting them, including relevant laws and regulations
and their intended scope;
b) An outline of any plans for the review of competition policy and/or laws and their enforcement; and
c) A statement of any plans for implementing the technical assistance and
cooperation arrangements envisaged by the Osaka Action Agenda.
MEXICO'S INDIVIDUAL ACTION PLAN
a) Description of the Mexican competition policy framework Introduction
Glossary:
DOF: Federal Official Daily Gazette
FCC: Federal Competition Commission
FLEC: Federal Law of Economic Competition
MDW: Minimum Daily Wage
RFLEC: Code of Regulations to the Federal Law of Economic
Competition
Principles
Mexico� competition policy and law are based on the following principles:
Non-discrimination. The FLEC does not make any distinction between national and foreign economic agents, providing equal rights and obligations to both of them.
Comprehensiveness. The FLEC applies to all economic agents, whether private or public. However, it identifies economic areas that do not qualify as monopolies, such as:
- exclusive state functions performed in strategic areas (the minting of coins; postal, telegraph and radiotelegraph services, the issuing of banknotes by a single bank that is a decentralized agency of the federal government; oil and other hydrocarbons; basic petrochemicals; radioactive minerals; the generation of nuclear power; public electricity services)
- trade and labor unions
- privileges granted to intellectual and industrial property
- export cooperatives (under certain conditions)
Transparency. The FCC publishes the following documents:
- annual economic competition report
- economic competition gazette, containing all resolutions and criteria of the FCC (every four months)
- announcements in the DOF about the initiation of investigations, stating the alleged anticompetitive practice or merger and the market where it is taking place
Summaries of the FCC� resolutions available at the website (weekly or biweekly)
Competition Legislation
The FLEC regulates Article 28 of the Constitution regarding economic competition, monopolies and free market participation. The purpose of this law is to protect the competition process, and the free market access, by preventing monopolies, monopolistic practices and other restrictions that deter the efficient operation of the goods and services market.
It applies to all private or public economic agents. Although it identifies economic areas that do not qualify as monopolies (see comprehensiveness principle above) Nevertheless, the FLEC establishes specific provisions in order to avoid the execution of anticompetitive practices in those areas.
The FCC was created simultaneously to the enactment of the FLEC, as an autonomous agency empowered to:
On March 4 1998, the RFLEC entered into force. Its objective is to promote further transparency and guidance in the enforcement of the Mexican Competition legislation. To this end, more precise time limits were scheduled for the proceedings brought before the FCC and some measures were established to simplify mergers procedures and to specify some anticompetitive practices.
Anticompetitive practices
Articles 9 and 10 of the FLEC distinguish two broad categories
of illegal behavior (i) absolute and (ii) relative monopolistic practices.
(i) Article 9. Absolute monopolistic practices are often referred to as "horizontal
practices" and are prohibited "per se". The principal absolute
monopolistic practices considered in the Law are the
following agreements between competitors:
These practices can be denounced by any person and are considered to be anticompetitive
per se, thus, they do not require an extensive analysis.
(ii) Article 10. It identifies six types of vertical conducts, which are evaluated
under a "rule of reason" approach because they may imply pro-competitive
effects as well as anticompetitive effects in the market. Therefore, the Commission
must asses these effects in order to determine if the FLEC is being violated.
The principal relative monopolistic practices considered in the Law are the
following:
Other types of vertical agreements may be reached under the catch-all provision
in section VII of this article.
For these practices to be considered illegal, the FLEC requires that the alleged
responsible parties must have substantial power in the relevant market.
Article 7 of the RFLEC implements Article 10, section VII of
the FLEC by adding five items to the list of relative monopolistic practices:
The RFLEC also clarifies the criteria applied both for defining the relevant
market and for determining the existence of market power.
It also allows a defendant to offer a defense for relative monopolistic practices
on grounds of efficiency.
Mergers and acquisitions
Article 16 of the FLEC: Merger, acquiring the control or any
other action through which corporations, associations, stocks, equity interest,
trusts and assets in general are carried out amongst competitors, suppliers,
customers or any other economic agents. This article also prohibits mergers
whose objective or effect is to reduce distort or hinder competition.
Article 17 requires the FCC to consider whether the merging parties would be able to fix prices unilaterally, substantially restrict competitors�� access to the market, or engage in unlawful monopolistic conduct.
Article 18 adds the requirement that, in analysing mergers, the Commission must identify the relevant market and determine market power.
The FLEC empowers the FCC to sanction an unlawful merger by ordering partial or full divestiture, as well as other conduct relief and a fine.
Article 20 establishes pre-merger notification requirements if a transaction exceeds 12 million MDW (about $49 million USD), or if the transaction results in holding more than 35% of the shares or assets of a firm with sales or assets exceeding that amount. Notification is also required if the parties�� assets or annual sales total more than 48 million MDW� ($199 million USD) and the transaction involves an additional accumulation of assets or shares of over 4.8 million MDW� ($19.9 million USD).
The RFLEC establishes additional criteria to determine if a
merger must be blocked or conditioned to certain divestiture. These Regulations
also contain provisions with respect to international mergers. Such mergers
should be notified before any legal and material effects occur in Mexico. When
foreign parties involved in the transaction do not acquire control of Mexican
companies nor accumulate additional capital shares, the merger does not need
to be notified.
In July 1998, the Commission issued a statement designed to supplement the treatment of market definition of the Code of Regulations. The statement describes two concentration indexes. One is the familiar Herfindahl index (HHI). The second is an �ndex of dominance��, calculated as the sum of squares of each firm� share of the HHI. The statement notes that these concentration-based indicators are not determinative, and that the FCC will also examine other factors that are relevant in determining whether the merged entity may obtain power to control price or substantially restrict competitors�� access to the market.
Proceedings
Proceedings before the FCC. According to Article 33 of the FLEC, these are:
I. The alleged responsible shall be summoned, and shall be notified about the nature of the investigation, where applicable, a copy of the complaint shall be attached;
II. The party summoned shall have a thirty calendar day term to submit an affidavit of defense and to attach the documentary evidence in his possession and shall submit all evidence that should be reviewed;
III. When the evidence has been reviewed, the Commission shall set a term no longer than thirty calendar days to submit verbal or written pleas; and
IV. Upon integration of the file, the Commission shall issue a resolution within
the following 60 calendar days.
Provided that this conditions are met, there is no discretionary
power for the Commission to reject a case.
Appeal for review
Appeal for Review. An appeal for reconsideration of a resolution
may be filed before the Commission. The objective of the appeal is to revoke,
amend, modify or confirm the resolution appealed. Pursuant to Article 39, economic
agents have the right to file this
appeal for review before the Commission so that it proceeds to review its first
instance decision. In addition, foreign entities as well as nationals, have
the right to start the �mparo��.
Amparo Proceeding. The Mexican Constitution establishes in
Articles 103 and 107 that all persons are protected against unconstitutional
acts by the government. This protection is available to any party who can raise
a claim that he is being subjected to an unconstitutional statute or that his
due process rights are being infringed. Due process, in this context, is not
limited to procedural issues but can attack the merits of an agency� decision
because the definition of due process in Article 16 of the Mexican Constitution
requires that agency orders articulate the �egal basis and justification for
the action taken��.
Penalties
The FLEC establishes fines up to the equivalent of 375,000 times the MDW (about
$1.53 million UDS) for having engaged in absolute monopolistic practices and
sanctions up to 225,000 times the MDW (about $918,750 USD) for engaging in relative
monopolistic practices.
As for penalties regarding mergers, the FLEC considers fines up to 225,000 times
the MDW (about $918,750 USD) for participating in a concentration prohibited
by this Law, and a fine up to 100,000 times the MDW (about $408,000 USD) for
failing to notify a concentration to the Commission. In addition, the FLEC gives
the CFC authority to impose conditions or to block parties from proceeding with
a proposed merger and to dissolve a completed merger or to order a partial or
total divestiture of what has been unduly concentrated, regardless of the fine
that may be applicable in such cases.
b) An outline of any plans for the review of competition policy and/or laws
and their enforcement.
The FCC is drafting a bill to reform the FLEC to strengthen its powers and autonomy.
This initiative is subject to discussion and approval by the Congress.
c) A statement of any plans for implementing the technical assistance and cooperation
arrangements envisaged by the Osaka Action Agenda.
The FCC, promotes and supports international cooperation by deepening the dialogue
on international aspects of competition policy in APEC as in other international
fora. This includes its commitment to encourage a more intensive relation with
other competition authorities within and outside the APEC region to facilitate
the development of consultation processes and technical assistance programs
regarding competition policy.
For this purpose the FCC participates in the discussion of international cooperation
aspects of competition policy within the framework of:
The United Nations Conference on Trade and Development (UNCTAD),
Intergovernmental Group of Experts on Competition Law and Policy (ad hoc meeting
on peer review), UNCTAD XI preparatory workshop for Competition Policy in the
promotion of competitiveness and development.
The Organisation for Economic Co-operation and Development (OECD), Competition Committee (before Competition Policy and Legislation Committee).
The Global Competition Forum
The International Competition Network (ICN) as vice-president and chair of the advocacy working group. Also in the General Framework Subgroup of the Cartel Workgroup; Advocacy Subgroup of the Competition Policy Implementation Workgroup, Subgroup 1 of the Antitrust Enforcement in Regulated Sectors Workgroup, and the Notifications and Procedures Subgroup of the Mergers Workgroup. The former President of the FCC chaired the Steering Committee of the ICN from August 2003 to September 2004.
At the WTO, in the Trade and Competition Policy Interaction Group.
FTAA. In the Competition Policy Working Group of the Free Trade Area of the Americas
APEC. The FCC is currently the Convenor of APEC� Competition Policy and Deregulation Group (CPDG) (refer to CPDG Report)
Activities within APEC:
As Project Overseer, the FCC is co-organizing the APEC-OECD seminars on regulatory reform with the OECD� Programme on Regulatory Reform, the seventh workshop of this initiative was held in November 1st, 2004 in Bangkok, Thailand.
The FCC also participated in: the High Level conference on Structural Reform,
convened by the SELI on September 8-9 in Tokyo, Japan; the Enforcement in Competition
Policy Seminar organized by Australia on May 26, 2004; and the 3rd and 4th APEC
Training Programs on Competition Policy, held in Kuala Lumpur, Malaysia, on
1-3 March and in Ho Chi Minh, Viet Nam on 3-5 August, respectively.