Mexico has revamped its competition framework by passing a new Competition Bill. Some of the major changes introduced by the bill include empowering the competition authorities (COFECE and IFT) to remove barriers, determine essential facilities, and order divestment of assets. It also establishes specialized courts to handle competition cases and gives competition authorities expanded investigation and prosecution powers, such as longer dawn raid periods. Additionally, the bill codifies the essential facilities doctrine and allows the government to set maximum prices for certain goods.

1. Mexico
Revamps
Its
Compe11on
Framework
Paseo
de
los
Tamarindos
150
–
PB,
Bosques
de
las
Lomas,
05120
México
D.F.
(55)
5091
0000
Av.
Ricardo
Margáin
444
Torre
Norte
Mezzanine
“A”
Valle
del
Campestre
66265
San
Pedro
Garza
García,
N.L.

2. Why
a
New
Compe--on
Bill?
• Implementa1on
of
the
June
2013
Cons-tu-onal
Amendment
that
created
a
new
telecom
and
compe11on
authori1es
and
framework
• Empower
the
Federal
Economic
Compe--on
Commission
(“Cofece”)
and
the
Federal
Ins-tute
of
Telecommunica-ons
(“IFT”)
to:
– (i)
remove
barriers;
(ii)
determine
essen-al
facili-es
and
(iii)
order
dives-ture
of
assets
– Impose
harsh
penal-es
– Sanc1on
new
compe11on
offenses
• Crea1on
of
Specialized
Courts
in
the
First
Circuit
(Mexico
City):

3. 15
Major
Changes:
Compe--on
Reloaded
1. Empowerment
of
Compe--on
Authori-es
9.
New
Cartel
Offense
2. Price
Control:
Maximum
Prices
10. Increasing
Ver-cal
Restraint
Offenses
3. Judicial
Review:
Specialized
Courts
11. S h a p i n g
M e r g e r
C o n t r o l
Proceedings
4. Structural
Balance
12. Harshening
Administra-ve
Fines
and
Administra-ve
and
Criminal
Sanc-ons
5. Inves-ga-on
and
Prosecu-on
Reloaded
6. Essen-al
Facili-es
Doctrine
7. Determina-on
of
Barriers
to
Entry
8. Dives-ture
of
Undertakings
13. Private
Relief
and
Class
Ac-ons
14. Watching
the
Overseers:
Hearings
and
Comptroller’s
Office
15. Electronic
Filings
and
Transparency

4. 1.
Empowerment
of
Compe--on
Authori-es
• Cofece
is
the
7-­‐Commissioner
independent
authority
with
jurisdic1on
to
hear
compe11on
cases,
except
for
telecoms,
radio
and
TV
• IFT
is
the
7-­‐Commissioner
independent
authority
with
regulatory
and
compe11on
jurisdic1on
ONLY
in
telecoms,
radio
and
TV
• The
Bill
empowers
and
provides
rules
for
Cofece
and
the
IFT
to:
• Remove
barriers
• Determine
essen-al
facili-es
• Order
dives-ture
of
undertakings
• Create
interim
measures
• Appoint
an
Inves-ga-ve
Authority
• Enact
regula-ons
and
statutes
Hot
Topic!
Is
the
delega1on
of
powers
from
Congress
to
Cofece
to
implement
substan1ve
concepts,
procedural
rules
and
regula1ons
excessive?

5. 2.
Price
Control:
Maximum
Prices
• The
Bill
allows
for
the
President
of
Mexico
to
determine
what
products
are
“necessary
for
the
na1onal
economy”
or
have
“popular
consump1on”
or
whose
“distribu1on
brings
as
consequence
an
unjus1fied
raise
of
prices”
• The
Ministry
of
Economy
will
set
maximum
prices
• Prior
Cofece’s
determina-on
as
to
whether
or
not
there
is
effec1ve
compe11on
• Speedy
proceedings
in
case
of
specific
request
of
the
Execu1ve
Hot
Topic!
No
defini1on
of
what
it
means
that
products
are
“necessary
for
the
economy”
or
“popular
or
na1onal
consump1on”

6. 3.
Judicial
Review:
Specialized
Courts
• Economic
agents
will
have
no
right
to
appeal
Cofece’s
and
IFT
decisions
• Only
a
cons1tu1onal
trial
(amparo
indirecto)
and
its
federal
appeal
(recurso
de
revisión)
will
be
available
• Crea1on
of
specialized
federal
courts
sea-ng
in
Mexico
City
to
deal
with:
• Amparo
indirecto
against
Cofece
and
IFT
decisions
• Federal
appeals
of
judgment
of
district
courts
• Cofece’s
and
IFT
jurisdic1on
• Professional
disqualifica1ons
• Ac1ons
for
damages
and
private
relief
Hot
Topic!
Would
two
specialized
federal
courts
produce
sufficient
diversity
and
different
opinions?

7. 4.
Structural
Balance
• Finding
equilibrium
and
independence
within
Cofece
and
the
IFT
by:
• Separa-ng
the
inves1ga1ve
and
decision-­‐
making
process
• Crea1ng
of
an
Inves-ga-ve
Authority
• Inves1ga1ve
Authority
in
charge
of
inves-ga-ng
and
prosecu-ng
• Preserving
Cofece
and
the
IFT
the
decision-­‐
making
bodies
Hot
Topic!
Could
the
Inves1ga1ve
Authority
be
independent
if
appointed
and
removed
by
the
Cofece
and
the
IFT,
respec1vely?

8. 5.
Inves-ga-on
and
Prosecu-on
Reloaded
• Renewed
importance
of
related
markets
• Enhanced
dawn
raid
powers
by
allowing
on-­‐site
interviews
of
employees
and
representa1ves
• Dawn
raids
will
last
up
to
two
months
with
one
equal
extension
• Cofece/IFT
may
ask
for
any
and
all
documents
and
informa1on,
including
electronic
devices
• Public
force
available
• Documents
and
objects
can
be
secured
Hot
Topics!
Are
fundamental
rights
and
procedural
guarantees
being
protected?
Is
the
indirect
amparo
available
against
dawn
raids?

9. 6.
Essen-al
Facili-es
Doctrine
• Cofece
and
the
IFT
may
start
proceedings
to
determine
essen1al
facili1es
• Such
determina1on
shall
depend
on
3
elements:
• Hold
control
of
a
facility
by
one
or
a
reduced
number
of
undertakings
• Impossibility
to
replicate
the
essen1al
facility,
and
• Indispensability,
non-­‐subs1tutability
of
the
essen1al
facility
• Determina1on
of
the
essen1al
facility
may
be
revoked
through
a
new
process
Hot
Topics!
Should
the
determina1on
of
essen1al
facili1es
be
available
for
all
markets,
or
only
for
regulated
networks?
The
regula1on
of
all
markets
is
too
broad
and
unnecessary

10. 7.
Determina-on
of
Barriers
to
Entry
• Cofece/IFT
may
start
proceedings
to
determine
the
existence
of
barriers
to
entry
• Such
determina1on
shall
be
conducted
according
to
Cofece’s
guidelines
(not
enacted
yet)
• Cofece
will
have
the
ability
to
eliminate
such
barriers
• Ex
post
and/or
ex
ante
elimina1on
of
barriers
Hot
Topic!
No
clear
rules
and
procedures
for
the
determina1on
and
elimina1on
of
barriers
to
entry,
nor
for
the
par1cipa1on
of
undertakings
in
such
determina1on

11. 8.
Dives-ture
of
Undertakings
• Cofece
may
start
proceedings
to
divest
undertakings’
shares,
businesses,
etc.
• Dives1tures
will
follow
from:
i)
recidivism
or
being
second
offender
of
ver1cal
viola1ons
and
illegal
concentra1ons
ii)
any
other
inves-ga-ons
• Undertakings
may
file
alterna-ve
op-ons
for
such
dives1ture
• Dives1ture
is
limited
to
the
tackling
of
an1-­‐
compe11ve
effects
Hot
Topic!
No
clear
rules
and
procedures
for
determining
Undertakings’
dives1tures

12. 9.
New
Cartel
Prac-ces
• Proposed
Bill
preserves
previous
cartel
behavior:
• Price
fixing
(or
informa1on
exchange
with
such
purpose
or
effect);
• Market
alloca1on;
• Output
restric1on;
and
• Bid
rigging
• New
and
prohibited
conduct
includes
the
exchange
of
informa-on
among
compe1tors
with
the
object
or
effect
of
restric1ng
compe11on
• Exchange
of
informa1on
can
be
applicable
to
the
4-­‐above
cartel
behavior
Hot
Topic!
The
Bill
does
not
contemplate
a
sellement
proceeding
for
cartel
cases

13. 10.
Improving
Ver-cal
Restraints
• Ver1cal
restraints
are
subject
to
determining
undertakings’
individual
or
joint
dominant
posi-on
or
collec-ve
dominance
• No
rules
for
determining
collec-ve
dominance
• Predatory
pricing
reshaped
the
test
of
“below
cost
pricing”
• The
Bill
includes
two
new
viola-ons:
• Margin
squeeze:
margin
reduc1on
between
the
wholesale
price
and
the
retail
price
• No
access
to
an
essen-al
facility:
restric1on
of
access
to
an
essen1al
facility
Hot
Topic!
A)
Could
the
new
viola1ons
and
changes
inhibit
pro-­‐compe11ve
conduct?
B)
No
rules
to
determine
the
concept
of
joint
dominant
posi1on

14. 11.
Shaping
the
Merger
Control
Proceedings
• The
substan1ve
analysis
remains
the
same:
ex
ante
analysis
• The
Bill
subs1tutes
“no-fica-on”
for
the
need
of
an
“authoriza-on”
as
condi1on
precedent
• Modifies
certain
thresholds
of
interna1onal
transac1ons
to
decrease
pre-­‐merger
clearances
• Provides
for
publishing
of
the
remedies
for
a
15-­‐day
term
offered
for
public
comment
• Decisions
are
valid
for
a
period
of
six
months
and
one
similar
extension
Hot
Topic!
No
opportunity
to
receive
formal
feedback,
preliminary
decision
or
alike
before
the
formal
decision.
Thus,
this
could
be
one-­‐1me
shot

15. 12.
Harshening
Administra-ve
Fines
and
Sanc-ons
• Minimum
prison
term-­‐sentence
increases
from
3
to
5
years
• Thus,
cartel
behavior
will
be
punished
from
5
to
10
years
of
imprisonment
(this
term
also
increases
the
term
for
the
statute
of
limita1on
for
criminal
malers
to
7.5
years)
• 10%
turnover
for
any
abuse
in
the
control
of
essen1al
facili1es
and
for
not
complying
with
the
elimina1on
of
a
barrier
• Joint
liability
for
those
having
decisive
Influence
or
control
over
a
decision
related
to
a
compe11on
viola1on
• Public
notaries
and
lawyers
will
also
be
liable
for
compe11on
viola1ons
Hot
Topics!
Dispropor1onality
in
the
minimum
prison
sentence
and
loss
of
criminal
benefits

16. 12.
Harshening
Administra-ve
Fines
and
Sanc-ons
• The
scope
for
recidivism
or
being
second
offender
changed
to
include
“any”
second
compe11on
offense
• Cofece/IFT
may
professionally
disqualify
any
incumbent’s
employee
for
5
years
• Increased
fines
for
contempt
behavior
• Dives-tures
of
Undertakings
• Joint
and
severally
liability
of
undertakings
• Statute
of
limita-ons
to
commence
criminal
inves1ga1ons
increased
from
5
to
10
years
Hot
Topics!
Disqualifica1ons
may
be
uncons1tu1onal
&
recidivism/second
offender
defini1on
is
improper
and
excessive

17. 13.
Private
Relief
and
Class
Ac-ons
• Class
Ac-ons
may
be
filed
against
Undertakings
that
commit
an1compe11ve
behavior
• Ac1ons
for
private
relief
will
be
available,
irrespec1ve
of
any
administra1ve
sanc1ons
and/or
imprisonment
of
individuals
• Need
to
have
a
defini1ve
resolu-on
from
the
Cofece/IFT
• Specialized
federal
courts
will
have
jurisdic1on
to
hear
and
adjudicate
private
relief
ac1ons
Hot
Topic!
There
is
an
inconsistency
as
to
the
need
for
a
final
decision
or
an
uncontestable
decision
in
order
to
start
any
private
relief
ac1on

18. 14.
Watching
the
Overseers:
Hearings
and
Comptroller’s
Office
• Mee1ngs
with
Commissioners
can
only
be
carried
out
by
a
hearing
in
the
presence
of
at
least
one
Commissioner
• All
hearings
will
be
recorded
and
videotaped.
The
objec1ve
is
to
avoid
“Regulator
Duress”
• Registry
of
claimants
and
the
scheduled
appointment
will
be
made
public
• Crea1on
of
a
Comptroller’s
Office
in
charge
of
“overseeing”
the
Cofece’s
ac1vi1es
and
monies
• Sessions
for
case
discussion
should
be
public.
• Need
to
clarify
access
to
discussion
of
cases
before
the
Cofece/IFT
Hot
Topic!
Need
to
have
clearer
rules
and
procedures
to
conduct
hearings.
Mee1ngs
with
staff
could
be
jeopardized

19. 15.
Electronic
Filings
and
Transparency
• The
Bill
contemplates
a
strict
transparency
and
publicity
policy
regarding
the
Cofece’s
decisions,
criteria,
Board
sessions,
etc.
• The
Cofece
will
have
to
keep
up
with
a
digital
management
of
files,
inves1ga1ons
and
cases
• Undertakings
and
Cofece
will
be
able
to
interact
through
electronic
means
(e.g.
electronic
filings,
electronic
signature,
etc.)
Hot
Topic!
Does
this
mean
that
Cofece
will
serve
process
to
Undertakings
electronically
and
give
proper
access
to
the
docket
without
1me-­‐constraints
or
addi1onal
burden?

20. What
is
Next?
• Shortly,
Congress
(meaning
the
House
of
Representa1ves
and
subsequently
the
Senate)
will
discuss
and
approve
the
proposed
Bill.
If
the
Bill
passes,
the
President
(if
no
veto
is
exercised)
will
publish
it
at
the
Official
Journal
and
it
will
enter
into
force
45
days
aper
its
publica1on
• Cofece/IFT
need
to
issue
regula1ons
and
internal
structure
rules
• Mexico’s
lep
wing
party
(“PRD”)
has
also
sent
a
proposal
to
amend
the
compe11on
law,
including
providing
for
harsh
criminal
sanc-ons
Hot
Topic!
It
is
expected
a
quick
discussion
at
the
House
of
Representa1ves.
It
is
a
risk
to
approve
the
proposed
bill
in
its
terms
without
a
deep
discussion
and
understanding
of
its
terms

21. Cofece’s
Strategic
Plan
• The
Cofece
issued
in
January
2014
a
Strategic
Plan
to
analyze
the
following
industries:
• Banking
and
financial
ins1tu1ons
• Telecommunica1ons
• Energy
• Airlines
• Railroads
• Beer
industry
• Food
and
beverage
industries,
and
• Construc1on
• Cofece
will
priori-ze
its
policy
towards
those
sectors
with
most
incidence
in
the
economic
sphere:
consumable
goods,
expenditure
of
the
low
income
popula1on,
sectors
with
transversal
impact
and
sectors
with
restric1ve
regula1ons
Hot
Topic!
It
is
necessary
to
file
comments
to
this
strategic
plan
by
relevant
target
industries

22. Luis
Omar
Guerrero
R.
loguerrero@bstl.mx
Bernardo
Ledesma
U.
bledesma@bstl.mx
Compe11on
Team
San1ago
Ferrer
P.
sferrer@bstl.mx
Ricardo
Pons
M.
rpons@bstl.mx
NOTE:
This
presenta1on
is
not
an
advice
and
the
ideas
so
presented
could
change
as
a
consequence
of
the
discussion
at
Congress.
Please
feel
free
to
contact
us
in
case
of
queries