Mexico: Federal Economic Competition Commission
Mexico
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Mexico: Federal Economic Competition Commission

Mexico: Federal Economic Competition Commission

Mexico

Mexico: from the enforcer

Address: Av. Revolución 725, Col Santa María Nonoalco, Alcaldía Benito Juárez, CP 03700, Mexico City, Mexico
Tel: +52 55 2789 6500
Web: www.cofece.mx

Contacts

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Alejandra Palacios Prieto
Chairwoman

Commissioners

Alejandro Faya Rodríguez
José Eduardo Mendoza Contreras
Brenda Gisela Hernández Ramírez
Eduardo Martínez Chombo
Gustavo Rodrigo Pérez Valdespín

David Lamb de Valdés
Head, Planning, Liaison and International Affairs Unit
Tel: +52 55 2789 6681
Email: [email protected]

Sergio López Rodríguez
Head, Investigative Authority
Tel: +52 55 2789 6655
Email: [email protected]

Fidel Gerardo Sierra Aranda
Technical Secretary
Tel: +52 55 2789 6554
Email: [email protected]

Heidi Sada Correa
Executive Director
International Affairs
Tel: +52 55 2789 6562
Email: [email protected]

Questions and answers

How long is the head of agency’s term of office?

The term of office of the head of the Federal Economic Competition Commission of Mexico (COFECE) is four years, after which the head may be reappointed for a second period of the same duration.

When is he or she due for reappointment?

In April 2017, Chairwoman Palacios second four-year term was ratified by the Senate. Her mandate as chair (second term) expires in September 2021; her term as Commissioner expires in 2022.

Which posts within the organisation are political appointments?

After a technical examination procedure, candidates to Commissioners are nominated by the President of Mexico for a non-renewable nine-year period and have to be ratified by the Senate.

The procedure for appointing Commissioners is briefly described below:

  • Upon the existence of a vacancy in a Commissioner position, an independent reviewing committee (RC) shall issue a public call. Positions are open to any interested person, but any Commissioner shall fulfil several requirements, including experience, outstanding professional performance and no recent links with agents who have been subject to any procedure before the antitrust agency.
  • Eligible applicants shall take a technical test on competition matters.
  • For each vacancy, the RC shall submit to the President of Mexico a list of the applicants who obtained the highest test scores (minimum three and maximum five individuals).
  • The President shall select, among said list, a nominee for each vacant position, to be ratified by the Senate.
  • Ratification by the Senate requires a qualified vote (at least two-thirds).
  • Commissioner positions have a tenure of nine years with no reappointment.
  • The head of the agency (Chairperson) is appointed by a two-thirds majority vote from the Senate from among the Commissioners in functions.

What is the agency’s annual budget?

The 2020 budget is 581,230,908 Mexican pesos.

How many staff are employed by the agency?

As at 15 August 2020, the total number of staff employed by COFECE is 445.

To whom does the head of the agency report?

COFECE is independent but as part of its accountability obligations it must submit an annual work programme and quarterly activity reports to the President and Federal Legislative body. The chair appears before Senate on an annual basis and may be summoned for extraordinary hearings.

Do any industry-specific regulators have competition powers?

As per the Constitutional Reform of 2013, the Federal Telecommunications Institute (IFT) is both the regulator and the competition authority for the broadcasting and telecommunications sectors. COFECE has no competition powers in these sectors.

If so, how do these relate to your role?

COFECE and the IFT must enforce the Federal Law on Economic Competition (FLEC) in their respective areas of authority. Both agencies are fully autonomous and perform their activities independently. However, both institutions have put in place several cooperation agreements to promote coherence in the enforcement of the law, share experiences, exchange information and foster competition.

Do politicians have any right to overrule or disregard the decisions of the authority?

No. COFECE’s final decisions may only be overruled judicially by means of a constitutional recourse denominated indirect amparo.

Does the law allow non-competition aims to be considered when taking decisions?

No.

Which body hears appeals against the agency’s decisions? Is there any form of judicial review beyond that mentioned above? If so, which body conducts this?

The only judicial body that may hear appeals against COFECE’s final decisions are the federal courts specialising in competition, broadcasting and telecommunications, and the only form of judicial review is by indirect amparo. Further, the Supreme Court has the power to attract appeals pending before the specialist courts.

When the Commission becomes aware of acts or general regulations contrary to competition and free market access, issued by a state or a municipality, it will notify such circumstance to the President of Mexico (or a competent authority), and if said authority(ies) deems it pertinent, it will initiate an action of unconstitutionality.

If the Commission becomes aware of acts or general provisions issued by Congress, or the President of Mexico, which contravene the exercise of the Commission's powers, it may file a constitutional controversy before the Supreme Court.

Has the authority ever blocked a proposed merger?

In 2019, COFECE blocked two proposed mergers.

File number: CNT-161-2018. Wal-Mart International Holdings, Inc. (Walmart), Cornershop (Cornershop), Cornershop Technologies, LLC (Cornershop LLC), Shareholder Representative Services LLC (Shareholder) and a natural person.

Cornershop is a grocery delivery platform, which allows shoppers to buy groceries online from different retailers. Walmart is a retail company that operates supermarkets, membership price clubs, pharmacies and online stores. COFECE blocked the acquisition of Cornershop by Walmart, as it considered that the transaction could have negative effects on competition in the corresponding markets. The merging parties submitted behavioural remedies, but these were insufficient to avoid the negative effects, since the proposed transaction could generate incentives to unduly displace or block Walmart´s competitors’ access to the Cornershop platform or hinder the development of new platforms. The new entity could have sufficient market power to diminish competition. Thus, COFECE blocked the transaction. Walmart challenged the legality of COFECE’s decision. The trial is in process at the time of the writing of this submission.

File number: CNT-025-2019. Inmueblemar (Inmueblemar), Planigrupo Latam (Planigrupo) and Nueva Wal-Mart de México (Walmart)

The merger sought compliance with remedies imposed by COFECE in 2015 (CNT-021-2015) on Soriana (a retail chain) to acquire 159 stores and other assets from its competitor Comercial Mexicana. To comply with these remedies, Soriana, through Inmueblemar, proposed to sell one store to Planigrupo, which would be leased to Walmart subsequently. As a result of the proposed transaction the number of competitors would be reduced in a geographic area. Hence, final consumers would end up paying higher prices since there would be no supermarkets other than Walmart in that area. Thus, the transaction was blocked. Walmart appealed COFECE’s decision and the trial is in process at the time of this submission.

Has the authority ever imposed conditions on a proposed merger?

Conditions were not imposed on proposed mergers during 2019. However, it has Imposed conditions in several mergers in previous years.

Has the authority conducted a Phase II investigation in any of its merger filings? If yes, please provide the most recent instances.

The FLEC does not foresee two distinct investigation phases in merger analysis. However, COFECE conducted and concluded three in-depth merger analyses during 2019.

File number: CNT-121-2018. Gebr. Knauf KG (Knauf) and USG Corporation (USG)

Merging parties manufacture and distribute dry solutions for non-load-bearing walls in commercial and residential construction. The proposed acquisition would have adversely affected competition in Mexico. Therefore, parties submitted a modified proposal of the transaction. Accordingly, Knauf proposed to sell its entire dry solutions business to Saint Gobain. With these structural modifications, COFECE granted clearance to both mergers.

File number: CNT-161-2018. Wal-Mart International Holdings, Inc. (WalMart), Cornershop (Cornershop), Cornershop Technologies, LLC (Cornershop LLC), Shareholder Representative Services LLC (Shareholder) and a natural person.

As mentioned before, potential competition concerns were identified in COFECE’s review. Walmart and Cornershop submitted remedies but these were insufficient to avoid the possible negative effects. Therefore, the merger was blocked. Walmart appealed COFECE’s decision and the trial is in process at the time of this submission.

File number: CNT-025-2019. Inmueblemar (Inmueblemar), Planigrupo Latam (Planigrupo), and Nueva Wal-Mart de México (Walmart)

This transaction is part of the efforts of Soriana to comply with the remedies established by COFECE in 2015 as part of the authorisation of a merger between Soriana and Comercial Mexicana, two of the main supermarket chains in Mexico. COFECE blocked the acquisition of Soriana’s store by Walmart, which would be operated through a lease scheme by the latter. Walmart challenged the legality of COFECE’s decision. The trial is in process at the time of the writing of this submission.

Has the authority ever pursued a company based outside your jurisdiction for a cartel offence? If yes, please provide the most recent instances.

Not during 2019.

Do you operate an immunity and leniency programme? Whom should potential applicants contact? What discounts are available to companies that cooperate with cartel investigations?

Yes. The Leniency and Sanction Reduction Programme, foreseen in article 103 of the Federal Economic Competition Law, allows any person or business that has participated in or is currently part of a cartel conduct, to receive a reduction in sanctions and penal immunity. These benefits may be provided upon submission of information and full cooperation with COFECE.

Interested parties may file their applications by voicemail at +52 55 2789 6632 or by email addressed to [email protected]. Applications should clearly indicate a desire to request protection as part of the immunity programme and include contact information.

In 2020, COFECE issued the Regulatory Provisions of the Leniency and Sanction Reduction Programme. The new Regulatory Provisions bring greater predictability and transparency to the programme. For instance, these provide clarity when an application is received and, on the rights and obligations of the applicants; these also provide key information for applicants to know their position in the queue; and establish the steps to follow when the Commission decides that conditional benefits of applicant to the Programme should be removed. The Provisions are legally binding.

The Commission is currently working on new Leniency Guidelines that adequately explain the changes that are included in the new provisions.

Is there a criminal enforcement track? If so, who is responsible for it? Does the authority conduct criminal investigations and prosecutions for cartel activity? If not, is there another authority in the country that does?

Yes. Since 2011, cartel offences (such as price fixing, output restriction, market allocation and bid-rigging) are considered criminal violations under competition and criminal laws.

As a result of the new FLEC, enacted in 2014, the minimum criminal sanction was raised from three years in prison to five, the maximum remaining at 10 years. Additionally, the alteration or destruction of information with the purpose of hindering or obstructing an investigation became a crime punishable with a minimum of three months and a maximum of one year in prison.

According to the new FLEC, once an administrative investigation has concluded, the Investigative Authority may file a criminal complaint against such individuals who participated in a cartel. The criminal investigation would run parallel to the administrative proceeding conducted by COFECE. The Investigative Authority is the only body within COFECE with the powers to file this complaint and the Attorney General’s Office is in charge of the criminal investigation.

To date, COFECE’s Investigative Authority has referred two cases to the Attorney General’s Office, both related to bid-rigging in the health sector. The first case was lodged in February 2017, against several bidders that coordinated bids in tenders called by the health sector between 2009 and 2015. Then in October 2019, the Commission used this power for the second time against several individuals, for possible bid-rigging which took place between 2011 and 2015.

Are there any plans to reform the competition law?

No.

When did the last review of the law occur?

The new FLEC was published in the Federal Official Gazette on 23 May 2014 and entered into force on 7 July 2014.

Do you have a separate economics team? If so, please give details.

Yes. COFECE has a Directorate General of Economic Studies that serves as a stand-alone bureau of economics within the agency. The directorate provides technical assistance to other areas in COFECE, particularly when they deal with complex economic issues. In addition, it is responsible for conducting market studies that could serve as grounds for the Commission’s advocacy efforts or enforcement actions, or both.

The Directorate General is led by:
Juan Manuel Espino Bravo
Director General of Economic Studies
Tel: +52 55 2789 6556
Email: [email protected]

Has the authority conducted a dawn raid?

Yes. In 2011, COFECE was given the power to conduct dawn raids. This power was confirmed and strengthened with the new FLEC of 2014.

Has the authority imposed penalties on officers or directors of companies for offences committed by the company?

Yes. In particular, in 2019.

File: IO-005-2016.

In 2019, COFECE imposed a total fine of 18 million, 93,000.826 Mexican pesos on three companies, Productos Galeno, Dentilab and Holiday de México, and five natural persons acting on their behalf, for having coordinated and rigged bids in public tenders, or abstained from participating in tenders, to divide among them the market of toothbrushes for adults and infants procured by the health sector. The sanctioned conducts took place from 2007 to 2013, in 68 public health sector tenders and in direct contracts mainly issued by the Mexican Social Security Institute (IMSS), the Institute for Social Security and Services for State Workers (ISSSTE) and the Health Ministry.

What are the pre-merger notification thresholds, if any, for the buyer and seller involved in a merger?

The FLEC provides that mergers shall be notified in accordance with the following:

  • When the transaction exceeds 18 million Units of Measure and Update (UMA)*; approximately US$70.7 million;  
  • When the transaction implies the accumulation of 35 per cent of the equity of an economic agent with annual sales or assets in Mexican territory of 18 million UMAs; and
  • When the transaction implies the accumulation of equity of approximately 8.4 million UMAs, and the participants in the merger have annual sales or assets in Mexican territory, jointly or separately, that exceed 48 million UMAs.

*In 2020, 1 UMA equals 86.88 Mexican pesos or 3.93 US$ - at the exchange rate of 22.15 Mexican pesos per US$ (19 August 2020).

Are there any restrictions on minority investments?

There are no restrictions on minority investments. Moreover, the FLEC provides for an expedited merger review procedure for transactions where it is evident that the merger shall not diminish, damage or impede competition. They include, for instance, transactions where the acquirer will not obtain decision-making power due to its relative participation or the internal corporate structure of the company.


Mexico: from the enforcer's competition economists

Address: Av. Revolución 725, Col Santa María Nonoalco, Alcaldía Benito Juárez, CP 03700, Mexico City, Mexico
Tel: +52 55 2789 6500
Web: www.cofece.mx

Contacts

image 97
Alejandra Palacios Prieto
Chairwoman
Tel: +52 55 2789 6666
Email: [email protected]

image 98
Sergio López Rodríguez
Head, Investigative Authority
Tel: +52 55 2789 6554
Email: [email protected]

image 99
Fidel Gerardo Sierra Aranda
Head, Technical Secretariat
Tel: +52 55 2789 6588

David Lamb de Valdés
Head, Planning, Liaison and International Affairs Unit
Tel: +52 55 2789 6681
Email: [email protected]

Juan Manuel Espino Bravo
Director General
Economic Studies
Tel: +52 55 2789 6556
Email: [email protected]

Heidi Sada Correa
Executive Director International Affairs
Tel: +52 55 2789 6562
Email: [email protected]

Questions and answers

How many economists do you employ?

Mexico’s Federal Economic Competition Commission (COFECE) employs 109 economists as at 15 August 2020.

Do you have a separate economics unit?

Yes, the General Directorate of Economic Studies (the Directorate) serves as a stand-alone ‘bureau of economics’ within the agency. The Directorate provides technical assistance to several areas within COFECE (except for the Investigative Authority), particularly when they deal with complex cases. In addition, the Directorate is responsible for conducting market studies that could serve as grounds for COFECE’s advocacy efforts or enforcement actions.

Do you have a chief economist?

The acting chief economist is Juan Manuel Espino Bravo, director general of Economic Studies.

To whom does the chief economist report?

To the head of the Technical Secretariat, Fidel Gerardo Sierra Aranda.

Does the chief economist have the power to hire his or her own staff?

Yes, subject to the requirements established by the COFECE's Human Resources Policies.

How many of your economists have a PhD in Industrial Economics?

Three. Two are commissioners, and the third one works in the Investigative Authority.

Does the agency include a specialist economist on every case team? If not, why not?

Yes, each General Directorate carrying out substantive tasks assigns a specialist economist as part of the case team.

Is the economics unit a ‘second pair of eyes’ during cases – is it one of the agency’s checks and balances? If not, why not?

COFECE’s institutional arrangement provides that all enforcement cases are managed through two phases. The Investigative Authority is responsible for conducting the investigation phase, through its General Directorates of Investigation (cartels, markets and regulated sectors) and the General Directorate of Market Intelligence, which have economists working in all the respective case teams. In addition, the Investigative Authority has a Coordination Office which functions as a ‘second pair of eyes’ by reviewing the economic and legal robustness of the investigated cases.

On the other hand, the Technical Secretariat oversees the adversarial phase whereby the Investigative Authority and the economic agent against which an accusation is filed are parties. The General Directorate of Economic Studies is part of the Technical Secretariat and as such may act as a ‘second pair of eyes’ to cases being conducted under the adversarial trial-like procedure. During the trial-like procedure the alleged offenders have the right to argue in their favour and submit evidence related to the allegations presented against them.

In this sense, this arrangement does provide several checks and balances: (1) by separating the authority charged with investigating from the authority in charge of procedural oversight, and (2) in both cases an economic unit does oversee the cases.

How much economics work is outsourced? What type of work is outsourced?

In selected cases, economic work may be outsourced. COFECE may use external experts when special expertise is required, but it is not the norm.

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