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

Mexico: Federal Economic Competition Commission

Mexico

Read private practice perspective on 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

image 217
Brenda Gisela Hernández Ramírez
Acting Chair Commissioner [1]

Commissioners

Alejandro Faya Rodríguez
José Eduardo Mendoza Contreras
Ana María Reséndiz Mora

José Nery Pérez Trujillo
Head, Planning, Liaison and International Affairs Unit
Tel: +52 55 6270 6747
Email: [email protected]

José Manuel Haro Zepeda
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 Chair Commissioner 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. In the event that the term of office of the appointed Commissioner concludes before the term for the position as Chair, she/he shall serve as head only for the remainder of the term of office. Article 19 of the Federal Economic Competition Law (LFCE per its initials in Spanish) provides that in a case of absence or vacancy of the Chair, the most senior Commissioner shall replace the Chair.  

When is he or she due for reappointment?

On September 10, 2021, Commissioner Brenda Gisela Hernández Ramírez took office as Acting Chair Commissioner in accordance with Article 19 of the LFCE , while the Senate appoints COFECE's new Chair for a four-year term.  

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 that 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 shall be conducted maximum 30 calendar days from submission of the nomination and requires a qualified vote (at least two-thirds).
  • Commissioner positions have 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.

The Commission currently has three vacancies for Commissioners. For these vacancies, the RC submitted to the President of Mexico the corresponding lists of eligible candidates (on 20 November 2020, on 20 April 2021 and on 26 November 2021). There is no legal deadline for the President to select a nominee from each of the lists, and to date, no candidates from these lists have been submitted to the Senate for ratification.

In view of these vacancies, in December 2021, COFECE filed before the Supreme Court a constitutional controversy requiring the Executive Power to fulfil its mandate to appoint the missing Commissioners.

What is the agency’s annual budget?

The 2022 budget is 616,125,143 Mexican pesos.

How many staff are employed by the agency?

The total number of positions at COFECE is 472; as of 15 July 2022, the number of staff employed by COFECE is 446.

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 or telecoms regulator) has competition powers for the broadcasting and telecommunications sectors..

If so, how do these relate to your role?

COFECE and the IFT must enforce the LFCE in their respective areas of authority. Both agencies are fully autonomous and perform their activities independently. However, both institutions have put in place a cooperation agreement which was signed in 2013 and modified in 2017, in order to promote coherence in the enforcement of the law, share experiences, exchange information and foster competition. Moreover, there is constant formal and informal collaboration between the different units of both institutions.

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 bodies that may hear appeals against COFECE’s final decisions are the Federal Courts Specialized 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 Specialized 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 may 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?

Yes.

In 2021, COFECE blocked one proposed merger between Soriana, a Mexican supermarket and Famsa, a retail store (File CNT-042-2020). In 2015, Soriana notified COFECE of its intention to acquire 159 stores of the Mexican supermarket Comercial Mexicana, distributed in 87 municipalities in the country. Once the Commission analyzed the possible effects of this merger, it identified 27 markets in which the operation, if authorized, could pose risks to competition. Therefore, in October 2015, COFECE established conditions to address the risks identified in these local markets, through a divestment program that Soriana accepted. In March 2020, Soriana and Famsa notified the Commission of their intention to concentrate, in an operation which consisted in the transfer by Soriana of the leasing rights of a supermarket in favor of Famsa, so that the latter could operate as a competitor of Soriana. On November 10, 2020, COFECE informed the economic agents that the notified concentration had the risk of affecting the process of competition. However, the notifiers did not present conditions to correct the indicated risks. In January 2021, the Board of Commissioners blocked the proposed merger, considering that it did not meet the requirements of the divestment program, as Famsa did not have the ability or means to remain a viable and effective competitor of Soriana, nor would it operate as a supermarket if the merger was authorized.

Has the authority ever imposed conditions on a proposed merger?

Yes.

During 2021, conditions were imposed on one proposed merger: G500 SAPI, Corporación G500 and G500 Network (File CNT-022-2020). The operation consisted of the creation of a franchise to sell gasoline and diesel through gas stations, subject to future expansion. The Commission authorized the transaction for 213 gas stations initially and imposed the condition that every time a new group wants to be part of the said franchise it had to be notified to the Commission before signing the franchise agreement. To this end, COFECE approved a mechanism so that G500 Network incorporates new franchisees, providing information in partners or shareholders and their service stations so that COFECE can verify the impact of the incorporation on the conditions of competition in the markets of sale to the public of oil products. G500 Network is a Mexican company that has more than five hundred service stations in the country that are part of the G500 SAPI purchasing club. .

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

The LFCE does not foresee two distinct investigation phases in merger analysis. However, COFECE conducted and concluded one in-depth merger analysis during 2021, between G500 SAPI, Corporación G500 and G500 Network (mentioned in the previous question).

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

Yes. In 2014, COFECE fined four international companies that fixed prices for hermetic compressors that were exported, imported and commercialized in Mexico.  In 2016, COFECE fined two international companies for exchanging sensible commercial information with the object and effect of manipulating the price of air conditioning compressors for automobiles. The conduct was carried out by an international cartel that aimed at establishing and maintaining high prices in future tenders in the international compressors market. Then, in 2017, COFECE fined seven global shipping companies for allocating the market of maritime transportation of vehicles and heavy machinery, anticompetitive conduct with effects in Mexico. The collusive agreements were implemented globally on international routes. What COFECE considered during its investigation was that these collusive agreements included Mexican ports, as point of origin or destination, to South America, Asia and Europe, and that the conduct had the effect of reducing competitive pressure and increased the costs of the services provided to companies in the automotive industry in the Mexican market.

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 LFCE, 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 program and include contact information.

In 2020, COFECE issued the Regulatory Provisions of the Leniency and Sanction Reduction Program. These Regulatory Provisions bring greater predictability and transparency to the program. 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 for all the applicants; and establish the steps to follow when the Commission decides that conditional benefits of applicant to the Program should be removed. The Provisions are legally binding.

In 2021, COFECE issued the Guidelines for the Leniency and Sanction Reduction Program as a tool to provide guidance on how COFECE receives, analyzes and resolves applications to the Immunity and Reduction of Sanctions Program. These Guidelines do not interpret or replace the Program regulation established in the competition act and the Regulatory Provisions of the Program. However, they reflect the operational practice of the Commission in the processing of the procedure, in such a way that it constitutes a tool that provides greater transparency and certainty to Economic Agents.

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.

The LFCE, enacted in 2014, raised the minimum criminal sanction 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 LFCE, 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 powers to file this complaint and the Attorney General Office is in charge of the criminal investigation.

In October 2019, the Investigative Authority submitted its second criminal suit to the Attorney General Office against several individuals who rigged bids in the public health sector. To draft the document that was filed as evidence of the suit, COFECE identified areas of opportunity compared to the first criminal suit to increase the possibilities for the Attorney General Office to effectively prosecute the case. In addition, COFECE has provided cooperation and assistance throughout their investigation.

Are there any plans to reform the competition law?

No.

When did the last review of the law occur?

The new LFCE was published in the Federal Official Gazette on 23 May 2014 and entered into force on 7 July 2014.  On January 27, 2017, a minor reform was made to some provisions of the FLEC with the objective of defining the functions of the Internal Control Body. The amendments include details on the appointment of the Head of the Internal Control Body,  such as age and previous experience; as well as new accountability obligations for the Head such as submitting quarterly and annual activity reports to COFECE with a copy to the Chamber of Deputies.

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 and/or enforcement actions.

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 LFCE of 2014. Since 2013, the Commission has carried out 103 dawn raids. In the midst of the COVID-19 pandemic, the Commission was able to conduct one dawn raid in 2021. The reduction in the number of dawn raids was intended to protect COFECE’s officials, as well as potential raided agents from COVID-19 contagion. Therefore, during 2021, relevant information was obtained through other investigative tools such as requests for information or compulsory interviews. Additionally, during 2021 when COVID cases and hospitalizations peaked in Mexico, suspensions on working days were issued to protect the health of all people involved in proceedings with the Commission (suspensions took place from January 11-29 and from February 1-19). However, COFECE’s officials continued working remotely.  During the last semester of 2021, a protocol was created to conduct dawn raids when it does not imply a health hazard. In this sense, in addition to the use of personal protective equipment, COFECE’s members are tested before and after dawn raids are conducted, and the number of staff members was reduced for these proceedings, among other measures..

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

Yes. In particular, in 2021 and 2022:

  1. File IO-006-2016.
    COFECE imposed fines for a total of 35 million 75 thousand Mexican pesos to 7 banks (Barclays Bank, Deutsche Bank, Santander, Banamex, Bank of America, BBVA Bancomer, J.P. Morgan) and 11 natural persons (traders) for collusion in the secondary market for the trade of debt securities issued by the Mexican government. To this end they exchanged messages (chats) using technological communication platforms that banks hire as work tools. The Commission proved that the banks and traders established 142 agreements to manipulate prices, establish the obligation to not commercialize and/or acquire certain government securities in specific transactions (not general agreements), which had a direct impact on the price of the related instruments in said transactions of the secondary market. It is calculated that these anticompetitive practices, carried out between 2010 and 2013, generated a harm to the market of 29 million 389 thousand Mexican pesos.
  2. File IO-001-2016
    COFECE sanctioned Casa Marzam, Casa Saba, Fármacos Nacionales, Nadro and Almacén de Drogas, as well as 21 natural persons who participated in their representation in agreements to restrict the supply of medicines, as well as to fix, manipulate and increase the price of medicines. Also, the Asociación de Distribuidores de Productos Farmacéuticos de la República Mexicana and a natural person were fined for collaborating in the execution of these conducts. As a result of the above, fines for a total of 903 million 479 thousand pesos were imposed and 10 directors were disqualified from serving as advisors, administrators, executives, agents, or representatives of said companies, for periods ranging from 6 months to 4 years. As for the latter disqualifications, this is the first time that COFECE applies this type of sanction, after a careful consideration of the intent, intentionality and duration of the conducts, which seriously affected a particularly sensitive market for families.
  3. File IO-004-2017
    COFECE imposed fines totaling 313 million 473 thousand Mexican pesos on Essity Higiene y Salud México, Kimberly Clark de México and Productos Internacionales Mabe, as well as 9 natural persons who acted on their behalf, for their responsibility in the exchange  of information and in the agreement to increase prices of products and/ or the elimination of promotions in the market for the sale of baby diapers, products for feminine sanitary protection and incontinence, all very important products for the health and hygiene of Mexican families.  The sanction conducts also included the verification compliance with the agreement; as well as various acts to maintain secrecy of communications once they were detected by the Commission.
  4. File IO-002-2018.
    COFECE imposed fines totaling 177.6 million Mexican pesos on 17 soccer clubs of the Liga MX, and for collaborating with them, to the Mexican Football Federation and  8 natural persons, for their responsibly in colluding to avoid or inhibit competition in the market for soccer players' draft through two conducts: 1) imposing maximum wage caps for women players, which further deepened the pay gap between women and male soccer players; and 2) segmenting the market of male players by establishing a mechanism that prevented them from freely negotiating and signing with new teams.
  5. File VCN-001-2021.
    COFECE imposed a fine to Frutas y Hortalizas de Calidad (FHC) and a natural person for a total amount of 2 million 345 thousand 760 Mexican pesos for failing to notify a merger. In November 2020 a transaction was carried out through which a natural person acquired a percentage of representative stocks of the social capital of HBC International, owned by FHC. The foregoing implied the indirect acquisition of a part the Interjet’s assets, since HBC holds a participation in said airline. Upon detecting this operation, the Commission opened a file to verify if the involved economic agents complied with the respective mandatory notification. Despite that the infringers were duly noticed of the foregoing, they did not submit statements, evidence nor arguments to defend themselves against the possible failure to comply with the LFCE, therefore the analysis was conducted with the available information.
  6. File VCN-001-2021
    COFECE imposed sanctions for a total 9 million 748 thousand 587 Mexican pesos to Cemex, ABC Capital, ABC Holding and a natural person, for failing to comply with the mandatory notification of two mergers. In the first months of 2022, COFECE had knowledge that the first transaction was carried out in 2018, when ABC Holding increased its participation in ABC Capital’s social capital; and that the second transaction took place in 2021, date on which Cemex sold stocks from ABC Capital to a natural person. Based on due process, COFECE authorized both mergers concentrations, as it was considered that these did not represent risks to competition. However, when proving the responsibility of the economic agents involved for failing to notify the mergers, COFECE imposed four fines: the fines for the companies involved in the first transaction amount to 7 million 956 thousand 187 Mexican pesos; while, for the company and the natural person related to the second transaction, the fines amount to 1 million 792 thousand 400 Mexican pesos.

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 83.4 million USD;  
  • 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; approximately 83.4 million USD; and
  • When the transaction implies the accumulation of equity of approximately 8.4 million UMAS; approximately 38.9 million USD, and the participants in the merger have annual sales or assets in Mexican territory, jointly or separately, that exceed 48 million UMAs; approximately 222.5 million USD.

* In 2022, 1 UMA equals 96.22 Mexican Pesos or 4.63 USD - at the exchange rate of 20.76 Mexican pesos per USD (02/08/2021).

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,
lcaldía Benito Juárez, CP 03700, Mexico City, Mexico
Tel: +52 55 2789 6500
Web: www.cofece.mx

Contacts

image 218
Brenda Gisela Hernández Ramírez
Acting Chair Commissioner [1]
Tel: +52 55 2789 6666
Email: [email protected]

image 219
José Manuel Haro Zepeda
Head, Investigative Authority
Tel: +52 55 2789 6554
Email: [email protected]

image 221
Fidel Gerardo Sierra Aranda
Head, Technical Secretariat
Tel: +52 55 2789 6588

José Nery Pérez Trujillo
Head, Planning, Liaison and International Affairs
Tel: +52 55 6270 6747
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 103 economists as of 15 July 2022.

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 and/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?

Two. One commissioner, and one economist working 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 specialised 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, market investigations 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.


Notes

[1] In terms of Article 19 of the Federal Economic Competition Law

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