Mexico: New COFECE leadership and IFT restructure exemplify antitrust regime

In summary

This article presents an examination of Mexico’s antitrust landscape, encompassing an overview of key elements that shape the competition environment. It describes the recent institutional adjustments within the Federal Economic Competition Commission (COFECE) and the Federal Telecommunications Institute (IFT) and how these changes impact competition enforcement. The article also discusses significant agency decisions in the competition arena over the past 18 months and sheds light on the future by analysing ongoing investigations and market studies undertaken by the regulatory bodies.

Discussion points

• Institutional adjustments
• Regulatory strengthening
• COFECE and IFT decisions
• Ongoing investigations and trial-like procedures
• Priority sectors and market studies conducted by COFECE
• Outlook and challenges

Referenced in this article

• COFECE
• IFT
• Federal Economic Competition Law

Introduction

In the past decade, antitrust practice has become a particularly relevant matter in Mexico owing to the significant transformations in both legislation and practice. The Mexican antitrust legal framework is primarily governed by article 28 of the Federal Constitution and the Federal Economic Competition Law (FECL). In general terms, article 28 sets forth that monopolies are prohibited and recognises the importance of competition as a driving force for economic development; while the FECL aims to promote competition, prevent and sanction anticompetitive conducts, and protect consumer welfare.

In June 2013, article 28 of the Federal Constitution underwent a major constitutional amendment to create a healthy and strong antitrust environment in Mexico. As a result, the current antitrust agencies in charge of enforcing and observing compliance with the FECL are the Federal Economic Competition Commission (COFECE) and the Federal Telecommunications Institute (IFT). Both agencies are constitutionally autonomous bodies in technical and economic terms. The IFT oversees the enforcement and regulation of antitrust legislation in the telecommunications and broadcasting sectors, while COFECE is the competent authority in all other markets in Mexico.

In addition to the capacities to conduct pre-merger filing review, the FECL has empowered COFECE and the IFT to pursue a greater number of investigations and exercise their authority more vigorously. In addition, to guarantee due process, the FECL provides that the authority in charge of investigating anticompetitive conducts and charging those responsible (the Investigative Authority) must be independent from the decision-making body (the Board of Commissioners).

The investigation stage lasts for up to 600 business days. When the investigation stage ends, the Investigative Authority must issue a statement of objections or close the investigation. If a statement of objections is issued, a trial-like procedure begins. At this stage, the involved economic agents will have access to the investigation file. Once all the evidence has been gathered and submitted, a 10-business-day period is given for the Investigative Authority and the involved economic agents to provide any final arguments in connection with the procedure. When the final arguments have been submitted, one commissioner will be appointed by an appointment order to receive and analyse all the gathered information. The selected commissioner will then be required to present a final resolution draft to the Board of Commissioners for its approval. COFECE or the IFT must issue a final resolution within the following 40 business days.

In addition to the procedure to investigate anticompetitive practice or an unlawful merger, the FECL provides for several special procedures, including:

• an investigation procedure, to determine the existence of barriers to competition or other factors that could generate anticompetitive effects;
• a procedure for ruling on market conditions such as effective competition, market power or any other analogous concepts; and
• a procedure for the issuance of formal opinions or resolutions on licensing, concessions, permits and similar authorisations.

The amendments to existing legislation, and the implementation of new specific regulation (including the regulatory provisions on the use of electronic means in investigations and other procedures), have increased the Mexican competition authorities’ efficiency and powers. The authorities use these powers fearlessly but responsibly, with a growing level of expertise that allows them to solve increasingly complex cases and to adapt to new legal practices and standards.

Institutional adjustments

COFECE and the IFT are government bodies that were created in 2014 through a constitutional amendment. Both authorities were created with full economic and technical independence and autonomy.

COFECE and the IFT each have a board composed of seven commissioners, and these are the governing bodies in charge of resolving, in a collegial manner and by majority vote, the cases and matters that, by constitutional mandate, fall within their jurisdiction.

The appointment of commissioners involves a rigorous selection process, in which an evaluation committee, formed by the heads of the Bank of Mexico and the National Institute of Statistics and Geography, examines and evaluates the technical capabilities of the prospective commissioners. By relying on experts from prestigious institutions, the process aims to uphold the integrity and effectiveness of the competition bodies. Based on the results of the evaluations, the commissioners are selected by the President of Mexico and ratified by the Senate.

Rodrigo Alcázar Silva and Giovanni Tapia Lezama were appointed as commissioners on 3 February 2023. With their appointments, the seven positions on the Board of Commissioners were finally filled after a two-year vacancy. Prior to this, the President of Mexico had avoided making these appointments until the Supreme Court compelled him to fill the empty seats to allow COFECE to continue its operations. Although only four commissioners are needed to hold a session, some procedures require five votes (ie, for determining essential factors or barriers to competition and for issuing guidelines). Following these appointments, COFECE can finally resume these procedures.

In contrast to COFECE, no commissioners have been appointed to the IFT’s board since 2019 and it has operated with only four commissioners since then. In March 2022, the IFT amended its by-laws to allow the board to hold sessions and make valid decisions with only three commissioners. While challenges persist for the IFT with an incomplete board, its adaptive measures have enabled the continuation of decision-making processes.

Andrea Marván, third woman chairing COFECE’s board

On 15 March 2023, Commissioner Andrea Marván took office as COFECE’s chair for a four-year term, which can be renewed once, after being ratified by the Senate. Andrea is the third woman to hold the position of chair of COFECE’s board. Additionally, Andrea Marván seeks to strengthen COFECE’s authority by effectively utilising all the powers granted by law, such as requesting precautionary measures during investigations, initiating class action lawsuits and exercising the authority to request the initiation of criminal proceedings against individuals engaging in cartel conducts. Neither precautionary measures nor class action lawsuits have ever been used by COFECE and the initiation of criminal proceedings has only been used a few times. The foregoing shows the new competition policy that is going to be implemented, through which Andrea Marván, as the new president of COFECE, seeks to strengthen the agency.

Regulatory strengthening

The FECL establishes that all procedures referred to in the law may be conducted by electronic means, provided that the principles of digital governance and data protection, as well as the applicable provisions on electronic signatures, are observed. COFECE has the power to issue guidelines for effective compliance with the FECL, which first must be submitted for public consultation and then be published in the Federal Official Gazette. By utilising electronic means, COFECE has sought to improve the efficiency and speed of all its processes.

On 13 February 2023, COFECE published the Guidelines for the issuance of opinions or resolutions in the granting of licences, concessions, permits and similar authorisation, by electronic means before COFECE. On 2 March 2023, COFECE published the Guidelines for the use of electronic means during the investigation, the sequel to the procedure, the verification and the incidents processed before COFECE. Both guidelines provide new ways to submit documents, make notifications and carry out various proceedings (including the presentation of testimonial, confessional, expert and observational evidence). In general terms, the guidelines provide the possibility of using technological tools to carry out procedures electronically, benefiting users by reducing time frames and making processes more efficient.

In accordance with the guidelines, users who intervene in any of these procedures may, at any time, declare whether they choose to use electronic means for the entire procedure or for certain actions or procedures only.

COFECE’s sectors of interest

One of the sectors of special interest for COFECE has been the transportation sector, which represented 9.9 per cent of Mexico’s gross domestic product (GDP) in 2022. COFECE has been investigating this sector for years. Finally, in March 2023, COFECE issued a formal opinion requesting and suggesting several amendments to the Civil Aviation Law and the Airports Law. In this Opinion, COFECE pointed out that the initiatives allow a state-owned company to simultaneously operate an airport and an airline, which could hinder access to airport infrastructure. COFECE’s main concern focuses on allowing access to all airlines to airports and their services without discrimination.^[1]

COFECE decisions

During 2023 and the first part of 2024, COFECE sanctioned entities involved in two anticompetitive cases and four gun jumping cases. Some of these cases are described below.

Cartel

Tortilla market in Chiapas

In June 2023, Chedraui, Soriana, their representatives, five dough and tortilla manufacturers and a government official of Huixtla were fined more than 2 million Mexican pesos for manipulating the price of tortillas and limiting their sale in Huixtla, Chiapas. COFECE focuses on this market as tortillas are an important part of the Mexican diet, being a basic basket food product that in 2021 had a weekly per capita consumption of just over 1kg.^[2]

Industrial gas equipment market

In September 2023, COFECE imposed a fine of over 2 million Mexican pesos on Equipos para Gas, SA de CV, Gas Tecnología y Equipos, SAPI de CV and three individuals for agreeing in a contract to a non-competition clause in the industrial gas equipment market. This clause was designed to prevent some of the individuals involved in the contract from entering the industrial gas equipment market. The purpose was to restrict the supply of goods and services required for the integration, installation, maintenance and commercialisation of equipment, accessories and spare parts.^[3]

Gun jumping

Since 2019, COFECE has imposed fines of over 233,627,558 Mexican pesos in gun jumping cases. In 2020, there were four gun jumping fines, with a total amount of fines of approximately 7,396,600 Mexican pesos, which in terms of monetary amount represents 3.16 per cent of the total fines imposed since 2019. In 2021, only one gun-jumping fine was imposed on the undertakings Interjet and HSBC, with a sanction of 955,680 Mexican pesos.

Notably, 2022 saw the highest annual number of fines for gun jumping, with fines imposed on six undertakings (Cemex, ABC Holding, Neology Inc, IAC Holdco, GCM and Franklin). The fines totalled 80,766,174 Mexican pesos, which represents in monetary terms 34.57 per cent of the total fines since 2019.

In 2023, two gun jumping fines were imposed, one of which is the highest gun jumping fine imposed by COFECE to date. HP, Inc and Plantronics, Inc were fined 61,580,800 Mexican pesos for having closed a transaction before the board had issued a resolution. Given the substantial amount of the fine imposed by the Commission, this past year accounted for 31.09 per cent of all fines imposed since 2019.

COFECE has issued only two fines so far in 2024. The first amounted to 1.545 million Mexican pesos against Gebr Knauf KG and the second, which is the second highest fine for gun jumping imposed by COFECE to date, amounted to 58 million Mexican pesos and was imposed on six undertakings that sell gasoline and diesel to end consumers (Segamex, Gasolinera Boquilla, SA de CV, Combylub, SA de CV, Servicio Camionero de Jiménez, SA de CV, Alamillo Promotora e Inmobiliaria, SA de CV and Gasolinera Mirasierra, SA de CV). The companies in question were fined for failing to notify two mergers that should have been notified to COFECE. In total, the fines imposed in 2024 add up to 59.545 million Mexican pesos, which represents 25.49 per cent of the total fines imposed since 2019 in monetary terms.

Blocked mergers

Dolphinarium entertainment services in Quintana Roo

In October 2023, COFECE resolved to partially object to a merger between several undertakings as it represented high risks to competition in the dolphinarium entertainment services market. This merger consisted of the acquisition of two adventure parks and an aquatic park located in Quintana Roo and an amusement park in Jalisco, as well as five dolphinariums located in Quintana Roo by Ejecutivos de Turismo Sustentable, SA de CV and Triton Investments Holdings LLC.

COFECE authorised the merger with respect to the services offered in aquatic, amusement and adventure parks since it was unlikely to affect free competition. However, COFECE objected to the operation with respect to the dolphinarium entertainment service, since it would give the purchasers the capacity to exert competitive pressure.^[4]

Barriers to entry and to economic competition

Card payment processing services through clearinghouses market

In September 2023, COFECE determined the existence of barriers to competition in the market for receiving card payments. This determination was made because commissions paid among banks for the operation of the card payment system was an average of 1.36 per cent, while in European countries, it is around 0.2 per cent. In other words, commissions in Mexico are six times higher. This, in turn, generates a systemic effect, since small businesses are unlikely to accept card payments in the face of such high commissions, which leads to the population preferring to use cash. Therefore, in collaboration with Mexico’s Central Bank and the National Banking and Securities Commission, COFECE recommended making several adjustments to the regulatory framework to increase competition in this sector and encourage financial inclusion.^[5]

Maritime transportation of passengers and cargo

In February 2024, COFECE decided that there was an absence of effective competition conditions in the Pichilingue–Mazatlan and Pichilingue–Topolobampo routes. This was due to the high degree of concentration in the market, the fact that shipping lines can fix their rates and fares without anyone else being able to offer better costs or services, and the existence of barriers to entry. Following the declaration of lack of conditions for effective competition, it is up to the regulatory authority, the Ministry of the Navy, to issue the tariff regulation for these services.^[6]

Ongoing investigations

During 2023 and the first part of 2024, COFECE’s Investigative Authority initiated four investigations into alleged cartels and one investigation concerning abuse of dominance. The IFT’s Investigative Authority initiated three alleged abuse of dominance cases.

COFECE investigations

Cartels

Radiological material acquired by health sector entities

In March 2023, the Investigative Authority initiated an ex officio investigation into alleged illegal agreements between competitors to coordinate positions in the national market for radiological and related material acquired by health sector entities. Collusion in the healthcare sector is particularly serious as it directly impacts the quantity and quality of medical supplies that government institutions can acquire for healthcare for the population.^[7]

Scopolamine

In May 2023, the Investigative Authority initiated an ex officio investigation into alleged cartel activity in the market for the distribution and commercialisation of scopolamine in Mexico. Scopolamine is an ingredient used in common medications for treating dizziness, nausea and other health issues. COFECE considers this sector a priority due to its impact on the population’s well-being. According to data from the National Institute of Statistics and Geography (INEGI), in 2020 54 per cent of Mexican households reported expenses relating to healthcare, including the purchase of prescription medications, and the healthcare sector accounted for 2.5 per cent of GDP in 2022.^[8]

Cinema distributors and exhibitors

In June 2023, the Investigative Authority initiated an ex officio investigation to determine whether illegal agreements were made among cinema distributors and exhibitors in Mexico. This investigation is of great importance because the film industry is a significant source of entertainment for Mexican families. In 2022, there were more cinema tickets sold than the total number of residents in Mexico – approximately 182 million tickets, with total box office revenues of 12.025 billion Mexican pesos.^[9]

Federal freight transportation

In April 2024, the Investigative Authority initiated an ex officio investigation to determine whether there were agreements between transportation suppliers to not compete among themselves to the detriment of consumers. Freight transportation is fundamental for the industry and commerce, as it ensures that products and inputs reach their destination in the best conditions. According to the Ministry of Infrastructure, Communications and Transportation, this mode of cargo transportation is the most used: it moved 56.8 per cent of the country’s cargo in 2022.^[10]

Abuse of dominance

Digital goods and services

In January 2023, the Investigative Authority initiated a complaint investigation in the market for the development, marketing and sale of digital goods and services for possible abuse of dominance practices. This market includes products and services such as e-books, software, video games, photographs, music and movies online, among others. These products and services, as well as applications, are created by developers and are marketed to end users through various channels.^[11]

Illicit mergers

Real estate services

In October 2023, the Investigating Authority initiated an ex officio investigation for a possible illicit merger in the market for the commercialisation of classified real estate advertisements in Mexican territory. The real estate sector has a great impact on the economy and the welfare of the population. According to INEGI, it represents 17.7 per cent of GDP.^[12]

Barriers to entry and to economic competition

Public rail freight service

In January 2024, the Investigative Authority began investigating the public railroad freight transportation market and its related services and rights to identify if there are any barriers to competition and free concurrence, as well as possible essential inputs. In Mexico, 25.3 per cent of all merchandise is transported by rail. This service transports a significant percentage of industrial and agricultural products, petroleum and its derivatives in the country.^[13]

IFT investigations

Abuse of dominance

Mobile operating system app stores and distribution of audiovisual content

In April 2023, following a complaint, the IFT’s Investigative Authority initiated an investigation into alleged abuse of dominance in the national markets mobile operating systems’ app stores and their related markets, as well as the distribution of audiovisual content through internet platforms. This consisted of tied sales and different prices being imposed on different buyers or sellers with equivalent conditions. The investigation also looked into activities that had the object or effect, directly or indirectly, of increasing the costs, hindering the productive process or reducing the demand faced by other undertakings.^[14]

Telecommunication networks providing voice, data or video services

In August 2023, the IFT’s Investigative Authority initiated an ex officio investigation into the probable existence of undertakings with substantial power in the telecommunications market. This investigation will cover the markets of telecommunications networks that provide voice, data or video services at the national, state, regional and local levels.^[15]

Public procurement of fixed telecommunications services

In February 2024, the IFT’s Investigative Authority initiated an investigation into the market of public procurement of fixed telecommunications services. This investigation began following a complaint that alleged the existence of contracts or agreements between competing undertakings to coordinate on bids, tenders and auctions, as well as exchanging information with any of these objects or effects.^[16]

Trial-like procedure

Trial-like procedures in various sectors are currently under way before the technical secretary. The parties to the procedure are the Investigative Authority and the undertakings accused by the Authority. At this stage, the undertakings submit a response to the statement of objections and the corresponding evidence.

Cartels

Marine diesel

Marine diesel is used by boats and ships, and the service stations where it is sold are in coastal areas or near river mouths. In January 2023, COFECE concluded that it had found evidence of probable collusion to fix, raise, agree or manipulate marine diesel prices paid by the public at Mexican service stations.^[17]

Petrol and diesel

Petrol and diesel are fundamental for the country’s economy because their availability, price and quality have an impact on the well-being of Mexican families and on all productive sectors. In January 2023, COFECE confirmed that it had found evidence of probable collusion to fix, raise, agree or manipulate petrol or diesel prices charged at service stations throughout the country.^[18]

Waterproofing materials

According to the National Housing Survey in 2020, 44.2 per cent of houses presented humidity due to water filtration, making this the main structural problem of houses in Mexico. More than 35 million houses in Mexico need waterproofing materials to maintain their homes. In February 2023, COFECE identified that some companies and individuals may have manipulated prices in the markets for the production, distribution and commercialisation of waterproofing materials in Mexico, and therefore found evidence of a probable cartel between those undertakings.^[19]

Non-residential real estate rentals

Non-residential real estate rentals are gaining significance in the economy because most retailers choose to establish their stores in such properties. Additionally, they serve as a crucial source of employment for Mexicans. In January 2024, COFECE confirmed that it had found evidence implicating several companies and individuals for allegedly manipulating prices in the non-residential real estate rental market in Mexico.^[20]

Maritime transportation services in Quintana Roo

The transportation sector is of great relevance in the national economy, accounting for 11.4 per cent of the national GDP. This sector also plays a significant role in Quintana Roo, where it represents 7.5 per cent of GDP. In February 2024, COFECE concluded that it had found evidence of probable collusion between several companies and individuals to segment the maritime transportation services market in Quintana Roo.^[21]

Abuse of dominance

Mezcal

The mezcal industry generated 40,000 direct jobs and more than 190,000 indirect jobs in 2022. This industry achieved a value of more than 15 billion Mexican pesos. In September 2023, COFECE determined that a legal entity and a natural person may have unilaterally refused to sell, market or provide a service that is normally offered to third parties in the mezcal conformity assessment market.^[22]

Self-service retail stores

Mexican families spend more than half of their income on consumer goods such as food, beverages, cleaning, personal care and household items. In October 2023, COFECE concluded that it had found evidence indicating that an undertaking had likely been abusing its market power and engaging in vertical price-fixing or other abuse of dominance practices in the market for the supply and distribution of consumer goods by self-service store chains in Mexico.^[23]

Medical oxygen

Medical oxygen is considered by the World Health Organization as a medicine of primary need due to its relevance for the treatment of the SARS-CoV-2 virus (covid). In October 2023, COFECE confirmed that it had found evidence of several undertakings that had allegedly abused their dominant position to engage in anticompetitive conduct of exclusivity in the market for the production, distribution and commercialisation of medicinal oxygen and related services in the national territory.^[24]

Digital advertising

Digital advertising services are commercial communications provided by digital media and platforms to advertisers that seek to inform, persuade or strengthen their brand. Digital advertising is the most widely used advertising medium in Mexico. In November 2023, COFECE found evidence of an undertaking that presumably abused its dominant market position to engage in likely anticompetitive conduct of tied sales or bundling in the market for digital advertising and related services.^[25]

Gun jumping and illicit mergers

Based on the investigation carried out by the Investigating Authority in November 2022, COFECE concluded that it had found evidence of the likelihood of several undertakings and individuals having carried out various illicit mergers and gun jumping in the market of commercialisation, distribution and retail of gasoline and diesel in the national territory.^[26]

Priority sectors

In accordance with COFECE’s Strategic Plan 2022–2025, it will focus especially on certain sectors in the coming years, recognising their significant impact on the Mexican economy, its citizens and the competition landscape. Specifically, COFECE has identified the following sectors of particular interest: food and beverages; transportation and logistics; financial services; construction and real estate services; energy; health; public procurement; and digital markets.

Food and beverages

The food and beverage sector encompasses all phases of production, ranging from agriculture to the retail sale of food and beverages, including the food manufacturing industry.

In 2018, the food and beverage sector accounted for more than 15 per cent of the value added by productive activities across the national economy.^[27]

In the fourth quarter of 2023, the accommodation and food services sector recorded a GDP of 583 billion Mexican pesos, indicating an increase of 0.72 per cent compared with the previous quarter and a rise of 1.96 per cent compared with the same period in the previous year.

For the 2022 National Household Income and Expenditure Survey, the total current expenditure amounted to 53,520 Mexican pesos. This comprised the quarterly average monetary expenditure per household, totalling 40,906 Mexican pesos, and the non-monetary expenditure, totalling 12,613 Mexican pesos. The quarterly average monetary expenditure in the category of food, beverages and tobacco was 14,167 Mexican pesos (34.6 per cent).^[28]

Transportation and logistics

In this sector, activities range from the manufacturing of transportation equipment to the provision of transportation services, as well as storage and dispatch services facilitating efficient product delivery to end consumers.

In 2023, these activities constituted an 8.5 per cent share of GDP. Moreover, during that year, 94.8 per cent of households incurred expenses in this sector, accounting for 20 per cent of nationwide household expenditure. In the fourth quarter of 2023, the transportation, postal and warehousing sector recorded a GDP of 1.82 billion Mexican pesos, indicating a decrease of 0.36 per cent compared with the previous quarter and a rise of 1.79 per cent compared with the same period of the previous year.^[29]

Financial services

The financial sector made up 5.8 per cent of GDP in 2023.^[30] In 2020, the segment involving bonds, insurance and pensions saw impressive growth of nearly 50 per cent, with an average annual rate exceeding 10 per cent.

Financial services play a dual role, serving both end users and supporting the development of various productive activities. In 2020, 27 per cent of households reported deposits in accounts and savings banks, and 85.6 per cent reported credit card payments. Nearly a quarter of the demand for services in this sector is utilised as input in other industries.

In 2022, credits rose to 65,724,655 (12.6 per cent), there were 6,938 million (4.1 per cent) transactions and transfers, and 143,581,670 (6.2 per cent) deposit accounts. The number of branches in the country reached 16,641, marking an 8 per cent growth compared with 2021.^[31]

Construction and real estate services

In 2023, the GDP of the sector grew by 10.5 per cent in the second quarter, primarily driven by civil engineering, which surged by 78 per cent during the same period.^[32] In the fourth quarter of 2023, a GDP of 1.61 billion Mexican pesos was recorded, showing an increase of 1.21 per cent compared with the previous quarter. The GDP for 2023 amounted to 1.51 billion Mexican pesos.^[33] While construction experienced a decline of 21.7 per cent between 2017 and 2020, real estate services saw a growth of 5.5 per cent during the same period.

In 2020, 8 per cent of households reported paying for home ownership fees, and 11 per cent made payments for services or materials relating to home repair, maintenance or renovation. Together, these expenses comprised 20 per cent of household expenditure on the acquisition of movable and immovable assets, valuable items and physical assets.

Energy

Oil and gas extraction, as well as electricity generation, production and distribution, accounted for only 4.92 per cent of GDP in 2023.

The significance of this sector lies in its widespread use as an input across various productive sectors. Around three-quarters of national production serves intermediate demand rather than end users, with 93 per cent of this demand originating from other sectors and industries.

Mexico contributes 1.05 per cent to global energy production. In 2022, energy consumption in Mexico’s industrial sector surged by 28.14 per cent, while residential, commercial and public sectors experienced a 5.25 per cent increase, and the agricultural sector saw a growth of 5.28 per cent compared with 2021. Additionally, primary energy production in Mexico rose by 5.47 per cent in 2022 compared with the previous year. However, Mexico experienced a 3.25 per cent decrease in energy intensity in 2022 compared with 2021, reaching 432.62 kJ per Mexican peso of GDP. This decline was attributed to the national GDP growing at a faster rate than energy consumption, with a 3.9 per cent increase in GDP compared with the previous year, while energy consumption grew by only 0.58 per cent compared with 2021.^[34]

Health

In the wake of the health crisis caused by the covid-19 virus, the significance of this sector was underscored, with a contribution of 2.3 per cent to GDP in 2020 and a growth rate of 3.4 per cent observed between 2016 and 2020. However, in 2020, a notable 54 per cent of households reported expenditures associated with healthcare, notably in medical services (30 per cent) and prescribed medications (31 per cent). In 2022, the GDP of the health sector in Mexico reported an amount equivalent to 5.1 per cent of the national GDP, measured at current values.^[35]

Public procurement

Competition surveillance in public procurement has been a strategic focus for COFECE since its inception. This has been reflected in the Strategic Plans for 2014–2017 and 2018–2021.

Public procurement involves governments and state-owned enterprises acquiring goods, services and public works. According to the World Bank, it typically constitutes between 13 per cent and 20 per cent of global GDP, with worldwide spending on public contracts reaching US$9.5 trillion.^[36] This sector is noteworthy for its broad scope, as many public acquisitions aim to supply goods and services across various sectors to the population. In Mexico, direct awards have increased over the past eight years, rising from 36 per cent of total federal government contracts in 2013 to 43 per cent in 2020. Conversely, public tenders accounted for 56 per cent of federal government contract amounts in 2013, dropping to 40 per cent by 2020.

The share of open public tenders in Mexico awarded amounts grew from 64.2 per cent in 2020 to 88.3 per cent in 2022, while the share of direct awards decreased from 35.8 per cent to 9.8 per cent.^[37]

In 2022, of the 178,754 contracts made for acquisitions, leases and related services, 83.6 per cent were made through direct award. In the case of the 3,792 contracts for public works and related services, 50.1 per cent were made through public tender. From the total amount in Mexican pesos of contracts made by Federal Public Administration institutions, 261,887,852,403.30 Mexican pesos (51.3 per cent) were through the public tender procurement procedure.^[38]

COFECE continues its long-standing approach to public procurement, focusing on three key areas: investigating and penalising collusion, advocating for pro-competitive procurement regulations and promoting competitive bidding processes.

Digital markets

In Mexico, the mobility restrictions imposed by the covid-19 pandemic resulted in a 90 per cent surge in the usage of online shopping apps compared with the first quarter of 2020, surpassing the global growth rate of 25 per cent. Additionally, two in every 10 companies with online sales platforms have seen their growth exceed 300 per cent.

Retail e-commerce in Mexico grew by 23 per cent and retail sector sales reached a value of 528 billion Mexican pesos during 2022. Subsequently, in 2023, retail e-commerce grew by 24.6 per cent and the market value of online retail sales reached 658.3 billion Mexican pesos during 2023 according to the Online Sales Study 2023 by the Mexican Online Sales Association (AMVO).^[39]

On the other hand, the gross value added of electronic commerce in 2022 was 1,749,091 million Mexican pesos at current prices. The gross value added of total electronic commerce in the GDP is 5.9 per cent (according to INEGI).^[40]

COFECE and similar agencies in other nations acknowledge that achieving their goals presents a fresh challenge due to the digitisation of the economy. Specific measures are needed to address the challenges arising from competition, the digital economy and market operations within this framework.

While the Commission has gained substantial experience in digital markets through issuing opinions, analysing mergers and conducting investigations, it is the first time these markets have been incorporated into its strategic planning. This underscores their significance and the intention to emphasise them in COFECE's endeavours.

Market studies conducted by COFECE

Natural gas

The energy sector is of great importance as it is an input for the rest of the productive sectors. Within the energy sector, the natural gas industry is of particular importance because it generates 52 per cent of the electricity in the country. Due to the significance of this sector, COFECE approved a study on free competition and economic competition in the natural gas production, distribution and commercialisation markets.^[41]

Market studies conducted by IFT

Spectrum costs

Because the radio spectrum is fundamental for the provision of mobile services, IFT deems it necessary to understand the conditions under which providers of mobile services have access to this resource. These conditions will influence competition and concurrence in the market, which ultimately affects prices, coverage and service quality. In March 2023, the IFT decided to begin a market study to analyse the impact of the cost of the radio spectrum on the performance of market participants and on the entry of new market participants.^[42]

Distribution channels in mobile telecommunications services

To offer mobile telecommunications services to end users, operators must have physical or digital distribution channels for related products and services. For their part, users must have terminal equipment. For this to be possible, it is necessary to have an efficient distribution chain. Therefore, in March 2023, the IFT initiated a market study to determine whether there are obstacles in the market to create or replicate efficient distribution channels. If such obstacles exist, they could impede the entry, permanence or expansion of mobile telecommunications operators.^[43]

Studies planned for 2024

According to a press release issued on February 2024, the IFT approved the Annual Programme of Activities of the Centre of Studies, which contains the studies, reports, forums and additional activities that will be carried out during the year. According to the Programme, three different studies are planned. The first relates to the applications of artificial intelligence and the impact on telecommunications and broadcasting. The second will address the potential risks and benefits that artificial intelligence poses in terms of economic competition. Finally, the third will gather information that will serve as a basis for the creation of the standard to be followed by the installation of equipment in homes in terms of telecommunications infrastructure.^[44]

Outlook and challenges

Mexico’s future competition environment is likely to be highly dynamic, particularly with regard to COFECE’s activities. As discussed above, COFECE now has a complete board, a new chair and the full capacity to address any competition matter that arises.

Until very recently, COFECE had made little use of its power to file criminal complaints for antitrust offences. However, it has recently stated that it has begun a new phase in which it will use all its attributions to inhibit the commission of anticompetitive conduct.^[45] As part of this new policy, COFECE has filed three complaints before the Mexican Attorney General's Office.^[46] The last of these complaints was filed in April 2024 against several undertakings accused of colluding to manipulate prices of certain products in the construction sector.

Since the next World Cup will be held in the United States, Mexico and Canada, the competition authorities of these countries have decided to launch an initiative to promote competition and guarantee fair prices in the provision of goods and services relating to the event. In this regard, Andrea Marván, the presiding commissioner, announced that the authorities of the three countries will work together to ensure that the benefits derived from the event are not harmed by anticompetitive practices. Ensuring competition during this event is critical, as the World Cup usually has a large positive economic impact for host cities in the tourism, construction and entertainment sectors.^[47]

Regarding the IFT, it remains unclear when the Mexican President will appoint new commissioners; however, the IFT has found a way to continue functioning with only four commissioners.

In terms of challenges, we anticipate that the above-mentioned priority sectors will face strong scrutiny from COFECE. Additionally, given COFECE’s recent enforcement activities relating to gun jumping under the FECL, it is expected to intensify its vigilance over entities that complete transactions before receiving permission and to continue imposing substantial sanctions on those who fail to notify.

Endnotes