Mexico: Federal Economic Competition Commission

Mexico is in the process of modernising its competition policy, a task that has required rethinking and improving its legal and institutional frameworks. It is a great honour for the Mexican Federal Economic Competition Commission (COFECE) to have its efforts recognised in Global Competition Review’s 2014 ‘Rating Enforcement’ survey with a three-star ‘Good’ rating, up from two-and-a-half stars in 2014.

Modernising our competition policy does not occur in isolation from Mexico’s political and economic contexts. Starting in 2013, the nation has undergone numerous structural reforms in key areas such as finance, energy and telecommunications. This new economic panorama has required the strengthening of legal frameworks that guarantee open competition, particularly with regard to these key strategic markets.

Constitutional amendments sanctioned in June 2013 established a new system for competition, including the creation of a constitutionally autonomous competition authority, COFECE. The reforms also created the Federal Institute of Telecommunications, another autonomous and independent entity entrusted with sectorial regulatory powers, as well as jurisdiction over competition issues only in the telecommunications and broadcasting arenas.

The constitution established that COFECE would enjoy the necessary authority to effectively accomplish its mandate. In order to do this, an investigative authority was created to operate independently from the authority charged with ruling on cases. Specialised courts have also been set up, led by judges focused on competition, telecommunications and broadcasting. Moreover, they will have jurisdiction over civil claims related to competition issues. These new courts are designed to enhance the enforcement of Mexico’s legal framework for competition by executing more in-depth competition analyses and improving the timeframes associated with legal proceedings.

Constitutional reform led to calls for a new Federal Law of Economic Competition (FLEC). The president of Mexico proposed a bill to Congress in February 2014. During the debate in Congress, opinions from experts, authorities and stakeholders were considered; as a result, both chambers of Congress amended several articles to strengthen legal certainty and due process. In April, Congress passed the law, and it was sanctioned and published in the Federal Official Gazette in 23 May 2014. The new FLEC entered into force on 7 July 2014.

The FLEC introduces new elements that coincide with international best practices and allows COFECE to more effectively fulfil its mandate. While maintaining essential elements from the old legislation already subject to judicial review and testing, it also acknowledges previously unlisted monopolistic practices that will now be subject to sanctions.

The new FLEC also establishes new proceedings. Due to widespread structural problems as well as anti-competitive restrictions that previously hampered the Mexican economy, the nation’s major political parties all deemed that improving Mexico’s competition landscape was urgently needed. This led to a special proceeding charged with determining essential inputs and competition barriers. As a result, the Commission is empowered to:

• issue recommendations to public authorities;
• mandate the elimination of undue barriers to competition;
• issue guidelines to regulate essential inputs; and, as a last resort
• order divestitures.

Note that in all cases COFECE must verify that proposed remedial measures will increase market efficiency. At COFECE, we are certain these new provisions will be clarified and enriched by administrative and judicial practice.

The FLEC insures an appropriate equilibrium between Commission powers and accountability. It mandates a firewall between investigation phases and establishes a congressionally appointed, independent internal auditor. The law also stipulates contact rules between the authority and the economic agents, and orders that all plenary sessions and resolutions be made public, while always protecting confidential and classified information.

The Federal Criminal Code was also amended to discourage the creation of cartels: strengthened criminal sanctions call for five to 10 years’ imprisonment for those convicted of committing or participating in cartel-related offences as defined by the FLEC. Additionally, a new criminal sanction punishes obstructing investigations by altering or destroying documentation.

Finally, it should be noted that Congress has committed to a full review of Mexico’s economic related regulatory framework as a means of aligning it with principles of free and open competition that the nation’s constitution establishes.

The past 12 months have been a time of transition for Mexico’s competition policy. Clearly, there will be challenges in the coming years; that said, COFECE will build on solid foundations established by the former Federal Competition Commission as well as new institutional powers and strategic planning. COFECE acknowledges the critical nature of its internal set-up as a means of fulfilling its mandate. Accordingly, its 2014–2017 Strategic Plan calls for the creation of a new division that will reinforce the investigations area to in-turn strengthen competition law enforcement. We have also committed to the implementation of an Advocacy Plan that recognises the importance of promoting competition in every sector in conjunction with the proactive creation of a culture of competition in Mexico.

In light of transformations currently taking place in Mexico, COFECE will play a key role in the implementation of numerous landmark reforms. For instance, financial reforms required that COFECE implement market investigations regarding competition conditions in the financial sector and its markets, and led to COFECE’s current official recommendations to the nation’s financial authorities. The Commission’s institutional framework, coupled with government and legislative commitments to boosting competition, place COFECE in a unique yet challenging position to transform the Mexican economy and enhance overall consumer welfare.