Mexico: Federal Economic Competition Commission

For us, 2014 was a year of institutional strengthening. As a result of constitutional amendments made in June 2013, Mexico’s Federal Economic Competition Commission (COFECE) is the nation’s new competition authority. The transition has implied large-scale challenges, as well as extraordinary opportunities for enacting reforms and establishing a fully effective agency for competition regulation and enforcement in Mexico.

That said, our two decades of competition policy experience in Mexico told us that the new legal framework, though it endowed the agency with greater powers, would not automatically make COFECE an effective competition agency. With precisely that in mind, COFECE issued its 2014-2017 Strategic Plan in February 2014. The plan establishes the agency’s mission, vision, values and objectives, as well as key economic sectors on which it will focus, to maximise effectiveness and the strategic measures that will drive the agency’s day-to-day activities. It also mandates producing an Annual Work Programme featuring a yearly actions agenda (the 2015 programme, for example, calls for 39 such actions).

New institutional design

The above-mentioned 2013 constitutional amendments also created Mexico’s new Federal Economic Competition Law (FECL), in force as of 7 July 2014. COFECE published its organisational statute at the same time, defining its institutional structure in accordance with the new constitutional framework. Notably, reforms mandate a firewall between the COFECE authority charged with investigations and the COFECE authority responsible for their resolution. As a result, this new investigative authority will carry out anti-competitive conduct investigations without prior authorisation from the Board of Commissioners. Following the investigation and the issuance of its statement of probable responsability, COFECE’s procedural oversight authority conducts an adversarial, trial-like procedure. At the procedure’s conclusion, the Board of Commissioners hands down a final resolution based on a majority-rule vote. The board’s final resolutions are subject to judicial review by means of a legal challenge known in Mexico’s legal system as juicios de amparo. These are submitted to newly created, specialised federal courts.

Guidelines and criteria for legal certainty

On its own, the new FECL cannot guarantee legal certainty for all economic agents. Accordingly, in November 2014, the Commission published regulatory provisions designed to develop, complement and implement its legal reach by specifying, for example, what the Commission will consider as an indicator of cartel activity, as well as clearly defining concepts such as essential facilities and related market and joint market dominance. Designing guidelines and criteria that will assure the Commission’s activities are carried out predictably has also been designated a Commission priority.

At the end of 2014, COFECE submitted four guideline and criteria proposals for public consultation including technical criteria regarding concentration indexes that Commission analyses employ, leniency programme guidelines and protocols governing the initiation of investigations into monopolistic practices or unlawful mergers. Furthermore, it is expected that technical criteria for initiating monopolistic practices investigations, guidelines governing COFECE’s merger procedures, guidelines on information exchange between competitors and protocols for detecting bid-rigging in public procurement processes will be submitted for public consultation by the end of 2015.

Institutional strengthening

The COFECE team is charged with FECL implementation and is the agency’s key enforcement asset to that end. A smaller agency previous to 2013 constitutional reforms, COFECE has since experienced an unprecedented, almost 30 per cent expansion in staffing. New personnel have undergone capacity strengthening in areas such as cartel investigation techniques, merger analysis and quantitative competition analysis methods.

With regard to enforcement, COFECE’s actions cannot be purely reactive; it must do more than just rely on complaints to initiate investigations. To that end, we enhanced capacities for detecting anti-competitive practices, particularly in markets that exert a high impact on economic growth, including an intelligence unit that proactively analyses market conditions.

Proprietary market studies are another tool COFECE has begun using for in-depth assessments of how certain markets work. They are to be undertaken in cases where, while there is no evidence of competition law violations, COFECE believes a specific market is not serving consumers optimally. In July 2014, for example, COFECE published an in-depth financial services market study that included 36 regulatory and public policy recommendations designed to foster sector competition.

Enforcement

Maintaining and improving COFECE’s enforcement capabilities is our top priority. In 2014, COFECE’s investigative arm prosecuted 18 cases: six from 2014, four that were initiated prior to that year, three that were dismissed and one was closed. The remaining four cases involved statements of probable responsability issued prior to hearings and sanctioning.

For the first time, the authority has also made use of a new power to regulate barriers to competition and essential facilities, launching a March 2015 investigation into the air transport services market, specifically with regard to aircraft arrival and departure protocols at Mexico City’s airport.

Merger review is another of COFECE’s critical activities. Last year we exercised oversight on transactions worth more than US$1.5 billion. Additionally, more than 100 mergers were analysed and concluded between June 2014 and March 2015, including high-complexity, international-scope cases like the Continental and Veyance merger as well as the merger between Pilgrim’s Pride and Tyson.

Advocacy

COFECE has reinvigorated its advocacy strategies. Though competition policy in Mexico took on unprecedented momentum starting in 2013, we came to realise this was merely one piece of the puzzle; market competition can only be achieved through joint efforts involving numerous stakeholders. Therefore, the Commission has called for cooperation among all sectors – public, private and social – to foster greater market competition. Last year, other such projects included two calls for papers: one inviting college undergraduates to undertake economic competition research; the other inviting journalists who cover related subjects.

We have strengthened our commitment to cooperation with our neighbours in Latin America and the Caribbean. The agency’s Economic Competition Internship Programme, piloted this year, promotes three-to-six-week staff exchanges with sister agencies in the region. Interns take part in investigations, enforcement and other projects alongside COFECE economists, attorneys and investigators to gain a first-hand appreciation of the agency’s enforcement-mandate practices and approaches.

In an ongoing effort to prevent new laws and regulation from hampering competition, COFECE works closely with Mexico’s Federal Commission for Regulatory Improvement to include competition assessments in regulatory impact analyses for all federal regulations. This action seeks to involve public officials in competition assessment and raise awareness about the benefits of market competition. Draft regulations that are found to negatively impact competition are referred to COFECE for analysis, assuring that possible competition threats are detected, in most cases before regulations are enacted. This initiative led to COFECE’s Honorable Mention in the 2014 ICN-WB Competition Advocacy Contest.

Conclusion

Over the course of 2014, COFECE made numerous changes and took on a wide-ranging project portfolio. We now enjoy much more effective instruments for enforcing competition legislation, as well as a dynamic, freshly empowered team with two decades’ worth of competition policy experience. Legal and organisational changes have come to pass; the next task is to reap the improvements these can bring in terms of expanded, more effective enforcement. Competition affects every Mexican citizen as well as all those who do business within our borders. COFECE is primed to work alongside every stakeholder and, not least of all, lead by example.