Antitrust Law in Mexico

1
Antitrust Law in Mexico

2
Institutional structurefor competition law
enforcementand advocacy in Mexico

• Since 1857 the Constitution prohibits monopolies
• 1980s reforms initiative to reduce government
  control and develop a market-based economy
• 1993 Federal Law of Economic Competition
• Creation of the Federal Competition Commission
  (CFC)
• Independent agency attached to the Economics
  Ministry

3
Competition policy objectives

• To protect the competitive process and free
  market access by preventing monopolies,
  monopolistic practices, and other restraints of
  the efficient functioning of markets for goods
  and services

4
Federal Competition Commission Legal Tools

• Preventing, opposing and sanctioning monopolistic
  practices
• Merger control
• Assessing agents interested in
• Participating in auction processes
• Obtaining permits or concessions
• Making declarations on competition conditions or
  substantial market power in regulated sectors
• Advocating competition principles

5
CFC strengths
Independence and credibility
It has matured into an autonomous and credible
authority, viewed with respect both domestically
and internationally.1
Productivity and continual improvement
It has applied the best principles of management
and has attained the highest standards of public
service1
Timely and effective merger control
It has developed a timely and effective merger
control regime.
Competition in regulated sectors
It has effectively promoted competition
principles in privatization and concession
granting processes.
Constitutional validation
It has obtained constitutional validation of the
law favorable Supreme Court decisions regarding
22 articles and unfavorable decisions regarding
only 4 articles.
1. Conclusions from the recent OECD peer review
Competition law and policy in Mexico, 2004.
6
CFC weakness
Limited sectoral coordination
Limited sectoral coordination between the CFC and
other regulators, which reduces its effectiveness.
Legal limitations
The CFC has no powers to divest monopolies,
undertake searches, implement leniency programs,
order preventive measure.
Increasing number of litigation
Between 1994 and 2003 the number of suits
(amparos and fiscal nullity) increased from 41 to
170.
Ineffective fines
Only 14 of fines have been collected, while 21
have been revoked and 58 are being challenged.
Budget limitations and excessive workload
Although the number of cases has increased, the
CFCs budget has fallen 9 in real terms between
2000 y 2004.
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LFCE Illegal Commercial Practices
Absolute Monopolistic Practices

• Agreements between competitors which eliminate
  competence and increase illegally their benefits
  with negative effects for consumers.
• Price fixing
• Output restriction
• Market division
• Bid rigging

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LFCE Illegal Commercial Practices
Relative Monopolistic Practices

• Acts or agreements which object or effect is
• Displacing agents from the market.
• Avoiding access of agents to the market.
• Establishing competitive exclusive advantages for
  one or more agents.

• Vertical market division
• Resale price restriction
• Tied sales
• Exclusive dealing
• Refusals to deal
• Boycott

9
Mergers

• Fusions, acquisition of control, or any other act
  in which are concentrated
• Societies, associations, stocks, or general
  assets.
• Between
• Competitors, suppliers, customers or any economic
  agents.

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Contestable Mergers

• Commission will contest those mergers which
  object or effect be
• Decrease, affect or avoid competence and free
  concurrence with respect to similar or highly
  related goods or services.
• Cases
• Power to fix prices or to restrict supply.
• Displace other economic agents or avoid access to
  the market.
• Execute any monopoly practice.

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Sanctions in case of Contestable Mergers

• Conditioning the act to the accomplishment of
  conditions fixed by the commission.
• Elimination of production lines
• Modification of terms for merging.
• Promote concurrence of other competitors.
• Others.
• Ordering partial or total elimination of what had
  been merged.

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Mergers Cases subject to notification

• Transactions of 12 million times SMGVDF (484.2
  million pesos).
• Accumulation of
• 35 or more of assets/stocks from a third agent.
• Assets or sales above 12 million times SMGVDF.
• Transactions between agents with assets or sales
  above 48 million times SMGVDF, jointly or
  separately.
• Exceptions
• Mergers between foreign societies without assets
  accumulation in national territory.
• Mergers where the concentrator part used to own
  98 of stocks during the three previous years.

13
Antitrust Law Example Cases

• CINTRA
• Cintra controlls Aeromexico and Mexicana.
• Both represent 80 of Mexican Market.
• CFC blocked the intention of sell them jointly.
• CFC has expressed that if a separate sell is not
  achieved shortly CINTRA has to dissapear.
• Eduardo Pérez Mota, president of the Comisión
  Federal de Competencia, said if for any reason
  these companies would not disincorporated and be
  sold on the next few weeks or months, either way
  CINTRA has to disappear and be split even if it
  falls under control of the public sector.
• 29/Sept/2005

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Microsoft and the Antitrust Law

• Microsoft vs.
• U.S. Antitrust Case
• Sherman Act Section Two
• Maintenance of Monopoly Power by Anticompetitive
  Means
• Attempting to Obtain Monopoly Power in a Second
  Market by Anticompetitive Means
• Sherman Act Section One
• Tying
• Exclusive Dealing Arrangements
• Settlements

15
Microsoft and the Antitrust Law

• Microsoft vs.
• I.B.M.
• Result of U.S. Antitrust Case
• Several additional antitrust cases
• Settled July, 2005 (800M).
• Sun Microsystems
• Abuse on distribution agreement
• Use of MS power to tip market over .NET vs. Java
• E.U. Antitrust Case
• Integration of Windows Media
• Requirement to disclose source code.

16
What to take from Antitrust Law

• Be aware of what you can do and what you cant
• You can
• Make alliances with competitors and other
  companies to reduce costs or make better
  products.
• Be the only option in the market because of your
  innovation.
• Make bundles that increase value to the customer.
• You cant
• Agree with competitors to take advantage of the
  market.
• Do anything to constraint the market of buyers
  options.

• Be aware of what others can do and what they
  cant
• They can
• Have 90 of market share and be almost your
  unique option.
• Give you or distributors promotions, subsidies or
  incentives to sell their products.
• They cant
• Interfere to make you or their distributors
  difficult to sale other products.
• Tie products together so you are obligated to get
  something extra that diminishes your buying
  options.