Lucía Ojeda December 6 2018 Competition authorities celebrate 25th anniversary amidst signing of USMCA SAI Law & Economics | Competition & Antitrust - Mexico Lucía Ojeda Competition & Antitrust IntroductionEvolution of competition policyUSMCACommentIntroductionIn 2018 the Federal Economic Competition Commission (FECC) and the Federal Institute of Telecommunications (IFT) celebrated their 25th anniversary. Since its inception, the FECC has played an essential role in boosting the Mexican economy by not only detecting and pursuing alleged infractions of the Federal Economic Competition Law, but also discouraging economic agents from engaging in anti-competitive conduct.The FECC, together with the IFT, has had a positive effect on various markets, including telecoms, health, agro-food, energy, transport, finance and public procurement. This positive effect was recognised by the Global Competition Review, which gave the FECC a three-and-a-half-star rating – equal to Canada, Spain, Norway, New Zealand and Italy. Ultimately, since the rise of the FECC, consumers within the Mexican markets have been effectively protected from unfair practices.Evolution of competition policy Competition policy in Mexico has evolved significantly since the establishment of the FECC and the IFT. In 1992, in the midst of negotiations on the North American Free Trade Agreement (NAFTA), the first Federal Economic Competition Law was published in the Federal Official Gazette.The law's entry into force in 1992 led to the establishment of the country's first competition authority the following year. The Federal Competition Commission (CFC) was subordinated to the Federal Executive through the former Ministry of Commerce and Industrial Promotion (today the Ministry of Economy). The commission had technical and operational autonomy.That same year, NAFTA was published in the Federal Official Gazette. The Mexican economy quickly welcomed a vast number of investors from around the world in various markets, and the country became an attractive territory for commercial interaction. Therefore, Chapter 15 (Competition Policy, Monopolies and State-Owned Enterprises) was promptly introduced to NAFTA. This chapter included international standards for antitrust law and, since its implementation, it has been a successful tool for addressing anti-competitive conduct by economic agents – both Mexican and foreign.In 2013 the Constitution was amended in order to strengthen competition and telecoms policies in Mexico. The CFC was dissolved and two constitutionally autonomous bodies were created:the FECC, which oversees economic competition; andthe IFT, which is responsible for the enforcement of competition policy only in the telecoms and broadcasting sectors.These new competition authorities have more investigative powers than the CFC.In 2014 specialised economic competition, broadcasting and telecoms tribunals were created. On 7 July 2014 the new Federal Economic Competition Law came into force, which both strengthened the FECC and IFT's existing tools and endowed them with new ones. The main changes included:a functional separation of the competition authority;judicial counterbalance;increased demand for transparency and accountability;strengthened investigative capacities;greater penalties; andnovel legal tools which enable a more effective investigation.USMCAChapter 15 of NAFTA helped to stimulate the framework for competition law in Mexico. As such, the recent signing of the US-Mexico-Canada Agreement, which will substitute NAFTA in the near future, is relevant from a competition perspective. The USMCA is an updated version of NAFTA, with modified and new chapters which reflect the modern market and new methods and technologies. The USMCA includes chapters not only on competition policy, but also telecoms, government procurement and other matters that concern the signatory parties' overall antitrust law.Chapter 18 of the USMCA, which concerns telecoms, introduces a new type of participant with regard to competition. In addition to monopolies, the USMCA recognises the existence of 'major suppliers', which are defined as suppliers with the:ability to materially affect the terms of participation (having regard to price and supply) in the relevant market for public telecommunications services as a result of control over essential facilities or use of its position in the market.(1)Chapter 18 imposes various obligations on such suppliers, such as a prohibition on treating foreign entities unfairly or less favourably than domestic ones. Essentially, the USMCA recognises major suppliers' substantial power over certain markets and provides additional protection to smaller economic agents.Notwithstanding the previous statement, Article 18.23 of the telecoms chapter enables enterprises to legally appeal the decisions of competition authorities or petition them to reconsider decisions that would negatively affect their national legal framework. However, this rule applies only to Canada and the United States, as the Mexican Constitution states that IFT decisions can be appealed only through an amparo indirecto trial (ie, a federal trial in which the complainant alleges that an authority has violated its constitutional rights). This article raises the question of whether Mexico's laws should accommodate a pre-amparo procedure.Chapter 13 of the USMCA (government procurement) establishes various norms for government procurement proceedings that should be followed to ensure the healthy functioning of the markets. The parties to the USMCA are bound to prohibit any action that might prejudice fair competition between suppliers.Notably, Article 21.2 of the competition policy chapter concerns procedural fairness in competition law enforcement. In contrast to NAFTA, the USMCA effectively gives additional protection to lawful confidential communications between counsel and their clients regarding the soliciting or rendering of legal advice. This article enforces that such information should remain confidential, even if solicited by an authority during an enforcement proceeding. Thus, the USMCA provides additional benefits to persons or entities that become involved in competition diligence. This is an improvement compared with current Mexican antitrust policy, as the FECC has previously had no clear guidelines on attorney-client confidential communications.Further, the competition policy chapter of the USMCA states that the signatory parties recognise the importance of cooperation and coordination between their respective national competition authorities for fostering effective competition law enforcement in the free trade zone. Thus, competition enforcement could be increased if the Mexican authorities apply the USMCA accordingly and collaborate with the US and Canadian antitrust authorities. It is also essential that competition policy evolves alongside the development of new markets.CommentThe Mexican competition authorities have made good progress in carrying out their various functions throughout the years and have been recognised globally for their positive effect on the country's economy. However, it will be interesting to see how the USMCA contributes to Mexican competition policy once implemented by the FECC and the IFT. It is hoped that the next 25 years will see both authorities continue their efforts to address the main competition problems in the evolving market.For further information on this topic please contact Lucía Ojeda Cárdenas at SAI Consultores SC by telephone (+52 55 59 85 6618) or email ([email protected]). The SAI Consultores website can be accessed at www.sai.com.mx.Endnotes(1) USMCA, Chapter 18, Article 18.1 (Definitions).