On 24 March 2022, the Second Collegiate Circuit Court in Administrative Matters, Specialised in Economic Competition, Telecommunications and Broadcasting (the Second Court), discussed the latest jurisdiction battle between the Federal Institute of Telecommunications (IFT) and the Federal Economic Competition Commission (COFECE) – this time, over matters related to over-the-top (OTT) content.
Over the past few years, the IFT has assumed jurisdiction over OTT content by ruling the concentrations between AT&T-Time Warner, Disney-Fox and, more recently, Televisa-Univision. Even though the COFECE had not challenged the IFT's jurisdiction regarding OTT content in those mergers, in the Televisa-Univision case, the COFECE drifted from previous criteria and assessed the OTT content markets considering that OTT services are not general interest services supplied by telecoms or broadcasting government concessionaires, and thus, they do not fall under the scope of the Federal Telecommunications and Broadcasting Law. Moreover, the COFECE argued that, considering the IFT's previous rulings, the OTT content did not belong to the licencing of content to providers of pay television or related services.(1) Hence, there was no compelling reason for the IFT to assume jurisdiction over OTT content.
Against this background, the COFECE and the IFT entered into a new jurisdiction battle over the Discovery/AT&T merger. After three months (in which the transaction's competition analysis was suspended by both the COFECE and the IFT), the Second Court confirmed the IFT's jurisdiction on the following grounds:
- The essence of OTT services is to provide audiovisual content over the internet, which in turn is built over a telecoms infrastructure.
- Even when OTT services do not require interaction with pay television providers (eg, Netflix, Disney+ and Apple TV+ provide stand-alone services directly to consumers), they use the internet as an essential input and, without those services, the distribution of content would not be possible. Therefore, it is not clear that OTT services are autonomous from the internet provision.
- The IFT has historically regulated the provision of OTT content to the preponderant agent in the broadcasting sector and has assumed jurisdiction over this market in previous concentration procedures.
Although the Second Court's judgment was not a surprise considering the history of jurisdiction over the OTT markets, it stands at odds with some of the reasoning from the most recent judgment of the First Collegiate Circuit Court in Administrative Matters, Specialised in Economic Competition, Telecommunications and Broadcasting (the First Court).(2) In such a matter, the First Court granted jurisdiction to the COFECE over internet search engines, social networks and cloud computing, while the IFT retained jurisdiction over the mobile operating systems market. However, considering the Second Court's reasoning, it is not clear that search engines, social networks and cloud computing could be assessed independently from the internet services, as they are provided necessarily over telecom networks, which the IFT regulates. The same could be argued for almost any digital platform, even those where the COFECE has assumed jurisdiction, such as food delivery, e-commerce or ride-hailing services.
In Mexico, jurisdiction in competition matters is placed among two authorities: the IFT and the COFECE. The IFT oversees the competition process in cases that concern broadcasting and telecoms markets, while the COFECE has authority on competition matters regarding all the remaining markets.(3) The reason behind this division is the specialisation and technical capacity that the complexities of the broadcasting and telecom markets involve. Nevertheless, the Mexican Federal Economic Competition Law does not provide a clear process by which both authorities could cooperate in matters where the line between jurisdictions is blurred; instead, it compels them to start a jurisdictional battle in the courts. So far, this has proven to require a case-by-case analysis, which only stalls merger procedures and disincentivises any antitrust or regulatory-like procedure.
The development of modern markets and the constant incorporation of technology into every business has erased the clear line between these jurisdiction limits, and now it is difficult to categorically state where this line should be drawn. Therefore, only a bright-line rule can be drawn. Where the frontiers of jurisdiction are not clear, the jurisdiction will be assessed on a case-by-case basis. The jurisdiction battle between the IFT and the COFECE is far from its end.
For further information on this topic please contact Lucía Ojeda, Ernesto Álvarez Castillo or Francisco J García del Valle Torres at SAI Law & Economics by telephone (+52 55 59 85 6618) or email ([email protected], [email protected] or [email protected]). The SAI Law & Economics website can be accessed at www.sai.com.mx.
Endnotes
(1) Both the COFECE and the IFT assumed jurisdiction over OTT content and issued rulings on these markets. In this case, the rulings were consistent – nevertheless, the authorities' rulings could have been contradictory.
(2) File CCA1/2021.
(3) According to article 5 of the Mexican Federal Economic Competition Law.