Under Mexico's competition law framework, the Federal Competition Commission (FCC) has the authority to declare whether substantial market power or effective competition conditions exist in certain regulated sectors, such as financial services, energy, transport and telecommunications. A recent case regarding substantial market power in the telecommunications market illustrates the scope and effect of the FCC's powers and the recourse available to economic agents that are affected by its decisions.

The Federal Telecommunications Law allows the FCC to determine whether public telecommunications network concessionaires exercise substantial market power. If it finds that there is a lack of economic competition, this determination empowers the Federal Telecommunications Commission (FTC) to take specific measures to regulate the market.

The quality and price of telecommunications services in Mexico have been sharply criticised, both within the country and internationally. The Organisation for Economic Cooperation and Development has found that domestic fixed-line call rates in Mexico are among the highest in the world. It was only a matter of time before the FCC issued a statement on the issue. In so doing, it targeted one of the biggest players in the sector: Telmex.

In 2007 four evaluations were initiated to determine whether Telmex had substantial market power in four different markets, all related to fixed-line call services.(1) Having requested information from Telmex and other economic agents, in 2009 the FCC determined, in all four proceedings, that Telmex had substantial power in the relevant markets. Although these findings did not trigger a penalty, they raised the prospect of a significant legal impact on Telmex. For instance, the FTC has the power specifically to regulate a dominant enterprise in terms of the pricing and quality of its services in order to prevent it from exploiting its position to the detriment of competitors and consumers. Therefore, if Telmex were deemed to be a dominant enterprise, it might be subject to such regulatory control.

In response, Telmex filed motions with the FCC for reconsideration of each determination.(2) The FCC rejected the motions for alleged lack of standing. This approach was based on a case on an administrative matter, which had been resolved by the Second Collegiate Court of the First Circuit. The court had found that an FCC determination regarding substantial market power did not directly affect the economical agent in question because it was not binding on either the FTC or the FCC itself. However, other courts reached the opposite conclusion.(3) They affirmed that an economic agent has standing to file a motion for reconsideration because a determination declaring it to be an agent with substantial market power affects its legal position, since it becomes subject to certain determinations (eg, the FTC's directions on tariffs and quality of service). When such uncertainties arise, the Supreme Court must either determine which of the criteria prevails or establish a new criterion. On June 23 2011 Telmex filed a motion before the court regarding the contradiction of criteria.

On August 17 2011 the court ruled in favour of the latter interpretation, thus allowing Telmex to seek reconsideration of the determinations. Significantly, the decision can be interpreted in two ways. According to one interpretation, the court's decision gives economic agents in Telmex's position legal standing because the FCC's decision affects them directly. On a different analysis, the decision does not directly affect the economic agents; however, the potential for harm means that they have standing. Interpreted in this way, the decision may provide grounds for a broader view of legal standing for economic agents that are affected by the FCC's decisions.

Consequently, Telmex re-filed the motions before the FCC, seeking reconsideration of the same four initial determinations. The FCC reconfirmed its initial determination regarding one of the motions, since Telmex was unable to submit new evidence that might modify the FCC's decision. FCC President Eduardo Pérez Motta stated: "The decision to reinforce the original resolution was made because [Telmex's] arguments were insufficient, invalid or not relevant." The resolution of the other three motions for reconsideration is still pending and the outcome is eagerly awaited.

For further information on this topic please contact Lucia Ojeda Cardenas at SAI Law & Economics by telephone (+52 55 59 85 6618 ), fax (+52 55 59 85 6628) or email ([email protected]).


(1) File DC-02-2007 evaluated leasehold wholesale services for local, national and international long-distance and cross-border connections and interconnections. File DC-05-2007 evaluated the local transit of dedicated transmission links to other authorised telecommunications networks. Both files were closed on June 25 2009. Files DC-03-2007 and DC-04-2007 considered the termination and origination, respectively, of public switched voice transit, through a public telecommunications network for fixed local services, that provides long-distance services to other authorised telecommunications networks. Both files were closed on October 22 2009.

(2) For File DC-02-2007, the file for the motion for reconsideration is RA-035-2009. For Files DC-05-2007, DC-03-2007 and DC-04-2007, the relevant files are RA-037-2009, RA-049-2009 and RA-045-2009, respectively.

(3) The Sixth Collegiate Court of the First Circuit for Administrative Matters and the Fifth Collegiate Circuit Court.