Anti-cartel enforcement in Mexico

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Cartels

Consistent with international practice, in Mexico, agreements among competitors that reduce or soften competition will be considered illegal per se and penalised as an absolute monopolistic practice. One particularity of the Mexican system is that firms and individuals can incur an infringement without reaching an actual agreement, since the mere exchange of information between competitors with an anticompetitive impact is forbidden per se and may be criminally sanctioned.

While not every interaction among competitors will update this infringement, an absolute monopolistic practice will take place in the face of hardcore collusion (i.e., agreements and information exchanges with the object or effect to fix or manipulate prices or their components; restrict output or input; allocate markets; or rig bids).

Note that violations may arise either by object or effect, implying that the enforcer will not need to prove actual market effects to ground an infringement. Absolute monopolistic practices are, by law, null and void. Administrative fines for firms involved in cartel conduct can reach up to 10 per cent of the wrongdoer's annual accruable income. Firms can also be subject to private litigation claims (including collective actions) to recover damages or losses arising from conduct updating an infringement declared by the enforcer.

Furthermore, individuals executing the practice on behalf of a company will be personally liable and subject to both criminal and administrative penalties, including fines of up to US$884,249, five-year debarment from carrying out director or counsel functions, and five to 10 years' criminal imprisonment. Facilitators (whether companies or individuals) can also be fined up to US$795,824.

While commitments and remedies are not legally available to settle cartel cases, as of 2006 the Law introduced a leniency programme that has increasingly become a cornerstone for cartel enforcement in Mexico, although some critics say that in the past two years leniency applications have been declining rapidly. The benefit is available for first and also for subsequent applicants, all of which will be required to acknowledge – and terminate – their participation in the collusive agreement (or information exchange), as well as provide enough evidence to ground or strengthen the agency's case. In exchange, applicants will be released from criminal liability and administrative penalties will be reduced proportionally to the marker.

To keep this benefit, the applicant is bound to maintain full and continuous cooperation with the agency throughout the proceeding; failure to meet the cooperation standard expected by the agency will lead to COFECE withdrawing the leniency benefits. As in any other jurisdiction, the success of this programme will be subject to the confidence that economic agents and private practitioners have in the agency. Unfortunately, recent revocations to the benefits granted have jeopardised this confidence.

During 2018, COFECE resolved two major cartel cases in the following markets:

1. Investigation on public procurement of condoms and latex catheters. COFECE found that five companies and seven individuals engaged in collusive agreements affecting several public tenders from 2011 to 2013. Pursuant to public procurement laws, public bids are capped by a maximum accepted price set through market research. COFECE found that the conspirators had manipulated the maximum price through such market research and engaged in bid rigging. Aggregated fines amounted to 112 million pesos.
2. Investigation on cash-in-transit services. COFECE found that seven companies and 10 individuals engaged in price fixing and market allocation by jointly setting a common fee to enter each other's facilities, setting minimum prices and not competing for each other's clients during price adjustment terms. Agreements took place between 2005 and 2011 and led to the imposition of aggregated fines of approximately 123.5 million pesos.

The following are recent important court precedents on this subject:

1. Supreme Court non-binding decision on leniency. The Supreme Court analysed the leniency obligation to fully and continuously cooperate with the agency; this was considered consistent with the legal certainty principle and understood as the need to cooperate totally (i.e., without obstacles or interruptions of any kind).
2. Specialised Court's non-binding decision on firm liability. The Court decided that the competition agency must analyse whether the firm charged with an infringement was not capable of behaving in a different manner (e.g., when facing possible threats to its patrimony or the integrity of its employees), when deciding on the firm's liability for antitrust infringements.

The fight against cartels remains a priority for COFECE. Furthermore, according to COFECE's 2018–2021 Strategic Plan, the agency continues to aim to promote leniency applications as a cornerstone of cartel enforcement. The IFT, in turn, has requested comments on the draft guidelines for the IFT leniency programme and applications within the telecoms and broadcasting market.

Although COFECE made it a policy objective to criminally prosecute cartel cases, and made some referrals for criminal prosecution in 2017, there is no public record of criminal liability being pursued in any of the cases from 2018. Also, there is no public information on how the 2017 referrals have evolved.

One of COFECE's most recently launched investigations in cartel enforcement refers to collusive agreements in the recruitment process for professional soccer players. This investigation is not only relevant in terms of substance but also in the media attention it has brought to COFECE. It could therefore be expected that COFECE will further use the public's interest in this matter, to further promote competition enforcement and principles.

In 2019 COFECE's investigative authority is actively using investigation tools (requests for written information, depositions and possibly dawn raids) in the nine cartel investigation cases announced in the past year (markets for liquefied petroleum gas, public procurement of iron, corn tortillas in different cities, ground passenger transportation services, cellulose based hygiene products, highway maintenance, production and marketing of sugar, and recruitment of soccer players). These, in addition to previously published and still ongoing investigations in other relevant markets such as air transportation passenger services, production and marketing of medicines, laboratory studies and blood-banks, among others.

COFECE has announced its intention to conclude the investigation stage in at least five of these files. At that moment, the Investigative Authority will assess whether to close the file or to formally charge alleged wrongdoers with a probable infringement, to proceed to a second – trial-like – phase to be resolved by the Plenary. Other cartel investigations at such second-level stage during the upcoming year include:

1. alleged agreements to set base prices for air transportation services;
2. alleged information exchange between producers of egg;
3. alleged bid rigging in the market of public procurement of dental brushes for the health sector; and
4. alleged price fixing and output restriction in the corn tortilla market in different municipalities.