Restrictive agreements and dominance in Mexico

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Antitrust: restrictive agreements and dominance

Consistently with international trends and best practices, the Law provides for a catalogue of vertical restrictions and abuse of dominance situations that, under specific market circumstances, may raise anticompetitive concerns, namely:

1. vertical non-compete agreements;
2. resale price maintenance and imposition of resale conditions;
3. tied sales;
4. exclusivities including territorial or customer allocation among non-competing parties; exclusive supply, distribution or sale; benefits based on exclusive rights; or exclusive resale restrictions;
5. refusal to sell available and regularly offered goods;
6. boycott (i.e., joint pressure to force third-party action or inaction or to penalise it);
7. predatory pricing and cross-subsidies;
8. discriminatory pricing;
9. raising rivals' costs; hindering third parties' production processes or artificially reducing demand; and
10. anticompetitive use of essential inputs through discriminatory sale, refusal to sell, or margin squeeze.

The Law acknowledges that conduct falling within any of the above descriptions may cause both positive and negative effects in the marketplace. As a result, relative monopolistic practices will only be illegal if (1) parties hold – joint or individual – substantial market power; (2) the object or effect of the conduct is foreclosing or blocking third-party access to the relevant or related markets or creating exclusive advantages; and (3) efficiencies arising from the conduct are not enough to counterweigh possible market harm, to the benefit of the competition process and creating overall consumer welfare.

In the presence of all three of these conditions, the practice will be illegal and may be fined with up to 8 per cent of the wrongdoer's annual accruable income. As is the case in absolute monopolistic practices, the agency will order the practice to cease while the affected parties may recover damages or losses through private litigation. Individuals acting on behalf of the dominant firm or facilitating the conduct may also be subject to civil fines and disablement, although not to criminal liability, which is reserved for cartel conduct.

Conversely to cartel cases, settlements for relative monopolistic practice cases are available and a relatively common path to terminate an investigation. Applicants must show commitment to cease the investigated practice and restore the competition process. If offered remedies are viable and effective, the agency will either waive or reduce the fine. This process, however, will not exclude private enforcement by affected parties.

During the past year COFECE concluded two relative monopolistic cases through settlements and remedies:

1. Investigation on exclusivity restrictions in the oxygen, nitrogen and argon markets. Three suppliers agreed to settle the investigation by eliminating or restricting exclusivity clauses ruling the provision of their services as well as restricting automatic agreement renewal for one year.
2. Investigation on exclusivity restrictions in the market for live events, entertainment centres and automated ticket sales. Six companies of the same economic group requested early termination of the investigation. COFECE granted this benefit subject to the elimination of existing exclusivity rights with promoters and operators and for the following 10 years, and the commitment not to increase rights over premises with specific capacities.

In terms of penalties, COFECE fined Pemex Tri US$21,889,551 for breaching the remedies approved by COFECE to settle file DE-002-2015, in which Pemex Tri was being investigated for discriminatory pricing and sale conditions to special marine diesel distributors. Additionally, pursuant to a court order COFECE re-evaluated file DE-015-2013 and fined Mexico City International Airport US$3,301,413 for imposing discriminatory conditions in the provision of ground transportation services for passengers to and from the airport.

IFT, in turn, fined Telcel US$5,066,763 for relative monopolistic practices in the market of airtime distribution. The IFT Plenary found that between 2012 and 2014, América Móvil and Telcel restricted competition through an exclusive agreement by means of which Blue Label would receive economic incentives for the exclusive distribution of Telcel airtime.

Pursuant to COFECE's 2018–2021 Strategic Plan, COFECE plans to achieve effective law enforcement by promoting founded claims and referring to market intelligence and screening to directly detect anticompetitive practices.

In practice, COFECE holds a significantly high standard to process a claim. During 2018, nine claims were dismissed and another seven were not processed. In this regard, the Supreme Court issued a recent non-binding decision related to the claimant's nature and rights in a competition investigation; overall it was concluded that the claimant has a legal right to demand from the agency a decision to its case. COFECE should revise its own standards for dismissing claims to be able to improve enforcement results.

COFECE has made public its intention to settle cases where remedies are sufficient to correct the market failure. However, the question remains regarding the possibility of claims for damages from private parties affected by the practice. COFECE can claim damages and file class actions, but this has not happened to date.

One of the most relevant new investigations in which COFECE will be focusing its investigative efforts involves possible relative monopolistic practices in e-commerce platform services in Mexico. This ex officio investigation is the first of its kind, as the digital market has never previously been investigated by COFECE. At this stage, however, the proceeding is strictly confidential, thus it is not possible to access information on investigated parties or lines of investigation. Another recently launched investigation relates to marketing, storage and transportation of oil and related markets.

COFECE intends to conclude at least three investigations in the upcoming year.

In terms of charged vertical infringements, the COFECE Plenary will be dealing with highly relevant cases such as:

1. refusal to sell and price discrimination in the generation, processing and marketing of credit information;
2. refusal to provide ground transportation passenger services to and from Cancun International Airport; and
3. refusal to sell in the wholesale salt market.

In terms of judicial interpretation, the Specialised Courts have issued non-binding criteria related to the investigation proceeding, considering that COFECE may validly use the information that was obtained through any of its preventive or corrective files to open a different infringement investigation if necessary. COFECE may also continue to gather information internally after the investigation term elapses, but will not be able to continue investigative actions with third parties. Finally, the Courts revised the nature of commitments reached to achieve early termination of infringement investigations, concluding that these constitute unilateral declarations of will which, consistent with civil law, become binding for the firm offering them.