Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

The FECL provides that mergers reaching or exceeding legal thresholds must be notified to COFECE or the IFT before they are carried out. A general recommendation regarding a deal with evident complexity or antitrust concerns would be:

  • to consult on complex horizontal mergers with the respective agency before any important information is actually shared between parties;
  • to exchange letters of intent or enter into similar agreements, subject to COFECE or IFT approval;
  • to refrain from actual transfer of assets or administration; and
  • to refrain from publicly announcing completion or closing.

If a special time frame for the deal or special confidential arrangements are needed, it is advisable to approach the agencies to obtain their approval of such arrangements.

Penalties for not filing reportable transactions may be up to 5 per cent of the turnover in Mexico of the parties involved.

Which parties are responsible for filing and are filing fees required?

Article 88 of the FECL provides that all participating parties must file, but at the same time accepts that one party may act as a common representative. Parties should be seen to be disclosing the information needed for a proper assessment of the merger. Because each merger may raise different economic and legal issues, according to the specific market circumstances of the case, it is advisable to make sufficient plans before appearing before the respective competition agency so that information that is best suited to the purpose of convincing the authorities can be supplied, thereby avoiding requests that may delay full completion of the deal. In any case, once all the data has been gathered and the briefs or questionnaires have been completed, it is generally advisable to have access to both parties’ data and information, except for information that is clearly confidential. The filing fee for a notification is the equivalent to about US$9,000.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

Article 87 of the FECL orders parties not to close all reportable transactions until the final resolution is issued. Thus, there are no waiting periods.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

While there are no specific sanctions for closing before clearance, article 127, section VII states that penalties for ‘illegal transactions’ may be up to 8 per cent of parties’ involved turnover in Mexico. A non-reported transaction may be deemed an ‘illegal transaction’. Two recent transactions were fined for closing before notification (fines between US$1 million and US$3 million).

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

No. As stated in question 7, foreign-to-foreign transactions with no effects in Mexico are not bound to be notified. But if the transaction has to be notified and the parties close before clearance, penalties will be triggered therein.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Foreign-to-foreign transactions with no effects in Mexico are not bound to be notified. Foreign-to-foreign transactions with effects in Mexico must be authorised before closing.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

No.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

Filings can be of two basic kinds. The ‘general’ procedure, with ordinary time frames (60 working days to issue a resolution), and a ‘fast-track’ procedure for simple and evident cases, with a shorter time frame (15 working days, as discussed in the following sections). The information that should be submitted is the same for both procedures, but the fast-track procedure requires further detail to prove that it is ‘evident’ that the merger is not anticompetitive and that the parties are not ‘potential competitors’, which requires a higher burden of proof. Parties usually opt to file under the ordinary procedure, which requires the data and information necessary to define the relevant market and to assess market power, in which case they are faced with a rather cumbersome questionnaire or with preparing a technical brief addressing the competition issues and even offering econometric analyses to support complex cases.

Solid market data and economic reasoning offer the best guarantee of good results and of avoiding misunderstandings of a factual or analytical nature. A balance must be struck between quantity of data and simplicity of argument. Most of the time spent before filing should be dedicated to the planning of information gathering so as to avoid delays and minimise the risk of the competition agencies’ opposition.

All information must be in Spanish, with proper translations of non-Spanish material.

Depending upon the complexity of the transaction and the extent and quality of the information available, a typical filing may be 10 to 40 pages long (excluding the formal and analytical annexes). It may take anything from one to six weeks to complete the filing in non-complex cases.

Article 89 of the FECL points out the notification brief must include:

  • names of the parties involved in the transaction;
  • names of legal representatives;
  • description of the transaction;
  • explanation of the rationale of the transaction;
  • incorporation deeds and public by-laws of the parties involved;
  • financial statements of the parties;
  • description of the parties’ stock structure;
  • activities of economic agents involved to the transaction, about holding an interest in the capital stock, management or in any activity of companies which may produce or trade similar or related goods or services to or having substantial relationship with the goods and services of the economic agents participating in the concentration;
  • parties’ and competitors’ market share information;
  • location of parties’ facilities;
  • description of products or services manufactured or sold by the parties involved; and
  • any other important information.

If the notifying parties fail to submit the information requested in article 89 of the FECL, COFECE may declare the transaction as not filed (section II, article 90 of the FECL). In addition, parties may be fined for up to approximately US$750,000 for submitting false information.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

Parties are welcomed by the staff to engage in pre-notification informal conversations. Article 92 of the FECL grants parties the right to request, from the day of filing, that the transaction should be reviewed under a ‘fast-track’ procedure if the parties can convince COFECE that the proposed transaction evidently may not lessen, harm or impair the competitive process. If the parties are successful, COFECE shall issue a ruling within 15 business days (15 days upon the issuance of an admissibility ruling issued by COFECE stating that no further information is needed for assessing the transaction). The fast-track analysis includes a general principle subject to several conditioning factors: parties must state that the acquirer does not already participate in markets related to the target’s relevant market. In practice, fast-track proceedings are rarely used.

When the written notification fails to comply with the requirements established in article 89 of the FECL, the authority, within the following 10 business days after the notification has been filed, shall inform the notifying parties that their notification is not complete and will grant an additional 10-business-day period for the parties to submit the missing information or documents. Said period may be extended per request of the notifying party in duly justified cases (the ‘basic information request’).

Once the notification brief is complete, the competition agency may issue a second request of information and data within 15 business days.

After the second request for information is met, the competition agency has 60 business days to issue a ruling. If the authority fails to issue such ruling, under a ‘sunset provision’ the filing is deemed approved by default (although this is a most uncommon event). Before the 60-business-day period elapses, the authority may extend this period by up to an additional 40 business days, which would bring the whole filing review period to a total of around 105 business days, depending on when time is counted from in each specific case. In extreme cases, however, the final resolution could take up to 155 business days.

A hands-on and fully cooperative approach by the parties may shorten the review process. The staff is usually expected to verify key data/information.

What is the statutory timetable for clearance? Can it be speeded up?

See question 17. In addition, parties may be asked to explain, orally or in writing, some of the data or arguments in the filing (a formal second request for information). The respective competition agency may conduct an investigation to complement information contained in the filing, which may involve requesting data or information from competitors, clients or suppliers. Each agency’s enforcement branch then produces a report with a recommendation to be submitted to each authority’s seven-member Commissioners’ Panel. This panel issues a ruling. Parties may appeal against the ruling before a federal judge strictly on constitutional grounds.

Article 90 of the FECL defines the timeline for clearance since notification to the final resolution (see quick reference table and question 17).