Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

The original Federal Economic Competition Law came into force in 1993 (amended in 2006 and 2011), and its implementing regulations governed merger control. Enforcement was the exclusive responsibility of the Federal Competition Commission (FCC). In 2013, the FCC was substituted by a new agency, the Federal Economic Competition Commission (COFECE).

In June 2013, stemming from an unprecedented constitutional reform in the field of telecommunications, two new agencies were created, the aforementioned COFECE and the Federal Institute of Telecommunications (IFT), both autonomous bodies, with legal personality. The IFT is the agency that reviews pre-merger notifications related to the telecommunications and broadcasting industries, and the COFECE reviews the rest of the premerger notifications in the other areas of the economy.

The Federal Economic Competition Law (FECL) was approved in Congress and was published in the Official Gazette on 23 May 2014. The FECL replaces the 1993 Act and came into force on 7 July 2014. The core of the merger analysis was not changed, but the order of the Chapter of Merger Control and its articles was modified. The FECL preserved most of the substantive provisions of the old Act; however, it created a newly designed agency.

Organic statutes for both the COFECE and the IFT were issued in July 2014 and September 2014 (modified in October 2014) respectively.

In November 2014, the COFECE issued the FECL’s Regulatory Provisions (updated in February 2018), while in January 2015 the IFT issued the FECL’s Regulatory Provisions for the Telecommunications and Broadcasting Industries.

COFECE issued its Guidelines for merger review in October 2015 (updated in April 2017), and is achieving notable influence, both in merger enforcement and advocacy functions.

Scope of legislation

What kinds of mergers are caught?

Article 61 of the FECL employs a very broad interpretation of ‘concentrations’, a term that includes mergers, acquisitions of control or any acts by which shares, trusts, equity, partnerships and assets of any kind are concentrated. Straightforward business vehicles that meet monetary thresholds should thus be informally referred to the COFECE before filing.

What types of joint ventures are caught?

Under Mexican competition law, joint ventures above jurisdictional thresholds (see question 5) are subject to clearance before they are completed. Assessment of these cases is similar to that of other concentrations (see question 20).

Although joint ventures are not addressed directly in the statute or regulations, current practice considers such arrangements as concentrations and thus subject to pre-notification rules if and when thresholds are met. Joint ventures are currently subject to rule-of-reason analysis, and where there are substantial horizontal or vertical issues in a particular case, it is therefore strongly advisable to explain and be prepared to substantiate the absence of anticompetitive concerns and efficiencies expected to arise from the joint venture to avoid incurring outright prohibition.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

The FECL does not provide an explicit definition of control. However, the Supreme Court has stated that a firm can exert decisive influence or control over others de jure or de facto. Transactions meeting the broad definition of ‘concentration’ (merger, acquisition of control or any act) and the monetary thresholds must be notified, regardless of the nature of what is being acquired. However, minority interests, non-controlling or any other ancillary participation should be claimed as of lesser concern (or mitigating factors) in merger review. Transactions that meet the pre-merger notification thresholds (see question 5 below), including transactions related to minority or other interests less than control, must be filed before the authority.

Minority and other interests less than control are caught, and COFECE has not formally considered ‘non-controlling’ interests as of lesser concern. Certain minority acquisitions are not subject to merger control, especially acquisitions by investment funds (less than 10 per cent), provided certain requirements are met.

Thresholds, triggers and approvals

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

There are three monetary thresholds defined in article 86 of the FECL. It is sufficient to trigger one of the three sections to be bound to notify a transaction.

Section I

The value of the transaction must exceed the threshold of 18 million times the Unit of Measure and Update (the UMU, a benchmark common to all legal thresholds, currently about US$79 million, considering an exchange rate of 19.23 Mexican pesos per US$1). By ‘value’, COFECE considers the price (or consideration agreed upon) paid by the purchaser, including money, liabilities or some type of exchange of shares or other assets to be paid in Mexico.

Section II

It has two components: the first part refers to the transfer of at least 35 per cent of shares, assets or other form of participation; and the second part is to determine if the agent object of the transaction owns assets or had sales in Mexico, regardless of destination, for more than 18 million times the UMU (about US$79 million).

Section III

It also has two components. The first one refers to accumulation of assets or social capital for more than 8.4 million times the UMU (about US$37 million). In case the transaction does not refer to the acquisition of all the shares of the target, the proportional value that is actually acquired is taken into account. With respect to this component, the value of the assets actually accumulated is assessed, and the value considered, refers to the higher figure between the commercial value and the value stated in the financial statements.

With respect to the second part of this section, COFECE considers the sum of assets or annual sales of the parties involved, separately or jointly, with a value that exceeds 48 million times the UMU (about US$210 million).

Sources of information for notification purposes

For the determination of the value of assets, sales or shares, the source of information are the financial statements. The required financial statements must be audited. Exceptionally, in the event of not having audited financial statements, internal financial statements may be submitted, as long as they comply with accepted financial information standards in Mexico or the country of the notifying agent.

The relevant variables to be considered in these financial statements are as outlined below.

Value of assets

For this test, COFECE considers the higher value of: total value of the assets as stated in the balance sheet; or commercial value of the assets, which may differ from the value stated in the financial statements.

In case of accumulation of assets consisting of shares, the value of these will be obtained from the seller’s financial statements. In cases where that value cannot be obtained, the amount of the assets can be calculated as a proportional amount of the assets of the acquired object.

Value of sales

The FELC refers to annual sales. COFECE may also assess the concept of ‘income’, which appears in the statement of income of the financial statements.

Concentrations that are below the thresholds provided for in article 86 the FELC may result as questionable and thus become subject to investigation.

COFECE welcomes informal inquiries from parties regarding specific doubts as to threshold analysis. Written but non-binding comfort letters may be requested if parties are clearly identified and proper powers of attorney are submitted with sufficient data to assess the specific problems prompting such inquiry.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

The FECL provides for mandatory pre-merger notification only, that is, those mergers or ‘concentrations’ meeting or exceeding the monetary thresholds prescribed by law. However, parties may voluntarily file a notification even if the transaction does not meet or exceed the thresholds and the agency may process it as a mandatory filing, or parties may seek a non-binding opinion from the COFECE for planning purposes.

The FECL exempts from notification (article 93 of the FECL) among others, the following:

  • mergers where the acquirer increases its participation in the acquired party over which the acquirer holds control since its incorporation or starting of operations dates, or when the COFECE has already authorised the acquisition of such control;
  • corporate restructures (ie, when all participating parties belong to the same ‘control group’ with no third party involved);
  • transactions involving firms listed on stock exchanges (Mexican or foreign) where the acquirer is allowed to purchase in one or several acts less than 10 per cent of the corresponding stock or title, and said acquirer may not exercise control over or influence the administration or corporate strategy, and may not exercise voting rights for 10 per cent or more of the stock, and may not appoint or remove the target’s members of the board, directors or managers; and
  • acquisitions of stock, trusts, investments or similar titles by one or more purely speculative investment fund provided that they do not already own assets or participation in any target’s competitors.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

It should be expected that all mergers affecting assets or operations of economic agents doing business in Mexico will in principle be subject to pre-merger notification. However, article 86 of the FECL states that thresholds are to be assessed on a national impact basis: ‘assets’ are understood to include only those located within Mexican territory; and ‘sales’ are now understood to be only sales originated in Mexico. Only parties with combined worldwide assets or sales of approximately US$210 million or more will have to notify foreign-to-foreign transactions provided that the target (worth about US$37 million or more) is located in Mexico. There is no nexus test.

Are there also rules on foreign investment, special sectors or other relevant approvals?

Mergers in some sectors or areas restricted for purposes of foreign investment also need to be cleared with the relevant authorities. Mergers in telecommunications are heavily regulated and will not be cleared by COFECE, but a specialised sectorial agency (IFT). In any event, compliance with legislation and other administrative filings should be consistently planned to avoid further requests or unwanted delay.

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).

Substantive assessment

Substantive test

What is the substantive test for clearance?

The main substantive test is whether the transaction will reduce, impair or prevent competition. Theoretically, the pro-competitive effects of the proposed transaction should be weighed against the anticompetitive effects.

The main test is then broken down into three sub-tests:

  • acquisition of market power to the extent of being able to determine price levels or restrict output in the relevant market;
  • intent to displace or the effect of displacing competitors orientated to obstruct or with the effect of obstructing market entry; and
  • intent to facilitate, or the effect of facilitating monopolistic practices by merging parties (rule-of-reason offences or ‘abuse of dominant position’ such as refusals to deal, exclusivity agreements, resale price maintenance, boycotts, predatory pricing, discrimination, cross-subsidies and other vertical conduct cases, as well as potential incentives to incur in horizontal behaviour).

In May 2015, COFECE issued a Resolution related to the technical criteria for calculating and applying a quantitative index in horizontal merger analysis. According to this Resolution, COFECE uses the Herfindahl-Hirschman Index (HHI), and the proposed ‘safe harbours’ are:

  • the value of the increase of HHI (Δ) is less than 100 points;
  • the value of HHI after the transaction is below 2,000 points; and
  • the value of HHI after the transaction is between 2,000 and 2,500 points, Δ is located between 100 and 150 points, and the resulting economic agent after the transaction is not one of the four largest economic agents in the relevant market.

The history of rulings shows that special circumstances, such as an alleged failing firm, although sometimes addressed in the past, are rarely awarded notable influence.

Is there a special substantive test for joint ventures?

No. See question 3.

Theories of harm

What are the ‘theories of harm’ that the authorities will investigate?

Precedents or practice may not be associated with any single theory of harm. Depending on the case at hand, the agencies focus on the analysis of a combination of the following outcomes: market dominance, joint dominance, unilateral effects, coordinated effects and vertical foreclosure. However, no special predominance on any theory may be singled out. However, rulings to condition or block transactions show mostly concerns over high combined market shares, even in the presence of broad geographical market definitions such as, for example, the ‘North American Area’.

Non-competition issues

To what extent are non-competition issues relevant in the review process?

The 2013 constitutional reform created the new COFECE and IFT as autonomous bodies. Therefore, when reviewing mergers, non-competition issues should not be relevant for the review process.

However, because COFECE and the IFT are still young agencies. There are no public precedents regarding this particular issue.

Economic efficiencies

To what extent does the authority take into account economic efficiencies in the review process?

Article 55 of the FECL formally recognises that the agency must review claimed efficiency gains stemming from the merger (or the conduct) that favourably affect the competition process. These efficiency gains may include the following: the introduction of new products, products on bargain sale, defective or perishable products, cost reductions arising from the creation of new technologies and production methods, integration of assets, increases in the scale of production, the introduction of technological innovation, the combination of productive assets or investments to improve the quality or extend the attributes of goods and services, improvements in quality, and others that do not cause a significant increase in prices or a significant reduction in consumer choice, and others causing such net contributions to consumer welfare that outweigh anticompetitive effects.

However, at the time of writing, no transaction has been cleared under findings based on economic efficiencies. Despite theoretically being accepted by the statute, in practice the agency is rather resistant to admit allegations thereon: in a transaction that was blocked in 2017 by COFECE (REA/Magnekon), parties appeared to have submitted a comprehensive study of merger-specific efficiencies with quantitative support. Moreover, alleged efficiencies represented potential reductions in variable costs, which are generally expected to benefit final customers. In addition, the parties submitted alleged evidence of a recent transaction in the same relevant market in which the efficiencies originally estimated in that case were obtained and actually passed through customers. COFECE concluded that many of the claimed efficiencies had positive effects, but decided to rule that the parties failed to prove that those efficiencies would be passed on to consumers. The resolution did not include estimations of potential harm to allow balancing pro-competitive effects against expected anticompetitive effects.

Remedies and ancillary restraints

Regulatory powers

What powers do the authorities have to prohibit or otherwise interfere with a transaction?

The competition agencies may order divestiture of assets, impose conditions or block the whole transaction outright. COFECE has imposed stringent conditions in several cases.

Remedies and conditions

Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?

Yes. Article 90, penultimate paragraph, of the FECL allows parties to offer undertakings that may remedy potential antitrust concerns during the review process, including divestment of certain assets or behavioural remedies as a condition for clearance. The notifying parties may submit, from the moment the written notification is filed and until one day after the concentration is scheduled for a Board of Commissioners session, draft conditions to avoid impairing, damaging or preventing the competitive process and free market access as a result of the concentration.

Rulings show that the COFECE often addresses or accepts undertakings related to divestment of assets.

What are the basic conditions and timing issues applicable to a divestment or other remedy?

The conditions will depend upon the nature and extent of the antitrust concerns at hand; however, COFECE may accept schedules that set up timing and other relevant facts to ensure that parties comply with agreed undertakings. COFECE may appoint a trustee, for example, to oversee specific divestiture procedures. The Commission’s Technical Secretariat performs these oversight and compliance functions.

Regarding transactions considered to pose possible risks to the competitive process, COFECE informs the notifying parties about the risks identified (within a 10-day period prior to the case being scheduled for a Board of Commissioners session), to allow the parties to propose conditions or remedies that may correct the aforementioned risks.

What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?

There is no public track record of a special nature, as foreign-to-foreign mergers with no effects in Mexico are not bound to be notified. For transactions with effects from 2013 to 2018, 18 transactions were subject to undertakings; some of them were even subject to investigation or penalties stemming from the lack of compliance thereof.

Ancillary restrictions

In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?

It is not uncommon for COFECE rulings to include restrictions concerning potential spill-over effects over related markets under its powers to prevent anticompetitive conduct. In addition, COFECE may impose remedies to address the effects of anticompetitive restrictions. COFECE has published guidelines regarding ancillary restraints, mostly referred to non-compete covenants.

Involvement of other parties or authorities

Third-party involvement and rights

Are customers and competitors involved in the review process and what rights do complainants have?

In complex cases, COFECE issues requests for information to customers or competitors to strengthen its analysis (notifying parties do not have access to these responses). Third parties have no legal rights to access a merger file. Filings and submitted documents, as well as third parties’ responses of information, are not public.

Publicity and confidentiality

What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?

Notifications and the process of merger review are not public. The only publicity given to any process is the publication of a redacted version of the final decision.

According to article 124 of the FECL, the information and documents obtained directly by the competition agencies during its investigations and inquiries will be considered as reserved information, confidential information or public information, under the terms of article 125 of the FECL.

During the investigation, access to the file is forbidden to third parties, and, in the aftermath of the procedure, only firms with legitimate legal interest may have access to it, with the exception of information classified as confidential.

Public officials will be subject to responsibility of the information they are presented with. When an order of a competent authority compels the presentation of information, the COFECE and the aforementioned authority shall dictate the measures that will be in place to protect the confidentiality in the terms of the FECL.

Article 125 of the FECL states that confidential information will only be considered as such when requested by the economic agent, and proves its confidentiality. That is, the merging parties involved are asked to identify their confidential information and to prove that the standards of confidential information protection are applicable. Under no circumstances will COFECE or the IFT be compelled to provide confidential information, nor will it be able to publish it. It will have to keep the information safe to this effect.

The public officials of the competition agencies shall abstain from publicly issuing declarations or revealing information related to the files or matters in process at the respective agency and that could cause harm or directly affect the parties involved, until the economic agent subject to investigation has been notified of the final resolution, preserving at all times the obligations that result from this article.

The COFECE has a strong reputation for keeping the confidentiality of all data and documents provided.

Cross-border regulatory cooperation

Do the authorities cooperate with antitrust authorities in other jurisdictions?

Mexico has entered into several international arrangements (agreements implementing competition chapters, annexes or memoranda of understanding) to coordinate and cooperate in competition enforcement matters, including: NAFTA (NAFTA was signed in 1994, but the competition cooperation agreement implementing the competition chapter is dated July 2000), the European Union (2000), the European Free Trade Association (2000), the United States (2000), Israel (2000), Canada (2001), Chile (2004), Korea (2004), Japan (2004), El Salvador (2007), Russia (2010), Nicaragua (2011) and the Dominican Republic (2012). Such arrangements provide the usual positive comity, exchange of non-confidential information, coordination, cooperation and related items.

Waivers are commonly requested in multi-jurisdictional transactions.

Judicial review

Available avenues

What are the opportunities for appeal or judicial review?

From the creation of COFECE and the IFT as autonomous constitutional bodies, and as stated in article 28 of the Mexican Constitution, actions or omissions of COFECE and IFT may be challenged only through indirect amparo (recourse on constitutional grounds) judgment.

The 2013 constitutional reform states that the resolutions issued by COFECE or IFT may be contested only by filing of indirect amparo and will not be subject to suspension. In cases in which COFECE imposes fines or orders the divestiture of assets, those resolutions will be executed until the amparo proceeding is resolved. The amparo proceeding will be conducted by specialised judges and courts in the terms of article 94 of the Constitution. In no case will ordinary or constitutional remedies against proceeding acts be accepted.

The judiciary has set up specialised tribunals of circuit and district courts in areas of economic competition, broadcasting and telecommunications. Since the 2013 constitutional reform, legislation or regulations offer little incentives for recourse of merger cases before courts. Hence, the specialised circuit courts and district judges have reviewed no merger cases in which COFECE has imposed conditions or blocked transactions. The courts have reviewed cases in which COFECE has imposed fines on unreported transactions and have confirmed COFECE’s decisions.

Time frame

What is the usual time frame for appeal or judicial review?

For court recourse, parties must file petitions within 15 business days of being notified of the final resolution. A district judge may take several months to issue its ruling. Parties may appeal before a circuit tribunal as a last resort. The appeal may take between one and five years to be ruled upon. As indicated in the previous question, the Council of the Federal Judiciary has established new specialised circuit tribunals and district courts in the fields of economic competition, broadcasting and telecommunications.

Enforcement practice and future developments

Enforcement record

What is the recent enforcement record and what are the current enforcement concerns of the authorities?

In 2018, the COFECE resolved 175 cases. Of those cases, three were blocked and one was conditioned. The most recent notable cases reviewed in 2018 were Rheem/GIS and Bayer/Monsanto (see question 36).

Current enforcement concerns for both agencies include the implementation of the Federal Law of Economic Competition, the publication of refined technical criteria and predictable rulings, lack of procedural transparency and the effectiveness and incentives of recourse to competition and telecomm courts.

COFECE is currently facing considerable challenges in enforcing competition principles amid wider government efforts to return influence to state-controlled entities in industries such as oil and energy.

Reform proposals

Are there current proposals to change the legislation?

No. The current Federal Law on Economic Competition was approved in Congress, published in the Official Gazette on 23 May 2014, and came into force on 7 July 2014.

As stated before, in June 2013, Congress made amendments to article 28 of the Mexican Constitution concerning telecommunications industries. Amendments include the creation of the IFT, which is entitled to review competition issues (mergers, acquisitions and monopolistic practices) in telecommunications industries.

Update and trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Key developments of the past year36 What were the key cases, decisions, judgments and policy and legislative developments of the past year? Rheem/GIS

COFECE blocked the proposed concentration between Rheem Manufacturing Company (Rheem) and Grupo Industrial Saltillo (GIS) which consisted in Rheem’s acquisition of GIS’s water heating assets. Both companies overlap in the production, distribution or wholesale commercialisation of electric and gas tank-type water heaters, both residential and commercial, in Mexico.

Otherwise Rheem would have become the main competitor in Mexico with significant market share in the relevant markets. Rheem and GIS competitors have a limited portfolio of products, low market shares and low brand recognition. Thus, no participant was identified with the ability to effectively counteract price increases resulting from the concentration. In addition, barriers to entry were found to limit entry of new participants or the growth of existent participants. Rheem and GIS proposed certain undertakings, but were rejected as insufficient to prevent negative effects to the structural conditions and competition dynamics of the market.

Bayer/Monsanto

COFECE conditioned the concentration between Monsanto and Bayer to the divestment of the genetically modified cotton seed business, the vegetable seed business and certain non-selective herbicides that belong to Bayer. COFECE’s assessment concluded that Bayer would become the sole supplier of genetically modified cotton seeds in Mexico and would gain significant market shares in the markets for crops such as onion, cucumber, tomato, watermelon, melon and lettuce as well as non-selective herbicides. The Agency found that these markets feature high entry barriers, mainly in terms of the difficulty and time required for research and development of new products, restrictions in legal frameworks, and high levels of investment required.

The undertakings proposed by Bayer and Monsanto entail the divestiture of their vegetable seed business and the genetically modified cotton seed business to BASF. COFECE determined that this company has the capacity and incentives to vigorously compete in the involved markets. For the analysis of this transaction, COFECE collaborated with competition agencies of several jurisdictions.