This GT Alert provides a general overview of a bill that has been sent by the Executive Branch to the Mexican Congress, for a new Federal Competition Law as well as to amend article 254 bis of the Federal Criminal Code on competition grounds.

On February 20, 2014 the Parliamentary Gazette disclosed a bill sent by the Executive Branch, for a new Federal Economic Competition Law and to amend article 254 bis of the Federal Criminal Code (the Competition Bill).

Among other aspects, the Competition Bill derives from the constitutional reform for telecommunications, broadcasting and economic competition published in the Official Gazette on June 11, 2013 (the Constitutional Reform), which extinguished the former Federal Competition Commission and created the Federal Economic Competition Commission (COFECE) as an autonomous agency to be the competition authority for all industries except for telecommunications and broadcasting.

The Constitutional Reform also extinguished the former Federal Telecommunications Commission and created the Federal Telecommunications Institute (IFT) as an autonomous agency in its capacity as regulator and also competition authority for the telecommunications and broadcasting industries.

In consequence, the Competition Bill, among other things, sets forth organic and operational changes in the appointment of the commissioners of the COFECE; in new internal areas such as the “investigator authority” and “internal control”; in the way the commissioners may be in contact with interested parties (by means of hearings to be held under certain rules); and also establishes mechanisms to resolve questions or conflicts concerning the powers and jurisdiction of the COFECE and the IFT.

The Competition Bill contains other relevant aspects, including without limitation the following:

  • New features in absolute monopolistic practices (horizontal practices) are added: (i) the establishment, agreement or coordination of proposals or the act of refraining from submitting proposals in private bids and auctions (not only in public ones as set forth in the current law); and (ii) the exchange of information among competitors with the purpose or effect of fixing, agreeing or manipulating prices; restrict supply; segment or assign markets and, in public or private bids and auctions (under the current law, information exchange is penalized only in connection with prices)
  •  Two relative monopolistic practices (vertical practices) are added concerning the essential facility concept: (i) denial, restriction or discriminatory access to an essential facility; and (ii) margin squeeze in connection with an essential facility.
  •  Certain special proceedings are set forth or complemented in order to (i) determine an essential facility or competition barriers; (ii) resolve on market conditions in matters related to effective competition; (iii) issue opinions or resolutions in the process of granting or awarding licenses, concessions and permits; and (iv) reduce sanctions.
  • Regarding merger clearance and concentrations, the parties involved would not be able to consummate and close the transaction without having obtained the previous authorization to do so; whereas in terms of the current law, the parties, under their own responsibility, may consummate the transaction as long as they have not been issued a stop action order from the commission.
  • Under the current law, one of the criteria that determine whether a merger or transaction must be authorized by the competition authority is the value of the assets and annual sales volume, whether in Mexico or abroad, of the economic agents participating in the transaction. Under the Competition Bill, reference to the value of such assets and annual sales volume would be limited to Mexico.
  • Also in connection with merger control and concentrations, the term for the antitrust authority to resolve a matter would be extended to 60 business days instead of the original 35 business days set forth under the current law, term which can still be extended for another 40 business days.
  • Concerning sanctions, certain aspects are added such as: (i) the imposition of measures to regulate access to essential facilities under the control of one or more economic agents; (ii) the imposition of bans to individuals to act as board member, manager, director, executive, agent, representative or attorney-in-fact of an entity for a period of up to five years, in addition to the imposition of fines, upon participating whether directly or indirectly in a monopolistic practice or an illicit merger or concentration, on behalf of or representing an entity; (iii) the imposition of fines to public notaries and commercial notaries that intervene in acts regarding a merger or concentration that is not authorized by the antitrust authority; (iv) the imposition of fines to an economic agent that fails to comply with regulation concerning essential facilities or with an order to eliminate barriers to competition; and (v) elimination of barriers to competition and free access to markets; regulation of essential facilities or the imposition of orders to divest assets, rights, or equity interests to eliminate anticompetitive effects.
  • The Competition Bill provides for an increase in the penalties that are applicable for incurring in absolute monopolistic practices, which shall be prosecuted only upon a criminal complaint brought by the COFECE or the IFT, which would only be formulated when the corresponding agencies determine the existence of responsibility for any such type of conduct.