An extract from The Cartels and Leniency Review, 10th Edition

Enforcement policies and guidance

An unprecedented amendment made to Article 28 of Mexico's Constitution in June 2013 resulted in competition acquiring a new status and made revamping the entire competition landscape in Mexico a state priority.

Mexico was the first country to have a complete ban on monopolies added to its Constitution (in 1857). Notwithstanding, there was neither a competition policy nor any supplementary law to regulate such a ban. The current 1917 Constitution reiterated the ban on monopolies and added that 'the law will punish severely and the authority will prosecute efficiently . . . any combination of [companies or individuals] that effectively causes consumers to pay exaggerated prices'. The wording of Article 28 of the 1917 Constitution authorised an aggressive approach to banning and punishing cartel behaviour. Despite such a strong mandate, the supplementary laws that regulated Article 28 of the Constitution dated 1926, 1931 and 1934 were rarely applied and failed to create an effective competition authority, a true state policy on competition and an efficient fight against cartels. Although the 1931 Federal Criminal Code provided for some crimes addressed to individuals and related to monopolistic matters (including cartels), in reality they were vaguely drafted, notably unconstitutional and have rarely been applied in practice, at least during the past 88 years.

In fact, Mexico had been slow to follow free-market principles on competition. By 1950, Mexico had enacted a post-Second World War law that entitled the executive branch (president) to determine maximum prices of certain products, which resulted in an extensive list, with most basic products falling within that price list. This reduced competition, created national private monopolies and gave rise to a significant growth in state monopolies. As such, it was not uncommon for the executive branch to gather the views of competitors to determine a maximum price for essential products of the economy. In this context, fair competition meant that competitors were coordinated and sought the protection of the state to order the market and fight inflation. This state of mind of competitors had a pervasive effect since fair competition was identified with competition coordination and not with free market principles.

This business culture prevailed until the rules of the game changed dramatically with the enactment of the first-ever 1993 Federal Economic Competition Law, which installed efficiency-oriented principles in the new legislation, thereby departing from government intervention in the economy and leaving business decisions to free markets. Cartel behaviour under the 1993 Federal Economic Competition Law was heavily punished, but there were several drawbacks. Fines, although considerable, were not sufficiently dissuasive. There were no leniency programmes available (they first appeared in 2006). Class actions were not available (they first appeared in 2011). Cartel behaviour, as set out in the competition statute, was not specifically deemed criminal behaviour until express amendments were made to the Federal Criminal Code in 2011 and 2014. Private damages actions were rare, and the only two at the time resulted in adverse decisions for the plaintiffs.

Moreover, the competition authority was connected with the Ministry of Economy and the Executive Branch, undermining its independence. And as the competition authority had the sole power to investigate and direct proceedings, and decide and hear internal appeals, this was criticised for clustering too much power in the competition authority and undermining due process and constitutional impartiality principles. Equally, the competition authority was understaffed for tackling the significant sectors of, and actors in, the Mexican economy, such as the telecoms and broadcasting sector, which accounted for much of the authority's resources and time, leaving little time for Mexico's other industries.

The 2013 constitutional amendment brought about the following vital changes to the competition framework:

  1. the creation of two constitutional autonomous bodies for competition matters no longer dependent of any branch of government: the Federal Institute for Telecommunications (IFT), entrusted with competition matters in telecommunications, radio and broadcasting; and the Federal Economic Competition Commission (COFECE), entrusted with competition matters in all other sectors of the economy;
  2. the separation of the investigator (the Investigating Authority) from the decision-making body (the Plenary, or Board of Commissioners, of COFECE or the IFT);
  3. the creation of specialised federal administrative district courts and collegiate circuit courts (seated only in Mexico City) devoted to hearing challenges against definitive and other competition authority decisions (including three additional federal unitary tribunals created in 2018 and a third district court created in 2021 because of the unparalleled workload facing the specialised courts);
  4. the elimination of an administrative challenge and confirmation that definitive decisions made by the competition authorities can only be challenged through an indirect amparo action or a constitutional challenge through a subsequent federal appeal before specialised collegiate circuit courts;
  5. confirmation that there is no possibility of a suspension or stay of the proceedings during amparo proceedings, except in decisions relating to fines and divestitures of assets issued solely by COFECE where they will be enforced once all means of challenge have been exhausted;
  6. the authority for COFECE and the IFT to issue decisions relating to determining essential facilities, eliminating barriers to entry and ordering divestitures of assets;
  7. the order to Congress to update the relevant statutes dealing with competition matters; and
  8. the order to Congress to punish severely (from the criminal standpoint) monopolistic practices (i.e., cartel behaviour).

As a consequence of the 2013 constitutional amendment, Congress passed new federal legislation in the form of the more robust Federal Economic Competition Law (FECL),2 which is applicable within the entire Mexican territory, as Mexico has no state-specific competition statutes. The FECL, based on its predecessor legislation, regulates and sanctions cartels, horizontal agreements and collusive behaviour, referred to in the FECL as 'absolute monopolistic practices', and treated as rule violations per se.

In the context of the FECL, cartel behaviour comprises any horizontal agreement, understanding or covenant among competitors that has as a purpose or effect any of the following types of conduct:

  1. price-fixing;
  2. output restriction;
  3. market or customer allocation;
  4. bid rigging; and
  5. information exchanges with any of the foregoing purposes or effects.

Unlike in other jurisdictions (e.g., the United States and the European Union), there are no supplementary behaviours that differ from those established in the FECL. Therefore, the FECL has no catch-all provision, as such a provision could be considered unconstitutional for violating principles of legal certainty enshrined in the Federal Constitution (as affirmed by the Federal Supreme Court in the 2003 Warner-Lambert case3). Similarly, federal judges have no authority to create offences, rather these have to be the result of legislative process and specifically enshrined within the law.

The enforcement of the FECL is entrusted to COFECE and the IFT in their respective jurisdictions. Each competition authority has a separate investigating body entrusted with investigating cases, and these bodies have significant powers, such as issuing requests for information, compelling the appearance of individuals and, more importantly, ordering dawn raids. Moreover, in November 2013, COFECE and the IFT issued their own regulations for implementing the FECL (the Regulations), which have been further complemented in recent amendments. These Regulations, in essence, provide a legal framework to enable COFECE and the IFT to comply with their constitutional mandates.

As a formal requirement to commence an investigation relating to a cartel offence, the statutory framework provides that there must be an objective cause4 that justifies the commencement of a case. And that cause could comprise indications of the existence of a cartel offence.

Article 3 of the Regulations provides that there are at least four independent rebuttable presumptions of conduct that indicate the existence of a cartel offence:

  1. an invitation or recommendation addressed to one or several competitors to coordinate prices, output or the conditions to produce, commercialise or distribute products or services in a market, or the exchange of information for an objective or effect of this kind;
  2. the sale prices offered within the national territory by two or more competitors of products or services that are the subject of international trading are considerably higher or lower than their international reference price, or the trend of their evolution for a specific period is considerably different from the trend of international prices within the same period, except for those cases in which the difference arises from tax provisions or transportation or distribution expenses;
  3. instructions, recommendations or adopted commercial standards by business chambers, associations, professional associations or similar to coordinate prices, offer products or services or other conditions to produce, distribute or commercialise products or services in a market, or the exchange of information for an objective or effect of this kind; and
  4. two or more competitors set the same minimum or maximum prices for a product or service, or adhere to a sale or purchase price of a product or a service that was issued by an association, business chamber or competitor.

In addition, COFECE has issued guidelines and technical criteria that, although not legally binding in some cases, include formal guidance for the interpretation and application of the FECL when prosecuting and sanctioning cartels. The following are the most significant ones applicable to cartel prosecution and these were recently strengthened in 2020 and 2021 through some minor amendments:

  1. Guidelines on the Initiation of Investigations into Monopolistic Practices;
  2. Technical Criteria to Request Dismissal of a Criminal Prosecution against a Cartel Offender;5
  3. Guidelines on the Conduct of Investigative Proceedings into Relative Monopolistic Practices and Illicit Concentrations;6
  4. Guidelines on the Exchange of Information between Economic Agents7 (dealing with information exchanges that could trigger competition concerns, and indicating that COFECE will follow worldwide best practice in this area8); and
  5. Technical Criteria for the Request and Issuance of Precautionary Measures during Investigative Proceedings, and for Setting Commitments.9

Moreover, around January 2018, COFECE pre-published, for public consultation, its first-of-a-kind guidelines on collaboration among competitors. In essence, the guidelines aimed to establish the elements COFECE would take into account when assessing the legality of any type of collaboration or cooperation between competitors (i.e., horizontal agreements). However, although the public consultation period has ended, COFECE has confirmed that it will not issue a final version of these highly anticipated guidelines. As a result, the authority has included additional guidance on competitor collaborations in its 2021 Merger Control Guidelines. The new Guidelines provide that, as an alternative to deter cartel consequences that might arise from collaborations, competitors may voluntarily notify a collaboration as a concentration to receive an approval from COFECE.

COFECE has made the fight against cartels its main priority and its Strategic Plan 2018–202110 states that the fight against monopolies and the eradication of conduct that might harm competition are both its priority and its constitutional mandate, and it deems cartel offences to be the most harmful of all anticompetitive practices.11 Consequently, COFECE has consistently given out a strong message conveying its policy of zero tolerance for cartel offences (except in the case of immunity applications).