The merger control regime in Mexico is structured based on ex ante review of relevant transactions. The Law sets forth specific economic thresholds to determine which transactions will require mandatory notification and approval before closing.
The process will start by filing a notification of concentration; the agency is empowered to request basic and additional information before the staff submits its recommendation to the Plenary, who may reject, authorise or impose remedies to the transaction. Once a concentration has been approved, it cannot be challenged again for its competitive effects in the marketplace, except if approved based on false information. Note that the Law does not provide for an ordinary appeal process; the only available means to challenge a decision made under the Law is a constitutional amparo trial, which based on expected timings is usually not used for these purposes.
Ex ante assessment, however, will not cover all merger control enforcement needs, as transactions lying below the notification thresholds may also raise anticompetitive concerns that need to be addressed. Additionally, since the Mexican regime is suspensory, there may also be gun-jumping cases – whether involving firms that notified in time but did not wait for clearance, or companies simply not filing at all. These infringements will be addressed by ex post enforcement, usually involving fines that can reach 8 per cent of the parties' annual accruable income in case of unlawful concentrations, or up to 5 per cent of such income as a penalty for closing before receiving clearance (for mandatory notice cases). Cases involving the latter have been increasingly common in recent years.i Significant cases
In terms of ex ante tools, the most relevant transactions recently revised include:
- AT&T/Time Warner. Filed before both agencies, this transaction set landmark criteria on cases involving concurring jurisdiction of the IFT and COFECE over the same transaction, concluding that the IFT should assess transactions 'substantially' related to the telecom and broadcasting services, while COFECE should decide on any other matters, even within one single transaction. As a result, both agencies cleared the transaction although it was the IFT that imposed behavioural remedies.
- The Walt Disney Company/Twenty-First Century Fox. The parties filed notice before both COFECE and the IFT showing a new example of possible overlap between both agencies. COFECE authorised the transaction with regard to film distribution for cinemas, home entertainment licensing (audio/video), non-digital music licensing; live entertainment and general licensing. The IFT has not resolved the matter to date, but a remedy negotiation process is ongoing. This transaction has gained significant attention as the President of Mexico has discussed the case during his daily press conferences (which may result in a game changer for competition policy in Mexico).
- Monsanto/Bayer concentration. International transaction approved by COFECE subject to conditions related to the supply of genetically modified cotton seeds and vegetable seeds for several crops and non-selective herbicides. Remedies involve the divestiture of such businesses to Basf.
- Rheem/Grupo Industrial Saltillo (Calorex) transaction was blocked, based on the absence of market participants that could pose a counterbalance to the resulting company, and the existence of entry and expansion barriers. Overlaps referred mainly to different types of water heaters.
- Arauco/Masisa. This transaction was accepted under structural remedies, which were presented as a modification to the notified transaction. Such modification follows COFECE's identification of risk derived from the laminated particleboard market share of the resulting entity (approximately 60 per cent), important barriers to entry, difficulties associated with potential competition based on imports from other jurisdictions and the elimination of the main competitive constraint faced by Masisa as the leading player (pre-transaction).
Regarding unlawful concentrations, COFECE opened and settled an investigation in the pharmaceutical market. The parties agreed to offer measures to restore competition and eliminate COFECE concerns pointing at possible scenarios in which a relevant pharmaceutical distributor could acquire control over a competitor.
The IFT, in turn, closed ex officio investigations arising from post-closing investigations in markets related to the leasing of dedicated links, internet access and telecom locations, as well as advertising radio slots in certain municipalities.
In terms of penalties, most COFECE cases refer to failure to notify a concentration:
- In BorgWarner/Remy Holdings International: parties were fined a total of US$152,883.
- In Alsea/Axo: following a court order, COFECE re-evaluated the matter and imposed the parties aggregated fines for US$1,625,459. In Banco Ve por Mas/Bankaool parties were fined US$79,006 overall, a reduced fine based on the fact that the parties accepted their responsibility for not notifying the transaction.
Finally, Villacero & Savoy were also fined US$3,555,259 for breaching clearance conditions that imposed restrictions on how members of the board should be appointed.
Regarding court cases, the specialised courts issued non-binding criteria stating that: (1) merger guidelines are not binding but COFECE may refer to them, as these adds to legal certainty; and (2) legal thresholds set forth in the Law refer to different scenarios without being exclusive.ii Trends, developments and strategies
COFECE will be carrying out an assessment of ex ante impact during 2019. Enforcement and penalties arising from failure to notify or gain pre-merger clearance are becoming more common. Companies are advised to duly analyse competition thresholds in the jurisdiction to avoid unnecessary risk.iii Outlook
COFECE has been clear in its interpretation that merger control needs to be addressed in an ex ante manner, owing to the difficulties in restoring competition once a concentration has been completed. In this sense, we can expect to see COFECE further penalising any breaches to the obligation to secure clearance before closing.
In terms of substantive enforcement, the only public ongoing investigation by COFECE for possible unlawful concentration is related to the marketing, distribution and public sale of gasoline and diesel; the investigation is still at a confidential stage.