An extract from The Public Competition Enforcement Review, Edition 13
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 for its competitive effects, except if approved based on false information. 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.48
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.49 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 without or 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:
- Uber/Cornershop. Following the rejection of the Walmart/Cornershop deal (the first digital platform case analysed by COFECE) and a long assessment process due to the jurisdictional dispute lost by the IFT, COFECE decided to approve the acquisition of Cornershop by Uber (both online platforms) without any conditioning, following an in-depth assessment in which COFECE dismissed any actual overlaps or competitive pressure impact.50
- Profluent Plastic Technologies/Plastic Technology Mexico. The transaction referred to the acquisition of a Mexican company involved in the manufacturing and marketing of PVC and high-density polyethylene pipes and connections. While parties' activities did not overlap, the non-compete clause was assessed as excessive by COFECE.51
- EssilorLuxottica/Grandvision. COFECE approved the acquisition of GrandVision by EssilorLuxottica in spite of overlaps in certain wholesale and retail segments, given that concentration indexes fell within acceptable parameters and the absence of barriers to competition or substantial market power.
In terms of ex post control and penalties, most COFECE cases refer to failure to notify a concentration: 52
- In Softbank/WeWork, parties were fined an aggregated amount of US$156,971.
- In Santander/Elavon/UBS, parties were fined an aggregated amount of US$100,882. COFECE considered that an ex post modification to the non-compete clause implied that the transaction was not closed under the approved terms, thereby implying it did not gain previous authorisation.
- In BAS Corporation/EXI Solar, parties were fined a total of US$45,378.
- In KKR Rainbow/Coty, parties were fined US$40,315.72.
- In addition, COFECE fined Moench Coöperatif and one individual for an aggregated amount of US$1.435 million due to a breach of the commitments offered to close unlawful concentration file IO-001-2017, pursuant to which the parties were supposed to prove the elimination of any link allowing Nadro to exert control over Marzam (both relevant distributors of pharmaceutical products in Mexico).
Regarding court cases, in recent years the specialised courts have issued non-binding criteria stating that: (1) merger guidelines are not binding but COFECE may refer to them, as this adds to legal certainty; (2) legal thresholds set forth in the Law refer to different scenarios without being exclusive;53 and (3) whenever a claim for unlawful concentration is filed while a merger notice is being processed, COFECE needs to reassess whether the facts that are the object of the claim are equal to those addressed in the merger notice, before dismissing the claim.54ii Trends, developments and strategies
As of January 2020, all submissions must be made through digital means, which significantly aid in overcoming the obstacles posed by the pandemic lockdown.
Enforcement and penalties arising from failure to notify or gain pre-merger clearance continue to gain relevance. 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.
Regarding unlawful concentration investigations, COFECE will likely finalise the probe launched in 2019 into the marketing and distribution of gasoline and diesel,55 while IFT might finalise its 2018 probe into paid TV, audio and internet services.56
Late in 2020, COFECE opened a public consultation to revise the Merger Guidelines, a process which is still ongoing and which is expected to provide more certainty in merger review cases.