19 June 2014 – On May 23, 2014 a New Mexican Competition Law, approved by the Mexican Congress on April 29, 2014, was published in the Official Federal Gazette. The New Law will come into force on July 7, 2014, introducing some major changes to the antitrust framework in Mexico. The Mexican Competition Authority is now more viable The Mexican competition authority (Federal Economic Competition Commission or “Cofece”) will see its powers both strengthened and extended. Also, novel legal concepts are introduced, some of which have attracted controversy. The new law accounts for the following:
- It strengthened dawn raid powers of Cofece, allowing it (a) to access any place, storage device, electronic device, or any other source of evidence, obtain and take away copies of information, and secure those during the raid; and (b) to demand explanations from any officer, representative, or member of the inspected company regarding any document or information obtained during the raid.
- Decisions to initiate an investigation will no longer be published in the Federal Official Gazette, impairing the target’s practice to undermine public investigations
- Cofece is vested with powers to initiate criminal prosecution prior to its final decision on a violation of antitrust law. Also, Cofece may now order the arrest of individuals for obstructing an investigation.
- The remedy of administrative appeal is abolished, leaving judicial review (through an amparo trial) as the only means to challenge Cofece’s resolutions.
- Enforcement of Competition Policy vis-à-vis private parties is strengthened: Claims for damages will have greater prospect of success through both individual and class actions.
- A new criminal offense has been created, sanctioning (with up to ten years of imprisonment) an exchange of information between competitors, when resulting in, or having the purpose of, price fixing, allocation of markets, restricting output or rigging bids.
- Monopolistic practices now include: (a) refusing, restricting or granting discriminatory access to essential inputs, while the extent of “essential inputs” remains uncertain; and (b) reducing existing margins between the price for essential inputs and the price for products or services correspondingly offered to customers employing the essential input (margin squeeze). In this respect, Cofece will attain authority to regulate access to essential inputs, to order measures aiming at an elimination of barriers to competition, and to order the divestiture of assets.
- An “Investigation Authority” was set up which is meant to conduct investigations on monopolistic practices and illegal concentrations. While the plenary (comprising seven Commissioners) remains the decisive body, its rules on transparency and accountability have been strengthened, decreasing a risk of abuse.
Procedural Rules on Merger Controls were subject to Change Procedural rules relating to merger controls have been modified. Allegedly, these modifications are unnecessary as the present mechanism of merger controls works effectively. The most relevant changes are:
- Mergers may never be finalized prior to clearance by Cofece.
- Thresholds for merger controls will now exclusively take into consideration annual sales originating in Mexico and/or assets in the Mexican territory
- The resolution period has been extended from 35 business days to 60 business days.
- Cofece has been vested with the necessary powers to require additional information at any stage of the regulatory procedure. Also, additional requirements for documentation and translation will be set.
- Cofece is now under an obligation to inform the parties on potential downside effects or risks to competition which may be caused by a transaction notification. In so doing, the parties shall be able to submit remedies or conditions proposals well in advance to the final decision.
Comment Companies and individuals should be aware of the relevant changes introduced to the antitrust enforcement environment in Mexico, considering Cofece strengthened powers. Companies should prepare to handle unannounced dawn raids in full cooperation with Cofece while protecting their rights. Individuals that interact with Cofece officials in the cause of dawn raid procedures should prepare themselves to respond to inquiries without compromising privileged communications and documents. Adequate antitrust compliance policies and programs will reduce the risk of being subject to investigations or sanctions well in advance. In addition, companies may be well-advised to consider what types of training and monitoring procedures are adequate to mitigate their exposure to risk. Companies should try to establish guidelines on how to interact with competitors, suppliers, and clients, covering risk-prone areas such as, information exchange, distribution policies, incentives and rebates. With regards to merger controls, companies will have to cope with more stringent information requirements that may substantially delay their timetable of aspired mergers. Click here for the full text of the new Federal Competition Policy