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Antitrust / Competition

Mexico: COFECE investigates possible cartel practices in the market of public procurement procedures

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In brief

The Investigating Authority of the Federal Economic Competition Commission (COFECE) published on 12 October 2022, a notice initiating an investigation, for alleged anticompetitive conduct of horizontal monopolistic practices (or cartel practices) in the market of public procurement procedures for the acquisition, leasing, maintenance services and managed services of information and communication technologies.

The market under investigation is related to products such as desktop and laptop computers, televisions, photocopiers, computer cameras, storage equipment, and associated products, in the national territory. Additionally, the investigation includes the contracting or purchase of information and communication technologies such as, transmission services, software licensing, internet servers, as well as maintenance and managed services related to information technologies. Any government contracting procedure through public procurement in the investigated market could be subject to this investigation.

Contents

  1. Recommended actions
  2. Comments

If the existence of a horizontal monopolistic practice is proven, economic agents could be fined up to 10% of their annual revenues in Mexico, as well as those who have participated, contributed to this illegal conduct may be sanctioned under the Federal Mexican Criminal Code, and may be subject to up to ten years in prison.

Recommended actions

  • In this type of proceedings it is normal for the antitrust authority to request information and documents from the companies offering products and services related to the market under investigation. In the event of receiving a request for information from the antitrust authority, it is essential to respond to such request, otherwise, the defaulting company will be subject to a fine.
  • In some cases, the antitrust authority considers it pertinent to subpoena individuals who are presumed to have knowledge of the market under investigation, e.g., technical personnel or managers of companies that offer products and services related to the market under investigation. In case of receiving a subpoena, it is recommended to consult with an attorney specialized in antitrust & competition matters. 
  • The Mexican antitrust authority is empowered to conduct dawn raids (on-site unannounced visits at the company’s offices, through which they may request information and/or photocopy documents related to the market under investigation). In these cases, it is recommended to contact the company’s legal counsel, and seek immediate advice from an antitrust & competition lawyer. Obstruction or failure to comply with a dawn raid may result in fines and/or criminal penalties.

Comments

  • The investigations of monopolistic practices in the digital economy market have grown in popularity over the last 3 years, especially because of the existence of two antitrust authorities in Mexico: COFECE and the Federal Institute of Telecommunications (IFT). The disagreements between these institutions have often triggered dual investigations in the digital economy and at least three major controversies over which authority is competent to decide on antitrust matters. In 2020, COFECE published its Digital Strategy report to address the new challenges presented by the digitalization of the economy from a competition perspective. 
  • Recently, COFECE reaffirmed their commitment, and in its Strategic Plan 2022-2025, identified the digital markets and public procurement as a key priority sector for the competition authority. Public procurement is a priority topic, given that taxpayers’ resources are used and must be allocated effectively and within a framework of competition so that they maximize their purchasing power in the best terms for the public service.
  • The investigation should not be understood as a judgment, but as an action by the authority to verify compliance with the Federal Mexican Antitrust Law.
  • Horizontal monopolistic practices are anticompetitive agreements, contracts or arrangements between competing economic agents, whose object or effect is the manipulation of prices, restriction or limitation of supply or demand, division or segmentation of markets, and, in this particular case, agreement or coordination of bids in auctions, as well as the exchange of information between competitors to carry out any of the aforementioned conducts.
  • This antitrust investigation was initiated on 31 March 2022. The inquiry period, of 120 business days,  shall be counted from this date in which the investigation period begun.
  • Each period has 120 business days, which may be extended for the same period up to four times.

Please do not hesitate to get in touch with us if you wish to discuss how this development may impact your business operations in Mexico. 

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Author

Luis Amado is a partner in the Antitrust & Competition Practice Group of the Firm's Mexico City office. He has more than 10 years of experience in his field and has conducted several antitrust and competition seminars for the telecommunications, automotive, electronics, medical, mining, metal, home appliance and white goods industries. Luis was part of the Firm’s EU Competition & Trade Practice Group in London, where he advised on antitrust matters. He was appointed Latin America's representative in the Firm committee responsible for abuse of dominance matters. He has also been a guest professor at Universidad Iberoamericana and IPADE, giving lectures on antitrust and competition.

Author

Raymundo Enriquez is currently the managing partner of the Mexico offices and the lead partner of Baker McKenzie's Antitrust Practice Group in Mexico City. He was a member of the Firm’s Executive Committee and a previous chairman of the Latin America Regional Council where he also served as the Latin America chair of the Global Diversity and Regional Pro Bono Committees. Mr. Enriquez is recognized as a leading lawyer for competition / antitrust and for business by Chambers Latin America. He served as a board member for several Mexico companies. In addition, he was a visiting lecturer at the Mexican Bar Association and a part-time tax and foreign trade law professor at Universidad Iberoamericana, where he obtained his JD from the university’s School of Law.

Author

Alina de la Luz is an associate in the Firm's Antitrust Practice Group in Mexico. Prior to joining the Antitrust Practice Group at the Firm, she was part of the Mexican competition authority (Federal Economic Competition Commission), as part of the investigating authority. With more than 8 years of experience in economic competition, mainly in abuse of dominance and analysis of competition conditions, she has conducted investigations in several markets: financial, energy, ports, digital, telecommunications, and transportation, among others. Likewise, she was head of the economic competition subject at UNAM and has taught about competition in several forums.

Author

Natalie Flores is currently the regional knowledge attorney for North America and Latin America in the Global Antitrust & Competition Group in the Firm's Mexico City Office. She has over ten years of experience as an attorney, and manages and executes regional and global legal content projects, training and client initiatives for the Competition Group within the context of the Firm's knowledge strategy across the region. Natalie oversees all regional knowledge for the antitrust and competition group for the Americas, including develop thought leadership, client training, and publications, amongst other antitrust initiatives for the region, and advises a diverse range of industry clients in multijurisdictional competition matters. She has experience in competition litigation, specifically class action. She is an active member of the Firm's various industry groups, with a focus in the Energy, Mining & Infrastructure group of Baker McKenzie. Natalie is on the Board for Mujeres en Energías Renovables (Women in Renewable Energy) en México (MERM), an association dedicated to promoting the development of women in renewable energy, and concentrates on advocating for renewables and the empowerment of women in the sector.

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