Reforms to the Mexican competition law

New and sole competition authority

As a result of the extinction of the Cofece and the IFT, which will occur the day after the appointments of the new "commissioners" are ratified, the creation of the National Antitrust Commission (CNA) is ordered. This must occur no later than June 30, 2025. This new authority would have the following characteristics:

1. Coexistence: The CNA will exist in parallel to the Digital Transformation and Telecommunications Agency, which will oversee the application of the new telecommunications and broadcasting law. However, the application of the LFCE will be limited to the CNA. 
2. Legal nature: The new CNA will be a decentralized public agency, sectorized to the Ministry of Economy.
3. Autonomy: According to the reform, the CAN will have management autonomy and technical and operational independence.
4. Integration: The CNA will consist of two separate bodies: (i) a Plenary composed of 5 commissioners, and (ii) a Unit that hears investigation proceedings whose head is the Investigating Authority.
5. Appointments: The commissioners will last 7 years in office and will be appointed in a staggered manner by the Head of the Federal Executive, with the ratification of the Senate. The head of the Investigating Authority will last 4 years in office, extendable, and will be appointed by the Plenary of the CNA with the favorable vote of the "presiding commissioner". Commissioners may be removed for serious causes.
6. Regulatory framework. The Executive will issue a regulation of the LFCE. In addition, the CNA will issue regulatory provisions, an organic statute, and may issue guidelines, technical criteria, and orienting guides.

Changes in Absolute Monopolistic Practices (AMP)

Although no new conducts are sanctioned, there are important changes:

1. AMP between potential competitors: All absolute monopolistic practices can now also be set up between “potential” competitors.
2. Illicit exchanges of information. Information exchanges between competitors will now be considered as a form of collusion to incur in an AMP, and no longer will be treated as an independent conduct.
3. Increase in fines. The fine for incurring in AMP’s increases up to 20% of the economic agent's income, highlighting that, prior to this reform, the maximum fine was up to 10%
4. New sanctions. Disqualification from 6 months to 5 years to participate in public procurement procedures for those who collude in public bids.
5. Criminal penalties are maintained. Once a Statement of Objections is issued, the Investigating Authority will have one year to file a complaint with the Attorney General's Office.
6. Limitation of the immunity program. The benefits of the reduction of sanctions are restricted depending on the time at which it is requested: (i) a minimum fine is provided only if it is requested before the initiation of an investigation and (ii) a 50% reduction of the fine is provided if it is requested after the initiation of the investigation. Additional benefits are granted to applicants such as not being disqualified and not being sued in class actions for damages promoted by the CNA. 

Changes in Relative Monopolistic Practices

No new conducts are sanctioned, but there are important changes regarding abuse of dominant position:

1. Increase in fines. The fine for incurring in relative monopolistic practices increases up to 15% of the economic agent's income, highlighting that, prior to the reform, the maximum fine was up to 8%.
2. Expansion of theories of harm. In addition to behavior that has an exclusionary effect, behavior that has an exploitative effect that limits the ability of other economic agents to compete in the markets will be considered illegal.
3. Changes to the benefit of reduction of fines. If this benefit is requested during the investigation period, the probe can be closed without charging liability. However, this benefit may now also be requested during the trial proceedings, charging liability and with a reduction in the fine of up to 50%.

Tougher penalties

The reform introduces tougher penalties in several cases. For example:

1. Recidivism: Recidivism and the divestment sanction order will no longer require the existence of a previous determination that has become final through a judicial process. With the reform, upon the issuance of the administrative resolution, that would be sufficient to be considered a recidivist and impose a fine of up to double the amount. 
2. Statute of limitations for damage actions: The statute of limitations for claiming damages will now be counted from the date the CNA issues its resolution.
3. Dissuasive fines: It is expressly ordered that the fines imposed must be of a dissuasive nature. The basis for the amount of the fines should not necessarily be based on the estimation of damage.
4. Generalized increase in the amount of fines: In addition to the increases in fines for monopolistic practices, there is a significant and generalized increase in all fines provided for in the LFCE. 
5. Strengthening of enforcement measures: Daily fines increase by up to 8,000 UMAs [$905,120 pesos] for each day of non-compliance with the CNA's orders. For example, the fulfillment of a request for information.
6. New fines: New fines are introduced for (i) failure to attend hearings or answer questions; (ii) obstructing verification visits; (iii) failure to comply with disqualifications; and (iv) delaying proceedings.
7. Precautionary measures: The possibility of lifting precautionary measures by posting a bond is eliminated. 

Compliance programs

1. Certification: The CNA will certify, upon payment of a fee, the antitrust compliance programs of the companies. This certification will be valid for 3 years.
2. Mitigation of liability: When imposing penalties, the CNA may consider as a mitigation of liability the fact that the company has a certified compliance program.

Increased merger control

The current regime on merger control is maintained, but relevant changes are incorporated: 

1. More transactions must be reported: The monetary thresholds for determining those concentrations that must be cleared by the CNA before they are carried out, are reduced and some exceptions to the obligation to notify certain transactions are eliminated.
2. Streamlining of the procedure: The CNA deadlines for the analysis of concentrations are reduced by half.
3. Investigation of concentrations: The period in which the CNA may investigate non-notifiable concentrations is increased from 1 to 3 years.
4. Indications of unlawful concentrations: The reform would incorporate, as an indication of an unlawful concentration, that a concentration is unlawful if it may substantially affect the conditions of competition in the relevant market or related markets.

Protection of attorney-client communications

The reform clarifies that only communications with external counsel will be considered protected by the attorney-client privilege, not so with in-house lawyers with whom the economic agent has an employment relationship.

New powers of the authority

The reform initiative introduces additional powers for the CNA, inter alia: 

1. New investigative powers: New investigative powers are granted to the Investigating Authority, such as (i) conducting inspections, (ii) conducting surveys, and (ii) collecting data through any tool.
2. Limitation of the authority's powers: The 10-year term of the authority to initiate "investigations" was changed to initiate "proceedings".
3. Complaints from the Ministry of Economy: The Investigating Authority will have the burden of perfecting the deficient complaints filed by the Ministry of Economy. 
4. Telecommunications: In the broadcasting and telecommunications sectors, the NAC will coordinate with the Digital Transformation and Telecommunications Agency. However, it may: (i) impose limits on the concentration of frequencies and cross-ownership of media, (ii) determine preponderant economic agents at the request of the Digital Transformation and Telecommunications Agency, and (iii) declare the non-existence of conditions of effective competition.

Exception regime for state-owned public enterprises

The LFCE will not be applicable to state-owned public enterprises.

Transitional regime

1. Investigation Procedures: Ongoing investigations by the Investigating Authority of Cofece and the IFT will be suspended the day after the publication of this reform in the Official Gazette of the Federation, and will be resumed the day after the Plenary of the CNA is integrated.
2. Head of the Investigating Authority: The current head of Cofece's Investigating Authority, could continue in his position at the CNA.

If you have any questions or comments, please contact us using the contact details provided in this press release. We will be happy to assist you. This document does not constitute legal guidance or advice.
 
 
 

Authored by Omar Guerrero Rodríguez, Ricardo Arturo Pons Mestre, Alan Ramírez Casazza, Martín Michaus Fernández, and Priscila Barba Rivas.