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Proposed Amendments to Federal Law of Economic Competition - International Law Office

International Law Office

Competition & Antitrust - Mexico

Proposed Amendments to Federal Law of Economic Competition

May 21 2009

Introduction
Penalties
Verification Powers
Pre-merger Filings
Provisional Remedies and Information Requests
Transparency


Introduction

Following a forum organized by Congress in connection with the global economic downturn, the public and private sectors have expressed their desire to increase competition in the Mexican economy. In order to do so, the powers of the Federal Competition Commission (FCC) need to be strengthened.

Therefore, on April 21 2009 Senator Santiago Creel presented a proposal to amend the Federal Law of Economic Competition in regard to the following areas.

Penalties

Under the proposals, the FCC would be able to impose substantially increased fines in order to bring the available penalties into line with international standards. At present, the FCC can impose a maximum fine of Ps82.2 million; the proposed amendments provide for a fine of up to 10% of the net profits of the infringer (currently, the law provides for this type of penalty only in cases of recurrence). Similarly, the proposed amendments contemplate an amendment to the Federal Criminal Code which would deem absolute monopolistic practices (ie, cartels) to be conduct seriously affecting consumers and therefore punishable by a prison sentence.

The proposed amendments provide for structural penalties such as winding up or the transfer of assets in case of recurrence. Currently, the law provides for this type of penalty only when an economic agent has been declared responsible for carrying out illegal practices on two prior occasions. They also provide for non-litigious resolutions for the early termination or settlement of procedures initiated by the FCC (eg, the filing of a commitment to cease illegal practices).

Verification Powers

Currently, during on-site visits the FCC may request only information and documents that have previously been requested in writing. The proposed amendments provide that the FCC would be able to carry out surprise on-site visits and request information and documents as needed.

Pre-merger Filings

The proposed amendments modify the criteria for applying for an expedited review process. These criteria would be included in the law, whereas they are currently set out only in the regulations. If the amendments are approved, economic agents will be able to request this expedited process when: (i) the transaction implies the first participation of an economic agent in the corresponding relevant market - for such purposes, the market shares in such market shall not be modified and will result only in a substitution of economic agents; and (ii) the acquiring party has no control over the acquired party and the transaction does not result in an increase of decision-making power over the operation, management or planning of the acquired party.

In addition, the proposed amendments provide that a pre-merger filing will not be required when:

  • the transaction is a corporate restructuring in which the parties belong to the same group of control and no third parties are participating in the transaction;
  • a controlling entity increases its participation in the controlled entity;
  • the transaction involves the acquisition of stock of foreign entities, and as a result of the transaction the parties do not acquire control over Mexican entities or increase their participation in Mexican entities or assets located within Mexico; and
  • the acquiring entity is an investment entity and the transaction results in the acquisition of securities in the stock market (except when such transaction allows the investment entity to have influence over the decisions of the acquired entity).

Provisional Remedies and Information Requests

The proposed amendments provide that the FCC would be able to enforce provisional remedies (eg, the suspension of acts or conduct that may harm competition), and require information for merchandise studies and opinions in specific economic sectors.

Transparency

Under the proposed amendments, the FCC would have to make public information with respect to its resolutions, its investigation methods and the criteria used to initiate an investigation.

For further information on this topic please contact Luis Gerardo García Santos Coy or José Ruíz López at Creel, García-Cuéllar, Aiza y Enríquez by telephone (+52 55 1105 0600) or by fax (+52 55 1105 0690) or by email (luis.garcia@creelmx.com or jose.ruiz@creelmx.com).


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