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27 June 2019
On 5 June 2019 the Federal Economic Competition Commission (COFECE) issued a press release announcing that it had rejected Wal-Mart International Holdings, Inc's (Walmart's) proposal to acquire Delivery Technologies, S de RL de CV (Cornershop).
According to the press release, the COFECE rejected the acquisition in light of the potential risks that it posed to competition and free market access.
Walmart is a multinational corporation whose main activities are the management and operation of supermarkets, membership stores, pharmacies and online stores, among others. It is one of the leading supermarket and retail brands in Mexico.
Cornershop is a Mexican company which showcases, sells and delivers products offered by other retailers through its internet platform and mobile app. Its services are available in a number of Mexico's main cities, including Mexico City, Monterrey, Guadalajara, Puebla and Cancun.
Walmart planned to acquire all of Cornershop's issued shares in both Mexico and Chile. According to Walmart, the aim of this international transaction was to accelerate the corporation's omnichannel capabilities and growth in Latin America.(1)
Notably, on 11 January 2019 the Chilean National Economic Prosecution Office approved Walmart's acquisition of Cornershop's issued shares in Chile without imposing any conditions. According to the competition authority, the acquisition posed no foreseeable substantial risk to competition, given the market's dynamism and size and the fact that Cornershop provided its services predominantly to Walmart.(2)
After concluding its analysis, the COFECE determined that the acquisition, as originally proposed, was likely to have the following effects:
In response to the above findings, Walmart and Cornershop submitted a series of remedies to the COFECE, pursuant to Article 90 of the Federal Economic Competition Law, in order to mitigate the aforementioned risks. However, the COFECE determined that the proposed remedies were insufficient in this regard and thus rejected the acquisition.
According to the COFECE's press release, once its decision has been notified to the parties, they may appeal it through an amparo trial before the specialised courts.
This case is significant as it is the first merger review case in which the COFECE has analysed vertical concentrations involving digital platforms. Economic agents should look out for future decisions in this context in order to understand how the COFECE:
For further information on this topic please contact Lucía Ojeda Cárdenas or Felipe García Cuevas at SAI Consultores SC by telephone (+52 55 59 85 6618) or email (firstname.lastname@example.org or email@example.com). The SAI Consultores website can be accessed at www.sai.com.mx.
(1) Walmart's announcement on the proposed transaction is available here.
(2) The Chilean National Economic Prosecution Office's decision is available in Spanish here.
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