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Changes in Mexican Antitrust Law
Alberto de la Peña
Last week, a Decree was published in the Official Journal of the Federation that amended, supplemented, and repealed various provisions of the Federal Competition Law (Ley Federal de Competencia Económica), the Federal Penal Code (Código Penal Federal) and the Federal Tax Code (Código Fiscal de la Federación) (collectively, the “Decree”) in the area of antitrust regulation. The most significant aspects of the reforms are the following:
1. Market Concentration Notifications:
- General. The Decree clarifies the criteria for determining when it is possible to make simplified notification of market concentration and in what situations no notification is required.
- Simplified Notification. With regard to notifications of market concentrations with the Federal Competition Commission (Comisión Federal de Competencia) (“Cofeco”) the Decree establishes new, detailed criteria for determining when it can be considered self-evident that a concentration is not for the purpose or effect of impeding competition or restraining trade, in which case it prescribes a simplified notification procedure that Cofeco must act upon within 15 days after receipt of the notification.
- Certain Concentrations Do Not Require Notification. The Decree envisions specific cases in which it will not be necessary to notify Cofeco of a market concentration, even when the amount of the transaction exceeds the legal limit, including in the following instances: (i) in the case of a corporate restructuring where no third party is involved; (ii) when there is an increase in the equity stake of a holder who has already held a controlling interest in a company since its formation or its authorization by Cofeco; (iii) in the case of an administrative trust, a guarantee trust (except in foreclosure) and/or any other trust not intended to transfer the trust assets to someone other than the settlor of the trust or the fiduciary institution; (iv) cases that involve (a) legal acts effected outside the country in relation to entities which are not tax residents in Mexico; or (b) foreign entities so long as such entities do not acquire control over Mexican entities; (v) when the acquiring party is an investment company and the acquisition is made with funds generated from the sale of equity stock in the investment company to the investing public; (vi) in the acquisition of shares and/or other securities on securities exchanges in México or abroad, when the purchaser does not acquire ten percent or more of the total stock of the company and does not acquire control thereof; and (vii) in the case of acquisitions by investment funds for purely speculative purposes; among others.
2. Cofeco’s Authority:
- General. The Decree strengthens the authority of Cofeco to enforce the law and impose sanctions.
- Authority to Conduct Investigations. The Decree grants Cofeco the authority to (i) carry out on-site investigations without a court order, and (ii) to order the suspension of any activity that may constitute a monopolistic practice or a prohibited market concentration for a maximum period of one year, including the authority to set the amount of the bond required to avoid or lift such suspension.
- Fines and Criminal Penalties. The amounts of the fines imposed have increased across the board and, in most cases, specific percentages of the violating parties’ revenues have been set as the parameters for assessing them (between 8 and 10 percent of the violators’ revenue). In the event of a second offense, a fine of up to twice the original amount may be imposed (reaching up to 20 percent of the violating party’s revenue). Criminal penalties of from three to ten years in prison have also been established for persons who enter into, arrange or carry out agreements to engage in absolute monopolistic practices.
3. New Courts and Specialized Trials in the Area of Antitrust:
- Courts and Special Trials. The Decree creates an ordinary administrative trial before the District Courts and specialized Tribunals in the area of competition law and antitrust. The aggrieved party will have the option to bring such an action before or after the administrative appeal. It has established a 180-day period for the promulgation of such trial procedures and the creation of the special antitrust Tribunals.
For more information, please contact:
Alberto de la Peña
You may also view the alert in the PDF linked below.