As a consequence of the COVID-19 pandemic, and aiming to maintain proper and efficient control and implementation of the Mexican antitrust policies, the Federal Economic Competition Commission (“COFECE” or the “Commission”) has issued several communications informing economic agents about their approach and the actions to be implemented amid the COVID-19 crisis.
Hence, below we set out an overview of the position taken by COFECE in order to deal with competition law enforcement and merger control review within the COVID-19 sanitary emergency context.
Formally, Mexican antitrust laws and regulations will not suffer any change as a consequence of the COVID-19 pandemic. However, seeking to avoid disruptions to the supply chains, as well as artificial restrictions to the offer of goods or services that leads to price increases, COFECE has established general guidelines that shall govern interaction among economic agents during the emergency:
- Collaboration agreements.
The Commission has stated that it will not prosecute any collaboration arrangement among economic agents, even though such arrangements implicate risks to the competition in the relevant market, as long as such agreements where deemed necessary within the frame of the actual sanitary emergency either to maintain or increase supply; satisfy demand of goods or services; protect supply chains; avoid shortages or hoarding of goods; and, on the conditions that the purpose of such arrangements is not to displace other competing agents.
In this case, economic agents must approach to COFECE´s investigating authority to inform about the agreement and empathize its importance in connection to the handling of the sanitary emergency.
- Price increase as an independent decision.
Aware that crisis imply market disruptions, COFECE has sharpened that legitimate price increases must derive from individual and independent decisions of the economic agents and must not be induced, encouraged or recommended by associations, confederations or chambers to their participants.
Notwithstanding the foregoing, COFECE will monitor such unilateral decisions in order to avoid the existence of any barrier or conduct against the Mexican antitrust policies, in which case, an investigation will be initiated.
As an example, COFECE’s investigating authority has issued a warning to the National Chamber of the Sugar and Alcohol Industry (Cámara Nacional de la Industria Alcoholera y Azucarera), related to potential price increase in the alcohol and other related products.
Considering the current conditions, the Commission has deemed as specially harmful any agreement taken by competitors with the intent to manipulate prices; restrict the supply of goods and/or services; segment markets; and, coordinate or refrain from participating in public bids, those kind of agreements will be considered particularly harmful, an therefore will be investigated and, if necessary, sanctioned to the full extent of the law.
- Hyped increases in price.
COFECE will be particularly vigilant to sensitive markets and to excessive increases of price in such markets in order to evaluate creation of barriers of entry or arrangements between economic agents causing such exaggerated increases. In such cases an investigation will be initiated.
- Merger control expedite procedures.
The Commission will expedite analysis of concentrations intending to cause synergies between economic agents to increase production of items required or essential to deal with the ongoing COVID-19 sanitary emergency.
3. Abuse of market power
Independently of the emergency situation, abuse of market power is a sanctioned conduct under the Federal Law of Economic Competition. As mentioned above, no specific changes to the regulations are being made as a consequence of the COVID-19 emergency. However, COFECE has declared that the surveillance over economic agents will be strict and any wrongful practice will be investigated and sanctioned.
4. Merger control
Due to the relevance of the merger control procedures (notificaciones de concentración) within the Mexican antitrust policy, and in order to ensure the optimum operation of the market, COFECE will not suspend the terms regarding both existing and new procedures.
Concentration shall be understood as any merger, acquisition of control, or any other act through which companies, associations, stock, partnership interest, trusts or assets, in general, are consolidated, and which is carried out among competitors, suppliers, customers or any other economic agent.
In terms of Mexican Antitrust Law (Ley Federal de Competencia Económica), concentrations meeting certain monetary thresholds must be subject to COFECE´s analysis and clearance. Therefore, as a first step, it is essential to analyse whether any of the thresholds and assumptions provided in the law to notify a concentration are met. For your reference, follows a brief description of each of the thresholds set forth in the Mexican Antitrust Law, as construed by the COFECE. If any of the thresholds are met, the transaction would need to be reported and cleared:
- Value of the Transaction. If the value of the transaction in Mexico exceeds, in one single act or a series of acts, 18 million units of measure and update (Unidades de Medida y Actualización) (‘UMA’) (i.e. approximately USD $80 million Dollars); or,
- Size-of-Target. If the transaction involves, in one single act or a series of acts, the acquisition of 35% of the capital stock or assets of an economic agent whose annual sales or assets in Mexico exceed 18 million UMAs (i.e. approximately USD $80 million); or,
- Size-of-Persons and Size-of-Transaction. If the transaction involves, in one single act or a series of acts, an accumulation of assets or capital stock in Mexico exceeding 8.4 million UMAs (approximately USD $37 million) and in such transaction two or more economic agents participate and the value of their assets or annual sales in Mexico, either separately or jointly, exceed 48 million UMAs (approximately USD $213 million).
All the notices in connection to the above mentioned must be filed through the COFECE’s digital platforms, therefore, avoiding any risk for the economic agents and public officers handling each of the cases.
As mentioned, the Commission will expedite clearance of concentration notices intended to cause synergies between economic agents to increase production of items required or essential to deal with the ongoing COVID-19 sanitary emergency.