I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
The aftermath of all the constitutional and statutory changes to the antitrust law since 2014 is that antitrust and competition enforcement activity in Mexico is still in development. That, of course, has influenced private antitrust litigation.
Since the 2013 constitutional amendment and its statutory implementation, which includes the integration of specialised federal courts and tribunals in the field as well as agencies created therein (the Federal Telecommunications Institute (IFT) and the Federal Economic Competition Commission (COFECE)), the competition and antitrust fields in Mexico have been active in some areas. Nevertheless, such movement has happened mostly through regulation, reflecting the views of specialists in two areas: on the one hand, telecommunications and broadcasting sectors; on the other, all the others.
The specialisation of the courts with jurisdiction in this subject matter, as well as the separation provided by the Constitution between the IFT (with jurisdiction for competition and antitrust enforcement in the telecommunications and broadcasting sectors) and COFECE (with jurisdiction over the remaining sectors) are established in the statutory provisions (the Federal Law on Economic Competition, the Federal Telecommunications and Broadcasting Act, the Organic Law of the Judicial Power of the Federation and the Amparo Law) and directly affect the applicable proceedings for private antitrust litigation as well as the likelihood of successfully claiming damages.
In 2012, Mexico enacted important amendments to the Federal Civil Code to include class actions, a recent concept for Mexico. Class actions require a specific proceeding, which includes as one of the grounds for a collective claim seeking damages the effectiveness of a res judicata resolution rendered by the antitrust authority declaring the existence and commission of a monopolistic practice under Mexican law. Such legislation began to produce effects in 2014 and continues to the present day in the form of new claims and even settlements, as well as initial decisions from the courts.
Finally, the Constitution and the statutory provisions regulating the amparo proceeding (a federal judicial proceeding conceived to challenge acts of any authority on constitutional grounds) suffered relevant amendments in 2011 and 2013. Among other effects, such provisions include the mandatory use of pro persona criteria and the possibility of filing a claim against private parties that de facto or even de jure perform any conduct that could be deemed an act of authority and, thus, is subject to constitutional challenge.
Nonetheless, Mexican private antitrust litigation appears not to have evolved as much as it should, and the few cases filed in the field have taken too long to be resolved. Litigation continues to focus on the following:
- a the use of antitrust government proceedings before the specialised agencies to have sanctions and penalties imposed on competitors (in fact, the use of public antitrust proceedings for private interests);
- b possible civil claims before the judiciary by companies that allegedly suffered damages from unlawful monopolistic practices previously sanctioned by the antitrust authority;
- c class actions initiated against companies under the grounds of a res judicata resolution rendered by the antitrust authority declaring the existence and commission of a monopolistic practice under Mexican law; and
- d amparo claims filed by private companies against a competitor under the concept of identifying its acts as those of an authority.
The specialised agencies and the federal courts have issued important decisions recently, either resolving on the merits, or developing and shaping what antitrust litigation will look like in the future.
In general, it has been confirmed and established that:
- a even when any company is enabled by law to initiate claims against competitors before the specialised agencies in terms of their statutes, that does not give the claimant legal title to try to use such proceeding to solve its private interests;
- b at least under the previous statute, damages could be sought judicially only when the resolution establishing the commission and responsibility of the unlawful antitrust practice by the defendant has become res judicata;
- c class actions must fulfil the elements for admission provided by the statutory law in order to be certified, including the res judicata effect of any resolution by the antitrust authority in its case;
- d class actions involving damages, even when initiated by a state authority, can be resolved through settlement agreements; and
- e private parties can be deemed authorities in a specific amparo proceeding and their acts may be challenged as such on constitutional grounds, but it is mandatory to demonstrate that the act itself is based on a legal provision, and is equivalent to and fulfils the description of an act of a formal authority.
Considering that in Mexico agency files and judicial records are not public, and only certain resolutions and criteria are published, it is difficult to obtain recent resolutions.
Nevertheless, it is definitely worth mentioning the recent rulings by the Supreme Court of the Nation, acting in Second Chamber, upholding the existence and legal effect of compromises agreed to in 2011 between a mobile telephone company and the former antitrust authority (Federal Competition Commission (COFECO)) during a proceeding related to alleged price squeeze practices. Such decisions were challenged through amparo by broadcasting companies under the theory of legitimate interests. Meanwhile, the IFT confirmed the appropriate performance and execution of the compromises. Nonetheless, the IFT itself has admitted a 2010 claim filed by cable companies for the exact same facts and alleged practices, which was dismissed on non bis in idem grounds, but the decision has been challenged by the petitioners.
Also, the Supreme Court has upheld the validity of several provisions of the previous competition statute, particularly regarding the proceedings declaring an agent as dominant in its area, and those established for the proceedings to sanction monopolistic practices.
Most importantly, the Supreme Court recently rendered a resolution upholding a cartel investigation process by COFECO regarding the pharmaceutical industry, and thus upheld the imposed sanction for price fixing in public bidding proceedings. This precedent is relevant for the case itself, and because the justices created a new standard to evaluate the basis for any cartel case brought by the investigation authority. The Court allowed the authority to construct a case based on several indicia and indirect evidence and, thus, allowed presumptions as valid grounds to overcome the presumption of innocence in absolute monopolistic cases.
The specialised courts have rendered resolutions (some final, others subject to appeal) on matters such as the declaration on preponderant agents in the broadcasting and telecoms industries issued by IFT. Such courts have tended to uphold provisions of the new telecoms and antitrust statutes and issued precedents establishing that judges should lower the review standards in decisions rendered by the specialised agencies.
Recently, the courts have been questioned regarding their resolutions in several amparo claims filed by a famous anchorwoman, a member of the press, her former team and the alleged audience against a radio station that terminated her contract, claiming such termination was ordered by the executive branch (as a consequence for some investigations made public). All the claims were dismissed, and the Supreme Court denied attracting the case.
COFECE has been very active in recent months. Along with studies and regulatory instruments (such as guides), the antitrust agency has initiated several investigations for absolute monopolistic practices and cartels in fields such as aviation, sugar production, agroindustry, corn and tortillas, financial services, ports and transport; and through the use of new capacities established on the statutory provisions, COFECE has initiated investigations into airports slots, freight transportation, barley and malt production for beer, in order to determine whether there are essential facilities or entry barriers to such markets. The IFT has been active as well, mostly through regulation and proceedings imposing sanctions against telecommunications and broadcasting companies for alleged misconduct, as well as deciding proceedings that involved the allocation of concessions to create new broadcasting networks in particular.
Decisions by specialised courts and tribunals have confirmed theories developed recently and upheld a high rate of the decisions and rulings of the antitrust authorities, which are defining the legal elements regarding amparo. Nonetheless, private competition enforcement advances are still on hold.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
Historically, legislation is the main reason for the lack of developments in private antitrust enforcement in Mexico. The previous statutory provisions adversely affected and made it practically impossible to be successful in damages actions from any unlawful antitrust conduct, either a monopolistic practice (absolute – cartels – or relative) or an unauthorised and illegal merger or acquisition.
The requirements for establishing damages under Mexican law are difficult to meet since, according to the civil law system tradition, an action for damages requires the claimant to demonstrate (beyond doubt) that (1) the defendant performed the illegal conduct, (2) the damages were suffered, and (3) there is a proportional and precise direct causal relationship between such conduct and the damages. Such elements, which should be analysed under strict standards, are mandatory in private competition enforcement, together with the specific elements also mandated under the antitrust laws.
Since its origin, Section 38 of the former Federal Law on Economic Competition (LFCE) provided that there would be no additional actions on antitrust grounds than those regulated in such statute. Such provision created a burden for private competition enforcement that was meant to be resolved in the damages rules included therein, but was not. In any case, it seemed that the legislation trusted the specialised antitrust agency more than the courts.
From 1998 to 2006, Section 38 provided that those who had demonstrated to COFECO during a government public proceeding to have suffered damages as a consequence of the anticompetitive conduct could then file an action before the judiciary to obtain those damages, and then the judge could consider the estimate of damages stated by COFECO. Such provision appears to have mandated that any judicial action for damages under antitrust conducts needed a prior government public proceeding before COFECO with an outcome against the defendant, required the plaintiff to have alleged and demonstrated the damages before such agency (being a party at the proceeding), and then to have COFECO agree. The statute was not clear, but this meant that the defendant would have knowledge of the claim even before there were grounds to file it and with a chance to challenge its grounds all the way through a complex system (appeal before COFECO, possible administrative litigation, amparo proceedings, etc.).
In 2006, the LFCE’s Section 38 underwent changes. While it no longer considered the need to prove the damages in the government public proceeding (the judge could ask for the agency’s opinion), it expressly required that before the filing of a judicial action, the prior proceeding before COFECO needed to be res judicata, in other words, the ruling against the defendant must have been firm and beyond any challenge.
Both provisions directly affected the chances of any person seeking damages on antitrust grounds, mostly due to the dependence on the administrative agency’s conduct and proceeding, and the fact that the legislation did not consider the reality of Mexican litigation. Only three private antitrust enforcement actions appear to have been initiated before the federal courts, and none of them were successful.
As part of recent amendments, the legal framework has changed. Nowadays, the new LFCE seems to have taken the field more seriously, establishing under Section 134 that those who have suffered damages as a consequence of antitrust misconduct can bring actions before the specialised courts, but only after the corresponding agency’s resolution in the public proceeding becomes res judicata. It expressly provides that the resolution will have collateral estoppel effect regarding the judgment about the conduct. Apparently the agencies are the only bodies entitled to jurisdiction regarding the validity or lawfulness of the conduct.
In any case, since actions for damages are in general deemed to be civil actions, the statute of limitations is established by the Federal Civil Code. Section 1934 provides a statute of limitations of two years from the date in which the damages were caused. But Section 134 of the new LFCE provides that the time limit will be suspended once the investigation for the government public proceeding is initiated.
Considering the fact that Mexican law has provided for specialised antitrust courts, the legislature should consider the possibility of filing suits for damages based on antitrust considerations regardless of whether the specialised agencies have resolved the matter in a government proceeding.
While Mexico’s new agencies have been more active than their predecessors regarding their collaboration, communication and relationship with foreign agencies and authorities (particularly those of the US and Canada), private competition enforcement has not been treated in Mexico as a priority yet. Thus, foreign and international resolutions have been treated the same as any other case or subject matter. Now, Mexican law provides for international and transnational cooperation, and antitrust foreign judgments would be enforced under general requirements, the respect of Mexican public policies being the most important.
Currently, Section 134 of the LFCE does not provide for specific limits regarding who has standing to bring a private competition enforcement action. The only general guidance of the law is that plaintiffs must have suffered damages arising from wrongful or illegal conduct.
Nevertheless, there are two kinds of monopolistic practices in Mexico: absolute (agreements between competitors, collusion, and cartels) or relative (commercial conduct that is generally allowed, but when performed by a dominant entity produces anticompetitive effects). Absolute practices can be brought by anyone before COFECE or the IFT; in contrast, relative practices can only be alleged by the affected persons (mainly, competitors). Thus, it follows that if an action is based on a resolution derived from relative monopolistic practices, only those who brought the case to the corresponding agency should be allowed to bring it before a judge for damages.
The statutory provisions allow groups of affected consumers and some authorities (whether ex officio or on behalf of consumers) to bring class action claims before the courts.
V THE PROCESS OF DISCOVERY
In general, civil law procedures in Mexican law do not allow discovery. Thus, parties will have limited knowledge of proof and evidence before the trial. Now, given the above-mentioned provisions, parties will most likely have been through a public proceeding before the antitrust agency, and therefore can use such records and obtain information that can be be used at trial. The information obtained by an antitrust authority during investigation is, however, deemed confidential and protected.
VI USE OF EXPERTS
Expert witnesses and economists are frequently used in antitrust practice and are fundamental for strategic purposes before filing a writ; they are vital for damages claims as well. Therefore, the role of experts and economists in private antitrust enforcement can be determinative in any action.
A systemic concern though is that Mexican law in general provides for the use of experts in trial, but it is very common to have the plaintiff’s expert unconditionally support the claim, and the defendant’s expert doing the same for the response. This outcome requires the judge to appoint an expert, and it is frequent that such third expert’s opinion will act as the judgment. In other words, it is sometimes easier for the judge to follow the third expert’s opinion, instead of considering all the evidence of the case at hand.
Now, specialised courts have shown some deference regarding the resolutions issued by antitrust agencies. Such deference might affect the influence of expert witnesses’ opinions.
VII CLASS ACTIONS
Since class actions are mainly a common law institution, they received delayed recognition in civil law countries’ statutory provisions. Mexico did so in 2012 through important amendments to the Constitution and the Federal Code of Civil Procedure (FCCP) that include three kinds of class actions, and establish that any of them could be tried in a specific and particular proceeding. The FCCP includes as one of the possible grounds for a class action to claim damages the effectiveness of a res judicata resolution rendered by the antitrust authority declaring the existence and commission of any monopolistic practice under Mexican law.
Probably for the same reason and notwithstanding preference for providing the day in court for the class, the claims for class actions in Mexico are subject to strict standards of admissibility before recognising a certification and, if so, at trial. The claim should (1) establish clearly the kind of action and the reasons for bringing it as a class action, (2) demonstrate at least 30 members of the class, and (3) most importantly provide for common facts and circumstances that could be deemed sufficient to relate the class to the defendant. Also, claimants should be careful about their specific claims and grounds, since some issues should not be tried in this kind of proceeding. If the claim is admitted, the defendant will produce a response, and after a conciliation hearing, evidence is introduced in the case. The statute of limitations for class actions is three-and-a-half years from the date of the damages or misconduct.
As indicated above, the legislation has produced effects during 2014 and 2015 in the form of new claims and agreements resolving these claims. The Consumer Protection Office has been actively filing lawsuits against companies, but has not been very successful in doing so.
A class action has yet to be filed based on an antitrust resolution, but the legal field expects the use of class actions to explode as new agencies start issuing rulings in new files. In any case, the main disadvantage for certainty purposes is that these kinds of actions and proceedings are not well known in Mexico and all the players involved (judges, authorities, consumers, attorneys, etc.) still need to be educated on their use.
VIII CALCULATING DAMAGES
In general, Mexican law provides for consequential damages, which to our understanding are those recognised in Section 134 of the LFCE previously mentioned. What could be seen as punitive damages would be part of the resolution by the antitrust authority in the public proceeding, as grounds for the amount of the fine or sanction imposed, where such amount will not be paid to any affected party but to the federal government. There are certain class actions that could potentially be tried to obtain punitive damages, but experience thus far has not shown that could be the case. Actually, in general the Supreme Court has been careful about the grounds for punitive damages, only allowing them in limited circumstances.
IX PASS-ON DEFENCES
Mexico has to our knowledge yet to discuss and define relevant issues in the field, such as whether the damages suffered by a purchaser of a cartelised product are reduced or mitigated if he or she ‘passes on’ some of the overcharge to his or her own customers. But under the current provisions, the LFCE would not provide grounds for such defence, since cartels are deemed absolute monopolistic practices and, thus, are considered illegal per se. At best, a pass-on argument could be tried as grounds to reduce the possible fine. Nevertheless, as mentioned before, according to the Mexican theory of damages, if some of the damage is passed on, the amount claimed should be reduced accordingly.
X FOLLOW-ON LITIGATION
The immunity programme recognised in Mexican antitrust law has sought to resolve the possible criminal charges and the amount of a fine or sanction that could result from a proceeding before the antitrust authority, specifically those regarding absolute monopolistic practices and cartels. Also, the immunity programme is supposed to be absolutely confidential, thus the informant would not be known by third parties, even after the resolution is rendered. Therefore, the programme will not affect any private action against those who would attempt to gain immunity.
If no immunity was sought for and the conduct is seen as criminal, and a case is filed before the respective criminal authorities, the affected party could try to use the criminal case in two ways: (1) by asking for damages before the criminal case judge, as they are a consequence of the criminal liability; or (2) by using the criminal records as evidence in a civil case or action.
Privileges are duly recognised in general in Mexican law, forbidding attorneys from revealing information, producing evidence or declaring against their clients, and that of course is applicable to private competition enforcement. That being said, the new LFCE has given the agencies broad capacities and powers to investigate (that is one of the main points for the statute to change), and provisions are not clear about the standard of protection of the privileges, nor about the possible use of any evidence related to the litigation to follow.
XII SETTLEMENT PROCEDURES
Viewed as a civil claim, the case for damages is open for conciliation and settlement, which would only have legal effect between the parties that enter into it. If reached during a trial, the settlement will be given res judicata effect for purposes of enforcement.
Class actions are treated differently if and when the claim is certified and admitted: parties are given an opportunity to conciliate interests and settle the dispute, but given the nature of the proceeding and its possible reach, the law requires such agreement be sanctioned by the judge and also demands an opinion from different authorities and agencies. Such settlement would then have res judicata effect and could be enforced against third parties (particularly by the defendant, to avoid further claims). Any party that considers it should be part of the class has 18 months to join it and, if allowed, will benefit from the agreement.
There is no statutory law forbidding the parties to arbitrate a conflict on private competition enforcement, but again it would require as a requisite a prior decision by COFECE or the IFT on the conduct.
XIV INDEMNIFICATION AND CONTRIBUTION
There are no limitations as such, but the claim would need to be filed against all the companies or persons that were considered responsible for illegal antitrust conduct in a res judicata resolution rendered by an agency.
XV FUTURE DEVELOPMENTS AND OUTLOOK
Past legislation in Mexico has deterred and adversely affected private competition enforcement. With the legislative changes and the judiciary specialisation, together with the importance that antitrust in general has taken in Mexico and specifically for the leading companies and industries over the past couple of years, private competition enforcement activity should increase, and some legal institutions will develop to become useful and frequent tools.
1 Juan Pablo Estrada-Michel is a partner at López Melih & Estrada.