I ENFORCEMENT POLICIES AND GUIDANCE
An unprecedented amendment made to Article 28 of Mexico’s Constitution June 2013 resulted in competition acquiring a new status, and made it a state priority to revamp the entire competition landscape in Mexico.
Mexico was the first country to have a complete ban on monopolies added to its Constitution (in 1857). Notwithstanding, there was neither competition policy nor supplementary law to regulate such a ban on monopolies.
The current 1917 Constitution reiterated the ban on monopolies and added that ‘the law will punish severely and the authority will prosecute efficiently [...] any combination of [companies or individuals] that effectively cause consumers to pay exaggerated prices [...]’. The wording of Article 28 of the 1917 Constitution authorised an aggressive approach to banning and punishing cartel behaviour. Despite such a strong mandate, the supplementary laws that regulated Article 28 of the Constitution dated 1926, 1931 and 1934 were rarely applied and failed to create an effective competition authority, a true state policy on competition and an efficient fight against cartels. Although the 1931 Federal Criminal Code provided for some crimes addressed to individuals and related to competition matters (including cartels), in reality they were vaguely drafted, notably unconstitutional and have rarely been applied in practice, at least during the past 80 years.
In fact, Mexico had been slow to follow free-market principles on competition. By 1950, Mexico had enacted a post-Second World War law that entitled the executive branch (president) to determine maximum prices of certain products, which resulted in most basic products falling within such a price list. This reduced competition, created national private monopolies and gave rise a significant growth of state monopolies. As such, it was not uncommon for the executive branch to gather the views of competitors to determine a maximum price for essential products of the economy. In this context, fair competition meant that competitors were coordinated and sought the protection of the state to order the market and fight inflation. This state of mind of competitors had a pervasive effect since fair competition was identified with competition coordination and not with free-market principles.
This business culture prevailed until the rules of the game changed dramatically with the enactment of the 1993 Federal Law of Economic Competition, which installed efficiency-oriented principles in the new legislation, thereby departing from government intervention in the Mexican economy and leaving business decisions to free markets. Cartel behaviour under the 1993 Federal Law of Economic Competition was heavily punished, but there were several drawbacks:
- a fines, although considerable, were not sufficiently dissuasive;
- b there were no leniency programmes available (they first appeared in 2006);
- c class actions were not available (they first appeared in 2011); and
- d cartel behaviour – as set out in the competition statute – was not deemed properly criminal behaviour until express amendments to the Federal Criminal Code in 2011 and 2014.
The 2013 constitutional amendment brought about vital changes to the competition framework:
- a the creation of two constitutional autonomous agencies for competition matters: the Federal Institute for Telecommunications (IFT), entrusted with competition matters in telecoms, radio and broadcasting; and the Federal Economic Competition Commission (Cofece), entrusted with competition matters in all other sectors of the economy;
- b the separation of the investigator (investigating authority) from the decision-making body (the Plenary of Cofece or the IFT);
- c the creation of specialised federal administrative district courts and collegiate circuit courts (that eventually were based only in Mexico City) devoted to hearing challenges against definitive and other decisions of the competition authorities;
- d the elimination of an administrative challenge and confirmation that definitive decisions by the competition authorities can only be challenged through indirect amparo or constitutional challenge through a subsequent federal appeal before specialised collegiate circuit courts;
- e confirmation that there is no possibility of a suspension or stay of the proceedings during amparo proceedings, except in decisions related to fines and divestitures of assets issued solely by Cofece;
- f the authority for Cofece and the IFT to issue decisions related to determining essential facilities, eliminating barriers to entry and ordering divestitures of assets;
- g the order to Federal Congress to update the relevant statutes dealing with competition matters; and
- h the order to Federal Congress to punish severely (from the criminal standpoint) monopolistic practices (i.e., cartel behaviour).
As a consequence of the 2013 constitutional amendment, the Federal Congress passed new federal legislation, the Federal Economic Competition Law (FECL),2 which is applicable within the entire Mexican territory. Mexico has no state competition statutes. The FECL – built from its predecessor – regulates and sanctions cartels, horizontal agreements or collusive behaviour, referred to in the FECL as ‘absolute monopolistic practices’ or per se rule violations.
Cartel behaviour comprises any horizontal agreements, understanding and covenants among competitors that have as their purpose or effect any of the following shortlisted behaviours:
- a price fixing;
- b output restriction;
- c market allocation;
- d bid rigging; or
- e information exchange with any of the above purposes or effects.
Unlike in other jurisdictions (i.e., the United States and the European Union), there are no further behaviours that differ from those so established in the FECL. Therefore, the FECL lacks a catch-all provision since it could be considered unconstitutional for violating legal certainty principles enshrined in the constitution as affirmed by the Federal Supreme Court in the 2003 Warner-Lambert case.3
The enforcement of the FECL is entrusted to Cofece and the IFT in their respective jurisdictions. Each competition authority has a separate investigating body entrusted with investigating cases, and these bodies have significant powers, such as issuing requests for information, compelling the appearance of individuals and, more importantly, ordering dawn raids. In November 2013, Cofece and the IFT issued their own regulations of the FECL (the Regulations). These Regulations provide a legal framework to enable Cofece and the IFT to comply with their constitutional mandates.
As a formal requirement to commence an investigation related to a cartel offence, the statutory framework provides that there must be an objective cause4 that justifies the opening of an investigation. That cause could comprise indications of the existence of a cartel offence.
Article 3 of the Regulations provides that there are at least four independent hypotheses or presumptions of conduct that indicate the existence of a cartel offence:
- a an invitation or recommendation addressed to one or several competitors to coordinate prices, output or the conditions to produce, commercialise or distribute products or services in a market, or the exchange of information for such an objective or effect;
- b the sale price offered within the national territory by two or more competitors of products or services that are the subject of international trading are considerably higher or lower than their international reference price, or the trend of their evolution for a specific period of time is considerably different from the trend of international prices within the same time period, except for those cases in which the difference arises from tax provisions or transportation or distribution expenses;
- c instructions, recommendations or adopted commercial standards by business chambers, associations, professional associations or similar to coordinate prices, offer products or services or other conditions to produce, distribute or commercialise products or services in a market, or the exchange of information for such an objective or effect; and
- d two or more competitors set the same minimum or maximum prices for a product or service, or adhere to a sale or purchase price of a product or a service that was issued by an association, business chamber or competitor.
In addition, Cofece has issued documents (guidelines and technical criteria) that, although not legally binding, include formal guidance for the interpretation and application of the FECL when prosecuting and sanctioning cartels, as follows:5
- a Guidelines to Initiate an Investigation against Offenders of Monopolistic Practices;
- b Technical Criteria to Request Dismissal of a Criminal Prosecution against a Cartel Offender;6
- c Guidelines whereby the prosecuting authority sets forth the methodology to carry out its investigations against cartel offences; 7
- d Guidelines to Regulate Information Exchanges among Economic Agents that could trigger competition concerns,8 under which Cofece will use worldwide best practices on this topic;9 and
- e Technical Criteria related to Provisional Measures during investigation procedures.10
Cofece has made the fight against cartels its main priority. Its Strategic Plan 2014–201711 states that the fight against monopolies and the eradication of conduct that might harm competition are its priority and constitutional mandate, and deems cartel offences as the most harmful of all anticompetitive practices.12 Consequently, Cofece now has a strong message regarding its zero-tolerance policy (except for immunity applications) against cartel offences. The recently launched Strategic Plan 2018–202113 (30 November 2017) confirms prior objectives: (1) timely investigation of anticompetitive practices; and (2) consolidation of the leniency programme.14
II COOPERATION WITH OTHER JURISDICTIONS
The Inter-American Development Bank (IDB) has recognised that competition policy enforcement is no longer a national task. During the 2013 Regional Competition Agreements for Latin America and the Caribbean, the IDB and the Regional Competition Centre for Latin America acknowledged that:
in a globalized economy, with many economic actors operating in international markets (regional and global), it is difficult to continue conceptualizing competition policy as a strictly domestic phenomenon or national jurisdiction. The internationalization of markets brought the internationalization of anticompetitive behaviour and these, in turn, brought the need to internationalize regulations.15
Many jurisdictions worldwide are seeking the consistent application of their competition policies as a result of the versatile international economy. Mexico is no exception, especially where the structural reforms in the finance, telecoms, competition and energy sectors are concerned. Cofece has publicly recognised that an adequate competition policy reduces high market concentration and diminishes possibilities for collusion, and has indicated its strong commitment to eradicate cartel behaviour.16 Therefore, for a period of more than 20 years, Mexico has executed cooperation agreements with several authorities and countries around the world. In addition, Cofece has participated extensively with the International Competition Network to adopt the best international practices on cartels.
For instance, Mexico has several bilateral cooperation agreements in place with the United States17 and Canada,18 under which these countries agree to fully collaborate with their local competition authorities. On the other hand, the World Economic Forum has recognised that the economic resilience of the Latin American region will depend on its capacity to strengthen the fundamentals of its economy by boosting its level of competitiveness.19 In this context, 2014 and 2015 have seen the consolidation of local competition policies in Latin America, since most of the jurisdictions in this region have reformed their local legislation to adopt and renew their local regimes.20
Hence, the Mexican competition authorities are open to supporting international cooperation, although the scope of their cooperation is limited to the legal boundaries of Mexico’s local legislation. This means, however, that the Mexican competition authorities are cooperating with other agencies worldwide to achieve an adequate and strong competition policy.
Although the Mexican competition authorities could conduct a coordinated investigation with other jurisdictions if an investigated cartel offence had also taken place in Mexico (or had effects in Mexico), neither Cofece nor the IFT have the capacity to cooperate with information requests or extraterritorial discovery from other authorities, as both require the intervention of the Mexican judiciary and a set of different international treaties.
Cooperation agreements executed by the Mexican authorities are limited to local legal boundaries and restrictions. Non-public information and evidence that the Mexican competition authorities obtain directly from cartel members during their prosecution cannot be shared with other authorities if the information or evidence is protected under local confidentiality laws or is obtained without gaining the consent of the investigated party (which will be highly unlikely to occur).
A similar circumstance arises in the context of, for example, extradition cases.21 Although Mexico could eventually accede to extradition requests, as its local legislation and international treaties formally contemplate such a faculty,22 there are several hurdles, such as:
- a complying with the statutory formalities under the extradition principles and rules;23
- b the complexity of local procedure to endorse the extradition;
- c the inconsistency between international treaties and local and foreign legislation; and
- d the lack of formal legally binding obligations between nations to force extradition.
These are only some of the factors that indicate that multi-jurisdictional cooperation is not enough.
Hence, interagency cooperation is limited as a form of enforcing a competition policy and the strategic measures that need to be adopted to prosecute anticompetitive practices worldwide. However, the Mexican competition authorities have the obligation to act independently and autonomously from other authorities. The existence of several international cooperation agreements does not relegate any local obligations that the Mexican competition authorities are subject to.
III JURISDICTIONAL LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
The FECL clearly outlines a general rule applicable for the sanctioning of a cartel (as previously mentioned, known as an absolute monopolistic practice).
Article 53 of the FECL states that any agreement or combination among competitors will be sanctioned if it has the purpose (objective) or the effect of the following:
- a price fixing;
- b restraining output;
- c allocating markets;
- d bid rigging; or
- e exchanging information with such purposes or effects.
The general rule provided in Article 53 has no jurisdictional limitations for its enforcement, and it does not make a distinction as to whether the agreement or collusion should be performed by an economic agent that has a physical presence in Mexico, or whether it is related to Mexican markets. There are also no de minimis rules. It is immaterial whether the cartel offence was formally executed locally or abroad, or whether it has an impact that harms Mexican markets or consumers, or both; the offender could be considered to be liable in all the extensions of the law. Likewise, absolute monopolistic practices are considered by statute null and void, and no longer render any legal effect.
Moreover, Article 53 not only sanctions the tangible execution of an anticompetitive agreement or combination, but also the intention of executing the conduct even if it is never formally executed, and the effects that might arise from the anticompetitive conduct even if the offender did not have any such intention.24 Administrative liability is independent of civil and criminal consequences that might arise.
Contrary to what occurs in other jurisdictions, there are no exceptions to the application of the competition law in Mexico; therefore, every person must abide by its content. However, liability in cartel prosecutions has been a hotly debated topic in Mexico, especially where the Mexican competition authorities render a final decision and resolve to make parent companies liable for actions executed by their subsidiaries, as neither the former Competition Act nor the current FECL fully regulate this controversial topic.
Owing to the lack of clarity in the statutory framework, the Mexican Supreme Court of Justice decided a relevant precedent in the matter. When resolving an appeal in 2007 of a cartel investigation against the Coca-Cola Export Corporation,25 the Supreme Court resolved that to prove the existence of an economic group through which parent companies should be held liable for the actions of their subsidiaries, at least two elements were required: a control element and a coordination element.
The Supreme Court decided:
In order to consider the existence of an economic group and that it might be considered as an economic agent in terms of the Federal Economic Competition Law, it should be analysed if the company, directly or indirectly, coordinates the activities of the group to operate in the market and, furthermore, it can exercise a decisive influence or control over the other company, either de jure or de facto.
In this regard, the Mexican liability attribution system is based on the fact that the authority has the obligation to prove, without doubt, the nexus of liability between the execution of the anticompetitive conduct and the actual intervention of the offender. Parent companies should not just be held liable for having an equity participation in their subsidiaries in the absence of their directions to the offender; rather, the authority has the obligation to evidence that the execution of anticompetitive conduct was a result of a parent company’s decisive intervention. In addition, specialised federal courts recently issued jurisprudence recognising that companies could be held responsible despite the fact that the individuals who executed the conduct on their behalf are not their formal or direct employees.26
In addition, the Supreme Court decided at the end of 2015 that, in accordance with Article 28 of the Constitution, cartel offences will be sanctioned despite their lack of effect on competition or even when they do not provoke a price increase or the payment of exaggerated prices despite the express wording of the constitutional provision.27
IV LENIENCY PROGRAMMES
The FECL provides a leniency programme for cartel offences.28 The leniency programme provided in the FECL is similar to leniency or amnesty programmes in other jurisdictions. The Mexican programme grants immunity to those cartel offenders who appear before the authority to self-report a cartel violation.
The leniency programme grants immunity to cartel offenders who request it by exempting them from criminal prosecution and disqualifications,29 and reducing the fine to its lowest possible amount. There is no exemption for damages in private or class actions. However, leniency protection is granted only if the following occurs:
- a a cartel member is the first to apply to the programme and recognises its participation in the cartel;
- b a cartel member provides enough evidence that allows the investigating authority to initiate an investigation procedure or at least allows the authority to presume the existence of a cartel;
- c the applicant fully and continuously cooperates with the competition authority throughout the entire procedure by providing information and collaborating with all requests; and
- d the applicant implements all necessary actions to terminate its participation in the cartel.30
In cases where there is already a first-leniency applicant, the remaining cartel offenders can obtain other types of benefits, which include partial fine reductions and full criminal prosecution immunity when they provide additional evidence related to the investigated conduct. The following table outlines what type of benefit applicants might receive:
Reduction of fines
Maximum fine reduction*
30% to 50% fine reduction
20% to 30% fine reduction
Fourth and subsequent
Up to a 20% fine reduction
* The minimum fine is equivalent to one Unit of Measure (approximately 75.49 pesos).
As in other jurisdictions, the marker system in Mexico is very relevant when applying to the leniency programme. Pursuant to the provisions set forth in the FECL and the Guide for Leniency Application Programmes issued by Cofece,31 a leniency applicant will obtain a marker after applying for the leniency programme.32 Nevertheless, it is common practice that, prior to formally requesting the leniency benefit, outside counsel conducts an informal telephone call or meeting with the investigating authority or his or her director for cartel investigation, or both, to review whether there is a prior applicant in a specific market without having to disclose the identity of the cartel applicant. Likewise, when formally submitting the leniency application, the applicant does not need to provide relevant information related to the cartel, as it can provide this subsequently.
According to Article 103 of the FECL, the investigating authority has the obligation to preserve as confidential the identity of the leniency applicant at all times and without exceptions. Likewise, information provided by the leniency applicant will be classified as confidential, and no third party (including private practitioners or outside counsel) should access such information.
The leniency programme has had a great success in Mexico. According to Cofece’s statistics, up to 2016, 113 leniency applications have been submitted since the implementation of the programme in 2006. Fifty-two of those applications were made between 2015 and 2016, of which 52 per cent were submitted by international companies and 47.8 per cent by nationals.33 However, the number of leniency applications decreased in 2017 to only 11,34 which was identified as a challenge to overcome for 2018–2021. Cofece deems that it needs to reinforce the marketing of its leniency programme to make it attractive to potential leniency applicants.
As a result of the June 2013 constitutional amendment, the incentives for collusion have changed in Mexico. The reform to Article 28 of the Constitution introduced a series of new and tougher penalties against cartel offences.
Pursuant to Article 127 of the FECL, any company or individual who actively participated in the cartel, or who contributed, induced or cooperated in the cartel behaviour, can be held liable. Monetary sanctions may vary in accordance with the degree of participation of the company or individual as follows:
Type of intervention
Active participation in the conduct
Up to the equivalent of 10% of the income of the offender
Participation through contributing, inducing or propitiating the conduct
Up to the equivalent of 180,000 times the Units of Measure*
* Currently, this fine may be raised to 13.5 million pesos.
Article 130 of the FECL provides that certain elements should be taken into consideration by the competition authority when calculating fines, including:
- a harm caused;
- b indications of intentionality;
- c market share;
- d market size;
- e duration of the conduct; and
- f the economic capacity of the offender.
Recidivism or a second offence entitles the competition authority to either double the fine (i.e., up to the equivalent of 20 per cent of the income of the offender) or order the divestiture of assets, rights, equity participation or shares under the terms of Article 131 of the FECL.
Individuals who participate either directly or indirectly in the commission of a cartel offence as a representative of a company might be disqualified from acting as a board member, administrator, director, manager, officer, agent or representative for a period of up to five years, and might be subject to a fine that could be equivalent to 200,000 times the Units of Measure.35
Fines are not the only sanctions applicable against cartel offenders. In addition to the major constitutional reform and the issuance of the new FECL, the Federal Criminal Code was modified to deter cartel behaviour. 36
Although the criminalisation of cartel offences is not entirely new to the Mexican competition system,37 the applicable sanctions have been toughened up, with imprisonment sanctions being modified to a minimum of five years and a maximum of 10 years.38 Under the current criminal rules, there is no possibility of commuting a prison sentence into another sanction. Therefore, a cartel offender in Mexico who is criminally prosecuted and sanctioned will necessarily serve time in jail.
Criminal prosecution can only be initiated by a formal request from the competition authority to the Federal Criminal Prosecutor. A major change is that Cofece or the IFT could give criminal notice to the Federal Attorney’s office once a statement of objections has been rendered, and not just at the time the competition decision has become res judicata. In fact, in February 2017, the first criminal prosecution request was filed by the Investigative Authority of Cofece before the Attorney General Office (Procuraduria General de la República) in a cartel investigation related to the pharmaceutical industry.
Both the FECL and Federal Criminal Code grant the competition authorities discretional powers to request a dismissal of the charges only when the offender requests it, the offender complies with all administrative sanctions, there is no legal action to challenge a Cofece or IFT decision and there is no recidivism by the offender.39
There is no Mexican legal tool that allows settlement for cartel behaviour. However, corporate criminal liability40 is a new legal tool that entered into force in June 2016 and, given the overhaul of the criminal justice system, will serve as a deterrent to cartel behaviour. To date, there is no corporate criminal liability for cartel behaviour crimes (Articles 11bis and 254bis of the Federal Criminal Code). Notwithstanding, in October 2017, a member of the Federal Mexican House of Representatives introduced a bill to amend – inter alia – the shortlist of crimes that could be the subject of corporate criminal liability and introduced that cartel behaviour could be prosecuted from the corporate criminal liability standpoint. If this bill is finally approved after all the legislative process, it would mean that cartel behaviour would not only be addressed and sanctioned to individuals (natural persons) but also to corporations and legal entities. The discussion on this issue will be vital because the current debate in specialised competition courts concerns the parent-liability to assert administrative liabilities and fines. Thus, the combination of corporate criminal liability and parent-subsidiary responsibility could not be discussed and implemented lightly. If this bill is passed, it will make companies reinforce their compliance and antitrust programmes.
VI ‘DAY ONE’ RESPONSE
The reinforcement of the investigating authority’s powers to obtain information during an investigative procedure is strong and somewhat disproportionate41 when considered in connection with certain legal vacuums (i.e., proper regulation about the protection of attorney–client privilege and confidential information).
The FECL provides a facility for issuing written requests for information without having the obligation to identify the party that is required to provide the information. A similar circumstance occurs when the investigating authority requires individuals to appear before the authority to testify.
Failure to provide information when these kinds of requests are issued or when an individual is required to testify before the authority (without even having the option of a proper defence through an attorney who can formally intervene during the declaration) will result in the imposition of heavy fines and will not excuse the required party from its obligation to provide information.
Likewise, dawn raids are executed with a certain amount of uncontrolled force, as the FECL and its regulatory provisions enable the investigating authority to issue a dawn raid warrant without an authorisation from the judiciary. Moreover, during a dawn raid, the authority can access any section, department, IT data or location that is part of the premises specified in the search warrant. In addition, neither the FECL nor its Regulations clearly delimit the extension of their dawn raids as none of the statutes regulate, for example, whether the investigating authority can perform a dawn raid in private domiciles, how to manage attorney–client privilege and confidential information, or whether the prosecuting authority can intervene in all types of information, are other legislative issues absent from our statutes.42 Recently, one of the specialised courts rendered a decision whereby certain parameters to protect attorney–client privilege information were introduced to the competition legal system. This decision will be the cornerstone of an unregulated subject to protect communications between a client and its legal counsel.43 In addition, Cofece may withdraw its first attempt to regulate attorney–client privilege during dawn raids, in order to analyse it in close detail.44
Dawn raids can be executed with such excessive force because of the fact that, with the recent amendments, the Federal Criminal Code also introduced a new misdemeanour,45 which is penalised with a one- to three-year imprisonment sanction in cases of obstructing, altering or destroying information and impeding the proper execution of a dawn raid.
Therefore, an immediate response against the investigative powers of the prosecuting authority is highly recommended and should include a well-trained response team and advice from external specialised counsel because of the increased sophistication of the investigating authority.
VII PRIVATE ENFORCEMENT
Private enforcement and class actions against cartel offences have not had the same degree of force in Mexico as they have in other jurisdictions. The prosecution and sanctioning of cartel offences can only be executed by the competition authorities. This means that, as a result of the new reformed competition regime, only the constitutionally autonomous bodies, Cofece and the IFT, have a relevant role, as no private enforcement can commence without a prior decision by the competition authorities.
On the other hand, local civil legislation has always made possible the claiming of damages that arise from an antitrust violation, and since 2011 it is possible to initiate class actions. However, there are still several hurdles for such legal actions to occur.
Article 134 of the FECL provides that a damage claim will only proceed when the decision rendered by the competition authority is definitive. Furthermore, the Supreme Court of Justice has issued case law on the matter, recognising that for a damages claim to proceed, the specialised authority should have proven the existence of the administrative offence.46 The cases available regarding this subject have been favourable to respondents, although they dealt with vertical restrictions and not cartel behaviour.
In addition, the Federal Code of Civil Proceedings governs class actions that require a res judicata decision from the competition authority, clearly evidencing the existence of a cartel offence. Therefore, although there has been a collective effort during the past few years to encourage class actions and damages claims against cartel offences, there are certain rules that make implementation difficult (i.e., the need to prove individual damage in ancillary proceedings).47
VIII CURRENT DEVELOPMENTS
A great deal of legal development has occurred in Mexico in recent years to send a clear message to deter cartels. Cofece is very active in the enforcement of the local policy as constant investigations against cartel behaviour have taken place during the past couple of years. Industries such as pharmaceutical, poultry, ground and maritime transportation, pension funds and auto parts have been under constant scrutiny.
The revamped legislation and newly created authorities seek to send a clear message to deter cartels in the markets. This zero-tolerance enforcement policy will have to be tempered by future legislation on cartel settlements to avoid the burden of a full administrative proceeding. Likewise, specialised courts have had a very active role in setting some boundaries and limits on what the competition authorities can do when asserting cartel behaviour.
A recent example is a case in which, for the first time in 10 years, Cofece revoked leniency benefits during the course of a cartel investigation. Mitsubishi Heavy Industry (MHI) and Denso Corporation (Denso) were sanctioned for price fixing and unlawful information exchanges, with fines equivalent to 72 million pesos.48 Based on the merits of the case, MHI and Denso colluded over a private tender regarding the acquisition of air-conditioning compressors.
In 2013, one of the impeached parties applied for leniency benefits, a circumstance that triggered the initiation of the investigation. However, Cofece’s Plenary revoked such benefits when rendering the final resolution as a result of not ‘fully cooperating’ in the procedural phase of the investigation.49 This was a strong message from the principal body of Cofece; their main objective of eradicating cartel behaviour was addressed along with the fact that, in cases where leniency has been requested, the competition authority expects full cooperation at all times. The case is currently under judicial review, whereby a first decision has been rendered by the specialised district judge reverting Cofece’s decision and setting a precedent in the sense that despite applying to leniency benefits, legal defence rights cannot be limited by Cofece as means of a tool to secure the leniency effectiveness.50 The Mexican competition policy still needs to shape a settlement procedure for cartels to provide a means of exit to offenders without the need to incur the burden of a full procedure that converts a dilemma into an all-or-nothing situation. This is the case even if no leniency benefits were granted, as the current mechanism contemplated by the FECL obliges the parties to face complex and time-consuming procedures despite admitting guilt.
Moreover, another relevant recent case refers to the first civil action related to a cartel investigation. The case concerned a bid rigging cartel by certain laboratories against the Mexican Institute of Social Security, who were sanctioned by Cofece back in 2010. The case, which was later confirmed by the Supreme Court, led the social security institute to file a civil action against all impeached laboratories, claiming a total cumulative award of 192 million pesos.
The case – the first of its kind in Mexico – has been recently admitted by one of the specialised district judges and is awaiting a decision. It is expected that this case will open the door for new actions to be brought against cartel offenders (of which there had been none in Mexico until last year), which will result in the strengthening of private enforcement locally.
1 Omar Guerrero Rodríguez is a partner and Martín Michaus Fernández is an associate at Hogan Lovells (Mexico).
2 The FECL was issued on 23 May 2014 but became effective on 7 July 2014.
3 See Amparo en Revisiõn 2617/1996, Supreme Court of Justice of the Nation.
4 Article 73 of the FECL.
5 Cofece has also published (on 30 November) a preliminary guideline that makes reference to collaboration agreements between competitors during a public consultation process. It is expected that this document will be approved in the first months of 2018.
6 These technical criteria were the subject of a public consultation period that ended in November 2015. Cofece issued the final document on 16 December 2015. They were subsequently amended and republished on 28 November 2016.
7 This Guide was the subject of a public consultation period that ended in October 2015. Cofece issued the final document on 21 December 2015.
8 This Guide was the subject of a public consultation period that ended in October 2015. Cofece issued the final document on 17 December 2015.
9 Cofece basically referred to experience from the United States and the European Union.
10 These technical criteria were the subject of a public consultation period that ended in November 2015. Cofece issued the final document on 16 December 2015.
11 Available at https://cofece.mx/cofece/index.php/transparencia/planeacion-y-desempeno.
12 Page 13, Cofece Strategic Plan 2014–2017.
13 Available at https://www.cofece.mx/wp-content/uploads/2017/12/PLAN-ESTRATEGICO-2018-2021.pdf.
14 Page 19, Cofece Strategic Plan 2018–2021.
15 Inter-American Development Bank and Centro Regional de Competencia para América Latina, ‘Acuerdos Regionales de Competencia en América Latina y el Caribe’ (2013).
16 Cofece Strategic Plan 2014–2017.
17 For example, NAFTA; Mutual Legal Assistance Treaty (MLAT), a Treaty on Mutual Legal Assistance in Criminal Matters, 1987; Agreement regarding the application of competition laws (ACA), 2000; and the Organisation for Economic Cooperation and Development (OECD) Revised recommendation of the Council Concerning Co-operation between Member countries on Anticompetitive Practices affecting International Trade, 1995 (C(95)130/Final).
18 For example, the Agreement between the Government of Canada and the Government of the United Mexican States regarding the application of their competition laws, 2001.
19 World Economic Forum, The Global Competitiveness Report, 2014–2015.
20 Examples include Argentina, Brazil, Colombia and Uruguay.
21 Mexico has executed more than 36 bilateral and multilateral extradition treaties and has local criminal and extradition laws.
22 For example, the US and Mexico Extradition Treaty of 1978 includes and provides, subject to several complex provisions, the possibility of extraditing persons in respect to specific offences, including ‘offenses against the laws relating to prohibition of monopoly or unfair restrictions’ (Item 26). However, the Mexican Federal Criminal Code sanctions specific conducts, which eventually will generate a discussion regarding the lack of consistency between such statutes.
23 For example, double criminality, non bis in idem (double jeopardy), reciprocity, jurisdictionality, commutation and speciality.
24 In fact, the intentionality factor might only be considered when calculating the fine assessment in accordance with Article 130 of the FECL.
25 Amparo en Revisiõn 169/2007. The Coca-Cola Export Corporation. Supreme Court of Justice.
26 See Práctica Monopólica Absoluta, Condiciones de Responsabilidad de los Partícipes, Alcance de la Expresión ‘En Representación O Por Cuenta Y Orden’, Prevista En El Artículo 35, Fracción IX, De La Ley Federal De Competencia Económica Vigente Hasta El 6 De Julio De 2014. Plenary of the Specialised Circuit in telecommunications, broadcasting and competitions matters. Registry: 2012679.
27 See Amparo en Revisiõn 839/2014, Amparo en Revisiõn 289/2015, Amparo en Revisiõn 804/2015 and Amparo en Revisiõn 971/2015. Mexican Supreme Court of Justice, Second Chamber.
28 See Chapter IV of the FECL, and especially Article 103.
29 The leniency protection can be extended to those individuals, subsidiaries and affiliates included in the leniency application.
30 Currently, Cofece is proposing an amendment to its Regulations whereby, to obtain leniency benefits, applicants must identify specific individuals that shall be beneficiaries of the leniency application (if leniency is requested by a company). However, as at 8 December 2017, these amendments are still under a public opinion process and have not been approved and published.
31 Available at https://cofece.mx/cofece/index.php/normateca.
32 This can be requested via email or telephone at any time prior to the closing ruling of the investigative phase of a procedure.
33 Cofece statistics: see https://www.cofece.mx/cofece/index.php/prensa/historico-de-noticias/celebra-cofece- 10-an-os-del-programa-de-inmunidad.
34 Page 12, Cofece Strategic Plan 2018–2021.
35 Currently, this fine may be raised to 15 million pesos.
36 See Article 254bis of the Federal Criminal Code.
37 Criminal sanctions against specific cartel offences were introduced in Mexico in May 2011 as a result of a prior reform to the former Competition Act.
38 See the 2014 amendment to the Federal Criminal Code (Article 254bis) dated 23 May 2014.
39 Under the Technical Criteria to Dismiss Criminal Prosecution, Cofece will also take into consideration any recidivism of the offender, the offender’s commitment to contribute with actions that encourage competition and the negative social impact of the cartel.
40 See Section 421 of the National Criminal Procedure Code published on 5 March 2014 in the Federal Official Gazette.
41 The proposed amendment bill of October 2017 by a member of the House of Representatives seeks to punish certain obstruction of justice activities as federal crimes with imprisonment terms of between five and 10 years: (1) declaring falsely before the authority (Cofece or IFT); and (2) delivering false information to Cofece or the IFT. These penalties are unprecedented under Mexican criminal law.
42 According to the FECL, dawn raids can last up to two months and can be extended for a similar period of time when the case justifies it. However, common practice shows that a dawn raid does not usually last more than a day.
43 See Recurso de Queja 41/2016, Primer Tribunal Colegiado de Circuito en materia administrativa especializado en competencia económica, radiodifusión y telecomunicaciones.
44 In addition, around October 2017, Cofece intended to modify the Regulations to limit the protection scope of attorney–client privilege during dawn raids. However, this modification is expected to be withdrawn, to be analysed in close detail.
45 See Article 254bis 1 of the Federal Criminal Code.
46 See Propiedad Industrial. Es Necesaria Una Previa Declaración Por Parte Del Instituto El Instituto Mexicano De La Propiedad Industrial, Sobre La Existencia De Infracciones En La Materia Para La Procedencia De La Acción De Indemnización Por Daños Y Perjuicios. Jurisprudencia (Civil). Primera Sala. Registro: 181491. Available at http://126.96.36.199/sjfsist/Paginas/tesis.aspx.
47 Notwithstanding, a June 2017 judgment by the First Chamber of the Supreme Court of Justice seems to have relaxed such a strict rule in the decision Amparo Directo 49/2014 (class action commenced by Profeco against Telefónica Movistar).
48 Docket IO-001-2013, Federal Economic Competition Commission.
49 Cofece’s Press Release – see https://cofece.mx/cofece/index.php/prensa/historico-de-noticias/sanciona-
50 A similar scenario is being faced in the Pension Fund case, in which certain amnesty applicants had leniency benefits withdrawn as individuals and companies for the perceived lack of full and total cooperation at all times and specifically for raising defences during the proceedings. This case is also under current court review by the specialised district courts in competition and telecoms matters but that decision would interpret and clarify the extent of cooperation during the proceedings.