The Cartels and Leniency Review: Mexico
Enforcement policies and guidance
An unprecedented amendment made to Article 28 of Mexico's Constitution in June 2013 resulted in competition acquiring a new status and made revamping the entire competition landscape in Mexico a state priority.
Mexico was the first country to have a complete ban on monopolies added to its Constitution (in 1857). Notwithstanding, there was neither a competition policy nor any supplementary law to regulate such a ban. 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 causes 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 monopolistic matters (including cartels), in reality they were vaguely drafted, notably unconstitutional and have rarely been applied in practice, at least during the past 88 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 an extensive list, with most basic products falling within that price list. This reduced competition, created national private monopolies and gave rise to a significant growth in 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 first-ever 1993 Federal Economic Competition Law, which installed efficiency-oriented principles in the new legislation, thereby departing from government intervention in the economy and leaving business decisions to free markets. Cartel behaviour under the 1993 Federal Economic Competition Law was heavily punished, but there were several drawbacks. Fines, although considerable, were not sufficiently dissuasive. There were no leniency programmes available (they first appeared in 2006). Class actions were not available (they first appeared in 2011). Cartel behaviour, as set out in the competition statute, was not specifically deemed criminal behaviour until express amendments were made to the Federal Criminal Code in 2011 and 2014. Private damages actions were rare, and the only two at the time resulted in adverse decisions for the plaintiffs.
Moreover, the competition authority was connected with the Ministry of Economy and the Executive Branch, undermining its independence. And as the competition authority had the sole power to investigate and direct proceedings, and decide and hear internal appeals, this was criticised for clustering too much power in the competition authority and undermining due process and constitutional impartiality principles. Equally, the competition authority was understaffed for tackling the significant sectors of, and actors in, the Mexican economy, such as the telecoms and broadcasting sector, which accounted for much of the authority's resources and time, leaving little time for Mexico's other industries.
The 2013 constitutional amendment brought about the following vital changes to the competition framework:
- the creation of two constitutional autonomous bodies for competition matters no longer dependent of any branch of government: the Federal Institute for Telecommunications (IFT), entrusted with competition matters in telecommunications, radio and broadcasting; and the Federal Economic Competition Commission (COFECE), entrusted with competition matters in all other sectors of the economy;
- the separation of the investigator (the Investigating Authority) from the decision-making body (the Plenary, or Board of Commissioners, of COFECE or the IFT);
- the creation of specialised federal administrative district courts and collegiate circuit courts (seated only in Mexico City) devoted to hearing challenges against definitive and other competition authority decisions (including three additional federal unitary tribunals created in 2018 and a third district court created in 2021 because of the unparalleled workload facing the specialised courts);
- the elimination of an administrative challenge and confirmation that definitive decisions made by the competition authorities can only be challenged through an indirect amparo action or a constitutional challenge through a subsequent federal appeal before specialised collegiate circuit courts;
- confirmation that there is no possibility of a suspension or stay of the proceedings during amparo proceedings, except in decisions relating to fines and divestitures of assets issued solely by COFECE where they will be enforced once all means of challenge have been exhausted;
- the authority for COFECE and the IFT to issue decisions relating to determining essential facilities, eliminating barriers to entry and ordering divestitures of assets;
- the order to Congress to update the relevant statutes dealing with competition matters; and
- the order to Congress to punish severely (from the criminal standpoint) monopolistic practices (i.e., cartel behaviour).
As a consequence of the 2013 constitutional amendment, Congress passed new federal legislation in the form of the more robust Federal Economic Competition Law (FECL),2 which is applicable within the entire Mexican territory, as Mexico has no state-specific competition statutes. The FECL, based on its predecessor legislation, regulates and sanctions cartels, horizontal agreements and collusive behaviour, referred to in the FECL as 'absolute monopolistic practices', and treated as rule violations per se.
In the context of the FECL, cartel behaviour comprises any horizontal agreement, understanding or covenant among competitors that has as a purpose or effect any of the following types of conduct:
- output restriction;
- market or customer allocation;
- bid rigging; and
- information exchanges with any of the foregoing purposes or effects.
Unlike in other jurisdictions (e.g., the United States and the European Union), there are no supplementary behaviours that differ from those established in the FECL. Therefore, the FECL has no catch-all provision, as such a provision could be considered unconstitutional for violating principles of legal certainty enshrined in the Federal Constitution (as affirmed by the Federal Supreme Court in the 2003 Warner-Lambert case3). Similarly, federal judges have no authority to create offences, rather these have to be the result of legislative process and specifically enshrined within the law.
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. Moreover, in November 2013, COFECE and the IFT issued their own regulations for implementing the FECL (the Regulations), which have been further complemented in recent amendments. These Regulations, in essence, provide a legal framework to enable COFECE and the IFT to comply with their constitutional mandates.
As a formal requirement to commence an investigation relating to a cartel offence, the statutory framework provides that there must be an objective cause4 that justifies the commencement of a case. And 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 rebuttable presumptions of conduct that indicate the existence of a cartel offence:
- 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 an objective or effect of this kind;
- the sale prices 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 is considerably different from the trend of international prices within the same period, except for those cases in which the difference arises from tax provisions or transportation or distribution expenses;
- 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 an objective or effect of this kind; and
- 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 guidelines and technical criteria that, although not legally binding in some cases, include formal guidance for the interpretation and application of the FECL when prosecuting and sanctioning cartels. The following are the most significant ones applicable to cartel prosecution and these were recently strengthened in 2020 and 2021 through some minor amendments:
- Guidelines on the Initiation of Investigations into Monopolistic Practices;
- Technical Criteria to Request Dismissal of a Criminal Prosecution against a Cartel Offender;5
- Guidelines on the Conduct of Investigative Proceedings into Relative Monopolistic Practices and Illicit Concentrations;6
- Guidelines on the Exchange of Information between Economic Agents7 (dealing with information exchanges that could trigger competition concerns, and indicating that COFECE will follow worldwide best practice in this area8); and
- Technical Criteria for the Request and Issuance of Precautionary Measures during Investigative Proceedings, and for Setting Commitments.9
Moreover, around January 2018, COFECE pre-published, for public consultation, its first-of-a-kind guidelines on collaboration among competitors. In essence, the guidelines aimed to establish the elements COFECE would take into account when assessing the legality of any type of collaboration or cooperation between competitors (i.e., horizontal agreements). However, although the public consultation period has ended, COFECE has confirmed that it will not issue a final version of these highly anticipated guidelines. As a result, the authority has included additional guidance on competitor collaborations in its 2021 Merger Control Guidelines. The new Guidelines provide that, as an alternative to deter cartel consequences that might arise from collaborations, competitors may voluntarily notify a collaboration as a concentration to receive an approval from COFECE.
COFECE has made the fight against cartels its main priority and its Strategic Plan 2018–202110 states that the fight against monopolies and the eradication of conduct that might harm competition are both its priority and its constitutional mandate, and it deems cartel offences to be the most harmful of all anticompetitive practices.11 Consequently, COFECE has consistently given out a strong message conveying its policy of zero tolerance for cartel offences (except in the case of immunity applications).
Cooperation with other jurisdictions
The Inter-American Development Bank (IDB) has recognised that competition policy enforcement is no longer a national task. During a forum seminar on 'Regional Competition Agreements in 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.12
Many jurisdictions worldwide are seeking the consistent application of their competition policies as a result of the adaptability of the international economy. Mexico is no exception. COFECE has publicly recognised that an adequate competition policy reduces high levels of market concentration and diminishes opportunities for collusion, and it has indicated its strong commitment to eradicating cartel behaviour.13 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 international best practice on cartels.
For instance, Mexico has several bilateral cooperation agreements in place with the United States14 and Canada,15 under which these countries agree to provide full collaboration with their local competition authorities. Moreover, COFECE holds trilateral meetings annually with its peers in the United States (both the US Department of Justice Antitrust Division and the Federal Trade Commission) and Canada (the Canadian Competition Bureau). In addition, in September 2021, COFECE published a new document entitled 'A matching competition agenda for prosperity in Mexico and the United States', in which COFECE analysed and diagnosed various markets of significance for the national economy, and made recommendations to be implemented by sector regulators to eliminate obstacles to participation by more suppliers, so that Mexican families and companies can enjoy the benefits of competition. The document was published following the US government's issuance of the Executive Order on Promoting Competition in the American Economy, which recognises the benefits of competition and states that an open and competitive economy is a required for sustained economic prosperity.
The Mexican competition authorities are open to international cooperation, if only to the extent legally permitted by Mexico's local legislation. This means, however, that the Mexican competition authorities cooperate with other agencies worldwide to achieve a strong and effective 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 has 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 the consent of the investigated party (which is highly unlikely to occur), unless it is a leniency applicant.
A similar circumstance arises in the context of, for example, extradition cases.16 Although Mexico could ultimately accede to extradition requests, as its local legislation and international treaties formally contemplate the authority to do so,17 there are several hurdles to this, such as:
- compliance with statutory formalities under the extradition principles and rules;18
- the complexity of local procedures to endorse the extradition;
- inconsistencies between international treaties and local and foreign legislation; and
- the absence 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. Inter-agency 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 are under an obligation to act independently and autonomously from other authorities. The existence of several international cooperation agreements does not relegate any local obligations to which the Mexican competition authorities are subject.
Jurisdictional limitations, affirmative defences and exemptions
The FECL 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 any of the following short-listed behaviours:
- restraining output;
- allocating markets or customers;
- bid rigging; and
- exchanging information with the foregoing 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 within a state or as a consequence of interstate commerce, 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.
Article 53 sanctions not only the actual execution of an anticompetitive agreement or combination but also the intention to execute 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 intend these effects.19 Administrative liability does not extend to any civil and criminal consequences that might arise.
Contrary to what occurs in other jurisdictions, there are no exceptions to the application of competition law in Mexico, except for very specific activities in the distribution of books and sugar cane production; 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 deciding an appeal in 2007 of a vertical restraint investigation against the Coca-Cola Export Corporation,20 the Supreme Court decided 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: control and coordination.
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 basis for the Mexican liability attribution system is that the authority has the burden to prove, without doubt, the nexus of liability between the execution of the anticompetitive conduct and the actual intervention of the offender. In the absence of direction of the offender by the parent company, the parent should not be held liable simply for having an equity participation in the subsidiary, rather the authority is obliged to show that execution of the anticompetitive conduct was the result of a decisive intervention by the parent company.
This was illustrated in April 2018, when a specialised Mexican Federal Competition Court (Specialised Collegiate Circuit Court), in a landmark decision, clarified the rules concerning liability of a parent company for the cartel behaviour of its subsidiary. In short, the Federal Collegiate Circuit Court ruled that controlling the stock of a subsidiary does not imply the extension of liability for the unlawful behaviour of a subsidiary to its holding company. The ruling sends a clear signal to the Mexican competition authority that to find a holding company liable for offences committed by one of its subsidiaries, there must be evidence of illegal collaboration. Therefore, this judgment represents a significant move forward and reinforces rules regarding the Investigating Authority's burden of proof (which require it to provide evidence that a particular company participated in an offence). Likewise, in an additional recent ruling, specialist courts also confirmed that requests for information directed to parent companies do not cover subsidiaries, and that the enforcement authority needs to respect separation and legal personality of parent companies and subsidiaries.
Furthermore, specialised courts have recently issued a number of landmark decisions. For instance, a specialised federal court issued precedents 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.21 Additionally, 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.22
The FECL provides a leniency programme for cartel offences.23 The leniency programme provided in the FECL is similar to leniency or amnesty programmes in other jurisdictions. The Mexican programme grants practical immunity to those cartel offenders who appear before the authority to self-report a cartel violation, even for ringleaders.
The leniency programme grants immunity to cartel offenders who request it by exempting them from criminal prosecution and disqualifications,24 and reducing the fine to its lowest possible amount (89.62 Mexican pesos). Yet, there is no exemption for damages in private or class actions, and leniency protection is granted only if the following occurs:
- a cartel member is the first to apply to the programme and recognises its participation in the cartel;
- a cartel member provides enough evidence that allows the Investigating Authority to initiate an investigation procedure or at least allows COFECE to presume the existence of a cartel;
- the applicant fully and continuously cooperates with the competition authority throughout the entire procedure by providing information and collaborating with all requests; and
- the applicant implements all necessary actions to terminate its participation in the cartel.25
If 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 conduct being investigated. The following table outlines what type of benefit applicants might receive.
|Applicant||Reduction of fines||Disqualification sanction||Criminal prosecution|
|First||Maximum fine reduction*||Immunity||Immunity|
|Second||30 per cent to 50 per cent fine reduction||Immunity||Immunity|
|Third||20 per cent to 30 per cent fine reduction||Immunity||Immunity|
|Fourth and subsequent||Up to a 20 per cent fine reduction||Immunity||Immunity|
|* The minimum applicable fine is equivalent to one Unit of Measure and Update (UMA) (the official unit for determining fines), which, in 2021, was set at 89.62 pesos and is expected to increase marginally in 2022.|
As in other jurisdictions, in Mexico, the marker system is a very significant aspect of the leniency programme. Pursuant to the FECL and the COFECE Guidelines on the Immunity Programme and Fine Reductions,26 a leniency applicant will obtain a marker after applying for the leniency programme.27 In addition, the applicant does not need to provide information on the cartel when formally submitting the leniency application, as this can be provided subsequently.
According to Article 103 of the FECL, the Investigating Authority is under an obligation to maintain the confidentiality of the identity of the leniency applicant at all times and without exception. Likewise, information provided by the leniency applicant will be classified as confidential, and no third party (including private practitioners or external counsel) should access this information.
Mexico's leniency programme witnessed a remarkable rise in applications in 2015 and 2016, but this has since tailed off.28 In 2013 and 2014, COFECE received four and six leniency applications respectively. The numbers jumped to 18 in 2015 and 26 in 2016, before declining to 15 in 2017 and only 10 in 2018. Applications decreased further to eight in 2019 and to six in 2020.29 The decline is attributed to concerns regarding the immunity programme and issues of legal certainty that have arisen following recent COFECE decisions. However, COFECE has reported that the total reduction in fines resulting from its leniency programme was 28 million pesos in 2019 and 624 million pesos in 2020.30
The International Competition Network's best practice suggests that the success of any leniency programme depends on the legal certainty that it provides to those who want to resolve their criminal liability. To provide that certainty, the authority should be explicit in defining the leniency requirements. Additionally, if an applicant meets the leniency requirements, the agency shall have little to no discretion to deny the request.31 For example, the US Antitrust Division attributes part of its success to its 20-year record of honouring leniency agreements, which provides comfort to potential applicants.32
Mexico's deviation from this best practice has been problematic. Specifically, it is argued that the lack of legal certainty is a leading factor for the declining number of leniency applications. And the attraction to leniency has decreased partly as a result of two cases in which COFECE withdrew the benefits of leniency to applicants for a failure to cooperate sufficiently,33 thus reducing certainty and predictability for would-be applicants.
However, specialised federal courts have recently decided that revocation of leniency benefits should be limited, and that leniency applicants should not lose leniency benefits even if they choose to exercise their constitutional defence rights against COFECE's claims.34 A specialised federal court recently ruled that the fact that a leniency applicant, when submitting a response to a statement of objections, exercises its defence rights through raising defences against the accusation should not be considered as conduct against the obligation to cooperate under the FECL, considering that cooperation rights are not infringed by clarifying investigated facts and contesting the accuracy of some of these, as there is no legal restriction to do so.
Furthermore, concerns regarding new anti-corruption laws have caused applicants to fear using the antitrust leniency regime because they could simultaneously implicate themselves criminally under the country's new anti-corruption laws.35 These factors, along with the very high fines that COFECE has recently imposed in cases commenced under the leniency programme, and the assessment of damages that COFECE has made for fining purposes, have contributed to an unwillingness to apply for the leniency programme. Nonetheless, COFECE believes the diminishing number of applications can be directly attributed to a lack of awareness of the existence of the leniency programme.36
Mexico has also adopted another noteworthy deviation to its leniency programme. Whereas in most jurisdictions a ringleader cannot be granted full immunity, this is not the case in Mexico. Unlike in other jurisdictions, the FECL makes no distinction. A benefit of the Mexican system is that cartel members are more likely to come forward when they do not have to worry about the uncertainty of who the ringleader is. Thus, international cartel applicants should note that although they may be ineligible for certain types of immunity in jurisdictions such as the United States, they may still be eligible in Mexico.
Moreover, COFECE's leniency programme was recently reinforced. In March 2020,37 COFECE published its new proposed Regulatory Provisions or Regulations for its Leniency and Fines Reduction Programme in terms of Article 103 of the FECL.38 The main features introduced by these new provisions include:
- explaining what should be understood under the obligation to 'fully and continuously cooperate' with COFECE under the context of a leniency application, as the scope of this obligation has been subject to debate in recent cases before federal courts;
- providing clarity on the procedure to follow when a request for immunity is received, as well as the rights and obligations of those who adhere to the Programme;
- providing key information so that applicants know their place in the chronological order of application for immunity, in the event that they are awarded the benefit definitively; and
- introducing a new specific process addressing revocation of an applicant's leniency benefits by COFECE, including the right to have a prior hearing before actual revocation, or to receive notice from COFECE that leniency benefits might be revoked, depending on the stage the investigative procedure is at.
As a result of the June 2013 constitutional amendment, the incentives for collusion have changed in Mexico. The amendment to Article 28 of the Mexican Constitution introduced a series of new and tougher penalties against cartel offences.
Pursuant to Article 127 of the FECL, any company or individual that actively participates in a cartel, or who contributes, induces or cooperates in cartel behaviour, can be held liable. Monetary sanctions may vary according to the degree of participation of the company or individual as follows.
|Type of intervention||Monetary sanction|
|Active participation in the conduct||Up to the equivalent of 10 per cent of the income of the offender|
|Participation through contributing, inducing or propitiating the conduct||Up to the equivalent of 180,000 times the UMA*|
|*Currently, the maximum fine is 16.1 million pesos.|
Article 130 of the FECL provides that certain elements should be taken into consideration by the competition authority when calculating fines, including:
- harm caused;
- indications of intentionality;
- market share;
- market size;
- duration of the conduct; and
- the economic capacity of the offender.
Recidivism or a second offence entitles the competition authority either to double the fine (i.e., up to the equivalent of 20 per cent of the income of the offender) or to 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 Unit of Measure.39
COFECE has boasted that of the total 390 million pesos in fines imposed in 2019, 137 million pesos (35 per cent) were from cartel sanctions. These numbers increased in 2020, with an overall total of 1,148 million pesos in fines, of which 715 million pesos (49 per cent) came from cartel sanctions.40 Notwithstanding this increase, the highest fine imposed by COFECE to date remains the 1,100 million pesos fine imposed in 2017 in a case concerning collusive agreements conducted by financial institutions in retirement and pension fund management services.41 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 has been modified to deter cartel behaviour.42
Although the criminalisation of cartel offences is not entirely new to the Mexican competition system,43 the applicable sanctions have been toughened up, with imprisonment sanctions being modified to a minimum of five years and a maximum of 10 years.44 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. Moreover, in December 2020, the House of Representatives approved a bill that amends the Federal Criminal Code45 to allow that when cartel behaviour is conducted in relation to 'necessary consumer items, personal hygiene products, medicines and medical supplies, goods intended to prevent the spread or contagion of diseases or any essential item', criminal sanctions will be doubled. This bill was recently sent to the Senate and awaits further review.
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 with the Attorney General's Office by COFECE's Investigating Authority, in a cartel investigation (a bid rigging cartel) in the pharmaceutical industry, and a second investigation, into similar conduct in the same industry, was filed in October 2019. Moreover, in October 2019, COFECE requested the Attorney General's Office to initiate a second criminal prosecution, although no further action has been publicly announced to date.46
Both the FECL and the 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.47
There is no Mexican legal instrument that allows settlement for cartel behaviour. However, corporate criminal liability48 was introduced in June 2016 and, given the overhaul of the criminal justice system, this legal resource will serve as a deterrent to cartel behaviour. To date, there is no corporate criminal liability for cartel behaviour crimes.49 Notwithstanding, in October 2017, a member of the Federal Mexican House of Representatives introduced a bill to amend, inter alia, the shortlist of crimes subject to corporate criminal liability, and proposing that corporate criminal liability should attach to cartel behaviour as a prosecutable offence. Although a considerable amount of time has passed since the bill was introduced and there is currently no prospect of its conclusion, if the legislative process ultimately results in its approval, it would mean that cartel behaviour would be addressed and sanctioned in relation to not only individuals (natural persons) but also corporations and legal entities. Extending discussion to this issue will be vital because the current debate in specialised competition courts primarily concerns the liability of parent companies for administrative liabilities and fines. The combined legislative option of corporate criminal liability and parent–subsidiary responsibility could not be considered, nor implemented, lightly, and it would certainly require companies to reinforce their compliance and antitrust programmes.
'Day one' response
The reinforcement of the Investigating Authority's powers to obtain information during an investigative procedure is strong and somewhat disproportionate50 when considered in connection with certain legal vacuums (i.e., proper regulation of attorney–client privilege and the legal protection of confidential information, which continues to be a much debated topic in the courts).
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 situation occurs when the Investigating Authority requires individuals to appear before it to testify.
Failure to provide information when these kinds of requests are issued or when an individual is required to testify before the Investigating 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 authorisation from the judiciary. Moreover, during a dawn raid, the Investigating Authority can access any section, department, information technology 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 scope of these dawn raids as none of the statutes expressly regulate this area. Other legislative issues absent from the statutes include whether the Investigating Authority can perform a dawn raid in private domiciles or whether the prosecuting authority can intervene in all types of information.51 On 21 December 2017, the First Specialised Competition Collegiate Circuit Court handed lawyers a victory on the recognition and protection of attorney–client privilege on antitrust matters.52 This has been one of the most keenly awaited judgments in Mexico, and gave rise to a subsequent binding precedent by the Plenary of the Circuit and, therefore, it represents a very significant leap forward for competition law in Mexico and more generally for the exercise of the legal profession.
In fact, this landmark decision, along with other precedents on the subject, led COFECE to publish its own Regulatory Provisions for the Management of Information Derived from the Legal Assessment Provided to Economic Agents.53 In broad terms, these Regulatory Provisions aim to regulate attorney–client privileged communications, introducing some features that will surely be subject to further debate, in the context of both a dawn raid and any investigation. The most significant new features are:
- COFECE recognises that information that contains privileged communication between an attorney and its client will have no weight or value if it is proven that the communication had the purpose of giving legal advice;
- interested parties (i.e., owners of the communication) should request COFECE to classify the information as protected, providing a detailed description of its content, as well as the reasons why COFECE should consider the information to have been given for the purpose of providing legal advice;
- if protected as such, any public servant who had access to the communications will not be able to continue to work on the investigation;
- the procedure to determine whether communications should be protected under legal privilege will be conducted by a permanent committee, to be established by COFECE and composed of COFECE's officers who must satisfy specific requirements depending on the status of an investigation; and
- once a request for protection is decided successfully, privileged information should be excluded from the investigation docket, and returned to its original owner.
Dawn raids can be executed with considerable force following amendments to the Federal Criminal Code introducing a misdemeanour offence for obstructing, altering or destroying information and impeding the proper execution of a dawn raid,54 punishable with imprisonment of between one and three years. These amendments greatly empowered COFECE to conduct dawn raids and between 2015 and 2017 alone COFECE reported the execution of 16 dawn raids. The number of raids conducted between 2018 and 2020 has varied, with 26 reported in 2018, 19 in 2019 but only two in 2020 because of covid-19 restrictions.55
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 outside specialised counsel because of the increased sophistication of the Investigating Authority.
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 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 it possible to claim damages that arise from an antitrust violation, and since 2011 it is possible to initiate class actions. However, there are still several hurdles to overcome before such legal actions can be pursued.
Article 134 of the FECL provides that a damages claim will only proceed when the decision rendered by the competition authority is res iudicata. Furthermore, the Supreme Court of Justice has issued case law on the matter, recognising that for a damages claim to proceed, the specialist authority should have proven the existence of the administrative offence.56 The cases available regarding this subject have been favourable to respondents, although they have 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 for cartel offences, there are certain rules that make implementation difficult (i.e., the need to prove individual damage in ancillary proceedings).57 This is an area in which changes are likely; for instance, the Organisation for Economic Co-operation and Development and Mexico's Secretary of the Economy have released a study detailing the problems currently being faced in private enforcement and follow-on actions, with proposed future policy changes.58
In recent years, Mexico has seen a great number of legal developments sending out a clear message of deterrence for cartel behaviour. COFECE is very active in enforcing policy and there have been constant investigations into cartel behaviour during the past few years. Industry sectors as diverse as pharmaceuticals, football and basic consumer goods have come under sustained scrutiny.
The zero-tolerance enforcement policy will have to be tempered by future legislation on cartel settlements to avoid the burden of full administrative proceedings. Specialised courts have had a very active role in setting boundaries and limits on what the competition authorities can do when determining the existence of cartel behaviour. The most salient current developments include the following.
i Private drug distribution cartel: 'fee' scheme
Following a five-year investigative process, COFECE imposed sanctions in a case concerning a controversial scheme in which 'fees' were paid by pharmaceuticals laboratories to distributors. Under this mechanism, the laboratory determined the price scheme, so distributors had little or no influence on the price paid by end consumers. The scheme, COFECE alleged, was a violation of the FECL, as laboratories were, in effect, imposing resale price conditions, and could also be interpreted as coordination between distributors, reducing their incentive to compete.
From its investigation, COFECE found that the scheme had been implemented, perhaps a number of years ago, by a certain laboratory to impose unitary prices, granting distributors only a commission or a fee based on the volume of sales, so distributors could not set their own prices. Moreover, it was held that the laboratory established exclusive distribution relations with only certain distributors, which were selected based on recommendations from a third party thus limiting sourcing options. Moreover, it was claimed that distributors colluded among themselves and segmented distribution channels for the laboratories that adopted the scheme, eliminating competition among them. The investigation indicated that this market segmentation was devised through meetings held in the context of a chamber of commerce.59
In particular, COFECE's sanctioned five different anticompetitive practices, including (1) an agreement to set 'rest days', whereby cartel members would not distribute drugs on particular dates, (2) a 'credit committee', whereby cartel members agreed to vet certain suppliers or third parties if they owed money to any cartel member, (3) agreements between cartel members limiting certain discounts for the same products, (4) increases in prices for pharmacies, including a 3.66 per cent joint increase, and (5) further coordination mechanisms for sales prices to increase margins without losing market share.
Following the defence submissions, COFECE's Board of Commissioners ultimately issued a final resolution imposing fines totalling 903 million pesos. In addition, this was the first-ever case in which the COFECE Board issued disqualification orders against executives involved in a cartel, with prohibitions on serving as an executive board member or director imposed for periods varying from a couple of months to four years. COFECE sanctioned major distributors such as Marzam, Casa Saba, Farmacos Nacionales, Nadro and Almacen de Drogas, and also Diprofar, the distributors' association, which allegedly contributed to the illegal behaviour.
The resolution was issued around August 2021 and the parties concerned are known to have challenged it in the specialised federal courts; however, the appeals are not expected to be heard for some months, given the heavy workload currently facing the courts.
ii Football cartel: first-ever no-poaching case
Following an investigation launched back in 2018, COFECE recently published its decision to sanction several football teams, the Mexican Football Federation (FMF) and eight of its representatives for colluding within the football players transfer market (both men's and women's leagues). COFECE's Board of Commissioners imposed total fines of 117.6 million pesos for collusion among 17 Liga MX football clubs, along with the Federation and the representatives that collaborated in the scheme.
According to public statements, COFECE's core finding was that clubs colluded to prevent or inhibit competition in the transfer market by two specific means: imposing salary ceilings for female players, which deepened the wage gap between female and male players; and segmenting the players' market by establishing a mechanism to prevent players from freely negotiating and contracting with new teams. Sanctions were imposed against América, Pachuca, Cruz Azul, Monarcas, Chivas, Santos Laguna, Tigres, Toluca, Pumas (UNAM), Rayados, Necaxa, Atlante, Tijuana, Atlas, León Querétaro o Gallos, and Puebla. The individuals fined have not been identified.
COFECE estimated that the two anticompetitive practices identified inflicted damage to the market amounting to 83 million pesos, which triggered the large fines. Of significance from an antitrust perspective, this case was the first no-poaching agreement ever tried in Mexico by COFECE and as such it will set an important precedent for many other industries.
Price-fixing to impose salary caps for female football players.
Following the creation of the Liga MX Femenil in 2016, several clubs agreed to establish a salary cap for this league based on three categories: (1) those over 23 years of age would earn a maximum of 2,000 pesos; (2) those under 23, 500 pesos plus a course of personal training, and (3) players in the under-17 category have no income but would receive assistance with transportation, studies and food. For the 2018–2019 season, the Liga MX announced to the clubs that the maximum salary would be 15,000 pesos and only four of its players would be entitled to earn above this amount. In addition, benefits could not exceed 50,000 pesos per tournament. The first cap on players' salaries was included in the original presentation by the Liga MX Femenil project and approved by the Liga MX Sports Development Committee. In addition, the FMF issued announcements to persuade clubs to comply with the salary cap and carried out verification procedures.
This conduct, with a duration from November 2016 to May 2019, involved Pachuca, Tijuana, América, Necaxa, Toluca, Tigres, Santos, Universidad, Rayados, Guadalajara, Morelia, Cruz Azul, Atlas, Querétaro and León. COFECE framed it as a collusive agreement with the purpose of manipulating prices (i.e., salaries of female players), and preventing clubs from competing for their recruitment through better salaries, which not only had a negative impact on the players' income but also had the consequence of widening the gender wage gap.
The 'gentlemen's agreement' (segmenting the player transfer market)
The 17 sanctioned clubs, with the assistance of the FMF, agreed to apply a right of retention, known as the 'gentleman's agreement', whereby each affiliated club registered its contracted players with the FMF and, when a contract expired, the club had the right to retain the player. If a different club was interested in signing a player, the interested club had to obtain authorisation from the 'owner' club (which listed the player as an 'inventory' item) and often had to pay a fee for the exchange. These agreements evolved with the transfer and contracting regime for football players known as 'the draft'.
The conduct constituted a collusive agreement with the purpose of segmenting the market for players and limiting competition in the clubs' recruitment, unduly restricting the mobility of athletes and limiting their bargaining power to obtain better salaries. According to COFECE's findings, this conduct occurred over a 10-year period, from 2008 to 2018, although some clubs might only have participated for shorter periods.
iii Manufacturing cartel: diapers and female hygiene products
COFECE also sanctioned several companies and individuals for colluding in the market of baby diapers, female hygiene products and incontinence products. The alleged offenders were found to have colluded in the wholesale market to manipulate sales prices to supermarkets and wholesale stores. According to COFECE's findings, the sanctioned practices affected supply conditions in the wholesale channel, and the authority imposed fines of more than 313.4 million pesos on Essity Higiene y Salud México, Kimberly Clark de México and Productos Internacionales Mabe, as well as on nine individuals acting on behalf of the firms.
In an investigation that commenced in November 2017, COFECE found that these offenders, through their representatives, periodically held meetings to exchange information, agree on product price increases and eliminate promotions, as well as verifying compliance with the agreement, monitoring the established prices and correcting deviations to what was agreed. To support the agreement, they maintained communications through emails. COFECE also claimed to have found conduct intended to maintain the secrecy of the communications and it was observed that the persons were aware of the illegality of their actions.
The collusion took place from February 2008 to June 2014 and the Board of Commissioners estimated that the sanctioned conduct caused damage of 1,567,036,589 pesos, so COFECE imposed the maximum possible fines. The alleged offenders are in the process of challenging the decision in the specialised courts; once this appeal process is resolved, the decision may lead to private actions by affected customers and consumers.
iv COFECE continuity challenges
World-renowned chairwoman of the COFECE Board of Commissioners Alejandra 'Jana' Palacios-Prieto concluded her appointment as chair in September 2021, in anticipation of her full departure from COFECE a couple of months later. Lauded for her performance and dedication to the COFECE institutional process, Palacios-Prieto's departure has added to the uncertainties the enforcement body has faced under the current federal administration.
Sadly, Commissioner Gustavo Pérez Valdespín passed away from covid-19 related issues and Commissioner Ignacio Navarro Zermeño stepped down at the end of his term of office in 2020. Then, following attempts by Congress to underdermine COFECE's independence and resources, Palacios-Pretos also left. In addition, the former head of COFECE's Investigating Authority Sergio López Rodríguez also concluded his term of office and was recently replaced by economist José Manuel Haro.
These changes leave COFECE's Board of Commissioners currently lacking three commissioners. Although the selection process for new ones is under way, there has been no indication whether the President will select new commissioners for ratification by the Senate in the short term. This uncertainty is compounded by the fact that the President-endorsed controlling party of government has constantly challenged COFECE's very existence and questioned the need for such an authority – despite international agreements such as the USMCA/CUSMA/T-MEC agreement between the United States, Canada and Mexico.
1 Omar Guerrero Rodríguez is a partner and Martín Michaus Fernández is a senior associate at Hogan Lovells.
2 The FECL was issued on 23 May 2014 and became effective on 7 July 2014.
3 See Amparo en Revisión 2617/1996, Mexican Federal Supreme Court of Justice.
4 Article 73 of the FECL.
5 These technical criteria were the subject of a public consultation that ended in November 2015. COFECE issued the final document on 16 December 2015. The criteria were subsequently amended and republished on 28 November 2016.
6 These Guidelines were the subject of a public consultation that ended in October 2015. COFECE issued the final document on 21 December 2015.
7 These Guidelines were the subject of a public consultation that ended in October 2015. COFECE issued the final document on 17 December 2015. These Guidelines were amended in 2020 with further minor inclusions.
8 COFECE basically drew on the experience of the United States and the European Union.
9 These technical criteria were the subject of a public consultation that ended in November 2015. COFECE issued the final document on 16 December 2015.
10 Available at www.cofece.mx/wp-content/uploads/2018/02/PE_2018-2021.pdf.
11 COFECE, Strategic Plan 2018–2021, page 11.
12 Inter-American Development Bank and Centro Regional de Competencia para América Latina, 'Acuerdos Regionales de Competencia en América Latina y el Caribe' (2013).
13 COFECE, Strategic Plan 2018–2021.
14 For example, the United States Mexico Canada Agreement (known as USMCA, CUSMA and T-MEC in the respective countries) was signed on the 30 November 2018 but has yet to be ratified in the US. The economic competition section of the new treaty will take on a much more prescriptive approach than that of its predecessor. For instance, Chapter 21 of the new treaty not only recognises the importance of cooperation and coordination, but it also provides detailed requirements for the parties. Practitioners believe the increased requirements are beneficial for the region. Increased cooperation will enable the countries to accelerate and streamline the pace of investigations, thus benefiting businesses; and consumers will benefit from increased cooperation, resulting in more efficient international policing of cartel behaviour. Many of the specific requirements set out in the USMCA are already common practice so it is unlikely that these new provisions will have a significant practical impact on competition enforcement. Nonetheless, many practitioners remain hopeful that the new treaty may pave the way for greater cooperation between Mexican, US and Canadian competition authorities. The USMCA still needs to be approved and ratified in the US, and will, therefore, not become effective before 2020. Other important agreements celebrated with the United States are (1) the mutual legal assistance treaty, a Treaty on Mutual Legal Assistance in Criminal Matters, 1987, (2) the Agreement regarding the application of competition laws, 2000 and (3) the Organisation for Economic Co-operation and Development's 'Revised recommendation of the Council Concerning Co-operation between Member countries on Anticompetitive Practices affecting International Trade', 1995 (C(95)130/Final).
15 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.
16 Mexico has executed more than 36 bilateral and multilateral extradition treaties and has local criminal and extradition laws.
17 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 of specific offences, including 'offences against the laws relating to prohibition of monopoly or unfair restrictions' (Item 26). However, the Mexican Federal Criminal Code sanctions specific conduct, and ultimately this will generate a discussion regarding the lack of consistency between these statutes.
18 For example, double criminality, non bis in idem (double jeopardy), reciprocity, jurisdiction, commutation and speciality.
19 In fact, the intentionality factor might only be considered when calculating the fine in accordance with Article 130 of the FECL.
20 Amparo en Revisión 169/2007. The Coca-Cola Export Corporation. Mexican Federal Supreme Court of Justice.
21 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 Specialist Circuit in telecommunications, broadcasting and competitions matters. Registry: 2012679.
22 See Amparo en Revisión 839/2014, Amparo en Revisión 289/2015, Amparo en Revisión 804/2015 and Amparo en Revisión 971/2015. Mexican Federal Supreme Court of Justice, Second Chamber.
23 See Chapter IV of the FECL, and especially Article 103.
24 The leniency protection can be extended to those individuals, subsidiaries and affiliates included in the leniency application.
25 To obtain leniency benefits, applicants must identify specific individuals that shall be beneficiaries of the leniency application (if leniency is requested by a company). The regulation has been updated to explicitly allow those who receive the immunity benefit to not be disqualified by Section X of Article 127 from acting as a board member, administrator, director, manager, officer, agent or representative.
27 This can be requested via email or telephone at any time prior to the closing ruling of the investigative phase of a procedure.
28 Leniency applications per year: 2012, 26; 2013, four; 2014, six; 2015, 18; 2016, 26; 2017, 15. See the annual Global Competition Review Rating Enforcement for Mexico's Federal Economic Competition Commission.
29 Global Competition Review Rating Enforcement 2018, on Mexico's Federal Economic Competition Commission. See also 'COFECE en números 2020', available at https://www.cofece.mx/wp-content/uploads/2021/06/Numeros2020.pdf.
30 See COFECE's annual Fines Report 2020, available at https://www.cofece.mx/wp-content/uploads/2021/03/IV-IM-2020-vf.pdf.
31 See the International Competition Network's Checklist for efficient and effective leniency programmes at www.internationalcompetitionnetwork.org/portfolio/leniency-program-checklist/.
33 The cases relate to an investigation involving Mitsubishi Heavy Industry and Denso Corporation (Amparo en revisión 60/2017, Décima Época Tesis I 10 A E268 A (10a)), which were sanctioned for price-fixing and unlawful information exchanges, as well as an investigation on the pensions fund market.
34 See 'Procedimiento de Investigación y Sanción de Prácticas Monopólicas Absolutas. Debe Respetarse el Beneficio de Reducción de Sanciones al Agente Económico que Ejerza su Derecho de Defensa (Legislación Vigente Hasta El 6 De Julio De 2014)'. Tribunales Colegiados de Circuito. Tesis aislada 2021121.
35 Criminal immunity was not included in Mexico's new anti-corruption leniency provisions, whereas all leniency applicants under Mexican antitrust law are granted total immunity for criminal charges levied by COFECE. Therefore, the failure to provide criminal immunity under Mexico's new anti-corruption provisions could kill the country's successful antitrust leniency programme. See 'Mexican anticorruption leniency programme could threaten antitrust efforts', at https://globalcompetitionreview.com/article/1170081/mexican-anticorruption-leniency-programme-could-threaten-antitrust-efforts.
36 COFECE backs this claim, citing a recent study by McKinsey & Company, which found that only 10 per cent of executives interviewed by McKinsey were aware of the leniency programme. See 'Estudio y análisis de la percepción sobre temas de competencia económica y la labor de la COFECE' – Note by Mexico, page 58, available at www.cofece.mx/wp-content/uploads/2018/01/Estudio-labor-COFECE-17.pdf.
37 These new Regulatory Dispositions are available at https://www.cofece.mx/emite-disposiciones-regulatorias-del-programa-de-inmunidad/.
38 The technical regulations were published on 15 October 2019 for a 20-day public consultation period, so that any interested person could submit their views to the initial project. More information is available at www.cofece.mx/conocenos/secretaria-tecnica-2/consultas-publicas/.
39 Currently, the maximum fine is 17.9 million pesos.
40 See 'Informe de multas, 2020', for details of monetary sanctions for FECL violators for 2020, at https://www.cofece.mx/wp-content/uploads/2020/03/IM-2020_v16.pdf.
41 From 'Sanciona COFECE a Afores por pactar convenios para reducir los traspasos de cuentas individuales', 10 April 2018, COFECE, at www.cofece.mx/sanciona-cofece-a-afores-por-pactar-convenios-para-reducir-los-traspasos-de-cuentas-individuales/.
42 See Article 254 bis of the Federal Criminal Code.
43 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.
44 See the 2014 amendment to the Federal Criminal Code (Article 254 bis) dated 23 May 2014.
45 Section 254 quater.
47 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.
48 See Section 421 of the National Criminal Procedure Code published on 5 March 2014 in the Federal Official Gazette.
49 Articles 11 bis and 254 bis of the Federal Criminal Code.
50 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 terms of imprisonment 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.
51 According to the FECL, dawn raids can last up to two months and can be extended for a similar period when the case warrants it. However, in practice, a dawn raid does not usually last more than a day.
52 The judgment described the scope of attorney–client privilege granted by the court as follows:
Antitrust audit reports prepared by external counsel for their clients relating to the investigated conduct and extracted during the relevant dawn raid by the competition authority are protected by this privilege, as long as the communication complies with the following conditions: (1) the exchange of information must arise between external counsel and the client (a lawyer who is not bound by an employment relationship with the client); and (2) the exchange of information must be related to the client's right to a proper defence. Additionally, if the enforcement authority comes across information that is protected by the above-mentioned privilege, it should adopt the necessary measures to preserve the secrecy of the relevant documents and exclude them from its investigation.
53 These Regulatory Dispositions were subject to a public consultation period, and were formally published on 30 September 2019.
54 See Article 254 bis 1 of the Federal Criminal Code.
55 Data on dawn raids collected and presented by COFECE in its annual report for 2020.
56 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'.
57 However, a June 2017 judgment by the First Chamber of the Supreme Court of Justice seems to have relaxed this rule in the decision Amparo Directo 49/2014 (class action commenced by Profeco against Telefónica Movistar).
58 See OECD (2018) 'Aplicación Privada Individual y Colectiva del Derecho de Competencia: Reflexiones para México', at www.oecd.org/daf/competition/ES-WEB-private-enforcement-competition-law-mexico-2018.pdf.
59 Public information identified certain distributors for Roche as well as certain laboratories involved in the investigation. These include: (1) Farmacos Nacionales, SA de CV; (2) Almacén de Drogas, SA de CV; (3) Nadro, SAPI de CV; (4) Grupo Casa Saba, SA de CV; (5) Casa Marzam, SA de CV; (6) Astrazeneca, SA de CV; (7) Laboratorios Pisa, SA de CV; (8) Iqvia, AG (before Quintiles IMS); and (9) Asociación de Distribuidores Farmacéuticos de la República Mexicana, AC.