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A review of the revamped Mexican competition law

A review of the revamped Mexican competition law

Enhanced Mexican competition among the country’s businesses will sharpen the nation’s productive and service sectors.

Last year, the nation’s Congress amended the country’s constitution to modify Mexican competition laws; this year, additional amendments were passed to continue the overhaul, as well as to include the creation of a telecom authority for the purpose of overseeing competitive concerns. These recent changes are part of a larger reform initiative by Mexican President Enrique Peña Nieto’s PRI led government aimed at fostering better business conditions to further stimulate Mexico’s growing economy.

The amendments establish two autonomous agencies for the enforcement of Mexican competition rules and policies, as well as a process to resolve conflicts between the two bodies. The Federal Telecommunication Institute (FTI) will be responsible for dealing with all antitrust issues involving the telecommunications industry, and the Federal Economic Competition Commission (CFCE) will replace the Federal Competition Commission in enforcing Mexican competition regulations across other industries.

The CFCE will oversee an internal panel with authority to conduct investigations into under-competitive markets or markets with impediments such as structural dynamics, etc. CFCE commissioners will then review findings and take commensurate actions from mandatory divestitures, to price setting for essential inputs, etc. The Commission will essentially have what opponents have called a “judge and juror” role, and all rulings will be considered authoritative. All mergers must be approved by the Commission. The regular waiting period for decisions to be made on such matters has been extended to 60 business days.

The primary purpose for the FTI is to resolve the “double window issues” brought about by the overlap of enforcement and regulatory authorities inherent in the previous regulatory structure. Essentially, the FTI will oversee and implement a new licensing regime, the establishment of a single license for telecommunication and broadcasting corporations, the balancing of regulations for dominant carriers, and the incorporation of must carry/must offer obligations. Companies controlling over half the market in sectors like telephone, internet, or television will be penalized with fee limits and infrastructure-sharing requirements by the FTI authorities.

Advocates of the recent changes in Mexican competition law point out that efficiency will be maximized by combining both competition and regulatory enforcement in the telecommunications markets in a single agency with a highly specialized and focused staff. Additionally, regulatory review will be less costly across all markets by simplifying antitrust risk assessments through avoiding the conflicting or inconsistent decisions that might have come about with two agencies investigating and ruling in the same cases. Nevertheless, companies with high market shares or that produce essential inputs for the Mexican manufacture of finished goods should be informed and cautious, as the overall impact of the new legislation has been to expand the list of activities that constitute antitrust violations.

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