PORPOSED AMENDMENTS TO THE FEDERAL ECONOMIC COMPETITION LAW

06/04/2010
Contact:
Jorge Mario Sánchez-DeVanny
jsd@sanchezdevanny.com
Gerardo Prado-Hernández
gph@sanchezdevanny.com
Cristina Sánchez-Vebber
csv@sanchezdevanny.com

PORPOSED AMENDMENTS TO THE FEDERAL ECONOMIC COMPETITION LAW

On April 5, 2010 The President of Mexico filed an initiative (the “Initiative”) to amend the   Federal Economic Competition Law (“FECL”) with the objective of attributing more power to the Federal Competition Commission (the “FCC”) and therefore strengthen the resolutions and position of the FCC in its fight to Project free competition and association in Mexico.

In our opinion, the proposed Initiative, if it is approved, will not result in a in depth amendment that would not relevantly modify the market and therefore the national economy; however, the Initiative does look to eminently strengthen the attributes and authority of the FCC. The Initiative includes among other amendments the broadening of criteria for simplified notices (with regard to concentrations that do not represent a risk for free competition and association in a relevant market; a sensible increase in the fines and sanctions that will be imposed on economic agents that infringe the FECL; it establishes procedures for verification visits by the FCC and grants the possibility of resolving investigation procedure without having to enter into litigation. Likewise an amendment to the Federal Criminal Code is also proponed to criminally sanction the infringing economic agents in the event that absolute monopolistic practices are carried out, such as price fixing, market divisions among other violations of that nature.

The Initiative intends to clarify that the resolutions of the FCC will be subject to the review of the federal judicial power through the intervention of the Federal Tax and Administrative Justice Tribunal, which we consider will require a special court or room for its implementation by such jurisdictional organism implementation we consider to require judicial.

In addition the Initiative adds several articles to the FECL. One of those articles explains and details the commercial operations which do not require concentration notice filings before the FCC, such as stock acquisitions in Mexico by investment corporations and trusts as long as these acquisitions do not allow the purchaser to influence the decisions of the seller; as well as operations in which Mexican investors acquire equity stock in foreign companies that do not have assets or investments in Mexico.

In addition, the Initiative will allow the FCC itself to carry the verification visits in any domicile of the investigated economic agents to verify compliance of the FECL and applicable legislation as well as to solicit the help of the police to carry out such visits. Likewise it establishes the guidelines under which such visits should be carried out.

The Initiative also provides, with regard to monopolistic practices, that the FCC will have to make public the general criteria under which investigations for monopolistic practices are carried out, allowing the process to be more transparent.

Under the Initiative, the fines and sanctions imposed on economic agents who infringe the FECL are increased considerable. The exposition of motives of the Initiative expressly mentions that the current sanctions and fines imposed in Mexico are very low and well beneath the sanctions and fines imposed by competition authorities in other jurisdictions of the world.

We’ll have to see the reaction of the productive sectors of the country to the Initiative which will have a relevant impact on Federal Congress to define the viability and reach of the Initiative.