Introduction
Following my previous article, a thoughtful reader suggested I write about why certain business strategies can be deemed either pro-competitive or anti-competitive. This topic seems fitting for this column, and I will illustrate it using tied-sales cases.
Background on Tied-Sales Cases in Mexico
Mexico has seen various tied-sales cases, including a recent one involving Google and others in the digital economy like MercadoLibre and Mercado Pago. Traditional markets have also been subject to tied-sales investigations in sectors such as avocados, guavas, gasoline, telecommunications, and advertising. Some cases have been penalized due to evidence of anti-competitive practices, while others were closed. In one case, a company agreed to stop the risky behavior without it being formally determined as anti-competitive.
Why are some cases penalized while others aren’t?
The primary factor is the evidence available in each case and whether it demonstrates a competitive risk. For instance, in the recent Google case, the accusation claimed that the company used its platform’s design and architecture to create a bias through pre-selected checkboxes, thus encouraging users to consume bundled services.
However, the full commission determined that the evidence showed most users could and did remove the pre-selection, negating any significant competitive concern. This doesn’t mean tied-platform architectures can’t generate biases and competitive issues in other cases, which must be assessed individually.
Another Digital Tied-Sales Case: MercadoLibre and Mercado Pago
The tied-sales case involving MercadoLibre’s commerce service and Mercado Pago’s financial service was also examined. The full commission considered the two services indistinguishable, which is problematic as one is a commerce service and the other a financial service beyond just payment processing. However, it’s unclear if evidence of anti-competitive effects from linking these services was found in the case.
Traditional Market Cases
In traditional markets, the avocado case was closed early. The APEAM association’s packaging agreed to stop linking affiliation services with others under investigation, resolving the likely market failure. This prevented regulatory intervention.
Penalized Case in Telecommunications
A penalized case occurred in the telecommunications sector. The Federal Competition Commission imposed a fine on Telmex for conditioning long-distance, reverse-charge calls from public phones on the purchase of Ladatel cards. Users should have been able to make these calls without buying a card, and Telmex’s conduct was deemed harmful to Avantel and AT&T, which provided long-distance services.
Key Questions and Answers
- Q: Why do some business strategies get penalized while others don’t?
A: The decision largely depends on the evidence available in each case and whether it indicates a competitive risk. If the evidence shows that the strategy doesn’t significantly impact competition, it’s less likely to be penalized.
- Q: What is a tied-sales case?
A: A tied-sales case refers to a situation where a company requires customers to purchase an unrelated product or service to buy the primary product or service they desire.
- Q: How do regulators assess competitive risks in tied-sales cases?
A: Regulators analyze the evidence to determine if a tied-sales strategy poses a competitive risk. This involves examining whether the strategy restricts consumer choice or creates barriers to entry for competitors.
