Introduction and Background
The Federal Executive has introduced a reform proposal to the competition law, which could be approved in the coming weeks. This reform transforms the institutional design and how the Mexican state perceives its role in markets. The underlying diagnosis is clear: competition, as it has been applied so far, hasn’t been sufficient to correct concentration phenomena or translate market operation benefits into greater well-being.
Increased State Presence in the Economy
The reform promotes a greater state presence in the economy under a new institutional model that exempts state-owned enterprises from antitrust law enforcement. This change in focus presents opportunities, such as enhanced coordination between sectoral and competition policies. However, it also raises concerns about technical independence, crucial for the new antimonopoly agency’s effective and reliable decisions. Moreover, it may spark discussions within the T-MEC context.
Strengthening Competition Agency Capabilities
The proposal includes various measures to reinforce the competition agency’s research and enforcement capabilities, aligning with the international trend of strengthening antitrust policy application. However, it introduces changes that could cause problems when analyzing business conduct. Notably, the treatment of information exchange between economic agents stands out, likely not requiring proof of a prior anticompetitive agreement. This will compel economic agents to exercise extra caution in their participation in industry associations, chambers, and events.
Ambiguous Concept of Potential Competitor
The inclusion of the “potential competitor” figure in collusion analysis is ambiguous and could lead to errors. Therefore, it’s essential for the new authority to learn from other jurisdictions’ experiences, such as Europe or the US, which have established objective criteria to identify new competitors.
Changes in Merger Analysis
In merger analysis, the reform strengthens investigation capabilities for transactions with notification breaches, reduces monetary thresholds, and extends the investigation period for non-notifiable operations. Simultaneously, it aims to halve the authority’s resolution deadlines. An increased number of cases is expected due to lower thresholds and companies’ voluntary notification strategy for non-notifiable mergers.
Managing Increased Caseload
The challenge lies in handling a larger caseload with reduced legal deadlines, potentially severely impacting the institution’s response capacity. Additionally, it must now address telecommunications and broadcasting markets. To tackle this, clear criteria and guidelines must be developed to guide particulars in correct notification and expedite procedures. Operational filters should also be implemented, enabling the institution to focus on high-impact matters.
Higher Scrutiny and Risks for Businesses
These and other changes imply a more scrutinized environment for businesses, along with the risk of administrative and civil sanctions. To enhance market efficiency and effectively combat harmful behaviors against competition and free competition, the authority must maintain high technical standards, avoid presumption-based approaches, and accurately deploy its powers.
Ethical Commitment and Legal Compliance
Failing to do so risks discouraging legitimate or innovative business strategies. Consequently, companies must embrace greater ethical commitment and implement stricter controls to ensure legal compliance.
Key Questions and Answers
- What is the main focus of Mexico’s competition law reform? The reform aims to increase the state’s presence in the economy and strengthen the competition agency’s capabilities under a new institutional model.
- How does the reform affect information exchange between economic agents? The reform may require economic agents to exercise extra caution in participating in industry associations, chambers, and events due to the ambiguous concept of “potential competitor” and reduced need to prove prior anticompetitive agreements.
- What changes does the reform bring to merger analysis? The reform strengthens investigation capabilities for breaches of notification obligations, reduces monetary thresholds, extends investigation periods for non-notifiable operations, and halves resolution deadlines.
- How will the institution manage the increased caseload? The institution must develop clear criteria and guidelines for correct notification and expedite procedures, as well as implement operational filters to focus on high-impact matters.
- What are the implications for businesses under the new reform? Businesses face higher scrutiny and risks of administrative and civil sanctions. They must embrace greater ethical commitment and implement stricter controls to ensure legal compliance.
