What are Barriers to Competition?
Barriers to competition refer to any fact, act, structure, or legal arrangement that hinder or distort the competitive process. These barriers can be removed by competition authorities through a relatively new procedure in Mexico, introduced only in 2014. This process aims to enable competition authorities to establish regulatory measures in markets where there hasn’t necessarily been anticompetitive behavior.
Advantages of the Barriers to Competition Procedure
This procedure offers several advantages, one of which is promoting the swift correction of market failures. Demonstrating anticompetitive conduct with all necessary evidence can be a daunting and time-consuming task. It requires substantial effort from the authority to gather information, as investigated companies are often the only source of relevant data. Moreover, anticompetitive conduct can displace a competitor before the authority can sanction or even detect it. Internationally, competition agencies typically take around two years to investigate anticompetitive practices due to their economic and legal complexity and the volume of evidence that needs to be collected.
How the Procedure Works
The barriers to competition procedure allows for information gathering and market function analysis. If the authority determines that the market isn’t operating appropriately, it establishes regulatory measures that can be reviewed by courts.
Origins and Global Adoption
This regulatory tool originated in the United Kingdom, known as “Market Investigation.” It has been successfully adopted by various jurisdictions worldwide in the past decade.
Usage in the United States
In the United States, a similar tool called “Section Five” has been infrequently used despite being available since 1914. In 2023, it was employed to initiate an investigation into the marketplaces sector, which remains unresolved.
Implementation in Mexico
Mexico has utilized this regulatory tool for nearly eleven years in markets such as self-haulage of cargo, turbine fuel, payment card compensation cameras, and others. Currently, cases in the e-commerce, federal passenger autotransportation, corn flour, and other markets remain unresolved.
Successes and Future Prospects
Regulatory measures issued by the competition authority have achieved their objectives. For instance, those issued for payment card cases were well-received by sector authorities: Banco de México and the National Banking and Securities Commission. The upcoming competition legislation is expected to maintain this tool. It’s crucial that the new competition authority continues using this tool judiciously and effectively.
Key Questions and Answers
- What are barriers to competition? Barriers to competition refer to any fact, act, structure, or legal arrangement that hinder or distort the competitive process.
- How does the barriers to competition procedure work? This procedure allows competition authorities to gather information, analyze market function, and establish regulatory measures if they determine the market isn’t operating appropriately.
- Where did this regulatory tool originate? This tool, known as “Market Investigation,” originated in the United Kingdom.
- How has this tool been used in Mexico? Mexico has employed this regulatory tool in various markets since 2014, with ongoing cases in e-commerce, passenger autotransportation, and corn flour.
- What are the advantages of this procedure? This procedure promotes swift market failure correction, as demonstrating anticompetitive conduct can be a lengthy and challenging process.
- How successful have these regulatory measures been? Regulatory measures issued by the competition authority have achieved their objectives, as seen in payment card cases.
