Cartels 2021

Last Updated June 14, 2021

Mexico

Law and Practice

Authors



Nader, Hayaux & Goebel, S.C. is a market leader in M&A, banking and finance, fintech, securities and capital markets, structured finance, telecommunications, tax, insurance and reinsurance, project finance, real estate, energy and infrastructure, restructuring and insolvency, government procurement and antitrust. NHG's staff consists of 17 partners and more than 35 associates, and represents one of the largest groups of corporate finance experts in the Mexican market which has been working together for more than 30 years. NHG is the only Mexican law firm with an office in London; it has a strong focus on developing and pursuing business opportunities in Mexico, the UK and other European countries, and enjoys excellent working relationships with law firms in all major cities around the world.

The Mexican legal framework for competition is comprised of the following main instruments:

  • the Federal Constitution, as the foundation of the legal system and the enforcement agencies;
  • the Federal Economic Competition Law;
  • the Regulations to the Federal Economic Competition Law;
  • the Regulatory Provisions for the Immunity and Sanction Reduction Programme provided for in Article 103 of the Federal Economic Competition Law; and
  • the Regulatory Provisions for the Qualification of Information Derived from Legal Counsel Provided to Economic Agents.

Two autonomous government agencies with federal jurisdiction enforce the legal framework for competition, namely the Federal Economic Competition Commission (the Commission) and the Federal Telecommunications Institute (the Institute). The Institute is in charge of enforcing competition law in the telecommunications and broadcasting sectors, and the Commission is responsible for enforcing the law in any other sector or market.

The procedure is of an administrative nature and can only be implemented or carried out by such governmental agencies. It is not possible to exercise legal actions of a civil nature in order to enforce competition law, except for claiming damages and lost profits.

As part of the competition system, specialised courts on competition, telecommunications and broadcasting exist. These courts are the judicial authority in charge of any challenges filed by parties affected by the resolutions of the enforcement agencies. Also, appeals against the decisions issued by specialised lower courts can be filed with specialised courts of appeal. 

The maximum administrative fine that can be imposed by the enforcement agencies for cartel conduct is up to 10% of the economic agent's annual income. These agencies can obtain the tax information of the relevant economic agent from the tax authorities in order to determine the amount of the fine. In case of recidivism, fines can be doubled. 

The Commission and the Institute are the only agencies allowed to file criminal complaints with the Office of the Attorney General. Criminal liability exists for cartel-like conduct and is punishable by imprisonment of five to ten years, regardless of the corresponding economic sanction. 

Once the Commission or the Institute resolutions become final, the affected entities or individuals can claim damages and lost profits with the specialised courts on competition, telecommunications and broadcasting. 

Private entities and individuals have no legal right to claim damages or lost profits without first having the final resolution from either the Commission or the Institute.

There is no private right of action for challenging cartel conduct. As mentioned in 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards, the challenging of cartel conduct can only be implemented by the Commission or the Institute, either ex officio or by means of a claim filed by a third party.

There are five types of cartel conduct (also known as absolute monopolistic practices) specifically defined and catalogued by the Federal Economic Competition Law. Absolute monopolistic practices are considered illegal and consist of contracts, agreements, arrangements or combinations among competitors, whose purpose or effect is: 

  • price fixing – to fix, raise, co-ordinate or manipulate the sale or purchase price of goods or services supplied or demanded in the market; 
  • output restriction – to establish an obligation not to produce, process, distribute, market (or acquire only a restricted or limited amount of) goods, or the provision or transaction of a limited or restricted number, volume or frequency of services;
  • market allocation – to divide, distribute, allocate or impose portions or segments of a current or potential market of goods and services, by a determined or determinable group of customers, suppliers, timespans or spaces; 
  • bid rigging – to establish, arrange or co-ordinate bids or abstentions from tenders, contests, auctions or purchase calls; and
  • exchange of information – to exchange information for the purposes referred to in the preceding paragraphs.

Cartels or absolute monopolistic practices are considered serious violations of the law; consequently, they are null and void and do not give rise to legal effects. 

The statute of limitations is ten years, beginning on the date the prohibited conduct ends.

Mexican competition law can only be enforced within Mexico; however, the Commission has specifically entered into co-operative agreements with foreign agencies such as the European Union. If a conduct occurs entirely in foreign jurisdictions, it will not be reached by enforcement in Mexico, unless its purpose or effects occur within the country. The Mexican enforcement agencies have the authority to participate in international cartel investigations and to co-operate with other countries in order to tackle cartel conduct. 

Mexico has entered into different free trade agreements which contain competition provisions that should be implemented; for instance, the revised United States–Mexico–Canada Agreement. Please refer to 3.5 Co-operation with Foreign Enforcement Agencies.

At the beginning of the pandemic outbreak, the Commission issued a statement establishing a set of criteria to allow certain types of collaboration agreements between economic agents (either competitors or non-competitors), for the purpose of maintaining or increasing supply, satisfying demand, protecting supply chains, avoiding shortages or hoarding of goods, provided that such collaboration was temporary and focused on addressing the pandemic, without having negative effects on consumers. Such collaboration is still permitted since the Commission has not issue a communication stating otherwise.

In order to prevent a cartel investigation, the economic agents need to inform the Commission of such agreements so it can authorise them.

The enforcement agencies are required to have an objective cause in order to start an investigation. An objective cause is any indication of the existence of cartel conduct. According to the principles of the Mexican legal system, the investigative authority should clearly and duly justify its allegations.

Furthermore, the Regulations to the Federal Economic Competition Law list certain conducts that could drive an investigation either ex officio or prompted by a claim filed by third parties. These conducts include:

  • the invitation (or recommendation) to other entities or individuals to co-ordinate practice offers and conditions of production, marketing or distribution of goods and services, or to exchange information with such purpose or effect;
  • the fixing of the sale price offered by two or more competitors in Mexico considerably above or below the international reference price;
  • instructions or recommendations adopted by business associations, business chambers or similar organisations to perform any of the conduct described above; and
  • two or more competitors establishing maximum or minimum prices, or adhering to prices issued by business associations or commercial chambers. 

There are different ways in which an investigation can be initiated: claims filed by any entity or individual even if the claimant is not the affected party; requirement by the executive branch, the Ministry of the Economy or the Consumer Protection Agency; ex officio investigations; and investigations deriving from information obtained from leniency applicants.

Once the Commission or the Institute decides to start an investigation, it is required to publish a notice in the Federal Official Gazette noting the beginning of proceedings, the relevant market and the type of alleged conduct. After this information is published, the investigative process provides the corresponding enforcement agency with a timeframe that runs from 30 to 120 business days (with the possibility to extend the investigative stage up to four times for 120 business days each time). The investigation process is of a confidential nature without the possibility of identifying the target entities or individuals.

Once the investigative authority considers it has sufficient grounds, it submits the case to the Board of Commissioners to determine whether the alleged responsible participants are formally served with a document called the statement of probable liability, or the case is to be closed in the event that insufficient evidence was obtained. After the alleged responsible entities or individuals are served with the statement of probable liability, a trial-like administrative proceeding starts. The parties to the trial are the investigative authority as plaintiff and the defendants. The defendants have 45 business days to answer every allegation and provide as much evidence as possible to persuade the Board of Commissioners of their innocence. Other steps are followed during the trial-like procedure and once the steps are completed the resolution should be issued. 

Dawn raids are possible and common during cartel investigations and in some cases are performed before the notice mentioned in 2.1 Initial Investigatory Steps is published. 

The obligations of a firm or individual facing a dawn raid are to allow the visit to take place without any obstructions and to provide all necessary support to the visiting officials. If the firm or individual rejects or obstructs the visit in any manner, then the officials will include the fact in the corresponding minutes and the alleged fact will be considered to be true. 

It is possible for the visited firm or individual to include comments or arguments in the minutes as well as to attach evidence or supporting documents to their arguments. The visited economic agents will be entitled to appoint two witnesses who will sign the minutes.

The scope of the dawn raids is broad. The officials are authorised to access facilities, means of transportation, computers, electronic devices, storage devices, files or any other elements that might contain evidence. The officials may also take pictures or record video and copy, by any means, documents, books, files, or information generated by any type of technology (including computers and emails) or material support, provided that they are related to the investigation. Seizure of the relevant documents is not allowed. Furthermore, the Commission or the Institute cannot have access to information protected by the attorney-client privilege, as it will be explained in detail under 2.12 Attorney-Client Privilege.

The firms or individuals visited are warned of certain measures, such as the imposition of fines. However, if spoliation of information occurs, then the enforcement agencies’ allegations may be considered as proved and criminal liability may be imposed.

The procedure of dawn raids is quite formal and must follow specific rules, as follows:

  • the investigative authority will issue an order containing the purpose, scope and term of the visit as well as the name and address of the visited economic agents; 
  • the visited economic agent is warned that in the event of access denial, hindering the visit or refusing to provide the documents or information requested, the enforcement measures (such as penalties) shall be imposed;
  • the visits are carried out with the purpose of obtaining information and documents related to the investigation;
  • the visits cannot exceed two months (with the possibility to extend them for two additional months);
  • the visits can be performed on business days and during business hours, provided that the authority may allow an inspection to be initiated on non-business days and during non-business hours or for an inspection to be continued into non-business days and hours;
  • the visited economic agent’s officers, representatives or employees must allow the on-site inspection, providing access to the facilities and information as mentioned above;
  • the visiting officers may request explanations regarding the facts, information or documents related to the purpose of the visit from the economic agent’s officers, representatives or personnel, whose answers will be recorded and included in the visit’s minutes; 
  • the visits can be conducted simultaneously in two or more places at a time; and
  • the visiting officials will draft minutes, in the presence of two witnesses, and a detailed description of the facts or omissions noted during the visit will normally be included. 

The visited economic agent has the right to counsel; nevertheless, the visit can start without the presence of counsel. The counsel is authorised to speak or provide comments that will also be recorded in the minutes. The counsel, like any other officer or representative of the visited economic agent, will also be subject to the warnings made by the visiting officials.

Because the competition law is a specialised legal framework, the economic agents typically engage separate counsel to address the investigations. For certain investigations it is also important to have an economist if some of the arguments to be used by the defendant rely on economic analysis. It is important to point out that there is no obligation to engage separate counsel.

The procedure to determine a violation of the Mexican competition law is divided into two stages. The first is the investigation procedure and the second a trial-like administrative procedure as described at 2.1 Initial Investigatory Steps. Both steps are carried out by the Commission or the Institute, however, the first stage is carried out by an investigative authority which is an independent entity within the enforcement agencies. The investigation procedure is confidential, so it is not possible to know if the economic agent is considered as the target of an investigation or only as a third party to the process. 

Therefore, the initial steps for the defence counsel are to work together with the economic agent to internally determine if responsibility exists. Regardless of the fact that the investigations are confidential and it is not possible to determine who is under investigation, a visit or a request for information can provide sufficient background to carry out an assessment to prepare all the arguments and supporting evidence if a statement of probable responsibility is to be served on the economic agents.

Evidence and testimony are obtained from diverse sources such as dawn raids; official requests to any firm or individuals, including authorities; information gathered from claims filed with the enforcement agencies; intelligence investigations performed by the Commission or the Institute; appearances of any individual related in any way to the purpose of the investigation; anonymous claims filed on the Commission’s website; public sources of information; economic analysis of market studies; co-operation with other authorities; information gathered in other procedures carried out with enforcement agencies; and information obtained from applicants for leniency.

The agencies, and specifically the Commission, have an intelligence unit in charge of gathering information from different sources such as surveys, internal analysis, etc. The enforcement agencies can also request information from other governmental agencies or foreign competition authorities.

The companies or individuals can be obligated to produce documents or evidence if formally required to do so. The Mexican competition law does not have extraterritorial effect, however, in certain cases, companies or individuals located in Mexico must produce documents related to activities or facts of an international nature.

The attorney-client privilege is only applicable for external counsel of the economic agents and communications among the target entity; the external counsel cannot be used as evidence during the process. For instance, if during a dawn raid the enforcement agency officials find communications between the external counsel and his or her client, that information cannot be included, or even considered, for the purposes of pursuing the agencies' allegations against the target firm or individual. Recent judicial criteria have confirmed the attorney-client privilege in competition matters.

In addition, the Commission has published rules applicable to attorney-client privilege in which it establishes what type of information can be considered attorney-client privilege and the procedure to request that the Commission treat the information gathered as such.

The rules on attorney-client privilege provide that the Commission will not use or grant evidential value to the communications if the economic agent proves that the communications with the external counsel had the purpose of seeking legal advice. The procedure to request the information be treated as attorney-client privilege is the following.

  • During a dawn raid the visited economic agent can request the visiting officials to classify certain documents or information as attorney-client privilege. The visiting officials must detail the request of the visited economic agent in the draft minutes.
  • Once the authority concludes the dawn raid, the visited economic agent has 20 business days to submit a formal request to the Commission. Even if the economic agent failed to present the request during the dawn raid, it has the right to submit the request. 
  • The information must be described; for example, if the information is digital, the exact location, name and type of document (agreement, letter, email, and memorandum), the name of the author and date.
  • A small description of the legal advice and the reasons for the information being considered as attorney-client privilege must be provided.
  • Proof that the external counsel is legally authorised to practice law must also be included.

All entities and individuals are protected by formal rules contained in the Mexican Federal Constitution, such as the principles of due process. Individuals should not be disturbed in their goods, domicile, papers or possessions without a written order of a competent authority, which should be duly supported.

Another important principle under Mexican law is the presumption of innocence for the defendants. If the Commission or the Institute do not gather enough evidence to accuse the defendants of cartel behaviour, the defendants should be considered innocent and the investigation should be closed.

In general terms, both the entities and individuals co-operate with enforcement agencies. However, the consequences of non-co-operation with the Commission or the Institute may give rise to fines imposed on the economic agents; for instance, a fine of approximately USD18,000 can be imposed for each day of non-compliance with an order or requirement from the enforcement agencies.

The information obtained by the enforcement agencies can be considered public, confidential or reserved as set out below:

  • information deemed public can be accessed by everybody or even published on the authority's webpage;
  • reserved information can be accessed by economic agents who are part of the trial-like procedure; and
  • information deemed confidential can only be accessed by the economic agent that provided the information.

In order to classify information as confidential, an economic agent is required to show and justify that the information is in fact confidential in nature, as well as to file a summary thereof. The following are included as bases for confidential classification:

  • information that, were it to be disclosed, would cause damage or lost profits;
  • information that contains personal data that requires consent for disclosure;
  • information that would put security at risk; or
  • information whose disclosure is prohibited by any legal provision.

Legal and factual arguments are raised at two different stages of the process. During the investigation stage, arguments can be raised through the responses and evidence provided to the official requests of the agencies, regardless of the fact that it is not possible to know if the economic agent is a target or not at this stage. 

The second stage of the process ‒ the trial-like procedure ‒ is the appropriate procedural moment to raise all arguments, file evidence, provide economic analysis and to include arguments to persuade the enforcement agencies.

A leniency programme exists in Mexican competition law and is available for any economic agent that has participated in cartel conduct (either directly or indirectly). The general rules applicable to the Leniency Programme are the following:

  • the applicant should be the first to provide enough evidence to allow the enforcement agency to presume a cartel;
  • the applicant should fully and continuously co-operate throughout the investigation stage and, if required, during the trial-like procedure; and
  • the applicant must cease its participation in the cartel.

If said requests are fulfilled, the agency will impose a minimum fine. Applicants who are not the first to provide evidence can also request such benefit, but they will only receive a reduction of 50%, 30% or 20% of the maximum permitted fine (depending on the chronological order in which requirements are submitted and on the supporting evidence provided).

The Commission published Guidelines on the Leniency and Fines Reduction Programme which provide details on the steps that an applicant should follow to apply for leniency, what an applicant should understand as full and continuous co-operation, and the procedure to revoke the benefit granted.

The enforcement agencies demand information from company employees of all levels of seniority through official requests and interviews performed by interviewers of the enforcement agencies. Former employees or officers can also be required to provide information or to appear for interviews or hearings.

The enforcement agencies can acquire information directly from the target company or others (including governmental entities). The enforcement agency normally issues official requests that should be fully answered within a period of ten business days (a term that can be extended). The agencies are authorised to issue as many official requests as they deem proper. Typically, the official requests contain a significant amount of information to be addressed, filed or produced. In the event official requests are not fully addressed, then the governmental agencies can either reiterate their request or impose a fine for every day of non-compliance.

The enforcement agencies do not typically seek information from companies or individuals outside Mexico. However, there are legal instruments that allow the enforcement agencies to obtain information located abroad.

There is inter-agency co-operation and co-ordination within Mexico. For instance, there is an important relationship between the Consumer Protection Attorney (CPA) and the Commission as well as the Energy Regulatory Commission. Several cases have started by means of co-operation or information provided by other government agencies. In addition, the Mexican competition law provides that the Ministry of Economy and the CPA can file claims for cartel conducts. Also, if the enforcement agencies learn that a cartel conduct may result in damages or lost profits to consumers, then the CPA should be informed so it can start an investigation accordingly.

The Commission is quite active in its relationship with foreign enforcement agencies. For instance, it is committed to adopt the best international practices through participation with international organisations such as the OECD, the International Competition Network, and the United Nations Conference on Trade and Development.

There are also international treaties and instruments that require the Commission to comply with mechanisms of co-operation with other agencies. In addition, it has entered into co-operative agreements with other agencies, such as the one executed with the European Commission for increased co-operation on competition matters and in merger control cases. The co-operation agreement with the European Commission includes the possibility for either agency to remit a case to the other when potential law violations exist. It also provides for training and exchange of officials between both authorities. For instance, in the past, US and British authorities have participated with the Commission in order to train their officials.

Criminal cases for cartel conducts can be filed with the Attorney General's Office by the Commission or the Institute without necessarily having a final resolution. Therefore, enforcement agencies can file criminal claims once the investigative authority issues the statement of probable liability. Third parties or other agencies cannot bring criminal cases for cartel conduct; it is not common for a cartel investigation to give rise to criminal procedures.

Once the Attorney General's Office is aware of the claim, it will apply the criminal law rules to determine whether or not a crime was committed. These rules and principles are quite different from the administrative procedure. If the Attorney General’s investigation results in an alleged cartel crime, it will then file the case with a criminal court for the fining process. The defendant has the right to due process and to know the basis and rationale on which the accusation is supported.

The procedure to enforce competition laws in Mexico is of an administrative nature and no civil actions to enforce such laws can be brought (other than damages or lost profits civil procedures). In order to file a complaint for cartel conduct the plaintiff needs to submit a written document containing:

  • the specifics of the alleged responsible entity or individual;
  • a description of the facts considered illegal, the market structure, and the goods and services involved;
  • how the conduct affects the market;
  • a list of documents and supporting evidence which may include minutes, communications, videos, audio recordings, statistics, market surveys; and
  • any other evidence or information that might help enforcement agencies to analyse the case.

The complaints are filed with either the Commission or the Institute, and the investigation and analysis of the claim is carried out by the independent investigative authority, which will eventually do one of the following:

  • issue an official communication marking the beginning of the investigation;
  • issue an official request in order to petition fulfilment of the requirements of a complaint; or
  • issue an official communication refusing the claim, either due to the lack of the necessary requirements or because the behaviour cannot be considered as cartel conduct.

Defendants do not have access to the information in possession of the investigative authority while the confidential investigation is in process. Once the statement of probable responsibility is served on the defendant, then it is possible to know the specifics of the conduct attributed to the defendant.

Cartel conduct always implies at least two involved parties considered to be competitors. Therefore, the enforcement carried out is typically brought against multiple parties within the same case. The identity of the parties involved in the conduct will be disclosed once the investigation stage is complete and the alleged responsible parties are served with the statement of probable liability.

Depending on the type of procedure (ex officio or following a claim) the burden of proof to initiate the investigation is on the side of the plaintiff or the agency. Once the investigation procedure is completed and the investigative authority gathers enough evidence (ie, from the claimant, information gathered during visits and investigations, and information provided by the target entities and other parties) then the investigative authority will have the burden of proof by means of the statement of probable responsibility.

The enforcement proceedings carried out by the Commission or the Institute are of an administrative nature. The finders of facts are both the plaintiff and the enforcement agency. The agencies (either the Commission or the Institute) enforce the law for those facts. In the event of criminal cases, the finder of fact is the enforcement agency which files the claim with the Attorney General. The Attorney General's Office investigates the criminal case and the criminal courts apply the law to those facts.

Evidence obtained in one proceeding can be used in another proceeding if it is related to the facts and the target company. Information provided by applicants for leniency is only used in the proceeding for which the information is provided for.

According to the legal principles applicable in Mexico, the evidence should comply with constitutional standards, which allow the defendant to have access to due process. The enforcement agencies should therefore produce and support their allegations with the highest standard of legal and economic analysis. If the defendant is fined by the Commission or the Institute, it could still challenge the decision by means of an amparo proceeding before specialised courts on competition, telecommunications and broadcasting. Such courts will analyse whether the procedure performed by the enforcement agencies followed legal standards and principles; if it did not, the resolution could be amended or revoked.

Experts are, in some cases, fundamental to a proper defence. Economists, in particular, as independent experts, produce an important part of the argument and evidence presented to the agencies.

The attorney-client privilege is recognised and cannot be used as evidence. Please refer to 2.12 Attorney-Client Privilege.

It is possible to have multiple or simultaneous enforcement proceedings involving the same or related facts. Nonetheless, the enforcement agencies typically order the joinder of files that are related by the same facts in order to have a single procedure.

Sanctions are imposed directly by the Commission or the Institute, depending on the case. However, criminal sanctions are imposed by the criminal courts.

Other than the Leniency Programme mentioned at 2.17 Leniency, Immunity and/or Amnesty Regime, there are no plea bargaining or settlement procedures for cartel conducts.

No collateral effects (other than criminal complaints or civil cases to claim losses and damages) exist. The Commission has been actively pursuing a fight against corruption agenda and as part of this agenda there are initiatives to create collateral effects: for instance, debarment in public procurement processes or in public bids of entities, or individuals sanctioned for cartel conducts.

Criminal proceedings can only be started by means of a formal complaint brought by the Commission or the Institute. Criminal law is quite formalistic and specific rules apply. Currently, only a few cases have been brought before the Attorney General. If under criminal rules, the cartel conduct described in the Federal Criminal Code is carried out, then a specific unit of the Attorney General's Office would require a criminal judge to start the fining process, provided that the corresponding judge determines the applicable sanction.

The cartel investigations performed by the enforcement agencies are of an administrative nature. The Mexican competition law allows companies and individuals to be fined after an adversarial procedure in the form of a judicial trial. The enforcement agencies are the only entities authorised to apply sanctions (other than criminal charges and resolutions determining damages and loss of profits). In the event of civil actions to claim damages and loss of profits, the specialised courts on competition, telecommunications and broadcasting will determine the corresponding amount to be paid, if applicable.

Sanctions are of an economic nature; however, the enforcement agencies can order the correction or suppression of certain types of conduct in the future.

The Commission specifically encourages economic agents to implement competition compliance programmes as a preventative measure to avoid violations of the Mexican competition law. Nevertheless, no specific rules or benefits are included in the corresponding law.

Sanctions imposed by the enforcement agencies are for the benefit of the government and are not intended to provide consumer redress or any benefit to other affected parties.

A judicial review is the only procedure available to challenge the enforcement agencies' resolutions. The judicial challenge (known as indirect amparo) should be filed with the specialised courts on competition, telecommunications and broadcasting. Appeals against the decisions of a lower court are lodged with specialised courts or appeal courts on competition, telecommunications and broadcasting. No other remedies are available to challenge either inner process resolutions or acts or final resolutions other than the above-mentioned indirect amparo.

No private right of action exists for cartel conduct in Mexico. However, once the final resolution from either the Commission or the Institute is issued, any affected third party can file civil actions to claim damages and loss of profits, which will be brought before the specialised courts on competition, telecommunications and broadcasting.

Class actions for competition cases are allowed in Mexico when led by the enforcement agencies; however, competition class actions are not common in Mexico.

No private right of action exists for cartel conduct in Mexico. Nevertheless, civil actions exist for damages and loss of profits.

Evidence obtained from government investigations is admissible and, in some cases, can be considered as an indication of cartel conduct.

Because there is no private civil litigation to enforce competition law related to cartel conduct, there is no describable frequency of claims. Also, it is not common in Mexico to file civil actions to claim damages or loss of profits.

The compensation for successful attorneys is agreed upon between clients and their counsel on a case-by-case basis. The resolutions issued by the enforcement agencies do not provide for the compensation of legal representatives.

The resolutions issued by the Commission or the Institute do not mandate that unsuccessful claimants be obligated to pay defence costs for counsel. Nevertheless, in a procedure to claim damages and lost profits, and depending on the case, costs can be included as part of those damages.

Mexican competition law does not allow for private civil litigation, except for civil cases related to damages and loss of profits; consequently, there are no appeals on this regard. It is possible to challenge decisions issued by the specialised courts on competition, telecommunications and broadcasting with the corresponding specialised courts of appeal. 

According to the strategic plans of the Commission, the following markets or sectors will be given specific attention and may be the subject of future cartel investigations: energy, finance, health, public procurement, agriculture and transportation.

The following guidelines have been published by the Commission and are non-binding; however important criteria and interpretations are included therein:

  • Guidelines on information exchange between economic agents;
  • Guidelines on initiating an investigation regarding anti-competitive practices;
  • Guidelines on investigations regarding absolute monopolistic practices; and
  • Guidelines on the Leniency and Fines Reduction Programme.
Nader, Hayaux & Goebel, S.C.

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Mexico City
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+ 52 55 4170 3000

+ 52 55 2167 3099

info@nhg.com.mx www.nhg.com.mx
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Basham, Ringe y Correa S.C. has more than 100 years of experience assisting its clients in conducting business throughout Mexico and abroad. Basham's practice includes the protection of distinctive signs such as trade marks, commercial advertisements and trade names. Specific work in this area includes drafting all types of agreements which involve distinctive signs, including franchise agreements; audits on intellectual property matters; and establishment of an international network of correspondents that allows Basham to manage a company’s intangible assets, simplifying administrative procedures, mail and the invoicing of clients. The firm's broader intellectual property work involves considerable experience in terms of patents and copyrights, as well as expertise in adjacent sectors such as privacy and data protection, life sciences and franchising. The firm’s clients include prominent international corporations, many of them on the Fortune 500 list, medium-sized companies, financial institutions and individuals.

Leniency Programme in Mexico: Legal Framework and Regulatory Evolution

Introduction

This article analyses the legal evolution of the Mexican antitrust leniency programme (the "Leniency Programme" or the "Immunity Programme") from its origins to date. It looks at the applicable legal framework, focusing on two emblematic decisions that led to the most recent reform of the applicable legal regime. Finally, it examines the recent introduction of regulatory provisions that improve the legal framework, provide greater certainty, and strengthen the programme.

Background and reasons behind the leniency programme

The first Mexican Federal Economic Competition Law (the “Former FECL”) came into force in 1994 and was amended in 2006 and 2011. As a result of a constitutional reform, a new law was enacted in 2014 that strengthened the competition system and is still in force today (the “FECL”).

The FECL sanctions the following absolute monopolistic practices (collusive conducts):

  • price fixing;
  • output restriction;
  • market allocation;
  • bid rigging; and
  • exchanging information for any of the above-mentioned purposes. 

Identifying the existence of cartels and finding evidence to sanction them is extremely difficult due to the secrecy and stealth with which their members conduct themselves. The co-operation of an insider facilitates the gathering of relevant evidence. Immunity programmes allow the authority to obtain valuable and useful information to prove collusive conducts. They also discourage the creation of new cartels as they introduce an element of instability in the cartel due to the possibility that any of its members may betray the others and confess to avoid sanctions. This instability is described in the classic game theory example of the “prisoner's dilemma”.

For these reasons, in 2006 the Leniency Programme was incorporated into the Former FECL in its Article 33 bis 3. The Programme is based on the successful American model, which is run by the US Department of Justice and dates back to 1978. Mexico, like other jurisdictions in the world, was inspired by this model when it implemented its Leniency Programme. 

Through the Programme, powers were granted to the Former Federal Competition Commission (currently the Federal Economic Competition Commission, or COFECE) to reduce sanctions against economic agents who provide sufficient evidence to demonstrate the existence of cartels, the players involved and the collusion mechanics. The objective of the Programme is to encourage economic agents that are part of a cartel to confess their participation and grant the competition authority valuable elements to prosecute and sanction the other participants, in exchange for immunity.

Article 33 bis 3 of the Former FECL was amended in 2011 to allow individuals who have participated in anti-competitive conducts on behalf of legal entities, and economic agents who have facilitated or contributed to the conduct, to take part in the Programme. Finally, Article 33 bis 3 of the Former FECL was embodied in Article 103 of the new FECL with minimal amendments.

According to this provision, there are three central obligations that applicants must fulfil to obtain the benefit on a definitive basis:

  • to provide sufficient elements to allow the Investigation Authority to initiate an investigation or presume the existence of the conduct;
  • to co-operate fully and continuously with the investigation and, where appropriate, in the trial-like proceeding; and
  • to take any necessary actions to terminate their participation in the collusive conduct.

The economic agents apply for the benefits of the Programme with the Investigation Authority which conducts the investigation and may grant a conditional immunity. However, definitive immunity is granted by the Board of Commissioners upon conclusion of the trial-like proceeding and subject to compliance with the conditions mentioned here.

In exchange for its co-operation, the applicant who is granted definitive immunity obtains a reduction of administrative sanctions, as well as criminal immunity. The first applicant will be given a symbolic minimum fine that results in a near 100% sanction reduction, and subsequent applicants may receive fine reductions of 50%, 30% or 20% respectively. Finally, individuals will not be deemed ineligible to continue serving in their professional positions in the companies they represent if they are granted definitive immunity.

Since the introduction of the Programme in 2006, its use has become more frequent and has been very successful. For about ten years the Programme ran successfully and without issues. Also, Article 103 of the FECL had not undergone major amendments since the issuance of the FECL. 

However, in 2016 and 2017, COFECE's Board issued two historic decisions of systemic relevance, in which it withdrew the conditional immunity granted to several economic agents, after having considered that they did not comply with the obligation to co-operate "fully and continuously" to benefit from the Programme under the FECL.

The first case in Latin America in which a competition authority decided to withdraw the conditional immunity and reduction of sanctions from an economic agent took place in Mexico in the decision issued by COFECE’s Board on 5 July 2016 in a case related to an international cartel of automobile air-conditioning compressors. The second withdrawal of immunity occurred in another emblematic case in the financial sector regarding a collusion between pension funds, in which COFECE’s Board decided on 20 April 2017 to impose the highest fine issued to date. 

Both resolutions are public and are available at COFECE’s website. Both decisions were challenged before the courts and have resulted in relevant judicial precedents, which have prompted reforms to the legal framework applicable to the Mexican Leniency Programme. These decisions will be explained in the following section.

Cases that have led to relevant judicial interpretation on the scope of the programme and the economic agents’ obligations

File IO-001-2013

On 2 April 2013, the former Federal Competition Commission published in the Federal Official Gazette (“Official Gazette”) a notice declaring the initiation of an investigation into possible information exchange between competitors in the international market, with the purpose and effect of manipulating the price of scroll compressors. The authority considered that the foregoing could have affected the local market since these compressors were used as inputs in the manufacturing and sale of automobiles in Mexico.

On 5 July 2016, COFECE’s Board issued the decision that concluded the trial-like proceeding. The public version of the decision states that:

  • two economic agents applied to the Programme and the Investigation Authority granted them conditional immunity;
  • COFECE’s Board decided to sanction two economic agents and impose a total fine of MXN72,034,039.34 (approximately USD3,635,457.18); and
  • COFECE’s Board granted definitive immunity to the first applicant, but it withdrew the immunity from the second applicant, after having considered that it did not comply with the obligation under Article 33 bis 3 of the Former FECL to "co-operate fully and continuously”.

COFECE’s Board considered that the second applicant did not co-operate "fully and continuously" in the trial-like proceeding, since it made statements in its defence disputing the presumptive accusation against it and denying the possibility that the Mexican competition authority could impose sanctions for carrying out the anti-competitive conduct. COFECE’s Board considered that this conduct was inconsistent and contradictory with its prior acceptance of the existence of the cartel and its participation in the collusive conduct. Therefore, it interpreted these actions as a failure to provide full and continuous co-operation in the trial-like proceeding. Consequently, it imposed the administrative sanction on the economic agent without applying the penalty reduction that would have corresponded if the definitive immunity had been granted.

The second applicant filed an amparo lawsuit to challenge COFECE’s decision. The first instance judge denied relief, through a judgment issued on 3 January 2016. Thereafter, both the second applicant and COFECE filed an appeal for review against the judge’s decision. Some of the arguments were analysed by a second instance court, but one was reserved to the Supreme Court of Justice of the Nation (SCJN), due to its relevance.

The second applicant mainly argued that Article 33 bis 3 of the Former FECL violates constitutional guarantees by leaving it to the discretion of the authority to assess whether the co-operation of economic agents is "full and continuous", given that the words "full" and "continuous" are ambiguous and their meaning is not statutorily defined. It also argued that it did co-operate fully and continuously during the investigation and the trial-like proceeding, by accepting its participation in the conduct and providing the pertinent information to the authority in a timely manner. It further argued that during the trial-like proceeding, it only exercised its right to defend and be heard, with the purpose of having its arguments considered in the context of the individualisation of the fine. However, it argued that it did not deny its participation in the conduct.

The SCJN ruled that Article 33 bis 3, Section II of the Former FECL was constitutional, because even though the provision does not define the concept of “full and continuous co-operation”, its grammatical meaning and the normative context in which the Article is immersed leaves no room for doubt about what should be understood by this concept and therefore does not generate legal uncertainty. The SCJN points out that, in the context of the co-operation that the economic agent must maintain, “full” co-operation implies full, total and unhindered support during the investigation and the trial-like proceeding, taking any necessary actions to terminate the participation in the anti-competitive conduct; while "continuous" co-operation should be understood as uninterrupted and constant during the investigation and, where appropriate, in the trial-like proceeding.

On the other hand, the second instance court concluded that the defence of the second applicant in the trial-like proceeding does not imply that it failed to co-operate fully and continuously pursuant to Article 103 of the LFCE, since it only exercised due process rights. The court considered that in the absence of an express definition of the obligation to “co-operate fully and continuously”, the obligation should be interpreted as the duty to “acknowledge the conduct carried out, provide the necessary evidence to carry out the proceeding, allow the performance of the proceedings, as well as not to destroy, hide or falsify information”. Therefore, the second instance court granted relief to the second applicant so that COFECE would issue a new decision in which it would again assess, whether it was pertinent or not, to withdraw the immunity taking into account the above considerations.

Finally, on 24 October 2019, COFECE’s Board issued a new resolution in which, among other issues, it granted the second applicant definitive immunity and consequently applied the corresponding reduction to the administrative fine.

File IO-003-2015

On 10 February 2015, COFECE published a notice in the Official Gazette regarding the initiation of an investigation into possible agreements between competing pension funds, with the purpose and effect of dividing the market through the establishment of bilateral agreements to reduce the number of transfers of worker accounts managed by them.

On 20 April 2017, COFECE’s Board issued a decision that concluded the trial-like proceeding. The public version of the resolution states that:

  • several economic agents requested to join the Programme and the Investigation Authority granted them conditional immunity;
  • COFECE’s Board decided to sanction four pension funds and 11 individuals with fines totalling MXN1,111,580,257.52 (approximately USD56,099,900.45), the highest fine imposed by COFECE to date; and
  • the Board of Commissioners granted definitive immunity to several economic agents subpoenaed in the trial-like proceeding, but withdrew the immunity from other economic agents and individuals, after having considered that they did not comply with the obligation established in FECL’s Article 103 to co-operate “fully and continuously”.

As in the previous case, COFECE’s Board considered that the applicants whose immunity was rescinded breached their obligation to “co-operate fully and continuously” during the trial-like proceeding, since they made statements disputing the presumptive accusation against them. Also, as in the previous case, COFECE’s Board considered that their conduct was inconsistent and contradictory with their prior acceptance of the existence of a cartel and their participation in the collusive conduct. Thus, it interpreted their actions as an absence of full and continuous co-operation in the stage of the trial-like proceeding. In the case of the individuals to whom the immunity was withdrawn, COFECE explained that it was not appropriate to grant them immunity if they denied having participated directly on behalf of a legal entity in the collusive conduct. Consequently, COFECE’s Board imposed administrative sanctions to said economic agents and individuals, without applying a reduction of fines under the Immunity Programme to them.

According to public sources, three pension funds filed amparo lawsuits against this decision. However, only the rulings corresponding to the proceedings related to one of the pension funds and some individuals are public.

The amparo lawsuit filed by the only pension fund for which the proceeding is public is currently undergoing judicial review. On 20 January 2021, the SCJN dismissed the arguments made by the economic agent and decided to reserve jurisdiction over other arguments to the competent court. Among the arguments studied by the SCJN is the application of certain criminal principles to the administrative proceeding. The SCJN ruled that the principles of criminal law invoked by the pension fund did not apply in this kind of administrative proceeding. As of the publication of this article, the Court’s final decision regarding the arguments that it was responsible for analysing remains pending.

In addition, there are three constitutional proceedings filed by individuals against the COFECE resolution, the rulings of which are public.

In the first of the proceedings, one of the individuals who was part of COFECE’s proceeding argued that having exercised his right of defence in the trial-like proceeding did not translate into a lack of "full and continuous co-operation" in terms of Article 103 of the FECL. Following the reasoning made by the judicial power in the first case analysed above, on 14 January 2019, the judge granted relief to the individual, after having acknowledged that exercising the right of defence in the trial-like proceeding does not imply that a person did not co-operate “fully and continuously” under Article 103 of the FECL. Consequently, the judge ordered COFECE to nullify its decision and issue a new one in which it again analyses the appropriateness of granting definitive immunity to this person.

The other two amparo proceedings initiated by individuals do not directly challenge any aspect related to the Programme, derived from the fact that these persons were granted definitive immunity in the COFECE resolution. Therefore, these procedures are not discussed here.

It should be noted that, to date, COFECE has not issued a decision in compliance with any amparo judgment in the File IO-003-2015, and some constitutional proceedings are still ongoing. Therefore, it is yet to be seen what will be the final ruling and interpretation made by the judicial branch about the Immunity Programme in the pending resolutions.

Regulatory provisions for the Leniency Programme

The previous cases raised relevant questions that had not arisen in the past, generated relevant criteria and established new interpretations of some aspects of the Leniency Programme, mainly the meaning of the concept of “full and continuous co-operation” and the scenarios where immunity may be withdrawn from an applicant to the Programme on a definitive basis. Based on this experience, COFECE made regulatory modifications that show the central criteria of the interpretations made by the judicial branch in the cases analysed above.

Recently, on 4 March 2020, COFECE’s Board published the Regulatory Provisions for the Immunity and Sanctions Reduction Programme provided for in Article 103 of the FECL (the “Provisions”) in the Official Gazette.

First, the Provisions state the procedure that the applicants must follow to request the conditional benefit of immunity and reduction of sanctions in terms of Article 103 of the FECL. This procedure takes up some of the rules previously included in the Guidelines on the Immunity Programme.

On the other hand, in accordance with the judicial cases analysed, the Provisions finally define “full and continuous co-operation”, specifying that this concept implies complying with the following requirements.

During the investigation stage:

  • the acknowledgment of participation in the collusive conduct;
  • the termination of participating in the collusive conduct, unless the Investigation Authority instructs otherwise, through the issuance of an official notice;
  • keeping the information delivered to COFECE confidential;
  • delivering, within the indicated deadlines, all the information and documents that are required during the investigation;
  • allowing and co-operating with visits, inspections and other acts conducted by the Investigation Authority;
  • carrying out the actions within their reach to ensure the co-operation of the individuals or legal entities that are part of their economic group;
  • not destroying, falsifying or hiding information; and
  • reporting all collusive conducts in which the economic agents participated or are participating.

During the trial-like proceeding:

  • not denying their participation in the conduct;
  • providing supervening evidence;
  • allowing the performance of the proceedings, and acts carried out of the Technical Secretariat; and
  • not destroying, falsifying or hiding information.

Another novel aspect of the Provisions is that they provide that when the applicant, or the persons covered by the application, do not comply with the obligations set forth in the FECL’s Article 103 and the Provisions, during the investigation stage, the Investigation Authority will recommend COFECE’s Board to rescind the benefits of the Programme. Also, during the trial-like proceeding, and until the case is completed, if the Technical Secretary detects acts or omissions that could imply a breach of the economic agent's obligations under the Immunity Programme, he or she will issue an official notice by which he or she will communicate the situation to the economic agent to grant it the opportunity of making clarifications and correcting the breach, if this is possible. If the breach is not remedied, the Board may revoke the conditional benefit to the corresponding economic agent when issuing its final resolution.

Final considerations

The Programme has evolved and been improved from its inception to date. The authors believe that the cases analysed will not compromise the success of the Programme. On the contrary, in their opinion the judiciary has contributed to delimiting its scope and has clarified some of the applicants’ obligations. 

Finally, the authors consider that the issuance of the Provisions by COFECE has been successful, since it made it possible to identify areas of potential uncertainty and to improve the legal framework. In the authors' view, its issuance contributes to the provision of a more solid and robust programme.

Basham, Ringe y Correa S.C.

Paseo de los Tamarindos No 400-A
Piso 9
Col. Bosques de las Lomas
CP 05120
Mexico City
Mexico

+52 55 5261 0400

+52 55 5261 0496

basham@basham.com.mx www.basham.com.mx
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Nader, Hayaux & Goebel, S.C. is a market leader in M&A, banking and finance, fintech, securities and capital markets, structured finance, telecommunications, tax, insurance and reinsurance, project finance, real estate, energy and infrastructure, restructuring and insolvency, government procurement and antitrust. NHG's staff consists of 17 partners and more than 35 associates, and represents one of the largest groups of corporate finance experts in the Mexican market which has been working together for more than 30 years. NHG is the only Mexican law firm with an office in London; it has a strong focus on developing and pursuing business opportunities in Mexico, the UK and other European countries, and enjoys excellent working relationships with law firms in all major cities around the world.

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Basham, Ringe y Correa S.C. has more than 100 years of experience assisting its clients in conducting business throughout Mexico and abroad. Basham's practice includes the protection of distinctive signs such as trade marks, commercial advertisements and trade names. Specific work in this area includes drafting all types of agreements which involve distinctive signs, including franchise agreements; audits on intellectual property matters; and establishment of an international network of correspondents that allows Basham to manage a company’s intangible assets, simplifying administrative procedures, mail and the invoicing of clients. The firm's broader intellectual property work involves considerable experience in terms of patents and copyrights, as well as expertise in adjacent sectors such as privacy and data protection, life sciences and franchising. The firm’s clients include prominent international corporations, many of them on the Fortune 500 list, medium-sized companies, financial institutions and individuals.

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