Mexico’s legal system has provisions regulating
monopolies and similar activities since at least 1917, when the current
Mexican Constitution was enacted.
Said Constitution prohibits the creation of monopolies and
the performance of monopolist activities, save for a few reserved to the
Federal government, such as the issuance of currency, and oil extraction.
For many years, however, antitrust regulation was not a
major obstacle to businesses, except for a very few of considerable size. The
opening of the Mexican economy during the early 90’s, however, gave way to a
number of investments by foreign entities that set up new companies or
purchased all or substantially all the stock
of a number of Mexican companies
that played leading roles in their industry, and made them grow in such a
fashion that local competitors did not have much of a chance.
It was under these circumstances that the current Federal Law on Economic
Competition (“Ley Federal de Competencia Económica”) was enacted,
The North America Free Trade Agreement (NAFTA), effective in México since
January 1, 1994, made it even
easier to US and Canadian investors to take over Mexican companies and carry
out cross borders transactions. All this caused some damage to
Mexican industries, in some cases because a sound management, scale
economies and large volume production resulted in lower prices, but in others
because such low prices were more the result of dumping and other predatory
The Federal Law on Economic Competition (FLEC) is, as its name indicates, a
federal law, applicable in all of México. Its main purpose is to ensure the
existence of a free competition process, by preventing and eliminating
monopolies, monopolist practices, and other restrictions affecting or
impairing the efficient functioning of goods and services markets.
Said FLEC is applicable in regards to
all economic activities, be them performed by individuals, business
organizations, unincorporated entities, government agencies, etc.
The authority in charge of supervising compliance with the
FLEC is the Federal Commission on Competition (the Commission), which is
authorized to, among other activities, prohibit or impose a fine on those
found liable of monopolist practices, or of carrying out mergers made with the
purpose of creating a monopoly.
Under the provisions of the FLEC
monopolist practices are those practices among competitors, clients or
suppliers that diminishes, damages or prevents competition
and free access to production, processing, distribution and
commercialization of goods an services.
FLEC provides also that certain concentrations regulated in said law
are subject to the prior approval of the Commission. A concentration is
defined as the merger, acquisition of control or any other act whereby
corporations, associations, organizations, shares,
partnership interests, trusts or assets in general are concentrated
among competitors, suppliers, clients or any other economic agents.
The Commission is obligated to object to and impose sanctions on
concentrations made with the purpose of lessen, diminish, deteriorate or
prevent competition on or the freely accessible offer of products or services
that may be deemed to the same, similar or substantially related.
The law provides for a procedure whereby the Commission determines if certain
economic practice is deemed as monopolist (in which case the Commission may
declare it null and void), or if a concentration may be approved. Acts carried
out against the FLEC may result also heavy fines.
The maximum fine may reach an amount in Pesos roughly equivalent to
Although more on the anecdotic than as a description on the applicable legal
provisions, we believe it should be noted that the Commission was perceived at
first to be rather benign. However, after the Commission was harshly
criticized for allowing, a few years back, the purchase of Cablevisión, S.A.
de C.V., the largest, and one of very few, cable vision companies in Mexico,
by Telefonos de Mexico, the only telephone company, it changed its attitude
and is now perceived as very firm on the strict compliance with applicable
To summarize, Mexico’s economy and legal system, after the opening started in the 90’s, NAFTA, the Free Trade Agreement with the European Union, the Free Trade Agreement with Israel, both signed in 2000, and other free trade agreements already signed with other countries (plus some others currently undergoing a negotiation process, such as Japan), offers a wide variety of activities that may be performed and market niches of all sizes, but this should not be interpreted as a form of permissiveness conducive to unfair commercial practices, such as monopolies and cartels.