Senate approves landmark changes to competition law

Thursday, April 28, 2011

Mexico's senate on Thursday unanimously approved a series of reforms that overhaul the competition law, allowing for greater power of sanctions, antitrust body Cofeco (CFC) said in a statement.

The announcement comes right at a time when mobile operator Telcel, the Mexican unit of Latin American telecoms giant América Móvil (NYSE: AMX), is facing a fine of US$1bn for alleged anticompetitive practices, the largest fine in the country's telecoms history.

The reforms are in keeping with key measures proposed by the executive branch on April 5, and which were also unanimously approved in the lower house of congress.

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The reforms address four central issues:

- Maximum fines for those committing "absolute" monopolistic practices and "relative" monopolistic practices. Such acts will entail paying out fines of 10% and 8% of annual revenues in Mexico.

- The establishment of jail sentences of 3-10 years for those committing absolute monopolistic practices.

- The authorization for the CFC to make unannounced visits to companies to gather information related to their investigations.

- The ability to impose precautionary measures to avoid irreversible damage to the competitive process during the investigation.

The measures also strengthen CFC's transparency obligations and create new divisions within the authority to avoid potential conflicts of interest, allow for non-legal settlements to disputes resulting from commitments made by the parties involved, and also simplify the process of notifying companies of potential monopolistic practices.

According to the statement, the reforms substantially strengthen the process of protecting competition and will ultimately benefit the consumer by allowing for a drop in prices and greater options.

Eduardo Pérez Motta, the CFC's president, said that with the approved reforms, "the government and congress have sent out a clear signal to put the Mexican consumer where he should be: at the center of the economy."

This week, América Móvil slammed the CFC's fine and said it plans to appeal.

Telcel has 30 days to ask the CFC to reconsider the decision and to present a proposal that shows how it intends to comply with the ruling and to end the alleged anticompetitive practice.

The ruling followed an investigation of charges filed by other telcos in 2006 and alleges that Telcel increases costs for its competitors by charging interconnection fees to terminate calls on its network that are above the charges for calls made within that network.