Blog dedicated to reporting on Mexican drug cartels
on the border line between the US and Mexico

Sunday, July 19, 2020

An interview with Mexico City's Aziz & Kaye, discussing cartels in Mexico

Chivis Martinez Borderland Beat  TY Gus Lexology

Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the "Cartels Volume" discussing topics including leniency systems, enforcement trends, judicial review and compliance developments within key jurisdictions worldwide.

What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?

In accordance with the results of the 2019 annual workplan, most of the recent investigations initiated by the Federal Economic Competition Commission (COFECE) have been intended to pursue the possible attempt of absolute monopolistic (cartels) and relative practices (abuse of dominance) and the determination of the existence of barriers to competition and free market access. Additionally, in the 2018–2021 strategic plan, COFECE considers financial, agri-food, energy, transport, health and public procurement sectors as priorities.

The above allows it to steer its efforts towards sectors where competition policy can have the greatest impact in terms of economic growth and wellbeing for consumers. Notwithstanding that there is no mention of a particular market being investigated as a priority, in 2019 the energy sector had the greatest impact since there COFECE is investigating LP gas, marine diesel at service stations, and aircraft fuels at airports, all of them nationally.

COFECE also is investigating the affiliation service in public broker schools, cornmeal and tortillas.

On the other hand, the Federal Telecommunications Institute (IFT), during 2019, conducted several investigations regarding abuse of dominance and illicit concentrations on the following markets:

  • Mobile internet access services, and the production, distribution, and commercialization of audiovisual content transmitted over the internet, nationally.
  • Provision of restricted television and audio services, fixed and mobile telephony, and fixed and mobile broadband internet access, nationally.
  • Production, distribution and the commercialization of content transmitted through an internet-connected platform; distribution and commercialization of electronic devices for the reproduction of content over the internet, and restricted television and audio services, nationally.
  • Provision of wholesale disaggregation services of the local preponderant undertaken network in the telecommunications sector, nationally.
  • Retail market for mobile telecommunications services and commercialization of mobile terminal equipment, nationally.

What do recent investigations in your jurisdiction teach us?

Competition authorities in Mexico are increasingly focusing on markets that play a truly important role in the Mexican economy, like telecommunications, energy, public bids, mostly in the health sector and tortilla production. The enforcers have the legal instruments to investigate and punish those undertakings who commit anticompetitive practices, mostly regarding cartel activity. In addition, the actions of COFECE and the IFT are becoming more sophisticated, and they are going deeper requesting more information than ever, which sometimes does not relate to the investigation, putting a heavy economic burden on those being investigated.

While many investigations have been initiated by complaint, a considerable number of investigations were initiated ex officio, triggered by news or journalistic notes. For example, in 2016, journalistic reports known as the Panama Papers reported a possible illicit concentration in the distribution medicine market involving Nadro and Marzam, hence COFECE initiated an investigation.

Also, the leniency program has been a very important tool by which COFECE has collected information to prosecute and sanction cartels.

How is the leniency system developing, and which factors should clients consider before applying for leniency?

The program was born with the 2006 reform, and in 2011 it was improved with the increase in fines (up to 10 per cent of income) and was incorporated as a crime in the Federal Penal Code. As of As of 2014, with the new Federal Economic Competition Act, as the criminal sanction increased, which went from five to 10 years’ imprisonment, the number of applications increased by almost 50 per cent compared to the previous 10 years. There have been other developments of the Federal Economic Competition Act that we think is helping the leniency programme, such as the possibility of the disqualification of directors for up to five years and high fines for individuals.

In accordance with the contribution made by Mexico at the Meeting of the OECD Working Party No. 3 on Co-operation and Enforcement, one of the greatest benefits derived from the creation of the leniency programme is the deterrence of undertakings in the cartel’s conduct. As cartel detection grows and complaints to Fiscalia General de la Republica (FGR) become a tangible possibility, applications to the leniency programme are increasing.

COFECE is the most advanced economic competition authority in Mexico in terms of its leniency programme. The IFT has seen no major developments, except for an infographic and a guide – documents that are not binding. In addition, there has been no news of any investigation resulting from its immunity programme. In this regard COFECE is very active (in media and visiting universities, trade associations, etc) to publicise the leniency programem and to generate a culture of antitrust compliance in Mexico.

The culture of antitrust compliance is one of the most positive effects, because the undertakings are now aware of the importance of avoiding the cartel activity.

The peak of legal development of the programme is the issuance of the Regulatory Provisions of the Immunity and Sanction Reduction Program, published on 4 March 2020, which provides legal certainty to those governed in the implementation of the programme.

Although it is true that COFECE had previously issued a Guide, this was not mandatory for COFECE, which caused some mistrust and discussions between the authority and potential immunity applicants. The principal topics that now are clear are:

acts of cooperation, in particular: not to deny in any way participation in absolute monopolistic practices (cartels); and to confess all monopolistic practices in which the applicant has participated in the market or markets that resulted in investigations. I consider it derived from an amparo trial by an applicant affected by COFECE’s determination to withdraw the leniency benefit;
gives clarity to the governed on the assumptions that would enable COFECE to determine whether or not the applicants have cooperated with the investigation and whether or not they would continue as beneficiaries of the programme;
that the applicant may ask the investigative authority or the technical secretary, as the case may be, to make public knowledge of its adherence to the programme;
that the technical secretary of COFECE, during the processing of the procedure followed in the form of a trial, and in the face of signs of non-compliance with the obligations of cooperation, the applicants may rectify their conduct, provided that the omissions are correctable (this is an especially serious issue because it is not indicated when an omission is considered irremediable);
that if the benefit granted is revoked, COFECE may use the information provided by the applicants; and
that in the event any applicant is revoked from the benefit, the other applicants will not move forward to obtain greater benefits.
With regard to factors that clients consider before applying for immunity, the principal ones are: (1) avoiding criminal sanctions (up to 10 years); (2) fines of up to 17 million pesos; (3) the disqualification of directors for up to five years; (4) factors affecting the reputation of companies, especially if they are public; and (5) compliance matters, especially in transnational companies.

On the other hand, in our daily practice we have observed some inhibitors, since the leniency programme does not protect against sanctions that prohibit participation in public tenders, or protect against accusations of serious crimes such as organised crime.

4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making and what are your experiences in this regard?

There is no mechanism to speed up the procedure for cartel investigations conducted by the competition authorities, with the exception of the reduction of the amount of fines that exist for relative monopolistic practices (abuse of dominance) and unlawful concentrations under article 100 of the FECL.

Before the statement of probable responsibility is issued, in proceedings before the Commission for abuse of dominance or unlawful concentration, the undertakings subject to the investigation may, on a single occasion, express in writing their willingness to benefit from immunity or reduce the amount of fines provided for by the law, and must prove to COFECE: (1) their commitment to suspend, eliminate or correct the corresponding practice or concentration, in order to restore the process of free market access and economic competition, and (2) that the proposed means are legally and economically feasible and appropriate to avoid, or eliminate, the relative monopolistic practice or unlawful concentration under investigation, stating the time frames and terms of verification thereof.

The decision may issue: (1) the granting of the benefit of immunity or a reduction in the amount of the fine and (2) measures to restore the process of competition and free market access.

Tell us about the authority’s most important decisions over the year. What made them so significant?

In February 2020, COFECE fined Productos Galeno and Holiday de México, suppliers of polyethylene gloves, 29 million pesos for coordinating their price offers and discounts in tenders in the health sector.

In June 2019 it fined Productos Galeno, Dentilab and Holiday de México, toothbrush suppliers, 18.9 million pesos for establishing, coordinating and arranging positions in procurement procedures and refraining from participating in them, in order to divide the market for adult and child toothbrushes.

As mentioned above, COFECE has a serious commitment to fight against collusion in public tenders, especially in the health sector, because it harms one of the most basic needs of the Mexican population. Also, in our view, the health industry is one of the most worried about COFECE’s performance because its resolutions have a very strong outcome, especially for the sanctioned undertakings in public tenders.

Also, in October 2019, COFECE fined 10 individuals 2.1 million pesos each for this absolute monopolistic practice (and one more facilitated its implementation), in the market of production, distribution and commercialisation of corn tortillas in the municipality of Ángel Albino Corzo, Chiapas. Regarding this decision, it is important to point out that COFECE has sanctioned at least 10 cartels in this market, which is very transcendent, because the tortillas are one of the basics for Mexican nutrition.

In both markets, these days, COFECE is pretty busy working on ongoing investigations.

Other relevant sanctions for absolute monopolistic practices were published by COFECE in the document entitled ‘15 Relevant Actions 2019’, which shows that the investigations that COFECE considered most important were as follows:

Cancun International Airport was fined 72.5 million pesos for banning new groups of taxis from offering their services within its facilities, favouring those who were currently operating; and
Aeromexico and Mexicana were fined a total of 88 million pesos because, between April 2008 and February 2010, they formed an agreement to jointly fix a minimum or base prices on at least 112 air routes in the Mexican territory.
Regarding the IFT, and as far as I am aware, it has only sanctioned a single absolute monopolistic practice, by an agreement between companies to share the markets for production, distribution and commercialisation of fixed telephony, restricted television and internet access services to final consumers in the State of Mexico (2014). The sanctioned companies were Cablevisión, a subsidiary of Televisa and Megacable (total fine of 42 million pesos).

What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?

In accordance with the OECD Inter-Peer Review on Competition Law and Policy in Mexico 2020 and the information gathered during the OECD investigation, judicial review of competition processes has improved, but the need to promote and develop comprehensive and ongoing training of specialised judges persists. It is also clear from the information gathered during the OECD research missions that the terms of two and a half years and three years are very brief for judges to be fully versed in the necessary expertise.

According to Mexico’s competition authorities, 34 per cent of its appealed decisions result from fines imposed as a procedural enforcement measure; secondly, with 20 per cent these are decisions concerning the existence of a position of dominance and 12 per cent of the appealed decisions derive from decisions on the non-existence of a domain position.

In addition, in 2018, eight constitutional appeals against COFECE’s competition decisions were granted, 15 were dismissed and 22 were denied.

On the other hand, it is important to mention that both COFECE and IFT are authorities that have the power to investigate violations of the law and to issue resolutions to sanction such violations; that is, in the first instance they do not need to coordinate with another authority or public body.

One remarkable challenge of an absolute monopolistic practice decision took place in September 2019, in which COFECE lost its resolution in which it had withdrawn the benefit of the leniency programme. The tribunal resolved that the defendants had the right of defence against the probable responsibility, therefore the benefit of reducing sanctions to the undertaking must be granted.

How is private cartel enforcement developing in your jurisdiction?

We believe that both COFECE and the IFT have done a good job of preventing and fighting against absolute monopolistic practices and punishing those who commit them.

The enforcement duty to fight against cartels is an exclusive prerogative provided to COFECE or the IFT by the Federal Economic Competition Act. In Mexico private enforcement before the judicial branch does not exist, and I don’t think that this situation will change in the near future.

Notwithstanding, is important to point out that individuals have the right to claim before specialised courts, if they have suffered damages or losses deriving from a monopolistic practice or an unlawful concentration, once COFECE’s or the IFT’s resolution is final and conclusive.

Today, the complexity of obtaining damages is a challenge. One of the reasons why victims do not attend to this procedure are the restrictions that the law imposes on the maximum amount of reparation a victim can obtain for damages. However, in recent years, the Supreme Court of Justice has ruled that certain legal provisions that restrict the amount of damage victims can claim is unconstitutional.

What developments do you see in antitrust compliance?

I think that the culture of antitrust compliance in Mexico is young, but starting to improve day by day, and companies are concerned about being in compliance with competition policies. In this sense, in our experience, we have advised several companies in different sectors of the industry to have a good institutional design in terms of compliance. In addition, companies sometimes request that we conduct exercises to measure their level of compliance, through simulations of verification visits, reviews of emails of their employees, interviews with employees, etc.

Nevertheless, it is worth mentioning that although awareness of competition compliance is increasing among companies, in most cases these are transnational companies.

However, in Mexico the competition authorities, and particularly COFECE, do not consider compliance programmes as mitigating monopolistic behaviour or practice, especially when economic agents apply to such compliance programmes ex post, that is, after they have committed the practice, or when they do not have real mechanisms that allow them to verify or document that they have committed the practice.

What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?

Our antitrust law is very young – it was issued in May 2014, so we are starting to challenge COFECE and IFT resolutions based on it, and no relevant resolution by specialised courts that may provoke changes has been issued. In this regard I don’t anticipate changes for cartel enforcement policy or antitrust rules for the next year.

Notwithstanding with the above, the fight against corruption announced and conducted by the Mexican federal government may see an increasing number of criminal complaints before the FGR related to cartel resolutions, especially on those files related to public tenders. In this regard, the clients need to be fully aware and immediately implement compliance programmes.

Finally, and connected with the previous paragraph, I want to point out that in 2019 COFECE commissioned a report to McKinsey on the ‘Study and Analysis of Perception on Economic Competition Issues and the Work of COFECE’; it noted that 90 to 96 per cent of business executives had zero or limited knowledge of competition rules and investigations.

The Inside Track

What was the most interesting case you worked on recently?

In cartel activity we are working on two very exciting cases: the first one in the market for financial intermediation of Mexican government securities, and the second in the market for the recruitment of football players. We are also working in an investigation of barriers to entry in the payment system market, whose processing involves a clearinghouse for card payments, which is a highly important regulated market with large volumes of information to be analyzed and processed.

If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?

The level of cooperation between antitrust authorities with other authorities need to change to improve; these authorities need to work together more closely to improve the quality of the investigations and resolutions.

We also believe that COFECE and the IFT should improve their investigation capacity and strengthen the arguments contained in the accusation (statement of probable responsibility).

Aziz & Kaye - Ismael Henestrosa Pérez


  1. HA HA this must be one of the few goofs I've seen here at BB 😄😄😄

    The cartels that COFECE refers to are not the same kind of cartel that BB and BB-readers refer to.

    Fun thing though. I hope you leave this post standing.

  2. Good change of pace article for BB. While the traffickers get lots of attention, there are other issues preventing Mexico from reaching her true potential.

    1. Rule Of Law!!! Without rules things don't work.

  3. This corruption is the upper end where drug money is laundered.

  4. Is this a joke???? The Cartels, not going to agree to this government interfering withe there business.

  5. Before long this company will be caught taking bribes and again raping the good Mexcian people

  6. This Mercenary Contractor is just going after the Big Bucks for nothing.
    By the way, where is Alejandro Hope?
    The former CISEN member who "graduated from US schools" has been missing for a while...


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