COMISIÓN N FEDERAL DE COMPETENCIA Competition policy and legislation in Mexico Mari Nieves Lanzagorta García APEC Trainning Course on Competition Policy For APEC Member Economies August 2005
Contents 1. Background 2. Competition legal framework 3. The Federal Competition Commission 4. Procedure 5. Competition advocacy 6. Capacity Building 1
1. Background
Promote competition to: Competition policy Favor the correct functioning of markets as a source of competitiveness and social welfare. Assure economic agents a free and non discriminatory access to markets, thus fostering entrepreneurship. Relies on: Institutions and enforcement of current legislation. Activities aimed at sensitizing society about the benefits of competition. 3
Competition policy Competition policy began in Mexico on June 1993, when the Federal Law of Economic Competition (FLEC) was enacted. The FLEC created the Federal Competition Commission (CFC) as an autonomous agency, solely responsible for its enforcement. A number of sectoral legislations contain dispositions conferring faculties to the CFC. 4
2. Competition legal framework
Constitutional framework Protecting the competitive process and free market access: article 28 in the Mexican Constitution, first paragraph, prohibits monopolies, state monopolies and monopolistic practices. Competition promotion in regulated sectors: article 28 in the Mexican Constitution, tenth paragraph, establishes that the concession of public services and federally owned goods shall be subject to laws which avoid concentrations that are contrary to the public s s good. Prohibition of interstate trade barriers: article 117 in the Mexican Constitution, index V. V 6
Competition legislation Federal Law of Economic Competition (FLEC) Code of Rules of the FLEC (RFLEC) Internal Rules of the CFC (RICFC) These legislations have been strengthened through numerous sectoral dispositions that promote competition principles. 7
Federal Law of Economic Competition Object: Protect the process of competition and free market access through the elimination of monopolies, monopolistic practices and other restrictions to the efficient functioning of markets. (Article 2,, FLEC) Scope: Of general observance throughout the national territory, applicable in all areas of economic activity and for all economic agents, both public and private. (Articles 1 and 3,, FLEC) 8
Prohibits: Federal Law of Economic Competition - Absolute monopolistic practices (horizontal). - Relative monopolistic practices (vertical). - Anticompetitive Mergers. Establishes the invalidity of restrictions on interstate commerce imposed by local governments. 9
Exemptions from the law Functions exercised exclusively by the State in strategic areas. Unions. Temporary privileges conferred to owners of intellectual and industrial property (patents and trademarks). Exporting cooperatives (under certain conditions). (Article 28,, Mexican Constitution) 10
3. The Federal Competition Commission
The Federal Competition Commission is a deconcentrated administrative body of the Ministry of the Economy, it has technical and operative autonomy, and for issuing its resolutions. (Article 23,, FLEC) 12
Faculties Prevent, investigate, and combat monopolies, monopolistic practices, and anti-competitive mergers, in terms of this law. (Article 23,, FLEC) Resolve requests by interested agents participating in tender offers and in obtaining permits and concessions. Make declarations on competition conditions and the existence of substantial market power. (Various sectoral legislations) 13
Organizational Structure Plenum: 5 Commissioners Chairman Executive Secretary Office of the Chairman GD Legal Affairs Operative GDs GD Investigations GD Administration GD Control and Follow up GD Mergers GD Privatizations and Public Auctions GD International Affairs GD Institutional Relations GD Economic Studies 14
The Plenum Supreme decision body made up of five Commissioners, including the Chairman. The Plenum s resolutions are decided by unanimity or majority vote by those Commissioners present. Commissioners cannot abstain from voting, except when there is a legal impediment. The Chairman presides over the sessions of the Plenum and has a casting vote in case of ties. The main functions of the Plenum are: Resolve on cases of its competency; Interpret any disposition in the RICFC; Give opinions on bills for laws or rulings relating to competition and free market access; and Resolve reconsideration appeals. Articles 13 and 14, RICFC 15
The Chairman The Head of the Commission is designated by the President and has the following attributions, among others: Coordinate the FCC s work; Admit cases to proceeding; Formulate the bases and subscribe agreements and contracts that the FCC celebrates; Give opinions on adjustments to programs, policies, laws, rulings, and administrative actions; Participate in the negotiation and discussion of treaties and international agreements. Issue and publish an annual report on the Commission s performance; Propose to the Plenum the policies of the Commission, and when they are approved, guarantee their application and execution. (Articles 28 FLEC and 22 RICFC) 16
Staff Total: 175 December 2004 Support 54 Professional 134 17
Budget The yearly budget for 2004 was of aproximately 15 million dollars. Two thirds of it were spent on human resources. The rest was divided among office expenses (including rent) and advocacy events and publications. 18
4. Proceedings
Initiating a proceeding Proceedings before the FCC shall be initiated ex-officio or at the request of an interested party. (Article 30, FLEC) An investigation may be initiated for: Monopolistic practices (ex-officio or complaint). Anticompetitive mergers (ex-officio or complaint). Failure in merger notification (ex-officio). (Article 23, RFLEC) Any person may file a complaint for absolute monopolistic practices, but only affected parties may file them in case of relative monopolistic practices. (Article 32, FLEC) 20
Sanctions Suspension, correction or elimination of the practice or merger in question. Partial or total divestiture of the forbidden merger (irrespective of a fine). Fine of up to 375,000 MDW (US$1.5 million) for absolute practices. Fine of up to 225,000 MDW (US$900,000) for relative practices and forbidden mergers. Fine of up to 100,000 MDW (US$399,000) for failure to notify a merger. Fine of up to 7,500 MDW (US$ US$30,000) to individuals who engage directly in monopolistic practices or prohibited mergers, on behalf of or through representation and mandate of o corporations. Fine of up to 7,500 MDW for making false statements (irrespective of any criminal liability). Fine of up to 10 per cent of the value of the assets or annual sales, in case of particularly serious infringements. (Articles 35 and 37,, FLEC) 21
5. Competition Advocacy
Advocacy activities Actively promote competition principles in the design and implementation of public policies, and in the way of doing business in Mexico. Review and issue opinions on legislative proposals. Advocate for procompetitive regulatory frameworks that foster private investment in the development of good quality infrastructure and services. 23
Transparency and info dissemination Main CFC information dissemination tools: Internet web page. Publication of the Plenum s criteria. Dissemination of resolutions using several formats: Weekly summaries in Internet; Monthly excerpts in the Federal Official Gazette, and Complete texts in the Quarterly Gazette of Economic competition. Economic Competition Report, featuring main annual actions. Seminars and conferences, press releases, bulletins and articles on competition topics. 24
6. Capacity Building
Professional Service Carreer During 2004 the Commission started the implementation of the Professional Service Carreer, which is a Federal Government system designed for the public employees to develop their skills and improve the quality of service. There are 7 sub-systems systems: - Human resources planning - Human resources selection - Professional development - Trainning and certification on capacities - Performance evaluation - Sepparation from job - Control and evaluation 26
Technical assistance programs: IDB Objective: build capacity within the CFC, sector regulatory agencies and the judicial branch to help improve the competitive climate in various economic sectors as a means to promote private investment. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) of the United States provide the training component financed through this Technical Cooperation Workshops held to-date date: For CFC: Abuse of dominance, Mergers (2003); Cartels, Distribution issues, Abuse of dominance and unilateral refusals to deal (2004); Study tour (2004); Black box (2005). For Regulators: Railroads, Electricity, Natural gas (2004). For Judiciary: Judges staff (2003), Judges (2005). Amount of funds: training ($206,850),, study tour ($46,440),, technical assistance ($178,070). Implementation began in 2002,, the agreement expires at the end of 2005. 27
Technical assistance programs: EU Objective: deepen economic, commercial and entrepreneurial relations by strenthening institutional capabilities of Mexico s s government agencies. The CFC is one of 7 direct beneficiaries of this technical assistance. Assistance directed at: Organizing seminars for sectoral authorities and experts; organizing events that will advocate competition principles geared at opinion makers (media, politicians, academics). ( 660,000) Capacity building for the CFC, including visits by European competition agencies. ( 144,000) Technical assistance and consultancies. ( 400,000) Implementation began November 10 th 2004 for a period of 72 months. The agreement expires October 30 th 2010. 28
Technical assistance programs: APEC Objective: improve understanding and implementation of APEC Principles to Enhance Competition and Regulatory Reform; improve integration of the competitive markets concept within the overall economic framework; improve enforcement of existing laws and regulations, leading to possible reforms. Description: four training courses in Mexico City for sectors that recently had opened up to competition or were facing significant reforms: Energy Telecommunications Transport Financial Services Target audience: government officials, regulatory agencies, private actors, the judiciary, the competition agency, and officials from APEC economies who participated in the project both as speakers and as attendees. Funds: $185,800 800 for all four components, disbursed from 2002 to 2003. 29
Assistance granted to other agencies There are two types of assitance granted to other agencies that are less experienced in competition matters: 1. Technical cooperation and exchange of personel for training purposes 2. Advice and assitance to agencies that are in the initial stages of implementing competition legislation. Recent training programs include: Costa Rica: training in CFC premises - March 2004, April 2005 Chile: training in CFC premises - June 2005 Honduras: meetings with legislators charged with drafting a competition law for Honduras El Salvador: exchange of CFC experience with counterparts in el Salvador, who have recently enacted their competition law 30
Mari Nieves Lanzagorta García Federal Competition Commission Mexico mnieves@cfc.gob gob.mx The opinions expressed in this talk are those of the speaker and do not necessarily represent the views of the FCC or any other member of its staff.