Identifier
Created
Classification
Origin
09MEXICO1312
2009-05-13 14:32:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Mexico
Cable title:  

TOUGHER MEXICO ANTITRUST LAW IN THE WORKS

Tags:  ECON EFIN ETRD PINR PGOV PREL MX 
pdf how-to read a cable
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DE RUEHME #1312/01 1331432
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P 131432Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 6465
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 2609
UNCLAS SECTION 01 OF 02 MEXICO 001312 

SENSITIVE, SIPDIS

USDOJ FOR HARROP

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PINR PGOV PREL MX
SUBJECT: TOUGHER MEXICO ANTITRUST LAW IN THE WORKS

UNCLAS SECTION 01 OF 02 MEXICO 001312

SENSITIVE, SIPDIS

USDOJ FOR HARROP

E.O. 12958: N/A
TAGS: ECON EFIN ETRD PINR PGOV PREL MX
SUBJECT: TOUGHER MEXICO ANTITRUST LAW IN THE WORKS


1. (SBU) SUMMARY: While Mexico has one of Latin America's most open
economies, its tenacious monopolies and weak regulation reduce
consumer choice, boost the cost of doing business, and hamper
Mexico's economic growth. Last month, influential PAN Senator
Santiago Creel introduced a bill to amend Mexico's Federal Economic
Competition Law. The legislation attempts to strengthen Mexico's
anti-trust commission by raising penalties against monopolistic
behavior to international standards. Fifteen Senators co-sponsored
the bill, which appears at this point to enjoy cross-party support.
However, the legislative session ended April 30, and with Lower
House elections scheduled for July, no action on this initiative is
likely until the Senate reconvenes in September. END SUMMARY.


2. (U) In the early 1990's Mexico initiated a process of trade
liberalization and regulatory improvement which was designed to
modernize the economy, improve competitive conditions, and
facilitate Mexico's insertion into the global economy. Part of this
modernization effort was the Federal Economic Competition Law (FECL)
in 1993, which created the Federal Competition Commission (CFC),
Mexico's anti-trust commission. In 2006, Mexico amended the FECL to
give the CFC better operative tools to regulate market concentration
and anticompetitive behavior in both the private and public sectors.
According to Angel Lopez Hoher, the head of CFC information
committee, the initiative submitted last month to amend the FECL is
the necessary next step in the evolution of Mexico's anti-trust
enforcement efforts.


3. (U) During his 2006 presidential campaign, President Calderon
promised to eliminate monopolies and oligopolies and increase
competition in Mexico, but it remains to be seen whether the
shrinking economy, the fight against drug syndicates, and an
anticipated tight presidential race in 2012 will allow him fulfill
this pledge. In addition to giving more teeth to the CFC, observers
note that to increase competition even further, lawmakers should
also armor the weak Profeco (Office for the Protection of Consumer)

and Condusef (National Commission for the Protection of Financial
Services' Users).


4. (SBU) Senator Creel, a strong advocate of competition in Mexico
since the monopolistic television network Televisa failed to back
his presidential aspirations against Calderon in 2006, worked
closely with CFC's experts to shape the legislation. Creel views
strengthening competition as an important measure to stimulate
Mexico's domestic market, especially in an economic crisis. Creel's
message to his colleagues when he introduced the bill - that
competition benefits consumers and makes economies more efficient,
that monopolies are one of the reasons that Mexico is not growing,
that they need to look beyond the current crisis and create the
right environment for the future growth of Mexico, and that Mexico
must adhere to international standards - was very effective,
according to the press.


5. (U) The bill proposes to raise penalties for monopolistic
behavior. Currently, penalties are established using the minimum
wage as a base, but the bill proposes using the international
standard and basing the formula on annual sales, taking into
consideration their size, capacity and particularly the damage
inflicted on the consumers and the economy. Currently the maximum
penalty in Mexico is 50 million pesos (4 million USD),but the bill
proposes to raise the fines in Mexico to up to ten percent of a
company's annual sales. (Note: So long as the business is able to
pay the fine without going under. End note.) Companies would be
fined for activities in two categories - collusion, such as in
fixing prices, public biddings or auctions, boycotting against a
third competitor, and conducting illegal activities; or abuse of
dominance, such as impeding market access to other competitors, or
imposing unilateral conditions in sales or purchases. If the same
company is found guilty twice of such monopolistic behavior,
sanctions will be doubled and the dismantling or sale of assets will
be expedited. Some cases of collusion will be considered serious
crimes, and may include jail time.

PROSPECTS FOR BILL'S PASSAGE
--------------


6. (SBU) The bill was submitted roughly two weeks before the
legislative session ended on April 30, and was superceded by several
security initiatives that the Calderon administration pushed hard on
the Senate to complete. No extraordinary sessions of Congress are
presently anticipated before the Lower House elections in July,
which means the bill will likely be taken up again in September when
the Senate reconvenes. The bill will first be considered by the
Senate's Trade and Industrial Development Committee. The
Committee's Chairman, Senator Eloy Cantu, is a PRI member from the

MEXICO 00001312 002 OF 002


State of Nuevo Leon, and is both pragmatic and business-friendly.
The prospects for passage out of his committee are good. Lopez is
optimistic that although the final law will likely be watered down,
it will still be an effective tool in CFC's arsenal to combat
Mexico's oligopolies.


7. (SBU) Even without effective penalties, the CFC has had a high
profile. Led by a politically fearless Eduardo Perez Motta and with
the few legal tools it has presently, the CFC has contributed in
these past years to stimulate competition. Last year, the
anti-trust commission conducted an investigation and concluded that
all mobile telephone companies were dominant. It is also
investigating other telecommunication markets to determine whether
monopolistic practices exist and issue the corresponding asymmetric
regulations for dominant players. Perez Motta has publicly
condemned collusion and unfair practices in the banking sector and
more recently in the cement and construction sectors. Along with
the Bank of Mexico Governor Guillermo Ortiz, Perez Motta voiced his
strong opposition to the usurious fees and interest rates charged by
the banks to their clients and spurred Congress to recently approve
a law to give the central bank more teeth to control and regulate
fees and interest rates. Over the past few years, CFC has worked
cooperatively with the Federal Trade Commission and the Department
of Justice to become an effective anti-trust watchdog.


8. (SBU) COMMENT: Not all Mexicans support the CFC's work, and
opposition to the bill has already begun. Critics say that given
the current economic situation, now is not the time for such a law
that goes after the growing sectors of the economy. Others suggest
that the proposed legislation is not in accordance with
international regulations, and the CFC is already too strong. These
objections, largely from Mexico's electricity, oil, energy,
telecommunications, cement, and other sectors dominated by single
companies, will likely increase in September when debate intensifies
over this next step in Mexico's anti-trust enforcement efforts.
Nevertheless, the proposal is an important step in the right
direction for the development and strengthening of the Mexican
economy. END COMMENT.

BASSETT