The Federal Economic Competition Law is reformed and the National Antimonopoly Commission is created.

In line with the constitutional reform of December 20, 2024 called "organic simplification" that aimed to eliminate constitutionally autonomous organizations such as the Federal Economic Competition Commission ("COFECE”), after being reviewed and modified by the Senate and the Chamber of Deputies, the Decree that reforms, adds and repeals various provisions of the Federal Law on Economic Competition (the “Act”) and the Federal Law on Parastatal Entities is passed to the federal Executive Branch for constitutional purposes. This Decree establishes important changes in the area of ​​economic competition and creates the new National Antimonopoly Commission (the “New Commission”) which will replace COFECE.

While the reform of the Law preserves the essence of economic policy and the fundamental organizational structure of COFECE, and also fulfills Mexico's obligations under the international treaties to which it participates, it does implement substantial changes that could significantly impact companies and their operations in Mexico.

Among the relevant changes included in the reform to the Law, the following stand out:

(i) The New Commission will be a decentralized public body of the Federal Public Administration, attached to the Ministry of Economy, with legal personality and its own assets, management autonomy, and endowed with technical and operational independence in its decisions, organization, and operation;

(ii) The Plenary of the New Commission is reduced from 7 to 5 Commissioners, without determining, until now, whether they go through the filter of an Evaluation Committee and if they take knowledge exams;

(iii) The number of behaviors considered to be in violation of the law is increasing;

(iv) The thresholds that define whether a transaction must be notified to the New Commission are reduced;

(v) Some exceptions to the obligation to notify are eliminated;

(vi) the time limits for procedures are shortened;

(vii) The enforcement measures and sanctions in the event of non-compliance with the provisions of the Law are significantly increased;

(viii) The new Commission will also assume authority over competition matters in the telecommunications and broadcasting sectors;

(ix) Companies that are responsible for functions that the State exercises exclusively in strategic areas determined by the Constitution, although they are still not considered monopolies, are no longer subject to the provisions of the Law in relation to other acts; and

(x) Likewise, activities carried out by state-owned companies and those expressly indicated in the laws issued by the Congress of the Union are not considered monopolies.

The changes to the structure, powers, and responsibilities of the New Commission will result, among other things, in a greater burden of cases to investigate and resolve. We highlight some important challenges for the New Commission:

(i) Preserve COFECE's human capital with training and experience in economic competition matters;

(ii) that the Commissioners selected have the technical knowledge necessary to perform their duties;

(iii) maintain operational systems and online procedures;

(iv) take care of and maintain the confidentiality and reserve of information in the files;

(v) that in practice their management autonomy and technical and operational independence are respected; and

(vi) that it be provided with the necessary resources to fulfill its powers and obligations.

Below we describe the changes to the Law in greater detail:

Background and general comments

• On December 20, 2024, it was published in the Official Gazette of the Federation (“DOF”) the initiative for constitutional reform in the area of organic simplification, which aimed to eliminate seven autonomous constitutional bodies, including COFECE, in order to reallocate public resources that were intended for the operation and functioning of autonomous constitutional bodies, thus allowing for greater investment in social policies and programs.

• After being approved by the Senate and the Chamber of Deputies, the Decree amending, adding to, and repealing various provisions of the Federal Law on Economic Competition and the Federal Law on Parastatal Entities is now submitted to the federal Executive Branch for constitutional purposes.

• The new law does not substantially modify economic or competition policy and complies with the standards required by various international treaties signed by Mexico, including the United States-Mexico-Canada Free Trade Agreement (USMCA) and agreements with the Organization for Economic Cooperation and Development (OECD).

Structure of the New Commission

• In accordance with the new Law, the New Commission that will replace COFECE and the Federal Telecommunications Institute (“IFT”), upon assuming its powers in the area of ​​economic competition and antitrust, will be called National Antimonopoly Commission.

• The New Commission will be a decentralized public body of the Federal Public Administration, attached to the Ministry of Economy, a branch of the Federal Executive Branch. The New Commission will have legal personality and its own assets, management autonomy, and will be endowed with technical and operational independence in its decisions, organization, and operation.

• As with COFECE, the New Commission maintains the separation between the Plenary and the Investigative Authority, which reinforces independence in the evaluation of cases and avoids potential conflicts of interest.

• The number of Plenary Commissioners is reduced from seven to five, and the President's term will be three years, renewable once.

Powers of the New Commission on Telecommunications and Broadcasting

• The new Commission will now have the following powers in the areas of telecommunications and broadcasting:

• Impose limits on national and regional frequency concentration, concessions, and cross-ownership that controls several media outlets serving the same market or geographic coverage area.

• Determine the existence of predominant economic agents and impose the necessary measures to prevent competition and free trade in these sectors from being affected.

• Declare the existence or non-existence of conditions of effective competition in these sectors and, where appropriate, the imposition, modification or termination of the obligations imposed on the predominant economic agents.

• Establish measures and impose specific obligations that allow for the effective disaggregation of the local network of the predominant economic agent.

• Share information and establish coordination mechanisms with the Telecommunications Regulatory Commission and, where appropriate, with the Digital Transformation and Telecommunications Agency.

• Analyze, evaluate, and, where appropriate, authorize structural separation plans submitted by the predominant economic agents in order to reduce their national participation to below 50% in the sector in which they have been determined to be predominant.

The ability to share information and establish coordination mechanisms with the Telecommunications Regulatory Commission and, where appropriate, with the Digital Transformation and Telecommunications Agency is important.

Entry into force and transition

• Preliminary investigations and ongoing proceedings will continue to be governed by the previous law.

• The COFECE and the current Commissioners will continue in their roles until the new Commission's plenary session is formed.

• The head of the COFECE Investigative Authority will continue in his role as head of the New Commission's Investigative Authority, which will continue the ongoing investigations.

• Likewise, legal acts issued and procedures initiated by COFECE and the IFT (the latter in the area of ​​economic competition) prior to the day following the convening of the New Commission's Plenary Session will have all their legal effects in accordance with the provisions in force at the time of their initiation.

Exemption of monopolies

• Companies that are responsible for functions that the State exercises exclusively in strategic areas determined by the Constitution, while still not considered monopolies, are no longer subject to the provisions of the new Law regarding other acts.

• The activities of public state-owned enterprises and those expressly designated by laws issued by Congress shall not be considered monopolies.

Consultations from the Federal Executive

• The Federal Executive Branch, through the Ministry of Economy, is empowered to notify the New Commission regarding matters relevant to the national interest in competition matters. In these cases, the New Commission will be required to rule on the matter raised within 10 days.

Elimination of the Internal Control Body of the New Commission

• The Internal Oversight Body of COFECE is being dissolved upon the formation of the New Commission's Plenary Session; its affairs, procedures, files, and archives are being transferred to the Internal Oversight Body of the Ministry of Economy, which will assume their processing and resolution, resulting in greater interference by the Ministry of Economy. This body supervised and sanctioned administrative violations, reviewed the management of federal resources, filed criminal complaints with the Specialized Prosecutor's Office for Combating Corruption, and handled complaints regarding procurement, leasing, and services.

Changes in the Requirements to be the Holder of the Investigative Authority

• The requirement to prove that the candidate has the technical knowledge necessary to perform the position has been eliminated from the requirements for holding the position of Investigative Authority of the New Commission.

Elimination of the Commissioner Candidate Evaluation Committee

• The reformed law makes no mention of the Commissioner Candidate Evaluation Committee, which issued calls for applications, received registrations, selected and evaluated candidates, classified confidential information, and, with the support of other authorities, compiled and submitted lists of candidates to the Executive Branch.

• Its structure and budget are eliminated, as well as all its functions of convening, receiving, evaluating, classifying information, and sending lists to the Executive Branch.

Changes in the powers of the Investigative Authority and the President of the New Commission

• Inspection and data collection

In addition to requesting information, the Investigative Authority may, under the new Law, conduct inspections and collect data using any tool, without defining the meaning and scope of "inspection" and "data collection."

• Opinions on public policies

Although they were not binding, the New Commission's power to issue opinions on adjustments to public programs and policies that may affect free competition, legislative initiatives, draft regulations or decrees on competition, and laws, regulations, agreements, circulars, and general administrative acts related to free competition and economic competition has been eliminated.

• Constitutional controversies

• The requirement for the economic competition authority to inform the Federal Executive, through its Legal Counsel, about state, municipal, or Mexico City acts or regulations that could violate the Constitution in matters of economic competition has been eliminated.
  • The duty of the Legal Counsel of the Federal Executive to publish his reasons in the cases he decides is also eliminated. No. initiate a constitutional controversy based on the report submitted by the economic competition authority.
  • The power of both the New Commission and its President to initiate constitutional disputes against acts or provisions of autonomous bodies, the Congress of the Union, or the Federal Executive Branch is eliminated.

• International cooperation
  • The power to establish, under international agreements and in coordination with the Ministry of Foreign Affairs, mechanisms for cooperation and coordination with foreign competition authorities is added, including the exchange of all types of information for investigations and proceedings under the Law.

Modifications to Monopolistic Practices

• Absolute monopolistic practices: The assumptions for this type of practice now include that they occur not only between current competitors but also between potential competitors.

• Relative monopolistic practices:

• A new object or effect is added, consisting of unduly limiting the ability of other economic agents to compete.
  • The concept of joint substantial power in the relevant market is elevated to the rank of law.

It will be important to know how the New Commission interprets these two new provisions in due course.

Concentrations

• The three reporting thresholds are reduced by 12% to 17%, and the first part of the second threshold is reduced to 30% of assets or shares (previously 35%).

• The resolution period is reduced from 60 to 30 days after the New Commission receives all the information; this period may be extended, except when the Federal Executive explicitly notifies the New Commission of a matter of national interest.

• The time limit for investigating unnotified concentrations was extended to three years, instead of one, from their completion.

• Stricter requirements are included for market efficiency gains resulting from a merger. Now, economic agents must also demonstrate that the efficiency gains: (i) will consistently outweigh their potential anticompetitive effects; and (ii) will result in improved consumer welfare.

• Two exceptions to reporting have been eliminated: foreign transactions that do not acquire control or accumulate participation in Mexico, and acquisitions made by investment funds for speculative purposes without overlaps in the same market.

Research

• The Investigative Authority's investigation period is limited to just three periods of up to 3 days each.

• Once the investigation period concludes, the Investigating Authority must submit its opinion to the New Commission's plenary session within 30 days.

• Once this opinion is submitted, a period of 10 business days is established for the Plenary to decide whether to initiate a trial or close the file.

The concept of Joint Substantial Power is added

• The concept of joint substantial power is added to the catalogue of criteria.

• In determining whether two or more agents have substantial joint power, the New Commission will consider:

• Common incentives or interdependent strategic behavior that distinguish these agents from the rest of the market; and

• Similar behavior patterns among them.

It will be important to know how the New Commission will interpret and apply this new concept in due course, as it could have significant consequences.

Qualification Procedure

• The request by economic agents to exclude from the file information and documents related to communications with their external lawyers that have been obtained by the New Commission or provided by the economic agents and that are intended to obtain legal advice has been elevated to the rank of law.

Immunity and Waiver Program

• Relative Monopolistic Practice or Illicit Concentration

• Depending on the timing and conditions, the economic agent subject to investigation for relative monopolistic practices or unlawful concentration may obtain the full benefit of exemption or reduction of the amount of the fines without incurring any liability, or obtain a reduction of up to 50% of the fine to which it would have been subject.

• Absolute Monopolistic Practice

• Now, only the first economic agent to provide the New Commission with evidence to presume the existence of an absolute monopolistic practice before an investigation is initiated in the corresponding market and who also (i) cooperates fully and continuously in the substantiation of the investigation and in the proceedings followed in the form of a trial; and (ii) takes the necessary steps to end its participation in the practice that violates the Law will be imposed a minimum fine.

• Other economic agents that (i) fully and continuously cooperate in the conduct of the investigation and in the proceedings conducted in the form of a trial; and (ii) take the necessary actions to end their participation in the practice that violates the Law, may obtain a reduction of their fine of up to 50, 30, or 20% of the maximum allowed, when they also provide evidence in the investigation, in addition to those already held by the Investigating Authority, which allows for the presumption of the existence of an absolute monopolistic practice.

Certification of Economic Competence Programs

• The New Commission will be able to certify antitrust compliance programs implemented by companies for a period of three years, and the existence of such a program may be considered a mitigating factor for companies in the event of noncompliance.

Sanctions and enforcement measures

• Coercive measures

• A daily fine of up to approximately $900,000 pesos is imposed for late compliance with the New Commission's orders.

• A fine of up to approximately $3 pesos is imposed for failing to appear before an authority without just cause, failing to answer questions, or answering them ambiguously.

• A fine of up to approximately $22 pesos is imposed for preventing or obstructing the conduct of a verification visit.

• A daily fine of up to approximately $1 pesos is imposed for violating a disqualification order.

• The New Commission can now apply enforcement measures independently of the corresponding criminal and administrative sanctions. That is, it does not require prior enforcement measures to be exhausted..

• Increase in penalty amounts

The maximum amounts of penalties are generally increased, including:

• For absolute monopolistic practices: 10% to 15% of the economic agent's income.

• For relative monopolistic practices: 8% to 10% of the economic agent's income.

• For having carried out a concentration that exceeds the thresholds without prior authorization: from 5% to 8% of the economic agent's income;

• For illicit concentrations: 8% to 10% of the economic agent's income.

• New sanction

• Temporary disqualification (direct or through an intermediary) from participating in public procurement for up to 5 years.

• Recidivism

• The final administrative resolution of the New Commission is now considered a preliminary sanction.

• Damages

• Individuals who suffer harm or damage due to a monopolistic practice or an unlawful concentration may bring the appropriate individual or collective legal actions to defend their rights, as soon as the New Commission issues the respective resolution, without it being necessary for the resolution to become final.
  • The New Commission will now also be able to bring such individual or collective legal actions.

• Federal Law on Parastatal Entities

A paragraph is added to Article 5 of the Federal Law on Parastatal Entities that establishes an exceptional regime as a Parastatal Entity for the New Commission.

Pursuant to the foregoing, the New Commission shall be governed, in terms of its governing body structure, administrative units, organization, functioning, operation, development, and control, by the provisions of the new Law and its organic statute, and, only in matters not provided for by these, by the Federal Law on Parastatal Entities.