31 Mar Position of the Federal Economic Competition Commission in view of COVID-19.
Due to the sanitary emergency caused by the COVID-19 epidemic, the Federal Economic Competition Commission (“COFECE” for its acronym in Spanish), expressing its awareness of its effects on the markets, in order to support that the supply chains are not interrupted, or the artificial restriction of output or price hikes of goods or services, on March 27 and 30 published two communications, based on which we may stress out the following key considerations:
1. Certain agreements among competitors are forbidden and strongly prosecuted under the Federal Economic Competition Law and the Federal Criminal Law, such as price fixing arrangements, output restriction, market allocation based on geographic, customers or seasonal considerations, bid-rigging, exchange of information to reach with any of the above purposes or effects.
2. Based on the current COVID-19 contingency, the COFECE stated in its communication of March 27 that it would not prosecute collaboration agreements among businesses that are necessary:
- to maintain or increase output, satisfy the demand, protect the supply chains, prevent the shortage or hoarding of products, and
- is not made with the purpose to displace other competitors.
3. It also recognizes that due to the variation of costs of certain inputs, Mexican peso exchange rate against the USD, as well as changes on the demand of certain goods and services, price increases may occur; however, any price increase should obey to individual and independent decisions of the companies, and not being induced or recommended by industry or commercial associations or chambers.
4. Under the current circumstances, any illegal agreement between competitors will be prosecuted as particularly serious.
5. The COFECE will be monitoring the sensitive markets where material increases of prices is observed, in order to investigate the existence of improper barriers or arrangements between competitors as causes of said increase.
5. The COFECE commits to expeditiously assess such pre-merger filings of transactions aiming to address the need of synergies and add production capacity to promptly and sufficiently satisfy the demand of consumer products and such others that are necessary to manage the current crisis.
7. On March 30, the COFECE issued a second communication stating that the Investigative Authority issued a warning to the National Chamber of the Sugar and Alcohol Industries (CNIAA) and several of its members, due to the fact that it had knowledge of the possible existence of price increases in pure alcohol, its derivatives and some of its inputs, including molasses, stating that such price hike might be caused by the possible existence of unlawful agreements among competitors to manipulate the prices of said products.
Based on the above, some practical considerations should be highlighted:
a) The feasibility to enter into collaboration agreements among competitors aiming to address extraordinary events caused by the COVID-19 emergency, should not be taken as a free rein to reach arrangements that may trigger serious infringements to the economic competition laws.
b) In each case, the goals and scope of the agreement, its duration, limits and purposes of the exchange of information should be assessed, as well as to carefully review that they do not involve forbidden objectives.
c) The COFECE will have at all times the legal authority to investigate and review the scope and purposes of collaboration agreements among competitors, even when they are entered with the purpose to legitimately address the needs of the sanitary emergency. Therefore, due compliance with the law shall be observed always.
d) Such agreements must be executed in writing and the parties must monitor that their implementation is made in accordance with antitrust laws.
e) Also, their duration in accordance with the purposes to which the agreements were entered should be assessed.
The above are only some of the considerations that should be taken into account for the execution of collaboration agreements among competitors in light of the antitrust legislation.
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Contact
Azucena Marín
amarin@cuestacampos.com
Gabriel Espinosa de los Monteros
gespinosa@cuestacampos.com
Andrés Urquidi
aurquidi@cuestacampos.com