22 Feb Mexican antitrust regulator issued a preliminary opinion by which it is determined that there are no effective competition conditions on the retail e-commerce market (marketplaces).
The investigative authority of the Federal Economic Competition Commission in Mexico (“COFECE”) issued a preliminary opinion identified with the file number IEBC-001-2022, by which it is concluded that there are no effective competition conditions on the national retail e-commerce market (“Investigated Market”) due to the possible existence of three barriers to competition and free market participation.
Derived from the analysis of competition conditions performed by the COFECE, the authority determined that two entities (Amazon and Mercado Libre, according to public sources) concentrate an important participation in the Investigated Market (in some cases higher than 85%), both of selling and buying users.
According to the preliminary opinion, the lack of effective competition conditions derived from three possible barriers to competition, namely:
1. Artificial loyalty programs as components of Marketplaces: The authority considers that the economic agents involved have loyalty programs that are not directly associated to Marketplace services (e.g., streaming service, games, music, shipping discounts etc.) and that constitute an artificial strategy that attracts and retains buyers and, in turn, reduces the possibility for buyers and sellers to use alternative marketplaces.
2. Buy box lack of clarity: In COFECE's opinion, sellers (users of marketplaces with substantial power) lack of clear information about the choice of featured offers. Such buy boxes work through algorithms that select and highlight a particular offer which is considered and displayed (to buying users) as the best offer. The lack of clarity of this mechanism could be affecting the efficient functioning of the Investigated Market.
3. Logistic solutions: The competition authority considers that the conditions of the marketplaces of the identified economic agents with substantial power within the Investigated Market, generate anticompetitive effects given that sellers face high operative costs in case of contracting their own logistics solutions, added to the fact that they would lose visibility within the marketplaces if not contracting the logistics services offered by the platforms of the investigated economic agents.
As a measure to cope the identified anticompetitive effects, COFECE issued several corrective measures that are considered necessary to eliminate the restrictions to the efficient operation of the Investigated Market.
The companies that could be affected by the resolution issued in this proceeding have a period of 45 days following the notification of the preliminary opinion to submit evidence and make representations to be considered by the authority before closing the proceeding with the pleadings phase and the issuance of the relevant resolution.
It is important to bear in mind that, according to the Law, COFECE should not impose the corrective measures proposed in the preliminary opinion if the Economic Agents that may be affected demonstrate that the barriers identified by COFECE generate efficiency gains and favorably affect the process of economic competition and free market participation, overcoming their possible anticompetitive effects, and result in an improvement for the consumer's welfare.
The preliminary opinion has already been questioned and both Amazon and Mercado Libre, have publicly stated that their practices, far from limiting competition, promote the same in consumers benefit, so it will be interesting to know the authority’s final ruling once the procedure has been concluded.
At Cuesta Campos we have experience providing legal advice to companies regarding economic competition regulations in Mexico and with the implementation of antitrust compliance programs.
For any question or comment regarding the above, you may contact the following attorneys of our firm:
Contact
Azucena Marín
Héctor Mercado
Hugo Cuesta Tamayo
THE ABOVE IS PROVIDED AS GENERAL INFORMATION PREPARED BY PROFESSIONALS WITH REGARD TO THE SUBJECT MATTER. THIS DOCUMENT ONLY REFERS TO THE APPLICABLE LAW IN MEXICO. WHILE EVERY EFFORT HAS BEEN MADE TO ENSURE ACCURACY, NO RESPONSIBILITY CAN BE ACCEPTED FOR ERRORS OR OMISSIONS. THE INFORMATION CONTAINED HEREIN SHOULD NOT BE RELIED ON AS LEGAL, ACCOUNTING OR PROFESSIONAL ADVICE BEING RENDERED.