Page 2 - Vertical Agreements
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al and E[ cEoxncolmusiicvAelvyanftogra:rdLee&S#C2 43;n Ricardo Elizondo | 23-Apr-15, 04:38 PM ] ©Getting The Deal Through MEXICO

Mexico

León Ricardo Elizondo
Legal and Economic Avantgarde SC

Antitrust law • Boycott: this is where an agreement is reached among several eco-
nomic agents, or an invitation is extended to them, to exert pressure
1 What are the legal sources that set out the antitrust law on customers or suppliers to discourage them from specific behaviour
applicable to vertical restraints? or to force them to act in a specific way.

The legal basis for competition law is national, exclusively at federal • Predatory pricing: the systematic sale of goods or services at prices
level, having its fundamental basis in the Political Constitution of the under average total cost or the occasional sale of the same below aver-
United Mexican States, the Federal Law of Economic Competition (the age variable cost.
Competition Law) and its Regulations (the Regulations), the Federal Civil
Code and the Federal Code of Civil Procedures. There are no local com- • Discounts conditional on exclusivity: the granting of discounts by pro-
petition laws. ducers or suppliers to purchasers with the requirement of exclusivity in
the distribution or marketing of products or services when the same is
At the international level the Mexican government is also a party to not justified by efficiency reasons.
international conventions supporting the enforcement of competition law,
such as the North America Free Trade Agreement, among others. • Cross-subsidisation: the persistent use of profits that an economic
agent obtains from the sale of a good or service to finance losses of
No criminal action can be brought for vertical restraints, unlike in the another good or service.
case of collusive conduct. Therefore criminal codes are not applicable.
• Price discrimination: the establishment of different prices or sales con-
Types of vertical restraint ditions for different purchasers located in equal conditions.

2 List and describe the types of vertical restraints that are • Raising rival’s costs: the action by one or several economic agents with
subject to antitrust law. Is the concept of vertical restraint the direct or indirect purpose or effect on competitors of any of the
defined in the antitrust law? following:
• increasing cost;
Conduct that diminishes, impairs or prevents competition and free mar- • impinging upon the production process; or
ket access in the production, processing, distribution and marketing of • reducing demand.
goods or services is prohibited (Competition Law). The Federal Economic
Competition Commission (COFECE) enforces this prohibition. All types of RMPs are caught, provided the firms involved have a significant
market power equivalent to dominance.
Vertical restraints are known under the Competition Law as relative
monopolistic practices (RMPs). This type of behaviour is judged under a Legal objective
balancing analysis or the rule of reason. The analysis requires market defi-
nition, market power assessment and an assessment of the impact of the 3 Is the only objective pursued by the law on vertical restraints
conduct on the competition process. economic, or does it also seek to promote or protect other
interests?
RMPs are acts, contracts, agreements or combinations of these, which
have as their aim or effect: The main objective of competition law, even when applied to vertical
• the improper exclusion of other agents from the market; restraints, is the protection of competition, understanding that consumer
• substantial hindrance of agent access to the market; or benefits will ensue from a healthy competition culture. There is no other
• the establishment of exclusive advantages in favour of one or several economic policy underlying competition law objectives.

entities or individuals. Responsible authorities

This can be achieved through: 4 Which authority is responsible for enforcing prohibitions
• Vertical market allocation: this is where non-competing economic on anti-competitive vertical restraints? Where there are
multiple responsible authorities, how are cases allocated? Do
agents agree to the exclusive distribution of goods or services accord- governments or ministers have a role?
ing to subject or geographical location, or for specific periods of time,
including the division, distribution or assignment of customers and The Competition Law used to be enforced by the Federal Competition
suppliers, and where there is an obligation not to manufacture or dis- Commission, which until 2103 was an independent administrative body
tribute goods or services for a specific period of time. within the Ministry of Economy. However, as a consequence of a consti-
• Vertical price-fixing: this is where prices or other conditions are set, tutional amendment, from 12 June 2013 it was recreated as an autonomous
which a distributor or supplier must follow when marketing or distrib- constitutional agency, which means that now it is completely independ-
uting goods or providing services. ent from the federal government, without having to report to any other
• Tying arrangements: this is where the conclusion of contracts is made authority. It is now called the Federal Economic Competition Commission
subject to acceptance, by the other parties, of supplementary obliga- (COFECE) (the Commission). The Commission will enforce absolutely
tions that have no connection with the subject of those contracts. all vertical agreements or restraints except those related to telecom-
• Exclusive arrangements: this is where a sale or transaction is made munications. The constitutional amendment also created the Federal
subject to the condition that one party does not use, acquire, market or Telecommunications Institute (IFT), a new independent agency empow-
provide the goods or services supplied by a third party. ered to regulate and enforce competition matters relating to broadcasting
• Refusal to deal: this is refusing to sell or provide to specific individu- or telecommunications activities or infringements.
als goods or services that are available and normally offered to third
parties.

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