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The Constitution provides a broad definition of illegal anticompetitive practices...

Article 28: Monopolies, monopolistic practices and
government monopolies are prohibited. The law will severely
punish:

All concentration or hoarding in one or a few hands of basic commodities with the object of raising prices",

All agreements, processes or combinations undertaken by producers, industrialists, tradesmen or service entrepreneurs, to prevent competition or free market access or competition and force consumers to pay exaggerated prices"

Whatever constitutes an undue exclusive advantage in favor of one or more persons and against the public in general or a certain social class"

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... and the Federal Law of Economic Competition (LFCE) translates these definitions into specific procedures - one of which addresses single-firm dominant conduct

Procedure	Relevant LFCE provisions
Merger review process	Article 16: The CFC shall challenge and punish those concentrations whose object or effect is to diminish, damage or impede competition and free market access involving similar or substantially related goods and services
Absolute monopolistic practices	Article 9: Contracts, agreements or combinations among competing agents whose object or effect is to: 1) fix prices, 2) restrict output, 3) divide markets, 4) rig bids. These conducts shall have no legal effects
Relative monopolistic practices	Articles 10 (in conjunction with 11,12 and 13), 7 and 24 paragraph V

Today's subject

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The Commission evaluates relative monopolistic practices through two broadly defined processes

	Description	Legal basis (LFCE)
Conduct	Relative monopolistic practices: acts, agreements or combinations whose object or effect is to unduly exclude, substantially impede access, or establish exclusive advantages in favor of one or more persons. Subject to rule of reason analysis	Art. 10 (typification of practices) Arts. 11,12, 13 (rule of reason)
Regulation	Declaration on effective competition conditions: CFC empowered to resolve on the existence of effective competition conditions as a prerequisite for economic regulation by sectoral regulators or the Ministry of the Economy	Art. 7 (Ministry of the Economy) Art. 24 (sectoral regulators)

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The LFCE lays out a structured analysis process to determine whether a conduct constitutes an illegal practice

Steps for analysis (LFCE)

Steps for analysis (LFCE)

	Practice	Object or effect	Rule of reason	Efficiencies
How does it work?	Typifies observed conduct into one of 11 practices	Determines if conduct: Unduly excludes Substantially impedes access Establishes exclusive advantages	Agent must wield substantial market power in the relevant market	Efficiency defense must show: Conduct has favorable effect on competition Anticompetitive effects offset by consumer benefits
Why is it there?	Typification provides legal certainty	Size does not demonstrate harm	Competitor injury doesn't demonstrate a violation	What's important is the net effect on welfare

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Relative practices are not limited to single-firm dominant conduct...

[D]

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... and some of them were only recently raised to the level of law

Relative monopolistic practices typified in Art. 10 LFCE

Vertical market division by reason of geography or time Vertical price restrictions Tied sales Exclusive dealing Refusals to deal Exclusionary group boycotts Predation Loyalty discounts Cross subsidization Discrimination in price, sales or purchasing conditions Raising rivals' costs

[Applies to VII-XI] Previously contained in catch-all provision and specificed in LFCE rules (therefore declared unconstitutional) Clarified during reforms

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Efficiency considerations may tilt the balance against illegality of single-firm dominant conduct

Case example: Wal Mart

[D]

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Mexico's competition law doesn't prosecute exploitative prices, but allows for price regulation when warranted by competition analysis

Article 24 LFCE	Article 7 LFCE
Sectoral legislation foresees price regulation only when effective competition conditions are absent: Telecommunications Railroads LP gas CFC charged with judging whether competition conditions exist	The Executive has the constitutional attribution to issue price controls throughout the economy Recent reforms to LFCE now require the Executive to obtain a CFC resolution declaring the absence of competition conditions before exercising this attribution

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A dominance determination triggers sectoral regulation in telecommunications (once litigation concludes)

_{Case example: Telmex}

The Federal Telecommunications Law empowers the Commission to determine if carriers have a dominant position A dominance determination allows the Federal Telecommunications Commission to impose specific obligations on this carrier

In 1997 the Commission initiated an ex-officio procedure to determine if Telmex had a dominant position The Commission determined that Telmex possessed substantial market power in five telephony markets: Local telephony service National long distance service International long distance service Access or interconnection to local networks Interurban transport Underpinning the CFC's analysis were the following considerations: Telmex's degree of vertical integration Its ability to unilaterally fix prices The existence of high entry barriers Telmex amparo still pending