Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
Mexico’s Federal Economic Competition Commission (COFECE) has announced the commencement of a new investigation focused on the oil and gas sector, this time on the market of storage, transportation and marketing of petroleum products, as well as services related thereto.
This new investigation was initiated ex officio by COFECE, which seems to have indications that suggest that vertical monopolistic practices (prácticas monopólicas relativas) may have potentially occurred in the relevant market. In essence, under the Mexican legal framework, vertical or “relative” monopolistic practices entail conducts that economic agents with substantial market power incur in, with the purpose or effect of improperly displacing or preventing other economic agents from entering into the relevant market (such as price discrimination, supply restriction, bundling, among others).
COFECE did not name the parties subject to investigation, and was quick to note that the investigation does not prejudge on the alleged conducts and omissions of any economic agents that may be involved. COFECE will have an initial term of up to 120 business days term to conduct its investigation. This initial term may be extended as much as four times (for up to 120 business days each) and upon its conclusion, COFECE will issue a resolution either formally initiating a process against the involved economic agents or dismissing the case.
If COFECE holds that relative monopolistic practices in fact occurred, involved economic agents may face fines of up to 8 per cent of their revenue and will be ordered to cease the conducts leading to the relative monopolistic practice (irrespective of, and in addition to, any criminal or civil liability that the economic agents may face). Individuals found guilty of participating in a relative monopolistic practice may also face substantial fines, in addition to criminal and civil liability.
COFECE has been very active in the oil and gas sector in 2018. During Q1, COFECE announced investigations on potential horizontal cartel arrangements (prácticas monopólicas absolutas) in the distribution and marketing of Liquefied Petroleum Gas (Gas LP), and on a potential illegal merger in the marketing, distribution and retail sale of diesel and gasoline.
Earlier this year COFECE also issued a non-binding Legal Opinion on the de facto monopoly that Aeropuertos y Servicios Auxiliares (a public instrumentality of Mexico’s Ministry of Communications and Transportation) holds in the airport fuel distribution market. Most recently, last month COFECE imposed a substantial fine (more than MX$418 Million) to Pemex Transformación Industrial (“Pemex TRI”, a subsidiary of Mexico’s State Productive Enterprise), for failure to submit an annual external audit report (i.e., on the benefits that Pemex TRI grants with respect to first-hand sales and marketing of all its petroleum products) that Pemex TRI was required to submit to COFECE, in order to comply with certain obligations assumed as part of a prior COFECE investigation.