VZCZCXRO0765
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1840/01 1682202
ZNR UUUUU ZZH
P 162202Z JUN 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 2250
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 MEXICO 001840 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/MEX/WOLFSON, WHA/EPSC/SALAZAR, AND EEB/TPP/MTA 
DOJ FOR CALDWELL HARROP 
STATE PASS FTC FOR RUSSELL DAMTOFT 
STATE PASS USTR FOR EISSENSTAT/MELLE/SHIGETOMI 
COMMERCE FOR 4320/ITA/MAC/ONAFTA/WORD 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV MX
SUBJECT: RAISING MEXICAN JUDICIAL AWARENESS ON COMPETITION 
ENFORCEMENT 
 
REF: 07 MEXICO 6249 
 
Summary 
------- 
 
¶1. (U) A U.S. District Court judge spent three days in Mexico 
discussing criteria used in American courts to adjudicate 
competition cases.  His conversations with Mexican judges, 
officials, and attorneys highlighted the similarity between 
the substantive principles that underlie U.S. and Mexican 
competition legislation, but also revealed major differences 
in how the laws are applied in the two countries.  The 
following week, an expert from the Federal Trade Commission 
spoke at an academic conference on how the U.S. government 
enforces competition rules.  Both events were part of an 
ongoing collaboration between the USG and Mexico's 
competition authority (the Federal Competition Commission, or 
CFC) to raise awareness among key Mexican actors of the 
importance of competition enforcement.  Separately, a bill to 
toughen penalties against anti-competitive behavior remains 
mired down in the lower chamber of Mexico's Congress, and the 
CFC plans to issue rules on compelling companies under 
investigation to provide information.  End summary. 
 
¶2. (U) Vaughn Walker, Chief Judge of the U.S. District Court 
of Southern California, visited Mexico City June 2-4 to 
participate in a series of events organized jointly by the 
Embassy (USAID and ECON) and Mexico's Federal Competition 
Commission (CFC).  These included a breakfast talk with the 
Association of Corporate Lawyers, a small roundtable 
discussion with Mexican federal judges and magistrates 
(magistrates are roughly equivalent to U.S. Circuit Court 
judges), a seminar for federal court law clerks, and a 
roundtable discussion with lawyers and economists from the 
CFC. 
 
¶3. (U) In his presentations, Walker emphasized the importance 
of effective enforcement of competition rules to economic 
growth and noted the striking similarities of the substantive 
legal frameworks on competition in the various countries he 
has visited to discuss the topic.  He also discussed the 
sorts of criteria that he and other U.S. judges have applied 
in various competition cases (he himself heard the DOJ case 
against Oracle's acquisition of PeopleSoft).  For mergers, he 
underlined the importance and difficulty of identifying the 
relevant market, and recommended paying close attention to 
the more global nature of competition in many sectors, as 
well as the impact of new technologies that can completely 
alter the "relevant" market.  He also stressed the additional 
weight that should be given to hard price data and to the 
perspective of consumers versus suppliers in any given 
market.  With regard to outright anti-competitive practices, 
he again stressed the importance of pricing evidence, but 
also the need for some kind of evidence, including 
circumstantial, of intent to collude. 
 
¶4. (U) Despite the similarity in the basic competition 
principles underlying U.S. and Mexican laws, Judge Walker's 
Mexican interlocutors pointed out numerous differences in the 
way the Mexican legal system actually works, including: 1) In 
Mexico, neither civil suits, criminal cases, or cases 
initiated by state (vice federal) authorities are allowed -- 
all competition cases must be funneled through the CFC, which 
has administrative (but not penal) enforcement authority.  2) 
Mexican judges ruling on appeals of CFC decisions rely almost 
exclusively on written submissions from the involved parties 
and rarely, if ever, call on witnesses to testify in person. 
3) Under Mexico's competition law, consumer benefit is not 
considered a criterion, though market efficiency -- a very 
similar concept -- is.  4) Relative to their U.S. 
counterparts, Mexican judges place a higher premium on strict 
adhesion to procedural form versus substantive arguments. 
 
¶5. (U) The CFC and Anahuac University (a well-known Mexico 
City school) have launched an ongoing education course on 
competition law for interested professionals.  Russell 
Damtoft, Associate Director of the International Affairs 
Office of the Federal Trade Commission, gave two days of 
presentations on how the U.S. competition enforcement regime 
 
MEXICO 00001840  002 OF 002 
 
 
functions.  During the first day, Damtoft detailed the 
origins and development of U.S. competition law and 
institutions, as well as some of the key cases to date that 
have formed U.S. jurisprudence on this subject.  He also gave 
a detailed description of how the FTC and the Department of 
Justice (DOJ) pursue competition cases, from the preliminary 
investigative phase all the way through possible appeals to 
the U.S. Supreme Court.  Like Judge Walker, Damtoft cautioned 
that accusations of illegal conduct from competitors on the 
supply side are frequently based on nothing more than a 
desire to harrass a business rival, and that the effect on 
consumers should be the paramount consideration in guiding 
government enforcement decisions.  Damtoft also described the 
considerable powers enjoyed by U.S. enforcement agencies in 
compelling companies to provide all information relevant to a 
case under investigation, up to having a judge throw 
uncooperative witnesses in jail for contempt of court.  While 
Mexico's CFC does have authority to seek information from 
relevant economic actors, it currently lacks teeth to 
effectively deter those who choose to stonewall. 
 
¶6. (U) On the second day, Damtoft discussed how firms 
interested in avoiding the rigors of competition in the 
marketplace frequently resort to legislators and/or 
regulators to seek anti-competitive regulations that can 
thwart effective competition, a practive at least as 
pernicious as anti-competitive business conduct.  He detailed 
how the FTC and DOJ engage in a process of competition 
advocacy to help educate lawmakers and regulators about the 
true costs of such anti-competitive regulation.  Finally, he 
elaborated on the relationship between competition, which 
focuses on the supply of goods and services, and consumer 
protection, which addresses distortions to consumer demand, 
and the importance of ensuring a sound relationship between 
the two disciplines so that they mutually reinforce the 
functioning of a market economy. 
 
¶7. (U) With regard to CFC's ability to compel companies to 
provide information relevant to its investigations (para 5), 
Heidi Sada, CFC's Director for Capacity-Building, told 
Damtoft and Econoffs that in fact the competition legislation 
passed in 2006 provides some stronger tools for doing just 
that.  However, CFC has not yet completed the process of 
writing the implementing rules.  According to Sada, these 
rules should be finalized and implemented by the end of this 
year.  Finally, CFC officials report that the bill introduced 
in the lower chamber of the Mexican Congress at the end of 
last year to increase significantly the penalties CFC can 
impose for anti-competitive conduct (REFTEL) has become 
watered down and tied to other proposals that do not enjoy 
government support.  This being the case, CFC is not 
currently supporting passage of the bill. 
 
Comment 
------- 
 
¶8. (SBU) Lack of competition in key domestic sectors 
continues to be a major obstacle not only to Mexican and 
foreign firms interested in entering those sectors, but to 
achieving the higher economic growth rate that Mexico needs 
to alleviate widespread poverty.  The CFC remains a weak 
competition watchdog relative to its counterparts in the 
U.S., Europe, and other developed countries, but is cognizant 
of its shortcomings and working hard to address them.  This 
means building its own technical capacity, engaging the 
legislature and judiciary on why a stronger competition 
enforcement regime is important to Mexico's future, and 
raising consciousness among relevant segments of the Mexican 
economy.  The Embassy will continue to support CFC's efforts 
in all these areas.  End comment. 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
GARZA