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PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #1312/01 1331432
ZNR UUUUU ZZH
P 131432Z MAY 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 6465
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHOT/AMEMBASSY OTTAWA 2609

UNCLAS SECTION 01 OF 02 MEXICO 001312 
 
SENSITIVE, SIPDIS 
 
USDOJ FOR HARROP 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PINR PGOV PREL MX
SUBJECT: TOUGHER MEXICO ANTITRUST LAW IN THE WORKS 
 
¶1. (SBU) SUMMARY:  While Mexico has one of Latin America's most open 
economies, its tenacious monopolies and weak regulation reduce 
consumer choice, boost the cost of doing business, and hamper 
Mexico's economic growth.  Last month, influential PAN Senator 
Santiago Creel introduced a bill to amend Mexico's Federal Economic 
Competition Law.  The legislation attempts to strengthen Mexico's 
anti-trust commission by raising penalties against monopolistic 
behavior to international standards.  Fifteen Senators co-sponsored 
the bill, which appears at this point to enjoy cross-party support. 
However, the legislative session ended April 30, and with Lower 
House elections scheduled for July, no action on this initiative is 
likely until the Senate reconvenes in September.  END SUMMARY. 
 
¶2. (U) In the early 1990's Mexico initiated a process of trade 
liberalization and regulatory improvement which was designed to 
modernize the economy, improve competitive conditions, and 
facilitate Mexico's insertion into the global economy.  Part of this 
modernization effort was the Federal Economic Competition Law (FECL) 
in 1993, which created the Federal Competition Commission (CFC), 
Mexico's anti-trust commission.  In 2006, Mexico amended the FECL to 
give the CFC better operative tools to regulate market concentration 
and anticompetitive behavior in both the private and public sectors. 
 According to Angel Lopez Hoher, the head of CFC information 
committee, the initiative submitted last month to amend the FECL is 
the necessary next step in the evolution of Mexico's anti-trust 
enforcement efforts. 
 
¶3. (U) During his 2006 presidential campaign, President Calderon 
promised to eliminate monopolies and oligopolies and increase 
competition in Mexico, but it remains to be seen whether the 
shrinking economy, the fight against drug syndicates, and an 
anticipated tight presidential race in 2012 will allow him fulfill 
this pledge.  In addition to giving more teeth to the CFC, observers 
note that to increase competition even further, lawmakers should 
also armor the weak Profeco (Office for the Protection of Consumer) 
and Condusef (National Commission for the Protection of Financial 
Services' Users). 
 
¶4. (SBU) Senator Creel, a strong advocate of competition in Mexico 
since the monopolistic television network Televisa failed to back 
his presidential aspirations against Calderon in 2006, worked 
closely with CFC's experts to shape the legislation.  Creel views 
strengthening competition as an important measure to stimulate 
Mexico's domestic market, especially in an economic crisis.  Creel's 
message to his colleagues when he introduced the bill - that 
competition benefits consumers and makes economies more efficient, 
that monopolies are one of the reasons that Mexico is not growing, 
that they need to look beyond the current crisis and create the 
right environment for the future growth of Mexico, and that Mexico 
must adhere to international standards - was very effective, 
according to the press. 
 
¶5. (U) The bill proposes to raise penalties for monopolistic 
behavior.  Currently, penalties are established using the minimum 
wage as a base, but the bill proposes using the international 
standard and basing the formula on annual sales, taking into 
consideration their size, capacity and particularly the damage 
inflicted on the consumers and the economy.  Currently the maximum 
penalty in Mexico is 50 million pesos (4 million USD), but the bill 
proposes to raise the fines in Mexico to up to ten percent of a 
company's annual sales.  (Note:  So long as the business is able to 
pay the fine without going under.  End note.)  Companies would be 
fined for activities in two categories - collusion, such as in 
fixing prices, public biddings or auctions, boycotting against a 
third competitor, and conducting illegal activities; or abuse of 
dominance, such as impeding market access to other competitors, or 
imposing unilateral conditions in sales or purchases.  If the same 
company is found guilty twice of such monopolistic behavior, 
sanctions will be doubled and the dismantling or sale of assets will 
be expedited.  Some cases of collusion will be considered serious 
crimes, and may include jail time. 
 
PROSPECTS FOR BILL'S PASSAGE 
---------------------------- 
 
¶6. (SBU) The bill was submitted roughly two weeks before the 
legislative session ended on April 30, and was superceded by several 
security initiatives that the Calderon administration pushed hard on 
the Senate to complete.  No extraordinary sessions of Congress are 
presently anticipated before the Lower House elections in July, 
which means the bill will likely be taken up again in September when 
the Senate reconvenes.  The bill will first be considered by the 
Senate's Trade and Industrial Development Committee.  The 
Committee's Chairman, Senator Eloy Cantu, is a PRI member from the 
 
MEXICO 00001312  002 OF 002 
 
 
State of Nuevo Leon, and is both pragmatic and business-friendly. 
The prospects for passage out of his committee are good.  Lopez is 
optimistic that although the final law will likely be watered down, 
it will still be an effective tool in CFC's arsenal to combat 
Mexico's oligopolies. 
 
¶7. (SBU) Even without effective penalties, the CFC has had a high 
profile.  Led by a politically fearless Eduardo Perez Motta and with 
the few legal tools it has presently, the CFC has contributed in 
these past years to stimulate competition.  Last year, the 
anti-trust commission conducted an investigation and concluded that 
all mobile telephone companies were dominant.  It is also 
investigating other telecommunication markets to determine whether 
monopolistic practices exist and issue the corresponding asymmetric 
regulations for dominant players.  Perez Motta has publicly 
condemned collusion and unfair practices in the banking sector and 
more recently in the cement and construction sectors.  Along with 
the Bank of Mexico Governor Guillermo Ortiz, Perez Motta voiced his 
strong opposition to the usurious fees and interest rates charged by 
the banks to their clients and spurred Congress to recently approve 
a law to give the central bank more teeth to control and regulate 
fees and interest rates.  Over the past few years, CFC has worked 
cooperatively with the Federal Trade Commission and the Department 
of Justice to become an effective anti-trust watchdog. 
 
¶8. (SBU) COMMENT:  Not all Mexicans support the CFC's work, and 
opposition to the bill has already begun.  Critics say that given 
the current economic situation, now is not the time for such a law 
that goes after the growing sectors of the economy.  Others suggest 
that the proposed legislation is not in accordance with 
international regulations, and the CFC is already too strong.  These 
objections, largely from Mexico's electricity, oil, energy, 
telecommunications, cement, and other sectors dominated by single 
companies, will likely increase in September when debate intensifies 
over this next step in Mexico's anti-trust enforcement efforts. 
Nevertheless, the proposal is an important step in the right 
direction for the development and strengthening of the Mexican 
economy.  END COMMENT. 
 
BASSETT