Remedies and commitments in abuse cases – OJEDA CARDENAS – December 2022 OECD discussion

Forum on Global Competition
“Remedies and Commitments in Abuse Cases”
Lucía Ojeda Cárdenas
2 December 2022

Legal Framework:
 Article 28 of the Mexican Constitution (2013
amendment)
 Federal Law of Economic Competition (LFCE 2014)
 Regulatory provisions COFECE
 Guidelines (procedure) COFECE
3
Competition Agencies: Sectoral Jurisdiction
(Autonomous Constitutional Bodies)
 COFECE (Federal Economic Competition
Commission): competition enforcement and advocacy
powers in all sectors of the economy, except for
telecommunications and broadcasting
 IFT (Federal Telecommunications Institute):
competition enforcement in the telecommunications and
broadcasting sectors + sectoral regulator (ex-ante
regulation)
Specialized Courts in competition law matters /
Supreme Court of Justice
Ultimate decision
Terminology
in the Mexican
Landscape

Preventive procedures:
 Merger Control (Concentrations) => Authorize / Not
Authorize / Conditions
 Not contemplated in other preventive procedures (e.g.,
favorable opinions in granting concessions)
Sanctioning procedures:
 Illegal Mergers => Sanctions / Commitments
 Absolute Monopolistic Practices (Cartels) => Sanctions /
Leniency Program
 Per se illegal, regardless of the effects
 Relative Monopolistic Practices (Vertical
Agreements/Abuse of Dominance) => Sanctions /
Commitments
 Justifiable (Efficiency Gains) / Effects analysis
required
Corrective procedures:
 Barriers to Competition/Essential facilities => Corrective
Measures
4
Terminology
in the
Mexican
Landscape
Different terminology // Different
purpose // Different legal standards //
Different types of remedy depending
on the sore to treat?

Two routes in procedures of Relative Monopolistic Practices:
5
a) Establishing an infringement of the LFCE (fully-fledge
prohibition decision) – In Mexico, less common.
OR
b) Commitments decisions (settlement):
Economic agents investigated are entitled to submit commitments
before the emission of the DPR (equivalent to the Statement of
Objections in the EU).
 Legal Standards for proposed commitments:
 Legally and economically feasible; and
 Appropriate to avoid or eliminate the relative monopolistic
practice under investigation, stating the timeframes and terms
of verification thereof.
• What is the legal boundary within the discretionary power of the
competition agency to accept or not the commitments submitted?
• Tension between the inquisitorial strategy and the open dialogue
to address concerns?
• Commitments included in Exemption and Fine Reduction
Procedures?
• Fine reduction when liability has not been established?
Committing
without
Commission?

 Legal mechanism applicable only to relative monopolistic
practices (vertical agreements/abuse of dominance) and illegal
mergers.
 Settlement nature (Voluntary and legally binding).
 In principle, do not involve the establishment of an
infringement of the LFCE, i.e., a breach of competition law) /
do not involve an admission of guilt by the agent involved
(Legal internal contradiction with the plain text of the Law?).
 Main purpose: Suspend, eliminate or correct the practice in
order to restore the process of free market access and
economic competition (addressing anticompetitive concerns)
 Early termination of the procedure (procedural efficiency).
 Required to be submitted before the emission of the DPR
(culmination of the investigation). Before the 2014 legislation,
agents involved were entitled to submit commitments during
the trial-like procedure.
 Can only be used once every five years (aiming to avoid
abuses and limit the scope for strategic litigation?).
6

Steps:
fine $$$.
7
 Agents may propose commitments to address the competition
authorities’concerns and restore competition conditions to the
market and submit them to the Commission before the DPR
emission.
 The proposal of commitments is on a voluntary basis by the
agents involved.
 For cases initiated In the case of by complaint, complainant has
the right to comment the proposed remedies.
 If the proposed commitments are insufficient to achieve the
objective of restoring competition, the Board of Commissioners
may either order the reopening of the investigation or request for
commitments to be improved.
 Commitment decisions do not protect companies from civil-
damage claims, but the establishment of an infringement is
required, e.g., Telcel/Axtel “megamulta case”
 Non-compliance with commitments resolutions is followed by a
Commitments
Procedure

7
Benefits:
 Pragmatic solution.
 Procedural efficiency: Regular timeframe (average of three to four
years if the investigation, trial-like procedure and appeal are
considered) / Commitments take less time.
 Avoidance of litigation costs for agents involved in time-consuming
proceedings.
 Avoidance of hefty fines.
 Allocation of resources on priority cases for competition policy
enforcement goals.
Drawbacks:
 Committing without commission? Blur line between competitive and
anticompetitive practices in vertical agreements and abuse of
dominance.
 Effectiveness / In some cases, such as Mexico, market testing is
limited to confidentiality issues.
 Commitments as a convenient tool for the authority when there is not
a strong case to prove, thus avoiding the scrutiny of the economic
analysis in the judicial review stage.
 Lack of judicial precedent development surrounding relative
monopolistic practices.
 Unequal bargaining power (agents investigated).
 Stakeholders affected may encounter more challenges when seeking
damages reparation.
Benefits and
Drawbacks

8
Commitments
Resolutions:
Structural versus
Behavioral
Remedies
Behavioral Remedies:
 Frequently used in Vertical Agreements/Abuse of Dominance cases.
 Creates an ongoing relationship between the agent in question and the
authority (+ resources concerning monitoring and verification) /
Monitoring from five to ten years
 Less flexibility for agents to operate and respond to changing dynamic
markets and future developments (e.g., change of circumstances)
• Does the imposition change the incentive for agents to engage in
anticompetitive practices?
• Are these remedies easy to circumvent?
Structural remedies:
 Frequently used in Merger Control.
 Considered an ultima ratio mechanism for sanctioning or corrective
procedures due to its highly intrusive nature. Only employed in
exceptional circumstances and when behavioral remedies pose to be
insufficient to correct or prevent risks to competition.
 One-off measure / Does not require long-term monitoring (less
allocation of resources to verify compliance and time invested), e.g.,
Marzam illegal merger
 Make use of the dynamics of markets to remove the incentives for
committing similar infringements in the future.
• How easy to circumvent are these remedies? (Degrees of structural
intervention)
• Over-enforcement or under-enforcement? What type of error is
sought to be avoided?

Undermining
deterrence?
Dissuasive
effect
achieved?
10
Downsides / Alternatives:
 Balancing the playing field? The new law restricted the scope
for the agents investigated to submit commitments during the
trial-like procedure
 What is the role of market testing? Transparency in the
process? Assessing effectiveness? What are the implications
for disclosure and confidentiality matters?
 Deprivation of the development of judicial precedents? Well-
structured commitment resolutions might serve as a soft law
tool (complementary to existent guidelines) to fill the gap
created by the lack of judicial determination of cases.
 Using commitments as a maneuver for strategic litigation //
The benefit can only be granted once every five years.
 The agents under commitments imposed are obliged to comply
and have the authority to monitor; otherwise, a hefty fine will
follow $$$ // Installment of third-party auditors.
 The former legislation established that following a fine for
non-compliance in abuse, a possible divestiture of assets in
cases of recidivism could follow (not applicable in the LFCE
2014).

Open
Regulatory
Dialogue
11
 Regulatory dialogue between the competition agencies and
the private sector is required in order to deliver the best
results in terms of efficiency and effectiveness of
commitment decisions.
 Cooperation and coordination are required to address the
technical complexity in the design and implementation of
remedial action. Role of sectoral regulators?
 The creation of guidelines – a helpful tool to provide
transparency and, thus, trust in the process + legal certainty
for private actors + more predictability in the outcome.
 Closing the gap for asymmetry of information, e.g., sector-
regulated firms.
 Regulatory dialogue might be helpful for the decision to be
less likely to be challenged in court.
 The period for negotiation plays a role in the theory. What
about in practice?
 Role of international cooperation in cases that affect
different jurisdictions? E.g., digital market cases.

11
Relevant
Cases
Telcel/Axtel (“Megamulta case”) = The case for compensation of
damages in Mexico.
2013 Cervezas Cuauhtémoc Moctezuma and Grupo Modelo:
Exclusivity => Behavioral remedies imposed
2013 Home Depot: Exclusivity => Behavioral remedies imposed
=> COFECE acknowledged full compliance
2014 Industrial Gases (Praxair, Cryoinfra and Infra):
Exclusivity => Behavioral remedies imposed => Fine for not full
compliance
2015 Pemex TRI: Discrimination in treatment of suppliers =>
Behavioral remedies imposed => Fine for not full compliance
2015 Ticketmaster: Exclusivity=> Behavioral remedies imposed
+ no concentration of real state commitment. => Fine for not full
compliance

Key
Takeaways
13
 In the pursuit of balance: Procedural Efficiency / Legal Efficacy
 Identification of potential remedies/commitments available
when designing the investigation strategy (Kovacic).
 Incentivize early discussion of potential commitments with the
economic agent on an open and flexible framework.
 Safeguard the procedure in case it does not have an early
termination while procuring an open dialogue to reach a
thorough understanding of the concerns and possible remedies.
 Consider the use of powers for effective market testing of
potential commitments (Challenge: confidentiality duties from
the authority).
 Improvement of legal and economic reasoning when drafting
commitments: authority concerns and commitments imposed //
Adoption of guidelines with substantive analysis of potential
infringements to avoid anticompetitive practices in the future.
 Transparent and disclose commitments to facilitate monitoring
=> channels to report deviations (whistleblowing mechanisms).
 Assessment: ex-post evaluations of commitments and
procedures in order to improve results for future cases =>
Publication of results

Further
Thoughts
14
 Right vs concession:
 Valid and legal arguments available for the competition agency
to deny potential adequate commitments in order to establish a
judicial precedent? What is at stake?
 Deterrence effect:
 How to measure the effects and the impact on deterrence?
 How to avoid the abuse of the mechanism by both competition
agencies and economic agents?
 Redress:
 What are the implications for affected economic agents that seek
reparation of damages?
 Does the use of this mechanism facilitate or make more complex
the follow-on claims over damages?

Prol. Paseo de la Reforma 600-010B
Col. Santa Fe Peña Blanca, Ciudad de México, C.P.
01210 14
Monte Cáucaso 915-305, Lomas de
Chapultepec Miguel Hidalgo CP 11000
Ciudad de México.

Remedies and commitments in abuse cases – OJEDA CARDENAS – December 2022 OECD discussion

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