Antitrust Enforcement in Mexico 1993-1995 and Its Prospects

United States-Mexico Journal, Dec 1996

By Gabriel Castaneda Gallardo, Published on 03/01/96

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Antitrust Enforcement in Mexico 1993-1995 and Its Prospects

Gabriel C. Gallardo, Antitrust Enforcement in Mexico Antitrust Enforcement in Mexico 1993-1995 and Its Prospects Gabriel Castaneda Gallardo 0 0 Part of the International Law Commons, International Trade Law Commons , and the Follow this and additional works at: https://digitalrepository.unm.edu/usmexlj Jurisprudence Commons Recommended Citation - Article 5 GABRIEL CASTANEDA GALLARDO* Mexico has had new and modern legislation on competition since June 1992: The Ley Federal de Competencia Econ6mica (the Federal Law on Economic Competition, LFCE),' regarded by several specialized fora as comparable to and even more liberal in some respects than its counterparts of the United States and Canada.2 Mexico has also formed a governmental agency entrusted with its enforcement, the Comisi6n Federal de Competencia (Federal Competition Commission, CFC). This paper reviews the origins of both, after their second anniversary, and comments on relevant aspects thereon, to offer a point of view on future developments. Before starting, it is necessary to state a caveat: the author is a true believer in antitrust law and policy. There is perhaps no better instrument to correct and remedy the imperfections generated in a market economy; there is probably no equivalent as an aid to prevent abuse of market power, whether coming from the private or the public sector; there is probably no more efficient guarantee of open markets. Competition law and active policy support contribute to the "democratization" of market entry by encouraging rivalry, which in turn brings lower prices, better product quality, and diversity of consumer choice. But, of course, competition and its set of analytical concepts and rules, when properly enforced, may conflict with powerful interests. It is only natural that such interests react through subtle or open mechanisms to exert pressure over regulators and the decision-making process to keep their privileges intact. Considering such pressure in the context of Mexican business and politics, it is fair to say that the early enforcement of the LFCE has suffered obstacles and opposition in a fast-track manner, when compared, for example, to enforcement of the Sherman Act in the United States, which confronted serious attacks from large firms, regulators, lawmakers and lobbyists. This is particularly relevant if we analyze the history of the Sherman Act from 1890 until the issuance of the Federal Trade Commission Act and the Clayton Antitrust Act in 1914. 4 However, the more violent the attacks, the more supporters of the LFCE will be required to create defenses. There may be delay in development of such defenses or effective enforcement, but I believe that competition policy will overcome these formidable obstacles, some of them transitional, such as the current economic crisis with which Mexico now struggles, and others of a more structural nature, such as the influence of regulatory capture. It is far from clear that competition policy should be kept dormant in order to ease the current economic crisis, as some voices may advocate., There appears to be no evidence that the formal antitrust "black out" helped pull the United States out of the Great Depression which commenced in 1929. Although there is no empirical evidence at hand, a concentrated econ ny sch as the Mexican cannot benefit fr a f.r..al (or informal) antitrust enforcement "black out." On the contrary, a reversal in antitrust enforcement will probably have the effect of entrenching both state controlled industries and private sector anticompetitive activities. This in turn will foster higher concentration ratios and collusive arrangements, thus generating an efficiency reduction which will take longer to cure. Therefore, the current crisis, paradoxically, may be a good reason not to shut off competition policy. In order to emerge from the crisis in a stronger position, Mexico needs plain, leveled market fields. Competition policy should help the government avoid being held hostage to mighty interests and should stimulate a solid private enterprise environment offering more opportunities to more economic agents. Far more harmful to competition law and policy is to support a selective enforcement policy. It may be better to have no competition enforcement at all, than to have a policy that discriminates according to the size or the direction of special interests, because then competition policy becomes a Mr. Hyde, distorting markets and creating havoc among the business community, along with imposing damaging transaction costs on the economy. Mexico is now preparing for an indispensable major national campaign for law and order. Competition law and policy must indeed be a part of it, since it goes to the heart of the economic component of the campaign: to create clear and permanent incentives to market entry. With no clear and enforceable rules there will be no incentives. Mexico's much needed campaign for law and order will have to fi (...truncated)


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Gabriel Castaneda Gallardo. Antitrust Enforcement in Mexico 1993-1995 and Its Prospects, United States-Mexico Journal, 1996, Volume 4, Issue 1,