New Law Governing Fintech Companies

No. 1  | MARCH 2018

www.olivares.com.mx

 

– LATEST NEWS –

New Law Governing Fintech Companies

Last week President Enrique Peña Nieto enacted the Decree whereby the Financial Technology Law (Ley Para Regular Las Instituciones de Tecnología Financiera the “Fintech Law”) was issued. The Decree was published in the Official Gazette of the Federation on March 9, 2018, and entered into force the day following the publication.

The term “Fintech” qualifies the manner in which financial services are provided.  Implementation of technology in the provision of financial services has been evolving as rapidly as we can see e-commerce transactions and in Mexico was lacking a proper legal framework.  These services are carried out more quickly and economically, unlike traditional financial services. Services provided by Fintechs range from payments and remittances, crowdfunding and crowdsourcing, to virtual asset management (cryptocurrencies).

The Fintech Law introduces governing principles for consumer protection, financial stability preservation, competition and promotion, as well as money laundering prevention, within the scope of digital platforms or web applications offering and providing financial products and services.

As a result of the new Fintech Law existing non-financial entities or newly incorporated entities that have as a corporate purpose to provide fintech services, shall apply for authorization to provide these services and may only conduct activities expressly authorized by the regulator. Such authorization will be directly issued by the National Banking and Securities Commission (CNBV for its initials in Spanish).

The authorization requests shall include, among other conditions, the following:

  • Business plan and policies for risks and IT infrastructure;
  • Client and proprietary account separation policies;
  • Privacy policies for use of personal data, management and risk disclosure;
  • Security measures that will apply to information management;
  • Processes and criteria for client Identification;
  • Anti-Fraud and anti-money laundering prevention policies;
  • Adherence Agreement templates for the general public to be filed before the National Commission for the Protection and Defense of the Users of Financial Services (CONDUSEF for its initials in Spanish); and
  • Information related to the interface, digital platform, URL, web page or electronic, digital or social media used, through which financial services will be provided.

Furthermore, the CNBV will also be the authority in charge to determine, through general resolutions and provisions, which Fintechs will required to have a Board of Directors, a Managing Director and with an Audit Committee, depending on the type of the company to be created or currently existing as a Fintech, based on the current General Corporations Law and the Securities Market Law.

While we anticipate that the regulations will increase for Fintechs in Mexico, with the new Fintech Law currently in effect, our preliminary recommendations include adopting a corporate vehicle with limited liability, preferably an which is stock corporation (S.A. for its initials in Spanish) or an investment promotion stock corporation (SAPI for its initials in Spanish), depending on the size and activity, as these vehicles provide greater transparency and corporate governance principles which adapt better to the processes, business models, asset types and portfolios, as well as other elements relevant to the business models of Fintechs wordlwide.

Notwithstanding the foregoing, it is important to consider the legal vehicle and regulations applicable to consumer protection, personal data protection and privacy, and financial operations.

Finally, it is necessary to mention the Law will result in several amendments to different laws, i.e. the Law on Credit Institutions, the Securities Market Law, the Law of Transparency and Financial Services Order, the Law of Protection and Defense of the Users of Financial Services, and the Federal Law for the Prevention and Identification of Transactions with Funds from Illegal Sources, thus placing Mexico as one of the few leading countries in the world with regard to Fintechs.

This newsletter is intended only as a general discussion of the addressed issues, and should not be regarded as legal advice.

For further information on the content of this newsletter, please contact

Gustavo Alcocer gustavo.alcocer@olivares.mx; Abraham Díaz abraham.diaz@olivares.mx or José Miguel Lecumberri jose.lecumberri@olivares.mx

or call at +52(55) 5322 3000

Amendments proposed to franchise regulation

POR GUSTAVO A. ALCOCER, SOCIO
CARLOS WOODWORTH M.
MANAGING INTELLECTUAL PROPERTY, INTERNATIONAL BRIEFING, APRIL 2005
On November 30 2004, the Senate sent for revision to the Lower Chamber of Representatives (Cámara de Diputados) a Decree to amend the Mexican Industrial Property Law. Among other amendments, the Decree includes amendments to Article 142 of the Law.
Until now, Article 142 has not been an issue of concern for franchisors since it simply provides for a general concept of what a franchise is. It imposes the offering information that franchisors must disclose to a prospective franchisee prior to executing a franchise agreement, but leaves the parties free to negotiate the terms of the agreement. This follows the principle known as contractual freedom of the parties in Mexican civil law.
Now, turning to the Decree, while the Senate sustains that the rationale behind the Decree is to provide legal certainty to the parties that will enter into a franchise agreement, the Decree essentially intends to interfere in the contractual freedom of the parties as shown by the introduction of compulsory minimum requirements in any franchise agreement.
The most relevant concepts included in the Decree, in connection with franchise arrangements, are:
1.     Article 142 of the Law will include a 30-day term obligation for franchisors to deliver the offering circular to potential franchisees. Failure by the franchisor to provide the information within this term may result in actions to nullify the franchise agreement.
2.     A new Article 142 bis will be added to provide the minimum requirements that a franchise agreement should include, among which we consider the following as the most relevant: (i) the territory in which the franchisee will perform the franchised activities, (ii) the rules for determining the minimum distance that should be kept between the franchisees’ establishments, (iii) the rules for entering into additional franchise agreements within the territory, (iv) the criteria and methods to determine profit and fees, and (v) the causes of termination and procedures to guarantee the necessary conditions to allow franchisees recover their investment.
3.     A new Article 142 bis 1 will be added to limit the franchisor’s interference in the administration of franchisees only to guarantee the observance of management and image of the franchise.
4.     A new Article 142 bis 2 will be added to provide a specific obligation for the franchisee to keep confidential, during the term of the agreement and after termination, all industrial or commercial secrets developed by franchisor.
5.     A new Article 142 bis 3 will be added to provide that none of the parties to a franchise agreement will be entitled to terminate the agreement unilaterally, unless the agreement was entered for an indefinite term, or upon the occurrence of a termination event as provided in the relevant agreement. A termination by a party that does not comply with this article will result in penalties, if penalties were included in the agreement, or will enable the affected party to claim damages from the other party.
6.     A new Article 142 bis 4 will be added to provide that the franchisee that has complied with its obligations under the franchise agreement shall have the right of first refusal for further franchise agreements in the territory.
Further, the Decree provides that only those agreements that include all of the minimum requirements will qualify for recordal before the MTO. A present franchise agreements are to be recorded before the MTO only insofar as the licensing of trade marks is concerned.
Additionally and most disturbingly, a new provision is intended to be introduced that provides that the cancellation of the licensed trade mark registration(s) under the franchise agreement will proceed when: one or more franchisees or the MTO determine that the franchisor or any of its subsidiaries has directly or indirectly violated the Industrial Property Law or the international treaties to which Mexico has adhered or that the franchisor performs acts which are contrary to the free competition or that constitute an abuse of industrial property rights.
The Decree, however, is yet to be approved by the Lower Chamber of Representatives, which is discussing it (through the Commission for Economic Affairs) with the active participation of the international franchising industry doing business in Mexico.

Income expectations in licensing

BY CARLOS WOODWORTH
MANAGING INTELLECTUAL PROPERTY, INTERNATIONAL BRIEFINGS, JUNE 2006
Technology transfer provides the scope for creativity in the organization and structure of what is usually a long-term relationship. The bottom line is always lasting profitability for the respective parties.
When setting a price for a technology transfer the initial objective should be to quantify the total size of the profitability pie to be generated by the combination of rights and resources which are expected to be contributed by the respective parties. There are many ways in which a licensor can realize a return on its investment in discovering, creating and developing the technology being licensed or otherwise transferred. However, a realistic approach to income expectations will facilitate a long-term relationship between the parties. It is the purpose of this briefing to outline specific criteria that should be considered to achieve a mutually satisfactory bottom line. Some of these are:
  1. Size of the relevant market: is the item resulting from the licensed technology utilized by the general public, or is it a relatively specialized item that is important to only a narrow sector of the population, or even to a limited geographical region?
  2. Dynamism of the market. This depends on the underlying sector of the economy that is expected to be caught as a result of the licence. Is it a market that is notably expanding and that may be expected to grow further? Or is this a flat market because of the excess production capacity, too many competitors or even general technological obsolesce?
  3. Characteristics of the technology to be licensed. Is the licensed technology a unique one, that is, or is expected to, create a new expanding market? Is a pioneer IP right involved? Or is it only an evolutionary refinement of something relatively standard?
  4. Quality of contribution by the owner of the technology. Does the proprietor enjoy a well-recognized reputation as an innovator and continuing source of useful ideas and improvements? Is it known to defend its rights vigorously against infringers?
  5. Assets expected to be contributed by technology recipient. Is the recipient financially capable, an efficient manufacturer, and/or does it possess a sound marketing, organization? If properly motivated, is it likely to maximize the potential of the relevant technology?
  6. General state of the economy. Are conditions considered to be healthy, expanding, in recession or in recovery? Is there an economic indicator, tax incentive, legal framework that could affect the contemplated business of the licensing parties?
Notwithstanding these basic criteria, an argument sometimes raised by a proprietor when it is offering an invention for license is that is has spent enormous time, effort and money to create and develop the technology involved. A realistic contra argument is that these are sunk costs to the licensor that are irrelevant to the licensee, who is only interested in the future profitability the licensed technology is likely to generate. The risk element is very important to determine profit sharing. Generally it is the licensee who bears the principal risk, since it is usually exposed to unknown elements in the marketplace that might help or hinder the introduction of the licensed product.
In summary, these criteria should help the parties conclude that their portion of the profit pie is not always mandated by a standard practice formula, but rather by practical approaches that might help them make a business determination when licensing technology.

Due diligence issues to consider in M&A

BY CARLOS WOODWOTH
MANAGING INTELLECTUAL PROPERTY, INTERNATIONAL BRIEFINGS, MAY 2008
When a merger divestiture or purchase of assets involves intellectual property, a corporate IP attorney should be part of the team. The business purpose of the transaction and expectations for the IP assets must be discussed with the client. Through that guidance, the corporate IP lawyer will be able to perform the due diligence and advise whether the transaction will meet the client’s expectations.
Although all attorneys know the value and importance of due diligence, when IP rights are involved, too many times the need for experienced IP lawyers as part of the transaction team is overlooked, and all too often, subtle points can be easily ignored in the due diligence process.
Whatever assets the seller owns will automatically go to the buyer, and the focus will always be whether or not seller really owns, or has the rights to use, the intellectual property that is the subject matter of the acquisition.
All prosecution, litigation and licence files relating to the intellectual property must be reviewed. The seller’s past failure to enforce its rights could result in the seller having nothing to transfer. The client may want to take steps to ensure that the assets it acquires will not infringe the rights of others. Have you thought that a change of control may terminate material licences?
Additionally, for transactional lawyers, many of the concepts used in IP representations and warranties are not common territory, and even when the language used under an acquisition agreement representations and warranties section might be familiar, the nature of the IP rights imposes the need to pay special attention, as they might have an unfamiliar scope.
The most important factor is to include someone on your team who knows IP and can spot these non-straightforward issues early in the process. Then, it is a matter of taking corrective action, where needed, and negotiating specific IP representations and warranties to protect the client.

A practical cross-border insight into merger control

por Gustavo Alcocer & Carlos Woodworth

 

1      Relevant authorities and legislation

 

1.1  Who is/are the relevant merger authority(ies)?

 

The Federal Competition Commission, which is an administrative agency independent from the Mexican Ministry of Economy, has technical and operational autonomy to issue its resolutions. The Commission is integrated to exercise merger authority by public officials, divisions and administrative units, of which the main authority is the Commission in Plenary session, comprised by 5 commissioners, including the Commission President. Resolutions are issued by majority votes of its members.

1.2  What is the merger legislation?

 

Listed in order of hierarchy: (i) Article 28th of the Mexican Constitution which establishes the antitrust prohibition and the monopoly exception regime, given that in the case of intellectual property (patents, trademarks and copyrights) and certain state monopolies (oil, electricity, postal service, among others) exceptions regime; (ii) international treaties to which Mexico is a party, containing antitrust provisions, include, among others, NAFTA and EUFTA; and (iii) the Federal Economic Competition Law (the “Law”) and its regulations, Industrial Property Law, Copyright Law and Foreign Investment Law.

 

1.3  Is there any other relevant legislation for foreign mergers?

 

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

 

1.4  Is there any other relevant legislation for mergers in particulars sectors?

 

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

 

 

2      Transactions caught by merger control legislation

2.1 Which types of transaction are caught – in particular, how is the concept of “control” defined?

 

The types of transactions caught under merger control provisions are subject to threshold tests related to the underlying value of each transaction. The Law defines concentration as any merger, control acquisition or any act resulting in the concentration of two different entities, including trust or assets in general among and between competitors, suppliers, customers or any economic agents. Notwithstanding the foregoing, the Commission is able to challenge and sanction, subject to express criteria, any concentration with the purpose of diminishing, damaging or not allowing competition, with respect to identical, similar or substantially similar goods and services. The Commission may issue a restrictive order not to execute the underlying transaction, until a favourable resolution is issued, during a term of 10 days following the filing of the concentration notice. Although Control is not a defined term, the Law regulation applies a control test as it relates to:

  1. the merger control notice, establishing that notice shall be filed prior to exercising direct or indirect control, in fact or by law; and
  2. allowing for the notice to be made by the party acquiring control of the corporation, in absence of the parties directly involved in the underlying transaction.

 

2.2 Can the acquisition of a minority shareholding amount to a “merger”?

 

The acquisition of a minority shareholding does not amount to a merger; however, if such acquisition is within the scenarios and thresholds specified under question 2.5 it would be subject to notice.

 

2.3 Are joint ventures subject to merger control?

 

Yes, please refer to questions 2.1 and 2.4.

 

 

2.4 What are the jurisdictional thresholds for application of merger control?

 

Based on the foregoing, the following transactions are subject to prior notice:

 

  1. When the transaction, irrespective of the place of execution, results in the direct or indirect amount in Mexico being the equivalent to more than 18M times the minimum general daily wage applicable in Mexico City (MGDW), $1,034,280,000.00 M.N., Pesos.

 

  1. When the actions originating the transaction imply an aggregate of 35% or more of the assets or shares of a party, whose annual assets in Mexico or annual sales originated in Mexico, are equal to more than 18M times the MGDW, $1,034,280,000.00 M.N., Pesos.

 

  1. When the actions originating the transaction imply an aggregation in Mexico of assets or capital stock amount to more than the equivalent of 8.4M times the MGDW $482,664,000.00 Pesos and two or more entities participate, which assets or annual sales volume on an individual or aggregate basis are equal to more than 48M times MGDW, $2,758,080,000.00 Pesos.

 

For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

 

2.5 Does merger control apply in the absence of a substantive overlap?

 

Merger control applies in the scenarios and thresholds described above, regardless of whether monopolistic conduct is incurred, which in turn may result in a discretionary antitrust investigation originated under the Commission authority or based on a third party claim.

 

2.6 In what circumstances is it likely that transactions between parties outside Mexico (“foreign to foreign” transactions) would be caught by your merger control legislation?

 

Foreign transactions may be caught by merger control provisions in Mexico, when and if, the value of such transactions exist in the Mexican territory, either as a result of capital stock, assets or sales,

respectively.

 

2.7 Please describe any mechanisms whereby the operation of the jurisdictional thresholds may be overridden by other provisions.

 

There are none.

 

2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions?

 

The principles that apply are the relevant market, the parties involved, the term between the stages and type of transaction.

 

 

 

3      Notification and its impact on the transaction timetable

 

3.1  Where the jurisdictional thresholds are met, is notification compulsory and is there a deadline for notification?

 

Yes, notification is compulsory when thresholds are met, and must be made prior to the implementation of the underlying transaction (for a more detailed deadline schedule, see our response to question 3.5).

 

3.2 Please describe any exceptions where, even though the jurisdictional thresholds are met, clearance is not required.

 

There are no exceptions to notification when thresholds are met.

 

3.3  Where a merger technically requires notification and clearance, what are the risks of not filing?

 

The Commission is entitled to: (i) order the cancellation of the underlying merger; (ii) order the partial or total divestment of assets acquired; and (iii) impose penalties of up to the equivalent of

400,000 times the MGDW ($22,984,000.00 Mexican Pesos).

 

3.4 is it possible to carve out local completion of a merger to avoid delaying global competition?

 

Yes, it is possible to carve out local competition through the establishment of conditions precedent applicable to the perfection of the merger in Mexico, such as the issuance of a favourable resolution issue by the Commission.

 

3.5 At what stage in the transaction timetable can the notification be filed?

 

Notification must be filed at any time before any of the following events occur:

 

  1. the underlying act is perfected in accordance with the applicable legislation or, should it be the case, the condition precedent to which such act is subject, is fulfilled;
  2. control is acquired de facto or de jure, or exercised directly or indirectly over another entity; or before assets, participation in trusts, partners’capital contributions or shares of another party are acquired de facto or de jure;

iii. a merger agreement is signed between the parties to it; or

  1. in the case of a succession of acts, before executing the last one that would result in exceeding the applicable threshold amounts.

 

With respect to mergers resulting from acts executed abroad, these must be notified before they have legal or material effects within Mexican territory.

 

3.6 What is the timeframe for scrutiny of the merger by the merger authority? What are the main stages in the regulatory process? Can the timeframe be suspended by the authority?

 

Within the following 15 days from filing date, the Commission is entitled to request additional information or documentation, which must be delivered by the interested parties within the following 15 days after the request, is served. After the documentation delivery process is completed, the Commission has a 35-day term to issue its resolution; however, the President of the Commission is entitled to extend each Commission term for up to an additional 40 days, only in extraordinary complex transactions.

 

3.7 Is there any prohibition on completing the transaction before clearance is received or any compulsory waiting period has ended? What are the risks in completing before clearance is receieved?

 

If within the following ten days from filing date, the Commission does not order the parties to refrain from executing the underlying merger until a favourable resolution is issued, then the parties, at their own risk, can execute the merger. Provided, however, that, if such order is not issued within such term, it shall not be interpreted as an implied authorisation for the execution of the underlying merger, unless the term granted to the Commission for issuance of its resolution expires, in which case it shall be interpreted as if the Commission has no objection against the merger. As for the risks in executing the merger before clearance is received, the interested parties are subject to those sanctions specified in response to question 3.3.

 

3.8 Where notification is required, is there a prescribed format?

 

The notice shall be made in writing through a free form writ, to which a copy of the underlying agreements shall be enclosed. Such writ must include the names or corporate names of the corresponding parties, the financial statements of the last fiscal year, their market share and any additional information through which the merger is documented.

 

3.9 Is there a short form or accelerated procedure for any type of mergers?

 

The Law does not provide for an accelerated procedure per se; however, if, at the time of filing the notice, the parties provide as much information as available such as analysis, reports, evidence, etc. to support the fact that such merger will notably not result in diminishing, damage or preventing competition, then the Commission is granted a term of 15 days to issue its resolution. If such term is not extended by the President of the Commission and expires, it shall be interpreted as if the Commission has no objection against the merger. Notwithstanding the foregoing, if the Commission determines that the merger does not notably diminish, damage or prevent competition, then the notification process shall be subject to the terms set forth under question 3.6.

 

3.10 Who is responsible for making the notification and are there any filing fees?

 

The parties participating in the underlying merger are responsible for filing the notification, and appointing a sole representative. In addition when the parties cannot, for any reason, provide the notice, the merging entity, the party acquiring control of the corporation, the entity intending to enter into the transactions or to aggregate the shares, equity interest, trust interests or assets, is responsible for filing the notice. The filing fees are $124,849.00 M.N. Pesos, regardless of the value of the underlying transaction. For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

 

 

 

4 Substantive assessment of the merger and outcome of the process

 

4.1 What is the substantive test against which a merger will be assessed? Are non-competition issues taken into account?

 

The parties are subject to scrutiny in order to determine if, as a result of the concentration the parties are able to fix prices, restrict in a material way competitors access to the relevant market or engage in illicit monopolistic practices. Non-competition issues are taken into account on a case-by-case basis (i.e. the scope of the noncompetition provision, the term of the obligation not to compete and the size of the relevant market, among others).

 

4.2 What is the scope for the involvement of third parties (or complainants) in the regulatory scrutiny process?

 

The Law allows for third party written complaints, in the event of absolute monopolistic practices (absolute monopolistic practices are contracts, agreements, arrangements, or combinations among

competitive economic agents, whose aim or effect are any of the following: (i) to fix, raise, to agree upon or manipulate the purchase or sale price of the goods or services supplied or demanded in the markets, or to exchange information with the same aim or effect; (ii) to establish the obligation to produce, process, distribute or market only a restricted or limited amount of goods, or to render a specific volume, number, or frequency of restricted or limited services; (iii) to divide, distribute, assign or impose portions or segments of the current or potential market of goods and services, by means of a determinable group of customers, suppliers, time or spaces; or (iv) to establish, agree upon or coordinate bids or to abstain from bids, tenders, public auctions or bidding), for affected party complaints in the case of other monopolistic practices (subject to verification of articles 11, 12 and 13 of the Law, relative monopolistic practices are deemed to be those acts, contracts, agreements or combinations, which aim or effect is to improperly displace other agents from the market, substantially hinder their access thereto, or to establish exclusive advantages in favour of

one or several entities or individuals) or transactions subject to merger control. Such claims need to be filed against the alleged responsible party, with a description of the facts deemed in violation of the Law and the concepts for which the claimant has suffered, or that will result in the presumption of, damages, if any. Once that the claim is filed, and during the investigation process, the Commission will not allow access to the claim file, and, during the process, only those entities with legal standing will have access to such information, except for that identified as confidential.

 

4.3 What information gathering powers does the regulator enjoy in relation to the scrutiny of a merger?

 

When exercising its powers, the Commission may request from the relevant parties information deemed material as well as summon those involved in the corresponding cases for purposes of merger scrutiny, request and verify information from third parties, including competitors and clients, among others. Additionally, the Commission with the assistance of the competent judicial authority may request to be authorised to perform on-site inspections. Notwithstanding the foregoing, if a merger is approved, the Commission is not authorised to initiate an investigation procedure, but only in those cases when such resolution was obtained based on false information.

 

4.4 During the regulatory process, what provision is there for the protection of commercially sensitive information?

 

Any information filed before the Commission or obtained by it during an investigation process will be classified as reserved, confidential or public. Reserved information is that available only to those entities with legal standing in the investigation process; confidential information means information that if disclosed to any entity with legal standing in the investigation process, such disclosure will result in damages to the disclosing party. Confidential information will only be treated as such if the disclosing party requests so.

 

 

 

5 The end of the process: remedies, appeals & enforcement

 

5.1 How does the regulatory process end?

 

The regulatory process concludes with a resolution by the Commission, and may end at different stages, depending on the process: 35 days (which may be extended) and, when merger control notice is given and parties demonstrate that the merger will not result in diminishing, damaging or obstructing free competition, the Commission will resolve within 15 days (which may be extended), following the admission date of the notice, respectively. If the Commission has not resolved after the applicable term expires, the notice is deemed not to be subject to objection by the Commission. This final resolution is subject to appeal.

 

5.2 Where competition problems are identified,             is it possible to negotiate “remedies” which are acceptable to the parties?

 

Yes, provided that such remedies are agreed upon, then parties are notified to the Commission, prior to the issuance of the resolution. The Commission may notify either formally or informally the criteria that needs to be met: i.e. excessive terms for non-compete provisions, which parties may reduce to comply with the set criteria and allow for the favourable resolution to be issued.

 

5.3 At what stage in the process can the negotiation of remedies be commenced? Please describe any relevant procedural steps and deadlines.

 

During the assessment period and before the resolution is issued, the negotiation of remedies can be commenced. There is no particular procedure to negotiate remedies which shall be agreed on before the resolution is issued.

 

5.4 If a divestment remedy is required, does the merger authority have a standard approach to the terms and conditions to be applied to the divestment?

 

No. The divestment remedy is customarily resolved as a condition precedent to the clearing the merger notice.

 

5.5 Can the parties complete the merger before the remedies have been complied with?

 

The parties may execute the underlying transaction, assuming any liability resulting from non-compliance of the Law. In the case of transactions that require filing before the public registry, filing is conditioned upon favourable resolution of the Commission.

 

5.6 How are negotiated remedies enforced?

 

Negotiated remedies need to be complied with in order for a favourable resolution to be issued.

 

5.7 Will a clearance decision cover ancillary restrictions?

 

No, ancillary restrictions are customarily resolved as conditions precedent to the clearance decision.

 

5.8 Can a decision on a merger clearance be appealed?

 

Yes, decisions can be appealed.

 

5.9 Is there a time limit for enforcement of merger control legislation?

 

The authority of the Commission to initiate investigations that may result in the application of sanctions expire in a term of 5 years, following the date the underlying conduct was performed. In the case of merger control, the transactions not subject to notice cannot be investigated after a one year term, following the date of completion of the transaction.

 

 

 

6 Miscellaneous

 

6.1 To what extent does the merger authority in Mexico liaise with those in other jurisdictions?

 

Mexico is a party to international treaties and arrangements to cooperate in competition enforcement matters, among which are NAFTA, UEFTA, and treaties with the USA, Japan, Korea and the European Free Trade Association. Such treaties and arrangements include commitments related to international coordination and cooperation matters.

 

6.2 Please identify the date as at which your answers are up to date.

 

October 21, 2010.

Mexico issues Personal Data Protection Rules

por Gustavo Alcocer

The long awaited Personal Data Protection Rules (Reglamento de la Ley Federal de Protección de Datos Personales en Posesión de los Particulares, the “Rules”) were finally issued on December 19, 2010 and published by executive decree of Felipe Calderon, President of Mexico, on December 21, 2011.

The Personal Data Protection Law (Ley Federal de Protección de Datos Personales en Posesión de Particulares, the “Law”) enacted by the Mexican Congress on April 27, 2010 and published on July 5, 2010, had three important dates: July 5, 2011, when the Personal Data Protection Rules should have been published; July 6, 2011, which was the deadline for the designation of the person/entity in charge of personal data compliance and the issuance of the privacy notice and; January 6, 2012, which will be the date when personal data owners may exercise their access, rectification, cancelation and opposition rights (“ARCO Rights”).

.

The Rules are now part of the Personal Data Protection legal framework in Mexico and have the purpose of regulating the provisions of the Law. Additional definitions to the ones contained in the Law include: ARCO Rights, digital media, exclusion list, administrative, physical and technical security measures, identifiable individual, remittance, electronic and physical back-up and suppression or data deletion.

 

The broad mandatory scope of application is not with a strict reference to the territory of Mexico but rather with a territorial approach. The Rules apply to any treatment of personal data by private individuals or entities as a result of the treatment of data or activities being performed within the Mexican Territory. As an example, if the responsible compliance person/entity is not I n the Mexican Territory the security measures contained in the Rules still apply.

 

There is personal data exempted such as data of individual business owners or private professionals and practitioners and such data resulting from a contractual or legal provision. Also public source is further regulated to include yellow pages and the like directories, daily news papers (not limited to printed versions) gazettes and other bulletins. It is not clear if all social networks are public source; thus, the information contained in such networks may not be excluded from application of the Rules.

 

Personal Data Protection principles contained in legal frameworks around the world are also present in the Rules that impose on the person/entity in charge of compliance to observe: consent, information, quality, purpose, loyalty, proportionality, responsibility, security and confidentiality, as referred to in the Law. Following these principles the Rules impose specific requirements to the different forms of consent, characteristics of the privacy notice, amongst other.

 

Other provisions of relevance regulate (i) the term to maintain personal data; (ii) the need to implement procedures for conservation, blockage and deletion of personal data; (iii) measures to be adopted by the compliance officer/entity; (iv) obligations of the compliance officer/entity; (v) treatment of personal data on computer systems and the cloud; (vi) national and international remittance of personal data; (vii) outsourcing; (viii) sensitive personal data; (ix) self-regulation and; (x) the exercise of ARCO Rights and the personal data protection administrative procedure, verification and sanctions.

 

The Rules entered into effect on Thursday December 22, 2011, with the exception of security measures that have been given a holding period of 18 months following the date of publication.

The International Comparative Legal Guide to: Merger Control 2010

BY GUSTAVO A. ALCOCER, PARTNER
AND CARLOS WOODWORTH M.
GLOBAL LEGAL GROUP 2010, CHAPTER 34

1. RELEVANT AUTHORITIES AND LEGISLATION

1.1 WHO IS/ARE THE RELEVANT MERGER AUTHORITY(IES)?

The Federal Competition Commission, which is an administrative agency independent from the Mexican Ministry of Economy, has technical and operational autonomy to issue its resolutions. The Commission is integrated to exercise merger authority by public officials, divisions and administrative units, of which the main authority is the Commission in Plenary session, comprised by 5 commissioners, including the Commission President. Resolutions are issued by majority votes of its members.

1.2 WHAT IS THE MERGER LEGISLATION?

Listed in order of hierarchy: (i) Article 28th of the Mexican Constitution which establishes the antitrust prohibition and the monopoly exception regime, given that in the case of intellectual property (patents, trademarks and copyrights) and certain state monopolies (oil, electricity, postal service, among others) exceptions regime; (ii) International treaties to which Mexico is a party, containing antitrust provisions, include, among others NAFTA and EUFTA; and (iii) the Federal Economic Competition Law (the “Law”) and its regulations, Industrial Property Law, Copyright Law and Foreign Investment Law.

1.3 LS THERE ANY OTHER RELEVANT LEGISLATION FOR FOREIGN MERGERS?

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

1.4 LS THERE ANY OTHER RELEVANT LEGISLATION FOR MERGERS IN PARTICULAR SECTORS?

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

2 TRANSACTIONS CAUGHT BY MERGER CONTROL LEGISLATION

2.1 WHICH TYPES OF TRANSACTION ARE CAUGHT – IN PARTICULAR, HOW IS THE CONCEPT OF “CONTROL” DEFINED?

The types of transactions caught under merger control provisions are subject to threshold tests related to the underlying value of each transaction. The Law defines concentration as any merger, control acquisition or any act resulting in the concentration of two different entities, including trust or assets in general among and between competitors, suppliers, customers or any economic agents.
Notwithstanding the foregoing, the Commission is able to challenge and sanction, subject to express criteria, any concentration with the purpose of diminishing, damaging or not allowing competition, with respect to identical, similar or substantially similar goods and services.
The Commission may issue a restrictive order not to execute the underlying transaction, until a favourable resolution is issued, during a term of 10 days following the filing of the concentration notice.
Although Control is not a defined term, the Law regulation applies a control test as it relates to:
i. the merger control notice, establishing that notice shall be filed prior to exercising direct or indirect control, in fact or by law; and
ii. allowing for the notice to be made by the party acquiring control of the corporation, in absence of the parties directly involved in the underlying transaction.

2.2. CAN THE ACQUISITION OF A MINORITY SHAREHOLDING AMOUNT TO A “MERGER”?

The acquisition of a minority shareholding does not amount to a merger; however, if such acquisition is within the scenarios and thresholds specified under question 2.5 it would be subject to notice.

2.3 ARE JOINT VENTURES SUBJECT TO MERGER CONTROL?

Yes, please refer to questions 2.1 and 2.4.

2.4 WHAT ARE THE JURISDICTIONAL THRESHOLDS FOR APPLICATION OF MERGER CONTROL?

Based on the foregoing, the following transactions are subject to prior notice:
I. When the transaction, irrespective of the place of execution, results in the direct or indirect amount in Mexico being the equivalent to more than 18M times the minimum general daily wage applicable in Mexico City (MGDW), $986,400,000.00 M.N., Pesos.
2. When the actions originating the transaction imply an aggregate of 35% or more of the assets or shares of a party, whose annual assets in Mexico or annual sales originated in Mexico, are equal to more than 18M times the MGDW, $986,400,000.00 M.N., Pesos.
3. When the actions originating the transaction imply an aggregation in Mexico of assets or capital stock amount to more than the equivalent of 8.4M times the MGDW $460,320,000.00 Pesos and two or more entities participate, which assets or annual sales volume on an individual or aggregate basis are equal to more than 48M times MGDW, $2,630,400,000.00 Pesos.
For reference purposes, the foreign exchange rates as of September 30, 2009 is 13.50 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

2.5 DOES MERGER CONTROL APPLY IN THE ABSENCE OF A SUBSTANTIVE OVERLAP?

Merger control applies in the scenarios and thresholds described above, regardless of whether monopolistic conduct is incurred, which in turn may result in a discretionary antitrust investigation originated under the Commission authority or based on a third party claim.

2.6 IN WHAT CIRCUMSTANCES IS IT LIKELY THAT TRANSACTIONS BETWEEN PARTIES OUTSIDE MEXICO (“FOREIGN TO FOREIGN” TRANSACTIONS) WOULD BE CAUGHT BY YOUR MERGER CONTROL LEGISLATION?

Foreign transactions may be caught by merger control provisions in Mexico, when and if, the value of such transactions exist in the Mexican territory, either as a result of capital stock, assets or sales, respectively.

2.7 PLEASE DESCRIBE ANY MECHANISMS WHEREBY THE OPERATION OF THE JURISDICTIONAL THRESHOLDS MAY BE OVERRIDDEN BY OTHER PROVISIONS.

There are none.

2.8 WHERE A MERGER TAKES PLACE IN STAGES, WHAT PRINCIPLES ARE APPLIED IN ORDER TO IDENTITY WHETHER THE VARIOUS STAGES CONSTITUTE A SINGLE TRANSACTION OR A SERIES OF TRANSACTIONS?

The principles that apply are the relevant market, the parties involved, the term between the stages and type of transaction.

3. NOTIFICATION AND ITS IMPACT ON THE TRANSACTION TIMETABLE

3.1 WHERE THE JURISDICTIONAL THRESHOLDS ARE MET, IS NOTIFICATION COMPULSORY AND IS THERE A DEADLINE FOR NOTIFICATION?

Yes, notification is compulsory when thresholds are met, and must be made prior to the implementation of the underlying transaction (for a more detailed deadline schedule, see our response to question 3.5).

3.2 PLEASE DESCRIBE ANY EXCEPTIONS WHERE, EVEN THOUGH THE JURISDICTIONAL THRESHOLDS ARE MET, CLEARANCE IS NOT REQUIRED.

There are no exceptions to notification when thresholds are met.

3.3 WHERE A MERGER TECHNICALLY REQUIRES NOTIFICATION AND CLEARANCE, WHAT ARE THE RISKS OF NOT FILING?

The Commission is entitled to: (i) order the cancellation of the underlying merger; (ii) order the partial or total divestment of assets acquired; and (iii) impose penalties of up to the equivalent of 400,000 times the MGDW ($21,920,000.00 Mexican Pesos).

3.4 IS IT POSSIBLE TO CARVE OUT LOCAL COMPLETION OF A MERGER TO AVOID DELAYING GLOBAL COMPLETION?

Yes, it is possible to carve out local competition through the establishment of conditions precedent applicable to the perfection of the merger in Mexico, such as the issuance of a favourable resolution issue by the Commission.

3.5 AT WHAT STAGE IN THE TRANSACTION TIMETABLE CAN THE NOTIFICATION BE FILED?

Notification must be filed at any time before any of the following events occur:
i. the underlying act is perfected in accordance with the applicable legislation or, should it be the case, the condition precedent to which such act is subject, is fulfilled;
ii. control is acquired de facto or de jure, or exercised directly or indirectly over another entity; or before assets, participation in trusts, partners’ capital contributions or shares of another party are acquired de facto or de jure;
iii. a merger agreement is signed between the parties to it; or
iv. in the case of a succession of acts, before executing the last one that would result in exceeding the applicable threshold amounts.
With respect to mergers resulting from acts executed abroad, these must be notified before they have legal or material effects within Mexican territory.

3.6 WHAT IS THE TIMEFRAME FOR SCRUTINY OF THE MERGER BY THE MERGER AUTHORITY? WHAT ARE THE MAIN STAGES IN THE REGULATORY PROCESS? CAN THE TIMEFRAME BE SUSPENDED BY THE AUTHORITY?

Within the following 15 days from filing date, the Commission is entitled to request additional information or documentation, which must be delivered by the interested parties within the following 15 days after request, is served. After the documentation delivery process is completed, the Commission has a 35-day term to issue its resolution; however, the President of the Commission is entitled to extend each Commission term for up to an additional 40 days, only in extraordinary complex transactions.

3.7 IS THERE ANY PROHIBITION ON COMPLETING THE TRANSACTION BEFORE CLEARANCE IS RECEIVED OR ANY COMPULSORY WAITING PERIOD HAS ENDED? WHAT ARE THE RISKS IN COMPLETING BEFORE CLEARANCE IS RECEIVED?

If within the following ten days from filing date, the Commission does not order the parties to refrain from executing the underlying merger until a favourable resolution is issued, then the parties, at their own risk, can execute the merger. Provided, however, that, if such order is not issued within such term, it shall not be interpreted as an implied authorisation for the execution of the underlying merger, unless the term granted to the Commission for issuance of its resolution expires, in which case it shall be interpreted as if the Commission has no objection against the merger.
As for the risks in executing the merger before clearance is received, the interested parties are subject to those sanctions specified in response to question 3.3.

3.8 WHERE NOTIFICATION IS REQUIRED, IS THERE A PRESCRIBED FORMAT?

The notice shall be made in writing through a free form writ, to which a copy of the underlying agreements shall be enclosed. Such writ must include the names or corporate names of the corresponding parties, the financial statements of the last fiscal year, their market share and any additional information through which the merger is documented.

3.9 IS THERE A SHORT FORM OR ACCELERATED PROCEDURE FOR ANY TYPES OF MERGERS?

The Law does not provide for an accelerated procedure per se; however, if, at the time of filing the notice, the parties provide as much information as available such as analysis, reports, evidence, etc. to support the fact that such merger will notably not result in diminishing, damage or preventing competition, then the Commission is granted a term of 15 days to issue its resolution. If such term is not extended by the President of the Commission and expires, it shall be interpreted as if the Commission has no objection against the merger.
Notwithstanding the foregoing, if the Commission determines that the merger does not notably diminish, damage or prevent competition, then the notification process shall be subject to the terms set forth under question 3.6.

3.10 WHO IS RESPONSIBLE FOR MAKING THE NOTIFICATION AND ARE THERE ANY FILING FEES?

The parties participating in the underlying merger are responsible for filing the notification, and appointing a sole representative. In addition when the parties cannot, for any reason, provide the notice, the merging entity, the party acquiring control of the corporation, the entity intending to enter into the transactions or to aggregate the shares, equity interest, trust interests or assets, is responsible for filing the notice.
The filing fees are $124,849.00 M.N. Pesos, regardless of the value of the underlying transaction. For reference purposes, the foreign exchange rate as of September 30, 2009 is 13.50 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

4. SUBSTANTIVE ASSESSMENT OF THE MERGER AND OUTCOME OF THE PROCESS

4.1 WHAT IS THE SUBSTANTIVE TEST AGAINST WHICH A MERGER WILL BE ASSESSED?

The parties are subject to scrutiny in order to determine if, as a result of the concentration the parties are able to fix prices, restrict in a material way competitors access to the relevant market or engage in illicit monopolistic practices.

4.2 WHAT IS THE SCOPE FOR THE INVOLVEMENT OF THIRD PARTIES (OR COMPLAINANTS) IN THE REGULATORY SCRUTINY PROCESS?

The Law allows for third party written complaints, in the event of absolute monopolistic practices (absolute monopolistic practices are contracts, agreements, arrangements, or combinations among competitive economic agents, whose aim or effect are any of the following: (i) to fix, raise, to agree upon or manipulate the purchase or sale price of the goods or services supplied or demanded in the markets, or to exchange information with the same aim or effect; (ii) to establish the obligation to produce, process, distribute or market only a restricted or limited amount of goods, or to render a specific volume, number, or frequency of restricted or limited services; (iii) to divide, distribute, assign or impose portions or segments of the current or potential market of goods and services, by means of a determinable group of customers, suppliers, time or spaces; or (iv) to establish, agree upon or coordinate bids or to abstain from bids, tenders, public auctions or bidding), for affected party complaints in the case of other monopolistic practices (subject to verification of articles 11, 12 and13 of the Law, relative monopolistic practices are deemed to be those acts, contracts, agreements or combinations, which aim or effect is to improperly displace other agents from the market, substantially hinder their access thereto, or to establish exclusive advantages in favour of one or several entities or individuals) or transactions subject to merger control. Such claims need to be filed against the alleged responsible party, with a description of the facts deemed in violation of the Law and the concepts for which the claimant has suffered, or that will result in the presumption of, damages, if any.
Once that the claim is filed, and during the investigation process, the Commission will not allow access to the claim file, and, during the process, only those entities with legal standing will have access to such information, except for that identified as confidential.

4.3 WHAT INFORMATION GATHERING POWERS DOES THE REGULATOR ENJOY IN RELATION TO THE SCRUTINY OF A MERGER?

When exercising its powers, the Commission may request from the relevant parties information deemed material as well as summon those involved in the corresponding cases for purposes of merger scrutiny, request and verify information from third parties, including competitors and clients, among others. Additionally, the Commission with the assistance of the competent judicial authority may request to be authorised to perform on-site inspections.
Notwithstanding the foregoing, if a merger is approved, the Commission is not authorised to initiate an investigation procedure, but only in those cases when such resolution was obtained based on false information.

4.4 DURING THE REGULATORY PROCESS, WHAT PROVISION IS THERE FOR THE PROTECTION OF COMMERCIALLY SENSITIVE INFORMATION?

Any information filed before the Commission or obtained by it during an investigation process will be classified as reserved, confidential or public. Reserved information is that available only to those entities with legal standing in the investigation process; confidential information means information that if disclosed to any entity with legal standing in the investigation process, such disclosure will result in damages to the disclosing party. Confidential information will only be treated as such if the disclosing party requests so.

5. THE END OF THE PROCESS: REMEDIES, APPEALS AND ENFORCEMENT

5.1 HOW DOES THE REGULATORY PROCESS END?

The regulatory process concludes with a resolution by the Commission, and may end at different stages, depending on the process: 35 days (which may be extended) and, when merger control notice is given and parties demonstrate that the merger will not result in diminishing, damaging or obstructing free competition, the Commission will resolve within 15 days (which may be extended), following the admission date of the notice, respectively. If the Commission has not resolved after the applicable term expires, the notice is deemed not to be subject to objection by the Commission. This final resolution is subject to appeal.

5.2 WHERE COMPETITION PROBLEMS ARE IDENTIFIED, IS IT POSSIBLE TO NEGOTIATE “REMEDIES” WHICH ARE ACCEPTABLE TO THE PARTIES?

Yes, provided that such remedies are agreed upon, then parties are notified to the Commission, prior to the issuance of the resolution. The Commission may notify either formally or informally the criteria that needs to be met: i.e. excessive terms for non-compete provisions, which parties may reduce to comply with the set criteria and allow for the favourable resolution to be issued.

5.3 AT WHAT STAGE IN THE PROCESS CAN THE NEGOTIATION OF REMEDIES BE COMMENCED?

During the assessment period and before the resolution is issued, the negotiation of remedies can be commenced.

5.4 IF A DIVESTMENT REMEDY IS REQUIRED, DOES THE MERGER AUTHORITY HAVE A STANDARD APPROACH TO THE TERMS AND CONDITIONS TO BE APPLIED TO THE DIVESTMENT?

No. The divestment remedy is customarily resolved as a condition precedent to the clearing the merger notice.

5.5 CAN THE PARTIES COMPLETE THE MERGER BEFORE THE REMEDIES HAVE BEEN COMPLIED WITH?

The parties may execute the underlying transaction, assuming any liability resulting from non-compliance of the Law. In the case of transactions that require filing before the public registry, filing is conditioned upon favourable resolution of the Commission.

5.6 HOW ARE ANY NEGOTIATED REMEDIES ENFORCED?

Negotiated remedies need to be complied with in order for a favourable resolution to be issued.

5.7 WILL A CLEARANCE DECISION COVER ANCILLARY RESTRICTIONS?

No, ancillary restrictions are customarily resolved as conditions precedent to the clearance decision.

5.8 CAN A DECISION ON MERGER CLEARANCE BE APPEALED?

Yes, decisions can be appealed.

5.9 IS THERE A TIME LIMIT FOR ENFORCEMENT OF MERGER CONTROL LEGISLATION?

The authority of the Commission to initiate investigations that may result in the application of sanctions expire in a term of 5 years, following the date the underlying conduct was performed. In the case of merger control, the transactions not subject to notice cannot be investigated alter a one year term, following the date of completion of the transaction.

6. MISCELLANEOUS

6.1 TO WHAT EXTENT DOES THE MERGER AUTHORITY IN MEXICO LIAISE WITH THOSE IN OTHER JURISDICTIONS?

Mexico is a party to international treaties and arrangements to cooperate in competition enforcement matters, among which are NAFTA, UEFTA, and treaties with the USA, Japan, Korea and the European Free Trade Association. Such treaties and arrangements include commitments related to international coordination and cooperation matters.

6.2 PLEASE IDENTITY THE DATE AS AT WHICH YOUR ANSWERS ARE UP TO DATE.

September 30, 2009.

The International Comparative Legal Guide to: Merger Control 2011

BY GUSTAVO ALCOCER
PARTNER
AND CARLOS WOODWORTH M.
ICLG TO: MERGER CONTROL 2011, CHAPTER 28 MEXICO

1. RELEVANT AUTHORITIES AND LEGISLATION

1.1. WHO IS/ARE THE RELEVANT MERGER AUTHORITY (IES)?

The Federal Competition Commission, which is an administrative agency independent from the Mexican Ministry of Economy, has technical and operational autonomy to issue its resolutions. The Commission is integrated to exercise merger authority by public officials, divisions and administrative units, of which the main authority is the Commission in Plenary session, comprised by 5 commissioners, including the Commission President. Resolutions are issued by majority votes of its members.

1.2. WHAT IS THE MERGER LEGISLATION?

Listed in order of hierarchy: (i) Article 28th of the Mexican Constitution which establishes the antitrust prohibition and the monopoly exception regime, given that in the case of intellectual property (patents, trademarks and copyrights) and certain state monopolies (oil, electricity, postal service, among others) exceptions regime; (ii) international treaties to which Mexico is a party, containing antitrust provisions, include, among others, NAFTA and EUFTA; and (iii) the Federal Economic Competition Law (the “Law”) and its regulations, Industrial Property Law, Copyright Law and Foreign Investment Law.

1.3. IS THERE ANY OTHER RELEVANT LEGISLATION FOR FOREIGN MERGERS?

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

1.4. IS THERE ANY OTHER RELEVANT LEGISLATION FOR MERGERS IN PARTICULAR SECTORS?

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

2. TRANSACTIONS CAUGHT BY MERGER CONTROL LEGISLATION

2.1. WHICH TYPES OF TRANSACTION ARE CAUGHT – IN PARTICULAR, HOW IS THE CONCEPT OF “CONTROL” DEFINED?

The types of transactions caught under merger control provisions are subject to threshold tests related to the underlying value of each transaction. The Law defines concentration as any merger, control acquisition or any act resulting in the concentration of two different entities, including trust or assets in general among and between competitors, suppliers, customers or any economic agents.
Notwithstanding the foregoing, the Commission is able to challenge and sanction, subject to express criteria, any concentration with the purpose of diminishing, damaging or not allowing competition, with respect to identical, similar or substantially similar goods and services.
The Commission may issue a restrictive order not to execute the underlying transaction, until a favourable resolution is issued, during a term of 10 days following the filing of the concentration notice.
Although Control is not a defined term, the Law regulation applies a control test as it relates to:
i. the merger control notice, establishing that notice shall be filed prior to exercising direct or indirect control, in fact or by law; and
ii. allowing for the notice to be made by the party acquiring control of the corporation, in absence of the parties directly involved in the underlying transaction.

2.2. CAN THE ACQUISITION OF A MINORITY SHAREHOLDING AMOUNT TO A “MERGER”?

The acquisition of a minority shareholding does not amount to a merger; however, if such acquisition is within the scenarios and thresholds specified under question 2.5 it would be subject to notice.

2.3 ARE JOINT VENTURES SUBJECT TO MERGER CONTROL?

Yes, please refer to questions 2.1 and 2.4.

2.4. WHAT ARE THE JURISDICTIONAL THRESHOLDS FOR APPLICATION OF MERGER CONTROL?

Based on the foregoing, the following transactions are subject to prior notice:
1. When the transaction, irrespective of the place of execution, results in the direct or indirect amount in Mexico being the equivalent to more than 18M times the minimum general daily wage applicable in Mexico City (MGDW), $1,034,280,000.00 M.N., Pesos.
2. When the actions originating the transaction imply an aggregate of 35% or more of the assets or shares of a party, whose annual assets in Mexico or annual sales originated in Mexico, are equal to more than 18M times the MGDW, $1,034,280,000.00 M.N., Pesos.
3. When the actions originating the transaction imply an aggregation in Mexico of assets or capital stock amount to more than the equivalent of 8.4M times the MGDW $482,664,000.000 Pesos and two or more entities participate, which assets or annual sales volume on an individual or aggregate basis are equal to more that 48M times MGDW, $2,758,080,000.00 Pesos.
For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

2.5 DOES MERGER CONTROL APPLY IN THE ABSENCE OF A SUBSTANTIVE OVERLAP?

Merger control applies in the scenarios and thresholds described above, regardless of whether monopolistic conduct is incurred, which in turn may result in a discretionary antitrust investigation originated under the Commission authority or based on a third party claim.

2.6 IN WHAT CIRCUMSTANCES IS IT LIKELY THAT TRANSACTIONS BETWEEN PARTIES OUTSIDE MEXICO (“FOREIGN TO FOREIGN” TRANSACTIONS) WOULD BE CAUGHT BY YOUR MERGER CONTROL LEGISLATION?

Foreign transactions may be caught by merger control provisions in Mexico, when and if, the value of such transactions exist in the Mexican territory, either as a result of capital stock, assets or sales, respectively.

2.7 PLEASE DESCRIBE ANY MECHANISMS WHEREBY THE OPERATION OF THE JURISDICTIONAL THRESHOLDS MAY BE OVERRIDDEN BY OTHER PROVISIONS.

There are none.

2.8 WHERE A MERGER TAKES PLACE IN STAGES, WHAT PRINCIPLES ARE APPLIED IN ORDER TO IDENTIFY WHETHER THE VARIOUS STAGES CONSTITUTE A SINGLE TRANSACTION OR A SERIES OF TRANSACTIONS?

The principles that apply are the relevant market, the parties involved, the term between the stages and type of transaction.

3. NOTIFICATION AND ITS IMPACT ON THE TRANSACTION TIMETABLE

3.1 WHERE THE JURISDICTIONAL THRESHOLDS ARE MET, IS NOTIFICATION COMPULSORY AND IS THERE A DEADLINE FOR NOTIFICATION?

Yes, notification is compulsory when thresholds are met, and must be made prior to the implementation of the underlying transaction (for a more detailed deadline schedule, see our response to question 3.5).

3.2 PLEASE DESCRIBE ANY EXCEPTIONS WHERE, EVEN THOUGH THE JURISDICTIONAL THRESHOLDS ARE MET, CLEARANCE IS NOT REQUIRED.

There are no exceptions to notification when thresholds are met.

3.3 WHERE A MERGER TECHNICALLY REQUIRES NOTIFICATION AND CLEARANCE, WHAT ARE THE RISKS OF NOT FILING?

The Commission is entitled to: (i) order the cancellation of the underlying merger; (ii) order the partial or total divestment of assets acquired; and (iii) impose penalties of up to the equivalent of 400,000 times the MGDW ($22,984,000.00 Mexican Pesos).

3.4. IS IT POSSIBLE TO CARVE OUT LOCAL COMPLETION OF A MERGER TO AVOID DELAYING GLOBAL COMPLETION?

Yes, it is possible to carve out local competition through the establishment of conditions precedent applicable to the perfection of the merger in Mexico, such as the issuance of a favourable resolution issue by the Commission.

3.5 AT WHAT STAGE IN THE TRANSACTION TIMETABLE CAN THE NOTIFICATION BE FILED?

Notification must be filed at any time before any of the following events occur:
i. the underlying act is perfected in accordance with the applicable legislation or, should it be the case, the condition precedent to which such act is subject, is fulfilled;
ii. control is acquired de facto or de jure, or exercised directly or indirectly over another entity; or before assets, participation in trusts, partners’ capital contributions or shares of another party are acquired de facto or de jure;
iii. a merger agreement is signed between the parties to it; or
iv. in the case of a succession of acts, before executing the last one that would result in exceeding the applicable threshold amounts.
With respect to mergers resulting from acts executed abroad, these must be notified before they have legal or material effects within Mexican territory.

3.6 WHAT IS THE TIMEFRAME FOR SCRUTINY OF THE MERGER BY THE MERGER AUTHORITY? WHAT ARE THE MAIN STAGES IN THE REGULATORY PROCESS? CAN THE TIMEFRAME BE SUSPENDED BY THE AUTHORITY?

Within the following 15 days from filing date, the Commission is entitled to request additional information or documentation, which must be delivered by the interested parties within the following 15 days after the request, is served. After the documentation delivery process is completed, the Commission has a 35-day term to issue its resolution; however, the President of the Commission is entitled to extend each Commission term for up to an additional 40 days, only in extraordinary complex transactions.

3.7 IS THERE ANY PROHIBITION ON COMPLETING THE TRANSACTION BEFORE CLEARANCE IS RECEIVED OR ANY COMPULSORY WAITING PERIOD HAS ENDED? WHAT ARE THE RISKS IN COMPLETING BEFORE CLEARANCE IS RECEIVED?

1f within the following ten days from filing date, the Commission does not order the parties to refrain from executing the underlying merger until a favourable resolution is issued, then the parties, at their own risk, can execute the merger. Provided, however, that, if such order is not issued within such term, it shall not be interpreted as an implied authorisation for the execution of the underlying merger, unless the term granted to the Commission for issuance of its resolution expires, in which case it shall be interpreted as if the Commission has no objection against the merger.
As for the risks in executing the merger before clearance is received, the interested parties are subject to those sanctions specified in response to question 3.3.

3.8 WHERE NOTIFICATION IS REQUIRED, IS THERE A PRESCRIBED FORMAT?

The notice shall be made in writing through a free form writ, to which a copy of the underlying agreements shall be enclosed. Such writ must include the names or corporate names of the corresponding parties, the financial statements of the last fiscal year, their market share and any additional information through which the merger is documented.

3.9 IS THERE A SHORT FORM OR ACCELERATED PROCEDURE FOR ANY TYPES OF MERGERS?

The Law does not provide for an accelerated procedure per se; however, if, at the time of filing the notice, the parties provide as much information as available such as analysis, reports, evidence, etc. to support the fact that such merger will notably not result in diminishing, damage or preventing competition, then the Commission is granted a term of 15 days to issue its resolution. If such term is not extended by the President of the Commission and expires, it shall be interpreted as if the Commission has no objection against the merger.
Notwithstanding the foregoing, if the Commission determines that the merger does not notably diminishing, damage or prevent competition, then the notification process shall be subject to the terms set forth under question 3.6.

3.10. WHO IS RESPONSIBLE FOR MAKING THE NOTIFICATION AND ARE THERE ANY FILING FEES?

The parties participating in the underlying merger are responsible for filing the notification, and appointing a sole representative. In addition when the parties cannot, for any reason, provide the notice, the merging entity, the party acquiring control of the corporation, the entity intending to enter into the transactions or to aggregate the shares, equity interest, trust interests or assets, is responsible for filing the notice.
The filing fees are $124,849.00 M.N. Pesos, regardless of the value of the underlying transaction. For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

4 SUBSTANTIVE ASSESSMENT OF THE MERGER AND OUTCOME OF THE PROCESS.

4.1. WHAT IS THE SUBSTANTIVE TEST AGAINST WHICH A MERGER WILL BE ASSESSED? ARE NON-COMPETITION ISSUES TAKEN INTO ACCOUNT?

The parties are subject to scrutiny in order to determine if, as a result of the concentration the parties are able to fix prices, restrict in a material way competitors access to the relevant market or engage in illicit monopolistic practices. Non-competition issues are taken into account on a case-by-case basis (i.e. the scope of the noncompetition provision, the term of the obligation not to compete and the size of the relevant market, among others).

4.2. WHAT IS THE SCOPE FOR THE INVOLVEMENT OF THIRD PARTIES (OR COMPLAINANTS) IN THE REGULATORY SCRUTINY PROCESS?

The Law allows for third party written complaints, in the event of absolute monopolistic practices (absolute monopolistic practices are contracts, agreements, arrangements, or combinations among competitive economic agents, whose aim or effect are any of the following: (i) to fix, raise, to agree upon or manipulate the purchase or sale price of the goods or services supplied or demanded in the markets, or to exchange information with the same aim or effect; (ii) to establish the obligation to produce, process, distribute or market only a restricted or limited amount of goods, or to render a specific volume, number, or frequency of restricted or limited services; (iii) to divide, distribute, assign or impose portions or segments of the current or potential market of goods and services, by means of a determinable group of customers, suppliers, time or spaces; or (iv) to establish, agree upon or coordinate bids or to abstain from bids, tenders, public auctions or bidding), for affected party complaints in the case of other monopolistic practices (subject to verification of articles 11, 12 and 13 of the Law, relative monopolistic practices are deemed to be those acts, contracts, agreements or combinations, which aim or effect is to improperly displace other agents from the market, substantially hinder their access thereto, or to establish exclusive advantages in favour of one or several entities or individuals) or transactions subject to merger control. Such claims need to be filed against the alleged responsible party, with a description of the facts deemed in violation of the Law and the concepts for which the claimant has suffered, or that will result in the presumption of, damages, if any.
Once that the claim is filed, and during the investigation process, the Commission will not allow access to the claim file, and, during the process, only those entities with legal standing will have access to such information, except for that identified as confidential.

4.3 WHAT INFORMATION GATHERING POWERS DOES THE REGULATOR ENJOY IN RELATION TO THE SCRUTINY OF A MERGER?

When exercising its powers, the Commission may request from the relevant parties information deemed material as well as summon those involved in the corresponding cases for purposes of merger scrutiny, request and verify information from third parties, including competitors and clients, among others. Additionally, the Commission with the assistance of the competent judicial authority may request to be authorised to perform on-site inspections.
Notwithstanding the foregoing, if a merger is approved, the Commission is not authorised to initiate an investigation procedure, but only in those cases when such resolution was obtained based on false information.

4.4. DURING THE REGULATORY PROCESS, WHAT PROVISION IS THERE FOR THE PROTECTION OF COMMERCIALLY SENSITIVE INFORMATION?

Any information filed before the Commission or obtained by it during an investigation process will be classified as reserved, confidential or public. Reserved information is that available only to those entities with legal standing in the investigation process; confidential information means information that if disclosed to any entity with legal standing in the investigation process, such disclosure will result in damages to the disclosing party. Confidential information will only be treated as such if the disclosing party requests so.

5. THE END OF THE PROCESS: REMEDIES, APPEALS AND ENFORCEMENT

5.1. HOW DOES THE REGULATORY PROCESS END?

The regulatory process concludes with a resolution by the Commission, and may end at different stages, depending on the process: 35 days (which may be extended) and, when merger control notice is given and parties demonstrate that the merger will not result in diminishing, damaging or obstructing free competition, the Commission will resolve within 15 days (which may be extended), following the admission date of the notice, respectively.
If the Commission has not resolved after the applicable term expires, the notice is deemed not to be subject to objection by the Commission. This final resolution is subject to appeal.

5.2. WHERE COMPETITION PROBLEMS ARE IDENTIFIED, IS IT POSSIBLE TO NEGOTIATE “REMEDIES” WHICH ARE ACCEPTABLE TO THE PARTIES?

Yes, provided that such remedies are agreed upon, then parties are notified to the Commission, prior to the issuance of the resolution. The Commission may notify either formally or informally the criteria that needs to be met: i.e. excessive terms for non-compete provisions, which parties may reduce to comply with the set criteria and allow for the favourable resolution to be issued.

5.3. AT WHAT STAGE IN THE PROCESS CAN THE NEGOTIATION OF REMEDIES BE COMMENCED? PLEASE DESCRIBE ANY RELEVANT PROCEDURAL STEPS AND DEADLINES.

During the assessment period and before the resolution is issued, the negotiation of remedies can be commenced. There is no particular procedure to negotiate remedies which shall be agreed on before the resolution is issued.

5.4. IF A DIVESTMENT REMEDY IS REQUIRED, DOES THE MERGER AUTHORITY HAVE A STANDARD APPROACH TO THE TERMS AND CONDITIONS TO BE APPLIED TO THE DIVESTMENT?

No. The divestment remedy is customarily resolved as a condition precedent to the clearing the merger notice.

5.5. CAN THE PARTIES COMPLETE THE MERGER BEFORE THE REMEDIES HAVE BEEN COMPLIED WITH?

The parties may execute the underlying transaction, assuming any liability resulting from non-compliance of the Law. In the case of transactions that require filing before the public registry, filing is conditioned upon favourable resolution of the Commission.

5.6. HOW ARE ANY NEGOTIATED REMEDIES ENFORCED?

Negotiated remedies need to be complied with in order for a favourable resolution to be issued.

5.7. WILL A CLEARANCE DECISION COVER ANCILLARY RESTRICTIONS?

No, ancillary restrictions are customarily resolved as conditions precedent to the clearance decision.

5.8. CAN A DECISION ON MERGER CLEARANCE BE APPEALED?

Yes, decisions can be appealed.

5.9. IS THERE A TIME LIMIT FOR ENFORCEMENT OF MERGER CONTROL LEGISLATION?

The authority of the Commission to initiate investigations that may result in the application of sanctions expire in a term of 5 years, following the date the underlying conduct was performed. In the case of merger control, the transactions not subject to notice cannot be investigated after a one year term, following the date of completion of the transaction.

6. MISCELLANEOUS

6.1. TO WHAT EXTENT DOES THE MERGER AUTHORITY IN MEXICO LIAISE WITH THOSE IN OTHER JURISDICTIONS?

Mexico is a party to international treaties and arrangements to cooperate in competition enforcement matters, among which are NAFTA, UEFTA, and treaties with the USA, Japan, Korea and the European Free Trade Association. Such treaties and arrangements include commitments related to international coordination and cooperation matters.

6.2. PLEASE IDENTIFY THE DATE AS AT WHICH YOUR ANSWERS ARE UP TO DATE.

New registry for security interests

BY RICARDO CADENA
MANAGING INTELLECTUAL PROPERTY, DECEMBER 2010 / JANUARY 2011
Enforcing security interests is not always as simple as we may want it to be, especially when it comes to chasing debtors who retain title or possession of secured IP, or any movable asset colateral, where the debtor can assign or set that asset as collateral in other credits. This situation has driven creditors to refuse to take movable assets as security interests unless they are left in consignment with a creditor or third-party depositary.

On October 7 2010 the Mexican Ministry of Economy launched the Asset Security Interest Registry (RUG), where any potential buyer or creditor may verify if a certain good is currently set as collateral. Additionally any creditors, Mexican or foreign, can now register a security interest at the RUG, giving the creditor a way to perfect the security interest and obtain priority over other creditors, however, its effectiveness is questionable, as registration at the RUG is not mandatory.

The Civil Law regulates intangible assets like IP as movable assets, so the question is: should you register security interests at the RUG? Any security interests on IP rights are recorded at the Mexican Institute of Intellectual Property (IMPI) to make them enforceable upon third parties. So registration at RUG may not be seen as necessary. However, it might be helpful to provide legal certainty to creditors when a specific security may not be registered at IMPI or if registered, is not public (such as patent applications, which are kept confidential), thus making it impossible for creditors to determine if a partner application has already been set up as collateral.

A practical cross-border insight into merger control

by Gustavo Alcocer & Carlos Woodworth

1      Relevant authorities and legislation

 

1.1  Who is/are the relevant merger authority(ies)?

 

The Federal Competition Commission, which is an administrative agency independent from the Mexican Ministry of Economy, has technical and operational autonomy to issue its resolutions. The Commission is integrated to exercise merger authority by public officials, divisions and administrative units, of which the main authority is the Commission in Plenary session, comprised by 5 commissioners, including the Commission President. Resolutions are issued by majority votes of its members.

1.2  What is the merger legislation?

 

Listed in order of hierarchy: (i) Article 28th of the Mexican Constitution which establishes the antitrust prohibition and the monopoly exception regime, given that in the case of intellectual property (patents, trademarks and copyrights) and certain state monopolies (oil, electricity, postal service, among others) exceptions regime; (ii) international treaties to which Mexico is a party, containing antitrust provisions, include, among others, NAFTA and EUFTA; and (iii) the Federal Economic Competition Law (the “Law”) and its regulations, Industrial Property Law, Copyright Law and Foreign Investment Law.

 

1.3  Is there any other relevant legislation for foreign mergers?

 

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

 

1.4  Is there any other relevant legislation for mergers in particulars sectors?

 

Not in terms of Economic Competition but certain requirements and limitations apply with respect to foreign investment.

 

 

2      Transactions caught by merger control legislation

2.1 Which types of transaction are caught – in particular, how is the concept of “control” defined?

 

The types of transactions caught under merger control provisions are subject to threshold tests related to the underlying value of each transaction. The Law defines concentration as any merger, control acquisition or any act resulting in the concentration of two different entities, including trust or assets in general among and between competitors, suppliers, customers or any economic agents. Notwithstanding the foregoing, the Commission is able to challenge and sanction, subject to express criteria, any concentration with the purpose of diminishing, damaging or not allowing competition, with respect to identical, similar or substantially similar goods and services. The Commission may issue a restrictive order not to execute the underlying transaction, until a favourable resolution is issued, during a term of 10 days following the filing of the concentration notice. Although Control is not a defined term, the Law regulation applies a control test as it relates to:

  1. the merger control notice, establishing that notice shall be filed prior to exercising direct or indirect control, in fact or by law; and
  2. allowing for the notice to be made by the party acquiring control of the corporation, in absence of the parties directly involved in the underlying transaction.

 

2.2 Can the acquisition of a minority shareholding amount to a “merger”?

 

The acquisition of a minority shareholding does not amount to a merger; however, if such acquisition is within the scenarios and thresholds specified under question 2.5 it would be subject to notice.

 

2.3 Are joint ventures subject to merger control?

 

Yes, please refer to questions 2.1 and 2.4.

 

 

2.4 What are the jurisdictional thresholds for application of merger control?

 

Based on the foregoing, the following transactions are subject to prior notice:

 

  1. When the transaction, irrespective of the place of execution, results in the direct or indirect amount in Mexico being the equivalent to more than 18M times the minimum general daily wage applicable in Mexico City (MGDW), $1,034,280,000.00 M.N., Pesos.

 

  1. When the actions originating the transaction imply an aggregate of 35% or more of the assets or shares of a party, whose annual assets in Mexico or annual sales originated in Mexico, are equal to more than 18M times the MGDW, $1,034,280,000.00 M.N., Pesos.

 

  1. When the actions originating the transaction imply an aggregation in Mexico of assets or capital stock amount to more than the equivalent of 8.4M times the MGDW $482,664,000.00 Pesos and two or more entities participate, which assets or annual sales volume on an individual or aggregate basis are equal to more than 48M times MGDW, $2,758,080,000.00 Pesos.

 

For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

 

2.5 Does merger control apply in the absence of a substantive overlap?

 

Merger control applies in the scenarios and thresholds described above, regardless of whether monopolistic conduct is incurred, which in turn may result in a discretionary antitrust investigation originated under the Commission authority or based on a third party claim.

 

2.6 In what circumstances is it likely that transactions between parties outside Mexico (“foreign to foreign” transactions) would be caught by your merger control legislation?

 

Foreign transactions may be caught by merger control provisions in Mexico, when and if, the value of such transactions exist in the Mexican territory, either as a result of capital stock, assets or sales,

respectively.

 

2.7 Please describe any mechanisms whereby the operation of the jurisdictional thresholds may be overridden by other provisions.

 

There are none.

 

2.8 Where a merger takes place in stages, what principles are applied in order to identify whether the various stages constitute a single transaction or a series of transactions?

 

The principles that apply are the relevant market, the parties involved, the term between the stages and type of transaction.

 

 

 

3      Notification and its impact on the transaction timetable

 

3.1  Where the jurisdictional thresholds are met, is notification compulsory and is there a deadline for notification?

 

Yes, notification is compulsory when thresholds are met, and must be made prior to the implementation of the underlying transaction (for a more detailed deadline schedule, see our response to question 3.5).

 

3.2 Please describe any exceptions where, even though the jurisdictional thresholds are met, clearance is not required.

 

There are no exceptions to notification when thresholds are met.

 

3.3  Where a merger technically requires notification and clearance, what are the risks of not filing?

 

The Commission is entitled to: (i) order the cancellation of the underlying merger; (ii) order the partial or total divestment of assets acquired; and (iii) impose penalties of up to the equivalent of

400,000 times the MGDW ($22,984,000.00 Mexican Pesos).

 

3.4 is it possible to carve out local completion of a merger to avoid delaying global competition?

 

Yes, it is possible to carve out local competition through the establishment of conditions precedent applicable to the perfection of the merger in Mexico, such as the issuance of a favourable resolution issue by the Commission.

 

3.5 At what stage in the transaction timetable can the notification be filed?

 

Notification must be filed at any time before any of the following events occur:

 

  1. the underlying act is perfected in accordance with the applicable legislation or, should it be the case, the condition precedent to which such act is subject, is fulfilled;
  2. control is acquired de facto or de jure, or exercised directly or indirectly over another entity; or before assets, participation in trusts, partners’capital contributions or shares of another party are acquired de facto or de jure;

iii. a merger agreement is signed between the parties to it; or

  1. in the case of a succession of acts, before executing the last one that would result in exceeding the applicable threshold amounts.

 

With respect to mergers resulting from acts executed abroad, these must be notified before they have legal or material effects within Mexican territory.

 

3.6 What is the timeframe for scrutiny of the merger by the merger authority? What are the main stages in the regulatory process? Can the timeframe be suspended by the authority?

 

Within the following 15 days from filing date, the Commission is entitled to request additional information or documentation, which must be delivered by the interested parties within the following 15 days after the request, is served. After the documentation delivery process is completed, the Commission has a 35-day term to issue its resolution; however, the President of the Commission is entitled to extend each Commission term for up to an additional 40 days, only in extraordinary complex transactions.

 

3.7 Is there any prohibition on completing the transaction before clearance is received or any compulsory waiting period has ended? What are the risks in completing before clearance is receieved?

 

If within the following ten days from filing date, the Commission does not order the parties to refrain from executing the underlying merger until a favourable resolution is issued, then the parties, at their own risk, can execute the merger. Provided, however, that, if such order is not issued within such term, it shall not be interpreted as an implied authorisation for the execution of the underlying merger, unless the term granted to the Commission for issuance of its resolution expires, in which case it shall be interpreted as if the Commission has no objection against the merger. As for the risks in executing the merger before clearance is received, the interested parties are subject to those sanctions specified in response to question 3.3.

 

3.8 Where notification is required, is there a prescribed format?

 

The notice shall be made in writing through a free form writ, to which a copy of the underlying agreements shall be enclosed. Such writ must include the names or corporate names of the corresponding parties, the financial statements of the last fiscal year, their market share and any additional information through which the merger is documented.

 

3.9 Is there a short form or accelerated procedure for any type of mergers?

 

The Law does not provide for an accelerated procedure per se; however, if, at the time of filing the notice, the parties provide as much information as available such as analysis, reports, evidence, etc. to support the fact that such merger will notably not result in diminishing, damage or preventing competition, then the Commission is granted a term of 15 days to issue its resolution. If such term is not extended by the President of the Commission and expires, it shall be interpreted as if the Commission has no objection against the merger. Notwithstanding the foregoing, if the Commission determines that the merger does not notably diminish, damage or prevent competition, then the notification process shall be subject to the terms set forth under question 3.6.

 

3.10 Who is responsible for making the notification and are there any filing fees?

 

The parties participating in the underlying merger are responsible for filing the notification, and appointing a sole representative. In addition when the parties cannot, for any reason, provide the notice, the merging entity, the party acquiring control of the corporation, the entity intending to enter into the transactions or to aggregate the shares, equity interest, trust interests or assets, is responsible for filing the notice. The filing fees are $124,849.00 M.N. Pesos, regardless of the value of the underlying transaction. For reference purposes, the foreign exchange rate as of October 21, 2010 is 12.41 Pesos per Dollar as quoted by Mexico’s Central Bank on the Official Gazette of the Federation (Diario Oficial de la Federación).

 

 

 

4 Substantive assessment of the merger and outcome of the process

 

4.1 What is the substantive test against which a merger will be assessed? Are non-competition issues taken into account?

 

The parties are subject to scrutiny in order to determine if, as a result of the concentration the parties are able to fix prices, restrict in a material way competitors access to the relevant market or engage in illicit monopolistic practices. Non-competition issues are taken into account on a case-by-case basis (i.e. the scope of the noncompetition provision, the term of the obligation not to compete and the size of the relevant market, among others).

 

4.2 What is the scope for the involvement of third parties (or complainants) in the regulatory scrutiny process?

 

The Law allows for third party written complaints, in the event of absolute monopolistic practices (absolute monopolistic practices are contracts, agreements, arrangements, or combinations among

competitive economic agents, whose aim or effect are any of the following: (i) to fix, raise, to agree upon or manipulate the purchase or sale price of the goods or services supplied or demanded in the markets, or to exchange information with the same aim or effect; (ii) to establish the obligation to produce, process, distribute or market only a restricted or limited amount of goods, or to render a specific volume, number, or frequency of restricted or limited services; (iii) to divide, distribute, assign or impose portions or segments of the current or potential market of goods and services, by means of a determinable group of customers, suppliers, time or spaces; or (iv) to establish, agree upon or coordinate bids or to abstain from bids, tenders, public auctions or bidding), for affected party complaints in the case of other monopolistic practices (subject to verification of articles 11, 12 and 13 of the Law, relative monopolistic practices are deemed to be those acts, contracts, agreements or combinations, which aim or effect is to improperly displace other agents from the market, substantially hinder their access thereto, or to establish exclusive advantages in favour of

one or several entities or individuals) or transactions subject to merger control. Such claims need to be filed against the alleged responsible party, with a description of the facts deemed in violation of the Law and the concepts for which the claimant has suffered, or that will result in the presumption of, damages, if any. Once that the claim is filed, and during the investigation process, the Commission will not allow access to the claim file, and, during the process, only those entities with legal standing will have access to such information, except for that identified as confidential.

 

4.3 What information gathering powers does the regulator enjoy in relation to the scrutiny of a merger?

 

When exercising its powers, the Commission may request from the relevant parties information deemed material as well as summon those involved in the corresponding cases for purposes of merger scrutiny, request and verify information from third parties, including competitors and clients, among others. Additionally, the Commission with the assistance of the competent judicial authority may request to be authorised to perform on-site inspections. Notwithstanding the foregoing, if a merger is approved, the Commission is not authorised to initiate an investigation procedure, but only in those cases when such resolution was obtained based on false information.

 

4.4 During the regulatory process, what provision is there for the protection of commercially sensitive information?

 

Any information filed before the Commission or obtained by it during an investigation process will be classified as reserved, confidential or public. Reserved information is that available only to those entities with legal standing in the investigation process; confidential information means information that if disclosed to any entity with legal standing in the investigation process, such disclosure will result in damages to the disclosing party. Confidential information will only be treated as such if the disclosing party requests so.

 

 

 

5 The end of the process: remedies, appeals & enforcement

 

5.1 How does the regulatory process end?

 

The regulatory process concludes with a resolution by the Commission, and may end at different stages, depending on the process: 35 days (which may be extended) and, when merger control notice is given and parties demonstrate that the merger will not result in diminishing, damaging or obstructing free competition, the Commission will resolve within 15 days (which may be extended), following the admission date of the notice, respectively. If the Commission has not resolved after the applicable term expires, the notice is deemed not to be subject to objection by the Commission. This final resolution is subject to appeal.

 

5.2 Where competition problems are identified,             is it possible to negotiate “remedies” which are acceptable to the parties?

 

Yes, provided that such remedies are agreed upon, then parties are notified to the Commission, prior to the issuance of the resolution. The Commission may notify either formally or informally the criteria that needs to be met: i.e. excessive terms for non-compete provisions, which parties may reduce to comply with the set criteria and allow for the favourable resolution to be issued.

 

5.3 At what stage in the process can the negotiation of remedies be commenced? Please describe any relevant procedural steps and deadlines.

 

During the assessment period and before the resolution is issued, the negotiation of remedies can be commenced. There is no particular procedure to negotiate remedies which shall be agreed on before the resolution is issued.

 

5.4 If a divestment remedy is required, does the merger authority have a standard approach to the terms and conditions to be applied to the divestment?

 

No. The divestment remedy is customarily resolved as a condition precedent to the clearing the merger notice.

 

5.5 Can the parties complete the merger before the remedies have been complied with?

 

The parties may execute the underlying transaction, assuming any liability resulting from non-compliance of the Law. In the case of transactions that require filing before the public registry, filing is conditioned upon favourable resolution of the Commission.

 

5.6 How are negotiated remedies enforced?

 

Negotiated remedies need to be complied with in order for a favourable resolution to be issued.

 

5.7 Will a clearance decision cover ancillary restrictions?

 

No, ancillary restrictions are customarily resolved as conditions precedent to the clearance decision.

 

5.8 Can a decision on a merger clearance be appealed?

 

Yes, decisions can be appealed.

 

5.9 Is there a time limit for enforcement of merger control legislation?

 

The authority of the Commission to initiate investigations that may result in the application of sanctions expire in a term of 5 years, following the date the underlying conduct was performed. In the case of merger control, the transactions not subject to notice cannot be investigated after a one year term, following the date of completion of the transaction.

 

 

 

6 Miscellaneous

 

6.1 To what extent does the merger authority in Mexico liaise with those in other jurisdictions?

 

Mexico is a party to international treaties and arrangements to cooperate in competition enforcement matters, among which are NAFTA, UEFTA, and treaties with the USA, Japan, Korea and the European Free Trade Association. Such treaties and arrangements include commitments related to international coordination and cooperation matters.

 

6.2 Please identify the date as at which your answers are up to date.