April 2, 2020

COVID-19: COFECE Sends Warning About Recommendation That Could Cause Anti-Competitive Issues

Holland & Knight Alert
Luis Rubio Barnetche | Guillermo Uribe Lara

The Investigating Authority of the Federal Economic Competition Commission (COFECE) sent a warning to the National Association of Real Estate Developers (ADI Mexico) in response to the recommendation that this association made among its members, in the context of the situation generated by COVID-19, with respect to the granting of discounts and benefits to tenants who are up to date with their payments. It should be noted that the recommendation made by ADI Mexico is not itself contrary to the Federal Law on Economic Competition (Competition Law), but it could become an absolute monopolistic practice if the recommendations are established in agreements whose purpose or effect is to determine a fee or to determine the maximum discounts to be granted to tenants and/or lessees.

Under the Competition Law, agreements between competitors whose purpose or effect is to fix prices, restrict supply, segment markets, manipulate bids or exchange information with any of the above effects are considered absolute monopolistic practices. Collusion is considered per se an offense, so it is unnecessary to prove damages because the coordination practice is itself considered a harmful anti-competitive practice. Additionally, economic agents can be fined up to 10 percent of their annual income and the individuals involved can be disqualified from holding certain management positions and be criminally sanctioned with five to 10 years of imprisonment and fined with the equivalent of $3,780 to $37,780 for the commission of this type of practice.

On March 27, 2020, COFECE issued its position on possible behavior that could take place between economic agents to address the crisis generated by COVID-19. Among these recommendations, COFECE stressed that price increases or determinations should be individually and independently decided by each company and should not be induced, encouraged or recommended by associations, confederations or chambers to their participants in order to prevent the commission of absolute monopolistic practices by these types of organizations.

Understanding that the interaction between economic agents (including competitors) is fundamental for the development of the economy, COFECE previously issued the "Guide for the Exchange of Information between Economic Agents," which contains certain recommendations to be followed in order to mitigate risks of carrying out anti-competitive practices.

With regard to the commission of absolute monopolistic practices, COFECE has an "Immunity Program" for any person or company that has participated or is participating in collusive agreements with its competitors. These persons and companies must provide information and elements with regard to such agreements, and maintain full and continuous cooperation throughout the procedure so such persons or companies may qualify for a reduction of fines and obtain release of the corresponding criminal responsibility. The first applicant to join the program, as long as it is in compliance with the requirements described above, will be imposed a minimum fine, and the following economic agents who apply for this benefit may have fines reduced up to 50, 30 or 20 percent. Finally, it is important to emphasize that the identity of the reporting economic agent will be kept confidential in all cases.

The attorneys at Holland & Knight have extensive experience in real estate and antitrust matters, particularly in implementing compliance measures and programs to mitigate antitrust risks. For more information, please contact the authors of this article or the Mexico City office of Holland & Knight.

Holland & Knight has established a COVID-19 Response Team to help clients respond to a variety of business and legal issues they may be facing in this crisis. Please visit Holland & Knight's Response Page for the latest COVID-19 news and updates important to your business.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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