April 14, 2020

COVID-19: Collaboration Agreements Among Businesses and in Trade Associations in Mexico

Holland & Knight Alert
Luis Rubio Barnetche

The Mexican Federal Commission on Economic Competition [Comisión Federal de Competencia Económica (COFECE)] understands that, in the context of the health emergency generated by COVID-19, companies will enter into certain collaboration agreements that could create competition risks. However, the COFECE itself considers that such agreements are necessary to maintain or increase supply, meet demand, protect supply chains and avoid shortages or hoarding of goods. Therefore, it made certain clarifications to the statement further explaining its position, which was published on March 27, 2020.

Among the agreements that can take place between economic agents, competitors or not, the following have been identified:

  • asset sharing to generate network economies and/or whose consequence is the cost reduction of necessary inputs related to the production, distribution and/or marketing of a product
  • production consolidation activities and/or licensing of patents or intellectual property rights to directly or indirectly, through third parties, produce certain goods, which can subsequently be used as an input
  • share distribution and/or marketing channels

In order to execute these agreements, it must be assessed whether or not the agreement would be considered a merger. For this purpose, several elements must be considered, such as (a) duration; (b) independence of the parties; (c) scope; and (d) whether or not competitive pressure levels between economic agents are maintained.

Based on the above, i) if the collaboration agreement is limited to the duration of the health emergency; ii) does not create a new agent or affect decision-making autonomy; iii) is limited to acts deemed necessary in the context of the health emergency and iv) maintains competitive pressure between the companies, such agreement shall not be considered a merger.

If the agreement is deemed a merger, it must be analyzed if such merger exceeds the thresholds established in the Federal Law of Economic Competition (Ley Federal de Competencia Económica) and, therefore, the investigating authority shall be notified.

In cases where the agreement is not deemed a merger, COFECE invites economic agents to inform the investigating authority of the existence of such agreements or other potentially similar or related agreements, their temporality and the reason why they are being made (i.e., relationship with COVID-19) so that this authority confirms that such agreement will not be investigated. The notification can be made via e-mail.

It is important to note that this is not a waiver to enter into collaboration agreements that have the purpose or effect of manipulating or fixing prices, reducing supply or segmenting markets. Even within the framework of these collaboration agreements related to the health emergency, economic agents must take care of the type of information that is shared and, if necessary, set forth protocols and enter into information exchange agreements that are relevant to mitigate risks in this area.

On the other hand, it is important to emphasize the need to have in place antitrust protocols for associations and chambers.

As of today, COFECE’s investigating authority has issued two warnings on the potential commission of absolute monopolistic practices, one to the Asociación Nacional de Desarrolladores Inmobiliarios (ADI) that promoted among its affiliates the granting of discounts to tenants and another to the Cámara Nacional de la Industria Azucarera y Alcoholera for an increase in the price of pure alcohol, its derivatives and some inputs for its elaboration, including molasses.

These type of warnings are not regulated by the Federal Law of Economic Competition, and consequently this alert only serves a courtesy notice from COFECE to prevent these types of trade associations from incurring absolute monopolistic practices, which are a per se practice, regardless of whether the agreements may have any favorable effect on the consumer.

COFECE has expressly stated its position that any decision on prices should be individually established by the companies and should not be induced, let alone agreed within a chamber or association.

Holland & Knight attorneys have extensive experience in matters related to the antitrust law, particularly in implementing protocols for the exchange of information between competitors, as well as competition protocols for chambers and associations. For more information, contact the authors or Holland & Knight's Mexico City office.

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 authors 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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