Mexico: Competition Litigation

The Mexican Constitution expressly prohibits a series of conducts considered anticompetitive, which are expressly provided for in the Federal Economic Competition Law (“LFCE”) and classified into three main categories:

1. Absolute monopolistic practices: Also called collusions or economic cartels, these are agreements between competitors to fix prices, limit the production or distribution of goods or services, divide markets, or coordinate tenders in bidding processes.
2. Relative monopolistic practices: These are conducts carried out by economic agents that dominate a given market and use their position of power to prevent the access of other competitors to said market or to displace those who are already competing in it.
3. Unlawful concentrations: Referring to mergers or acquisitions of companies that have the objective or effect of hindering, diminishing, damaging, or preventing free competition.

Persons who consider themselves affected by any of these conducts can file a competition damages claim.

The LFCE stablishes that a competition damages claim can only be exercised until the Federal Economic Competition Commission (“COFECE”) or the Federal Institute of Telecommunications (“IFT”) –authorities responsible for preventing, investigating, and sanctioning anticompetitive conducts in Mexico– have issued a definitive resolution that establishes the occurrence of the monopolistic practice or unlawful concentration in question.

Such a resolution must be res judicata in order to enable claimants to sue.

Although the LFCE does not expressly provide for the type of remedies that may be awarded in a competition damages claim, the Federal Civil Code does provide that, in the case of unlawful conduct (such as anticompetitive conducts), the remedy will consist, at the choice of the injured party, in the reestablishment of the previous situation or the economic payment of damages (compensatory damages).

The law does not establish how damages will be quantified in this type of claims. Nor does it indicate whether the judge is obliged to consider the quantification of damages made by the COFECE or the IFT in its resolutions, which must consider several circumstances such as the seriousness of the infringement, the damage caused, evidence of intent, the infringer’s participation in the markets, the size of the affected market, and the duration of the anticompetitive conduct.

However, we believe that given the regulatory nature of these authorities, the judge should consider this estimation and individualize it according to the plaintiff.

Regarding liability, the Federal Civil Code provides that individuals who have jointly caused damage are jointly and severally liable to the victim.

Finally, while the LFCE establishes the possibility for an economic agent under investigation for anticompetitive conduct to benefit from a waiver or reduction in the payment of fines (leniency, for absolute monopolistic practices, and commitments adoption for relative monopolistic practices), it expressly states for commitments adoption that such a possibility will be without prejudice to any actions that may be taken by affected third parties claiming damages and losses arising from civil liability for the commission of the relative monopolistic practice or illicit concentration.

Although there is no similar specific rule for leniency applicants, it should also be noted that leniency beneficiaries are not disclosed by competition authorities and, thus, in principle, no legal or factual reason preventing claimants to sue leniency beneficiaries.

The Statute of Limitation for a competition damages claim under the LFCE is not predetermined but, actually, uncertain as per the applicable law.

For instance, as stated, a competition damages claim may only be filed until the COFECE or the IFT has issued its resolution determining the existence of an anticompetitive conduct (and that such resolution has become res judicata).

On the other, according to the Federal Civil Code, the Statute of Limitation to claim damages is two years from the date these were caused.

The logic interpretation would be that such two-year term should start when the respective resolution becomes res judicata. However, in an apparent contradictory manner, the LFCE provides that the statute of limitations of the competition damages claim is interrupted with the initiation of the investigation, which must necessarily occur before the final resolution is issued. Why would the Statute of Limitations be interrupted if it the period hasn’t begun?

To further complicate matters, the investigatory powers of the COFECE and the IFT expire in ten years, starting from the date the unlawful concentration occurred or from the date the corresponding monopolistic practice ceased.

As if this were not enough, absolute monopolistic practices are considered a crime under the Federal Criminal Code. According to the Federal Civil Code, the statute of limitations for claims for damages resulting from the commission of a crime expires after ten years (if such a crime was declared by a court).

The LFCE provides that competition damages claims must be filed before federal district judges specialized in competition, broadcasting and telecommunications.

Per the Mexican Constitution, Competition is a Federal exclusive matter and, accordingly, competition is solely regulated in the LFCE. Thus, per the LFCE, the specialized district judges have exclusive jurisdiction on such claims.

Again, given that, in México, competition is a Federal exclusive matter, LFCE is the only substantive applicable law in competition cases. Similarly, regarding competition damages claim, given that federal courts have exclusive jurisdiction, the substantive federal law will be immediately applicable: Federal Civil Code, Commercial Code and Federal Civil Proceedings Code (CFPC). Pursuant to the CFPC, state procedural law might be applied when federal law is insufficient, i.e. only in a subsidiary manner.

As to the standard of proof, under the LFCE, as the resolution of the competition authority serves as full legal evidence of the unlawfulness of the anticompetitive conduct in competition damages claims, claimants do not need to meet any other standard of proof regarding those conducts but only regarding the damages that arise therefrom.

Moreover, it should also be noted that for relative monopolistic practices, one of the legal elements of its description is that, in essence, the conduct has the effect or intention to harm competitors, so in many cases damages might even be implied in the competition authority resolution. While such a resolution, pursuant to the LFCE, will serve as full evidence of the unlawfulness of the conduct, the LFCE does not state the same for damages, and thus courts may not arrive to the same conclusion.
Claimants must demonstrate that there is a direct causation relationship between the anticompetitive conduct and the alleged damages, which implies that they must provide evidence that: (i) the alleged damages exist; and (ii) that those damages were the direct consequence of the anticompetitive conduct. There is no law established standard of proof of those 2 specific items, and claimants are entitled to present any evidence that might convince the court of their existence.

As stated before, while, pursuant to the LFCE, the competition authority’s resolution will serve as full evidence of the unlawfulness of the conduct, the LFCE does not state the same for damages, and thus courts may not arrive to the same conclusion. Accordingly, courts have full jurisdiction to decide on the existence of the damages and, more importantly, on whether such alleged damages are a consequence of the anticompetitive conduct.

As it was emphasized, a competition damages claim can only be pursued once the resolution of the COFECE or the IFT has become res judicata. Consequently, a private action cannot be initiated until the public action has been exercised and, most importantly, definitively concluded.

Economic agents that are sanctioned by such authorities may challenge such resolution through an amparo proceeding. If this happens, whoever wishes to file a competition damages claim must wait until the amparo is resolved in order to exercise it.

During the investigation stage, if the COFECE or the IFT find evidence suggesting that consumers may be affected, they are required to inform and ask the opinion of the Attorney General.

Both COFECE and the Attorney General’s Office have the necessary legal standing to bring class actions for the defense and protection of the rights and interests of consumers.

Class actions are provided for in the Federal Code of Civil Procedures and entail specific procedural requirements, including: (i) demonstrating harm to consumers resulting from undue concentrations or monopolistic practices, (ii) addressing common factual or legal issues among the affected group members, (iii) that there’s at least thirty members of the collectivity, (iv) establishing a connection between the object of the action and the harm suffered, and (v) adhering to the statute of limitations, which is three years and six months.

The judge must certify compliance with these requirements and admit or dismiss the claim.

Lastly, in the judgment issued in a class action, the defendant may be ordered to repair the damage, through the performance of one or more actions or to refrain from performing them, as well as to cover the damages individually to the members of the group.

The LFCE does not establish or recognize any defense specifically applicable to competition damages cases. Case Law has neither defined any unique defense.

Generally, the party that makes an allegation bears the burden of proof of demonstrating it (that applies for both claimant and respondent). Case Law has defined some exceptions, namely the principle of evidentiary facilitation, that in México entails that the party who has easier access to evidence or a stronger position to prove or disprove a fact should bear the burden of proof.

As was said before, while the resolution of the authority is sufficient to prove the existence of anticompetitive conduct, evidentiary-wise, the subject matter of competition damages claim is to demonstrate the existence of damages and them being direct consequence of the anticompetitive conduct. Considering that, in principle, the burden of proof corresponds to claimant, as it seems illogic to ask defendant to demonstrate the inexistence of damages or its link with the conduct.

Yes. As the CFPC is applicable, each party has the right to appoint an expert, a person specialized in a particular subject, profession, or field, to provide his opinion. It is also possible for the parties to agree and appoint a single expert.

In relation to the procedure, the party wishing to present expert evidence must make the request within a ten-day period from the start of the legal term, through a written document in which he must: (i) formulate the questions or specify the points on which the expert opinion will be based; (ii) designate his expert; and (iii) propose a third expert in case of disagreement.

Upon receiving this document, the judge must provide the other parties with a five-day period to add relevant questions to the questionnaire and appoint their own expert if they deem it necessary.

The experts appointed by the parties must appear before the judge to accept and protest to perform their duties.

Once this is done, each expert must render their report. If their opinions differ on any essential point, the judge must request a report from the third expert.

The weight given to these expert opinions is at the discretion of the judge, who exercises the broadest and most cautious judicial discretion.

Although the decision-maker is the specialized federal district judge, the parties are the ones who must initiate and impulse the proceeding. By virtue of the dispositive principle that governs civil trials, the judge cannot take the initiative to gather the evidence he deems necessary, since it is the parties who bear this burden, as it is in their own interest to do so.

Since Mexico follows the civil-law tradition, its procedures are eminently written and do not incorporate elements such as discovery or jury trial systems.

In a claim for damages, an individual plaintiff will submit their claim and evidence before the specialized federal district judge, outlining the factual basis for their action. Conversely, the defendant must present their exceptions and defenses against the claim.

The procedure generally consists of the following phases:

1. The plaintiff presents the claim and supporting evidence.
2. The claim is admitted, and the defendant is summoned.
3. The defendant responds to the claim, stating their exceptions and defenses, which can be procedural or substantive.
4. The court addresses any procedural defenses raised by the defendant.
5. The probatory phase begins, where each party presents their evidence.
6. A final hearing takes place, during which written arguments are made.
7. A judgment is rendered.
8. Execution of the judgment follows.

After a judgment is issued, either party may file an appeal to seek confirmation, revocation, or modification of the judgment by a higher court. Once the appeal period has expired without an appeal being filed or the appeal has confirmed the judgment, the judgment becomes final, and its execution can proceed.

The amount of damages awarded to the plaintiff is determined in a liquid manner during the execution of the judgment.

In relation to the cross-examination rules, the parties may freely, orally, and directly question their witnesses and their opposing party’s witnesses.

Unlike other legal systems, in Mexico the trial begins as soon as the lawsuit is admitted by the judge (with the exception, as we have seen, of class actions, which must be certified before the trial begins).

The duration of civil lawsuits cannot be predetermined or estimated as it varies depending on factors such as the judges’ workload, the complexity of the case, the procedural progress of the parties, the types of evidence presented, the number of appeals filed during the trial, among others.

As mentioned above, there is the possibility for the parties to appeal the sentence issued by the judge, through which a higher court may confirm, modify, or revoke such determination.
Subsequently, an amparo proceeding can be filed against the judgment from the second instance, which has the potential to suspend its execution.

The purpose of this trial is to protect human rights and it has become a sort of third instance since it also proceeds against judgments in which the law has been applied improperly or inaccurately.

No. As stated before, the benefits that may be granted to infringing economic agents (such as the waiver or reduction of the fines that should be imposed on them) are separate and distinct from the actions for damages that may be brought by third parties affected by the monopolistic practice or unlawful concentration.

This means that these economic agents might still be subject to competition damages claims and held liable for their actions.

The judge must take into account the anti-competitive effects that the monopolistic practice or the unlawful concentration have produced, making use of what has been assessed and considered by the competition authorities in their resolutions, since these are economic aspects whose analysis fall within the expertise of those authorities.

The LFCE does not recognize or contemplate the case in which economic agents benefit from the “umbrella effects” resulting from a collusion or economic cartel.

Finally, since this is a civil trial, the judge may adopt the resolution methodology of his choice, which will depend on the particularities of each case and, above all, on the parameters used by the experts in their opinions.

There are no specific guidelines on how interest should be calculated. Even so, this information might be included in the estimation of damages provided by the COFECE or the IFT, as well as in the opinions of the experts involved in the case.

Yes. According to the Federal Civil Code, the plaintiff has the right to demand full or partial payment of damages from all joint debtors or from any individual debtor. If a joint and several debtor pays the damages in full, he has the right to seek reimbursement from the other co-debtors for their respective share.

The Federal Code of Civil Procedures allows for the dismissal of a claim in situations where the plaintiff fails to address any deficiencies or meet the requirements outlined by the judge within the given timeframe. Additionally, claims may be dismissed if they are found to be unfounded, frivolous, or reckless.

In addition, the parties may enter into a contract for the purpose of terminating the action or claim, provided that mutual concessions are made. In such contract, the defendant usually agrees to pay a certain amount (or to do or refrain from doing something) in exchange for the plaintiff withdrawing his claim.

In the case of class actions, once the complaint is certified, a preliminary hearing and conciliation process must take place, where the judge will personally propose solutions to the dispute and encourage the parties to resolve it. In doing so, the judge may seek assistance from experts deemed appropriate.

As a result, a class action can be settled through judicial agreement between the parties at any stage of the proceedings prior to the final judgment.

If the parties reach a total or partial agreement, the judge will review it to ensure its legality and the adequate protection of the collective interests involved.

Following this, the judge will hold a hearing involving various authorities, and after considering the opinions of all parties, the judge may approve the agreement, thereby making it legally binding (res judicata).

Confidential or proprietary information is safeguarded by the Constitution, various laws, including the LFCE and its Regulatory Provisions. As a result, information disclosed during court proceedings is accessible only to the parties involved and is not made public.

During the proceedings, the parties have the option to request that specific information provided be treated as confidential, providing valid justifications for their request. Furthermore, judges are obligated to uphold the rights of confidentiality and protection of personal data as established in the Federal Law of Transparency and Access to Public Information.

Generally, any document might be presented as evidence unless it is confidential or was acquired in violation of human rights (such as privacy). Exceptions to confidentiality may occur in specific cases, such as when the causes for classification no longer exist, when the classification term expires, when a competent authority determines that public interest prevails over information confidentiality, when the Transparency Committee deems declassification appropriate, or when the information pertains to serious human rights violations or crimes against humanity.

Regarding exceptions, the LFCE explicitly states that the identity of the Economic Agent and individuals seeking immunity under the program will be kept confidential.

Yes. According to the Federal Code of Civil Procedure, the party that loses the case is responsible for reimbursing the other party for the costs incurred during the proceeding. A party is deemed to have lost when the court accepts, either fully or partially, the claims made by the opposing party.

The costs of the proceeding are determined by the court, taking into account the applicable tariff provisions, and represent the amount that the successful party should have paid or actually paid, excluding any unnecessary expenses or superfluous acts and forms of defense. The party that incurred unnecessary expenses will be responsible for bearing them.

In cases where multiple parties are considered to have lost, the court will distribute the costs proportionally among them, and the amount will be allocated proportionally among the successful parties as well.

In the specific context of class actions, the Federal Code of Civil Procedures stipulates that each party is responsible for their own expenses and costs related to the class action, including the fees of their representatives, which are subject to a maximum limit.

The concept of a third-party funder, commonly found in other countries or in arbitration proceedings, is not explicitly recognized in the context of competition damages claims. However, parties are free to seek financing from external sources to support their legal action. It’s important to note that such financing arrangement would be independent of the litigation itself and, thus, third party funders are not, per the law, liable for the other party’s costs.

The only way for a third party to participate in the litigation would be through an assignment of litigation rights. Under the Federal Civil Code, it is possible for a creditor to enter into an agreement to assign their litigation rights, including the transfer of the rights associated with the disputed relationship and, consequently, the procedural position of the assignor.

In terms of legal fees for lawyers representing plaintiffs and defendants, there is no specific regulation governing this matter. The fees will be determined based on the agreement between the lawyer and client, allowing for various fee structures such as hourly rates, milestone-based payments, contingency fees, or other mutually agreed arrangements.

Ironically, the main obstacle to litigating competition damages claims lies within the LFCE itself. Upon reviewing the LFCE, one will notice that it only dedicates a single article to regulate these types of actions.

Some contradictions have already been noted between the provisions of the LFCE and the Federal Civil Code and the Federal Code of Civil Procedures, leaving both potential claimants and potential defendants in a vulnerable position.

Another challenge arises from the judges who preside over these lawsuits, as they lack familiarity with civil lawsuits or actions due to their extensive exposure to amparo lawsuits, if not exclusively.

Civil trials operate on different logics, dynamics, and objectives compared to amparo trials, featuring distinct rules, principles, stages, and standards.

This has been reflected in the small number of competition damages claims filed, of which even fewer have been resolved. Only a few lawsuits have been followed and no sufficiently relevant or solid precedents have been set that could serve as a basis for the future.

Finally, it cannot be overlooked that requiring that the resolution issued by competition authority be final in order for these actions to be exercised disregards the autonomy and independence of both.

This requirement unreasonably prolongs the process of seeking repair for damages and hampers timely access to justice for those affected by anticompetitive practices. The delay in obtaining resolution and subsequent reparations can further exacerbate the harm caused by anticompetitive acts.

With the global economy leveraging technology further, new cases, problems, damages and conducts will appear. As an example, in early July 2023, COFECE announced an investigation into potential illegal practices in the “digital goods and/or services market.” The broad and undefined definition of the market raises concerns. It remains unclear and there are no indications as to which specific economic agents will be investigated. Will it include Amazon, Facebook, Instagram, Apple, OpenAI, Twitter, Microsoft, Google, or others?

A simple comparison highlights the impracticality of such an approach. Should a similar investigation be conducted in the market for the development, marketing, and sale of “physical” goods and/or services? Would such an investigation encompass all industries? These questions underscore the need for clarity and consistency in defining the scope of investigations.

Moreover, with the explosion of AI, new services and products will emerge and more sophisticated monopolies will begin to appear. The very definition of relevant market power (contained in the LFCE) will likely be adjusted, as now digital players are showing that while they might not hold the power to fix prices or directly restrict supply in a market, leveraging on Network Effects, Data and Algorithmic Collusion they hold market shares so strongly defined no competition could overtake them, which, more importantly, results in a greater difficulty to demonstrate the damage those conducts effect.

In that sense, the explosion of AI legal services will definitively present interesting new debates and challenges for competition litigation, as smaller firms now have access to more sophisticated and powerful tools that can help design new arguments and better understand new market scenarios.