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Mexico's Senate Ups Fines for Antitrust Breaches
email this pageprint this pageemail usMiguel Angel Gutierrez & Michael O'Boyle - Reuters
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December 08, 2010



Mexico City - Mexico's Senate approved a bill on Tuesday to dramatically increase fines against companies breaking anti-monopoly laws, which could help the wider economy by improving competition.

Lawmakers voted 55-53 to pass the bill, which now goes to the lower house, where its future is uncertain. The legislation would replace comparatively small fines with penalties of up to 10 percent of a company's revenues in Mexico.

"This is what is colloquially called giving the (Federal Competition) Commission more teeth," said Senator Eloy Cantu, from the opposition Institutional Revolutionary Party.

Under current laws, fines reach a maximum of 80 million pesos ($6.4 million).

Analysts say the lack of competition in key industries like telecommunications and cement raises costs, keeping Mexico from growing as fast as other emerging economies like Brazil and making it hard for the central bank to rein in inflation.

A version of the bill was passed by the lower house in April, but the Senate made changes that now need to be approved by lower-house lawmakers.

If approved by the lower house, the bill could mean tougher investigations of companies like billionaire Carlos Slim's Telmex, cement giant Cemex) and soft drink bottlers like FEMSA, which largely dominate their markets.

The bill also introduces jail terms for crimes like collusion and establishes special courts, which backers say will keep companies from blocking penalties with injunctions filed before different judges, now a common practice.

WEAK TEETH?

Senators from President Felipe Calderon's National Action Party (PAN), who originally backed the reform, voted against the bill and claimed that the changes made in the Senate watered down some of the initial proposals.

For example, the new bill requires regulators to notify firms before conducting site visits, compared with surprise inspections allowed under the first version.

"This is a set of dentures that will fall out with the first bite," said PAN Senator Ruben Camarillo.

Still, analysts said the bill gives the antitrust commission more tools to combat collusion among firms that bid on government contracts, such as work for state-run oil monopoly Pemex.

"It is in public contracts where collusion is very frequent, and the competition commission needs to do something because this is a big drain on public resources," said Ramiro Tovar, an antitrust law specialist at Mexico City's ITAM university.

Lawmakers strengthened Mexico's antitrust law in 2006, but left regulators with little power and resources compared with watchdogs in many developed countries.

Congressional sources and analysts doubted the lower house would move quickly to approve the bill. Moreover, some expected the bill would face legal challenges if it becomes law.

"This looks good, but let's wait for the final version. Because of the complexity of the judicial system, I would not be surprised to see legal challenges to what Congress approves," said Alonso Cervera, an economist at Credit Suisse in New York. ($1 = 12.48 pesos)




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