Para David L., Edgar T., Ana G., Martín M. y Ana H., quienes en su infinita inocencia me animan a cumplir los más insospechados sueños. Gracias.
Premio COFECE de Investigación Edición 2016-2017
Abstract:
The present paper is a comparative study of the fine determination on competition matters in Mexico and the European Union.
The analysis consists in four parts: (1) a general framework of sanctions in both jurisdictions, (2) a thorough analysis of the elements considered by the authorities in determining fines as portrayed in the case law from 2014 to 2016, (3) an analysis of the application of the Guidelines on Fines, and the Fines Criteria and (4) conclusions and recommendations.
The goal is to determine whether the development of guidelines for fine determination is desirable and, if so, which are the elements that those guidelines should include in order to guarantee the predictability, proportionality and deterrence of fines in competition matters.
Recommendations for both Mexican and European Union competition authorities are included in order to further develop their current fine determination criteria.
El presente documento desarrolla un estudio comparativo sobre la determinación de multas en asuntos de competencia económica tanto en México como en la Unión Europea.
El análisis se conforma de cuatro partes: (1) un marco general de sanciones en ambas jurisdicciones, (2) un análisis detallado de los elementos considerados por las autoridades al determinar las multas tal y como se refleja en las resoluciones que comprenden del 2014 al 2016, (3) un análisis de la aplicación de los Lineamientos de Multas y los Criterios de Multas y (4) conclusiones y recomendaciones.
El objetivo es determinar si el desarrollo de lineamientos para la determinación de multas es deseable, y de ser así, cuáles son los elementos que dichos lineamentos deberían incluir con el fin de garantizar la previsibilidad, proporcionalidad y el carácter disuasivo de las multas en asuntos de competencia económica.
Se incluyen recomendaciones para las autoridades de competencia económica Mexicanas y de la Unión Europea con la finalidad de que puedan seguir desarrollando sus criterios de determinación de multas.
Table of content
1.2. Mexico and the European Union Enforcers.
2.1. Different types of sanctions.
3.1.1. Gravity of the practice.
3.1.2. Economic capacity of the offender
3.1.3. Impact caused by the offender to the Commission’s enforcement powers.
3.2.4. Economic capacity of the offender
4.2.2. Adjustments to the Basic Fine.
5.1. Legislation related to fine determination.
Case Law and jurisprudence: II
Introduction
Throughout the last century, the idea of a market in which undertakings compete with each other for new customers by offering better prices, higher quality or a wider variety of products and services, inspired the development of competition policy and the creation of competition authorities all around the world.
In the European Union (EU), competition policy first emerged in the 1960s together with the establishment of the European Economic Community and has been further developed ever since. In Mexico, it was in the early 1990s when competition policy was implemented for the first time and just recently, in 2014, underwent a major reform.
Competition policy strives to ensure competition in the markets by prohibiting and preventing anti-competitive agreements, abusive behavior, unlawful mergers and public restrictions of competition. In doing so, competition authorities usually enjoy a wide range of investigative powers and are able to impose a variety of sanctions to enforce the competition legislation effectively. One of the most important sanctions are fines.
Fines are intended to act as a powerful deterrent against unlawful practices of undertakings. In both, Mexican and EU jurisdictions, fines can rise up to 10% of an undertaking’s annual worldwide turnover. During 2014, the EU Commission processed 16 cases involving more than 60 undertakings[1] in which it imposed fines summing up to more than 1.5 billion euros. In the same period the Federal Economic Competition Commission of Mexico (Mexican Commission) processed two major cases involving 28 undertakings and imposed fines for 14 million euros.[2]
How do the competition authorities determine the amount of a fine to be imposed? And which characteristics should the fine incorporate? In answering this questions, we should bear in mind that the central goal of the imposition of fines is deterrence. However, the competition authority needs to regard the proportionality of the fine as a principle of law, whenever it decides to impose them. Predictability is another relevant characteristic when imposing fines, since the principle of legal certainty requires that the subject of the law is able to foresee the consequences of its infringement.
In order to pursue the objectives of deterrence and proportionality of fines, the competition legislation and the courts, in both EU and Mexican jurisdictions, have provided the competition authorities with wide discretionary powers.[3]
This freedom however should find its limitations in predictability and transparency when imposing a fine. Even if the competition legislation provides upfront a maximum amount for fines to be imposed and a list of elements to be considered when determining the fine, it would remain difficult for an undertaking to foresee the possible outcome of its infringement, as will be analyzed in the following paragraphs.
Unpredictability bears mainly two risks for the enforcement of competition policy: first, the deterrent effect of a potential fine loses its impact, and secondly, the decisions of the competition authority regarding the determination of the fines become vulnerable to judicial review, endangering the credibility and efficiency of the institutions.
In this aspect, the determination of fines in the EU and in Mexico show fundamental differences. While the EU has been striving since 1998 to develop a transparent, predictable and systematic way to determine fines that are deterrent and proportionate, the legislation in Mexico is still far from providing copious legal certainty.
This analysis aims at answering the question: Is the implementation of clear guidelines for fines determination a way to ensure predictability, proportionality and deterrence of fines?
Therefore, two jurisdictions will be subject to a comparative analysis: on the one hand the Mexican jurisdiction, where the competition authority currently does not provide a clear framework for the imposition of fines. On the other hand, the EU jurisdiction will be studied, where new guidelines on the imposition of fines were issued in 2006.
In doing this comparative analysis, the most recent resolutions (as referred by the Mexican Commission) and decisions (as referred by the EU Commission) will be taken into consideration; namely those issued in 2014 and 2015. From these documents will be examined the legislative provisions that competition authorities rely on, the structure of the fine determination and the role played by guidelines for fine determination. At last, a conclusion will be reached on the convenience of developing guidelines on fines as a way to ensure predictability, proportionality and deterrence of the sanctions and recommendations will be made for improving –or developing– the methodology on fine determination in both jurisdictions.
1. General Aspects
1.1. Competition Law
Competition, as an economic term, is considered as: “a process of rivalry between firms […] seeking to win customers’ business over time”.[4] In theory, markets with perfect competition would provide lower prices, higher quality and wider choices in products and services than those achieved by undertakings under monopolistic conditions. Furthermore, competition is considered to provide a greater efficiency in the allocation of resources and wellbeing.[5]
In real markets though, a sum of economic and non-economic drivers provides an environment in which perfect competition is not likely to be achieved. Therefore, competition legislation and authorities have the task to enforce and ensure effective competition in the market.
In doing so, the legislation in EU and Mexico establishes a catalogue of anticompetitive practices to be avoided by the undertakings and, simultaneously, entrusts the competition authorities with a wide range of investigative powers and a list of sanctions to ensure compliance with competition legislation.
1.2. Mexico and the European Union Enforcers
Some preliminary remarks are necessary to provide a fair comparison between the Mexican and EU jurisdiction.
In Mexico, competition enforcement is a federal competence, exercised by two autonomous entities: the Federal Competition Commission and the Federal Telecommunications Institute. The former enjoys the broader powers on competition matters while the latter has an auxiliary and exclusive competence on telecommunication matters.
The EU is a supranational economic and political partnership[6] whose current legal framework consists of two major treaties, the Treaty of the European Union and the Treaty on the Functioning of the European Union (TFEU). The Treaty of the European Union provides the existence of the EU Institutions and defines its competences.
Competition enforcement in the EU is a competence of the EU Commission. The EU Commission, the National Competition Authorities and the advisory bodies are the main players of the competition procedure.
For the purposes of the present analysis only the decisions issued by the EU Commission will be discussed.
1.3. Forbidden practices
In both jurisdictions, the practices incompatible with the correct functioning of the market are forbidden. These practices may be performed by one or more undertakings (concept used in the EU)[7] or economic actors (concept used in Mexico)[8] which, by doing so, hinder the competition process and/or the free access to the markets.
In both jurisdictions the forbidden practices are divided mainly in three big groups; (1) cartels (concept used by the EU)[9] or absolute monopolistic practices (concept used by the Mexican Competition Law)[10], (2) abuse of dominance (concept used by the EU)[11] or relative monopolistic practices (concept used by the Mexican Competition Law)[12] and (3) unlawful concentrations.[13]
2. Sanctions
The procedure followed by the competition authorities in order to find an infringement of competition legislation in both jurisdictions, includes an initial investigative period followed by a trial-like procedure in which the concerned undertaking is informed of the findings of the investigation so it can defend itself from the authority’s allegations.
In between this procedural path the concerned undertaking has two possibilities: either (1) to reach an agreement with the authorities and avoid sanctions for the infringement by reaching commitments[14] which, in case of being accepted, will end the procedure, or (2) to continue the procedure where two new possibilities are envisaged: either (a) the authority founds no infringement or (b) the authority issues a decision sanctioning the offender.
2.1. Different types of sanctions
Sanctions can be imposed by the competition authorities either for procedural or for substantive infringements. The procedural sanctions are the ones which help the authorities to obtain the cooperation needed from the different parts of the proceedings in order to render the procedure efficient. Alternatively, the substantive sanctions are the ones imposed by the competition authorities on the undertakings that infringed the competition legislation.
2.1.1. Procedural sanctions
The different procedural sanctions envisaged by the Mexican Competition Law are: warnings, fines, assistance of police force and arrest up to 36 hours for those who oppose to comply with the procedural rules.[15] The EU foresees a procedural sanction consistent in a fine “not exceeding the 1% of the total turnover in the preceding business year” followed by a list of forbidden behavior during the procedure.[16]
2.1.2. Substantive sanctions
The Mexican Competition Law has a list of differentiated sanctions for substantive infringements that includes: (1) an order to suppress the unlawful practice, (2) divestiture of assets,[17] both as a regular condition or sanction in concentration cases and as a qualified sanction for the recidivist in the commission of absolute or relative monopolistic practices, (3) fines with different higher limits for different infringements,[18] (4) the imposition of measures to regulate the access to essential facilities[19] and (5) the disqualification of a person to perform administrative or representative duties within an undertaking.[20]
Meanwhile, in the EU the sanctions for substantive infringements of articles 101 or 102 TFEU are fines that “shall not exceed 10% of its total turnover in the preceding business year”,[21] and a similar provision is found in the case of unlawful concentrations which states “The Commission may by decision impose fines not exceeding 10% of the aggregate turnover of the undertaking concerned”.[22]
2.2. Goals of a sanction
Sanctions are considered by the EU Commission as a mean to carry out the task of supervision over the competition policy entrusted to it by the TFEU, “[t]hat task […] also encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to steer the conduct of undertakings in the light of those principles.”.[23]
In relation to fines as a sanctioning method, their main goal is deterrence. Within the EU, fines are thought to have specific deterrence, for those who have acted in breach of the law, as well as general deterrence, “in order to deter other undertakings from engaging in, or continuing, behavior that is contrary to [articles 101 and 102 TFEU]”.[24]
In Mexico, the goals of fines as a sanction are referred to as: “fundamentally deterrent”,[25] which means that they are “aiming to inhibit the commission of conducts which hinder the process of competition and free access to the market”.[26]
In fines, deterrence is reached by high financial penalties which turn potential infringements into economically discouraging activities. This means, that if a given undertaking is confronted with the decision to engage in an infringement of the competition legislation in order to obtain a bigger revenue, the threat of the fine needs to be big enough to exceed the revenue that the undertaking expects to obtain from the infringement.
A rational undertaking will calculate the possible outcome before engaging in an infringement. If the fine that can be imposed on it by the authority is equal or less than the projected additional revenue generated through the infringement, it is likely to engage on it, since it speculates that the competition authority may never find out about the infringement. Even if the competition authority becomes aware of the infringement and imposes a fine on the undertaking which is equal or less than the unlawful enrichment obtain with it, it still remains a rational decision to engage in the infringement, since the additional income was not to be earned in any other way. To the contrary, if the fine imposed is bigger than the projected revenue of the infringement, the undertaking will tend to avoid engaging in the infringement since, if caught by the authority, the financial risk would exceed the potential benefit of infringing the competition legislation. The amount exceeding the potential benefit is the deterring element of the fine.[27]
In this context, the EU competition authority mentions that “[w]hatever sanctions a jurisdiction applies, it is generally recognized that antitrust enforcement cannot be effective if it is not possible to impose deterrent civil/administrative fines on undertakings”.[28]
In this sense, both jurisdictions share the same view on the objective of sanctions: deterrence. Deterrence has three effects: (1) penalization of the infraction performed by the concerned offender, (2) avoidance of recidivism by the concerned offender and (3) prevention of third parties to engage in similar unlawful activities.[29]
3. Fine Determination in Mexico
The Mexican Competition Law provides that “when imposing a fine, some elements shall be considered to determine the gravity of the infraction, such as damages caused; indications of intention; market share of the offender; size of the market; duration of the practice or concentration; economic capacity; and, if necessary, impact on the Commission’s exercise of powers”.[30]
These elements are further developed by the Regulatory Dispositions of the Federal Economic Competition Law (Mexican Regulatory Dispositions) with the aim of clarify them.[31] Such provisions include the possibility to calculate the economic capacity of the undertaking with the information available in the case file; the obligation of the Mexican Commission to prove intentionality of the natural person which represented a legal person on the infringement before imposing the sanction concerning its destitution; the possibility of the Mexican Commission to estimate the conditions in the concerned market previous to the infringement with the information available, and other elements.
Besides these two legislative instruments,[32] no further information is provided within the Mexican legislation that could flesh out how these concepts should be quantified or interpreted by the Mexican Commission and hence, a wide margin of discretion is left to it.
When imposing a fine, the Mexican Commission needs to consider both, the elements provided by the law and the final objective of the fine as a sanctioning method: deterrence. Simultaneously, an obligation of proportionality lays upon the Mexican Commission since, in exercising its mandate, it has to regard its duty of fairness and equity as and administrative institution entrusted with enforcement powers.[33]
In order to be able to impose proportional sanctions, it is essential for the Mexican Commission to maintain a wide margin of discretion. Nevertheless, the threat of the misuse or abuse of this discretion can be contested in case of appeal. A given undertaking could plead that the determination of sanctions is different and unpredictable in many of the cases; and it might be right, but this does not necessarily imply that the fine was inaccurately determined, but rather reveals the complexity and uniqueness of many of the cases followed by the Mexican Commission.
As will be further analyzed, the issuance of rules or guidelines in the determination of fines could help to ensure the discretion of the authority, the proportionality and deterrence of the fine and the predictability required by the undertaking.
3.1. Elements to consider
Article 130 of the Mexican Competition Law establishes the elements that shall be considered when determining the amount of a fine. At the same time, article 127 of the Mexican Competition Law, foresees eleven different upper limits on fines for diverse violations of the competition law.[34] In its last paragraphs, article 127 foresees the possibility to double the amount of the fine to be imposed in the case of recidivism.
In determining the amount of the fine, a wide margin of discretion has been awarded to the Mexican Commission. This discretion recognized by the courts, is rooted in the following consideration: “while performing its activities a wide sort of economic valuations are required [by the Mexican Commission], related with factual and legal matters and even subjective attitudes and/or a mix of all of these, in order for [it] to achieve the goals established by the Constitution, which is to avoid the performance of monopolistic practices throughout the control and sanction of illegitimate practices.[35] Without this discretional margin of action it would be difficult for the authority to ensure that all the particular circumstances of a case or an undertaking are taken into consideration.
Further, the courts have explained that their ultimate goal is to ensure that the administrative authorities, which exercise the State ius puniendi, are aware of all the circumstances surrounding a given infringement and should respect and consider all the guarantees assisting the undertaking concerned,[36] such as the principle of proportionality. Hence, the court imposes on the administrative authorities the burden to consider both objective and subjective elements when determining the amount of a fine.
The objective elements help to define the amount of the fine while the subjective elements could modify the fine either by reducing or increasing it in order to suit the specific circumstances of the case and the undertaking concerned.[37]
The Mexican Commission has confirmed this approach in its case IO-001-2013 Mitsubishi Heavy Industries Ltd. (Mitsubishi Case)[38] which was related to an international cartel that fixed, raised and manipulated prices in the market of automotive compressors with effects in the national territory. In this case, the Mexican Commission specified that the objective elements of a fine are the (1) benefit obtained by the undertaking and the (2) damage caused to the public interest as a result of an unlawful practice; while the subjective elements are those capable to mitigate or aggravate the amount of the fine.[39]
Before proceeding with the study of the different elements, it is important to know that the cases referred to in the present analysis are ruled under the former Mexican competition law[40] and do not necessarily reflect a criteria that has to be followed by the Mexican Commission when determining fines in the light of the new Mexican Competition Law. Notwithstanding, the elements that the former competition law required to take into consideration when determining the amount of a fine are similar enough to the provisions in the current Mexican Competition Law as to afford an accurate example of how the Mexican Commission may interpret and apply the new dispositions.
3.1.1. Gravity of the practice
The first element to consider is the gravity of the practice concerned. The graver the infringement is considered, the higher will be the fine to be imposed.
In determining how grave an unlawful an act may be deemed, the law provides five criteria that shall be considered by the authority:
- Damage caused
- Indications of the intentions of the offender
- Market share of the offender
- Size of the affected market
- Duration of the practice or concentration
Besides the five criteria established by the Mexican Competition Law the Mexican Commission has included additional gravity criteria such as: (6) type of affected market,[41] (7) type of affected goods,[42] (8) general economic affectation,[43] (9) participation of other authorities,[44] (10) sector of the population affected[45] and (11) the negative impact on innovation.[46]
Additionally, when considering the gravity of a practice, the Mexican Commission consider the absolute monopolistic practices very grave violations per se.[47]
3.1.1.1. Damage caused
The ‘damage caused’ is the first element to be considered: the bigger the damage caused to the market by the infringement, the higher will be the fine imposed. The application of this element in practice will be analyzed below, the cases in which it is considered an aggravating or mitigating factor as well as those cases in which it is not applied.
In compliance with this criteria, the Mexican Commission needs to estimate the unlawful enrichment of the concerned undertaking which is the profit obtained that originated in the performance of the forbidden practice, also known as overprice.
In doing so, the Mexican Commission takes into account all the information gathered in the case files. Usually, it creates a scenario in which the infringement did not take place and therefore the market would behave normally, then it compares the real and the created scenario adjudicating the differences to the existence of the infringement.
In those cases where the Mexican Commission considers that the information available is not sufficient for accurately calculating the overprice or a given infringement, it follows the provisions of the Fines Criteria which will be further analyzed below.[48]
3.1.1.1.1. Aggravating Factor
In the case DE-019-2007 Chapala (Chapala Case) related to a cartel in which several real estate brokers fixed the price at which they would offer their services in the Chapala region, the Mexican Commission established that the damage caused by the practice was equivalent to the overprice paid by the buyers of real estate in that region. The Mexican Commission found that the price paid to the real estate brokers was not a result of a functional market, but rather the product of an unlawful practice exercised by the real estate brokers which artificially raised the price of their services.[49]
Another example is the Transportistas Case, which was related to a cartel that fixed and raised prices in the transportation market on certain routes within the state of Chiapas. In this case, the Mexican Commission established that the damage caused was equivalent to the overprice imposed by the providers of the transportation service. Different from the Chapala Case, in this case, the Mexican Commission calculated the overprice by considering the market size, the market share of the concerned undertakings and the percentage of price-raise agreed by them, concluding that the overprice oscillated between 5% and 8% of the price charged for the transportation service.[50]
Further in the Zucarmex Case, related with a cartel which fixed, raised and manipulated the price of standard and refined sugar to wholesalers and imposed a limited amount of trade, the overprice was calculated by considering the average price per ton of sugar prior to the infringement and further compared with the price per ton after the cartel. This comparison allowed the authority to conclude there was a 6.21% overprice.[51]
In the Mitsubishi Case, the authority obtained the regular price of the automotive compressors from the documents used by the cartelist during their negotiations. The original price offered by the participants of the cartel was lower than the final fixed and raised priced they used after the cartel meetings. The authority then mentioned that the original price was to be considered the price that would have prevailed if there had been no agreement between competitors and therefore, the difference between the first and the agreed rate was considered the overprice.[52]
3.1.1.1.2. Exceptions
Although present in the law, this element cannot always be taken into consideration in practice. This was the situation in the case COND-001-2014-I Alsea (Alsea Case),[53] in which the Mexican Commission imposed a fine on concentrated undertakings because they did not comply with the commitments the operation was subjected to in order to receive the Commission’s authorization for the concentration. In this case, the Mexican Commission decided that the damage caused was not to be considered given the nature of the case itself.[54]
The Mexican Commission based this approach on a judgment which establishes that the Mexican Commission is not obliged to accredit the damage caused by a violation of its own resolutions, since the non-compliance with the resolution is by itself a solid reason to impose a fine and no further requirements shall be met but the proof that the undertaking did not comply with the concerned resolution. In the Alsea Case it was sufficient for the Mexican Commission to prove that the undertakings did not comply with the commitments that were adopted.[55]
Another example in which the damage caused is not taken into consideration is when the Mexican Commission imposes a sanction for not notifying a concentration when the undertakings had the obligation to do so in accordance with the Mexican Competition Law. Such was the situation in case IO-001-2014 Grupo Axo (Grupo Axo Case),[56] an infringement due to the omission of notifying a notifiable concentration. In this case, the Mexican Commission imposed a fine without analyzing particularly the damage caused by the omission to notify, because the omission itself was considered grave enough to impose a fine regardless of the damage caused.[57]
3.1.1.2. Indications of the intentions of the offender
In both Mexican and EU jurisdictions the forbidden practices are pursued equally whether they have anticompetitive effects or only anticompetitive objectives regardless of whether those objectives are accomplished or not. Therefore, this element should not be considered relevant when assessing the existence of a forbidden practice, but only as a criteria to determine the gravity of the infringement.
This element attempts to assess whether the undertaking deliberately intended to breach the law or if, given the specific situation of a case, the practice is not so evidently unlawful and hence the undertaking acted in good faith or by simple mistake. This will help to customize the level of deterrence that the fine needs to achieve; the fine is likely to be higher if the infringement was intentionally performed by the concerned undertaking. The cases in which this element is considered an aggravating or mitigating factor will be analyzed below.
The Mexican Regulatory Dispositions provide a list of examples of conducts that can be taken into account when determining the intentionality of the offender[58] which are: (i) the termination of the infringement at the beginning or during the procedure; (ii) the participation of the public authority as an instigator or facilitator; (iii) the actions performed to conceal the infringement, and (iv) the fact that the undertaking was not playing a leading role in the infringement.
3.1.1.2.1. Aggravating Factor
In the case IO-002-2009 Embraco (Embraco Case),[59] the Mexican Commission imposed a fine on several transnational undertakings for an international cartel that fixed and raised prices in the market of hermetic compressors. The Mexican Commission determined among other indications that the fact that all communications and meetings of the participants of the cartel were held in secret and closely guarded, was a clear indication that the participants were aware of the unlawfulness of their activities.[60]
Similarly, in the Grupo Axo Case related to an un-notified concentration, the infringement was regarded intentional for both parties given that: (1) the parties acknowledged to be aware of the amount of the transaction, (2) it was obvious that this amount exceeded the threshold imposed by the competition law, (3) one of the two parties of the operation had previously notified operations of smaller amounts.[61] That particular party was assigned an especially aggravating circumstance “given the contradictions of its operations before the Commission”.[62]
Finally, in the Transportistas Case the Mexican Commission considered that the intentions of the undertakings were to deliberately perform an unlawful practice. Although the agreements were rather public, including the participation of the local authorities as facilitators, and were specifically acknowledged by the undertakings –which could prima facie imply good faith-, the fact that the undertakings did not stop the contested practice after being informed that it could be considered contrary to the law, led the Mexican Commission to conclude that the unlawfulness of the practices was not relevant for the undertakings.[63]
3.1.1.2.2. Mitigating Factor
However, in the Transportistas Case, the Mexican Commission considered the particular situation of some of the undertakings concerned. For example, some of them were willing to cooperate closely with the authority and offered to further collaborate with it by helping to create awareness of the national competition policy within the state of Chiapas. This situation was considered as an indication of the intentions of the offender that would eventually impact the calculation of the amount of the fine as a mitigating factor.[64]
In the Zucarmex Case, the Mexican Commission determined that infringement was to be considered intentional since the Head of Legal of one of the economic agents specifically noted and warned them that the exchange of emails could constitute a violation of the competition legislation, specifically a cartel, and urged them to stop the practice.[65] Nonetheless, even when the Mexican Commission considers intentionality as an aggravating factor, in Zucarmex Case, this fact had no impact in the imposition of the fine, which was ultimately mitigated because the economic agents cooperated with the authority in the investigation and procedural phases.[66]
3.1.1.3. Market share of the offender
Under this criteria, the Mexican Commission observes the percentage of the relevant market that is comprised by each of the undertakings concerned in order to impose a proportional fine. Usually, the size of the market share is related to the damage caused to it with the infringement. The bigger the market share of the offender, the higher the amount of the fine is to be expected.
Within the Mexican jurisdiction, this element is neither considered an aggravating nor a mitigating factor, but only a number which helps the authority to calculate the amount of the fine in a proportionate way. However, in the EU jurisdiction it is believed that when an undertaking holds the bigger share of the relevant market, it can, in principle, be considered to have a more important role or a bigger interest in the successful performance of the unlawful practice and if so, it is considered an aggravating factor.[67]
3.1.1.3.1. Calculation of the market share of the offender
In the Chapala Case, the calculation of the market share of the offender was determined based on the information available on the file. The Mexican Commission estimated the combined and individualized market share of the offenders in the relevant market during a period of four consecutive years,[68] which allowed it to conclude that the infringement comprised approximately 73% of the relevant market and hence this cartel was comprehensive in nature and capable to hinder the correct functioning of the real estate broker services in the Chapala region at a big scale which made the infringement very grave.
Similarly, in the Embraco Case, the Mexican Commission could calculate the combined and individualized market share of the undertakings participating in the cartel, thereby allowing the competition authority to individualize the amount of the fines more accurately.[69]
3.1.1.3.2. Exceptions
Like the ‘damage caused’ criteria, the ‘market share of the offender’ element is not present in every fine assessment for reasons related to the nature of the procedures. In the Grupo Axo Case, related to an un-notified concentration, the Mexican Commission did not analyze the market share of the offenders since it had no direct link to the gravity of the conduct. In this case the non-compliance with the law was considered sufficiently grave by itself, making this criteria irrelevant.[70]
A further exception can be found in the Mitsubishi Case, where the infringement consisted in an agreement between the two only participants of a private tender. In this case, even when a single of them won the contract, the fine imposed was the same for both economic agents, regardless of their market share, since both of their participations were needed to raise, fix, and manipulate the price of the automotive compressors.[71]
3.1.1.4. Size of the affected market
Being intimately related to the previous criteria, the size of the affected market provides the competition authority with an idea of the economic impact of an infringement. The bigger the affected market, usually the graver the practice is to be considered and the higher is the fine to be expected. Still, the authority could consider a conduct to be very grave when it involves a particularly sensitive product or service, regardless the size of the affected market.[72]
The size of the affected market is not necessarily considered an aggravating or mitigating factor when determining the amount of the fine to be imposed, but rather a number that helps to calculate the market share of each of the offenders and portraits the economic impact of a given infringement.
3.1.1.4.1. Calculation
In calculating the size of the affected market, the competition authority usually considers both the information available in the case files and public information. In the Chapala Case, the Mexican Commission determined the size of the affected market taking into account the information provided by the National Institute of Geography and Statistics which held the official information of all income obtained for ‘real estate brokers services’ in the specific entity needed. Later, the competition authority compared and confirmed the information obtained from public sources with the information available in the case files strengthening its conclusions.[73]
In the Embraco Case, the Mexican Commission obtained the information of the affected market –the entire Mexican state territory- by requiring the Secretary of Economy to report all the importations carried out by the concerned undertakings which included hermetic compressors.[74]
Furthermore, in the Mitsubishi Case, the Mexican Commission considered the affected market to be the whole automotive industry of the country which is the seventh biggest in the world, obtaining the data from the Foreign Commerce National Bank.[75]
3.1.1.4.2. Exceptions
The size of the affected market together with the ‘market share of the offender’ and the ‘damage caused’ are elements that are usually not considered when assessing a case related with concentrations, as is visible in the Grupo Axo Case[76] and the Alsea Case.[77]
3.1.1.5. Duration of the practice or concentration
The duration of the practice is one of the most important elements to consider when determining the amount of a fine. Usually, this element is influential for the rest of the criteria. For instance, it is likely that the longer the practice takes place, the bigger would be the impact of the infringement on the affected market or the ‘damage caused’. Therefore, the bigger the duration of the practice, the higher the fine would be.
The duration comprises the amount of time that the practice has been ongoing. The Mexican Regulatory Dispositions observe that, when calculating the duration of the practice, the competition authority shall consider years, months and days of the infringement.[78] The only limitation foreseen by the Mexican Competition Law in relation with the duration of the practice is the prescription of the Commission’s competences which is defined in article 137 of the Mexican Competition Law: “The Commission’s powers to initiate investigations which may result in liability and impositions of sanctions, pursuant to this Law, expire within a ten year period, from the date on which the unlawful concentration is executed, or, in other cases, from the moment of the cessation of the unlawful conduct prohibited by this Law.”[79]
3.1.1.5.2. Limitation
In the Transportistas Case, the Mexican Commission determined that even when the unlawful practice –price fixing- could have occurred a long time ago, the competence of the authority to investigate unlawful practices had a time limit of up to five years[80] from the date that the investigation initiated and, therefore, the authority only considered the agreements that were made from 2007 onwards regardless of when the initial infringement had begun.
3.1.1.5.3. Exceptions
In cases of concentration, the duration of the practice is rather irrelevant since the usual violations in that area are related to a non-compliance with an obligation provided either by the law or a resolution, which are considered instant infringements. For example, in the Grupo Axo Case, the Mexican Commission considered the practice that gave origin to the fine, the omission of the notification of a concentration, an unlawful practice of instant realization[81] and hence grave since the moment of the infringement regardless of the amount of time that the unlawful concentration subsisted.
3.1.1.6. Other criteria
Besides the elements provided by the Mexican Competition Law, the Mexican Commission has recently considered other elements when determining the amount of fines. The possibility to consider these elements which respond to the specific circumstances of each case, is a good example of how and to which extent the Mexican Commission exercises its discretion in order to impose fines that are proportionate.
3.1.1.6.1. Type of affected market
The type of the affected market refers specifically to the market or markets that have been directly or indirectly affected by the infringement. This criteria has been recently used by the Mexican Commission in four occasions.
In the Embraco Case in which the absolute monopolistic practice consistent in the price fixation of hermetic compressors was considered to be grave, since it impacted four markets,[82] as well as the alimentary industry in general.[83]
The Chapala Case was the second time, in which the Mexican Commission considered that the type of affected market was especially relevant since the ‘real estate broker fees’ comprised an average of 8.5% of the total annual income of services in the region during the years the infringement took place.[84]
The third one is the Zucarmex Case, in which the Mexican Commission considered that the type of affected market to be particularly grave since it impacted the “lower income consumers”.[85]
Finally, in the Mitsubishi Case, the Mexican authority considers the affected market as an aggravating factor since the automotive industry is considered the seventh biggest in the world and the Chevrolet Trax –the only affected vehicle- is the second most sold SUV and holds a 2% market share of the total new automobile sales.[86]
3.1.1.6.2. Type of affected goods
In the Embraco Case, the absolute monopolistic practice was considered to be grave since it affected all electro-domestic products that included hermetic compressors as a key component; mainly fridges, freezers and air conditioners which are present in almost all households within the country, ultimately impacting a relevant share of the total population.[87]
This criteria was also used in the Zucarmex Case, where the affected element was sugar -both standard and refined-. Sugar, is considered a first-need-element of Mexican families, and therefore, an infringement that impacts this kind of products is considered to have a general affectation on the population.[88]
3.1.1.6.3. General economic affectation
Once again in the Embraco Case, the Mexican Commission considered the infringement to be particularly grave since the hermetic compressors at national scale are almost entirely imported. Further, the import of hermetic compressors in Mexico surpasses one billion Mexican pesos annually which the Mexican Commission considered an indication of the national scale impact of the infringement.[89]
Similarly, in the Mitsubishi Case, the Mexican Commission considered the infringement to be very grave because it affected the national automotive market which is valued in four hundred twenty eight thousand millions of Mexican pesos, for 2015 being one of the most dynamic industries in the country with an average annual growth of 10%.[90]
3.1.1.6.4. Participation of other authorities
The analysis on the ‘participation of other authorities in the infringement’ is visible under the title of ‘Indications of the intentions of the offender’ in the Transportistas Case. Nevertheless, it is the opinion of the author that -in the context of relative novelty and general unawareness of the national competition policy, especially in one of the neediest states of the nation- the fact that the local authorities were participating in the agreement should have been considered as a direct and strong mitigating factor for the purposes of the determination of the fine of each undertaking concerned.
Similarly, within the EU Guidelines on Fines, the participation of the authorities in the infringement is considered a mitigating factor when determining the amount of a fine that, depending on the specific case, could even preclude the EU Commission of imposing a fine.[91]
In the Transportistas Case, an agreement concluded by the undertakings to fix and raise prices was not only witnessed by the local authorities but they were also participating in it. The fact that an authority is taking part in an agreement, could legitimately confuse a concerned undertaking, which could claim to be acting bona fides presuming that the agreement was legal. Moreover, the undertakings’ allegations mention that the local authorities even coerced the undertakings to sign the unlawful agreement.[92]
This element is a clear example of how wide and unexpected the circumstances of a given case might be. When the competition authority needs to foresee that other authorities of the state could participate in or incite the infringement of the competition policy, the sky is the limit. The challenge remains in the possibility to develop fines determination criteria that can provide legal certainty to the undertakings and still leave sufficient room for the authority to consider and assess unforeseeable circumstances.
3.1.1.6.5. Sector of the population affected
In the Transportistas Case, the Mexican Commission further took into consideration that Chiapas was considered the state with the highest percentage of people in poverty within the country, with more than 50% of the population in a situation of extreme poverty. Hence, a rise in transportation prices could have a major detrimental impact on the daily life of the community and therefore the authority considered the unlawful practice very grave since it further hindered the general development of the region.[93]
Similarly, in the Zucarmex Case, the Mexican Commission, refers tangentially to the sector of the population affected under the ‘type of affected market’ title. The authority mentions that the infringement at hand, was to be considered particularly grave since it impacted primarily the lower-income population.[94]
3.1.1.6.6. The negative impact on innovation
The authority considered in the Mitsubishi Case, that the infringement distorts artificially the competition within the market, allowing inefficient competitors to stay in it and hindering the natural innovation process that competition inspires between competing economic agents.[95] Furthermore, the authority considers that the overprice paid, could have been covered by the dealer agency and –going a step further- that the agency could have reduced other costs that might have affected the quality of the product, in order not to translate the overprice to the final consumer.[96]
3.1.2. Economic capacity of the offender
According to the Mexican Competition Law,[97] the ‘economic capacity of the offender’ is the second element to consider when determining the amount of a fine. By considering this element, the Mexican Commission ensures that the fine imposed does not represent an unproportional burden to the economic capacity of the offender or that it does not render the undertaking’s business inviable. In this sense, the larger the economic capacity of the offender, the better it is considered to cope with the amount of the fine, while a low economic capacity will persuade the Mexican Commission to reduce the amount of the fine to make it payable by the undertaking.
The ‘economic capacity of the offender’ is usually obtained from the annual fiscal declaration presented by the undertaking or requested by the Mexican Commission to the National Secretary of Finance. However, the sole consideration of the annual fiscal declaration when determining the ‘economic capacity of the offender’ should not be regarded as an absolute rule since the authority can estimate the economic capacity of the offender by other means.
Once the Mexican Commission is aware of the economic capacity of the undertakings, it compares on the one hand the maximum fine that can be imposed on the undertaking concerned according to the competition law and, on the other hand, the possibility of the undertaking to cover that amount. In doing so, the Mexican Commission takes due regard of the proportionality of the fine ensuring that it does not constitute a disproportionate burden. In practice, 10% of the economic capacity of the offender is considered the upper limit of the fine that will be imposed.
Furthermore, when the economic capacity of the offender is not identifiable for whatever reason, the Mexican Regulatory Dispositions provide that the authority shall assume that the undertaking has the capacity to confront the maximum fine.[98]
3.1.2.1. Calculation
In the Transportistas Case, the Mexican Commission analyzed the information available in the case file and the information visible in the annual fiscal declarations of the undertakings concerned concluding that in the file the undertakings provided information of an economic capacity more than three times higher of what was visible in the annual fiscal declaration.[99] Since much of the information regarding the economic capacity of the undertakings is classified, it is not possible to reconstruct the calculations of the competition authority in these particular cases.
Another example is the Chapala Case, in which the Mexican Commission had several annual declarations for each undertaking comprising all years that the infringement took place. The competition authority calculated the yearly and the average economic capacity of all the offenders and determined the respective fines accordingly. Interestingly, for those undertakings whose declarations showed no taxable income, the Mexican Commission determined that this sole fact was not a sufficient element to leave the infringement unpunished and hence that a fine would, nevertheless, be imposed.[100]
The decision taken by the authority of imposing a fine even when the economic capacity of an undertaking was apparently not existent, is consistent with its approach regarding fine determination criteria: “in any case, it is not possible to observe only one of the elements that constitute the sanction evaluation, rather they shall be considered prudently as a whole by the authority with the objective of determining the gradation of the sanction. The later will constitute the individualization of the sanction”.[101]
3.1.3. Impact caused by the offender to the Commission’s enforcement powers
The ‘impact caused by the offender to the Commission’s enforcement powers’ is the third and newest element for determining the amount of a fine according to the Mexican Competition Law.[102] It is important to point out that the Mexican Competition Law provision states that the Mexican Commission shall consider this element only “if necessary”,[103] thereby leaving its inclusion to an individual and free assessment of the authority about its relevance in the particular cases.
Article 183 of the Mexican Regulatory Dispositions provides that in assessing this element, the Mexican Commission shall have due regard to: (1) the offender behavior throughout the investigation, as well as the degree of cooperation with the Mexican Commission and (2) the degree of cooperation of the offender during the trial-like procedure.[104]
The idea behind this new element is undoubtedly deterrence. The more the undertaking obstructs the procedure followed by the Mexican Commission by, for example, sending wrong or incomplete information, applying irresponsibly for time extensions, etc., the more the authority can consider this attitude as an aggravating element when determining the amount of the fine.
Another use of this element is to promote the cooperation of the undertakings. In this case, they could expect the authority to reward their cooperation by using it as a mitigating factor when determining the amount of the fine.
3.1.3.1. Can it be considered a mitigating factor?
Currently, the Mexican Commission has issued three resolutions including the analysis of this element which could be considered conflicting to the least.
In the Alsea Case on the one hand, the undertakings concerned requested the retroactive application of the new competition legislation because they thought it might be considered a mitigating factor when calculating the amount of the fine. In this case, the position of the Mexican Commission was very clear; there was no possibility of a mitigating effect:
“[T]his authority does not consider that there was such cooperation by Alsea, since receiving the notifications of the authority acts, not to present irrelevant proofs and complying with the requirements, are part of its obligations”.[105]
On the other hand, in the Transportistas Case, some undertakings also asked for the retroactive application of article 130 of the Mexican Competition Law looking for a possible mitigating factor for the determination of the fine. In this case, the competition authority mentioned: “Regarding the mentioned request, in conformity with the judicial criteria applicable to the retroactivity principle, both elements –the collaboration proposition and the cooperation throughout the investigation- will be considered by the Commission as mitigating elements of the sanction in terms of article 130 of the Federal Economic Competition Law”.[106] In this case, whereas the collaboration proposition can be indeed considered an extra effort by the undertaking to comply and cooperate with the competition authority, it is not clear if the “cooperation throughout the investigation” should be considered “a part of its obligations” in terms of the rationale of the Alsea Case.
Following the Transportistas Case, in the newer Zucarmex Case, the Mexican Competition authority considered the following: “[…] given the cooperation of the economic agents during the investigation and trial-like procedure, and the fact that the attributed [anticompetitive] practices where over before the beginning of the investigation […]”[107] the fine to be imposed was to be mitigated. This newer case seems to point towards the possibility of using consistently this criteria as a mitigating element in future cases.
As mentioned before, this element is a novelty of the 2014 Mexican Competition Law, whose use is considered optional and whose interpretation by the competition authority as a mitigating or aggravating factor is not mature yet.
3.1.4. Summary
From the cases analyzed in the previous titles it is visible that the Mexican Commission follows the provisions of article 130 of the Mexican Competition Law, regarding the elements that it shall consider when determining the amount of the fines. Those elements are (1) gravity of the practice, (2) economic capacity of the offender and (3) the impact caused by the offender to the Commission’s enforcement powers.
Although these elements are always referred to by the Mexican Commission in the fine determination analysis, we have pointed out that they do not necessarily need to be considered in certain cases such as infractions related with concentrations where the ‘damage caused’, ‘market share of the offender’, ‘size of the market’ and ‘duration’ are not analyzed for assessing the ‘gravity of the practice’.
Similarly, by analyzing the particular characteristics of each case when determining the amount of the fine, the Mexican Commission has further elaborated on these elements and interprets them with much freedom, exercising the wide margin of discretion awarded to it by the Constitution and recognized by the courts.
Finally, while the Mexican Commission has been extensive and thorough in its analysis of the specific elements of fine determination in each case, little effort has been made to provide consistency in the determination of fines, transparency on how each element impacts the final amount of the fine, and predictability of how the elements will be considered. Consequently, it is difficult for an undertaking to foresee the fine that it can confront if it violates the competition legislation.
3.2. Fines Criteria
In an attempt to provide to a certain extent uniformity and transparency to the quantification of the elements to be considered when imposing a fine, the former competition commission acknowledged in 2011 the following: “The Board of Commissioners recognizes the importance of the margin of discretion awarded to the authority in the analysis of the specific circumstances of each case, but also values the importance of the predictability and transparency of its resolutions. A wider transparency in the weighing of the relevant elements that is performed to determine fines impresses bigger incentives to the voluntary compliance with the law.”[108] Further, the former competition commission issued a Project of Technical Criteria for Fine Determination (Fines Criteria) which clarifies the interpretation and implementation of the legal elements in the determination of fines.
The proposed criteria takes a mathematical approach in four steps.[109] The Fines Criteria propose to consider the: (1) ‘affected sales’, (2) a Fine Base, (3) recidivism and (4) ‘economic capacity of the offender’, fleshing them with the elements provided by the Mexican Competition Law in order to obtain the amount of the fine.
3.2.1. The affected sales
The first element is the ‘affected sales’ – or purchases-. This element will take the form of a number that will be calculated by considering (a) the size of the relevant market, i.e. the value of the total transactions within that market, of which (b) the share of participation of the undertaking in the relevant market should be obtained and, finally, (c) shall be multiplied by the duration of the practice.
Affected Sales = (Size of Relevant Market)*(% Participation of the Undertaking)*(Duration)
As an exercise to portrait the methodology proposed by the Fines Criteria, an example will be provided from an imaginary infringement showing the procedure of the fine calculation for this infringement.
Given that the ‘size of the relevant market’ of the imaginary infringement is €100, the undertaking concerned has a market share of 30%, and the infringement lasted 2 years, the ‘affected sales’ would be equal to €60, as provided by the calculation below.
Example: Affected Sales = (100)*(30%)*(2) = 60
3.2.2. The Fine Base
Secondly, the Fine Base shall be obtained by multiplying (a) the amount obtained as ‘affected sales’ and (b) the ‘damage caused proportional factor’ (Damage Factor), further, the result of this operation shall be (c) multiplied by the ‘gravity proportional factor’ (Gravity Factor). The obtained amount, corresponding to the Fine Base shall be the amount upon which the mitigating and aggravating factors shall be applied.
Fine Base = (Affected Sales)*(Damage Factor)*(Gravity Factor)
In determining the amount corresponding to the value of sales, we only have the amount corresponding to the ‘affected sales’. Below we will learn how to calculate the missing factors and to apply them in order to obtain the amount corresponding to the Fine Base.
Example: Fine Base = (60) (Damage Factor) (Gravity Factor)
3.2.2.1. Damage Factor
In order to calculate the Damage Factor, the Fines Criteria propose to first consider the overprice, “the difference between the price observed and the estimated price that should have prevailed in absence of the monopolistic practice or unlawful concentration, expressing that difference as a percentage of this last price”.[110]
When the information available is not sufficient for calculating the specific case overprice, the Fines Criteria propose to consider -as a general rule- an overprice of 20% for absolute monopolistic practices and 10% for relative monopolistic practices and unlawful concentrations.
An example for the application of the general rule of overprice proposed by the Fines Criteria can be found in the Chapala Case, in which the Commission considered the information available in the case file and concluded that it was not sufficient to accurately determine the situation in the market previous to the existence of the cartel, especially since it had been ongoing for over ten years. The Mexican Commission decided to consider an overprice of 20% as proposed by the Fines Criteria[111] in order to calculate the amount of the fine.[112]
This general rule of overprice proposed by the Fines Criteria was also used by the Commission in the Embraco Case.[113]
In our practical example, we will consider that our imaginary undertaking sells an imaginary product for €1.00 in the market in which the infringement is taking place. In a scenario in which the infringement did not take place, the Mexican Commission was able to estimate the price of the product at €.60, given the information provided by the case file. The overprice in our example will be 40%, obtained from the difference between the €1.00 and €.60.
The participation of the undertaking is 30% of a market size of €100, and given the simplicity of the example, that 30% corresponds to €30, the quantity of product sold by the undertaking at €1 apiece is 30 units. However, in a scenario in which the infringement did not take place, the sales of the undertaking would have been €18 for 30 units [(30) (.60)]. Hence, the infringement earned the offender an additional profit of €12.
Once the overprice is determined, the Fines Criteria provide that this amount shall be multiplied by two in order to include a deterrent element in the fine calculation, and the result of this multiplication shall be considered the Damage Factor.
Damage Factor = (Overprice)*(2)
Example: Damage Factor = (40%)*(2) = 80%
3.2.2.2. Gravity Factor
The Fines Criteria propose to determine the Gravity Factor “considering all the mitigating and aggravating elements of the case that allow the authority to distinguish the nature of the conduct and intentions of the offender. This factor shall be located between a 50% lower and 200% higher rank. The lower limit allows to determine a Fine Base that is equivalent to the damage caused while the higher limit has the objective to adequately sanction high gravity conduct”.[114] Additionally, a list with proposed mitigating and aggravating factors are included in the Fines Criteria.
The mitigating factors proposed are: (a) cooperation with the authority, (b) suspension of the infringement when the investigation starts, (c) absence of efforts by the offender to conceal the infringement, (d) authorization or encouragement by the authorities regarding the infringement, (e) improvements on the efficiency of the market, (f) volunteer compensation to the natural or moral persons damaged by the infringement, (g) proof that the infringement was performed by the higher leaders of the undertakings and that the administration was not aware and (h) absence of intentionality of the offender.[115]
The aggravating factors proposed are: (a) obstruction or resistance to the Commission’s investigative powers, (b) existence of a punishment system in order to ensure the compliance with the infringement, (c) intention of concealing the conduct, (d) pressure imposed to, or lobbying with, the authorities in order to obtain the authorization of the infringement, (e) that the affected market is critical for the national economy or for mass consumption, (f) the leading position of a concerned undertaking, (g) participation of the high executives of an undertaking and (h) the intentionality of the offender.[116]
In the mathematical formula, the Gravity Factor will be converted into a number oscillating between 0.5 and 2 according to the Fines Criteria. If there is no intentionality or if there are mitigating factors, the sanction can be reduced by up to 50%. If there is intentionality, the fine can be increased up to the double of the original amount.
The value that shall be awarded to each of the elements considered mitigating or aggravating factors is not provided by the Fines Criteria, nor by the Mexican Competition Law or the Mexican Regulatory Dispositions, and hence, the Mexican Commission enjoys a wide margin of discretion.[117]
For the sake of our example, we will consider that the infringement of our imaginary undertaking was not extraordinarily intentional as to reach a doubling factor, but that it was, as most practices, a concealed infringement in which the high executives of the undertaking were participating (which is common in cartels) and hence, the Gravity Factor was set at 1.5 by the Mexican Commission.
Now, we have enough information to obtain the Fine Base, which will be €72, six times the unlawful enrichment of €12 obtained by the undertaking.[118]
Example: Fine Base = (60) (80%) (1.5) = 72
3.2.3. Recidivism
Thirdly, recidivism is regarded as an adjustment to the Fine Base and the Fines Criteria recommend to adopt the biggest outcome of the three possible calculations: (i) multiply the Fine Base by 2, (ii) 10% of the annual sales or (iii) 10% of the value of the assets of the undertaking concerned.[119]
Fine Base adjusted with recidivism = (Fine Base) (2)
Example: Fine Base adjusted with recidivism = (72) (2) = 144
3.2.4. Economic capacity of the offender
The fourth step concerns the adjustment of the fine to the economic capacity of the offender. The Final Fine will be the smallest of (1) 10% of the economic capacity of the offender or (2) the Fine Base adjusted with recidivism.
Final Fine = Min [Fine Base adjusted with recidivism, 10% Economic capacity of the offender]
In the case, our imaginary undertaking will have an economic capacity of €1,000. Considering that our imaginary undertaking participates in other markets –which is not always the case-, or has other business besides the one that provides it an annual income of €30, the 10% of the economic capacity of our imaginary undertaking will be €100.
Example: Economic capacity of the offender: 1000 10%=100
Final Fine = Min [144, 100] = 100
According to the Fines Criteria, the corresponding fine for our imaginary undertaking would be €100 reduced by the 10% economic capacity of the offender threshold. This €100 are equivalent to more than four times the income obtained by the infringement which was calculated to be €24 [(€12) (2 years)]. As a conclusion for our example, we can point out that the fine imposed to the imaginary undertaken is similar to the entire size of the affected market and if the 10% of the economic capacity would not exist, the fine could have reached up to six times the unlawful enrichment obtained by the undertaking with the infringement.
On the one hand, if the Mexican Commission is forced to follow methodologies similar to the Fines Criteria the possibility of imposing unproportioned fines needs to be envisaged. On the other hand, thresholds as the ‘economic capacity of the offender’ can also be a threat to deterrence, since, for example, in the case of the imaginary undertaking, the economic capacity of the offender would be €100 and hence, 10% of it would be €10. The final fine for the undertaking would be €10, less than one third of the unlawful enrichment obtained by the undertaking with the infringement.
3.2.5. Summary
The Fines Criteria proposed in 2011 are a way to provide further transparency and predictability to the imposition of fines by the Mexican Commission, it proposes a mathematical methodology that includes most of the elements provided by article 130 of the Mexican Competition Law, except the ‘impact caused by the offender to the Commission’s enforcements powers’ since this element was just added in 2014.
At the same time, it provides a margin of discretion for introducing the subjective elements corresponding to each case in the determination of the Gravity Factor.[120]
If the Mexican Commission is to issue a similar guideline for the determination of fines, three lessons can be obtained from the Fines Criteria: (1) the need to include a differentiated methodology for infringements related to concentrations, (2) the need to provide a more accurate way to quantify the subjective elements by including a general rule of neutrality from where the mitigating and aggravating factor could depart, for example, the 1.0 factor,[121] and finally, (3) the provision of a higher and minimum amount for the fines to be imposed related to the ‘damage caused’ with the infringement, whereby the fine cannot be higher than ‘certain times’ the damage caused nor less than ‘certain times’ the damage caused.
4. Fine determination in the EU
As previously mentioned, the sanctions provided by the EU competition legislation are primarily fines. The EU Regulation 1/2003 (EU Competition Regulation) establishes in article 23(2) that the EU Commission can impose fines up to 10% of the undertaking’s total turnover for the infringement of the dispositions enshrined in articles 101 and 102 of the TFEU, for contravening a decision ordering interim measures or for failing to comply with a binding commitment. Different from the Mexican legislation, this article does not provide different sanctions or different fine limits for different unlawful practices, rather it is a general rule applicable to all the described violations.[122]
4.1 Elements to consider
In article 23(3) of the EU Competition Regulation it is provided that: “In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement”.[123] The two main elements provided by the EU Competition Regulation are identical to the ones required by the Mexican competition legislation: gravity and duration of the infringement. The main difference is that the EU Competition Regulation itself does not provide further criteria to determine the gravity of the infringement.
The EU Commission issued in 1998 the first guidelines for fine determination “in order to ensure the transparency and impartiality of its decisions”[124] which after eight years of implementation, were replaced by the Guidelines on the Method of Setting Fines imposed pursuant to article 23(2)(a) of Regulation 01/2003 (Guidelines on Fines) issued in 2006 which considered and included the experience acquired by the EU Commission.
4.2. Guidelines on Fines
Together with the TFEU and the EU Competition Regulation, the Guidelines on Fines form part of the relevant competition legislation that influences the determination of fines imposed by the EU Commission. The Guidelines on Fines are a piece of soft law, issued by the EU Commission itself and obligatory to it as long as they are in force.
The Guidelines on Fines establish a two-step methodology when determining the final amount of the fine to be imposed. Firstly, it proposes to calculate a Basic Fine which will be an amount obtained by considering the ‘value of sales’, the ‘gravity of the infringement’ and the duration of the practice. Secondly, it proposes to apply the mitigating and aggravating factors that shall affect the amount obtained as a Basic Fine either by rising or reducing it.[125]
Examples for the usage of the Guidelines on fines will be provided in the following sections.
4.2.1. Basic Fine
4.2.1.1. Value of sales
In order to obtain the amount corresponding to the Basic Fine, the first element to consider is the ‘value of sales’ of the undertaking concerned, which is the value of the sales that was affected either “directly or indirectly” by the infringement in the last full business year.[126] This is an objective element that will provide the EU Commission with a number that it can use in the calculation of the final fine.
4.2.1.1.1. Calculation
The value of sales will be inevitably attached to the value awarded to a given product or service. This value will not necessarily be certain or obvious at first sight. How easy or hard the calculation of the value of sales may be, depends on the type of the product or service and the practice.
A sui generis example of how to calculate the ‘value of sales’ can be found in the Case AT. 39924 Swiss Franc Interest Rate Derivatives (Swiss Franc Case) which concerned a collusive agreement whereby four major banks agreed on different selling and buying conditions of financial products.[127] The ‘value of sales’ in this case was determined by taking into consideration a “notional amount” of those products which serve as a basis to calculate the actual amount earned by market participants.[128]
Similarly, in the Case AT 39984 Romanian Power Exchange (Romanian Power Case),[129] concerning an abuse of dominance in the short-term electricity trading in Romania, the ‘value of sales’ was difficult to calculate given the complexity of the market, the service provided and the operational system of the concerned undertaking. In this case, the undertaking did not charge a fee based on volume traded, which could be considered the value of the service, but rather it charged a fee based in variable elements which the concerned undertaking did not make available to the EU Commission and hence, the authority decided to calculate the fine “with the best figures available”.[130]
4.2.1.1.1.1. Last full business year
The provision of the Guidelines of Fines determine that the value of sales that the EU Commission shall take into account should be the one corresponding to the last full business year of its participation in the infringement.[131] However, in practice the EU Commission does not follow this provision to the letter.
In the Case COMP/39922 Automotive Bearings (Bearings Case), related to a concerted practice whereby the undertakings exchanged information and coordinated the prices of automotive bearings, the EU Commission considered that the cyclical nature of the sales of the automotive bearings did not reflect the last business year’s value of sales of the undertakings and hence, took the ‘value of sales’ corresponding to the average annual sales of automotive bearings for the six years that the infringement took place.[132]
Similarly, in the Case AT. 40098 Blocktrains (Blocktrains Case), related to a cartel which allocated existing and new costumers, exchanged confidential information and coordinated prices, among others, in the market of rail cargo transport services for block trains between Central and Eastern Europe, the EU Commission opted to consider an annual average of the ‘value of sales’ of the undertaking concerned since “the value of sales was clearly not constant over the entire period of the infringement”.[133]
In the Case AT. 39801 Polyurethane Foam (Polyurethane Case),[134] the competition authority considered that neither the last year nor the average of the year that the infringement took place represented accurately the ‘value of sales’ of the undertakings, and so it determined that “[i]f the last year is not sufficiently representative, the Commission may take into account another year and/or other years for the determination of the value of sales”, choosing the ‘value of sales’ from 2009.[135]
4.2.1.1.2. Summary
The ‘value of sales’ is an element that the EU Commission calculates from the value of the sales –or purchase- of the services or products subject to the infringement. According to the Guidelines on Fines, this amount is obtained from the last full business year of the concerned undertaking. However, the EU Commission commonly deviates from this provision and considers the value of sales corresponding to (1) the average value of sales of the period that the infringement took place, and to (2) the value of sales of the year that represents better the impact of the infringement in the market; thereby disregarding the Guidelines on Fines disposition.
4.2.1.2. Gravity of the infringement
Further, the Guidelines on Fines establish that “the basic amount of the fine will be related to a proportion of the value of sales, depending on the degree of gravity of the infringement, multiplied by the number of years of the infringement”.[136]
The gravity is to be considered by the EU Commission on a case by case basis taking into account all the relevant circumstances of the case. In doing so, the Guidelines on Fines establish as a general rule that, even for the gravest of the infringements, the upper limit of the percentage of ‘value of sales’ that shall be considered by the EU Commission will be 30%. The graver the infringement is considered to be, the closer to the 30% threshold will be taken into account for the purpose of determining the corresponding fine.
In addition, the Guidelines on Fines provide certain elements that can be considered by the competition authority when determining the gravity of an infringement: “In order to decide whether the proportion of the value of sales to be considered in a given case should be at the lower end or at the higher end of that scale, the Commission will have to regard a number of factors, such as [1] the nature of the infringement, [2] the combined market share of all the undertakings concerned, [3] the geographic scope of the infringement and [4] whether or not the infringement has been implemented”.[137]
4.2.1.2.1. Nature of the infringement
By considering the nature of the infringement, the EU Commission attempts to award the highest fines to those practices that are considered most harmful. This is the case in the infringements consisting in horizontal price fixing, market sharing and output limitation agreements enshrined in article 101 TFEU. According to the Guidelines on Fines, these are the most harmful restrictions on competition and shall be heavily fined, meaning that the percentage of the ‘value of sales’ to be considered shall be at the “higher end” of the scale, being the upper limit of 30% referred previously.[138]
Regarding this provision, it is interesting to notice that the EU Commission does refer to the gravity of the infringements mentioned above and its duty to consider a higher percentage of the ‘value of sales’. However, when it comes to select the percentage to be considered, it rarely reaches the 20%.
An example of this criteria can be observed in the Bearings Case, in which the competition authority determined that the practice consisting in price coordination of automotive bearings price was to be considered “by its very nature, among the most harmful restrictions of competition. Therefore, the proportion of the value of sales taken into account for the infringement is set at the higher end of the scale of the value of sales.” It took into account the 17% of the ‘value of sales’ for the determination of the fine, even considering that the infringement covered the entire territory of the European Economic Area (EEA).[139]
Similarly, in the Blocktrains Case, the EU Commission considered that the practices consisting in consumer allocation and price coordination arrangements were, by its very nature, among the most harmful restrictions of competition and selected the 17% of the ‘value of sales’ for the determination of the fine, even given that the infringement considered two anticompetitive elements and they were rigorously implemented.[140]
Similar situations are detected in: (a) the Case AT. 39780 Envelopes Case (Envelopes Case), an infringement consisting of price coordination in the market of paper envelopes where the percentage selected was 15%;[141] (b) the Polyurethane Case, consisting in coordination agreements for price fixing in the market of flexible polyurethane foam, where the percentage considered was 15%;[142] (c) the Case AT. 39965 Mushrooms (Mushrooms Case), consisting in price coordination for canned mushrooms in the entire EEA territory, where the percentage considered was 17%;[143] (d) the Case AT. 40055, Parking Heaters (Parking Heaters Case), consisting in price fixing in the market of fuel-operated parking heaters for cars and trucks where the percentage considered was 18%;[144] (e) the Swiss Franc Case, consisting in an agreement of selling and buying conditions where the percentage considered by the EU Commission was 16%;[145] (f) the Case AT. 39792, Steel Abrasives (Steel Abrasives Case), consisting on and agreement and/or concerted practice which coordinated the price of steel abrasives in the entire EEA territory for more than three years where the percentage considered was 16%,[146] and (g) the Case AT 39904, Rechargeable Batteries (Rechargeable Batteries Case), which consisted in the exchange of commercially sensitive information and/or price coordination relating to the supply of rechargeable lithium batteries in the entire EEA, that lasted over six years, where the percentage considered by the EU Commission was 16%.[147]
As can be concluded by the decisions analyzed, the EU Commission does not follow to the letter the provision of the Guidelines on Fines since to the most harmful restrictions they do not award a percentage of the ‘value of sales’ close to the higher end of the 30% threshold, but rather only percentages located in the second third of the range.
4.2.1.2.2. Combined market share of the undertakings concerned
This criteria, although referred to by the authority when mentioning the elements taken into consideration in the determination of the fine, is not usually further described.
Nonetheless, in the Parking Heater Case, the competition authority referred to it as an element that contributed to the determination of the fine, by mentioning “[i]t should also be taken into account that: […] (iii) the combined market share of Webasto and Eberspächer is well above 80%.”.[148] Unfortunately, no more information is provided as to how or to which extent the fact, that the combine market share was above 80%, impacted the fine determination.
This factor is also taken into account in the Case AT. 39824 Trucks (Trucks Case), related to collusive agreements on the pricing and gross price increase for medium and heavy trucks in the EEA and lasted for at least 14 years. In this case, the authority numbers the combined market share of the undertaking concerned as an element that should impact on the amount of the fine. Unfortunately, until the date of the present analysis the full public version of the Trucks Case resolution has not been published and the impact of this factor in the calculation of the fine cannot be appreciated.[149]
This element could be addressed as an objective element, which helps the EU Commission to determine the amount of the fine to be imposed, but does not impact as an aggravating or mitigating factor. Nonetheless, it is possible to foresee that, the bigger the combined market share of the undertaking may be, the higher the amount of the fine is to be expected.
A way in which this criteria could be addressed is that “[t]he combined market share of all the undertakings concerned and the geographic scope of the infringement are both relevant for the ability of for instance a price cartel to raise prices without losing too much custom to outsiders.”,[150] meaning that the bigger the combined market share, the less the offenders need to worry about their consumers finding alternative providers which ultimately points towards a bigger damage to the competition process in the market and justifies a higher fine.
4.2.1.2.3. Geographic scope
Similarly to the former criteria, the geographic scope of the infringement is always referred to by the competition authority when determining the amount of the fine, but the actual impact that it has in the selection of the percentage of the ‘value of sales’ made by the EU Commission, is rather unknown.
In the Polyurethane Case, the geographic scope of the infringement was the territory of ten Member States, regardless that the undertakings involved were not present in each of the ten affected Member States.[151] Taking into consideration this geographical scope, the EU Commission selected the 15% of the ‘value of sales’ for the determination of the fine, but did not explain if, or how, the geographical scope of the infringement was related to the selected percentage of ‘value of sales’.[152]
In the Mushrooms Case, the EU Commission established that the geographic scope of the infringement included the entire EEA, and further established a percentage of the ‘value of sales’ of 17%.[153] Unfortunately, the decisions referred to did not break down the individual impact of each of the elements considered when determining the amount of the fine and, therefore, it is not possible to determine whether the difference in the percentage of the ‘value of sales’ selected by the authority is related to the geographical scope of the infringement or any other mitigating or aggravating factor.
Further, in both, the Trucks Case and the Steel Abrasives Case, the EU Commission took into consideration the enlargement of the EEA. In both cases, the infringement took place long enough to allow the EEA to incorporate new member states and, therefore, the EU Commission calculated this as an automatic enlargement on the geographic scope of the given infringement. For the undertakings which had sales in the newly added states, this enlargement resulted in the inclusion of the ‘value of the sales’ for each of those new states in the fine calculation, which ultimately raised the amount of the fine imposed.[154]
4.2.1.2.4. Whether or not the infringement has been implemented
Under this criteria, the EU Commission seeks to assess whether or not the forbidden conduct actually took place. If the forbidden conduct was not implemented, it is likely that the EU Commission considers the infringement less grave than in the case of an implemented forbidden conduct.
However, in the Steel Abrasives Case, where the infringement included several agreements on price fixing and manipulation, which also surcharged two types of markets, namely ‘steel scrap’ and ‘energy’ markets the EU Commission stated that “the different elements of price coordination are part of the same single and continuous infringement concerning prices, [and thus] the relevant factors for the assessment of the gravity of the infringement are common to all the participants in the infringement and it is not appropriate to apply a lower percentage in respect of gravity to Pometon than to the other participants in the infringement, even if it did not take part in the coordination on the energy surcharge and the revision of the scrap surcharge.”[155] Under this scope it is possible that the EU Commission could consider that the no implementation –or participation- of a part of the infringement cannot be considered as mitigating element when assessing the gravity of a practice.
4.2.1.2.4.1. Aggravating Factor
On the one hand, in the Case AT.39523 Slovak Telekom (Slovak Telekom Case),[156] which concerned an infringement consisting in a refusal to supply and a margin squeeze on the wholesale market for accessing the Slovak Telekom local loop, the EU Commission took into consideration that not only the conduct was implemented, but that there were four different conducts which isolatedly could have been considered an infringement of competition legislation and combined formed an overall plan to restrict competition. The EU Commission considered them as a single and continuous infringement and the conduct was considered grave.
4.2.1.2.4.2. Mitigating Factor
On the other hand, in the Bearings Case, the Commission decided to consider a lower ‘value of sales’ for a period in which the cartel had a limited activity and a lower intensity. For that period of the infringement, the Commission considered a ‘value of sales’ of only 10%.[157]
4.2.1.3. Duration
The Guidelines on Fines mention that the duration of the practice should be considered in full or half years, where anything below six months should be rounded up to a half year, and anything between a half year and a full year shall be considered a full year.[158]
Despite the provision of the guidelines, the EU Commission does not seem to follow it in its recent decisions. In the Slovak Telekom Case, the competition authority decided to take into account a duration of five years and four months, instead of five years and a half without providing a reason for the deviation.[159]
Similarly, in the Swiss Franc Case where the infringement had a duration of four months, it was not rounded up to six months.[160]
In the Bearings Case, examples are found of duration multipliers like 3.25, 7.25 or 7.16, where only full or half numbers should be imposed, which point towards the same direction of the former examples, that the provision of the Guidelines on Fines on rounding up the duration of the practices is not a uniform –or common- practice in determining the fine of a concerned undertaking.[161]
Unexpectedly, in the Mushroom Case, the EU Commission went as far as to consider that “[t]he duration to be taken into account for the purposes of calculating the fine to be imposed on each addressee, rounded down to the month”,[162] without providing any reasoning for the contravention. A similar unexplained contravention is visible in the Steel Abrasives Case.[163]
4.2.1.4. Additional amount for deterrence
Further, the Guidelines on Fines consider an ‘additional amount’ or ‘entry fee’[164] which shall be “a sum of between 15 % and 25 % of the value of sales” that shall have as its objective to deter all kind of infringements but especially horizontal price fixing, market sharing and output limitation agreements.[165]
Usually, the EU Commission does not provide a reasoning for selecting the percentage considered as the ‘additional amount’, so it is difficult to assess which are the elements considered by it when choosing the percentage between 15% and 25% of the ‘value of sales’. Nevertheless, in almost all cases, the ‘additional amount’ is the same that the percentage of the ‘value of sales’ considered for the determination of the Basic Fine.
An example of the application of the additional amount can be found in the Swiss Franc Case, where the EU Commission considered that an additional amount to the ‘value of sales’ was important to deter the undertakings concerned from entering on such illegal practices again, and concluded that a sum of 16% of to the ‘value of sales’ was to be added to the Basic Fine,[166] equal to the percentage that the EU Commission chose as a ‘value of sales’ for the determination of the amount of the fine.[167]
Similarly, in the Blocktrains Case the Commission considered that a sum of 17% of the ‘value of sales’ was to be added to the Basic Fine, in order to deter the undertakings from engaging in unlawful practices,[168] which was equal to the ‘value of sales’ taken into consideration for the determination of the fine.[169]
As an example, the Basic Fine corresponding to an imaginary infringement whose total ‘value of sales’ is 100€, lasted two years and was considered among the graver ones by the EU Commission, the Basic Fine would be calculated as follows:
Basic Fine = (30% value of sales affected by gravity) (duration) + additional amount
Basic Fine = (18) (2) + 18 = 54
4.2.2. Adjustments to the Basic Fine
The adjustment to the Basic Fine consists of considering the subjective elements of each case in order to notice those aggravating and mitigating circumstances that can impact the amount of the fine to be imposed. The Guidelines on Fines include two lists, one of aggravating and another of mitigating examples.[170]
4.2.2.1. Aggravating Factors
Some elements are to be considered by the EU Commission as aggravating elements which indicate that the infringements were made on purpose. Under these circumstances, the EU Commission considers that a rise of the fine will add the needed deterrent effect in order to penalize the infraction performed, to avoid recidivism and to prevent third parties to engage in similar unlawful activities.
4.2.2.1.1. Recidivism
Recidivism, or the possibility that an undertaking did not stop a formerly analyzed practice, is regarded here as an aggravating circumstance that shall increase up to 100% of the amount obtained as Basic Fine, for each infringement established.[171]
In the Slovak Telekom Case, the EU Commission increased the fine imposed by 50% and established: “It is irrelevant whether this new infringement is committed in a different geographic market. It is sufficient that the same undertaking has already been found responsible for similar infringement”.[172]
4.2.2.1.2. Refusal to cooperate with the Commission
Refusal to cooperate or obstruction to the EU Commission’s activity is also considered an aggravating factor, in this case, the amount of the fine could rise if the undertaking concerned did not cooperate with the EU Commission in the development of the investigation or any part of the competition procedure.
Additionally, this element is also considered as mitigating factor where, if a given undertaking is willing to cooperate with the EU Commission “beyond its legal obligation”, it might be awarded with a reduction in the amount of the fine to be imposed.[173]
4.2.2.1.3. Role of leader or instigator on the infringement
This aggravating element has two lines of application, the EU Commission could rise the amount of the fine under the label of ‘leader of the infringement’ or ‘instigator of the infringement’. In assessing whether an undertaking was a leader or an instigator, a case by case analysis shall be performed.
In the case Shell Petroleum v Commission, the Court clarified that: “(i) to qualify as an instigator, an undertaking must have encouraged others to join or implement the cartel, even if this occurred on one single occasion”,[174] while in the Koninklijke Wegenbouw Stevin v Commission case, the Court referred to the concept of leader: “(ii) an undertaking can be considered as a leader if it can be established, with respect to the circumstances of the case, that said undertaking acted as a driving force or played a central part in the functioning of the cartel, […] Actively ensuring compliance with the decision of the cartel is a determining criteria in this respect. It is not sufficient to establish that an undertaking was putting pressure on others or dictated their conduct. Finally, neither the market power nor the resources of an undertaking are relevant when determining whether an undertaking was a leader.”[175]
An increase of 50% was awarded to the fine imposed on Shell and Koninklijke Wegenbouw Stevin for their role as leaders and instigators of the infringement.[176] This can provide an overview of how this aggravating factor could impact the fine assessment by the EU Commission.
4.2.2.2. Mitigating Factors
Some elements are to be considered by the EU Commission in order to provide a reduction in the imposition of the fine. The Guidelines on Fines provide a list of mitigating factors that can be considered by the competition authority when determining the fine to be imposed, but it is important to point out that in determining the amount of the fine, the EU Commission is under no obligation to grant a reduction of the fine if this reduction deprives it from its deterrent effect, thereby undermining the effectiveness of the competition provisions.[177]
4.2.2.2.1. Evidence of the infringement termination
The Guidelines on Fines provide that this mitigating criteria is to be considered only if the infringement concerned is not secret.[178] In the studied cases there is no application of this mitigating factor.
However, this mitigating factor has been criticized by Wils who refers to Case T-329/01 Archer Daniels Midland v Commission: “The justification for this mitigating circumstance in the case of clear-cut infringements is indeed far from obvious. As the Court of First Instance has pointed out: ‘termination of an infringement only after the Commission has intervened, should not be rewarded in the same way as an independent initiative of the offending party, and merely constitutes an appropriate and normal reaction to that intervention’; ‘if termination of an infringement as soon as the Commission intervenes were to be recognized as an attenuating circumstance, that would unduly impair the effectiveness of Article 81(1) EC by weakening both the penalty and its deterrent effect’; ‘the classification of the continuation of an infringement after the Commission intervenes as an aggravating circumstance […] rightly constitutes an incentive to terminate the infringement, but […] does not reduce the penalty or its deterrent effect’”.[179] Notwithstanding this approach, the possibility for the competition authority to consider the infringement termination as a mitigating factor subsists.
4.2.2.2.2. Negligence
Different from the Mexican Competition Law, the EU competition legislation does not consider intentionality as a separate criteria to determine the gravity of an infringement. A contrario sensu, the Guidelines on Fines consider negligence as a mitigating factor, which allows us to conclude that the intention of the undertaking does have an influence on the assessment of the fines. Although none of the analyzed cases included negligence as a mitigating factor, it is clear that when an infringement is considered to be negligently performed, it is likely that the corresponding fine will be reduced.
4.2.2.2.3. Substantially limited involvement in the infringement
In another attempt to reach proportional fines, the Guidelines on Fines consider the involvement of the concerned undertaking in the infringement where the less the undertaking was involved in the infringement, the more likely it was to be awarded with a reduction of the fine.
An example of how the EU Commission interprets this mitigating element can be found in the Bearings Case, where the competition authority granted a reduction of 15% of the Basic Fine to an undertaking which participated in the cartel discussion to a much lesser extent than other parties and was not actively involved in the price coordination.[180]
A similar example can be found in the Envelopes Case, where the competition authority determined that a given undertaking played a considerably different role in the cartel, with lesser involvement and a significantly lower participation in the coordination and was perceived by the other undertakings as “a party with whom it was difficult to reach an agreement” therefore the EU Commission granted the concerned undertaking a reduction of 10% for its limited involvement in the infringement.[181]
4.2.2.2.4. Anti-competitive conduct authorized or encouraged by a public authority or legislation
The present mitigating element has not been considered by the EU Commission in the cases analyzed. Nonetheless, it is possible to assess that, when the infringement has been authorized or encouraged by a public authority or legislation, the fine to be imposed to the undertaking can be reduced and even annulled, depending on the particular circumstances of the case.
This element is relevant because if, for example, in the extreme case in which a piece of legislation allows or even provides that a given undertaking shall engage on an anticompetitive practice, it would be absurd to fine that undertaking for complying with the law. It is further pointed out that the Court has held that national authorities have the duty to disapply any national law that requires undertakings to engage in anti-competitive conducts; therefore, once this is determined, the undertakings can no longer claim that they are obliged by that law to act in breach of the Community competition rules and their conduct is therefore liable to be penalized.[182]
Nonetheless, there are many shades of gray in the present mitigating element and it is likely that the possible authorizations or encouragement provided by the public authorities or the law are not clear cuts, in which case the relevance of considering this element a mitigating factor can be useful for the undertakings concerned.[183]
Finally, an example of the application of this criteria as a mitigating factor is the Case COMP/C.38279/F3 French Beef, where the French authority in the form of the Minister of Agriculture was found to intervene in favor of the conclusion of the anticompetitive agreement, “This was reflected in his speeches in parliament and his press release the day the agreement was concluded. His intervention put strong pressure on the slaughterers to conclude an agreement. In particular, […] before the Minister intervened, the slaughterers refused to sign the agreement presented to them by the farmers. Account should be taken of this mitigating circumstance by reducing the fine imposed on each of the slaughterers’ federations by 30 %. But the Minister’s intervention was in turn the result of several weeks of demonstrations by farmers who were members of the farmers’ federations involved, demonstrations which were aimed at securing the slaughterers’ signature to an agreement; consequently, the benefit of this mitigating circumstance should not be allowed to the four farmers’ federations”.[184] This case can give us an idea of the possible impact this criteria might have on the fine determination.
4.2.3. Final considerations
4.2.3.1. Specific increase for deterrence
As already mentioned, deterrence is the main objective of the imposition of fines in competition procedures. Deterrence has a triple purpose of punishing the infringement, avoiding recidivism and prevent other undertaking from engaging in such practices.
The ‘specific increase for deterrence’ foresees the possibility to make adjustments to the fine where the undertaking concerned obtained a particularly large turnover form the commission of the infringement. In this case, the EU Commission shall aim to increase the fine in order to exceed the unlawful gain of the undertaking and thereby ensure deterrence.[185]
In the Slovak Telekom Case, the Deutsche Telekom was found to have parental liability over Slovak Telekom’s infringement of article 102 TFEU. The EU Commission further analyzed that the fine imposed represented less than 0.1%[186] of Deutsche Telekom’s worldwide turnover and hence, determined to multiply the amount of the fine by 1.2 in order to specifically increase the fine for deterrence.
Similarly, in the Blocktrains Case, the EU Commission considered that the fine imposed to the undertaking with the biggest annual turnover was to be multiplied by 1.1, taking into account its comparatively large size, in order to ensure deterrence.[187]
Finally, in the Rechargeable Batteries Case, the authority established that, “Particular attention should be paid to the need to ensure that fines have a sufficiently deterrent effect; to that end, the fine to be imposed on undertakings which have a particularly large turnover beyond the sales of goods or services to which the infringement relates may be increased.”,[188] and subsequently adjusted the amount of the fine by increasing it 20%.
4.2.3.2. Ability to pay
The Guidelines on Fines foresee the possibility for the EU Commission to take into account the ability of the concerned undertaking to pay the fine that will be imposed on it. This element will only be considered, if the undertaking requires it and only in the case that the fine that is to be imposed would “irretrievably jeopardize the economic viability of the undertaking concerned and cause its assets to lose all their value”.[189]
An example of the application of this criteria can be found in the Envelopes Case in which two undertakings required the EU Commission a reduction on the fines to be imposed on them because they would not be able to pay them. In this case, the EU Commission considered that the undertakings concerned “demonstrated that the fine in the full amount would frustrate the ongoing financial restructuring of their groups, and hence would very likely lead to their insolvency”, and granted the reduction requested.[190]
4.2.3.3. Possibility to deviate from the methodology
A final provision of the Guidelines on Fines establishes the possibility to deviate from the methodology provided in it. This deviation can only be used if the particularities of the case or the need to achieve deterrence require so.[191]
This exception on using the methodology provided in the Guidelines was invoked by the EU Commission in the Bearings Case, in which the authority decided to limit the amount of a fine to one of the undertakings participating in a cartel to the 10% of its ‘value of sales’ of the previous year, while the rest of the undertakings fines were imposed taking into consideration the average ‘value of sales’ of the six years of durations of the infringement.[192]
Another example of such exception is provided by the Envelope Case in which the amount of the Basic Fine would reach the 10% of the total turnover of the concerned undertakings, which is the upper limit provided by the EU Competition Regulation. In this case, the EU Commission remembered the General Court[193] which determined that in such cases, the mitigating and aggravating cannot be properly applied since any consideration on this regard would not have an impact on the final determination of the fine, because the maximum threshold was already reached anyway. In such a case, the EU Commission considered that the application of the mitigating and aggravating factors would be nullified in practice, rendering the individualization of the fine impossible.[194] In this case, the Commission considers a deviation of the Guidelines on Fines methodology. As a result, a reduction was applied to all fines in order to be able to individualize them.[195]
Similarly, in the Polyurethane Case, the EU Commission employed the exception provided by the point 37 of the Guidelines of Fines in order to adjust the 10% limit of annual turnover. In this case, the 10% of annual turnover considered was not the one of the concerned undertaking, but the one of a bigger undertaking that was considered the parent company of the undertaking involved in the infringement. However, the undertaking upon which the fine was to be imposed was bought by the parent company on a date after the beginning of the infringement and hence, the EU Commission decided to recalculate the 10% limit taking this fact into consideration, in order to avoid that the parent company would be held liable for the conduct of the undertaking concerned previous to the date of the purchase.[196]
Finally in the Steel Abrasives Case, the undertaking concerned asked the EU Commission the application of point 37 of the Guidelines on Fines in order to obtain a reduction on the fine to be imposed. The undertaking argued that, in a resolution issued by the authority in relation to undertakings concerning the same infringement, a mitigating factor was applied to an undertaking on the grounds of a ‘lower participation’ and, therefore, as a principle of equal treatment the authority should deviate from the methodology in order to grant the observation of this principle. The EU Commission admitted the argument an considered the lower level of participation of the concerned undertaking as a mitigating factor.[197]
4.3. Summary
In the EU jurisdiction, the elements that the EU Commission should consider when determining the amount of a fine to be imposed for an infringement of competition provisions, is enshrined in two main legislative documents, which are the EU Competition Regulation and the Guidelines on Fines. Together, these documents provide a maximum threshold for the amount that the fine can reach, and a methodology which includes objective and subjective elements in order for the EU Commission to be able to calculate the fine corresponding to each undertaking.
Although the methodology proposed by the Guidelines on Fines is aimed to reach deterrence and, at the same time, provide the possibility to impose proportional fines on a case by case basis, it is not followed to the letter by the EU Commission, regardless its obligatory character. This is manifested by the cases analyzed in which the EU Commission mentions in a general manner the elements it takes into account when determining the amount of the fine, but does not mention specifically how the elements affect the fine determination. Further, three major inconsistencies have been pointed out, which are the unjustified deviations from points: (1) 22 of the Guidelines on Fines which provide that for the most harmful restrictions, the EU Commission shall consider a ‘value of sales’ close to the ‘higher end’ of the 30% ‘value of sales’ threshold,[198] and (2) 24 of the Guidelines on Fines, where it is provided that the EU Commission shall round up the duration of the practice to a half year or a full year when considering the duration of the practice in the process of determining the fine to be imposed.[199] Additionally, in the decisions issued by the EU Commission there is no explanation on how (3) the ‘additional amount’ of the Basic Fine is determined.[200]
These inconsistencies undermine the credibility on the provisions of the Guidelines on Fines, thereby decreasing its effectiveness. The fact that in most of the cases the EU Commission unjustifiably deviates from the provisions of its own issued Guidelines on Fines, reveal the need to update the guidelines in order to portrait the actual activity of the EU Commission and provide realistic predictability of the fine determination assessment.
5. Comparison between Mexico and the EU
Is the implementation of clear guidelines for fines determination a way to ensure predictability, proportionality and deterrence of fines? In order to answer the question, we will compare the two different jurisdictions studied: the EU that has enacted guidelines on fines and Mexico which operates without guidelines on fines.
5.1. Legislation related to fine determination
On the one side, the EU Competition Regulation shows undetailed legislative provisions related to fines determination. This regulation indicates that in determining the amount of a fine, the EU Commission shall consider the gravity and duration of the infringement.[201]
On the other side, the Mexican Competition Law includes a more descriptive provision: “to determine the gravity of the infraction, such as damages caused; indications of intention; market share of the offender; size of the market; duration of the practice or concentration; economic capacity; and, if necessary, impact on the Commission’s exercise of powers”.[202]
From this difference on the legislative provisions, two conclusions can be reached: (1) that the Mexican Competition Law has a broader and more descriptive approach to determine a fine compared to the EU Competition Regulation and, (2) that none of both legislations includes the proposition of a mathematical methodology to reach the amount of the fine to be imposed.
5.2. Guidelines on fines
The EU Commission has enacted a methodology for the determination of fines with the issuance of the Guidelines on Fines. This can be understood as an alternative to the scarce specifications provided by the EU Competition Regulation. However, it is a fact that the competition policy in the EU has been present for more than 50 years by now and only after 1998 the EU Commission had implemented the Guidelines on Fines.
Until now, the Mexican Commission has not enacted a methodology for the determination of fines. Nonetheless, in 2011, the Mexican Commission attempted to develop a mathematical methodology for the determination of fines by proposing the Fines Criteria which aimed to include both objective and subjective elements in order to provide a fine which contained a deterrent element and was predictable and proportionate.
From this difference we can reach two conclusions: (1) both jurisdictions have functioned for many years without the urgent need of a methodology of fine determination and, (2) at a certain point the need of a methodology has been envisaged with the outcome of the issuance of the Guidelines on Fines by the EU Commission and the Fines Criteria project by the Mexican Commission.
5.3. Practice
Although the EU Commission has issued the Guidelines on Fines which are obligatory for that institution, in practice, the EU Commission deviated many times from the guidelines without justification, thereby undermining their purpose. However, it is also true that some of the provisions which are respected, do provide a mathematical methodology that is more or less consistently applied[203] throughout the EU Commission decisions such as the determination of a Basic Fine and the application of aggravating and mitigating factors.
In this sense, the Guidelines on Fines do propose a methodology which, if complied with, can provide predictability, consistency, deterrence and proportionality of the fines. Yet, the current Guidelines on Fines are not soundly complied with by the EU Commission and hence, it turns out difficult to achieve their goals.
The Mexican Commission on the other hand, performs a comprehensive analysis of each of the elements required by the Mexican Competition Law and provides reasoned justifications for those elements that, on a case by case basis, decides not to take into account.
However, no consistent mathematical methodology is identifiable when determining the amount of the fine. The need of the development of such a methodology is evident by the recurrent reference that the Mexican Commission makes to the Fines Criteria, a document which is a project inspired on a former law, which has not been officially issued and which is not obligatory for the authority, as was exemplified by the Chapala Case[204] and by the Embraco Case[205] mentioned before.[206]
From this comparison we can conclude that, although the issuance of guidelines for the determination of fines can provide a framework that helps the competition authorities to achieve predictability, deterrence and proportionality of the fines they impose, this methodology would benefit from a design inspired by the actual praxis of the competition authorities insofar that they can rely on them and apply them consistently in their decisions.
5.4 Recommendations
From the previous analysis we can reach conclusions related to the convenience of developing guidelines on fines, and the way in which they are addressed by the competition authorities in practice.
5.4.1. EU Commission
Regarding the Guidelines on Fines, the general recommendation is to update the provisions in order for them to represent the current activity of the EU Commission related to fine determination. In a more specific sense, the findings of this analysis point towards four main provisions that need to be reviewed.
Firstly, relating the point 23 of the Guidelines on Fines which indicates that: “[h]orizontal price-fixing, market-sharing and output-limitation agreements, which are usually secret, are, by their very nature, among the most harmful restrictions of competition. As a matter of policy, they will be heavily fined. Therefore, the proportion of the value of sales taken into account for such infringements will generally be set at the higher end of the scale”,[207] we recommend: either (1) to follow the provision and increase the percentage considered for those infringements, or (2) to lower the higher threshold to a more realistic level. As an example, from the analyzed decisions we could conclude that 20% of the ‘value of sales’ portrait better the activity of the EU Commission, since the percentages chosen in these cases were clustered in a rather small range, but always lower than this threshold.
Secondly, in relation with the point 24 of the Guidelines on Fines, where it is provided that “periods of less than six months will be counted as half a year; periods longer than six months but shorter than one year will be counted as a full year”,[208] we recommend: either (1) to follow the provision and round up the duration of the practice as established by the guidelines, or (2) to modify the provisions enshrined in this point to one similar to the Mexican Regulatory Dispositions which requires the Mexican Commission to consider “years, months and days” when calculating the duration of the infringement.[209]
Thirdly, in relation with the provision of the point 25 of the Guidelines on Fines relating the possibility to include an ‘additional amount’ in the calculation of the Basic Fine as a special deterring element for some infringements,[210] we recommend: either (1) to provide an explanation in the decision of why a given percentage is chosen from the interval of 15% to 25% as required by the Guidelines on Fines or, (2) to modify the provision by saying that an equal amount to the ‘value of sales’ selected for the determination of the fine will be added to the calculation of the Basic Fine as a specific deterrent element for certain infringements, which would reflect the current EU Commission practice.
Finally, as a general recommendation relating to the decisions issued by the EU Commission, with regard of the elements that the authority shall take into consideration for the imposition of a fine, we recommend to be more exhaustive in its reasoning about how and to which extent one element or another influences the outcome of the fine determination. In doing so, it should bear in mind that, mentioning the elements that the EU Commission is taking into account in an aggregated way, does not provide sufficient information of how the quantification of the fine is achieved.
5.4.2. Mexican Commission
The first and major recommendation of the present analysis to the Mexican Commission is the issuance of guidelines for the imposition of fines. Although the current resolutions do include a thorough analysis of the elements that the Mexican Competition Law requires and, although the issuance of a methodology might not be urgent, the Mexican Commission could profit from developing guidelines to provide the process of fine determination with transparency and consistency, while ensuring the deterrent element of the fines and their proportionality.[211]
If the Mexican Commission decides to issue a methodology for the determination of fines, some recommendations steam from the analysis performed above: firstly, the inclusion of a ‘general rule of overprice’, similar to the one provided by the Fines Criteria in order to use it when the overprice of a given infringement cannot be calculated by other means.[212]
Secondly, a provision in how to include a deterrent element to the fine, should be envisaged. This provision could be similar to the ‘additional amount’ provided by the EU Guidelines on Fines, or the proposition of the Fines Criteria of multiplying the overprice by two, or any other alternative that provides a clear view on how this deterrent element will be included and calculated.
Thirdly, the methodology should envisage a system to quantify how the subjective elements such as intentionality will affect the determination of the fine. In doing so, a provision such as the one proposed by the Fines Criteria could be welcome, since it establishes clearly that the mitigating factors could reduce the fine to the half, while the aggravating factors could double it. Simultaneously, an additional provision foreseeing what to do in cases where no aggravating or mitigating factors are to be found, would also be welcome.
Fourthly, a provision establishing an upper limit in the imposition of fines additional to the one provided by the law in order to avoid the imposition of unproportioned fines is also recommended. As mentioned before, the upper limit on the imposition of fines can only be a reference in certain cases. For the rest of the cases, an upper limit which refers to the overprice could be envisaged, for example, up to ‘certain times’ the amount of the damage caused by the infringement.
Finally, a fifth recommendation would be to include sufficient provisions to address both, infringements related with monopolistic practices as well as infringements related with concentrations matters, respecting the individualities of each type of infringement. As analyzed before, the Mexican Commission has provided clearly that there are some elements that are more suitable for some infringements than others.[213]
6. Conclusion
The central question of this analysis was, if the implementation of clear guidelines for fines determination would be a way to ensure predictability, proportionality and deterrence of fines. The answer is yes. Nonetheless, not ‘any’ guidelines on fines would automatically result in predictability, proportionality and deterrence. The challenge remains for the competition authorities to develop guidelines on fines which are (a) detailed enough to provide uniformity and predictability in the imposition of sanctions, (b) issued and followed by the competition authority, and at the same time, (c) sufficiently flexible to allow the competition authority the discretion it needs to ensure the proportionality of fines and (d) comprehensive of all different types of infringements.
In doing so, special consideration shall be taken to the subjective elements included in the fine determination assessment. As was portrayed in the present analysis the particularities of each infringement are vast and, in general, unpredictable. Therefore the authorities shall retain, as they currently do, an open catalogue of subjective elements and enough discretion to confront the unexpected circumstances of each case.
If succeeding, the development of the proposed fine methodology will render the competition authority more effective since it will be easier to calculate and impose fines which are deterrent and proportionate. Likewise, the decisions issued by the competition authorities will be less vulnerable to judicial review since they will be rather consistent and uniform. Finally, the fines will enjoy a reasonable foreseeability for the undertakings strengthening its deterrent objective. All these benefits will ultimately boost the competition authorities’ objective, which is the prevention and sanction of practices that affect the competition process and the free access to the markets.
Bibliography
Legislative documents:
Mexico:
Primary legislation
- Politic Constitution of the United States of México of 1917.
Secondary legislation
- Federal Economic Competition Law published on the Official Journal of the Federation on 23 of May 2014.
- Federal Economic Competition Law published on the Official Journal of the Federation on 24 of December 1992, last reform 9 of April 2012.
- Regulatory Dispositions of the Federal Economic Competition Law published on the Official Journal of the Federation on 10 of November 2014.
EU:
Primary legislation
- Treaty of the European Union, published on the Official Journal of the EU the 26 of October 2012, C 326/13.
- Treaty of the Functioning of the European Union, published on the Official Journal of the EU the 26 of October 2012, C 326/47.
Secondary legislation
- Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, published in the Official Journal of the EU the 1 of January 2003, L 1/1.
- Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, published in the Official Journal of the EU the 29 of January 2004, L 24/1.
Soft law
- Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (2006/C 210/02), published in the Official Journal of the EU the 1 of September 2006, C 210/2.
Decisions and resolutions:
Mexico:
- COFECE 25 February 2014, IO-002-2009, Compresores Herméticos.
- COFECE 22 May 2014, DE-019-2007,
- COFECE 16 December 2014, CNT-084-2014, Continental Carlyle.
- COFECE 25 June 2015, IO-004-2012, Autotransportes de Chiapas.
- COFECE 05 October 2015, CNT-021-2015, Soriana Scotiabank Inverlat.
- COFECE 15 October 2015, IO-001-2014 Axo.
- COFECE 12 November 2015, COND-001-2014-I, Alsea.
- COFECE 19 February 2016, IEBC-001-2105 AICM.
- COFECE 02 June 2016, IO-006-2013 Zucarmex.
- COFECE 05 July 2016, IO-001-2013 Mitsubishi.
EU:
- EU COMMISSION 02 April 2003, 38279, French Beef.
- EU COMMISSION 16 September 2006, 38456, Bitumen – NL.
- EU COMMISSION 03 June 2014, 39984, OPCOM Romanian Power Exchange.
- EU COMMISSION 30 September 2014, 39922, Automotive bearings.
- EU COMMISSION 17 November 2014, 39801, Polyurethane Foam.
- EU COMMISSION 23 January 2015, 39780,
- EU COMMISSION 23 January 2015, 39965, Mushrooms.
- EU COMMISSION 02 March 2015, 39924, Swiss franc interest rate derivatives.
- EU COMMISSION 10 September 2015, 40098,
- EU COMMISSION 05 November 2015, 39526, Slovak Telekom.
- EU COMMISSION 30 November 2015, 40055, Parking heaters.
- EU COMMISSION 25 May 2016, 39792, Steel Abrasives.
- EU COMMISSION 09 July 2016, 39824,
- EU COMMISSION 12 December 2016, 39904, Rechargeable Batteries.
Case Law and jurisprudence:
Mexico:
- “COMISIÓN FEDERAL DE COMPETENCIA. JUSTIFICACIÓN Y ALCANCES DEL CONTROL JUDICIAL DE SUS RESOLUCIONES.” Época: Novena Época; Registro: 168499; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo XXVIII, Noviembre de 2008; Materia(s): Administrativa; Tesis: I.4º.A.622 A; Página: 1325.
- “ DEBEN GUARDAR PROPORCION CON EL LUCRO O PERJUICIO (ATRIBUCIONES DEL EJECUTIVO EN MATERIA ECONOMICA).”, Época: Séptima Época; Registro: 254556; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación; Volumen 78, Sexta Parte; Materia(s): Administrativa, Administrativa; Tesis: Página: 49.
- “RECARGOS Y SANCIONES. SU PROPORCIONALIDAD Y EQUIDAD NO DEPENDEN DE QUE GUARDEN UNA RELACIÓN CUANTITATIVA CON LAS CONTRIBUCIONES OMITIDAS.”, Época: Novena Época; Registro: 194943; Instancia: Pleno; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo VIII, Diciembre de 1998; Materia(s): Constitucional; Administrativa; Tesis: P. C/98; Página: 256.
- “RESPONSABILIDADES DE LOS SERVIDORES PÚBLICOS. PARA QUE SE CONSIDERE DEBIDAMENTE FUNDADA Y MOTIVADA LA IMPOSICIÓN DE UNA SANCIÓN ADMINISTRATIVA, LA AUTORIDAD DEBE PONDERAR TANTO LOS ELEMENTOS OBJETIVOS COMO LOS SUBJETIVOS DEL CASO CONCRETO.”, Época: Novena Época; Registro: 170605; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo XXVI, Diciembre de 2007; Materia(s): Administrativa; Tesis: I.4º.A.604 A; Página: 1812.
- Judgment 80/2014, Second Collegiate Circuit Tribunal for Administrative matters, specialized in Economic Competition, Broadcasting and Telecommunications.
EU:
- Case C-198/01 Consorzio Industrie Fiammiferi v Autorità Garante della Concorrenza e del Mercato, [2003] ECLI:EU:C:2003:430.
- Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECLI:EU:C:1991:161.
- Case T-343/06 Shell Petroleum and others v Commission [2012] ECLI:EU:T:2012:478.
- Case T-104/13 Toshiba Corp. v Commission [2015] ECLI:EU:T:2015:610.
- Case T-211/08 Putters International NV v Commission [2011] ECLI:EU:T:2011:289.
- Case T-357/06 Koninklijke Wegenbouw Stevin v Commission [2012] ECLI:EU:T:2012:488.
Books:
- Wish and D. Bailey, Competition Law (Oxford, 2015).
- P. Wils, Principles of European Antitrust Enforcement (Oxford, 2005).
Articles:
- Barbierde la Serre, E. Legathu, “The Law on Fines Imposed in EU Competition Proceedings: Faster, Higher, Harsher”, Journal of European Competition Law & Practice, 2013, Vol. 4, No. 4 pages 325 to 344.
- P. Wils, “The European Commission’s 2006 Guidelines on Antitrust Fines: A Legal and Economic Analysis”, World Competition, Volume 30, No. 2, June 2007.
Web pages:
- Directorate General on Competition, European Union Commission: http://ec.europa.eu/competition/index_en.html
- European Union: http://europa.eu/index_en.htm
- World Bank Data Base: http://data.worldbank.org/
- European Central Bank: https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html
Others:
- Annual Report on Competition Policy of the Directorate General for Competition of the Commission of the European Union 2014.
- Explanatory memorandum of the legislative initiative decree presented by the Executive Power whereby the Federal Economic Competition Law is issued, of 19th of February 2014.
- de Cossio, “Sanciones bajo la ley federal de competencia económica un comentario de análisis económico del derecho”, presentation at the seminar ‘Reformas a la Ley Federal de Competencia Económica a la luz del derecho comparado actual’, 03 September 2010, UNAM, Mexico City, Mexico.
- First Quarterly Report of the Mexican Federal Competition Commission 2014.
- First Quarterly Report of the Mexican Federal Competition Commission 2015.
- Fourth Quarterly Report of the Mexican Federal Competition Commission 2014.
- Fourth Quarterly Report of the Mexican Federal Competition Commission 2015.
- Proyecto de Criterios Técnicos para la Imposición de Multas en Materia de Competencia Económica (2011).
- Report on the functioning of Regulation 1/2003, COM (2009) 206 final: Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM (2014) 453.
- Second Quarterly Report of the Mexican Federal Competition Commission 2014.
- Second Quarterly Report of the Mexican Federal Competition Commission 2015.
- Third Quarterly Report of the Mexican Federal Competition Commission 2014.
- Third Quarterly Report of the Mexican Federal Competition Commission 2015.
- United Kingdom Merger Assessment Guidelines.
Footnotes
[1] Annual Report 2014 of the Directorate General of Competition of the European Commission: http://ec.europa.eu/atwork/synthesis/aar/doc/comp_aar_2014.pdf.
[2] Throughout the present document, the monetary amounts referred to will be converted to Euro currency in order to provide consistency. The exchange rate is based on the respective annual average rate Euro-Mexican Pesos, provided by the European Central Bank: https://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html.
[3] For the EU Commission see Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (2006/C 210/02), published in the Official Journal of the EU the 1 of September 2006, C 210/2, point 2. For the Mexican Commission see Época: Novena Época; Registro: 168499; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo XXVIII, Noviembre de 2008; Materia(s): Administrativa; Tesis: I.4o.A.622 A; Página: 1325; “COMISIÓN FEDERAL DE COMPETENCIA. JUSTIFICACIÓN Y ALCANCES DEL CONTROL JUDICIAL DE SUS RESOLUCIONES.”.
[4] United Kingdom Merger Assessment Guidelines, paragraph 4.1.2.
[5] R. Wish and D. Bailey, Competition Law (Oxford, 2015), pages 5 and 6.
[6] Further information regarding the European Union can be fined in the webpage of the European Union, following this link: http://europa.eu/about-eu/basic-information/about/index_en.htm
[7] The term ‘undertaking’ referred to in the competition legislation within the EU, has been conceptualized by the EU Court of Justices as “every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed” in its ruling on Case C-41/90 Klaus Höfner and Fritz Elser v Macrotron GmbH [1991] ECLI:EU:C:1991:161.
[8] The term ‘economic agent’ is described by the Federal Economic Competition Law published on the Official Journal of the Federation on 23 of May 2014 (Mexican Competition Law) in its article 3, fraction I, as “Any natural or legal person, either profitable of non-profitable, Federal, State or Municipal public administration agencies or entities, business chambers and professional associations, trusts, or any other form of participation on the economic activity”.
[9] Consistent on the forbidden practices provided by article 101 TFEU.
[10] Enlisted in article 53 of the Mexican Competition Law.
[11] Consistent on the forbidden practices provided by article 102 TFEU.
[12] Enlisted in articles 54 and 56 of the Mexican Competition Law.
[13] Regulated in the EU by the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, published in the Official Journal of the EU the 29 of January 2004, L 24/1 (EU Concentrations Regulation), and in Mexico in articles 86 to 93 of the Mexican Competition Law.
[14] Article 100 of the Mexican Competition Law and article 9 of the -Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, published in the Official Journal of the EU the 1 of January 2003, L 1/1. (EU Competition Regulation).
[15] Article 126 Mexican Competition Law.
[16] Article 23(1) EU Competition Regulation.
[17] At the date of the present analysis no divestiture of assets has been ordered by the competition authority. Nonetheless, divestiture of assets as a condition or sanction in concentrations cases is a common practice. In Case CNT-084-2014 Continental Carlyle, the Mexican Commission argued that the concentration would substantially lessen competition in Mexico in the market of development, manufacture and sale of commercial vehicle air springs, which would result in higher prices and decreased quality of service for customers for commercial vehicle air springs, hence the Mexican Commission subjected the approval of the concentration to the divestiture of the North American air springs business, which included manufacturing and assembly facilities in San Luis Potosí, Mexico, and all of the tangible and intangible assets primarily used in or for the business. Similarly in the case CNT-021-2015 Soriana Scotiabank Inverlat, the competition authority subjected the authorization of a concentration to the provision by the undertaking concerned of a disinvestment scheme in the market of supermarket retailers.
[18] An example of this different provisions is the differentiated higher limit for the fines to be imposed for the commission of absolute monopolistic practices which is the 10% of the undertakings’ annual turnover, and the commission of relative monopolistic practices, which is 8% of the undertakings’ annual turnover.
[19] An example of this type of institutional activity, is expected in the resolution of case IEBC-001-2015 where the competition authority issued a preliminary opinion, which establishes as an essential facility the runways for landing and departing, taxiways, visual help and airport platforms of the International Airport of Mexico City and foresees an inefficient use of the mentioned essential facilities which affects negatively the competition process.
[20] Article 127 Mexican Competition Law.
[21] Article 23(2) EU Competition Regulation.
[22] Article 14(2) EU Mergers Regulation.
[23] Guidelines on Fines, see n.3 supra.
[24] Idem.
[25] COFECE 15 October 2015, IO-001-2014 Axo (Axo Case), page 164. See also Explanatory memorandum of the legislative initiative decree presented by the Executive Power whereby the Federal Economic Competition Law is issued, of 19th of February 2014. Page12. See also Época: Novena Época; Registro: 194943; Instancia: Pleno; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo VIII, Diciembre de 1998; Materia(s): Constitucional; Administrativa; Tesis: P. C/98; Página: 256; “RECARGOS Y SANCIONES. SU PROPORCIONALIDAD Y EQUIDAD NO DEPENDEN DE QUE GUARDEN UNA RELACIÓN CUANTITATIVA CON LAS CONTRIBUCIONES OMITIDAS.”.
[26] COFECE 12 November 2015, COND-001-2014-I, Alsea (Alsea Case), page 112.
[27] F. de Cossio, “Sanciones bajo la ley federal de competencia económica un comentario de análisis económico del derecho”, presentation at the seminar Reformas a la Ley Federal de Competencia Económica a la luz del derecho comparado actual, 03 September 2010, UNAM, Mexico City, Mexico. See also W. P. Wils, Principles of European Antitrust Enforcement (Oxford, 2005).
[28] Report on the functioning of Regulation 1/2003, COM (2009) 206 final: Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM (2014), paragraph 35.
[29] See also W. P. Wils, “The European Commission’s 2006 Guidelines on Antitrust Fines: A Legal and Economic Analysis”, World Competition, Volume 30, No. 2, June 2007.
[30] Article 130 Mexican Competition Law.
[31] Articles 176 to 186 Regulatory Dispositions of the Federal Economic Competition Law published on the Official Journal of the Federation on 10 of November 2014 (Mexican Regulatory Dispositions).
[32] The Mexican Competition Law and the Mexican Regulatory Dispositions.
[33] Época: Séptima Época; Registro: 254556; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación; Volumen 78, Sexta Parte; Materia(s): Administrativa, Administrativa; Tesis: Página: 49; “MULTAS. DEBEN GUARDAR PROPORCION CON EL LUCRO O PERJUICIO (ATRIBUCIONES DEL EJECUTIVO EN MATERIA ECONOMICA).”. See also “RECARGOS Y SANCIONES. SU PROPORCIONALIDAD Y EQUIDAD NO DEPENDEN DE QUE GUARDEN UNA RELACIÓN CUANTITATIVA CON LAS CONTRIBUCIONES OMITIDAS.”, see n.25 supra.
[34] Article 127, fr. III, IV, V, VII, VIII, IX, XI, XII, XIII, XIV and XV of the Mexican Competition Law.
[35] “COMISIÓN FEDERAL DE COMPETENCIA. JUSTIFICACIÓN Y ALCANCES DEL CONTROL JUDICIAL DE SUS RESOLUCIONES.”, see n.3 supra.
[36] Época: Novena Época; Registro: 170605; Instancia: Tribunales Colegiados de Circuito; Tipo de Tesis: Aislada; Fuente: Semanario Judicial de la Federación y su Gaceta; Tomo XXVI, Diciembre de 2007; Materia(s): Administrativa; Tesis: I.4o.A.604 A; Página: 1812; “RESPONSABILIDADES DE LOS SERVIDORES PÚBLICOS. PARA QUE SE CONSIDERE DEBIDAMENTE FUNDADA Y MOTIVADA LA IMPOSICIÓN DE UNA SANCIÓN ADMINISTRATIVA, LA AUTORIDAD DEBE PONDERAR TANTO LOS ELEMENTOS OBJETIVOS COMO LOS SUBJETIVOS DEL CASO CONCRETO.”.
[37] Alsea Case, page 113, see n.26 supra. COFECE 22 May 2014, DE-019-2007, Chapala (Chapala Case), page 213. COFECE 25 June 2015, IO-004-2012, Autotransportes de Chiapas (Transportistas Case). COFECE 02 June 2016, IO-006-2013, Zucarmex (Zucarmex Case), page 184.
[38] COFECE 05 July 2016, IO-001-2013 Mitsubishi (Mitsubishi Case).
[39] Ibid, , page 385.
[40] Federal Economic Competition Law published on the Official Journal of the Federation on 24 of December 1992, last reform 9 of April 2012.
[41] Chapala Case, page 215, see n.37 supra, COFECE 25 February 2014, IO-002-2009, Compresores Herméticos (Embraco Case), page 565, Mitsubishi Case, page 386 to 388, see n.40 supra and Zucarmex Case, page 187 and 188, see n. 39 supra.
[42] Ibid Embraco Case, page 565, Zucarmex Case, page 187.
[43] Ibid, page 565 and 566 and Mitsubishi Case, page 395, see n.40 supra.
[44] Transportistas Case, page 262, see n.38 supra.
[45] Ibid, page 254 and 255 and Zucarmex Case, page 188, see n. 39 supra.
[46] Mitsubishi Case, page 386, see n.40 supra.
[47] Chapala Case, page 214, see n.37 supra.
[48] See ‘Damage Factor’.
[49] Chapala Case, page 219, see n.37 supra.
[50] Transportistas Case, page 271, see n.38 supra.
[51] Zucarmerx Case, page 194, see n.39 supra.
[52] Mitsubishi Case, page 414, see n.40 supra.
[53] See n.26 supra.
[54] Ibid, page 114.
[55] Judgment 80/2014, Second Collegiate Circuit Tribunal for Administrative matters, specialized in Economic Competition, Broadcasting and Telecommunications. Pages 161 to 163.
[56] See n.23 supra.
[57] Ibid, pages 167 to 162.
[58] Article 182 Mexican Regulatory Dispositions.
[59] See n.41 supra.
[60] Ibid, page 8.
[61] Axo Case, pages 170 to 172, see n.25 supra.
[62] Ibid, page 172.
[63] Transportistas Case, pages 256 to 260, see n.38 supra.
[64] Transportistas Case, pages 260 to 262, see n.38 supra.
[65] Zucarmex Case, page 189, see n.39 supra.
[66] Zucarmex Case, page 199, see n.39 supra.
[67] Guidelines on Fines, point 28, see n.3 supra.
[68] Chapala Case, pages 218 and 219, see n.37 supra.
[69] Embraco Case, pages 572 and 573, see n.41 supra.
[70] Axo Case, page 166, see n.25 supra.
[71] Mitsubishi Case, page 406, see n.40 supra.
[72] See ‘Gravity of the infraction’ above.
[73] Chapala Case, pages 216 to 218, see n.37 supra.
[74] Embraco Case, pages 568 to 572, see n.41 supra.
[75] Mitsubishi Case, page 395, see n.40 supra.
[76] Axo Case, page 166, see n.25 supra.
[77] See n.26 supra.
[78] Article 185 of the Mexican Regulatory Dispositions.
[79] Art 137 of Mexican Competition Law.
[80] According to the article 34, bis 3, of the competition law of 1992, see n.40 supra.
[81] Axo Case, page 166, see n.25 supra.
[82] Embraco Case, page 567, see n.41 supra.
[83] Ibid, page 565.
[84] Chapala Case, page 215, see n.37 supra.
[85] Zucarmex Case, page 188, see n.39 supra.
[86] Mitsubishi Case, page 396, see n.39 supra.
[87] Embraco Case, page 565, see n.41 supra.
[88] Zucarmex Case, page 188, see n.39, supra.
[89] Embraco Case, pages 565 and 566, see n.41 supra.
[90] Mitsubishi Case, page 395, see n.40 supra.
[91] Guidelines on Fines, point 29, see n.3 supra. See ‘Mitigating Factors’ below.
[92] Transportistas Case, page 262, see n.38 supra.
[93] Transportistas Case, pages 254 and 255, see n.38 supra.
[94] Zucarmex Case, page 188, see n.39 supra.
[95] Mitsubishi Case, page 388, see n.40 supra.
[96] Mitsubishi Case, page 389, see n.40 supra.
[97] Article 130 Mexican Competition Law.
[98] Article 183 of the Mexican Regulatory Dispositions.
[99] Transportistas Case, pages 254 and 263, see n.38 supra.
[100] Chapala Case, pages 226 and 227, see n.37 supra.
[101] Chapala Case, page 213, see n.37 supra.
[102] Article 130 Mexican Competition Law.
[103] Idem.
[104] Article 183 Mexican Regulatory Dispositions.
[105] Alsea Case, page 125, see n.26 supra.
[106] Transportistas Case, page 261, see n.38 supra.
[107] Zucarmex Case, page 199, see n.39 supra.
[108] Proyecto de Criterios Técnicos para la Imposición de Multas en Materia de Competencia Económica (2011) (Fines Criteria), paragraph 3.
[109] Ibid, paragraph 6.
[110] Fines Criteria, point 6.8.
[111] Fines Criteria, page 6.
[112] Chapala Case, page 221, see n.37 supra.
[113] Embraco Case, page 575, see n.41 supra.
[114] Fines Criteria, point 6.13.
[115] Ibid, point 6.14.
[116] Ibid, point 6.15.
[117] See ‘Impact caused by the offender to the Commission’s enforcement powers’ above.
[118] See ‘Damage Factor’ above.
[119] Fines Criteria point 6.16.
[120] See ‘Gravity Factor’ above.
[121] See ‘Gravity Factor’ above.
[122] Article 23(2) EU Competition Regulation.
[123] Idem.
[124] Guidelines on Fines, point 3, see n.3 supra.
[125] Guidelines on Fines, points 9 to 11, see n. 3 supra.
[126] Ibid, point 13.
[127] EU COMMISSION 02 March 2015, 39924, Swiss franc interest rate derivatives (Swiss Franc Case), paragraph 26.
[128] Ibid, paragraph 66.
[129]EU COMMISSION 03 June 2014, 39984, OPCOM Romanian Power Exchange (Romanian Power Case).
[130] Ibid, paragraph 306.
[131] Guidelines on Fines, point 13, see n.3 supra.
[132] EU COMMISSION 30 September 2014, 39922, Automotive bearings (Bearings Case), paragraph 77.
[133] EU COMMISSION 10 September 2015, 40098, Blocktrains (Blocktrains Case), paragraph 77.
[134] EU COMMISSION 17 November 2014, 39801, Polyurethane Foam (Polyurethane Case).
[135] Ibid, paragraph 82.
[136] Guidelines on Fines, point 19, see n.3 supra.
[137] Ibid, point 22.
[138] Ibid, point 23.
[139] Bearings Case, paragraphs 83 to 85, see n.116 supra.
[140] Blocktrains Case, paragraphs 82 to 84, see n.117 supra.
[141] EU COMMISSION 23 January 2015, 39780, Envelopes (Envelopes Case), paragraph 78.
[142] Polyurethane Case, paragraph 86, see n.118 supra.
[143] EU COMMISSION 23 January 2015, 39965, Mushrooms (Mushrooms Case), paragraph 61.
[144] EU COMMISSION 30 November 2015, 40055, Parking Heaters (Parking Heaters Case), paragraph 90.
[145] Swiss Franc Case, paragraph 74, see n.111 supra.
[146] EU COMMISSION 25 May 2016, 39792, Steel Abrasives (Steel Abrasives Case), paragraph 216.
[147] EU COMMISSION 12 December 2016, Rechargeable Batteries (Rechargeable Batteries Case), paragraph 93.
[148] Parking Heaters Case, paragraph 89, see n.128 supra.
[149] EU COMMISSION 19 July 2016, 39824 Trucks (Trucks Case), paragraphs 114 to 117.
[150] W. P. Wils, “The European Commission’s 2006 Guidelines on Antitrust Fines: A Legal and Economic Analysis”, page 20, see n.29 supra.
[151] Polyurethane Case, paragraph 26, see n.118 supra.
[152] Ibid, paragraph 86.
[153] Mushrooms Case, paragraph 61, see n.127 supra.
[154] Steel Abrasives Case, paragraph 210, see n.148 supra and Trucks Case, paragraph 111, see n.151 supra.
[155] Steel Abrasives Case, paragraph 215, see n.148 supra.
[156] EU COMMISSION 05 November 2015, 39526, Slovak Telekom (Slovak Telekom Case).
[157] Bearings Case, paragraph 79, see n.116 supra.
[158] Guidelines on Fines, point 24, see n.3 supra.
[159] Slovak Telekom Case, paragraphs 1517 and 1518, see n.135 supra.
[160] Swiss Franc Case, paragraph 76, see n.111 supra.
[161] Bearings Case, paragraph 87, see 116 supra.
[162] Mushrooms Case, paragraph 63, see n.127 supra.
[163] Steel Abrasives Case, paragraph 218, see n.148 supra.
[164] Rechargeable Batteries, paragraph 82, see n.149 supra.
[165] Guidelines on Fines, point 25, see n.3 supra.
[166] Swiss Franc Case, paragraphs 77 and 78, see n.111 supra.
[167] Ibid, paragraph 74.
[168] Blocktrains Case, paragraph 88, see n.116 supra.
[169] Ibid, paragraph 84.
[170] Guidelines on Fines, point 28, see n.3 supra.
[171] Guidelines on Fines, point 28, see n.3 supra.
[172] Slovak Telekom Case, paragraphs 1517 and 1528, see n.117 supra.
[173] Guidelines on Fines, point 28, see n.3 supra.
[174] E. Barbierde La Serre, E. Lagathu, “The Law on Fines Imposed in EU Competition Proceedings: Faster, Higher, Harsher”, Journal of European Competition Law & Practice, 2013, Vol. 4, No. 4 pages 325 to 344. See also Case T-343/06 Shell Petroleum and others v Commission [2012] ECLI:EU:T:2012:478 (Shell v Commission), paragraph 156.
[175] See n.151 supra. See also Case T-357/06 Koninklijke Wegenbouw Stevin v Commission [2012] ECLI:EU:T:2012:488, paragraphs 265-273 and 283-287; Shell v Commission paragraphs 151-182 and 196-237, see n.151 supra.
[176] EU COMMISSION 16 September 2006, 38456, Bitumen – NL, paragraphs 342 to 349.
[177] See n.151 supra. See also Case T-104/13 Toshiba Corp. v Commission [2015] ECLI:EU:T:2015:610, paragraphs 201 to 203.
[178] Guidelines on Fines, point 29, see n.3 supra.
[180] Bearings Case, paragraph 95, see n.116 supra.
[181] Envelopes Case, paragraph 87, see n.125 supra.
[182] W. Wils, “The European Commissions’ 2006 Guidelines on Fines, legal and economical analysis”, page 36, see n.29 supra. See also Case C-198/01 Consorzio Industrie Fiammiferi v Autorità Garante della Concorrenza e del Mercato, [2003] ECLI:EU:C:2003:430 (CIF Judgment), paragraph 55.
[183] See also W. Wils, “The European Commissions’ 2006 Guidelines on Fines, legal and economical analysis”, page 36, see n.29 supra. See also CIF Judgment, paragraphs 51 and 56-57, see n.159 supra.
[184] EU COMMISSION 02 April 2003, 38279, French Beef, paragraph 176.
[185] Guidelines on Fines, point 31, see n.3 supra.
[186] Slovak Telekom Case, paragraph 1533, see n.135 supra.
[187] Blocktrains Case, paragraph 93, see n.117 supra.
[188] Rechargeable Batteries Case, paragraph 97, see n.149 supra.
[189] Guidelines on Fines, point 35, see n.3 supra.
[190] Envelopes Case, paragraphs 106 and 107, see n.125 supra.
[191] Guidelines on Fines, point 37, see n.3 supra.
[192] Bearings Case, paragraph 100, see n.116 supra.
[193] Case T-211/08 Putters International NV v Commission [2011] ECLI:EU:T:2011:289, paragraph 75.
[194] Envelopes Case, paragraphs 89 to 92, see n.125 supra.
[195] Ibid, paragraph 92.
[196] Polyurethane Case, paragraph 97, see 118 supra.
[197] Steel Abrasives Case, paragraphs 229 and 230, see n.148 supra.
[198] See ‘Nature of the infringement’ above.
[199] See ‘Duration’ in chapter ‘Guidelines of Fines’ above.
[200] See ‘Additional amount’ above.
[201] Article 23(3) EU Competition Regulation.
[202] Article 130 Mexican Competition Law.
[203] See ‘Possibility to deviate from the methodology’ above.
[204] Chapala Case, page 221, see n.37 supra.
[205] Embraco Case, page 575, see n.41 supra.
[206] See ‘Fine determination in Mexico’ above.
[207] See ‘Nature of the infringement’ above.
[208] See ‘Duration’ in chapter ‘Guidelines of Fines’ above.
[209] Article 185 of the Mexican Regulatory Dispositions.
[210] See ‘Additional amount’ above.
[211] See ‘Fine determination in Mexico’ above.
[212] See ‘Damage caused’ above.
[213] See ‘Elements to consider’ in the chapter ‘Fines determination in Mexico’ above.
