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Cofece fines Notary Public for the first time in gun-jumping case

On June 1, 2017, the Mexican Federal Competition Commission (Cofece) imposed MXN 365,000 (approximately EUR 18,000) fines on Mexico Multifamily Fund VIII, Invex, CIbanco, HSBC and Monex, for gun-jumping, namely the early implementation of a merger prior to its clearance in accordance with merger control rules. Cofece also imposed a MXN 8,545,000 (approximately EUR 420,000) fine on Mexico City’s Notary Public #151. This is the first fine ever imposed by the Mexican Authority on a notary public for gun-jumping.

As provided in Article 86 of the Mexican Competition Law, mergers reaching the legal thresholds must be notified before Cofece. This applies to (i) transactions amounting in Mexico the equivalent of 18 million times the minimum general wage in force for the Federal District (EUR 60 million, approximately) or more; (ii) transactions involving acts with an accumulation of at least 35 per cent of the assets or capital stock of an economic agent, whose assets in Mexico or annual sales originated in Mexico involve more than the equivalent to 18 million times the minimum general wage in force for the Federal District (EUR 60 million, approximately); or (iii) transactions involving acts with an accumulation in Mexico of assets or capital stock higher than 8.4 million times the minimum general wage in force for the Federal District (EUR 28 million, approximately), and the transaction involves the participation of two or more economic agents with assets in Mexico or annual sales originated in Mexico, jointly or separately, of 48 million times the minimum general wage in force for the Federal District (EUR 162 million, approximately).

Under the Mexican Competition Law, the parties are bound to act independently as long as clearance and closing does not occur. Exchange of sensitive information among the parties, which may lead to anti-competitive conduct is also prohibited and would be investigated as a cartel violation. If the parties proceed to the implementation of the merger before clearance is received, they are subject to penalties of up to 5% of each of the parties’ annual turnover in Mexico. Moreover, if it is determined that the transaction is anticompetitive, fines of up to 8% of each parties’ Mexican annual turnover may be imposed, as well as conditions or the order to divest or unwind the corresponding transaction. Penalties may be imposed not only to the parties under the transaction, but also to those individuals ordering or executing the transaction.

Indeed, as a result of the recent constitutional reforms (i.e. 2013, enforceable since 2014), Article 127 of the Mexican Competition Law now foresees the imposition of penalties up to 180,000 times the minimum general wage in force for the Federal District (EUR 700,000, approximately) on notary publics executing transactions prior to such transactions receiving Cofece’s clearance in accordance with merger control rules.

On April 2016, the Mexican competition watchdog’s Plenary Sitting cleared the acquisition of six real estate properties in investment trusts managed by HSBC, by CIM Group Acquisitions and Compass Group Holdings. A few months later, when, in accordance to the Mexican Competition Law provisions, the parties submitted proof of the closing of the transaction, Cofece realized that the buyer was not CIM Group Acquisitions but Mexico Multifamily Fund VIII, a company controlled by CIM Group. Cofece also realized that the transaction had been executed by Mexico City’s Notary Public #151 in spite of the latter being aware of the fact that Cofece had authorized the purchase of the six real estate properties by CIM Group, and not by Mexico Multifamily Fund VIII.

The fine imposed on Mexico City’s Notary Public #151, is significant, particularly given the specific facts of the case as well as Cofece’s limited enforcement history in this area. This decision comes on the heels of a MXN 14.02 million (EUR 690,000, approximately) fines imposed by Cofece on Panasonic Corporation, Panasonic Europe, Ficosa Inversión and Pindro Holding for Panasonic’s failure to disclose that its purchase of Spanish auto parts maker Ficosa International would boost its indirect ownership of Ficosa Mexico.

This decision makes it clear that Cofece will not hesitate to impose severe fines for violations of the Mexican Competition Law, even if the infringing party voluntarily informs the Commission of the transaction and the transaction raises no competition issues, therefore strengthening the need for companies and individuals involved in a transaction to strictly comply with the requirements as foreseen by the applicable law and to refrain from gun-jumping.

These fines form part of the increasing trend for antitrust authorities around the world to punish gun-jumping practices. The US antitrust agencies have traditionally been the most active enforcers of antitrust law with respect to gun-jumping, but authorities elsewhere, as these fines evidence, are approaching the issue in a more aggressive way, including, in some jurisdictions, “dawn raids” of companies between signing and completion to check for gun-jumping (such as those carried out by the French NCA in the Altice case in 2016 and the European Commission in the context of the Ineos/Kerling transaction in 2007).

     The updated minimum general wage for the Federal District can be found in: http://www.sat.gob.mx/informacion_fiscal/tablas_indicadores/Paginas/salarios_minimos.aspx

* Marta is a Mexico City-based lawyer who specializes in Competition and Regulatory Law, with a focus on TMT. Since graduating from her LLM, Marta has practiced in Paris and Brussels in the Competition and International Trade teams of international law firms, working mainly on Merger Control, Antitrust, State Aid and Regulatory issues. Marta is also an ambassador of Thousand Network and a member of the Association des Juristes Européens, ANADE and Abogadas MX.


Marta Loubet

Marta is a Mexico City-based lawyer who specializes in Competition and Regulatory Law, with a focus on TMT. Since graduating from her LLM, Marta has practiced in Paris and Brussels in the Competition and International Trade teams of international law firms, working mainly on Merger Control, Antitrust, State Aid and Regulatory issues. Marta is also an ambassador of Thousand Network and a member of the Association des Juristes Européens.

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