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Mexico Senate Approves Watered-Down Antitrust Legislation in 55-53 Vote

Mexican lawmakers approved a watered- down version of legislation that seeks to boost competition by imposing fines on companies that act as monopolies.

The Senate voted 55-53 to pass a bill proposed by President Felipe Calderon to beef up the power of the Federal Competition Commission, known as Cofeco, by allowing it to fine companies and giving it autonomy.

The lower house of Congress in April passed legislation allowing Cofeco to fine companies as much as 10 percent of the revenue they report in Mexico if they act as a monopolies. Senators today modified the bill so that fines only apply to the division or service that a company may have used to violate regulations, rather than applying to total income.

“It would seem that these changes were made in order to make it harder for the commission to act effectively in the fight against monopolies,” Ruben Camarillo, a senator from Calderon’s National Action Party, told lawmakers today.

The legislation would also allow for jail terms of as long as 10 years for officials whose companies act as monopolies.

The lower house must approve the Senate’s modifications before the bill can be signed by Calderon.

The current maximum antitrust penalty is 82.2 million pesos ($6.65 million), an amount that Cofeco President Eduardo Perez Motta says is too low when compared with other nations.

Mexico’s economy has underperformed peers in the region because of lack of competition in industries including telecommunications, banking and energy, Perez Motta has said.

PRI Support

Senator Raul Mejia from the Institutional Revolutionary Party, known as the PRI, backed the changes to the bill today. He said the legislation passed by the lower house went too far by fining an entire corporation over a violation by a single unit.

“This is irrational in economic terms because a company could go bankrupt,” PRI senator Raul Mejia said.

A 2007 bill in the lower house to increase antitrust sanctions almost came to a vote before falling apart after lawmakers wanted to soften the legislation. Like today’s change, lawmakers wanted to restrict the fines to a company’s division or service that committed the violation. They also planned to reduce fines to 4 percent of gross domestic sales from 15 percent.

About 30 percent of consumer spending in Mexico goes to markets with a lack of competition, causing people to spend 40 percent more than they would with better enforcement of antitrust rules, Calderon said in April.

While energy and water utilities in Mexico are operated by state-run companies, the telecommunications sector is under the control of billionaire Carlos Slim, who controls America Movil and Telefonos de Mexico SAB, operator of about 79 percent of Mexico’s fixed phone lines.

Several other major Mexican industries are dominated by one or two players. Grupo Televisa SAB and TV Azteca SA rule the broadcasting business, while Grupo Modelo SAB and Fomento Economico Mexicano SAB control most of the beer market.

The peso strengthened 0.1 percent to 12.4880 per dollar at 5:42 p.m. New York time from 12.4941 yesterday.

To contact the reporter on this story: Adriana Lopez Caraveo in Mexico City at adrianalopez@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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