Mexico: COFECE investigates the market for services related to credit card transactions

In short

On October 27, 2022, the Commission of Inquiry of the Federal Commission for the Economy (COFECE) published a notice of initiation of an investigation into the marketing of services related to credit card transactions in the form of deferred payments with months irrelevant (market under investigation) due to alleged absolute monopolistic practices (or cartel practices), in particular the fixing of prices and the exchange of commercially sensitive information.

It is important to mention that the survey does not include cardholders, but only economic agents who participate in the market under investigation. That is, to carry out such transactions there must be payment systems that allow it, physical stores with point-of-sale terminals or virtual stores that offer the possibility of making purchases under this modality. Additionally, the survey includes financial institutions that offer lines of credit and associated cards, payment clearing and settlement services, among others, all of which allow interest-free purchases.

Contents

1. Recommended actions
2. Background
3. comments

• In this type of procedure, it is normal for the antitrust authority to request information from companies offering products and services related to the market under investigation. In the event of receipt of a request for information from the competition authority, it is essential to respond to it under penalty of a fine for the defaulting company.
• In some cases, the antitrust authority considers it appropriate to subpoena persons alleged to have knowledge of wrongdoing in the market under investigation, for example, technical staff or company executives. companies that offer products and services related to the market under investigation.
• The Mexican Antitrust Authority has the authority to conduct “blitz” visits (unannounced on-site visits to company offices, through which they may request information and/or photocopy documents/files related to the procurement under investigation. investigation). Obstruction or failure to comply with a dawn raid may result in fines and/or criminal penalties.
• If you receive a subpoena, request for information, or if your business has been raided, you should consult a lawyer who specializes in antitrust and competition matters.

• The market under study includes products offered to a user (cardholder) by a financial institution through which he can make payments for products and services using a line of credit. Payments for such purchases can be made on the next credit card deadline, or payments can be deferred for interest-free months (usually 6, 12, 18, or 24 months).
• Absolute monopoly practices are anti-competitive agreements, contracts or arrangements between competing economic agents, the object or effect of which is price manipulation, market segmentation, bid-rigging and/or the establishment of aimed at restricting supply on the market under study. Please note that the exchange of sensitive commercial information between competing economic agents which could result in any of the behaviors mentioned above is also considered an absolute monopolistic practice.
• If the existence of an absolute monopolistic practice is proven, the responsible economic agents could be fined up to 10% of their annual income in Mexico. In addition, individuals who directly participate in and/or contribute to such unlawful conduct may be subject to imprisonment for up to 10 years.
• The investigation should not be understood as prejudice, but as an action by the authority to verify compliance with Mexican federal antitrust law.
• This antitrust investigation was initiated on April 29, 2022. The investigation period, of 120 business days, is counted from the date the investigation period began. Each period has 120 working days, which can be extended for the same period up to four times.

• On October 26, 2022, COFECE reaffirmed its commitment on Competition Day, and in its Strategic Plan 2022-2025, to maintain the financial market as a key priority sector for the competition authority.
• The financial sector is a priority issue, given that the services offered are essential to carry out multiple economic activities, such as purchases with credit cards with interest-free months. In addition, this sector generates a significant percentage of the country’s gross domestic product, while digital financial services can impact the financial inclusion of Mexicans and facilitate access to credit for small and medium-sized businesses. According to the National Institute of Statistics and Geography (INEGI), in 2021 the financial sector generated 3.8% of the country’s gross domestic product and 67.8% of the population was a user of some type of service. financial.