MEXICO TRENDS AND DEVELOPMENTS Contributed by: Christian Lippert Helguera, Carlos Chávez Alanís, Juan Carlos Burgos Carbajal and Gerardo Rodríguez Aguilar, Galicia Abogados, S.C.
Market information In recent months, the Merger Control Section of COFECE has moved to request market informa - tion and economic analysis even in cases where no overlaps exists or in which such overlaps are minimal, signalling those matters that lack such information and analysis will likely experience a lengthier review process as staff will have to avail themselves of such information, whether by resorting to RFIs or market tests. As noted above, filing thresholds are already relatively low and will be reduced once the Bill becomes law. This results in mid-market trans - actions having to undergo a merger review pro - cess which, in turn, requires the hiring of counsel and the payment of filing fees, thus increasing transaction costs. Should the trend to require market information and economic analysis in these cases continue, timing and predictability of clearance of these transactions could become more cumbersome. Disclosure of ownership The FCA requires applicants to disclose the identity of each person and entity having a direct or indirect interest in the parties to a transaction (ie, buyer and target). The practice of COFECE has been to limit this requirement to equity hold- ers that own (directly or indirectly) 5% or more in the buyer or target or, in the case of typical private equity structures, limited partners who hold a 20% or larger interest in a fund. As part of this disclosure, COFECE requires that investors holding interests in excess of the thresholds described above, identify all invest - ments they own in Mexico in those markets that are relevant to the analysis of the proposed transaction. This is one of the more time-con - suming items in the merger control process where private equity structures are involved. It
will thus be important to keep an eye on the way the CNA continues to look at these investments as it begins to operate. Non-compete and non-solicit agreements COFECE continues to closely look at non-com - pete and non-solicitation agreements as part of its merger review process. It applies strict criteria to sign off on such arrangements, including that the same should generally not extend beyond three years, bind parties other than sellers, cap - ture products or services not offered by the tar - get nor territories served by it at the time of the transaction (except where the applicants can show that actual expansion plans exist). Having non-compete or non-solicit clauses in the transaction agreements that do not conform to the aforementioned criteria results, in prac - tice, in delays in securing clearance, even if staff are satisfied that the underlying transaction does not raise competition concerns. It will thus be important to understand if the CNA will continue to apply these criteria or if changes are made to this approach. Investigations and Enforcement Tools Speedier investigations The FCA currently states that COFECE has a period of no more than 120 business days, extendable up to four times for even periods, to investigate cartels, abuse of dominance and illegal mergers. The Bill proposes limiting extensions to only three (instead of four). It also proposes to reduce the period within which the Board must issue a decision on the findings (statement of objections or proposal to close the matter) reached by the Investigative Author - ity from 40 business days to 30. With respect to market probes (ie, investiga - tions into potential barriers to competition and
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