Economic Liberalization and Antitrust in Mexico

Abstract

Mexico recently adopted antitrust legislation modeled after that in the European Union and the United States. The law established an enforcement agency, the Federal Competition Commission, and gave it the fundamental task of preserving economic reforms. Accordingly, the agency initiated a vigorous program of traditional antitrust enforcement, including merger oversight and investigations of both horizontal and vertical business activities. The theoretical framework proposed in this paper suggests that dedicating resources to traditional antitrust enforcement may not be an appropriate policy for a liberalizing economy. Instead, the agency should devote its resources to competition advocacy -- especially during Mexico's transition to a more open economy -- and limit its enforcement activities to unambiguously anticompetitive horizontal restraints on competition. Traditional antitrust enforcement, especially against business activities with ambiguous anticompetitive effect, may simply encourage producer interest groups to lobby other government agencies for protection. This protection will be counterproductive to the goals of liberalization and may often be more anticompetitive than the cure. Qualitative evidence suggests that the Federal Competition Commission has allocated its competition advocacy role by challenging government-generated barriers to entry, growth and exit. These resources are expected to have greater returns in terms of economic reform than do traditional antitrust enforcement efforts. We conclude that conventional antitrust enforcement should be relegated to mature developed economies and that competition advocacy be emphasized for economies in transition.