The First Collegiate Court of the Circuit on Administrative Matters Specializing in Economic Competition, Broadcasting and Telecommunications, located in Mexico City, with jurisdiction throughout Mexico, recently issued legal opinion number 1.1o.A.E. 123 A (10a.), titled: “Substantial Power in a relevant market. Variables that should be considered in order to determine such”. In its legal opinion, the Collegiate Court held that “the analysis of the substantial power in a relevant market cannot be performed in abstract terms, under a perfect perspective”, considering that when consumers do not perceive the existing products and services as perfect substitutes, under real conditions, the various economic agents have a certain amount of power. Based on the foregoing, the Court determined that it is necessary to consider the principal item corresponding to the market share held by the economic agent investigated, as well as other variables that can be indicative of the substantial power that said economic agent actually has in the relevant market, such as the position held by the other competitors in the relevant market, the existence of potential entrants into the market and the counterweight that can be exerted by buyers.
On February 23, 2016, the Department of Energy (“SENER”) published in the Official Journal of the Federation (“DOF”) a notice informing that, as of April 1, 2016, it will be able to grant permits for the importation of gasoline and diesel to any interested party who fulfills the applicable legal requirements. Therefore, parties will not have to wait until January 1, 2017, which was the date originally set forth for such purposes in the fourteenth transitory article of Mexico’s Hydrocarbons Law.
This policy measure is justified by the SENER considering that it will promote free competition by eliminating restrictions on the current supply model; it will offer consumers access to prices below the maximums, particularly along the border; and it will also incentivize investment in transportation and storage infrastructure, which will result in greater energy security and promote better conditions for the full opening of these fuels market in 2018.
Until now, the State productive enterprise Petróleos Mexicanos, (“Pemex”) had been the only party authorized to import these refined products, as part of a framework of controlled prices. Due to growing domestic needs and insufficient refining capacity in Mexico, the country already imports half of its total demand of gasoline and 40% of its total demand of diesel.
The scheme of the special tax on production and services applicable to these products has already been amended by the Federal Congress, in transition toward the liberalization of prices expected for 2018. Beginning 2016, the Mexican Energy Regulatory Commission (“CRE”) is authorized to grant the first permits for service stations with brands other than Pemex, after having granted during 2015 the permits for an overwhelming majority of the more than 11,000 operating stations. Additionally, as of the date of this note, the CRE has already granted 10 permits for the commercialization of at least one of these fuels. And recently, on March 3rd, it approved the provisional rates for the refined products’ storage terminals currently owned by Pemex Logistica; this after having published, on January 12th, the regulations for open access to said service and to pipeline transportation, which will also be amended to facilitate the market opening.
The implementation of the energy reform on midstream and downstream activities is moving forward and is accelerating, which creates important business opportunities that will hopefully soon yield economic benefits to Mexican consumers.
On February 4, 2016, the Secretary of Economy of Mexico, Ildefonso Guajardo Villarreal, signed the Trans-Pacific Partnership, also known as the TPP, in Auckland, New Zealand, along with the Ministers of Commerce of the other 11 countries that make up the TPP: Australia, Brunei Darussalam, Canada, Chile, the United States of America, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.
As established in the preamble of the TPP, this is a multilateral agreement that has been negotiated to promote economic integration, liberalize trade and investment, strengthen the competitiveness of businesses in global markets, support the growth and development of micro, small and medium-sized enterprises, facilitate regional trade by promoting efficient customs procedures, promote high levels of environmental protection, and protect and enforce labor rights, among others.
The TPP is more than a Free Trade Agreement because it contains highly important provisions to trade and procedures, such as rules related to the importation of textiles and apparel, rules of origin, customs administration and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, trade remedies, and investment rules, among others, and it also regulates various aspects of trade as such relate to competition policies, elimination of employment discrimination, intellectual property, competitiveness and business facilitation, just to name a few. For Mexico, the TPP currently represents the most important multilateral trade negotiation it has conducted.
The Mexican Senate is currently analyzing and discussing the TPP in order to determine whether it will ratify it, as prescribed by the Mexican Constitution. The TPP is undergoing respective approval procedures in each signatory country. It is important to note that the text of the TPP states that the parties have a two-year term to provide notice that they have concluded their legal procedures to approve the TPP. If after this term all 12 parties have not made this notification as to approval, the TPP will become effective if at least six countries representing 85% of the GDP of the parties provide notice of approval in each of their countries.
The entry into force of the TPP represents a big step for Mexico to advance in the integration of a stronger economic and trade policy. Considering the benefits and significance of the TTP, one should stay informed as tothe TPP’s entry into force and the repercussions the TPP could have in each industry.
The Department of Labor and Social Welfare (“STPS” for its Spanish acronym) schedules annual inspections for all companies in Mexico. The purposes of inspections may vary; however, they are mainly performed to review general labor conditions, safety, health and environmental work conditions as applicable to each company. During the performance of such inspections, the STPS inspectors request various documents from the company to confirm compliance with legal requirements established by the Federal Labor Law, the Federal Regulations on Safety, Health and Environmental Work Conditions and the various Official Mexican Standards (“NOMs” for their Spanish acronym) issued by the STPS. The following is a list of some of the main items that are subject to inspection: I. General Work Conditions: a) Individual Employment Agreements; b) Pay stubs of salaries and benefits; c) Attendance Records (including overtime); d) Employee Seniority Chart; e) Internal Work Rules; f) Collective Bargaining Agreement, if applicable; g) All documents related to the creation and acts of the Joint Commission on Profit Sharing; and h) All documents related to the creation and undertakings of the Joint Commission on Training, including plans, training programs, and evidence of compliance with such. II. Safety, Health and Environmental Conditions in the Workplace: a) All documents related to the Joint Commission on Safety and Health Conditions; b) All that is relative to prevention and protection against fires, including creation of the corresponding brigade; c) Permits and authorizations for operation of machinery and equipment; d) Warning signs and colors; e) Full use of adequate protection and safety equipment; f) Different manuals, programs, studies, and evaluations relative to machinery and equipment, noise and vibrations, lighting, ventilation, receptacles subject to pressure, vapor generators, chemical substances, abnormal atmospheric pressure, thermal conditions in the work environment, etc. and g) Notices and statistics on work accidents. Given the Federal Labor Law amendment, fines for violations by companies on this subject matter have increased considerably. Following the amendment, a fine is imposed for each violation and for each employee who is affected by such violation, resulting in an increase of inspection visits by STPS. Consequently, it is essential for companies to be prepared at all times. Companies will greatly benefit from conducting internal expert reviews to verify that the company is in compliance with all applicable legal and health and safety provisions. In the author’s experience preventive measures are always less expensive for companies than corrective measures.