Mexican Competition Law: Interview with Alejandra “Jana” Palacios

Editor’s Note:

When Alejandra “Jana” Palacios first started in her role as Commissioner President of the Mexican Federal Competition Commission (Cofece) in September 2013, she brought with her a reputation as someone who would not bend easily when it came to being tough on cartels and other anticompetitive behaviors. On the implementation of an institution-building strategy for the Commission, she was equally forthright. She pushed hard to increase competition and level the playing field across key sectors of Mexico’s economy; achieved international recognition by establishing Cofece as one of Latin America’s boldest and most active enforcers; and defended and promoted the agency’s independence as a fundamental element of effective competition enforcement.

Prior to her appointment at Cofece, Jana was director of governance projects at the Mexican Institute for Competitiveness (IMCO), a Mexican public policy think-tank, where she was responsible for research projects on economic regulation, public procurement, and telecommunication, among others. She also served as a consultant for the former Federal Telecommunications Commission and the Mexican Institute for Social Security (IMSS). She has been a lecturer and academic coordinator in the economics department at the Instituto Tecnológico Autónomo de México (ITAM). She holds a master’s degree in business administration and a bachelor’s degree in economics from the ITAM, and a master’s degree in public administration and public policy from the Centro de Investigación y Docencia Económicas (CIDE).

Jana recently sat down with Mexico City-based competition lawyer Marta Loubet, on behalf of Antitrust Magazine, to give one of her first interviews after leaving her role as Commissioner President of Cofece:

Antitrust: Can you tell us a bit about your story and how that experience influenced your vision as Commissioner-­President of Cofece?

Jana Palacios (JP): I think it is important to start by noting that at the time of my appointment as a Commissioner in Cofece there were several coincidences. First, the implementation of a Constitutional Reform, which implied creating two new Boards of Commissioners in Cofece and in the Federal Telecommunications Institute (commonly known as the IFT, as per its Spanish acronym, responsible for competition matters in the telecommunications and broadcasting sectors). Second, the fact that access to these positions started to be determined by the results of a competitive process, which offered opportunities to people who otherwise would not have had the opportunity to participate. Commissioners from the previous antitrust agency had been closely tied to the central government (mainly through the Office of the President and the Ministry of Economy), and the aforementioned new process opened this opportunity to other types of profiles.

I had always liked the subject of industrial organization. I had studied in depth the aviation and telecommunications industry from the perspective of competition. In addition, I worked with civil society organizations on some proposals to open markets to competition, which were introduced in 2012 to the transition team of President Peña Nieto, so the Administration was familiar with my work when I entered the process to become a Commissioner.

As for the influence of my career on my work in the Commission, I consider it important that I have never had political aspirations, which is why, during my time at Cofece, I had the sole objective of creating an institution of excellence. From the beginning I was very clear that my objective should be to strengthen the institution as a way to ensure effective competition enforcement in Mexico.

Antitrust: Is there anything in particular that prompted your interest in the field of economic competition?

JP: While I believe in markets, I think they don’t always necessarily work well if you let them be and don’t put rules on them whenever it is needed. In this sense, the implementation of competition policies (and, more broadly, economic regulation policies) is exactly about making markets work for the well-being of people, and that is something that I find fascinating.

Antitrust: What would you say were your priorities and goals at Cofece, and which of those goals were achieved? How would you describe the legacy of the Commission, under your presidency, in the field of competition in Mexico?

JP: The institution-building project we worked on had four pillars. The first was strategic planning (in the medium term, but also splitting it into Annual Working Programs), accompanied with evaluation and monitoring of the resulting actions through different committees that we created in the Commission.

The second pillar was human resources management. When we arrived, we faced a high turnover rate, which meant that the first year we lost approximately 30 percent of our staff. Some of these officials were part of the team of the previous Commissioner President and decided to leave with the change of cycle, others went to implement the IFT’s competition policy, and another group went to private practice and other government agencies that were going to work on issues related to competition, such as the regulatory bodies of the energy sector. This situation required us to accelerate the training (both in terms of soft skills and hard skills) and development of the existing teams, which we accomplished through the development of an individual evaluation system based on personal goals related to the institutional Annual Working Plan, which gave employees who successfully passed their evaluations access to professional promotions. It also required us to implement strategies to attract new talent. Relatedly, and close to my heart, is the issue of gender equality. We developed a whole series of initiatives to improve gender equality, including specific leadership programs for women and men, and conferences on topics such as sexism. Our work on this front is recognized internationally.

The third pillar was to streamline procedures and provide certainty about how we were going to apply the new antitrust law and what our relationship with undertakings would be like, including ensuring that the law would be applied evenly; establishing a respectful treatment with economic agents, without preferences; and analyzing the cases based on their merits. For example, we established a Communication Protocol to provide certainty about which communications should be expected on different types and phases of matters, as well as on the communication routes and tools for each. We also published relevant guidelines that did not previously exist on merger review, the leniency program, and attorney-client information management, among others.

Finally, the fourth pillar was accountability and transparency, in the sense of the importance of continuous self-evaluation and communication of the results of the Commission’s operations to the public, in order to ensure the correct implementation of the strategy.

Some aspects of the original human resources management plan have been complicated to implement in recent years with the entry of the current Administration and the salary reductions and other austerity initiatives that it has entailed. For example, the Commission used to grant bonuses to officials based on the fulfillment of the objectives of the Annual Working Plan, but that could not continue. We also used to have a Cofece-Conacyt scholarship, which was a very valuable tool for attracting talent by allowing Cofece’s public servants to train at institutions such as Harvard or the University College of London, but that had to be suspended due to lack of funding from Conacyt. Hopefully, these initiatives can eventually be resumed.

If I had more time, I would have liked to continue strengthening a professional civil service in the Commission.

Antitrust: What would you say are the biggest challenges for competition in Mexico today?

JP: To me, competition enforcement is about experimenting, evaluating and adjusting, and starting over. For example, when we arrived we began conducting dawn raids that led to some of the most important investigations we have had in recent years—but dawn raids are now complicated by circumstances such as remote work stemming from the pandemic, or the fact that information is increasingly being stored on servers in other countries. That is why the dawn raid system must be reevaluated to find a way to adapt it to this new world.

Another challenge in Mexico is the maximum limit of fines. I think it would be optimal to modify the law so that the fines are more aggressive, as long as the sanctioned undertaking has the economic capacity to pay the fine. I believe that, if the economic agent can pay it, the fine should never be less than the amount of the damages caused (something that has happened in Mexico in several recent cases). Regarding how the sanction is calculated, I believe that the limit—established at 10% of the turnover of the undertaking during the last year the violation was carried out—is low, especially taking into account the limits to sanctions for similar conduct in other jurisdictions.

I also believe it is important to bring back to Cofece the implementation of the competition policy in the telecommunications and broadcasting markets. By way of illustration, the salaries of the Economic Competition and Investigation Unit of the IFT represent 30% of the salaries of those counterparts at Cofece, yet in the past eight years we analyzed more than 1000 merger reviews, while the IFT Unit must have reviewed no more than forty. In this sense, if these resources were concentrated in a single authority, its capacity to enforce competition policy would be strengthened. Furthermore, consolidation would avoid conflicts of jurisdiction between authorities.

In addition, I believe that there is an area of ​​opportunity related to imposing commitments in the context of mergers and abuse of dominance cases, including making regulatory changes in order to improve their effectiveness. There have been cases where undertakings include a set of commitments with the Commission and, once the merger is conditionally approved by Cofece, the parties file an appeal before the court against those commitments. I believe that the Judiciary should be part of the commitment negotiation procedure so that the commitments agreed upon are final.

These are some of the areas that I believe, after a few years of enforcing the current law, should be revised.

Antitrust: Cofece has been one of the pioneers (both in Latam, in terms of competition, and at the national level, in the Administration) in creating a task force focusing on the technology sector. Is there anything in particular that boosted your interest in technology and its intersection with competition law?

JP: I would say that there are several elements, but in general, the economy is digitizing and eventually all companies will use technology as part of their operations, which creates new challenges for the authority to deal with.

In the context of this global trend, it is important to note that Mexico has certain peculiarities. For example, large technology companies that in other countries already raise many concerns, here have been key to end historical monopolies in certain sectors. In other words, large technology companies have injected competitive pressure in markets where there was no competition before.

On the other hand, in my view, all of the aspects that are being discussed in the European Union and in the United States on ex ante regulation of platforms should also be in consideration in Mexico. In Latin America, there are proponents of waiting to see how these initiatives are developed and then, based on that result, implementing them in the region, while others argue that intervention should be carried out in parallel with the initiatives that are taking place in the European Union and in the United States. I do not have the answers to this debate, but I think these are very interesting questions that we at least should be discussing.

Finally, in recent years the number of transactions involving companies in these sectors has grown, so once again, it was important for Cofece to be prepared in this regard.

Antitrust: In Europe and the United States, there is some concern about the way in which these companies accumulate data and market power that may have the potential to be used in the context of international operations of political influence financed by governments or individuals. Do you feel that any of that falls within the scope of Cofece’s jurisdiction?

JP: I think that what we have to ask ourselves is “what worries us about the data?” If it is about the use of data to manipulate users, for example, we have to analyze whether that constitutes a competition problem or not. I believe that we are going to reach a point where the large technological platforms will be more regulated (as we see is already happening in certain European countries), but this regulation will not necessarily be specific to competition.

Upon my departure, I left a list of recommendations on issues I thought should be tackled by whomever took my position, including things that I would have addressed if I had stayed one more period. One of those issues is deciding whether Mexico wants to be a leader or a follower in the implementation of competition regulation for big tech, and if Cofece should be at the forefront of that discussion within Mexico. Beyond specific regulation in competition, the country will have to decide what to do with large technology companies, including on issues such as their use of data, and that conversation must involve a number of parties (Cofece should be there, but also the IFT and data protection and consumer protection agencies). In this context of broader regulation, I would find it very interesting for Cofece to take a proactive role.

Antitrust: Do you think governments in Latam are taking seriously both the challenges of the pro-competitive or anti-competitive actions of these companies, as well as the scope of their impact?

JP: You have to distinguish between different groups of agencies in the region. There are certain agencies that are more developed than others due to their experience and resources—for example, Mexico, Chile, Brazil, Colombia, and Peru—while other jurisdictions have more limited teams in terms of staff or do not have specific laws on matters of competition.

In this first group of agencies, I think they ask themselves the same questions—many of which still remain unanswered—and work on similar lines in relation to the challenges that these companies pose in terms of economic competition.

Antitrust: To what extent did you think about the fact that the rest of the Latam region sees Mexico as one of the leading authorities on the matter?

JP: It was something that was important to us and that we took very seriously. For example, one of our initiatives was the implementation of a Latam region training program. Every year, until the beginning of the pandemic, we invited two or three public servants from agencies in the region to train at Cofece in matters of their interest—for example, merger control, investigations of cartels and abuse of dominance, or strategic planning. This program was an important commitment of Cofece towards the region and I hope that it will resume soon.

Antitrust: Relatedly, and taking into account multi-jurisdictional practices and the international presence of certain large companies, regardless of the sector, do you think a greater convergence of competition laws is necessary at the international level? Could you elaborate a little on the efforts of Cofece during your presidency to cooperate or ensure cooperation with other international agencies?

JP: I think that the commitment of Cofece and the competition agencies in general is towards convergence in processes and best practices. One limitation is the fact that the agencies can only act to the extent that their own competition laws allow it, so there are times when there is a desire for cooperation on the part of an agency, but it is limited by the applicable laws. Within these limits, there is something very interesting in the dynamics of the ICN; those of us who participate proactively in this network are there in order to identify and implement these best practices.

Antitrust: How do you see the relationship between the objectives pursued by Cofece and the broader political objectives of the Administration, regardless of the sector, including regulatory bodies and not limited to the current Administration?

JP: The relationship between sector-specific regulators and Cofece is very important and must be strengthened. Regulators work with elements that are very relevant to ­Cofece´s enforcement efforts. For example, many sector-specific laws, including in the energy, aviation, banking, and railway sectors, require the delivery of certain specific data to regulators. Cofece needs this information to carry out its studies and investigations, which leads to Cofece frequently requesting this information from the regulators. This type of information is easily obtained when there is a good relationship between agencies, but becomes more difficult to obtain when the relationship is not so fluid.

In addition, sector-specific regulators sometimes know of “bad practices” in their sector. Having a good relationship with the Commission and an understanding of its work helps to establish the climate of trust that sector regulators need in order to get in touch with Cofece and, formally or informally, denounce behaviors that they consider to be in contravention of the competition act.

Finally, I believe that the expertise of the Commission opens up an avenue for ​​collaboration between sector-­specific regulators and Cofece on advancing smart regulation in order to make markets work for consumers.

For all these reasons, I believe that a good relationship among authorities is very important. And we have to proactively work on these approaches. In this sense, President Biden’s initiative, his Executive Order, is very interesting.

Antitrust: How can the application of competition law meet objectives related to consumer welfare, environmental rights, or other areas that transcend the pure defense of competition? Do you think that an adjustment to the applicable regulations in Mexico in this regard would be desirable?

JP: I find the changes in the conversation surrounding the scope of competition analysis and its objectives over the last decade very interesting. Several years ago, when I mentioned that market analyses in the context of merger control were very narrow and did not take into account elements such as conglomerate effect, my comments generated some surprise, and right now we are precisely discussing how to take these elements into account when analyzing a merger. But I think it is necessary to think much more carefully about whether we can apply competition enforcement to address environmental issues. I think that there may be, as in the case of the electricity sector, a very nice coincidence in that economic competition may generate innovation (e.g., producing renewable energy at cheaper cost), which translates into more clean energy, but I find it complicated, for example, to consider authorizing a transaction based on the mere fact that it would have the effect of generating more clean energy.

Antitrust: Changing the subject, when cartel investigations began to take off, leniency programs became a very effective tool that led to the discovery and sanction of many cases. However, in recent years we have seen fewer cases and fewer requests for immunity internationally. In your opinion, do we see fewer cartel cases because there are fewer cartels, cartel participants have become more cautious, or class actions deter applications for leniency? And that leads to the broader question of whether, in your opinion, the competition authorities have relied too heavily on leniency applications in their fight against the cartels. What was your experience in this regard at Cofece and how did you decide to deal with the decline in leniency requests?

JP: I think that in Mexico the recent drop in leniency applications has to do with the decrease in dawn raids. In other words, at least in Mexico, it is necessary to distinguish between the first applicant for leniency and those that follow. Because there is no culture of self-reporting when the undertaking identifies bad practices in the organization, if companies do not feel the threat of an investigation by the authority, they generally do not consider applying to the leniency program. In this sense, the proactivity of the authority in executing dawn raids, investigations, and sanctions in the context of cartels is important. In several recent cases, the companies that applied for leniency did so after an investigation had been opened and after they had internally analyzed the possible elements that Cofece had obtained as a result of a dawn raid. It is also important for Mexican executives to commit to eradicating these practices and to encourage self-reporting.

In this sense, another important area of ​​opportunity is related to class actions. In order to encourage those first applications for leniency, it is important that the undertaking is protected against the consequences of class actions.

Antitrust: Cofece is an example through its actions to promote gender equality. Could you tell us about the actions undertaken during your presidency that you consider to have had the greatest impact?

JP: Among the multiple programs we implemented, there is one in particular that fascinates me, Mujeres en Ascenso. The program involved two generations of thirty general and deputy directors, as well as area directors. Each consisted of a nine month program that began with a 360-degree evaluation of strengths and areas of opportunity in the participants’ leadership skills, and during the rest of the program, leadership skills were developed with sessions on topics such as developing a professional brand, giving and receiving feedback, using specific skills to strengthen teams, and network development.

The main result of the program was the empowerment of the women of the Commission; as a result, they actively sought promotions, which had an impact in promotions at all levels, including more women applying to be Commissioners or for other high-level management positions. It also prompted initiatives led by the participants themselves to push more aggressive gender equality actions in the Commission, such as the establishment of more comprehensive maternity and paternity leave schemes. And the foregoing gave rise to dynamics where men requested training themselves, above all to correct their gender biases.

Within only two generations, this program produced a very impressive dynamic of change in the culture of the Commission. The new austerity rules set by the central government made it difficult to continue implementing this program, but I hope that it can be resumed soon for the new generations of public servants.

I believe that the change in leadership in the presidency of the Commission can be very positive insofar as it can constitute a new impetus for the re-implementation of this and other initiatives.

Antitrust: What were the challenges that, as a woman, you faced to get to the place where you are now and to be able to play such an important role in the field of competition and, in general, in the Mexican Administration?

JP: I had the fortune of having an extraordinary team of Commissioners who formed, together with me, the first Board of Commissioners of Cofece. These were all professionals with a common goal, who showed broad support for gender equity policies. In this context, the fact that I was a woman in a leadership position, with the possibility of making proposals on how to run the institution, forced me to be proactive on the subject.

In addition to the ever-present issues of discrimination and sexism, personally, the most difficult issue for me to manage was to find the balance between family and work, especially with the challenges that taking care of children imposes on women.

Antitrust: From your role in the Commission, you showed great interest in institution-building, promoted an equity agenda and applied a public interest approach to your initiatives; will you continue working on these issues, either in competition or in another area?

JP: As of January 2022, I am joining the University of Southern California’s Sol Price School of Public Policy as a senior fellow, where I will focus on issues of economic regulation—including competition in the tech sector in Latin America and institution-building, of course.