Bloomberg News

Grupo Modelo Antitrust Fine Is Upheld by Court

August 28, 2007

Grupo Modelo SAB (GMODELOC), Mexico's largest brewer, was ordered by a Mexican federal court to pay a fine for hampering an antitrust probe that focused on the beer maker's exclusive contracts with retailers.

Modelo lost its last appeal against a fine of 746,460 pesos ($67,300), said Eduardo Perez Motta, president of the Federal Competition Commission. The punishment was levied during an investigation that stemmed from a complaint by SABMiller Plc (SAB), the agency said.

Modelo never handed over information on prices, sales volumes and other matters requested by the competition agency, Perez Motta said. The probe began in 2003 and centered on whether the brewer used unfair practices in contracts that sought to smaller, local stores from distributing rivals' brews.

``This is an important precedent for future investigations,'' Perez Motta said. ``It's very clear that not providing information to the agency can result in a fine.''

Jennifer Shelley, a spokeswoman for Grupo Modelo in Mexico City, said that the competition commission was wrong in saying that the fine related to the SABMiller complaint. She said the fine was for not providing information and declined to comment further.

Mexico's antitrust agency, armed with a tougher competition law enacted last year, is trying to loosen the grip of large companies that dominate industries such as beer, bread, cement, telecommunications and television. Their control of the markets has helped give Mexico the most billionaires in Latin America, including Carlos Slim, the world's richest man.

Investigation Closed

The investigation of Modelo's exclusivity contracts was closed in January without any antitrust action because of a lack of evidence. That case could be re-opened, depending on the resources the commission has, Perez Motta said.

Grupo Modelo's shares trading on the Mexican stock exchange fell 47 centavos to 54.49 pesos as of 4:07 p.m. New York time.

Perez Motta said that the fines his agency can levy are small compared with antitrust penalties in other countries, and he plans to push legislators to toughen penalties.

Mexico's antitrust agency plans to begin an investigation of the telecommunications industry at the end of September or beginning of October. It could lead to special regulation on Telefonos de Mexico SAB, the largest fixed-line telephone company, and America Movil SAB, Latin America's largest mobile telephone service provider. Perez Motta said in July that the agency was planning an investigation into the market dominance of the two companies, which are owned by Slim.

The agency is also investigating an incident from July 2004 in which Cemex SAB, the world's third-largest cement maker, obtained a court order that blocked a ship called the Mary Nour from unloading its cargo of cement at a Mexican port. Cemex controls more than half the Mexican cement market.

The commission also plans to submit to lawmakers a non- binding opinion on regulations that may impede the entrance of imported goods into Mexico, Perez Motta said. That may be done in December, he said.

To contact the reporter on this story: Thomas Black in Monterrey at tblack@bloomberg.net

To contact the editor responsible for this story: Michael Nol at mnol@bloomberg.net.


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