Bloomberg News

Mexican Antitrust Regulator Puts Pressure on Billionaires

June 12, 2012

Eduardo Perez Motta, Mexico’s chief antitrust regulator, has seen his staff members get blocked, bullied and even beaten by the companies they’re inspecting.

Perez Motta himself has been hauled in front of federal investigators, accused of bias and kicked out of the meeting that determined one of his agency’s most important rulings. Now, after eight years on the job, the 56-year-old says he’s finally getting what he’s been seeking all this time: cooperation.

He helped broker a settlement last month with billionaire Carlos Slim that cut fees in return for concessions, and he’s poised to announce a deal with the nation’s dominant TV broadcaster soon. Perez Motta’s agency used to lose 75 percent of antitrust cases in Mexico’s appeals courts; now he wins three-quarters of them, he says. That shift, the result of hard- learned lessons in and out of the courtroom, has made the country’s business barons more willing to compromise.

“The companies we regulate have been very demanding,” Perez Motta said in an interview. “You never stop learning.”

For some critics, the concessions coming from corporate chieftains are still too small. Consumer group AlConsumidor AC says Perez Motta’s Federal Competition Commission didn’t do enough to punish Slim, the world’s richest person according to the Bloomberg Billionaires Index, after he used his market heft to inflate prices for decades. When the antitrust agency settled the case, it removed a $1 billion sanction against Slim’s company, America Movil (AMXL) SAB.

Making Progress

America Movil agreed to the settlement to “create certainty in the market” and “address the commission’s concerns,” said Alejandro Cantu, the Mexico City-based company’s general counsel.

Criticism of the settlement misses the point, Perez Motta argues. The fact that Slim agreed to a deal is a sign of progress in itself, and more Mexicans are seeing the benefit of competition between Slim and rivals, he says.

A settlement may be coming shortly in another high-profile case. Last week, the agency reviewed an appeal by broadcaster Grupo Televisa SAB. The company has said it will offer a compromise to overturn a January ruling blocking its investment in the wireless business. A settlement could involve “firewalls” between the mobile-phone investment and other businesses, Chairman Emilio Azcarraga said in March.

Perez Motta, interviewed before the agency met, declined to discuss the Televisa case because it was under review. Televisa also declined to comment.

Collision Course

The decisions of Perez Motta’s agency have taken on heightened importance as Mexico’s media and phone industries collide. Slim is threatened by the entry of broadcasters Televisa and TV Azteca into the telecommunications business, and he’s responded by pulling advertising and dispatching lawyers to impede their progress. The TV companies, led by billionaires Azcarraga and Ricardo Salinas, have likewise lobbied to keep Slim out of their industry. Perez Motta, in many cases, gets to be the referee.

“This climate of tension and differences shows you that one side wants something that the other doesn’t like,” he said. “From the perspective of competition, that’s good.”

America Movil shares have gained 6.9 percent this year in Mexico City trading, compared with declines of 7.6 percent for Televisa and 3.9 percent for TV Azteca.

‘Common Battleground’

Technology may have made the clash between Slim and his fellow billionaires inevitable. Carriers can now provide voice, video and Internet service from a single source, be it a telephone line or cable, bringing the worlds of phone and TV into the same orbit. Officials such as Perez Motta have been able to use that trend as an opportunity to tighten the reins on some of Mexico’s biggest and most influential companies.

“The government has been able to put two large financial groups at odds in a common battleground,” said Gregorio Tomassi, an analyst at Banco Itau BBA who has followed the industry in Mexico for more than four years.

Slim has a fortune of $64.3 billion, about 60 percent of which comes from telecommunications. A statistics-obsessed Yankees fan who still drives his own car around Mexico City, the 72-year-old entered the industry in 1990, buying the state-run phone company in a privatization sale.

Video License

Slim’s America Movil has 70 percent of the mobile-phone market and 80 percent of land lines in Mexico. Still, the wired business is in decline, and wireless profits are shrinking because of restrictions imposed by regulators. TV companies, meanwhile, have entered the phone and Internet markets. Slim aims to counterattack by getting a license to offer video service -- something the government hasn’t granted yet.

Televisa’s Azcarraga, 44, inherited the broadcast business from his father, a man known as “the Tiger” for his combative style. The company has grown into an international Spanish- language empire, with a stake in U.S. network Univision and cable networks that air as far south as Argentina.

Salinas, 56, made his fortune giving high-interest loans to poor Mexicans for household appliances and acquired a government-owned TV chain in 1993. That became TV Azteca SAB.

All three are taking advantage of an expanding economy and relatively low inflation. Mexico’s gross domestic product grew 4.6 percent in the first quarter, the fastest pace in more than a year. Consumer prices rose 3.85 percent last month from a year earlier, higher only than Colombia and Chile among Latin America’s seven largest economies.

Presidential Election

Mexico’s presidential election on July 1 will determine who will pick Perez Motta’s successor. The front-runner, Enrique Pena Nieto, has advocated specialized courts to handle antitrust cases. While President Felipe Calderon has advocated lifting Mexico’s 49 percent cap on foreign investment in land-line phone companies, Pena Nieto has said that should happen only when Mexicans are allowed to own such assets in other countries.

The confrontation between the telecommunications titans has been an irresistible soap opera for Mexicans, who are accustomed to living with industries such as beer and cement that are dominated by a few companies.

“We’re seeing convergence between two industries that didn’t compete with each other before,” said Maria Elena Gutierrez, a communications professor at Universidad Panamericana in Guadalajara. “This hadn’t existed.”

Former Professor

Perez Motta has been waiting for this moment since he began a 10-year term as president of the Federal Competition Commission in 2004. The former college professor, who served as Mexico’s ambassador to the World Trade Organization, inherited an antitrust agency that had been created only a decade earlier and was still struggling to establish itself as an enforcer.

Slim had already warded off the antitrust agency’s attempts to rein in his power. When the commission determined in 1997 and in 2004 that Slim’s Telefonos de Mexico was dominant in the phone business, the carrier made sure the rulings couldn’t be enforced by filing injunctions.

Perez Motta faced other challenges from companies such as Gruma SAB (GRUMAB), a corn-flour producer. After a 2007 decision to block the company from making an acquisition, Gruma called the cops to stop antitrust officials from entering its offices, Perez Motta says. Then Gruma got the ruling overturned by the Supreme Court because the company hadn’t been notified in time. The lesson was clear: Antitrust officials couldn’t afford a single mistake.

A Gruma spokesman didn’t respond to phone and e-mail messages seeking comment on the incident.

‘We’ve Learned’

A standoff this year showed how far the agency has come. Antitrust officials sent to deliver news of an unfavorable ruling against Salinas-owned mobile-phone company Grupo Iusacell SA were met by corporate security. A confrontation ensued, with one antitrust representative receiving a blow to the face.

This time the outcome was different. A throng of local news media was on hand to witness the scuffle, and federal police showed up to aid the agency. Iusacell was served the papers. A spokesman for the company declined to comment.

“The judicial branch has given us clear guidelines to do things correctly,” Perez Motta said. “We’ve learned.”

He’s learned other lessons as well. Last year, Perez Motta spoke with the press about the agency’s bringing the $1 billion sanction against America Movil for anticompetitive practices. In Mexico, it was known as the “megafine.”

For talking publicly about the case, even though an appeal hadn’t yet been filed, Perez Motta deserved to be recused from further deliberations, America Movil argued. His fellow commissioners agreed, and when the antitrust commission took up the appeal on April 30, Perez Motta wasn’t able to vote.

Unanimous Vote

The commission decided unanimously to revoke the fine, with some conditions. To get out of paying the $1 billion, America Movil agreed to put into writing a plan it had announced last year to reduce the fees it charges rivals. If America Movil goes back on its word, the penalty will be harsher.

Perez Motta says he would have voted for the settlement if he had been allowed to participate. The fee cuts will produce $6 billion a year in savings for consumers, which makes the settlement better than fighting a long court battle over the $1 billion fine, he says. Never before had Slim’s company offered a compromise or volunteered to share information to avoid a penalty, Perez Motta told reporters last month.

“If you had been through my experience of the last seven and a half years and had been in the trenches like I have, you would see what a big deal this is,” he said.

To contact the reporter on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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