Economic Interest Groups, Collusion, and Market Power

Economic Interest Groups (EIGs) Explained

Definition of Economic Interest Groups

An Economic Interest Group (EIG) is a collective of natural or legal persons who share common commercial and financial interests, coordinating their activities to achieve a specific shared objective.

EIGs Versus Collusion: Key Differences

• Collusion: Independent companies agree on price increases or other anti-competitive actions.
• No Collusion: Companies are part of the same holding or Economic Interest Group (EIG).

Types of Economic Interest Groups

There are two primary classifications:

• De Jure: A legally binding union, often established through a mercantile act or formal agreement.
• De Facto: An informal arrangement, often based on family relations or effective coercion.

Understanding Collusion in Business

Definition of Collusion

Collusion involves absolute monopolistic practices, which are considered illegal. These practices consist of contracts, agreements, arrangements, or combinations among competing economic agents, whose purpose or effect is to restrict competition (as per Article 53 of the Federal Economic Competition Law, or similar legislation).

Abuse of Dominance and Relative Monopolistic Practices

Defining Abuse of Dominance

Abuse of dominance refers to conduct by one or more economic agents who possess significant market power and use it to displace or disadvantage other economic agents (e.g., through unfair requirements, conditions, or other exclusionary tactics).

Justification for Relative Monopolistic Practices

Efficiency is sometimes cited as a potential justification for certain relative monopolistic practices, though this is often subject to strict scrutiny.

Case Study: Abuse of Dominance in Mobile Communications

Consider a scenario in Mexico where a single company holds substantial market power in the mobile communications sector. This dominant undertaking has maintained control of essential infrastructure and a stable market share for many years. Other companies seeking to enter the Mexican mobile market are reliant on this dominant agent's infrastructure, requiring them to pay interconnection fees. If the dominant undertaking begins charging excessively high interconnection fees to its competitors, it can lead to the elimination of alternative offers. This may force some competitors to exit the market or sell their assets to the dominant firm, illustrating an abuse of market dominance.

Defining the Relevant Market in Competition Law

Importance of Relevant Market Definition

An accurate and optimal definition of the relevant market is crucial. Without it, assessing the objectivity and suitability of claims regarding substantial market power becomes significantly hindered.

Key Requirements for Market Definition

• Product-Service Market: Defined by the possibility of substituting the good or service in question with other available alternatives.
• Geographic Market: Defined by its location, considering factors such as distribution costs, consumer costs of accessing other markets for the same good, and regulatory restrictions.