Ministry of Economy of Mexico-OECD Co-operation to Strengthen Competitiveness in Mexico COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY 2019 INDUSTRY RETAIL COMPETITION POLICY IN THE MEXICAN GROCERY Competition Policy in the Mexican Grocery Retail Industry 2019 COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY 2019 2 │ Please cite this publication as: OECD (2019), Competition Policy in the Mexican Grocery Retail Industry www.oecd.org/daf/competition/competition-policy-in-the-mexican-grocery-retail-industry.htm This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the European Union. This document and any map included herein are without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city, or area The OECD has two official languages: English and French. The English version of this report is the only official one. © OECD 2019 COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY © OECD 2019 ACKNOWLEDGEMENTS 3 │ Acknowledgments This report was prepared by Niccolò Comini, Competition Expert at the OECD and benefitted from the comments of Michael Saller, Senior Economist at the OECD. The OECD Secretariat thanks the Ministry of Economy for its input, review and fruitful co-operation, in particular Ernesto Acevedo Fernández, Under-Minister of Industry and Commerce; Jorge Arreola Cavazos, Head of the Unit of Competitiveness; Aurelio Limón Cruz, Area Director in the Unit of Competition and Public Policies for Market Efficiency, Elías Mizrahi Alvo, Area Director in the Unit of Competition and Public Policies for Market Efficiency and Ana Lilia Martínez Valdés, Area Director in the Unit of Competition and Public Policies for Market Efficiency. Furthermore, the OECD recognises the contributions of José Eduardo Mendoza Contreras, Gustavo Rodrigo Pérez Valdespín and David López Victoriano. The OECD acknowledges the valuable review, the quality of comments and the richness of information provided by Alejandra Palacios Prieto, President Commissioner of the COFECE, Raúl Picard del Prado, of the Confederación de Cámaras Industriales (CONCAMIN), Lorena Cerdán Torres of the Consejo Mexicano de la Industria de Productos de Consumo (CONMEXICO), Mauricio García Perera of the Consejo Nacional Agropecuario (CNA), Alejandro Malagón Barragán of the Cámara Nacional de la Industria de las Conservas Alimenticias (CANAINCA), Manuel Cardona Zapata of the Asociación Nacional de Tiendas de Autoservicio y Departamentales (ANTAD), Leonardo Álvarez Córdova, General Director of Innovation, Services and Internal Commerce at the Ministry of Economy and Carlos César Reza González, Area Director at the Ministry of Economy. COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY © OECD 2019 1. INTRODUCTION 5 │ Table of contents Acknowledgments .................................................................................................................................. 3 Chapter 1. Introduction ........................................................................................................................ 7 Chapter 2. The grocery retail market .................................................................................................. 9 2.1. The composition of the grocery retail market ............................................................................. 11 2.2. Definition of the relevant markets .............................................................................................. 16 2.3. Concentration and buyer power in the industry .......................................................................... 17 Chapter 3. Competition authorities’ activity in the grocery retail industry .................................. 23 3.1. Merger ......................................................................................................................................... 23 3.2. Horizontal and Vertical Agreements........................................................................................... 26 3.3. Abuse of dominance ................................................................................................................... 27 Chapter 4. How regulation can affect the grocery retail industry .................................................. 35 4.1. Codes of conduct ........................................................................................................................ 35 4.2. Other regulations ......................................................................................................................... 39 Chapter 5. Conclusions ....................................................................................................................... 47 Bibliography......................................................................................................................................... 49 Tables Table 2.1. Regional Share of Trade (%) ................................................................................................ 11 Table 2.2. Share of Trade (%) ............................................................................................................... 12 Table 2.3. Total Revenue (MXN millions) ........................................................................................... 12 Table 2.4. Income’s shares spent on food by channels ......................................................................... 15 Table 2.5. Market share (in edible grocery sales) of the top 10 retailers in the European Union (2000 - 2011) ................................................................................................................................. 18 Table 2.6. Market Shares of the top five largest US food retailers (1992, 2001, 2009) ........................ 18 Table 2.7. Grocery Retail Industry Concentration in Latin America (2015) ......................................... 19 Table 4.1. Business cases discussed in the agreement framework ....................................................... 39 COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY © OECD 2019 6 │ Figures Figure 2.1. Percent of consumer expenditures spent on food .................................................................. 9 Figure 2.2. Food Inflation (%) ............................................................................................................... 10 Figure 2.3. Non-Food Inflation (%) ...................................................................................................... 10 Figure 2.4. Supermarkets by state ......................................................................................................... 13 Figure 2.5. Number of stores ................................................................................................................. 13 Figure 2.6. Sales floor ........................................................................................................................... 14 Figure 2.7. Share of food expenditure by income class and shop category in Mexico (2013) .............. 14 Figure 2.8. Economic units by retail channel ........................................................................................ 15 Figure 4.1. OECD Retail Trade Indicator ............................................................................................. 42 Figure 4.2. Licences or permits needed to engage in commercial activity ............................................ 42 Figure 4.3. Specific regulation of large outlet ....................................................................................... 43 Figure 4.4. Protection of existing firms ................................................................................................. 43 Figure 4.5. Price controls....................................................................................................................... 44 Boxes Box 3.1. Investigation on joint purchasing agreements in the French food retail market ..................... 27 Box 3.2. The Mexican framework ......................................................................................................... 29 Box 4.1. The Asda Case Study in the United Kingdom ........................................................................ 36 Box 4.2. The Permanent Executive Committee (CEP) ......................................................................... 38 Box 4.3. The Spanish case on planning, zoning and license restrictions .............................................. 41 Box 4.4. Misleading and deceptive price promotions in United Kingdom ........................................... 45 COMPETITION POLICY IN THE MEXICAN GROCERY RETAIL INDUSTRY © OECD 2019 1. INTRODUCTION 7 │ Chapter 1. Introduction The grocery retail industry plays a key role from a consumer welfare perspective, considering that – in developed economies – it is the main channel through which households buy food, beverages and other basic products. This industry is populated by a wide set of actors such as farmers, manufacturers, processors and retailers. In the last 15 years, competition assessment of the grocery retail market has become a popular topic amongst competition authorities. Several antitrust agencies worldwide have conducted comprehensive market investigations into the groceries