Michael O'Boyle
Fri, October 6, 2023
(Bloomberg) -- Walmart Inc. will face an antitrust panel in Mexico after a three-year probe concluded the retailer’s local unit abused its market power, a charge that could result in billions of dollars in fines.
The company, Mexico’s biggest retailer, is reviewing the allegations and will get its first opportunity to defend itself in an administrative process before the board of antitrust regulator Cofece, according to a Walmart de Mexico statement Friday. Under Mexican law, Cofece’s board reviews findings from agency investigators and the company’s defense before deciding how to resolve the case.
“Walmex is confident that it has always acted in accordance with applicable law to guarantee the best prices, quality and assortment to its customers and will exercise all rights and remedies available under applicable law,” the company said.
Cofece launched the probe three years ago into alleged abuse of Walmex’s market position in the wholesale supply and distribution markets, as well as retail operations and related services. At the time, the agency cited its own recently concluded study that found small businesses were disadvantaged by large retail chains that imposed tough conditions, such as delaying payments or requiring vendors to carry the risk of unsold products. Small companies in the US have also described Walmart as a demanding customer that can make or break their businesses.
Walmart, based in Bentonville, Arkansas, didn’t provide information about the specific allegations it’s facing. It has 45 days to present its defense.
The antitrust regulator can fine companies in such cases for up to 8% of their Mexico unit’s revenue. Walmart had sales of $33.8 billion last year in Mexico. The company’s local operations are run by Wal-Mart de Mexico SAB, a publicly traded company controlled by the US parent. Shares of Walmex have dropped 6.7% this year, compared with a 2.5% gain for Mexico’s benchmark index and a 10% increase in Walmart shares.
Cofece is independent of President Andres Manuel Lopez Obrador’s administration, whose tax authorities used potential criminal fraud charges to push Walmex to pay an 8.1 billion peso tax settlement back in 2020 that heralded an aggressive charge by the government to collect more from big companies.
Walmart's Mexico unit to face anti-trust panel after three-year investigation
By Daina Beth Solomon
MEXICO CITY (Reuters) -Walmart's Mexico unit said on Friday it will face an anti-trust panel for alleged relative monopolistic practices related to the supply, wholesale distribution and marketing of consumer goods.
The allegations follow a three-year investigation by Mexico's antitrust regulator, Cofece, and the company now has 45 days to provide arguments and evidence in its defense.
Walmart de Mexico, known as Walmex, was first told in 2020 that it was under review for possible antitrust behavior.
"Walmex is confident that it has always acted in accordance with applicable law to ensure the best prices, quality and assortment to its clients," the company said in a statement, adding it could not yet predict any impact to its finances and operations.
Cofece declined to comment.
Specifics of the allegations were not immediately clear. In 2020, Cofece flagged concern about large retail chains imposing terms on their suppliers, saying such practices created risk for the smaller companies and could hit their finances.
The agency's commissioners will oversee a trial-like process, weighing the findings of its investigative unit against Walmex's defense.
If it determines Walmex has violated competition law, Cofece can impose a fine of up to 8% of the company's annual income in Mexico.
The retailer last year posted revenue of more than 819 billion pesos ($45 billion) from its operations in Mexico and Central America. It is due to report third-quarter results on Oct. 25.
Walmex is the biggest supermarket chain in Mexico with 2,890 locations and regularly outperforms local rivals.
The company is also in fierce competition with Amazon.com as both retail giants scale up e-commerce operations in the country.
The research division of Mexican bank Banorte said Walmex shares could see some short-term volatility following the announcement due to uncertainty over the potential impact on its operations.
($1 = 18.1638 Mexican pesos)
(Reporting by Valentine Hilaire and Daina Beth Solomon; editing by Stephen Eisenhammer, Sandra Maler and Edwina Gibbs)
By Daina Beth Solomon
MEXICO CITY (Reuters) -Walmart's Mexico unit said on Friday it will face an anti-trust panel for alleged relative monopolistic practices related to the supply, wholesale distribution and marketing of consumer goods.
The allegations follow a three-year investigation by Mexico's antitrust regulator, Cofece, and the company now has 45 days to provide arguments and evidence in its defense.
Walmart de Mexico, known as Walmex, was first told in 2020 that it was under review for possible antitrust behavior.
"Walmex is confident that it has always acted in accordance with applicable law to ensure the best prices, quality and assortment to its clients," the company said in a statement, adding it could not yet predict any impact to its finances and operations.
Cofece declined to comment.
Specifics of the allegations were not immediately clear. In 2020, Cofece flagged concern about large retail chains imposing terms on their suppliers, saying such practices created risk for the smaller companies and could hit their finances.
The agency's commissioners will oversee a trial-like process, weighing the findings of its investigative unit against Walmex's defense.
If it determines Walmex has violated competition law, Cofece can impose a fine of up to 8% of the company's annual income in Mexico.
The retailer last year posted revenue of more than 819 billion pesos ($45 billion) from its operations in Mexico and Central America. It is due to report third-quarter results on Oct. 25.
Walmex is the biggest supermarket chain in Mexico with 2,890 locations and regularly outperforms local rivals.
The company is also in fierce competition with Amazon.com as both retail giants scale up e-commerce operations in the country.
The research division of Mexican bank Banorte said Walmex shares could see some short-term volatility following the announcement due to uncertainty over the potential impact on its operations.
($1 = 18.1638 Mexican pesos)
(Reporting by Valentine Hilaire and Daina Beth Solomon; editing by Stephen Eisenhammer, Sandra Maler and Edwina Gibbs)
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