Mexican Competition Commission

The Mexican Competition Commission identified Telmex’s substantial monopoly power in several parts of Mexico’s telecommunications market, but regulatory efforts to limit that power came to nothing. Its encounter with Telmex illustrates the gap between recognizing market dominance and being able to constrain it when a company can exploit legal procedures to resist enforcement.

Review of Telmex

In 1996, Avantel, a long-distance phone provider, petitioned the Mexican Competition Commission to determine whether Telmex held a dominant position in telecommunications. The commission ruled in 1997 that Telmex had substantial monopoly power in local telephony, national long-distance calls, and international long-distance calls, among other areas. The finding established that the company’s dominance extended across multiple segments of the market, not merely one kind of service.

The ruling did not produce effective limits on Telmex’s monopolies. The book emphasizes the difference between a regulator’s formal determination and its practical ability to alter market conditions: Mexican authorities made attempts to curb the monopolies, but those efforts came to nothing.

The Amparo and the Limits of Enforcement

One obstacle was the recurso de amparo, an appeal for protection through which a party could argue that a particular law did not apply to it. The amparo had roots in Mexico’s 1857 constitution and was originally intended to safeguard individual rights and freedoms. Telmex and other monopolies, however, used it as a means of cementing market power.

In this account, the legal remedy’s function is sharply reversed. A protection designed to defend rights could become a loophole in equality before the law, allowing powerful firms to resist rules intended to limit their conduct. The commission’s finding against Telmex therefore exposed the extent of the monopoly without ensuring that the company would be subject to effective regulatory constraints.

Significance

The commission’s case forms part of a broader contrast between Mexican and United States institutions. In the book’s account, business entry in Mexico is shaped by licensing costs, red tape, political influence, and difficulty obtaining finance; these barriers can exclude entrepreneurs or protect incumbents from competitors. Telmex’s ability to maintain its position despite an adverse regulatory determination exemplifies how formal institutions may leave entrenched economic power intact.

That contrast becomes concrete in Carlos Slim’s unsuccessful attempt to establish a competing retail chain in the United States. After his company acquired CompUSA, Slim violated an existing franchise arrangement with COC Services, which sued in a Dallas court. The absence of an equivalent to the amparo in Dallas meant that the tactic did not work there: Slim lost and was fined $454 million. The comparison underscores the distinction between identifying a monopoly and enforcing rules against powerful actors. In the Mexican case, the commission could declare Telmex dominant, while the legal and political environment described by the book left its monopoly challenges unsuccessful.