Walmart Mexico Found Engaging in Monopolistic Behavior

By Brendan O'Boyle and Diego Oré

MEXICO CITY (Reuters) – Mexico's antitrust watchdog Cofece ruled that the local unit of U.S.-based retail giant Walmart (NYSE:WMT), known as Walmex, engaged in monopolistic behavior related to its suppliers, according to a company statement on Friday.

Walmex has been ordered to pay a fine of just over 93 million pesos (approximately $4.6 million). The company stated it believes the regulator's analysis is incorrect and intends to appeal the ruling.

"Walmex is disappointed by this decision but will comply with Cofece's resolution while challenging the decision," the company remarked, noting that the ruling from Cofece's governing body was not unanimous.

Walmex contends that Cofece's 900-page ruling contained errors in the application of the law.

Markets responded positively, with Walmex shares on Mexico's main stock exchange rising over 4% shortly after the decision's announcement.

Rodolfo Ramos, an analyst at Banco Bradesco, commented, "Our initial reaction is that the determination takes off the table the more concerning scenarios of mandating divestments or levying large fines."

Cofece did not immediately respond to requests for comments. The ruling follows an investigation into the top retailer in Mexico, which also operates in Central America, lasting over four years.

Cofece accused Walmex of dictating prices and terms to its suppliers or distributors, highlighting a lack of competition in many areas of Mexico's retail sector.

Walmex asserted that both it and its subsidiaries acted lawfully. According to Walmex, the regulator acknowledged that the retailer could continue negotiating payments to suppliers, except for two specific cases from the original four investigated.

As Mexico's largest private employer, Walmex believes the ruling will not ultimately affect its operations. Since the investigation became public late last year, Walmex's stock has dropped, closing at 57.10 pesos on Dec. 11 after being valued at 66.77 pesos at the end of September 2023.

Cofece is among several autonomous government watchdogs Congress voted to abolish last month, transferring competition policing powers to other governmental agencies under the president's direct control.

> ($1 = 20.2422 Mexican pesos)