Exclusive-Mexico's antitrust watchdog accuses banks of joint price fixing

Mexico's antitrust watchdog COFECE has issued preliminary findings alleging 21 banks and financial institutions, including Mexican subsidiaries of HSBC, Santander, and Scotiabank, engaged in price-fixing for deferred credit card payment fees. The 649-page document details alleged collusion to set merchant surcharges and exclude some from the market. This marks the start of a trial-like phase where institutions can present their defense, with potential penalties reaching up to 10% of their annual Mexican earnings, underscoring significant regulatory risk in the region's financial sector.

Analysis

Mexico's antitrust regulator, COFECE, has issued preliminary findings suggesting that 21 banks and financial institutions, including the Mexican subsidiaries of HSBC, Santander (SAN), and Scotiabank (BNS), engaged in anti-competitive practices. The core allegation is the collusive fixing of fees and surcharges for merchants related to deferred credit card payments, a practice that also allegedly involved excluding certain merchants from the market. This development introduces significant legal and financial risk for the named institutions, as potential penalties could reach as high as 10% of a company's annual Mexican earnings. The investigation, which began in 2022, now enters a trial-like phase where the accused parties can present their defense. This action is consistent with COFECE's history of imposing substantial fines, such as the 903 million peso fine against pharmaceutical distributors in 2021 and the 2.4 billion peso fine against gas distributors in 2022, underscoring the credibility of the regulatory threat.

Key Decisions for Investors

• Investors with exposure to HSBC, Santander (SAN), and Scotiabank (BNS) should immediately assess the materiality of their Mexican operations and price in the heightened regulatory risk, given the potential for fines up to 10% of local annual earnings.
• It is critical to monitor the evolution of this case, as the current findings are preliminary; the final resolution from COFECE's plenary and the magnitude of any fines will be a significant catalyst for the affected stocks.
• This action signals a robust and aggressive enforcement environment in Mexico, warranting a broader portfolio review for any concentrated positions in other key Mexican industries that could face similar antitrust scrutiny.