Mexico’s Federal Economic Competition Commission (Cofece) has launched a formal investigation into a prominent supermarket retailer over allegations of imposing unfair pricing and terms on suppliers and distributors. Although the company’s name hasn’t been officially disclosed by Cofece, indications point to Walmart de Mexico, often referred to as Walmex, the nation’s leading supermarket chain.

Jose Manuel Haro, the head of Cofece’s investigative unit, revealed that this inquiry centers on potential abuse of market dominance, described as «relative monopolistic practices.» Violations can result in substantial fines, potentially up to 8% of the company’s annual income.

In response to the investigation, Walmex issued a statement expressing confidence in its adherence to legal standards while striving to maintain competitive pricing and consistent product supply. Nevertheless, Walmex’s shares witnessed a significant drop, falling more than 5% to their lowest point in over 30 months.

Walmart has a well-known history of robust negotiations for lower prices with its suppliers. In 2019, Reuters reported instances where the retailer imposed penalties on food suppliers providing groceries to competitors, such as Amazon.com Inc.

Haro refrained from disclosing the company’s name or commenting on specific negotiation tactics within the Cofece probe. More details will be provided in the final decision.

«In this case, it’s about the imposition of prices or other terms on suppliers and distributors,» Haro explained. «The entity in question is imposing conditions that could undermine principles of fair competition.»

In response to Cofece’s statement, Walmex confirmed it received a notification from the authority on the previous Friday, coinciding with its initial disclosure of the investigation. This notification pertains to matters related to the supply, wholesale distribution, and marketing of consumer goods. Walmex is currently reviewing the notification and has a 45-day window to present arguments and evidence in its defense.

Walmart holds a 71% stake in Walmex, which operates 2,890 stores throughout Mexico.

Cofece issued a statement underscoring that the investigated company has the opportunity to defend itself through a trial-like process against findings of «probable vertical price fixing and/or other relative monopolistic practices.» Furthermore, it retains the right to appeal Cofece’s decision to a court.

Cofece emphasized the critical importance of monitoring the food and beverage sectors to prevent anti-competitive practices, particularly considering that more than half of Mexican households allocate their income to consumer goods.

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