Antitrust Watchdog Targets Walmart: $4.6M Fine and 8% Revenue Risk Over Supplier Practices

Mexico’s Cofece has imposed a $4.6 million fine on Walmart de Mexico for using its market power to unfairly pressure suppliers. The antitrust body warned of further penalties, including 8% of revenue, if the company fails to comply with imposed restrictions.

Cofece Warns Walmex of Potential 8% Revenue Penalty

According to Reuters, Walmart's Mexican subsidiary Walmex faces possible penalties of up to eight percent of its income from Mexico's antitrust regulator, Cofece, if the company does not adhere to a resolution that forbids it from participating in specific actions that are considered unlawful.

Cofece's announcement included additional information regarding a ruling that Walmex announced on Friday. The regulator fined the company over 93 million pesos ($4.62 million) for participating in a supplier monopoly practice.

"For 13 years, Walmart used its market power to impose abusive conditions on its suppliers, obtaining illegal advantages over its competitors," the watchdog said in the statement, describing many sanctions it imposed on Mexico's largest retailer, Walmart.

Walmex Supplier Practices Under Scrutiny

This statement claims that Walmex, the Mexican branch of Walmart, "had a system that allowed it to impose discretionary discounts, pressuring its suppliers not to offer better prices and terms to other retailers, which severely harmed them, especially small and medium-sized businesses."

Walmex stated on December 13 that it would appeal the regulator's decision because it thinks the regulator's analysis is wrong. However, the company did not immediately react to a request for comment after Cofece's statement.

Walmex was barred by Cofece from punishing or terminating contracts with suppliers as a means of reprisal for the suppliers' business dealings with other self-serve stores, the regulator ruled on Monday.

Long-Term Oversight to Ensure Compliance

The antitrust agency also claimed that it forbade Walmex from making its suppliers pay a certain amount or disclose details about the terms and conditions they give to other companies.

"Cofece will verify compliance with the measures for ten years and may fine Walmart up to 8% of its income if it does not comply with this resolution," according to the agency.

Last month, the Mexican Congress decided to dismantle Cofece and other independent government watchdogs, transferring authority for competition enforcement to other branches of government directly reporting to the president, Investing.com shares.

Four-Year Investigation Highlights Walmex’s Market Power

The resolution was reached after a nearly four-year probe into the largest private employer in Mexico, which also runs businesses in Central America.

After Walmex first announced the sentence, the markets responded warmly. Analysts pointed out that the company could have faced a higher penalty—around $4.6 million—given its more than $650 million net profit in the third quarter.