(Dow Jones Newswire circulated the following article on October 3.)
MEXICO CITY — Mexico’s antitrust agency plans to issue a final ruling on the merger of Grupo Mexico SA’s two railways in early December, followed by a separate opinion about railway regulations, a top official said.
Mining company Grupo Mexico last November announced it would merge its Ferromex unit with Ferrosur, controlled by billionaire Carlos Slim, to better compete with U.S.-based railroad Kansas City Southern (KSU).
In June, the agency rejected the merger on the grounds that alternative means of shipping, like trucking, wouldn’t be an effective counterweight to the new rail company.
“We are in the appeals process, which is a right the company has. They have requested that we reconsider,” Eduardo Perez Motta, president of the Federal Competition Commission, or CFC, said at a press conference Monday.
Perez Motta said all options are on the table, which include approving the merger, but are subject to certain conditions like the divestiture of assets.
Kansas City Southern has opposed the Ferromex-Ferrosur merger, saying it would hurt competition and give Grupo Mexico dominance in certain regions of the country, including Mexico City and the port of Veracruz on the oil-rich Gulf Coast.
Kansas City Southern last year gained full control of local railway TFM, which runs through the heart of the industrial sector to the border town of Nuevo Laredo from the Pacific port of Lazaro Cardenas.
Separately, the CFC is investigating Ferromex and Ferrosur for possible acts of collusion, which could result in a fine of up to $62 million.
“Some people say that Ferromex and Ferrosur are operating together. In our opinion they are separate companies,” Perez Motta said.
CFC Sets Sights On Railroad Regulations Once it rules on the Ferromex-Ferrosur appeal, the CFC plans to issue an opinion on how Mexico’s railways should operate – including trackage rights – to boost competition in the railway industry.
Perez Motta said disputes between railways over interconnection rates, haulage rights, and trackage rights were hurting the sector’s productivity and leading to higher costs for consumers.
Mexico’s rail network was broken up into three companies – TFM, Ferromex and Ferrosur – when it was privatized in 1997. U.S.-based Genesee & Wyoming Inc. (GWR) owns a fourth, smaller carrier, Ferrocarriles Chiapas-Mayab, which operates in six states.
“The sector isn’t working because there aren’t good regulations in place. There is a regulatory black hole,” said Perez Motta, who expects the CFC to issue its opinion in January at the latest.
Among the recommendations under consideration are new rules that would require changes to the law and a dedicated regulatory body for the railroad industry, he said.