Amazon, Mercado Libre In Mexican Watchdog Crosshairs

The Mexican antitrust regulator, known as Cofece, has raised red flags regarding potential barriers to competition within the e-commerce sector. According to Cofece’s preliminary report, shared on Tuesday via the official gazette, major players such as Amazon and Mercado Libre collectively control over 85% of transactions and sales in the market.

The report highlights concerns over the dominance of these industry giants, citing the existence of strong networks between user groups that effectively impede the entry of new competitors, thus creating significant hurdles for smaller players looking to expand their presence, reported Yahoo News.

Cofece underscores the challenges faced by smaller retailers, who often encounter substantial financial barriers in terms of investing in technological tools, maintaining inventory, and advertising to effectively compete with established market leaders like Amazon and Mercado Libre. Moreover, the clustering of both buyers and sellers around a single marketplace, a phenomenon referred to as “singlehoming,” further exacerbates the difficulties for smaller entities.

Related:

According to Cofece’s analysis, the current competitive landscape inadequately pressures Amazon and Mercado Libre due to the limited presence of smaller participants, who lack the requisite number of buyers and sellers needed to mount a substantial challenge.

To address these concerns, Cofece has recommended that the government intervene by mandating the implementation of a series of corrective measures by the two retail giants within a six-month timeframe. These measures include enhancing transparency for service providers and considering the separation of streaming services from the core marketplace operations.

Amazon, the U.S.-based retail behemoth, made its foray into the Mexican market in 2013, subsequently launching its marketplace platform there in 2015. Meanwhile, Mercado Libre, often referred to as the South American counterpart to Amazon, established its presence in Mexico in 1999 and has since expanded its offerings, particularly in financial services.

The regulatory scrutiny from Cofece underscores growing concerns over the concentration of power within the e-commerce sector in Mexico and signals a potential shift towards more stringent oversight to foster a more competitive marketplace environment.

Source: CA Finance Yahoo