The Board of Commissioners of the Mexican Federal Economic Competition Commission (COFECE) has fined four retirement fund administration companies a total of 1.1 billion pesos ($58.6 million) for “monopolistic practices.”
The four retirement fund administrators, known in Mexico by the term afores, are Profuturo GNP Afore, Afore Sura, Afore XXI Banorte, and Principal Afore. The COFECE also sanctioned 11 individuals who acted on behalf of the fund administrators.
The agents allegedly agreed to reduce transfers between retirement funds administrators, which the COFECE said reduced competition between the companies to win the workers’ preference.
“The objective of this illegal practice was to reduce commercial expenses, which would have greater benefits for the afores,” said COFECE in a statement. “As it is a market in which it is complex to modify the commissions amount, and in which investments are regulated, the funds administrators sought to increase their profits from a reduction of their commercial expenses.”
COFECE said that because the commissions Afores charge are regulated, transfers are a key source of competition. “In agreeing to limit these,” said COFECE, “the incentives to offer a better service are reduced, and the possibility that workers have to reward or punish their afore according to their degree of satisfaction is eliminated.”
In 2014, of the total expenditure of an Afore, the commercial expenses represented about 34%, and came to be up to 50% of the commission charged to the workers, said the regulator. “These actions, while seeking to reduce the costs of the administrators, were not reflected in better commissions for the clients.”
Implementation of the agreements was monitored through emails in which mechanisms were established to hide the identity of the afores, “which shows that the sanctioned knew about the illegality and consequences of the action,” said COFECE. “In addition, based on data from the sector regulator, CONSAR, it was proven that in the periods in which the agreements were in force, the transfers of accounts between the afores involved were reduced.”