Mexican watchdog flags corn flour maker Gruma for wielding too much market power
Source: Live Mint
MEXICO CITY, – Corn flour and tortilla-maker Gruma holds the power to fix higher prices, Mexico’s antitrust watchdog said in a preliminary decision on Monday, concluding after an investigation that conditions in the key food segment are not competitive.
“This market is fundamental for Mexico’s economy and the wellbeing of consumers, especially due to its impact on the price of tortillas,” the watchdog, known as Cofece, said.
Corn tortillas are the main staple of Mexican diets, consumed daily by 70% of the population. The cost of tortillas makes up about 6% of household food budgets.
Cofece noted that across eight regions in the country Gruma controlled between 50% and 90% of corn flour sales. In order to restore competition and curb prices, the agency recommended that the company sell five corn flour plants and also halt some commercial strategies including those designed to make it difficult for tortilla makers to switch suppliers.
The Cofece investigation revealed that Gruma controls a much larger share of the corn flour market than anyone else, reaching between 22 and 80 times its largest competitor across the eight regions. It also showed that Gruma’s average price comes in nearly 10% higher than its national competitors.
Shares of Gruma fell more than 6% after the preliminary ruling was announced.
In a statement released after the decision, Gruma said it has fully cooperated with Cofece. It said it has always operated lawfully.
The company added that due to the preliminary nature of the ruling, it was not possible to predict how the antitrust agency’s governing body would ultimately resolve the case.
The probe covered both the distribution and marketing of corn and corn flour, as well as related services, according to the watchdog’s announcement published in the official government gazette.
Gruma and other interested parties will now be able to present arguments ahead of the governing body’s review of all evidence and its final ruling.
Until then, Gruma is not obligated to take any action.
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