Mexico OKs Retailer Purchasing Alliance

Mexico’s antitrust watchdog Thursday approved a purchasing alliance among three retailers seeking to cut costs and lower prices to compete with mighty Wal-Mart de Mexico, commonly known as Walmex.

The Federal Competition Commission overturned its earlier finding that the venture could lead to price-fixing by retailers Gigante, Soriana and Comerci.

Facing growing market dominance by Walmex, an affiliate of No. 1 global retailer Wal-Mart Stores Inc. of Bentonville, Ark., the three supermarket chains last year announced the creation of Sinergia, a joint purchasing venture aimed at getting better prices from suppliers.

Walmex declined to comment.

The commission blocked Sinergia in February, finding that the retailers’ ability to negotiate prices with suppliers through the venture implied they could set prices jointly wherever the stores operate. But the commission gave the stores the chance to appeal.

In now approving the deal, the commission said it would be illegal for the companies to “coordinate price strategies” or “carry out anti-competitive practices.”

“The [commission] decided to put [Sinergia] under permanent supervision so that its economic savings, besides making the supermarket chains more competitive, translate into benefits for the consumer,” the commission said.

Comerci, Soriana and Gigante had argued before the commission that Sinergia would benefit Mexico’s retail industry and consumers by promoting competition and helping keep smaller retailers alive. Such ventures are common worldwide, they said.

Analysts said the venture was likely to benefit Gigante the most.

Seen as the weakest retailer of the three, Gigante has lagged behind the others in developing centralized distribution and other cost-saving measures to confront Walmex, analysts said.

Walmex’s low-price strategy has helped it gain dominance in Mexico’s fragmented market.

Opponents of Sinergia, mainly international companies that supply Mexican retailers, contended that Sinergia was simply a means of pressuring them to lower prices for merchandise.