Insights into the Mexican E-Commerce Competition Landscape

Photo: Mymemo via Adobe Stock
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Executive Summary
As digital commerce accounts for a growing share of economic activity, ensuring a competitive and level playing field in the retail sector, including e-commerce, has become more critical than ever. In Mexico, e-commerce now represents 15 percent of total retail sales, a significant increase from 10 years ago, when that figure stood at just 1 percent. Online sales in Mexico totaled $74 billion in 2023 and are projected to have reached about $100 billion in 2024 and $176.8 billion by 2026.
Yet a preliminary report issued in February 2024 by the Investigative Authority (IA) within the Federal Economic Competition Commission (COFECE)—Mexico’s antitrust regulator—is critical of trends that may threaten this growth potential. Using a narrow definition of retail that disregards current economic realities, the report identifies significant market concentration and barriers to entry, concluding that “conditions of effective competition do not exist” in “retail e-commerce” (defined by COFECE as the e-commerce retail market).1 To fix the problem, the report proposes remedies that may hurt rather than promote competition in the Mexican retail market. The report calls for further regulation in Mexico of “two leading economic players of the retail e-commerce market,” here referring to operations of U.S.-based Amazon and Mercado Libre in Mexico.
In particular, these remedies may harm Mexican consumers, workers, independent sellers (i.e., small- and medium-sized businesses), and the broader economy, while providing an unfair advantage to three Chinese e-commerce companies—Shein, Temu, and AliExpress—whose emergence has also raised significant geopolitical, commercial, and consumer safety issues. In addition, COFECE’s proposed approach risks violating multiple chapters of the United States-Mexico-Canada Agreement (USMCA), damaging North American economic relations and disrupting integration efforts ahead of the agreement’s mandatory 2026 review. To avoid these pitfalls, Mexican policymakers and COFECE’s leadership should consider a more comprehensive definition of retail—one that allows for a return to healthy competition and a fairer state of play, rather than one that paves the way for the asymmetrical regulation of specific foreign firms.
Introduction
In today’s economic landscape, e-commerce occupies a growing share of retail transactions. Online consumption is here to stay due to several key drivers: widespread adoption of smart devices; enhanced internet access; synergies with social media platforms; and shifts in consumer behavior since the Covid-19 pandemic. The benefits of this shift have been noticeable and numerous for both businesses and consumers. E-commerce has lowered barriers to entry for millions of businesses, unlocking new geographic markets and enabling greater economies of scale. These gains in productivity have reduced business expenses, lowered consumer prices, and fostered economic growth, especially across developing economies and for historically disempowered groups. E-commerce has likewise been a boon to economic competitiveness, enabling increased operational efficiency and improved convenience. It is also more environmentally sustainable than traditional retail, at least in the case of large stores.
E-commerce has likewise been a boon to economic competitiveness, enabling increased operational efficiency and improved convenience.
Notwithstanding these positive outcomes, some policymakers and regulators have come to view large online companies—colloquially labeled “Big Tech”—with skepticism, scrutinizing whether their size is due to merit or anticompetitive behavior. Some countries, such as Brazil and Turkey, are debating on whether or not they should replicate or build upon the European Union’s Digital Markets Act (DMA), an ex ante competition policy for large digital platforms.
Meanwhile, at an October 2023 meeting of the Joint Statement Initiative on Electronic Commerce (JSI) at the World Trade Organization (WTO), the United States retreated from several of its longstanding digital trade priorities, all of which historically dovetailed with the interests of successful U.S. tech companies. Now, as “many countries . . . are examining their approaches” to digital competition, the U.S. government has effectively left the international conversation, instead emphasizing the importance of “policy space for . . . debates to unfold” absent “proposals that might prejudice or hinder those domestic policy considerations.” The result has been an effective ceding of digital competition policy leadership to the European Union, punctuated by U.S. trade representative Katherine Tai’s October 2023 call for “balancing the right to regulate in the public interest and the need to address anticompetitive behavior in the digital economy.”
At the same time, Chinese companies—with government support—have emerged as major players in sectors like retail, cloud computing, semiconductors, and artificial intelligence. Foreign firms aiming to access the Chinese market face a highly restrictive digital policy that emphasizes “internet sovereignty” via restricted market access and forced technology transfers. While this model has accompanied significant growth in China’s digital sphere, few countries have replicated it—a fact that perhaps indicates conditions unique to China, such as a massive domestic market and an authoritarian system.
This is the context out of which the preliminary report from COFECE’s Investigative Authority has emerged. Although COFECE has drawn the ire of former Mexican president Andrés Manuel López Obrador (nicknamed “AMLO”), and is currently the target of constitutional reform proposals (potentially non-USMCA compliant) that call for multiple independent agencies’ dissolution, the February 2024 report aligns with AMLO’s broader agenda to reduce the rights of domestic and foreign private sector companies. Predictions of COFECE’s ultimate decision offer little insight. The future of the commission itself is uncertain, between AMLO’s recent appointment of three new commissioners (out of seven total) and President Claudia Sheinbaum’s reluctance to discuss its potential dissolution, and amid questions of compliance with the USMCA. While it is unknown how COFECE will function following the constitutional reform’s passage, the February 2024 report should be considered on the merits of whether the proposed regulations would, in fact, hinder a competitive, dynamic, and growing industry, ultimately hurting Mexican consumers and businesses.
Unpacking the Preliminary Report
Fundamentally, the preliminary report fails to recognize that online companies Amazon and Mercado Libre compete directly with omnichannel retailers such as Walmart and Costco, local bricks and mortar (B&M) stores, and social media platforms, and instead concludes that there are no conditions of effective competition in Mexico’s “retail e-commerce market.” The IA’s analysis and narrow definition leads to its conclusion that 85 percent of sales and transactions occur on two platforms, Amazon and Mercado Libre. Whereas other businesses in the sector are said to exert insufficient competitive pressure, the two market leaders allegedly enjoy vast market power, including the ability to fix prices, grow their user base via network effects, maintain significant barriers to entry, and offer differentiated tools using their extensive data pools. The IA argues that such practices—and “the high costs that sellers would incur when contracting integrated logistics solutions for each of the platforms on which they offer their products”—lead “sellers to concentrate their presence in a single marketplace,” such as Amazon or Mercado Libre, thus reducing effective competition.
These supposed barriers exist only if Amazon and Mercado Libre are considered “dominant,” a term that the IA gives an excessively narrow and flawed definition. The report considers online marketplaces with a “national geographic dimension” as the sole “relevant market for sellers,” thus excluding more local omnichannel retailers such as Palacio de Hierro and Coppel, both of which offer a combination of online (e.g., computer or mobile device) and in-person channels, as well as exclusively B&M stores, social media platforms, and informal economy channels. Such a narrow definition led the IA to find that Amazon and Mercado Libre process over 85 percent of the industry’s sales and transactions—a finding that does not reflect the realities of the Mexican economic landscape.
A recent report by Deloitte demonstrates that physical retail channels compete head-to-head with online retail channels, including online marketplaces, contradicting a key assumption of the IA’s report.
In sum, robust competition in the Mexican retail market among online and physical channels provides Mexican consumers with significant benefits. Physical retail channels compete head-to-head with online retail channels, including online marketplaces—a fact the report does not account for. It is important to note that Mercado Libre and Amazon, the two companies highlighted in the IA’s report, are not even among the top 15 retailers in Mexico; Mercado Libre is just the 19th-largest retailer in the country, while Amazon does not even appear in the top 20. These two giants face fierce competition from legacy retailers in Mexico and increasingly from Chinese e-commerce companies, whose online presence is growing rapidly.
In sum, robust competition in the Mexican retail market among online and physical channels provides Mexican consumers with significant benefits.

Reflecting dynamic competition in Mexico’s retail market, Walmart saw a 129 percent jump in product assortment and a 78 percent increase in sellers in 2023, leading the chain’s online revenues to grow by 21.7 percent year-over-year, reaching a total of 6.7 percent of the company’s worldwide gross revenue. Walmart is Mexico’s largest supermarket chain and fourth-most-visited e-commerce site based on monthly visits (36.6 million)—likewise, other omnichannel retailers such as Liverpool and Coppel have invested significant resources to build out their digital and logistics infrastructure, with the latter enjoying a 1000 percent increase in sellers in 2023.
Mexican sellers, ranging from small- and medium-sized enterprises (SMEs) to multinational enterprises (MNEs), utilize a host of alternatives to Amazon and Mercado Libre. Some distribute their products through the informal economy, which accounts for over a quarter of the country’s GDP and more than half of its jobs. Many more look to retailers with a physical presence, whose stores account for 88 percent of Mexican retail sales. Social commerce, or retail sales facilitated by social media platforms like Facebook, WhatsApp, and TikTok, offers sellers another channel.
While the IA’s February 2024 report claims that social networks and B&M stores do not provide equivalent value propositions—particularly since the former do not allow transactions to take place within their platforms—economic trends tell a different story. In 2023, social media–derived retail sales in Mexico grew by over 20 percent, exceeding $2 billion. Projections indicate that this sales channel will account for 40 percent of all online sales in Mexico by 2025 and will eclipse $6 billion in gross transaction value by 2028. By contrast, sales on Amazon Mexico, the alleged beneficiary of a lack of competition in retail, represent only 1.5 percent of total retail transaction value in country. However, the IA nevertheless appears intent on regulating this small segment of the retail industry and, in doing so, is relying on narrow definitions that ignore market and consumer realities.
The IA’s phrase “relevant market for buyers” is likewise worthy of scrutiny. By limiting the scope to online firms and multicategory retailers, the report’s authors once again disregard the many choices consumers have when looking to purchase a product. Their finding that 61 percent of the relevant market is controlled by three firms requires them to ignore the informal economy’s massive role in everyday transactions and buyers’ spending patterns, let alone the growing share of Mexicans eager to shop via social media platforms. Mexican buyers are highly influenced by social networks when making purchases, with 43 percent of online shoppers making purchases via conversational commerce and 29 percent of online shoppers purchasing through live streams.
Furthermore, the exclusion of physical B&M stores from the IA’s market definition further skews its findings against online retail companies. The IA claims that such stores are not substitutes, owing to their less comprehensive value proposition—they “lack the convenience, variety, and logistical support of online marketplaces”—but Amazon and Mercado Libre directlycompete with national and regional omnichannel retailers such as Walmart, Coppel, and Costco on prices, convenience, and product quality. As in the United States, Mexican “consumers buy products, not store types”; 75 percent of Mexican consumers prefer to interact with and move between online and offline shopping environments prior to a purchase. As a report from the Organisation for Economic Co-operation and Development questions, “does it make sense to argue that the same product, being sold by the same retailer, generally at the same price, sits in a different product market depending upon whether the customer opts to complete the transaction online or instore?” Competition is all but certain to increase and fragment leading retailers’ market share as low-price Chinese competitors emerge. The obtaining of excessive market share by e-commerce firms is not a concern, as the head of the IA recognized following the report’s publication, admitting that “[Mexico] is in a particularly different circumstance from other jurisdictions and other countries” in which digital platforms “have high levels of concentration.”
When e-commerce is analyzed using a definition inclusive of omnichannel providers, the results are indicative of dynamic and healthy competition. In 2023, Mercado Libre led in market share with 15.4 percent, and Amazon ranked second with 11.2 percent. In terms of monthly site visits in 2023, Amazon led with approximately 152.4 million, and Mercado Libre closely followed with nearly 147.5 million. The e-commerce component of retail experienced 12 percent year-on-year growth in overall traffic, driven by a 20 percent increase in app traffic and a 4 percent rise in web traffic. This surge was primarily due to the entry of new competitors, notably PDD Holdings’ Temu. AliExpress was the third-most frequented, with 63.7 million visits per month, while Temu garnered 18.4 million visits in October 2023, just 18 months after it launched. Chinese firms dominated the shopping apps space in Mexico that year: Temu and Shein led with 37.4 million and 27.4 million users, respectively. In April 2024 alone, Chinese app traffic saw significant increases, with Temu, AliExpress, and Shein reaching 15 million, 11.2 million, and 10.1 million active users, respectively. AliExpress is currently the fourth-most downloaded shopping app in Mexico, surpassing Amazon. Mercado Libre’s marketplace app ranked third, with over 25 million downloads. This fragmentation suggests that concerns of market dominance are overblown, especially as additional Chinese firms enter the market and omnichannel competitors challenge online companies via aggressive growth strategies.
The IA’s report specifically identified three barriers to free competition and corrective measures for each. The first alleged barrier is the “artificiality in . . . the [two] marketplaces’ loyalty program[s].” According to the report, membership programs offered by Amazon and Mercado Libre contain components that “are not directly linked to the ability of the marketplaces to conduct or facilitate transactions between buyers and sellers,” impacting buyers’ behavior by attracting and retaining them from shopping on alternative marketplaces. Examples cited by the IA include benefits related to streaming, gaming, and music services. The report proposes that the two firms disassociate these services—and any other service unrelated to the use of their marketplaces—from memberships and/or loyalty programs. It also calls on them to stop promoting these services on their marketplaces.
In effect, the report alleges that Amazon Prime and Meli+ serve as a business strategy to “lock in” consumers. Again, the report seems disconnected from the facts—research shows that Mexican consumers multi-home, whereby they simultaneously subscribe to and use various retail memberships from different retailers. In fact, a recent study reflects that 94 percent of members at one of Mexico’s leading four big-box stores (Walmart, Sam, Costco, and HEB), MeLi+, or Amazon Prime also have a membership with at least one more of these six retailers.
Paid membership programs are both important and valued by consumers, but this does not mean that having a paid membership program is a requirement for a retailer to succeed. Retailers have other options to attract customers; in fact, a study found that four out of the top five retailers with higher sales revenues in Mexico do not have a paid membership program, and only five of the top twenty retailers have such a program.
The second barrier alleged by the IA is Buy Box’s “opacity.” As defined in the preliminary report, Buy Box is an offer management system within the marketplace that uses a series of algorithms to select and highlight a particular offer as the best offer for buyers. The report explains that “for sellers offering products through Amazon and Mercado Libre, winning the featured offer slot is crucial, as it provides greater visibility and increases the probability of sales.” However, “the limited and inefficient information available to sellers regarding the operation of the Buy Box and the variables it considers when choosing the featured offer . . . could lead them to erroneous strategies as they seek to win the featured offer slot, making it difficult for them to compete effectively.” The report proposes four remedial measures related to Buy Box to support sellers, including ordering Amazon and Mercado Libre to publish all the variables and weights considered.
The third and final supposed barrier focuses on logistical solutions and self-preferencing practices. According to the report, the two stores prevent the interconnection of their application programming interfaces (APIs) with external logistics firms and favor sellers who use in-house logistics services by attributing distinctive features (e.g., Amazon Prime) that yield superior product positioning and exposure via Buy Box. The IA argues that such practices—and “the high costs that sellers would incur when contracting integrated logistics solutions for each of the platforms on which they offer their products”—lead “sellers to concentrate their presence in a single marketplace,” thus reducing effective competition. In response, the report proposes that the two stores modify the criteria of their Buy Boxes to not consider the use of in-house logistics solutions as a variable and to allow any and all external logistics firms to integrate with their APIs.
The IA’s allegation that these three business practices—loyalty programs, the Buy Box system, and self-preference logistical solutions—are barriers to competition merits rethinking. First, the IA overestimates the impact of loyalty programs on market dynamics by characterizing them as necessary—rather than simply helpful—to a successful retailer. Amazon derives significant revenue from transactions with non-Prime members, and Mercado Libre only introduced the elements cited by the IA’s report in 2021, after the company achieved its popular market position. Second, the IA’s scrutiny of loyalty and subscription programs disregards the importance of innovative consumer acquisition strategies and value propositions in a dynamic and competitive industry. Businesses across industries develop unique benefit systems to attract new customers and satisfy existing ones. Bundled access to affiliated streaming sites, games, and music represents only one such approach; others include new partnerships with U.S. brands, membership-free warehouse shopping, exclusive products, and in-store kiosks to help customers make digital purchases.
The allegations of anticompetitive practices lofted at Amazon and Mercado Libre by the IA would benefit from supportive evidence that the IA has not offered. In addition to helping the Mexican government fulfill its obligation to ensure due process, the IA’s arguments would enjoy more persuasive power and legal force if concretely substantiated. For example, regarding the two firms’ alleged self-preferencing of in-house logistics programs, the IA’s claim invites scrutiny by neglecting to cite seller data indicative of such a distinction, including the 86 percent of Amazon’s global sellers who utilize Fulfillment by Amazon and the 64 percent who do so exclusively. To raise these numbers here begs for the IA to conduct (and share) a thorough investigation determining the Mexico-specific breakdown of these figures that is relevant to the IA’s findings.
Similarly, the IA does not produce monetary estimates in support of its claim that “switching” and “entry” costs encountered by sellers seeking third-party logistics providers render non-Amazon alternatives through the Merchant Fulfillment Network, Easy Ship, and Seller Flex programs nonviable. Amazon and Mercado Libre may indeed engage in self-preference and logistics practices that stifle their competitors, but absent evidence to that effect, the IA’s analysis and recommended actions are insufficient.
The same can be said of the IA’s criticisms regarding opacity in the Buy Box. The IA’s claim that sellers lose out due to “information asymmetries” would benefit from statistical substantiation that directly illustrates how the current information provided to sellers is insufficient and harms sales. The IA may consider information provided by Amazon and Mercado Libre to be insufficient and therefore damaging, yet sellers themselves may find it sufficient and helpful. Without polling sellers or otherwise gathering evidence, there is no way to characterize the dynamic taking place.
Assessing the impact of Buy Boxes on sellers is still in its formative stages, with various theories being put forward. For example, the British Competition and Markets Authority has highlighted potential risks associated with personalized pricing, especially when it is complex or lacks transparency. These risks include a decrease in consumer trust in online markets and higher search and transaction costs, as consumers may spend more time shopping around to avoid personalized prices. The British Competition and Markets Authority determined that the requirement to provide excessive information “could help dishonest and high-risk sellers to game the process, thereby exposing customers to greater risk of fraud and abuse.”
Mexico’s view on the Buy Box issue is not unanimous. The Mexican IA’s concerns and preliminary recommendations for forced disclosure of sensitive data and intellectual property differ from the preliminary analysis by British Competition and Markets Authority of Amazon’s “Buy Box.”
If implemented, the IA’s recommendations may run afoul of national treatment commitments made by the Mexican government in the USMCA. For example, in adopting relevant market definitions that are unreflective of current realities—and that target a U.S. firm and another foreign competitor—the IA proposes an approach that runs against Chapter 19 of the agreement, which concerns digital trade: “No Party shall accord less favorable treatment to . . . a digital product of which the author . . . producer, developer, or owner is a person of another Party, than it accords to other like digital products.” Likewise, the IA proposal that Amazon must divulge its Buy Box’s factors and weightings may violate intellectual property rights protections outlined in Chapter 20. Under the USMCA, Mexico cannot derogate from its provision of “treatment no less favorable [to foreign nationals] than it accords to its own nationals with regard to the protection of intellectual property rights” unless such a derogation is “necessary to secure compliance with laws or regulations” and is “not applied in a manner that would constitute a disguised restriction on trade.” The IA’s apparent targeting of Amazon, a U.S. firm, suggests that COFECE’s proposed regulations may not meet Mexico’s national treatment obligations. The same can be said in relation to Chapter 21, which includes a competition policy agreement to treat “persons of another Party no less favorably than persons of the Party in like circumstances”; this is a less actionable concern, however, as violations of Chapter 21 are not subject to dispute settlement.
If implemented, the IA’s recommendations may run afoul of national treatment commitments made by the Mexican government in the USMCA.
The IA’s proposal to force the two marketplaces to integrate their platforms with any logistics providers, including those that may not meet the companies’ standards, threatens to destroy many jobs. For example, if sellers increasingly turn to other marketplaces to list their goods, the two firms’ expansion plans may be curtailed, potentially limiting job growth or prompting job cuts. Demand for workers among alternative platforms may increase amid such constraints, especially as part of expansion strategies by Liverpool and Coppel; however, these firms’ comparatively smaller scales and capital bases may limit offsetting gains.
Mexican SMEs sell through a variety of outlets, including B&M stores, in-person marketplaces, online platforms, and wholesale channels. The proposed measures threaten the dynamic growth in these outlets, as handicaps on the competitiveness of market leaders would likely lead to reduced investment, inferior marketplace quality, and curtailed innovation. The IA’s logistics proposals may leave Mexico’s retail sector worse off.
The proposed measures threaten the dynamic growth in these outlets, as handicaps on the competitiveness of market leaders would likely lead to reduced investment, inferior marketplace quality, and curtailed innovation.
Potential Advantages for Chinese Online Retailers
The IA’s recommendation to further regulate Amazon (a U.S. company) and the Argentina-based Mercado Libre poses several significant geopolitical, commercial, and consumer safety problems. In recent years, Chinese online retailers such as Shein, Temu, and AliExpress have entered and greatly expanded their operations in Mexico, with characteristically low prices alongside massive investments in domestic manufacturing and logistics, which have quickly led to increased site visits and sales. The three firms’ shares of the Mexican retail market are expected to rise in the coming years, and COFECE’s potential targeting of Amazon and Mercado Libre may serve as an accelerant. Ahead of the 2026 review of the USMCA, the proposed intervention may create another trade dispute that could further complicate efforts toward North American economic integration (“nearshoring”) and the de-risking of supply chains. It may also exacerbate weaknesses within Mexico’s customs administration and trade law enforcement, as the operating models and success of Shein, Temu, and AliExpress benefit from tariff exemptions and a failure on the part of Mexican authorities to enforce protections against products demonstrated to have been produced with forced labor in China.
Consumers may, yet again, face severe consequences. There are many well-documented criticisms of the Chinese e-commerce firms, among which product safety, inadequate consumer service, environmental degradation, and counterfeiting are all causes for concern. For instance, in August 2024, the Mexican Tax Administration Service (SAT) discovered a significant increase in imports of clothing, home decorations, jewelry, kitchen utensils, toys, electronics, and other items from China, many of which lacked legal accreditation. In response, the SAT has confiscated 1.4 million of these products, as the seized merchandise entered the country without the necessary legal documentation, posing significant safety risks.
USMCA
The USMCA has emerged as a critical tool to bolster North American cooperation, prosperity, and economic competitiveness. The agreement supports millions of jobs, facilitates billions of dollars’ worth of trade and economic output, and fosters collaboration on a wide range of shared priorities, from improved wages and labor protections for Mexican workers to deepened cross-border emergency planning systems. However, disputes relating to energy, agriculture, autos, and dairy have provided reason for all three signatories to take issue with the agreement’s implementation. In the 2026 review, these irritants will command significant attention. COFECE’s potential action against Amazon may also emerge as a flash point capable of harming trade relations.
Finally, the issue of removing Chinese goods from key North American supply chains is expected to dominate discussions surrounding the USMCA on topics ranging from autos and trade remedies to textiles and telecommunications. The fact that Canada and Mexico have lagged behind the United States in implementing restrictions on trade and investment with China, allowing Chinese exports to circumvent U.S. trade restrictions, will prompt the United States to seek a more coordinated North American approach to de-risking.
The entrance of Shein, Temu, and AliExpress into Mexico’s retail e-commerce industry poses a host of challenges for domestic authorities, which COFECE’s potential approach would further exacerbate. Chinese e-commerce companies are infamous for allegedly stealing clothing designs, which poses a threat to the protection of intellectual property for clothing brands large and small. Well-known fashion companies and small-scale independent designers—including Mexico-based Valfré—have filed over 90 lawsuits accusing Shein of copyright infringement. Chinese retail e-commerce firms are also responsible for well-documented labor rights violations. The two largest, Shein and Temu, have faced numerous allegations that their cotton is sourced from Xinjiang, where the United States has accused the Chinese government of committing genocide against the Uyghur minority and using forced labor. Shein and Temu have also been consistently accused of underpaying and overworking employees.
At the same time, Chinese companies operating in Mexico have little ability to turn down Chinese government requests for data, constituting significant risk to users’ privacy. These companies’ operating models also pose threats to the environment and consumer safety. Shein’s production and distribution methods, for example, emit 6.3 million tons of carbon dioxide a year, equivalent to 1.5 million gasoline-powered passenger vehicles driven for one year. Exposure to toxic chemicals is another risk posed by the three Chinese firms’ products. Dangerous levels of lead, formaldehyde, antimony, and other cancer-linked chemicals have consistently been found in their wares.
Moreover, Mexican trade associations like Canaintex have attributed a large portion of the 16.8 percent decline in the size of the country’s textile and apparel industry—a figure representing 80,000 jobs—to the surge in sales by Chinese platforms like Shein, Temu, and AliExpress. The many downsides that accompany the operating models of Shein, Temu, and AliExpress show few signs of dissipating.
If the COFECE Plenary rejects the IA’s findings, Mexico’s retail market will maintain its competitiveness in prices, products, and delivery methods, allowing consumers to weigh multiple factors as they make choices. Mexican consumers may take issue with the downsides of buying from Chinese companies and express their preferences by turning elsewhere; if they do, they can enjoy lower prices with less concern about issues like forced labor, copyright infringement, and environmental degradation. Conversely, if COFECE adopts much or all of the IA’s recommendations, Chinese companies will be given an edge by the handicapping of their competitors, resulting in even less competitive pressure on Chinese firms to improve their practices.
Conversely, if COFECE adopts much or all of the IA’s recommendations, Chinese companies will be given an edge by the handicapping of their leading competitors, resulting in even less competitive pressure on Chinese firms to improve their practices.
Status of the IA’s Preliminary Report
The IA’s report regarding anticompetitive practices now sits with COFECE’s Technical Secretariat, to whom Amazon and Mercado Libre will present arguments in their defense, as they are entitled to do under Mexican law. Once these statements are submitted and evaluated, the COFECE Plenary, which is composed of seven commissioners, will issue a final decision. Before that happens, COFECE would be well served by further scrutinizing the report’s proposed corrective measures, which—aside from relying on a faulty definition of the relevant markets—would undermine the interests of consumers, workers, SMEs, and the broader Mexican economy.
Damage to the Mexican Economy
Consumers can expect to bear the brunt of the proposed reforms’ consequences. Whereas retail bundling generates a consumer surplus of approximately $75 million annually in Mexico, restrictions on the two firms’ loyalty programs could eliminate these cost-saving opportunities and other membership benefits. For example, higher prices would likely lead streaming services associated with Amazon and Mercado Libre to witness a fall-off in subscribers, which would likely be a boon to larger streaming providers, potentially reducing consumer choice.
Job losses should be expected if COFECE adopts the report’s proposals, especially losses related to logistics solutions. Since entering Mexico, Amazon has invested over $3.0 billion in-country and directly created over 8,000 jobs across more than 40 facilities (plus another 32,000 indirect jobs). This growth has manifested in $490 million paid out to Amazon employees and more than $700 million to non-Amazon employees. By comparison, Mercado Libre plans to invest $2.45 billion in Mexico in 2024 alone—up from $1.6 billion in 2023—as well as expand its footprint beyond its current 90 facilities and 12,000 direct employees. According to the Argentina-based e-commerce firm, over 414,000 Mexican families rely on Mercado Libre as their primary source of income. The two firms’ contributions to the job market are most visible in logistics, where Amazon and Mercado Libre have invested extensively in in-house logistics systems, staffing, and contractor relationships, all based on long-term expectations of continued seller demand. If artificial restrictions are imposed on Amazon and Meli, many of these jobs could be at risk.
SMEs—critical actors in the Mexican economy, accounting for more than 95 percent of business units, 14.6 percent of national GDP, and nearly 50 percent of jobs—would likewise face a slate of adverse outcomes if the report’s proposed measures are enacted. Mexican SMEs sell through B&M stores and in-person marketplaces, as well as online and wholesale channels. According to Amazon, for example, more than 27,000 Mexican independent businesses list a total of 3 million products on the platform, creating upward of 57,000 direct and indirect jobs. The benefits of SME digitalization are numerous: improved operational efficiency, lower barriers to starting and operating overseas—including for rural and historically marginalized groups—expanded addressable markets, enhanced labor productivity, and a more level playing field with larger competitors. Amazon’s investments across Mexico have measurably improved the country’s supply chain efficiency, introducing competitive pressures that have contributed to the lowering of prices by up to 28 percent. Prior to Amazon’s entrance, for example, major retailers struggled to meet delivery promises or offered slow delivery speeds (often longer than a week). Now, due in part to modest pressures brought on by Amazon and Mercado Libre, omnichannel retailers and start-ups increasingly offer same-day deliveries across Mexican cities. Competitors’ logistics investments have likewise increased. Forcing Amazon and Mercado Libre to further integrate inferior logistics providers with their innovative delivery processes risks undermining this increased efficiency and competition-driven growth.
The IA’s proposals for asymmetrical regulation, including the forced disclosure of key commercial differentiators like Buy Box criteria, may disincentivize large-scale investment and marketplace innovation in Mexico—and not only by Amazon and Mercado Libre. As supply chain resiliency efforts grow in the United States, COFECE risks scaring off the 34 percent of manufacturers who cite concerns over legal and regulatory obstacles as their primary reason for not fully capitalizing on nearshoring-related growth opportunities in Mexico. Infrastructure projects that rely on foreign sector investment may falter as MNEs increasingly view Mexico’s business environment unfavorably; one such project is the Interoceanic Corridor (CIIT)—a cornerstone of AMLO’s domestic agenda that Claudia Sheinbaum may continue—which seeks to connect southern Mexico’s ports, highways, and airports across the Pacific and Atlantic Oceans. Handicapping successful foreign-owned first movers via a constricted market definition and asymmetric regulations would signal to foreign MNEs that Mexican regulators are unfair, arbitrary, and punitive. In the process, COFECE may establish a concerning antitrust precedent that scares off nearshoring-focused investors and damages economic competitiveness.
The IA’s proposals for asymmetrical regulation, including the forced disclosure of key commercial differentiators like Buy Box criteria, may disincentivize large-scale investment and marketplace innovation in Mexico—and not only by Amazon and Mercado Libre.
Takeaways
- Before rendering a final decision, the COFECE Plenary should revise the Investigative Authority’s proposed definitions of buyers’ and sellers’ relevant markets to better reflect economic realities and prevent adverse consequences. The IA report ignores on-the-ground market dynamics and embraces antitrust approaches similar to those employed by the European Commission’s Directorate for Competition to arrive at what reasonable observers can assume are the IA’s predetermined targets. In adopting the report’s proposed definitions and remedial measures, the IA’s report may prompt COFECE to establish a competition policy that raises prices, destroys new jobs, disincentivizes innovation, slows investment, and erodes logistics and product improvements. It may also provide advantages to Chinese firms whose expansion plans will introduce numerous downsides for Mexican consumers and businesses. Before issuing its final decision, COFECE should amend its view of relevant markets to include omnichannel retailers, bricks and mortar stores, and other competitors. Such a decision would be reflective of well-reasoned and evidence-based oversight, rather than a slanted analysis similar to discriminatory EU interventions in digital markets.
- The Mexican government should embrace competition policies that enable Mexican businesses and consumers to capitalize on U.S. nearshoring efforts, integrate the North American economy, and account for U.S.-China competition. The IA’s targeting of two foreign firms threatens to add to Mexico’s already deteriorating business climate at a critical juncture. President Sheinbaum seeks to restore Mexico’s status as a reliable destination for inward foreign direct investment after AMLO’s years of persistent attacks on the private sector, the rule of law, and independent agencies; yet the report’s enactment would represent a doubling down on her predecessor’s policies. It risks creating an additional bilateral trade irritant, alienating constituencies critical to the USMCA’s survival and harming the broader negotiating environment for its 2026 renewal. Such an outcome is ill-fitting for Mexican businesses and consumers eager to formalize, grow, and further integrate with North American supply chains. Instead, the Mexican government should embrace a less punitive stance toward Amazon and Mercado Libre, reduce regulatory uncertainty, and enhance efforts for continental supply chain resiliency. It should also consider implementing policies mindful of the United States’ de-risking agenda and competition with China.
- The COFECE Plenary should consider the implications for consumers and user privacy as Chinese retailers Temu, Shein, and AliExpress would benefit from the proposed remedies. The three Chinese retailers are growing more quickly than Mercado Libre or Amazon. The proposed remedies would benefit these Chinese competitors by making consumers’ experiences with Mercado Libre and Amazon worse, such as by removing valued bundled membership offerings like streaming services, and by requiring that even low-quality logistics providers be integrated in the companies’ APIs. Consumers are likely to respond by looking to other marketplaces, including the three Chinese online marketplaces. Chinese companies are routinely compelled to turn over any and all customer data or information to the Chinese government and the Chinese Communist Party, with no meaningful recourse to any independent judiciary or other authority to resist, and no right to inform Mexican consumers, companies, or government authorities when their data is turned over to Chinese authorities. By contrast, Amazon and Mercado Libre operate in democratic countries under the rule of law, with protections for the companies and their users’ data from government intrusion.
- Amazon and Mercado Libre should continue to cooperate with Mexican regulatory authorities wherever possible to facilitate competition, job growth, improved consumer welfare, and broad-based growth. Despite the significant handicaps threatened by Mexican authorities without evidentiary backing, the two firms’ sizable and ongoing investments—as well as Amazon’s cooperation with EU regulators on similar accusations—suggest they do not consider the report’s proposals complete impediments to doing business in Mexico. Alternatively, the two firms may expect that the COFECE Plenary’s final decision will dilute, if not wholly depart from, the Investigative Authority’s recommendations. In any event, Amazon and Mercado Libre should continue to engage with COFECE in a constructive fashion, as the proposed regulatory intervention may threaten thousands of jobs, raise prices, and impede otherwise-improving delivery processes.
- The United States government should engage with its Mexican counterparts to raise due process concerns and encourage procedural improvements. As discussed above, the IA’s disregard for market realities invites scrutiny of Mexico’s business climate and threatens North American economic integration. Regardless of nearshoring and de-risking tailwinds, FDI will not flow into Mexico—let alone increase—if foreign investors perceive domestic authorities as hostile. The U.S. government should articulate these concerns to its Mexican counterparts and obtain a mutually satisfactory outcome. One such opportunity is the mandatory 2026 review of the USMCA, where the three partners are expected to discuss ongoing trade disputes and review the agreement’s implementation. Other USMCA-related forums include the trilateral Committee on Good Regulatory Practices, which is responsible for “encouraging regulatory compatibility and regulatory cooperation, with a view to facilitating trade between the Parties,” and the Committee on Intellectual Property Rights, where members “exchange information, pertaining to intellectual property rights matters, including how intellectual property protection contributes to innovation, creativity, economic growth, and employment.” Additional venues for engagement include the North American Leaders’ Summit and the High-Level Economic Dialogue.
- The United States, through the United States Trade Representative, should reinvigorate its defense of U.S. firms abroad, convey that the IA’s proposals would violate Mexico’s commitments in the USMCA, and consider initiating dispute settlement proceedings if the COFECE Plenary adopts the IA’s proposals. The U.S. government has not shied away from establishing formal dispute settlement proceedings (pursuant to USMCA Chapter 31) to resolve bilateral trade conflicts with Mexico regarding energy, agriculture, and labor. Washington should pursue similar action and defend its digital trade firms if the COFECE Plenary adopts the IA’s findings, as the latter’s recommendations are discriminatory and appear to violate binding commitments within the USMCA’s digital trade and intellectual property Otherwise, the U.S. government risks inviting additional threats to North American economic integration, including a precedent of selective enforcement, which would damage the agreement’s credibility and invite similar actions against U.S. technology companies worldwide, hindering U.S. competitiveness and growth. The government of Argentina should consider initiating consultations with Mexico in response to discriminatory treatment of Mercado Libre by COFECE. While not the focus of this paper, the government of Argentina should also consider investigating issues that are raised by the IA’s proposal for forced disclosure of proprietary information and details of technical infrastructure related to Buy Boxes. If implemented, it is possible that these measures could violate basic national treatment and nondiscrimination obligations that are central to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Conclusion
As digital trade grows in prominence in Mexico, domestic policymakers should seek to foster a competitive environment in Mexico’s retail market that fully capitalizes on the policies of nondiscrimination and the benefits of trade. The IA’s February 2024 report, however, relies on an arbitrarily narrow definition of the retail market to produce discriminatory findings. The report’s proposed remedies, aimed at regulating players Amazon and Mercado Libre, may in fact stifle competition, undermine the industry’s impressive growth, and disadvantage Mexican consumers and workers. It will also favor Chinese competitors such as Shein, Temu, and AliExpress, whose expansion carries significant geopolitical and consumer safety risks. Furthermore, the IA’s proposals may conflict with Mexico’s obligations in the USMCA and establish a problematic precedent for digital trade in Mexico that is similar to the European Union’s approach, potentially harming the broader domestic economy. To ensure a fair and thriving retail sector, the Mexican government should adopt a more realistic definition of the retail market rather than disproportionately targeting specific companies.
Meredith Broadbent serves as a senior adviser (non-resident) with the Economics Program and Scholl Chair for International Business at the Center for Strategic and International Studies in Washington, D.C.
This report is made possible through generous support from the Computer & Communications Industry Association.