MEXICO CITY (Reuters) -Mexican antitrust regulator Cofece said on Tuesday it had identified "possible barriers" to competition in the e-commerce market, with Amazon (NASDAQ:AMZN) and Mercado Libre together controlling more than 85% of transactions and sales.
In a preliminary report shared in the official gazette, Cofece said strong networks between users' groups limit new entrants to the market and pose a "practically insurmountable challenge for the expansion of the smaller players."
Smaller retailers face high investments for the technological tools, operating inventories and advertising needed to compete with these giants, it said, adding that this is exacerbated by the clustering of both buyers and sellers around one marketplace, or "singlehoming."
Smaller participants meanwhile "exert insufficient competitive pressure on Amazon and Mercado Libre," the Mexican regulator stated, because they lack the number of buyers and sellers needed to compete.
Cofece recommended that the government orders the two retail giants to implement a program of "corrective measures" within six months. Those include greater transparency for service providers and splitting off streaming services from marketplace membership.
Amazon did not immediately respond to a request for comment.
In a statement issued late on Tuesday, Mercado Libre said it was analyzing Cofece's preliminary report, which it described as the start of the process, and pledged its cooperation.
It stressed that even if Cofece's governing board eventually issues a formal resolution, it would not involve any economic sanctions since no investigation into monopolistic practices has been launched.
U.S. behemoth Amazon entered Mexico in 2013 and launched its marketplace there two years later. Mercado Libre, its South American counterpart, entered Latin America's second-largest economy in 1999 and has been expanding its financial service offerings.
($1 = 17.1977 Mexican pesos)