Snapshot: intellectual property for fashion goods in Mexico

Market spotlight

State of the market

What is the current state of the luxury fashion market in your jurisdiction?

According to Euromonitor, luxury in Mexico is a US$4.7 billion industry, despite challenges around pandemic restrictions, which hit sales at major department stores, such as El Palacio de Hierro. In 2021, the luxury goods market in Mexico was bolstered by the reopening of physical retail stores. Given the dominance of physical retailing in luxury goods in Mexico, brands and retailers faced significant challenges during the covid-19 crisis to not only try to maintain sales, but also to gain consumer confidence in the safety and hygiene of their locations since their reopening. Luxury players began to plan their safety measures for reopening during the periods of closure. Store-based specialist retailers and department stores were forced to close for long periods during the covid-19 crisis. Thus, those retailers that already had e-commerce operations focused on supporting and developing them. Accordingly, having seen double-digit current value growth in 2021, luxury goods is expected to see continued double-digit increases in sales in 2022 and 2023, and further strong year-on-year increases for the rest of the forecast period. Sales are set to exceed the levels seen immediately prior to the outbreak of covid-19 by 2022.

With respect to luxury fashion goods particularly, according to Statista’s data available at https://www.statista.com/outlook/cmo/luxury-goods/luxury-fashion/mexico, revenue in the luxury fashion segment amounts to US$457 million in 2022. The market is expected to grow annually by 4.32 per cent (compound annual growth rate, 2022–2025). The largest segment is luxury apparel, with an average revenue per capita of 2.44 per cent in regards to luxury for 2022.

Finally, according to McKinsey & Company’s The State of Fashion 2022, between 2 and 5 per cent GDP growth in Mexico is projected for 2022, which is linked to growth in the US economy.

Manufacture and distribution

Manufacture and supply chain

What legal framework governs the development, manufacture and supply chain for fashion goods? What are the usual contractual arrangements for these relationships?

There are several statutes applicable to development, manufacture and supply chain regarding fashion goods.

These include:

 

The usual contractual arrangements include manufacturing, packaging, logistics and distribution, shipping, sale, licensing, design and marketing. Retailers should be cautious in protecting confidential information (trade secrets), intellectual property rights, data protection, materials and quality requirements. They must include, among others, an adequate description of goods and services, pricing, expected timeframes for delivery, distribution channels, supply chain strategies, service and management details and liability insurance.

Distribution and agency agreements

What legal framework governs distribution and agency agreements for fashion goods?

In general terms, the Code of Commerce governs distribution and agency agreements for fashion and other goods. However, agency and commercial distribution agreements are not specifically regulated under Mexican laws, and therefore are considered atypical. These agreements are usually complemented with clauses or additional agreements that include licenses to use intellectual property rights, either to manufacture protected products (such as industrial designs) or to use specific trademarks. For this purpose, retailers must adhere to the Federal Industrial Property Law. In addition, employment contracts play a significant role in protecting intellectual property created by employees, works made for hire, or when independent contractors or providers are commissioned to develop certain designs on behalf of retailers and such designs could be eligible for copyright or trademark protection (or both).

What are the most commonly used distribution and agency structures for fashion goods, and what contractual terms and provisions usually apply?

The most common structure of distribution for fashion goods in Mexico is a producer-customer through the producer’s own stores (either physical premises or online); however, there is also a tendency to include a retailer (with inner boutiques), therefore implementing the structure producer-retailer-customer. Each party purchases the goods to sell them to the next participant of the distribution chain.

Import and export

Do any special import and export rules and restrictions apply to fashion goods?

Due to the amendments to the General Import and Export Tax Law, as of 29 October 2019, and until September 2024, the import duty for footwear, textiles and clothing will be between 25 and 30 per cent for countries with which Mexico does not have a free trade agreement.

Corporate social responsibility and sustainability

What are the requirements and disclosure obligations in relation to corporate social responsibility and sustainability for fashion and luxury brands in your jurisdiction? What due diligence in this regard is advised or required?

Textiles, in general, must comply with the Mexican Official Norm NOM-004-SCFI-2006. For clothing, specifically, the company must inform consumers of the name of the manufacturer or importer, brand, country of origin, fibre composition (including components), product care and size.

An in-depth due diligence process for best practices is highly recommended. Companies must not only assess production of goods, from a perspective that is supported by components of IP portfolios, data collection and advertising strategies – as required in all acquisition processes – but must also determine if the company promotes a positive brand image to build ownership among the stakeholders and loyalty and empathy with consumers and competent authorities in the relevant jurisdiction. Brands should focus on environmental and health impacts when assessing product manufacturing, in relation to the following, for example:

• raw materials to be used;
• treatment of water;
• use of fewer chemical products;
• less waste;
• packaging materials (eg, paper and plastic);
• no risks to users;
• no animal testing; and
• if the brand is associated with a cause or employs people with special needs.

A thoughtful and diligent social media strategy is crucial, as platforms have become the principal tool to spread and promote corporate social responsibility campaigns.

What occupational health and safety laws should fashion companies be aware of across their supply chains?

The Mexican Constitution provides for the standards and principles to be observed across supply chains. The Federal Employment Law, the Federal Regulation on Occupational Safety and Hygiene in the Working Environment, Regulations of the Ministry of Labour and Social Welfare and several other Mexican official statutes regulate standards relating to topics such as:

• age and working conditions;
• manufacturing standards and equipment;
• use of fire protection equipment and personal protective equipment;
• distribution safety;
• transport regulations and storage activities or services;
• working with pesticides and fertilisers at agricultural facilities;
• forest exploitation; and, more recently
• the official standard on psychological risk factors within the labour environment.

 

These standards are typically applied through employment contracts, where employers have strict duties in connection with occupational health, safety and psychological regulations.

Online retail

Launch

What legal framework governs the launch of an online fashion marketplace or store?

The Code of Commerce and the Federal Consumer Protection Law (Consumer Law) include a brief section dedicated to online business transactions, that focuses primarily on setting forth dispositions to authenticate the parties participating in the online business transaction, the goods and services offered and other terms and conditions necessary to transact. The Civil Code is also applicable to these transactions, for matters not covered by the Code of Commerce.

There is also a non-binding Mexican Standard for Electronic Commerce (NMX-COE-SCFI-2018) and a Code of Ethics issued by the Federal Consumer Protection Attorney’s Office (PROFECO) that suppliers may adopt as a good practice. The Code of Ethics is a set of values and principles that all suppliers adhered to PROFECO must observe in activities related to e-commerce, in order to respect and promote consumer rights on the internet.

Complying with the Code of Ethics allows suppliers to apply for a digital trust seal called Distintivo Digital PROFECO, with official recognition and endorsed by PROFECO.

For e-commerce services, contracts of adherence (eg, terms of use) registration before PROFECO is optional (voluntary) and a good practice. However, if suppliers adopt the Mexican Standard for Electronic Commerce and the Code of Ethics, these regulations become legally binding and the registration of the contract of adherence becomes mandatory.

Sourcing and distribution

How does e-commerce implicate retailers’ sourcing and distribution arrangements (or other contractual arrangements) in your jurisdiction?

Click-through and click-wrap agreements are considered standard agreements and are applicable to any e-commerce business transaction, according to the Code of Commerce. For their execution, the end consumer must agree to the terms and conditions set forth therein, in an express or tacit form, without the possibility to negotiate or amend them. Because Mexico is very consumer driven, the Consumer Law sets forth the requirements that providers must comply with, which include clear terms and conditions.

Terms and conditions

What special considerations would you take into account when drafting online terms and conditions for customers when launching an e-commerce website in your jurisdiction?

According to the Consumer Law, terms and conditions should be drafted in Spanish and must appear within the virtual store or electronic commerce platform in a visible, easily accessible place for the consumer. Furthermore, the service provider must inform, using clear signposting, the total amount to be paid. It is expected that terms and conditions provided to consumers are up to date, and this information should be available for consumers before the transaction occurs.

The virtual store or e-commerce platform referred to in the terms and conditions should give access to hyperlinks whose purpose is to facilitate access, file and print information to improve the experience and provide certainty to the consumer when using the site. Terms and conditions will be subject to the provisions of the Consumer Law.

As a minimum, the terms and conditions should include:

• information on the supplier plus contact information; and
• the specifications, characteristics, conditions/terms applicable to the goods, products or services offered (ie, prices, rates, guarantees, quantities, qualities, measures, interests, charges, terms, restrictions, deadlines, dates, modalities, reservations and other applicable conditions); additionally, suppliers must inform regarding the mechanisms:
  • for the consumer to verify that the transaction reflects his or her intention to purchase;
  • for accepting the transaction (consent may be expressed by electronic means);
  • for the security and confidentiality of personal information and the transaction;
  • for submitting requests, complaints or claims; and
  • for payment and delivery.

Tax

Are online sales taxed differently than sales in retail stores in your jurisdiction?

There are no online sales taxes different from those applying for retail stores in Mexico.

Intellectual property

Design protection

Which IP rights are applicable to fashion designs? What rules and procedures apply to obtaining protection?

The following IP rights are available to fashion goods under the Federal Industrial Property Protection Law:

• industrial designs;
• three-dimensional trademarks;
• conventional trademarks (wordmarks, composite); and
• non-conventional trademarks (shapes, holograms, scents, textures and trade dress).

 

From a copyright standpoint, the protection afforded to fashion goods under the applicable federal copyright law includes designs, indigenous knowledge and cultural expressions.

What difficulties arise in obtaining IP protection for fashion goods?

IP protection for fashion goods is fairly straightforward. However, the competition in the fashion goods industry is huge and therefore designers must be more cautious to avoid coming up with designs that are confusingly similar to those in the marketplace, which, in the end, reduces protection possibilities. In addition, current title holders are always on the lookout, aggressively seeking to protect their rights and avoid the competition from acquiring their own protection. Under these circumstances, registrants are therefore subject to the criteria of the Mexican Patent and Trademark Office, which tends to be very discretional. Moreover, there are some practical obstacles, for example, when it comes to the protection of perfume bottles as three-dimensional trademarks, as it has been the regulator’s criteria to consider that protecting the shape of a bottle to distinguish bottles (regardless of their contents) falls into the descriptiveness prohibition for registering trademarks in Mexico. Nevertheless, it is possible to achieve IP protection over such bottles by means of other legal figures such as copyrights.

Brand protection

How are luxury and fashion brands legally protected in your jurisdiction?

Luxury and fashion brands are legally protected in Mexico as registered trademarks (conventional or non-conventional), industrial designs and copyrights. The latter do not require registration to afford exclusive protection, while trademarks and industrial designs must be registered in order to provide exclusive protection to their owners.

Not only trademark registration, but also a correct prosecution and maintenance of such registrations, are key for the protection of luxury and fashion brands. A trademark registration in Mexico is rather simple and quick, when submitted electronically and no obstacles are faced, and registration may be obtained within a term of three to four months. Conducting a correct feasibility search prior to the filing is of the utmost importance to avoid complications in the process or even the possibility of invading third-party rights by the use or intent of registration of confusingly similar trademarks. Likewise, applicants must be mindful when deciding to register trademarks, that even though no proof of use is required when filing for registration, pursuant to recent amendments to the applicable legislation, holders of a trademark registration must file a declaration of actual and effective use of each trademark before the authority, during the three months following the third year after the registration was granted, as well as on each renewal conducted every 10 years.

Domain names are usually anticipated by trademark protection, as in all cases, the owner of a domain name replicating a registered trademark without the authorisation of the trademark holder may lead to a dispute before the World Intellectual Property Organization, by means of which the trademark holder may be able to recover or shut down the site accessible to the relevant domain. Nevertheless, it is important to consider that domain names are not considered a type of intellectual property right under Mexican law, nor are they registered or formally watched by any Mexican authority.

Licensing

What rules, restrictions and best practices apply to IP licensing in the fashion industry?

For proper enforceability of license agreements in the fashion industry, licenses for trademarks, service marks and industrial designs must be granted in written form and include, at least, the following terms:

• the IP rights being licensed (confirm ownership – making sure they are properly registered, current and in use, and are not encumbered or under an infringement action);
• consideration for the use of the licence and royalty structure thereof;
• the term and territory allowed;
• whether the licence is exclusive or not;
• distribution channels; and
• whether the licence may be sublicensed or assigned.

 

In the case of industrial designs, the same terms apply, except that the length of the licensing term should not exceed the term of protection of the industrial design being licensed. As per the amendment to the Federal Industrial Property Law, the licence need not be recorded before the Mexican Patent and Trademark Office, but it is always recommendable as a best practice. If the licence being granted refers to copyrights, it should necessarily be granted in exchange for a consideration and for a specific period of time that should not exceed five years, except for cases, such as software, where the investment justifies a broader period of licensing. Again, as a best practice, it is recommended to register each licence agreement before the Copyright Office.

Enforcement

What options do rights holders have when enforcing their IP rights? Are there options for protecting IP rights through enforcement at the borders of your jurisdiction?

IP rights holders have the option to enforce their rights through administrative and judicial actions. Administrative actions include infringement proceedings against unauthorised users or acts of unfair competition, preliminary injunctive measures, border measures to prevent unauthorised imports or imports of knockoffs that may jeopardise the competitiveness of a business, and in extreme cases, the health and safety of consumers. To that end, there is a recordation process that allows IP owners to protect their rights at the border, by recording their trademarks with Mexican Customs. On the other hand, judicial actions include litigation before Mexican courts if a Mexican authority violated the exclusive rights or any provision of the applicable laws in prejudice of an IP owner; these actions also include the possibility for the IP owner to claim for damages in specific cases.

Data privacy and security

Legislation

What data privacy and security laws are most relevant to fashion and luxury companies?

The applicable statute in Mexico is the Federal Law on Protection of Personal Data held by Private Parties (DPL), governing how entities or individuals should process (the definition of which includes collection, use, disclosure, transfer or storage) personal data, as well as with whom and how they share such information. The National Institute of Transparency, Access to Information and Protection of Personal Data (Instituto Nacional de Transparencia, Acceso a la Información y Protección de Datos Personales) is the federal authority in charge of overseeing the due observance of the DPL and provisions arising therefrom.

Compliance challenges

What challenges do data privacy and security laws present to luxury and fashion companies and their business models?

Although there are no challenges in the DPL for the luxury and fashion industry specifically, it is always recommended for companies to implement clear internal privacy policies. From an employment perspective, the policies must be in place to prevent employees from disclosing information received under other employment and to set forth clear obligations within their current one. All employment agreements should include confidentiality clauses to: (1) safeguard confidential information employees may have access to as a result of the employment relationship, and that most likely involves a competitive advantage for the employer (that according to Mexican IP laws may constitute a trade secret); and (2) prevent misuse of information, including personal data collected within the scope of the employment.

From an e-commerce perspective, fashion retailers must make privacy notices available to end consumers that must include all requirements set forth in the DPL.

A data controller must only process the data for the purposes set forth in the privacy notice and shall refrain from transferring the data collected except when (1) there exists a contractual relationship that justifies it; (2) the transfer is to a related party; or (3) instructed by a judicial order. When retailers, as data controllers, collect sensitive or financial information from data subjects, express consent must be obtained. In addition, end customers must have the option to opt out of marketing campaigns and advertising. From a consumer protection perspective, retailers must comply with strict consumer protection laws and avoid using information collected for marketing and advertising without proper consent.

Innovative technologies

What data privacy and security concerns must luxury and fashion retailers consider when deploying innovative technologies in association with the marketing of goods and services to consumers?

Although innovative technologies always impose operative challenges, the requirements to protect personal, sensitive and financial data remain the same. Retailers must make sure that contracts entered into with payment platforms comply with all security measures to avoid leakage, and that they hold retailers harmless from any liabilities thereof. When facial recognition and biometric technologies are being used, controllers must inform data subjects and obtain their express consent, thus increasing security measures to prevent disclosures that could place a risk or hardship, such as discrimination, on the data subject. When using cookies, web beacons, pixels or embedded scripts, retailers must inform data subjects to obtain their consent and make sure that, when used in combination with personal data, they apply the same processing requirements as set forth in their privacy notices. The same applies to GPS and other tracking technologies that may also reveal sensitive data and therefore require, in addition to express consent, stricter security measures to be adopted.

Content personalisation and targeted advertising

What legal and regulatory challenges must luxury and fashion companies address to support personalisation of online content and targeted advertising based on data-driven inferences regarding consumer behaviour?

All companies must comply with strict requirements regarding the processing of personal data. As mentioned above, the use of cookies, web beacons, pixels or embedded scripts requires retailers to inform consumers and obtain their consent, through clicks, tick boxes or other means, correctly linked to their name, in order to send them targeted advertising based on data-driven inferences of their behaviour. The Consumer Protection Agency keeps a public registry of consumers who do not wish for their information to be used for marketing or advertising purposes. All interested parties may inform the Agency – either in written or email form – of their desire to be registered and avoid receiving unwanted advertising. In this regard, under the Federal Consumer Protection Law, all companies that use consumer information for marketing or advertising purposes must not send advertising to consumers who have expressly requested otherwise. It should also be noted that suppliers of the goods advertised shall be jointly responsible for handling consumer information when such advertising is sent through third parties. Failure to comply with these provisions could trigger administrative fines, not only on the advertiser, but also on the supplier of the goods advertised.

Advertising and marketing

Law and regulation

What laws, regulations and industry codes are applicable to advertising and marketing communications by luxury and fashion companies?

The regulations applicable to advertising and marketing communications by luxury and fashion companies are the Code of Commerce, Federal Consumer Protection Law and its Regulations, and the Law for Transparency, Prevention and Enforcement against Improper Practices in Advertising. Under specific cases, such as food, beverages and cosmetics, regulations of the General Health Law also apply. In addition, the codes of conduct of specific chambers related to the industry may apply, but such provisions would only be binding on their affiliates.

Online marketing and social media

What particular rules and regulations govern online marketing activities and how are such rules enforced?

According to the Consumer Law, advertising principles include:

1. any advertising sent to consumers must indicate the name, address, telephone number and, if this is absent, email address of the supplier of the company that, if applicable, sends the advertising on behalf of the entity, and the contact information for the Federal Consumer Protection Attorney’s Office;
2. personal information from consumers that may be used and transferred under an opt-out basis – it should be noted that there is an anti-spam provision under the Consumer Law under which it is prohibited to send marketing or advertising messages when the consumer has already opted out. Any infringement of the anti-spam provision could lead to the imposition of fines ranging from US$28 to US$92,000;
3. commercial entities shall refrain from using consumers’ information for marketing purposes when consumers have registered in the consumer protection registry (similar to the ‘do not call registry’, REPEP, in the US) for marketing, publicity or any other similar purposes;
4. the information or advertising related to goods, products or services disseminated by any means or form must be accurate, verifiable, clear and free of language, dialogues, sounds, images, trademarks, appellations of origin and other descriptions that induce or could induce error or confusion by being misleading or abusive; and
5. advertising shall be expressed in Spanish and the prices must be set forth in local currency, in clear and legible terms in accordance with the general system of measurement units; without prejudice that, in addition, they may be expressed in another language or another measurement system.

 

Regarding e-commerce practices, the supplier must refrain from using sales or marketing strategies that do not provide the consumer with clear and sufficient information about the services offered, especially in the case of marketing practices aimed at vulnerable people (children, the elderly and the sick). In any case, the supplier must incorporate mechanisms warning when the information is not suitable for vulnerable people.

Regarding privacy and marketing, it is worth noting that marketing campaigns can rely on an opt-out consent, but the data subject can object to this specific processing or withdraw his or her consent at any time. In addition, the data controller must always inform the data subject of the marketing purposes as well as the opt-out mechanism (through the privacy notice) before processing the data.

Product regulation and consumer protection

Product safety rules and standards

What product safety rules and standards apply to luxury and fashion goods?

One of the cornerstone principles of consumer rights is the protection of the life, health and safety of the consumer.

The same general rules and standards applicable to other industries apply to luxury and fashion goods. Those set forth in the Federal Consumer Protection Law and the Quality and Infrastructure Law provide specific obligations regarding product safety and consumer protection. Also, and when it comes to cosmetics, it should be considered that the General Health Law and related Regulations include specific safety provisions.

Among the most relevant consumer rights is the right to health, safety and quality – goods and services must comply with safety and quality standards and regulations applicable to the relevant industry.

Regarding standards applicable to luxury and fashion goods, it is worth noting that textiles, in general, must comply with the Mexican standard NOM-004-SCFI-2006. For clothing, specifically, the company must inform consumers of the name of the manufacturer or importer, brand, country of origin, fibre composition – including components, product care and size.

Also, there is a Mexican standard, NOM-089-SSA1-1994, setting forth the test methods to determine the microbial content in beauty products, in order to know the sanitary quality and determine if they are suitable for human use.

Product liability

What regime governs product liability for luxury and fashion goods? Has there been any notable recent product liability litigation or enforcement action in the sector?

The product liability regime is mainly governed by the Federal Consumer Protection Law and its Regulations. In addition, the federal and local Civil Codes and the Code of Commerce may be applicable regarding merchants’ liability.

However, there are several laws and regulations that may be applicable to specific products (eg, cosmetics are subject to the General Health Law and its Regulations), especially regarding publicity and sanitary control of products and services.

In addition, there are several technical regulations (known as Mexican Official Standards) that regulate, among others, the characteristics of production and distribution processes – especially when they may constitute a risk to people’s safety or harm human health, as well as matters related to the use of specific terminology.

There has been no notable (or publicly reported) product liability litigation in the luxury and fashion goods sector. However, there have been several precedents that are shaping a new perspective for the scope of civil liability – especially with respect to the limits of compensation and punitive damages.

Regarding the limits of compensation, there are several judicial precedents that are now concluding that limits, established in laws or regulations, may not be applicable, since they affect the rights of victims to a proper indemnity.

As for punitive damages, although this figure is not expressly regulated in the Civil Code, it is being included in several judgments. In accordance with these judgments, punitive damages are now being considered as part of the moral damages, when it is proven that there was a malicious conduct involved. However, the rules for its quantification are not very clear, therefore moral damages are becoming a more relevant subject than ever since they now represent an exposure that is difficult to measure accurately.

M&A and competition issues

M&A and joint ventures

Are there any special considerations for M&A or joint venture transactions that companies should bear in mind when preparing, negotiating or entering into a deal in the luxury fashion industry?

There are no specific considerations applicable to this industry. A due diligence process must be conducted to verify, among others, the following in relation to the company:

• industrial and intellectual property, including:

• • trademarks, service marks, slogans, domain names, innovations, inventions, patents, geographical indications, trade dress or other intellectual property owned, used or proposed for use;
  • trade secrets, know-how and other valuable confidential information, as well as the mechanisms used to protect it and keep it confidential;
  • any current or pending administrative or office action in respect of each intellectual property right;
  • copyrights or software, either registered or unregistered;
  • licences; and
  • intellectual property developed by employees, providers or independent contractors of the target company regarding assignment of intellectual property rights and work made for hire;

• privacy and data protection

• • all privacy notices of the target and its subsidiaries, and all policies and procedures regarding the treatment of personally identifiable information;
  • the administrative, technical and physical security measures implemented to protect personal data from damage, loss, alteration, destruction or unauthorised use, access and processing;
  • any data protection security issues that have arisen within the target or any of its subsidiaries; and
  • any outstanding complaints, legal actions, prosecutions or investigations regarding non-compliance with any legislation relating to data protection; and

• consumer protection matters, if applicable to industry standards, including:

• • the terms and conditions used; and
  • claims, if any, made thereof.

Competition

What competition law provisions are particularly relevant for the luxury and fashion industry?

The Federal Economic Competition Law sets forth an array of rules and tools regulating how companies should interact and compete in the Mexican markets. Those particularly relevant for the luxury and fashion industry include the following.

 

Absolute monopolistic practices

Pursuant to article 53 of the Competition Law, agreements, or mere information exchange among competitors, with the object or effect to fix or manipulate prices, restrict output or inputs, allocate markets, or of bid rigging, will be regarded as per se illegal cartel behaviour, even if no actual effect was caused or when the anticompetitive purpose was not directly intended but rather just collateral.

While highly differentiated products (such as those offered in the luxury and fashion industries) are not usually prone to these types of agreements, the per se illegal treatment and the fact that an infringement can be triggered with mere information exchanges make it advisable to carefully assess commercial activities involving contact with competitors (eg, in the context of associations, fashion shows or special collaborations).

 

Relative monopolistic practices

Article 56 of the Competition Law, in turn, sets forth a list of single-firm actions or vertical restraints, most of which are ordinary commercial practices, but will be illegal when involving an abuse of a dominant market position. For example:

• exclusive distribution – a supplier of a certain brand restricts the territory (country, city), customer or channel in which the distributor will be able to resell the brand;
• exclusive dealing – selling a certain brand only if the buyer agrees not to carry one or more (potentially competing) third-party brands or products;
• resale price maintenance – setting a list of mandatory resale prices to which retailers will need to adhere;
• tied sales or bundles – offering two independent products (ie, accessories or brands) as a package while refusing to sell them separately;
• discriminatory pricing – setting differentiated prices for re-sellers that seem commercially similar or equivalent; and
• refusal to sell – rejecting purchase offers from certain buyers while fulfilling orders from other buyers.

 

As anticipated, these practices will be regarded as illegal by Mexican law when: (1) the parties involved hold substantial market power, namely, a leading market position that allows the company to individually influence market prices in spite of the decisions and actions of competitors, buyers or others in the marketplace; (2) the practice restricts third parties from accessing consumers or sets exclusive advantages; and (3) overall effect assessment shows that consumers are not sufficiently benefited by the efficiencies that the practice may create.

Relative monopolistic practices will be common in the context of franchise, supply or distribution agreements, among others. Special review is suggested whenever these or other commercial strategies involve restricting third-party access to consumers or inputs, or for leading products and brands. 

Finally, note that competition investigation processes are highly burdensome and involve very high penalties, ranging from 8 to 10 per cent of a company’s annual accruable income; thus, preventive assessment is highly advisable.

Employment and labour

Managing employment relationships

What employment law provisions should fashion companies be particularly aware of when managing relationships with employees? What are the usual contractual arrangements for these relationships?

There are no particular provisions for fashion companies when managing relationships with employees. The contractual arrangements may vary, depending on the industry. However, the general terms of employment include an indefinite term, scope of work, place of work, working hours, salary, vacation days and other benefits set forth in the Mexican Federal Labor Law. It is always highly recommended to include terms to protect the company’s intellectual property rights, including trade secrets. In addition, companies must make sure that all employees execute the agreement including language where all designs created by employees, if any, are considered works made for hire and are thereby assigned to the company since inception to avoid ownership issues.

Trade unions

Are there any special legal or regulatory considerations for fashion companies when dealing with trade unions or works councils?

There are no special legal or regulatory considerations for fashion companies when dealing with trade unions or works councils – they are subject to the same considerations applicable to other industries.

Immigration

Are there any special immigration law considerations for fashion companies seeking to move staff across borders or hire and retain talent?

There is no special law to address immigration aspects related to this particular industry. The applicable law is the Mexican Immigration Law, which sets out three main immigration statuses under which foreigners may remain in national territory:

• visitor: this legal status is granted to foreigners in transit or entering national territory without the intention of establishing a residence in the country – categories of this status include permits to engage in paid activities and border worker permits;
• temporary resident: foreigners who are authorised to remain in Mexico for more than 180 days and up to four years to engage in paid activities; and
• permanent resident.

Update and trends

Trends and developments

What are the current trends and future prospects for the luxury fashion industry in your jurisdiction? Have there been any notable recent market, legal or regulatory developments in the sector? What changes in law, regulation, or enforcement should luxury and fashion companies be preparing for?

There have been cases of alleged cultural misappropriation, notably raised by the Mexican government. Some landmark cases involve luxury and fashion companies including Carolina Herrera, Michael Kors, Louis Vuitton and Isabel Marant, which were accused of copying fabric patterns or designs from indigenous communities, disregarding existing provisions contained in the Mexican Copyright Law and even the United Nations Declaration of Rights of Indigenous Peoples (section 31).

Significantly, to reframe their legal needs and provide support to indigenous communities, the World Intellectual Property Organization has produced Practical Guidelines about Intellectual Property for Indigenous and Local Communities, with the aim of incentivising the protection of cultural expressions through the available intellectual property rights in each jurisdiction.

Mexican authorities are very sensitive on cultural heritage protection, and legal controversies are generally based on unauthorised use of Mexican cultural heritage, discriminatory practices, or the alteration or depiction of folk art causing demerit to a certain community. Nonetheless, these cases have only been enforced through warning letters from the Ministry of Culture and recommendations from the National Human Rights Commission.

As a result, the Mexican legal framework has been developing legal and regulatory amendments, the most relevant being in the copyright and cultural heritage field:

• On 24 January 2020, the Mexican Copyright Law was amended to protect the traditional cultural expressions and folk art against (1) exploitation without the written authorisation from the relevant indigenous community; and (2) distortion of such art, made with the purpose of causing demerit or damage to the reputation or image of the referred community. This law recognises indigenous communities as the right holders.
• And recently, on 17 January 2022, the Federal Law for the Protection of the Cultural Heritage of Indigenous and Afro-Mexican People and Communities was issued. This law aims to recognise and guarantee the protection, safeguarding and development of the cultural heritage and collective intellectual property of indigenous and Afro-Mexican peoples and communities. So far, the new law has generated a wave of confusion regarding the scope or misconception of cultural heritage, its ownership, uncertainty on the legal procedures for cultural exploitation, as well as blurred lines in relation to jurisdiction, licensing and enforcement mechanisms. This law recognises indigenous and Afro-Mexican peoples and communities as right holders, and it is governed by the principle of self-determination of indigenous peoples.

 

A copyright and cultural misappropriation clearance and legal advice from intellectual property experts are recommended before the use of Mexican cultural heritage or folk art, in order to avoid administrative infringements, crimes, civil liability or risks related to brand and reputation.

Coronavirus

Coronavirus

What emergency legislation, relief programmes and other initiatives specific to your practice area has your state implemented to address the pandemic? Have any existing government programmes, laws or regulations been amended to address these concerns? What best practices are advisable for clients?

In Mexico, there was no emergency legislation, relief programmes or other initiatives specific to the fashion area to address the pandemic, in addition, there were no amendments to address such concerns, other than the ‘Order to establish the extraordinary measures to respond to the sanitary emergency caused by the SARS-CoV2 virus’ (the Order), were the authorities established the period of suspension of non-essential activities. The Order does not clearly make the essential activity treatment extensive to the supply chain of goods and services that needs to flow to ensure that the core essential activity continues operating undisputedly; it contains a limited and vague reference to the supply chain concept with respect to the health sector, and with respect to some segments of the transportation industry, but is silent, however, on a supply chain approach for other essential activities. A criterion that was applied by Mexican authorities when determining the essential nature of manufacturing activities was whether the goods manufactured were sold in the Mexican market: according to this interpretation, only goods supplied domestically into Mexico would be considered essential. Manufacturing facilities that export all or most of their production for integration into essential industries were faced with the prospect of having to shut down because of failing to meet the criterion.

Law stated date

Correct on

Give the date on which the information above is accurate.

25 January 2022.