By Raul Cortes
MEXICO CITY (Reuters) -Tortilla-maker Gruma holds the power to fix higher prices in the corn flour market, Mexico's antitrust watchdog said in a preliminary decision on Monday, concluding that conditions in the top food segment are not competitive.
"This market is fundamental for Mexico's economy and the wellbeing of consumers, especially due to its impact on the price of tortillas," the watchdog, known as Cofece, said.
Shares of Gruma fell as much as 10% on Monday and closed 7.5% lower.
Corn tortillas are a staple in Mexican diets, consumed daily by 70% of the population. The cost of tortillas makes up about 6% of household food budgets.
Cofece noted that across eight regions in the country, Gruma controlled between 50% and 90% of corn flour sales.
In order to restore competition and curb prices, the agency recommended that the company sell five of its 18 corn flour grinding plants over a two-year period.
It also recommended Gruma halt some commercial strategies, including those designed to make it difficult for tortilla makers to switch suppliers.
The Cofece investigation revealed that Gruma controls a much larger share of the corn flour market than anyone else, reaching between 22 and 80 times its largest competitor across the eight regions. It also showed that Gruma's average price comes in nearly 10% higher than its national competitors.
Gruma, in a statement, argued it had always operated lawfully and that it had cooperated with Cofece.
The company added that due to the preliminary nature of the ruling, it was not possible to predict how the antitrust agency's governing body would ultimately resolve the case.
The probe covered both the distribution and marketing of corn and corn flour, as well as related services, according to the watchdog's announcement published in the official government gazette.
Gruma and other interested parties will now be able to present arguments ahead of the governing body's review of all evidence and its final ruling.
Until then, Gruma is not obligated to take any action.