Combating inflationary pressure while avoiding price regulation: Nigeria’s FCCPC seeks consumer collaboration

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By Editor

Under the aegies of its recently appointed acting Vice Chairman and CEO, Dr. Adamu Abdullahi, the Nigerian Federal Competition and Consumer Protection Commission (FCCPC) today published a statement condemning the continuing consumer price increases in the country, despite the recent strengthening of the Naira currency.

The agency was, wisely, quick to point out that “the FCCPC cannot directly regulate prices.” Yet, it promised to “utilise its existing legal framework to enforce fair competition and consumer protection provisions. This includes monitoring and investigating unusual price hikes, addressing complaints filed by consumers, and taking action against any businesses found to be engaging in anti-competitive practices such as price-fixing, price gouging or cartel formation.”

In an interesting twist, the FCCPC also said that it had appointed so-called “operatives” (whom we imagine to be akin to contracted on-the-ground shadow buyers of goods and services) to report back to the Commission in their apparently ongoing “monitoring of both formal and informal markets.”

To support these ‘operatives,’ the FCCPC called upon regular consumers, trade associations, and farmer groups “to identify and remove unnecessary barriers to entry in various sectors, combat price-fixing, and dismantle cartels,” in the hopes of subsquent consumer-protection enforcement actions and, ultimately, lower prices for consumers.

A New Dawn for African Antitrust in Uganda

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By Guest Author, Simon M. Mutungi, Ph.D.

Competition law first emerged in 19th century North America where it was known as antitrust law. Back then, large companies entered legal arrangements where they formed a trust that would hold and consolidate their property. They would then cooperate as a single group in various ways to maximize their profits at the expense of customers. To better understand the impact of such an arrangement, imagine you are a kid again back in kindergarten, preparing for a tag-of-war match and you have chosen the biggest and strongest colleagues as your teammates to compete with other students. That team is going to win that competition before the whistle even blows.

Enter John D. Rockefeller, one of modern history’s richest men, who formed a trust that consolidated a large number of petroleum companies under a single board of trustees. Through this trust called Standard Oil, he controlled about 90 percent of America’s oil refining capacity at its peak. Consequently, he could price the oil as he wished, and he did not need to produce quality petroleum products as there was no strong competition against his trust. Seeing the negative effect of such an arrangement on consumers and the economy at large, neighbouring Canada would pass the world’s first competition law in 1889 followed by the U.S in 1890 to break up such trusts hence the name ‘Antitrust’ law.

Now, 134 years later, Uganda has finally caught up following this month’s presidential assent of the Competition Act 2023, a very late yet equally very welcome endeavour. Till then we had mostly relied on sectoral laws such as Uganda Communications Act and regional laws like COMESA’s Competition Protocol. More recently, the Africa Continental Free Trade Area Competition Protocol was also promulgated. Competition law is basically a policy designed to promote fair market competition by regulating anti-competitive conduct by companies. Uganda’s introduction of a Competition Act marks a significant stride in its economic legislative framework, aiming to create a fair business environment and improve consumer welfare. This editorial highlights the ABCs of competition law tailored for businesses and individuals who might be unfamiliar with the concept, in the context of Uganda’s new law.

Levelling the playing field

Imagine a marketplace in Uganda where only one seller has maize to sell. Without competition, this seller can charge high prices, and buyers have no choice but to pay up if they need maize. That seller would also have no incentive to produce good quality maize products since there would be no other alternatives to his products. Competition law levels the playing field by preventing such monopolies and ensuring that no single company can dominate a market to the detriment of consumers and competitors. It encourages innovation, fair pricing, and quality through healthy competition. By regulating anti-competitive practices, such as price-fixing and market sharing, competition law keeps markets open and accessible, allowing new entrants and fostering an environment where businesses of all sizes can thrive. This ensures consumers benefit from a wider choice of products and services, improved quality, and better prices.

 The Ugandan Competition Act 2023

President Museveni signed this law into effect on 2nd February 2024.and it addresses various practices as explained below:

 Prohibition of anti-competitive agreements.

The Act in effect, for instance prevents MTN and Airtel from agreeing on a deal to fix airtime or data prices at a certain level. It prevents Nile Breweries and Uganda Breweries from agreeing on a deal to limit the production of beers to cause a shortage and increase the price of Nile Special or Tusker Lite respectively. Under the Act, NTV cannot coordinate with NBS TV to divide the tele-broadcasting market by region, where one channel exclusively airs content in one area while the other operates in a different region, thereby avoiding direct competition. These are all examples of a horizontal agreement between competitors. The Act also prevents vertical arrangements such as tying arrangements where for example City Tyres would contract with Cafe Javas to only serve food to clients that used services of the former. Another example of vertical arrangements prohibited under the Act is resale price maintenance agreements where Unilever Uganda Limited for example would enter a contract with Akiki’s Retailer Shop to sell Geisha soap at a specific price, preventing her from offering discounts or altering the price. A deal forcing Akiki’s retail shop to only sell Unilever products under an exclusive supply/distribution agreement is also illegal under the new law. This position was earlier provided by the commercial court in Ezee Money v. MTN Uganda, where court found that MTN’s use of illegal exclusivity agreements on mobile money agents and intimidation tactics in the market; restricted competitors from rendering beneficial services to the public and thus constituted unfair competition in violation of the Communications (Fair Competition) Regulations, 2005.

However, the Act’s limitation lies in the genius nature of companies, which typically avoid explicit collusion agreements, opting instead for subtle coordination through mutual adjustments in their actions without documented interactions. For instance, Mogas and CityOil may observe each other’s pricing and adjust their own prices accordingly without any direct communication. If one station raises its prices and the others follow suit, maintaining higher prices collectively, they are indirectly coordinating to benefit from higher profits at the expense of consumers, despite not having an explicit agreement to do so. While the law addresses this issue in price fixing and tendering exercises, it leaves other media open and as such it ought to address not just overt but also covert forms of collusion, ensuring it encompasses both explicit and implicit conspiracies to ensure market fairness.

Abuse of dominant position

Dominant position is defined under the Act as a firm commanding 30 percent of the market or where a group of three or more has a 60 percent market share. Such a firm(s) are not allowed to use this position to the detriment of their competition or consumers for instance through predatory pricing. This is a concept where, hypothetically, Kinyara significantly lowers sugar prices below cost to outcompete and drive Kakira out of the sugar market and once the latter has left the market, the former raises prices again, taking advantage of its now dominant market position.

Another example of abuse of dominant position is the refusal of access to an essential facility.  The Act does not define what an essential facility is but it is basically a facility/asset/infrastructure that is owned and controlled by a dominant firm or monopolist which facility a third party needs access to, to offer its own product or service. This doctrine is applied when the facility in question is something competitors cannot feasibly replicate due to legal, economic, or technical barriers, and where denying access to this facility would hinder competition.

Essentially, it ensures that no company can use control over a crucial resource to lock out competition and maintain its dominance, thereby promoting a more competitive marketplace. This doctrine has proved controversial and Ugandan courts have dealt with this issue before and will likely deal with it again. For example, can MTN commanding a dominant position in the mobile money market deny any third-party fintech aggregators access to its mobile money platform? This issue was at play again in the 2013 Ezee Money v MTN matter where the court determined that MTN had unjustly prevented Ezee Money from connecting with the aggregator, Yo! Uganda Limited, to its network. As a result, Ezee argued that it incurred substantial financial losses.

The court rejected MTN’s flimsy response that the law only protected licensed persons and held that its activities unfairly prevented, restricted or distorted competition in the communications sector contrary to the Uganda Communications Act and the Communications (Fair Competition) Regulations, 2005. MTN was ordered to pay general damages of USD 235,000 as well as punitive damages to the tune of USD 441,000, though this was appealed. This verdict, in my opinion, was the catalyst for the emergence of the hundreds of Ugandan fintech start-ups that have leveraged the essential infrastructure provided by MTN and Airtel. This development has led to the creation of a robust national payment system, ultimately and significantly benefiting us, the consumers. This will also be critical as Uganda ventures into the open banking sphere.

Mergers, acquisitions and joint ventures

The Act requires that for all mergers, acquisitions and joint ventures to be consummated, there must be authorization from the Minister of Trade. Firstly, the Minister should immediately prescribe a threshold for the kind of mergers and acquisition that will require ministerial approval lest Frank’s Auto Shop acquisition of Amara’s Garage in downtown Kisenyi require clearance which can cause a mountain load of paperwork headache for both the minister and these SMEs. Only acquisitions that can alter competition on a large scale should require ministerial approval. For example, MTN can never be allowed to acquire Airtel in this current market under the new law.

Another type of arrangement the Act indirectly prohibits is “killer acquisitions” This refers to a strategy where a dominant firm acquires a potential competitor, not necessarily for the value of its existing operations, but to prevent future competition. Imagine a large pharmaceutical company, like Quality Chemicals Ltd that dominates the market for a specific class of HIV/AIDS medication “ARVx,”. Now imagine a small start-up, Ankole Pharma Ltd, develops a promising new HIV/AIDS drug “AnXX” that could potentially revolutionize treatment in this category, posing a competitive threat to Quality Chemical’s ARVx. Before Ankole Pharma can bring AnXX to the market, Quality Chemicals Ltd acquires Ankole Pharma.

However instead of further developing and marketing Ankole Pharma’s ground-breaking drug AnXX, Quality Chem shelves or kills the project altogether. This move effectively eliminates a potential competitor, ensuring Quality Chemical’s market dominance remains unchallenged, preventing the innovative drug from reaching patients who could benefit from it. This scenario exemplifies a “killer acquisition” in the pharmaceutical industry, where the primary motive is to stifle competition and innovation rather than enhance the acquirer’s product portfolio.

Such are the practices that competition law seeks to prevent. In a free capitalistic market, parties tend to place profits ahead of the consumer welfare and government intervention is welcome to this extent. This intervention is however a costly venture as the government would need to train/hire economists and lawyers to add some bite to its bark. Noting that there is also no competition authority despite the law being passed, the country still has challenges ahead in this regard.

The author, Dr. Mutungi

(c) Dr. Simon Mutungi

Problems in the Ports! Competition Commission of Mauritius Launches a Market Study in the ports industry

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By Tyla Lee Coertzen

On 26 February 2024, the Competition Commission of Mauritius (“CCM”) announced the launch of a market study in the ports sector established in terms of section 30 of the Mauritian Competition Act of 2007 (the “Act”).

Section 30 empowers the Executive Director of the CCM to, inter alia, undertake general studies on the effectiveness of competition in individual sectors of the economy in Mauritius. In the media release published by the CCM,[1] it is stated that the outcome of such study will be to enable the CCM to make recommendations to the Mauritian government in an effort to improve the market for the benefit of consumers, businesses and the Mauritian economy at large. The CCM’s media release confirms that the study is aimed at identifying potential distortion in the competitive process that might have a negative effect on competition. Importantly, a market study undertaken in terms of section 30 is not to be construed as a formal investigation of restrictive practices by the CCM, but rather a general consideration of any relevant market to ascertain further information the effectiveness of competition in the sector. The Act does not make provision for the consideration of public interest effects in respect of competition law in Mauritius. Thus, presumably, the market study will focus only on competition-related effects.

It is said that several stakeholders have notified the CCM of conduct within the ports sector that potentially has a negative effect on competition, further, that similar issues have been faced by Greece, Romania and Mexico, where the competition authorities have also conducted market studies have also been undertaken in respect of ports.

The Mauritian economy is heavily dependent on the harbor located in Port Louis, which is said to handle over 95% of the total volume of external trade to and from Mauritius and amounts to a significant portion of the Mauritian GDP. It is predominantly regulated by the Mauritius Ports Authority as well as the Cargo Handling Corporation.[2]

For purposes of conducting the market study, the CCM has appointed a ‘study team’ consisting of its own staff as well as experts in the competition law and economics fields. A key individual part of the team is John Davies, a member of the United Kingdom Competition Appeal Tribunal and who served as the Head of the Competition Policy Division at the Organisation for Economic Cooperation and Development (“OECD”). John Davies also previously served as the Chief Executive of the CCM. Other key members of the study team include Simon Roberts, a Professor at the School of Economics of the University of Johannesburg as well as Thando Vilakazi, the Director of the University of Johannesburg’s Centre for Competition, Regulation and Economic Development (“CCRED”).

Interestingly, in an OECD Policy Roundtable conducted in 2011,[3] the OECD Competition Committee debated the issue of competition in ports and port services, building from key experiences of relevant jurisdictions. In this regard, it was noted that the two main competitive restraints facing ports come from other modes of transport and other ports, however it was agreed between OECD Member States that generally other modes of transport (i.e., road, rail and air) pose very limited constraints on maritime transport. However, given that the Port Louis handles close to all external trade in Mauritius, and operates as the only port in Mauritius, it is clear why the CCM would wish to ensure that the port works efficiently from a competition perspective.

Stakeholders who wish to engage with the CCM to participate in the market study are encouraged to contact the CCM.

[1]             See the media release at https://competitioncommission.mu/wp-content/uploads/2024/02/MR-Port-Market-Study.pdf.

[2]             See https://www.trade.gov/country-commercial-guides/mauritius-port-expansion-and-bunkering.

[3]             See the OECD Competition Committee Roundtable on Competition in Ports and Port Services at https://www.oecd.org/daf/competition/48837794.pdf.

COMESA Snapshot: How have the COMESA Draft Regulations changed its competition regime?

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By Gina Lodolo & Tyla Lee Coertzen

On 24 January 2024, the COMESA Competition Commission (the “CCC”) issued a press release requesting comments to its proposed Draft Regulations (as amended in November 2023) (“Draft Regulations”).

The Draft Regulations contemplate an over hall of many key features of the CCC’s current competition regime, which has been in place since 2014. The Draft Regulations, importantly, make provision for the CCC to act as a consumer protection agency as well as an antitrust enforcer. While the consumer protection provisions have also been significantly bolstered, this article provides an overview of the salient aspects that the Draft Regulations seek to change vis-à-vis the competition regime. We highlight the key proposed amendments in this article.

Merger Control Regime:

  • One of the most salient amendments to the regime is contained in Article 37, which proposes to change the CCC’s merger control regime from non-suspensory to suspensory. In this regard, when the amendment comes into effect, notifiable mergers cannot be implemented by parties before approval is obtained from the CCC.

Previously, a party to a merger was required to notify such a merger within 30 days from the date of the ‘decision to merge’ (which date has generally been considered by the CCC to be the date any agreements underlying a merger were signed by parties). With the introduction of a suspensory regime, the 30-day rule is expected to fall away, thereby alleviating the pressure off of merging parties to ensure timeous notification of a merger with the CCC.

However, under the current regime, the CCC has a review period of 120 calendar days, with the ability to extend the review period for a maximum of 90 days. Importantly, the Draft Regulations do not envisage a shorter review period, and given that the regime is to be amended to a suspensory one, such a review period could result in significant delays in global transactions, particularly as the old regime was non-suspensory. In its Draft Regulations, the CCC has, however, contemplated a simplified procedure where a merger does not give rise to significant competition or public interest concerns.

  • In the Draft Regulations, the threshold for the definition of a merger has been heightened through the introduction of a change of control of a firm being on “a lasting basis”. 

The definition of a ‘merger’ also now expressly includes joint ventures, that perform on a long-lasting basis all the functions of an autonomous economic entity. In this regard, the Draft Regulations bring the notifiability of joint ventures largely in line with European case precedent. Thresholds have also been introduced for joint ventures whereby a joint venture will be notifiable if it intends to operate in two or more member states, at least one parent of the joint venture operates in one or more member states and the thresholds are met.

  • Interestingly, the Draft Regulations introduce separate thresholds for firms operating in digital markets. In this regard, the Draft Regulations contemplate that a prescribed transaction value be met, as opposed to the more traditional asset/turnover value thresholds.
  • The CCC has also introduced broad powers under Article 38(3) to conduct an investigation where it believes that a merger has been implemented without approval and where the CCC finds that a merger has been implemented prior to approval, a penalty of up to 10% of the merging parties’ annual turnover in the Common Market may be imposed.
  • Another important contemplated amendment is found in Article 40, which provides COMESA Member States with an opportunity to request that a merger be considered under its national competition law within 21 days of receiving notice of the merger from the CCC. The relevant Member State must, however, demonstrate that the merger is likely to disproportionality reduce competition to a material extent in the Member State before the CCC determines whether it will allow the referral in whole or part. Similarly, the CCC may refer a merger for independent consideration to any Member State.
  • The CCC has introduced significant consideration for public interest factors when considering mergers. These include, inter alia, the effect on employment, ability of small and medium sized businesses to be competitive, ability to compete in international markets, environment protection / sustainability considerations and innovation. The latter two considerations are a rather novel concept that the CCC is seeking to introduce, and which has been introduced more prominently in the European Union. The consideration of public interest factors could, however, lead to unintended consequences such as introducing uncertainty and subjectivity / favouring short term public interest considerations at the behest of long-term growth for the greater public interest benefit. Following finalisation of the Draft Regulations, the CCC will publish Public Interest Guidelines which may give guidance in relation to the CCC’s extent of its public interest considerations.
  • The Draft Regulations apply to mergers that meet the relevant threshold, and additionally, where a merger is non-notifiable, the Regulations will still apply to mergers that are likely to restrict competition in the Common Market or any substantial part of it- this may introduce some uncertainty over when the CCC will exercise jurisdiction over mergers that do not meet the statutory thresholds. This seems to be an indication that the CCC is trying to avoid situations of ‘merger creep’ in the digital platform markets.

Market Inquiry powers:

  • The Draft Regulations introduce the powers of the CCC to conduct ‘market inquiries’, in order to inquire into issues affecting consumers or the general state of competition without necessarily referring to the conduct or activity of any particular undertaking.
  • On the basis of the CCC’s findings following the conclusion of a market inquiry, the CCC may initiate a formal investigation, enter into agreements with or order undertakings to implement remedies aimed at addressing the CCC’s concerns, make policy recommendations, conduct advocacy initiatives or take further actions within its powers.  
  • The Draft Guidelines further obligate COMESA Member States to assist the CCC with its investigations, market inquiries or studies within their territory when requested, which investigations, market inquiries or studies may be conducted jointly or under the CCC’s guidance.

Settlement:

  • The Draft Regulations introduce the ability of the CCC to develop procedures to negotiate settlements, however, salient features of a (binding) settlement provided for in the Draft Regulations are as follows:
    • there must be an acknowledgment for engagement or participation in conduct that violated the Regulations;
    • liability in respect of conduct is acknowledged; and
    • agreement with the CCC’s findings to avoid lengthy standard procedures.

Anti-competitive agreements:

  • The Draft Regulations provide that anti-competitive agreements can attract a fine of up to 10% of annual turnover in the Common Market for each of the participating undertakings (previously penalties were determined by the Rules).
  • Public interest factors will be taken into account when assessing potentially anti-competitive agreements, including the novel consideration of the effect on environmental protection and sustainability (it is not clear whether these will be considered for purposes of aggravating or mitigating circumstances).
  • Public interest factors will also be considered when considering whether the CCC will grant an application for authorization for a firm to enter into an agreement even if the agreement is anti-competitive, if the benefits from the agreement outweighs the anti-competitive effects.
  • Minimum resale price maintenance has been introduced as a per se contravention. The Draft Regulations do not delineate whether a minimum price may be recommended as long as it is not enforced (such is the case in the South African Competition Act).

Abuse of dominance:

  • Article 31 of the Draft Regulations introduces a presumption of dominance threshold of 30%. This is a low market share threshold in circumstances where market power does not also need to be established. The CCC will also give consideration to firms operating in digital markets wherein data quantity, accessibility, control and network effects will be relevant considerations.
  • An additional violation for an abuse of dominance has been added for applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.
  • Article 33 of the Draft Regulations introduces a separate violation for an abuse of ‘economic dependance’. The reference to ‘gatekeepers’ infers that this Article could be targeted towards digital platforms /markets.

Cartel conduct:

  • A leniency policy has been introduced by the CCC. This is particularly welcomed as it will assist in avoiding applying for leniency across multiple jurisdictions, which usually results in firms being disincentivized to apply for leniency where results are uncertain. The CCC will develop Guidelines for the implementation of the leniency programme.

General other proposed amendments include:

  • Obligations of Member States will become more extensive under Article 7 of the Draft Regulations and the Draft Regulations clearly provide that decisions of the CCC will bind Governments of Member States as well as State Courts.
  • The CCC is set to be renamed as the COMESA Competition and Consumer Commission and will thus increase its focus in relation to consumer protection related matters.
  • Stringent appointment requirements and procedures for members of the Board of the CCC have been introduced.
  • Article 17 introduces the appointment of an Executive Director to act as the chief executive officer of the CCC. The Executive Director will not be subject to the direction or control of any other person or authority.
  • The Executive Director is provided with various new powers, including:
    • the powers to conduct market inquiries into matters affecting competition and consumer welfare.
    • The ability to negotiate and conclude settlement and commitment agreements through the Executive Director, largely solidifying negotiations that already take place in practice.
    • The power to make interim orders, conduct dawn raids, issue comfort letters and issue advisory opinions.
  • The Draft Regulations provide the Board with the power to issue block exemptions (subject to approval of the Council, through the Bureau), exempting any category of agreements, decisions, and concerted practices from the application of Article 29 of the Regulations.
  • The CCC now has the power to enter into, search and inspect any premises, including a private dwelling where the CCC reasonably suspects that information or documents that may be relevant to an investigation are kept.
  • Interim orders can be made in matters of urgency, pending the conclusion of an ongoing investigation where there is a risk of serious irreparable damage to competition or consumer welfare or to protect the public interest.

Asked to comment on the proposed Regulations, Primerio director, Michael-James Currie says “the proposed amendments go a long way to bringing the COMESA antitrust regime in keeping with most jurisdictions with well established competition law enforcement. The removal of finite penalty caps in favour of a common “10% of local turnover” threshold, the (eventual) introduction of a leniency policy and introduction of a suspensory merger regime are welcomed. The ambiguity created by the current regime (which requires a merger to be notified within 30 days after a decision to merge has been taken) can be impractical and served little benefit. Companies operating within the Common Market will need to re-evaluate their commecrial operations from a compliance perspective as the risk matrix will change considerably”. Currie went on to say that these proposed Regulations are a continuation of the strong leadership shown at the CCC under CEO Willard Mwemba, and that he expects to see more enforcement activity by the CCC over the next two years.

The time to provide comment to the Draft Regulations has been extended to 14 March 2024.  The Draft Regulations can be accessed here.

Whose interest is it anyway? CAK stresses ‘public interest’ in merger control

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Competition Authority of Kenya emphasises the role of public interest in M&A reviews

By Joshua Eveleigh

On 05 January 2024, the Competition Authority of Kenya (“CAK”) approved Nava Apparels L.L.C-FZ acquisition of the assets of Mombasa Apparel (EPZ) and Ashton Apparel (EPZ) on the condition that Nava retains all of EPZ’s 7019 employees on terms that are no less favourable than their current terms of employment.

Notably, post-transaction the merged entity would have an insignificant market share of only 3.83% in the market for the manufacture of clothing apparel for export. Accordingly, the merged entity would still face significant competitive restraint from various other market players post-transaction and, against this, the CAK found that the transaction would not result in any substantial lessening or prevention of competition in the relevant market.

Similar to South Africa’s merger control regime, the CAK is mandated to conduct a public interest assessment, in addition to the conventional competition assessment, during its merger review process. As part of its public interest assessment, the CAK has particular regard to the enhancement and sustainment of employment; the ability of SMEs to enter into and compete into a particular market; and the ability of national industries to compete in international markets. Where the CAK has a credible basis to conclude that a notified transaction will result in a public interest concern, it may prevent that particular transaction.

What is interesting in this instance, however, is that the merger decisions do not appear to include any particular period within which the retrenchment moratorium must be adhered to. Without guidance, the acquirer may find itself in the invidious position of not being able to retrench any of the 7019 employees for an extended period of time.

The CAK’s recent decision emphasises the agencies’ commitment to preventing merger specific retrenchments. Parties intending to conclude mergers in Kenya must proactively consider the effect of the proposed transaction on the public interest, as is the case in other African jurisdictions such as South Africa and be able to meaningfully engage with the CAK to proffer public interest commitments.

Fidel Mwaki, Kenyan lead partner of Primerio International, says: “An interesting decision by the CAK that highlights the need for businesses to seek legal and regulatory guidance on public interest factors that may affect their workforce retrenchment timelines when looking to conclude mergers.”

South African Competition Appeal Court releases its decision in respect of the Forex matter: The hindering of international cartel conduct or the inadequate presentation of a case

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By Tyla Lee Coertzen and Sarah van den Barselaar

Introduction

In our previous update on this matter, we reported on the South African Competition Appeal Court (“CAC”)’s second hearing of the Forex case.

On Monday, 8 January 2024, the CAC handed down its judgement of the appeals brought by several national and foreign banks (the “Respondents”) against an earlier decision handed down by the South African Competition Tribunal (the “Tribunal”).

The CAC’s decision comes eight years after the South African Competition Commission (“Commission”) commenced its investigation into various national and foreign banks for alleged collusion and manipulation of the Rand-Dollar exchange rate between the years 2007 to 2013. The appeals heard by the CAC arose from the exceptions proceedings launched by majority of the Respondent banks, which sought to attack the allegations against them.

The CAC has now formally dismissed the cases against 23 of the 28 Respondents, highlighting a significant question on the impact of the judgement, namely whether it has the effect of hindering international cartel conduct or whether it was merely a product of an inadequate case presented by the Commission.

Background to the judgement

The CAC’s judgement follows a decision handed down by the Tribunal in 2019 (which ordered the Commission to comply with several requirements to establish the necessary jurisdiction over a number of Respondent banks who were neither domiciled nor carried on business in South Africa) as well as the 2020 decision of the CAC in the same matter. In this regard, the Commission was ordered by the Tribunal to reconfigure its referral affidavit to include allegations pertaining to, inter alia, (i) the establishment of a direct or immediate and substantial effect in South Africa, (ii) confining the case to a single overall conspiracy (“SOC”), (iii) the facts relied on to prove that the relevant bank had joined the SOC, and (iv) the facts on which the Commission relied to allege that there were adequate connecting factors between the Respondents. In summary, the Commission was ordered to amend its referral affidavit to ensure it met the requirements of both personal and subject matter jurisdiction against the Respondents.

The Commission based its entire case on the alleged SOC in which it alleges all of the Respondents were participants. The Commissions case thus had to: (i) meet the requirements set out in the Tribunal’s 2019 decision and the CAC’s 2020 decision, (ii) set out the core requirements of a SOC, and (iii) show that each firm was aware of actual conduct planned or put into effect by other undertakings in pursuit of same. The Commission’s case against the Respondent banks was based on the establishment of a SOC, namely, a common anti-competition objective (i.e., that each firm intentionally contributed to the common objectives that were pursued by all participants).

Simply put, the Commission had to prove that all the Respondent banks in its referral affidavit had perpetrated the SOC and, where that each bank could have reasonably foreseen their participation in the SOC, were aligned with the risk of such. In determining whether the Commission had alleged this, the following legal issues were placed before the CAC:

  1. whether Respondents who were not traders in foreign currency could be included in the alleged conduct;
  2. whether the referral affidavit complied with the requirements set out by the Tribunal;
  3. whether the Commission adequately demonstrated the existence of personal and subject matter jurisdiction in cases of pure peregrine (i.e., firms neither domiciled nor carrying on business in South Africa);
  4. whether the Commission adequately demonstrated the existence of personal and subject matter jurisdiction in cases of incola and local peregrine (i.e., banks with some presence in South Africa by way of a local branch in South Africa);
  5. whether the allegations contained in the referral affidavit were sufficient to show the Respondents had joined and/or actively participated in the SOC; and
  6. whether certain Respondents were incorrectly joined in the proceedings.

Key findings

The CAC made the following key findings.

Holding company liability

The CAC found that the fact that certain Respondents who were merely holding companies of banks (and who were not themselves registered banks and not authorized to trade in foreign currency) cannot be a sufficient basis on which to establish a case against such company. On this issue, and due to the insufficient evidence presented by the Commission, the CAC found that several Respondents had been incorrectly joined in the proceedings.

Personal and subject matter jurisdiction

The CAC found that that in establishing the requisite jurisdiction over international Respondents, there are separately defined requirements for the establishment of both personal and subject matter jurisdiction. Specifically, in respect of subject matter jurisdiction, it must be established that the alleged conduct has a direct or immediate or substantial effect in South Africa. On personal jurisdiction, the CAC found that one needed evidence of linkages to each South African bank as part of the SOC (thus linking the incola banks and the peregrini banks).

The CAC found that reference to an occasional participation without any evidence and that is not linked to a South African bank is inadequate to meet the requirements set out by the Tribunal, and resultantly found that the Commission had failed to show personal jurisdiction for several of the Respondents.

Non-traders

The CAC emphasized that the individuals who were not traders in foreign currency employed by the banks derived no basis to be joined to the matter. On this basis, the CAC dismissed the case against the sixth Respondent’s (namely, Standard New York Securities Inc.).

Impact of the judgement

Simply put, the CAC upheld the appeals brought by 23 of the Respondent banks and dismissed the appeals brought by the remaining 4 Respondent banks. As such, the remaining 4 Respondent banks will proceed to face charges at a main trial before the Tribunal alongside Investec Bank (who elected not to join the other Respondent banks in the exception proceedings).

The scope of the judgement is significant in that it did not sanction cartel conduct. Rather, the decision concerns the key averments that needed to be put forward by the Commission in order to successfully present a case against all the Respondent banks it joined in the proceedings. While the Commission had several opportunities to amend its pleadings in order to comply with the requirements set out by the Tribunal and the CAC, it could not do so adequately and was unable to provide the necessary evidence nor establish the necessary jurisdiction against several of the Respondent banks. Thus, the CAC’s judgement represents the Commission’s inadequate case for prosecution of the alleged cartel conduct.

The inadequacies are seen in the findings of the CAC, including, inter alia, the Commission failing to comply with the requirements of the CAC’s 2020 decision, and the failure of the Commission to lead a sufficient case with adequate evidence against the Respondent banks. This is despite the Tribunal’s previous decision indicating the need to establish personal jurisdiction and allowing the Commission the ability to reconfigure its referral affidavit in an attempt to ensure a fair and just handling of the matter. Despite several years of investigations and preparation, the CAC’s recent judgement represents a mere product of the Commission’s case being flawed and lacking necessary evidence.

FCCPC leadership shake-up: Farewell to a Nigerian antitrust legend

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AAT is sad (but not surprised) to report that the new Nigerian government under President Bola Tinubu has sacked the legendary head of its competition-law enforcer, the Federal Competition and Consumer Protection Commission (FCCPC), Babatunde Irukera. His termination is with immediate effect. His pro tempore replacement at the agency will be Dr. Adamu Ahmed Abdullahi, as the next-in-command Executive Commissioner of Operations.

While it is certainly not a shocking revelation that incoming administrations frequently shake up their senior agency leadership, it is nonetheless an objective loss to the burgeoning FCCPC, which — under Irukera’s leadership — invariably gained international respect and, indeed, won an award for Nigeria’s most effective government institution.

The reactions of those with personal knowledge of the outgoing FCCPC CEO were almost invariably gloomy. Says Andreas Stargard, a partner with competition firm Primerio Ltd.: “This is a real loss to the Commission, which was literally brought into existence under the aegis of Babatunde. The antitrust community views his departure with dejection and a real concern for the future trajectory of the otherwise blossoming young agency, with which we had nothing but positive experiences so far. Babatunde is a real leader, and I wish him well in his future endeavours — I have a feeling that this is not the last we have seen of him in Nigerian antitrust.“

Messrs. Babatunde Irukera (outgoing FCCPC CEO) and Ali Kamanga (COMESA Competition Commission, CCC) at the first IBA competition-law conference in Lagos, Nigeria (photo: A. Stargard, November 2023)

Other industry voices echoed similar sentiments, with academic Vellah Kigwiru opining that Irukera “had so much to offer for the continent,” while the FCCPC’s Chief Legal Officer, Florence Abebe, stated poignantly:

“He is such an icon. FCCPC cannot be the same. The sadness is real. He took the then-CPC from a T-shirt and face cap wearing council with disgruntled incapacitated staff to what it is today on the continent and globally. Staff welfare was paramount, he prioritised capacity development like no other, he demanded excellence and professionalism from staff; he folded his sleeves and did the work, he wasn’t just directing operations, he was handling himself. While we were preparing, this guy was thinking on his feet. He is a genius, unpredictable, humble, compassionate, patient to the core, and didn’t accept failure. He is an institution!”

Mr. Irukera’s departure comes on the heels of the FCCPC’s record-setting multi-million dollar single-firm conduct settlement with British American Tobacco, on which AAT reported previously.

10 January 2023 update:

After widespread criticism and backlash against the manner in which Mr. Irukera’s departure from the Commission was announced by the new(ish) Nigerian government, the administration revised its statements to the effect of having “relieved [him] of his duties,” as opposed to “dismissed” the CEO. From a tweet: “I have followed the concerns in the media on the report that President Bola Ahmed Tinubu dismissed Babatunde Irukera EVC/CEO, Federal Competition and Consumer Protection Commission (FCCPC) and Alexander Ayoola Okoh — Director-General/CEO, Bureau of Public Enterprises (BPE). The President’s directive did not intend a dismissal. The two men who have served our country were relieved of their duties by the President, as he scouts for their successors. The connotations implied in using the word dismissal were clearly not intended in the statement issued. President Tinubu thanks the two men for their services and wishes them well in their future endeavours.”

Nigeria & Single-Firm Conduct: FCCPC Smokes Monopolist with Largest-Ever Fine

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British American Tobacco faces $110 million fine for abuse of dominance in Nigeria, after settlement with up-and-coming antitrust enforcement agency

By Nicola Taljaard and Nicole Araujo 

About three years ago, in the summer of 2020, British American Tobacco Nigeria Limited and associated companies (collectively “BAT”) became the subject of an investigation by Nigeria’s then-brand-new Federal Competition and Consumer Protection Commission (“FCCPC”). The FCCPC was looking into the potential violation of the Federal Competition and Consumer Protection Act (“FCCPA”) and Administrative Penalties Regulations, 2020 (“Regulations”). After three years of investigating BAT’s business practices (including “dawn raids” on the company’s various office locations), the FCCPC found BAT guilty of having engaged in unfair business practices under section 155 of the Act by abusing its market dominance in Nigeria and violating public health regulations.  For the former, notably, BAT had penalized retailers for fostering an equitable and competitive market for its rival’s products in-store.

As a result of the finding, the FCCPC and BAT entered a consent order in December 2023. As part of this settlement pact, BAT agreed to engage in tobacco health advocacy, provide written assurances to the FCCPC and to be monitored by the FCCPC for the ensuing two years to ensure that BAT modified its behavioral and business practices to accord with relevant antitrust and tobacco control laws and efforts. BAT also agreed to pay a hefty fine of $110 million to the FCCPC in accordance with Clause 11 of the Regulations.  Notes Andreas Stargard, competition partner at specialist firm Primerio Ltd., “[t]he penalty agreed upon by the parties constitutes the largest fine imposed by the FCCPC thus far. It is also the first known instance in which the Regulations — which were intended to clarify the methodology for calculating administrative penalties — were applied and where the FCCPC has used the discretion conferred on it under Clause 11 to ‘consider administrative penalties on a case-by-case basis as the circumstances require’. Notably, BAT cannot appeal this fine, as it is part of a mutually agreed ‘consent order’ between the parties.”

In accordance with the terms and nature of the consent agreement, respectively, the FCCPCwithdrew the pending criminal charges against BAT and the agreement is not subject to appeal. Moreover, in compliance with applicable legislation, BAT and the relevant associated companies must advocate for both tobacco control and public health. 

The investigation and consent agreement have certainly come at a precarious time for BAT, which recently published that the value of its cigarette brands had diminished considerably in the past year and is known to have entered into a separate agreement with the US authorities surrounding investigations into the violation of a prohibition on tobacco sales to North Korea. 

The fine agreed to between the FCCPC and BAT follows the fairly recent publication of the FCCPC’s Regulations which delineate the legislative framework for the administration and imposition of administrative penalties according to the Act. The FCCPC reiterated its commitment to enforcing the law, making sure companies follow the relevant regulations, fair markets are fostered by all, and the protection of consumer interests are at the core of competitive actions and regulations. Ultimately, a fine to this extent sends a clear signal to other companies about the importance of fair, competitive behaviour and antitrust compliance. 

The Morocco Competition Council takes action to ensure fairness in Morocco’s fuel market with a settlement of 1,840,410,426 Moroccan Dirhams

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By Gina Lodolo

In a move towards ensuring fair competition in Morocco’s fuel market, the Morocco Competition Council (“MCC”) recently took decisive action. This decision followed amendments to the legal framework governing competition in Morocco, aligning it with Laws No. 40.21 and No. 41.21, which amended and supplemented Law No. 104.12 related to freedom of prices and competition, and Law No. 20.13, which pertains to the Competition Council, along with their implementing decrees and their entry into force. In this regard, in June 2023, the MCC initiated an investigation into potential practices that contravened competition rules within the fuel market.

The complaints were filed against nine companies operating in the supply, storage, and distribution of gasoline, along with the professional organisation representing these companies (the “Companies”).

In response to the investigation, the Companies expressed their willingness to engage with the new legal framework, particularly the settlement procedure outlined in Article 37 of Law No. 104.12, as amended and supplemented.

The MCC considered and approved the requests submitted by the Companies to enter into discussions. The General Rapporteur was tasked with initiating official discussions with each company and its professional organisation separately. The result of these discussions was the signing of reconciliation minutes, documenting the approval of the reconciliation proposals.

On 23 November 2023, the MCC issued a report detailing reconciliation agreements that had been entered into with the Companies, stipulating that the Companies would collectively pay an amount of 1,840,410,426 Moroccan dirhams as a reconciliatory settlement. In addition to the financial commitment, the Companies made a set of pledges aimed at improving the competitive functioning of the fuel market and preventing anti-competitive practices.

These commitments are legally binding and include:

  1. Developing competitive risk maps within the Companies.
  2. Establishing effective internal warning systems.
  3. Appointing an internal official responsible for overseeing the conformity program.
  4. Providing detailed reports on supply, storage, and distribution activities every three months for a period of three years.
  5. Ensuring that price changes align with market dynamics.
  6. Allowing independent service stations to change prices without prior approval.
  7. Not linking discount programs to service stations with compliance with recommended prices by the Companies, directly or indirectly.

The commitments also emphasised the importance of preventing anti-competitive practices related to the exchange of sensitive information. In this regard, the Companies committed to adopting best practices regarding the collection, exchange, or sharing of information, especially in the management of shared infrastructure for storage and distribution.

To ensure the effective implementation of these commitments, the MCC will be closely monitoring and evaluating compliance. In this regard, the Companies are required to provide periodic evaluation reports, demonstrating their commitment to the agreed-upon measures.

The MCC’s proactive approach in addressing potential anti-competitive practices in Morocco’s fuel market through reconciliation agreements is a significant step forward and signifies robust and increased enforcement activity in Morocco.

The full MCC Report is accessible here.

South African Competition Appeal Court Still Grappling with Complex Forex Case

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By Gina Lodolo and Nicola Taljaard

Eight years after the South African Competition Commission (“Commission”) commenced its investigation into various national and foreign banks (“the Respondents”) in the Rand rigging case commonly referred to as the “Forex case”, the competition authorities continue to grapple with this complex case. While the Commission has continued to encourage the respondent banks to enter into settlement agreements with it, and several banks have done so, the case continues in respect of several Respondents. 

Briefly, the Forex case pertains to an allegation of collusion between South African and foreign banks which would have led to the manipulation of the Rand-Dollar exchange rate amongst said banks. The complained of conduct is alleged to have occurred between 2007 – 2013 (at least) amongst 28 banks in Europe, South Africa, Australia, and the United States of America. The banks allegedly conspired to manipulate the South African Rand by, inter alia, electronically sharing information on USD/ZAR currency pair trades. The harm alleged to the Commission extended to the Rand exchange rate, which had spillover effects on South African trade, foreign direct investment, corporate balance sheets, public and private debt, financial assets, and concomitant prices of goods and services. Accordingly, the Commission’s case is premised on section 4(1)(b)(i) and (ii) of the Competition Act 89 of 1998 (“Act”) – being market allocation and price fixing.

Earlier this month, the Competition Appeal Court (“CAC”) again heard the Forex case, as new arguments have come to the fore. This time, the remaining Respondents have alleged that the Commission bears the onus to prove that all the Respondents partook in a single overarching conspiracy to manipulate the Rand. In this regard, despite the Tribunal having noted that the Commission’s referral “contains adequate details that have enabled us to conclude that the Referral, as a whole, prima facie, shows that there was a [single overall conspiracy] between the foreign and local banks to manipulate trading in the USD/ZAR currency pair”, the Respondents maintain that the case cannot proceed until this onus has been fully discharged.

Despite various developments over the past years, including a number of unsuccessful exception, objection, dismissal and strike out applications brought by the Respondents relating to jurisdiction, prescription and lack of particularity as well as successful joinder applications (in respect of the primary case) by the Commission, the case has not substantively progressed, and it currently stands to become one of the longest running matters before the competition authorities.

One of the Respondent’s Standard Chartered Bank (“SCB”), a multinational British Bank, has also recently entered into a settlement agreement with the Commission, in terms of which it admitted liability to the manipulation of the USD/ZAR currency pair and agreed to pay an administrative penalty of c.ZAR 42 million. SCB’s settlement follows a similar settlement between the Commission and Citibank in 2017. The Commission did not seek penalties against ABSA Bank, Barclays Capital and Barclays Bank as these Respondents had applied and were granted leniency in terms of the Commission’ Corporate Leniency Policy.  

 The Tribunal and CAC did, however, in March this year, require that the Commission file a new referral affidavit in order to substantiate the case that it had previously pleaded insufficiently. As to the Respondent’s argument that the Commission could not initiate complaint referrals absent the initiation of an investigation, the Tribunal noted that while the Commission needs to commence an investigation against a Respondent specifically to be able to initiate a complain referral against them, it clarified that whether such initiation is express or tacit, is immaterial. The Tribunal further noted that to oblige the Commission to specifically mention each respondent in its complaint to the Tribunal would lead to an absurd outcome, namely that the Commission would be precluded from joining potential or even self-confessed member(s) of a cartel subsequent to its complaint referral.

As it stands, the CAC continues to hear arguments on behalf of 13 banks, predominantly regarding evidence as to their involvement in the alleged “single overarching conspiracy”, and while the Respondents have spared no expense in defending their case, the competition authorities have in no way backed down.

This is an important case, but has also served as an important precedent setting case in relation to whether the Tribunal has jurisdiction to adjudicate a matter involving foreign entities (i.e., whether the Commission has jurisdiction to hear a complaint where firms are neither domiciled nor carry business in the Republic of South Africa). In this regard, the CAC held that the Competition Tribunal could enjoy personal and subject matter jurisdiction over pure peregrini, provided that there were adequate connecting factors between the foreign firms’ conduct and the complaint from the Commission and upheld that Tribunal’s decision in relation to local peregrini that the Tribunal had jurisdiction where the qualified effects test was met and that a penalty sought should be confined to turnover within and exports from South Africa.

Primerio Director, Michael-James Currie provides the following insights: “the Forex case has, throughout the several bouts before the adjudicative bodies, confirmed that the thresholds for establishing jurisdiction over foreign entities and foreign conduct have been lowered. The Commission does however still have the onus on demonstrating that the conduct had a “substantial, direct and reasonably foreseeable effect in South Africa”. This will likely remain a contentious issue at trial as even South Africa’s National Treasury has confirmed that the conduct unlikely had any impact on the ZAR exchange rate. To the extent that individuals were prejudiced by the alleged conduct, it would be particularly interesting to see whether such victims would consider civil follow-on damages actions.”

[Gina Lodolo and Nicola Taljaard are lawyers in the competition law department at Primerio. The views expressed in this article are their own and not attributable to Primerio]