Concurrences: Interview with Commissioner Bonakele

nyuevent960x200-1

Antitrust in Developing Countries: Competition Policy in a Politicised World

Our friends at Concurrences Review are hosting the fourth edition of the joint conference co-organized by Concurrences & New York University School of Law, in New York City on October 27, 2017.

Tickets and more information can be obtained here.

Below is the interview of Tembinkosi Bonakele (Commissioner, South African Competition Commission) by Ioannis Lianos (Professor, University College London). The two will participate in the conference panel “Impact of the New Nationalism on Competition and Economic Development in Developing Countries.”

Interview between Prof. Lianos and Commissioner Bonakele

© Concurrences

Competition authorities are increasingly interested in assessing the effects of mergers or other conduct on innovation. How is this concern over the promotion of innovation affecting the substance of competition law enforcement, and in particular the extraterritorial application of competition law, as innovation is often taking place in the context of global value chains? How should one resolve conflicts over competing visions over the impact of competition on innovation, as it seems to be, for instance, the case between the EU and the US, and possibly BRICS countries?

One of the aims of competition law is to encourage innovation. Firms and individuals are incentivised to innovate due to the protection conferred on their innovations by intellectual property laws (IP). Therefore, at least theoretically, competition and IP laws ought to be complementary. However, the conflicts between competition law and innovation/IP laws are increasingly coming into sharp focus within the context of global value chains. One such example is the recent global mega-mergers in the seeds and agro-chemicals sectors. These mergers illustrate how multinationals can leverage their significant innovation and research resources by extending their IP protections through ‘ever-greening’ of patents, reciprocal IP cross licensing arrangements with close rivals, joint ventures and collaborative research and development. This level of collaboration suggests that the seed/agro-processing markets are likely more concentrated than is currently understood. From a policy perspective, competition authorities in both the EU and US seem supportive of this level of concentration based on the theory that such concentration increases innovation, notwithstanding their (unintended) global unilateral effects to which developing countries are especially vulnerable, given the centrality of agriculture for the sustenance of communities in their economies. The vulnerability of developing countries is further exacerbated by the fact that they are trying to regulate multinationals which have access to resources that dwarf the GDPs of many developing countries, and are able to lobby hard politically, against any interventions aimed at their activities.

Against this backdrop, the way forward for BRICS and other developing countries is to continue efforts to establish their own research platforms to enable the true impacts of the trade-off between innovation and competition law to be better understood from a developing country perspective. Furthermore, there is scope for greater global co-ordination amongst competition law agencies to ensure that global transactions are investigated and remedied in a co-ordinated manner.

Broader public policy concerns, than consumer welfare narrowly defined, are increasingly taken into account by various competition law systems around the world, in both developing and developed countries when assessing mergers and, in some instances, anticompetitive conduct. There is also increasing demand for a broader canvas of principles and values in order to assess business conduct, as this is demonstrated by the development of the concepts of “social” and “green” capitalism. Should competition law authorities explore more systematically this trend and eventually move to a public interest standard in assessing anticompetitive conduct, at least in some economic sectors (for instance involving primary goods, such as food, shelter, or with considerable environmental impact etc.)? What would be the implications for the global governance of antitrust?

Many countries already apply tests beyond the typical competition law tests in merger assessments, but they do not declare those tests in an open and transparent way. In contrast, South Africa’s merger regulation explicitly includes a public interest test and guidelines have been issued setting out how the test will be applied during merger assessment.

Should public interest cover some old and emerging social issues such as green issues or the environmental impact on food security, shelter and so on? I think there is scope for these to be part of an assessment of merger transactions, but their location need not necessarily be with a competition agency and they can be properly assessed through a different regulatory agency in a transparent manner. Countries should be allowed to structure their agencies the way they deem fit.

Within South Africa’s context, in order to address historical inequalities and economic and political imbalances, competition legislation specifically provides for both competition law and public interest standards in the merger assessment process. It bears specific mention that the courts have recently confirmed that both the competition law and public interest tests are of equal prominence in any merger determination process. In a developmental context, economic exclusion exacerbates inequality, poverty and unemployment and competition policy in conjunction with industrial policy (introduced through public interest) can break down barriers to entry and unleash innovation and new entry, which are pivotal to the unleashing of economic growth and development.

Although public interest considerations in merger assessment would appear, largely, the preserve of developing countries, developed countries and most notably, the European Union, seem to be re-considering their stance towards public interest considerations in merger assessment. Moreover, the impact of globalisation appears to be giving rise to a new wave of ‘new nationalism’ in developed countries (and the United States is no exception). This has ushered in more inward looking perspectives to international trade and ironically, may give rise to the use of public interest considerations in ‘tit for tat’ exchanges in transactions taking place within an increasingly geopolitical context. Thus, the implications for the global governance of anti-trust may be convergence.

In recent years the competition authorities of BRICS countries and other large emergent economies have been increasingly active in competition law enforcement, adjudicating high profile cases of global importance. The experience gained may be a source of inspiration for competition authorities in other emergent and developing countries, and could also be an important source of learning and wisdom for the competition authorities in developed countries. Do you consider that BRICS and other larger emergent competition authorities should strive to ensure global convergence with the EU and/or US models of competition law, as this is put forward by some, or should they opt for different models, experimentation being an important source of collective learning for both developing and developed countries? Should convergence, or experimentation, be the main/driving principle for the global governance of competition law? 

In the developed world, competition law is applied within a context in which it is presumed that markets are naturally competitive, self-correcting and don’t require policy interventions to address failures. However, that presumption cannot hold true in a developing country context where markets are undeveloped, highly concentrated, non-inclusive and unemployment and inequality are high. In this ‘developmental context’ competition law is applied within a context in which it is presumed that firms with market power exploit it. Therefore, in developmental context, competition law more than just efficiency, but human and socio-economic development as well.

Rather than seeking convergence with developed country perspectives on competition law, developing countries need to play a more prominent role in understanding how competition law policy can be used to address poverty, inequality and unemployment. This will require developing countries through the auspices of representative regional platforms such as BRICS, to enhance co-operation, share experiences and develop legal and competition law expertise from a developmental perspective.

Thus, it is important to appreciate that approaches to competition law in the developed and developing worlds are diverse and that divergence should be tolerated and informed by context. This does not take away the need for global co-operation and sharing best practices. There are also instances where harmonisation may be desirable, like in regions with or striving for common markets.

Advertisements

South Africa: Abuse of Dominance Investigations– Out with the Old, In with the New

The South African Competition Commission (SACC) recently announced that it would withdraw its complaint of abuse of dominance levelled against two of the four pharmaceutical companies who had allegedly engaged in excessive pricing in relation to certain cancer medications in South Africa.

The companies who were implicated in the SACC’s investigation were Roche and Genentech, Pfizer, Equity and Aspen.

The SACC indicated that it had withdrawn its complaint in respect of Aspen and Equity as the relevant products only generated a small portion of revenue in South Africa or in the case of Equity, the relevant product is not registered in South Africa and was only imported once into South Africa from Germany (which was the basis for the high price charged in South Africa). The complaint against Roche and Pfizer will, according to the SACC, continue.

In the same week, the SACC announced that it has launched an abuse of dominance investigation against Vodacom for engaging in exclusionary conduct. This investigation by the SACC is somewhat puzzling as it appears from the SACC’s media release that the reason why Vodacom is being investigated is on the basis that Vodacom had won a tender issued by the National Treasury to become the sole provider of mobile telecommunication services to the government.

The SACC alleges that previously, government departments could purchase mobile telecommunication services from any mobile network operator, but following the award of the tender to Vodacom, other departments, including state owned entities and municipalities, will be incentivised to adopt new contracts with Vodacom. In other words, Vodacom would either be precluding government departments or inducing them not to deal with Vodacom’s competitors in contravention of Section 8 of the Competition Act.

In order to sustain an exclusionary conduct complaint, it must be demonstrated that the alleged conduct was in fact anti-competitive and cannot be outweighed by any pro-competitive or other efficiency justifications.

Importantly, the SACC has not indicated that the actual tender process in any way distorted a competitive bid being submitted by Vodacom.

Accordingly, by being awarded the tender, particularly a public tender issued by the National Treasury, one would have anticipated that this would be indicative that Vodacom’s bid was the most competitive offering – why else sign the agreement in the first place. It could hardly be the case that the National Treasury was ‘forced’ into accepting Vodacom’s terms and if there was an irregularity with the tender process, then why lodge a complaint with the Competition Authorities. This would be a public procurement issue.

Accordingly, the message which seems to be imparted from the SACC’s decision to investigate Vodacom is that dominant firms should be particularly cautious about tendering for a particular bid – they may just win.

Although the investigation has only recently been announced by the SACC, Vodacom’s share price dropped 8% following news of the investigation. Regardless, of whether the complaint levelled against Vodacom has any merit, Vodacom is already paying a reputational price which in today’s day and age, can be significantly costly.

Competitiveness and a new African Public Procurement mindset

By Sanjeev Ghurburrun, Geroudis

Mauritius has long been one of those countries which favours restrictions in Public Procurement in order to limit the number of entities which can bid and benefit from Government or Government related tenders.

For lack of a better approach, tenderers restrict the number of entities which can bid by automatically asking for significant years of experience and operation and proven track records. This is the historical way in which tenderers consider that they will not end up with non-performing companies winning bids. Unfortunately, this system has led to a reduction in competition and an increase in joint bidding with local and international companies in order to comply with possible criteria which one entity on its own may not have.

Enter in 2009, a Competition framework and legislation which provides tools to change, at least for some sectors of the industry, the above mindset in Government, along with tools to sharpen competition between bidders who can use its principles to question authorities and competitors alike.

On the public-sector side, any corporation or Government company which ‘engages in commercial activity for gain or reward’ falls within the competition legislation and has to abide by it.Getting to a new Public Procurement mindset

What this also means is that if such a Government Corporation or company (or parastatals as they are coined locally) is a monopoly in its market, it is also subject to the restrictions under competition principles which are generally applicable to any monopoly, and prohibited from exclusionary or exploitative conduct.

What it boils down to is that a monopolistic Government enterprise issuing tenders and awarding to any winning bidder a resulting contract containing clauses exploiting its monopoly position or excluding competitors could be considered as an abuse of its monopoly position by the Competition Commission.

Consider the UK example of London Luton Airport Operations Ltd (Luton Operations). This company conducted a tender to award a concession to operate a coach service between Luton Airport and London. Luton Operation was in a position to award this lucrative concession as Local Government had granted to it previously the enjoyment of this concession.

People getting out of the National Express Bus in London.

ATS, the losing bidder, brought a competition action alleging abuse of dominance by Luton Operations. The claim was based on alleged unfairness of the tender procedure and terms of the new contract, which included, in short, a seven-year exclusivity over routes of London and a right of first refusal over new routes to London.

The duration of the exclusivity was actually increased from 5 to 7 years during post-bid negotiations with the winning bidder National Express in return for a greater share of the revenue.

The Court confirmed that the grant of exclusivity for a long period to a single competitor had a distortive effect on the downstream market (for bus services between Luton Airport and London) by preventing any other operator from entering the market. The Court also went further to say that even if there was room for only one operator, a well-run competitive tender should mimic the competitive process by awarding the contract to the operator that offered the best service to consumers rather than the highest fee to the body awarding the concession.

The distortion was aggravated due to the extended exclusivity which could not be justified. In conclusion Luton Operations were found to have abused their dominant position, inter alia, in the grant and duration of the exclusivity to National Express and the right of first refusal over new routes.

In conclusion, the tools are here. Let us see how far the Mauritius private sector takes the game to the public sector on changing the Public Procurement mindset.

Akzo rejects CCC notification request, claims no ‘failure-to-file’ in paint deal

Paint giant goes on offensive against COMESA request for retroactive merger filing

By AAT Editors

As AAT first reported here on Sept. 26, the COMESA Competition Commission has launched its first failure-to-file investigation into an M&A transaction (here, likely, a licensing deal), specifically involving Dutch commercial paint giant AkzoNobel and paint brand “Sadolin“.

Today’s news, reported in local Ugandan media, is that AkzoNobel’s Director for Decorative Paints in Sub-Saharan Africa, Johann Smidt, made strong comments at the “relaunch” of Sadolin Uganda, claiming that Akzo’s reassignment of the Sadolin brand name & distribution network to Crown Paints East Africa falls outside the CCC’s purview.”  This sentiment was echoed by Crown’s CEO, Rakesh Rao, saying that “[w]e do not have a merger going on; we are a fully independent plant, so COMESA does not come into the picture at all.

Competition lawyers caution that, on occasion, a business person’s notion of what constitutes a “notifiable transaction” can be at odds with the legal definition thereof, says Andreas Stargard,  an antitrust attorney with Primerio Ltd.

“Whilst they may not be a classic ‘merger’ or ‘acquisition’ in the eyes of the business people, certain types of exclusive licensing agreements or even patent or other IP [intellectual property] assignments may very well fall within the purview of competition regulators, including the COMESA Comp Com.,” said Stargard.

The facts surrounding the transaction itself are by all accounts, fairly confounding.  As best as one can interpret the media reports, the former AkzoNobel license agreement was one with an entity called “Sadolin East Africa” (SEA).  However, upon the purchase of SEA by Japanese company Kansai Plascon (AKA “Plascon Uganda” in the region), Akzo cancelled the agreement and has now entered into a new replacement license with Crown Paints (AKA Regal Paints).  It is the cancellation and reassignment that, according to two letters sent by the CCC on September 19th and 25th, requesting that the companies make retroactive merger-notification filings to bring them into belated compliance with the COMESA merger regime.

For now, we know that Akzo remains defiant (presumably basing its critical position on advice of legal counsel), with its local director stating that “whatever we have done to date has been within the laws of this country and this region”.

While some of Akzo’s statements were presumably vetted by antitrust counsel, others are at odds with a “good” antitrust story and appear to be less-carefully made proclamations: Akzo has said that “we believe that we are going to improve competition because we have a new player who is introducing a new product and an existing player, who is Sadolin and we will continue to be here,” yet its director also noted “that the war of words between Sadolin and Plascon had eaten into their market share and that this had influenced their quick agreement with Crown paints”.

As attorney Stargard observes, “it is usually not considered to be an effective antitrust defence to claim that a competitor has ‘eaten into your market share’, and that your actions that are now under investigation were motivated by said competition…”

EAC poised to pressure remaining members into antitrust enforcement

By AAT staff

On the heels of the COMESA Competition Commission launching its first-ever “failure-to-file” merger investigation, the East African Community (EAC) Competition Authority is poised to dip its toes into the waters of being operational — but it will require its member states to active enforcement programmes of their own, says the agency head.

There are hurdles to the regional body of the African Great Lakes, as our sources point out: only two out of the EAC’s six members states — namely Kenya and Tanzania — have working antitrust enforcement authorities at the moment.  Having only one-third of a supra-national organisation’s members being versed in competition enforcement is a hindrance to the EAC Authority’s competence and pragmatic effectiveness, said chairman of the Board of Commissioners, Sam Watasa at the agency’s 2nd meeting at the organisation’s Arusha headquarters.  He is quoted as saying:

“Kenya and Tanzania have operational National Competition Agencies, Rwanda and Burundi had enacted laws but are yet to be operationalised. In Uganda there was a draft Competition Bill.”

M&A news: First publicly reported failure-to-file accusation in COMESA

Commission goes after Dutch paint manufacturer in Uganda in supra-national enforcement action threat

By AAT staff

The African expansion saga of Japanese paint manufacturer Kansai continues, albeit not in Southern Africa (after having travailed through a hostile takeover of South African paint company Freeworld Coatings and obtaining a majority stake in Zimbabwean competitor Astra Industries in 2010 and 2013, respectively): the current Kansai-related antitrust story is a COMESA one, which comes to us from East Africa.

As was reported back in 2013 in industry publication CoatingsWorld, Kansai had set its sights on expanding into Eastern Africa as well, focussing on the Sadolin brand (formerly owned by AkzoNobel and since its private equity buy-out produced under a continuing AkzoNobel licence and under the parent label Crown Paints).

This has now changed, says competition attorney Andreas Stargard with Primerio Ltd.: “Recently, the COMESA Competition Commission had become aware of press reports that AkzoNobel had withdrawn its Kansai/Sadolin licence in Uganda (a COMESA member state) and effectively entered into — or planned to enter into — a new agreement with an unnamed ‘local producer’.”

Mr. Stargard, who practices competition law with a focus on African companies and jurisdictions, points out that the COMESA merger-notification regime requires a mandatory filing under certain conditions, such as those affecting 2 or more member states and involving businesses with at least $10m in combined regional revenues.

“Whilst the COMESA review is non-suspensory (meaning the parties must notify, but can go ahead and implement the transaction prior to the termination of the CCC’s antitrust review), the notification itself is mandatory.  A failure-to-file can result in significant fines of up to 10% of combined turnover, as well as the regional annulment of the merger within the COMESA countries.

This is what has now happened with Mr. Lipimile’s Sept. 19th letter to AkzoNobel: the CCC chief warned the company that it would risk voiding any contracts if it failed to make a ‘curative’ retroactive filing by yesterday, Monday, 25 September 2017.”

The CCC’s letter to the Dutch paint giant reads in relevant part: “Kindly be informed that the COMESA competition commission has become aware through the media that Akzo Nobel Powder Coatings has entered into sales, manufacturing and distribution agreements with a local paint manufacturer in Uganda.  I wish to inform you that, mergers and any other forms of agreements between competitors are required to be notified to the Commission….without such notification, and subsequent approval by the Commission, such transactions are null and void ab initio and no rights or obligations imposed on the participating parties shall be legally enforceable in the Common Market.”

As to the likelihood of any notification having been made — or at least made satisfactorily and completely —  Andreas Stargard observes that:

“By any antitrust lawyer’s standards, scrambling to make a filing within less than a week, as seems to be required by George’s letter here, is a tall order — merger notifications usually require significant preparatory work, including data analysis, document collection, and interviews with the business people to advance to a final ‘filing’ stage.  To do so in 6 calendar days is extremely difficult.”

He concludes that, “as COMESA is still a relatively young regime in terms of merger filings — with few resources at hand to manage notifications in and of themselves, much less enforcement actions — we expect that the CCC and the parties will somehow arrive at an amicable settlement in this matter.”

Adverse effects of price-fixing: East Africa recognises drawbacks

It is not really news, but worth mentioning as it is literally happening simultaneously: As the most developed antitrust enforcement jurisdiction in Africa, South Africa, charges ahead with heavy-handed actions, such as denying alleged currency manipulators “access to file” in the investigative process, or accusing two livestock-feed processors of colluding in the sales and pricing of animal feed ‘peel pulp’, the East African nations lag behind.

What is news, however, is that they have begun to recognise the shortcoming and the adverse effects of collusion and other anti-competitive conduct on their economies: Andreas Stargard, an antitrust lawyer with Primerio Ltd., notes that the head of the East African Community (EAC), Mr. Liberat Mfumukeko, recently addressed ongoing antitrust violations in the EAC: “The Secretary denounced anti-competitive practices (cartels and the like) as serious obstacles to obtaining foreign direct investment in the region.  Moreover, he recognised the violations as ‘impeding effective competition’ and thereby directly hurting African consumers,” says Stargard.

Mr Mfumukeko is quoted as stating: “The EAC markets pose challenges to investors and consumers including the charging of high prices arising from anti-competitive practices such as cartels. These practices impede effective competition in the markets.”

Within the EAC, Stargard notes, the primary jurisdictions with operational antitrust regimes are Kenya and Tanzania, with others such as Uganda lagging behind even farther, having no competition legislation or only having draft bills under review.  Most other nations lag behind, although, as Mr. Stargard observes, many are part of the broader COMESA competition regime.  “The COMESA rules, however, have thus far been enforced with a primary objective of merger regulation,” he says, “effectively failing to police any collusive conduct in the close to two dozen member states at all, despite the explicit prohibition thereof in the COMESA regulations.”

South Africa: Merger Thresholds and Filing Fees Increased

As of 1 October 2017, the recently revised merger thresholds which were published by way of Government Gazette will become effective.

The large merger thresholds have remained unchanged, however, the thresholds for an intermediate merger (which requires mandatory merger notification if met) have been amended as follows:

The combined threshold has been increased to R600 million (approx.US$46 million) R560 million).  The combined threshold for an intermediate merger relates to either the combined turnover of the merging parties’ South African specific turnover or the merging parties combined asset value in South Africa.

The lower merger threshold (i.e. the target’s thresholds) for an intermediate merger has also been increased from R80 million to R100 million (approx. US$7.6 million) For purposes of the lower merger threshold, however, either the turnover or the asset value of the target entity is utilised.

The large merger thresholds remain unchanged with a combined threshold of R6.6 billion (approx. US$500 million) and the target’s threshold at R190 million (approx.US$14.6 million)

For purpose of both the intermediate and large merger thresholds, any combination of the South African specific turnover or asset value of the merging parties which exceed the thresholds will require a mandatory merger notification. In other words, the combined large merger threshold will be met if the acquiring firm’s asset value combined with the target firm’s turnover exceeds R6.6 billion.

In addition to the merger thresholds, the merger filing fees have also been increased and the new filing fees are:

  • Intermediate merger: R150 000
  • Large merger: R500 000

The merger thresholds were previously revised in 2009 and as John Oxenham, Director of Primerio Ltd., comments “increasing the target’s thresholds for purposes of an intermediate merger will assist in ensuring that transactions which are highly unlikely to result in any anti-competitive effects are subject to the merger control process“. Oxenham also points out that it is noteworthy that the filing fees have increased by 50% in respect of intermediate mergers and more than 40% for large mergers.

In addition to the mandatorily notifiable thresholds, Michael-James Currie notes that “the South African Competition Commission may call for the notification of any transaction which does not meet the intermediate merger thresholds (i.e. a small merger) within 6 months after the transaction has been implemented should the Commission be of the view that the small merger raises competition or public interest concerns“.

[For legal advice, please contact a Primerio representative]

 

The African WRAP – SEPTEMBER 2017 Edition

Since our June 2017 Edition of the African WRAP, we highlight below the key competition law related topics, cases, regulatory developments and political sentiment across the continent which has taken place across the continent in the past three months. Developments in the following jurisdictions are particularly noteworthy: Botswana, Kenya, Mauritius, Namibia, Tanzania and South Africa.

[AAT is indebted to the continuous support of its regular contributors and the assistance of Primerio’s directors in sharing their insights and expertise on various African antitrust matters. To contact a Primerio representative, please visit Primerio’s website]


Botswana: Proposed Legislative Amendments

Introduction of Criminal Liability

The amendments to the Competition Act will also introduce criminal liability for officers or directors of a company who causes the firm to engage in cartel conduct. The maximum sanctions include a fine capped at P100 000 (approx. US$10 000) and/or a maximum five year prison sentence.

Fines for Prior Implementation

Once finalised, the legislative amendments will also introduce a maximum administrative penalty of up to 10% of the merging parties’ turnover for implementing a merger in contravention of the Act. This would include ‘gun-jumping’ or non-compliance with any conditions imposed on the merger approval.

Restructuring of the Authorities

Proposed legislative amendments to the Botswana Competition Act will likely result in the Competition Commission’s responsibilities being broadened to include the enforcement of consumer protection laws in addition to antitrust conduct.

Furthermore, there is a significant restructuring of the competition agencies on the cards in an effort to ensure that the Competition Authority – which will become the Competition and Consumer Authority (CCA) – is independently governed from the Competition Commission. Currently, the Competition Commission governs the CA but the CA is also the adjudicative body in cases referred to the Commission by the CA.

The proposed amendments, therefore, seek to introduce a Consumer and Competition Tribunal to fulfil the adjudicative functions while an independent Consumer and Competition Board will take over the governance responsibilities of the ‘to be formed’ CCA.

South Africa

Information Exchange Guidelines           

The Competition Commission has published draft Guidelines on Information Exchanges (Guidelines). The Guidelines provide some indication as to the nature, scope and frequency of information exchanges which the Commission generally views as problematic. The principles set out in the Guidelines are largely based, however, on case precedent and international best practice.

The fact that the Commission has sought to publish formal guidelines for information exchanges affirms the importance of ensuring that competitors who attend industry association meetings or similar forums must be acutely aware of the limitations to information exchanges to ensure that they do not fall foul of the per se cartel conduct prohibitions of the Competition Act.

Market Inquiry into Data Costs

The Competition Commission has formally initiated a market inquiry into the data services sector. This inquiry will run parallel with the Independent Communications Authority of South Africa’s market inquiry into the telecommunications sector more broadly.

Although the terms of reference are relatively broad, the Competition Commission’s inquiry will cover all parties in the value chain in respect of any form of data services (both fixed line and mobile). In particular, the objectives of the inquiry include, inter alia, an assessment of the competition at each of the supply chain levels, with respect to:

  • The strategic behaviour of by large fixed and mobile incumbents;
  • Current arrangements for sharing of network infrastructure; and
  • Access to infrastructure.

There are also a number of additional objectives such as benchmarking the standard and pricing of data services in South Africa against other countries and assessing the adequacy of the regulatory environment in South Africa.

Mauritius

Amnesty re Resale Price Maintenance

The Competition Commission of Mauritius (CCM) has, for a limited period of four months only, granted amnesty to firms who have engaged in Resale Price Maintenance. The amnesty expires on 7 October 2017. Parties who take advantage of the amnesty will receive immunity from the imposition of a 10% administrative penalty for engaging in RPM in contravention of the Mauritius Competition Act.

The amnesty policy followed shortly after the CCM concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).

The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and 4 007 110.00 respectively for each contravention.

Please see AAT’s featured article here for further information on Resale Price Maintenance under Mauritian law

Tanzania

Merger and Acquisition Threshold Notification

The Fair Competition Commission has published revised merger thresholds for the determination of mandatorily notifiable thresholds. The amendments, which were brought into effect by the Fair Competition (Threshold for notification of Merger) (Amendment) Order published on 2 June 2017, increases the threshold for notification of a merger in Tanzania from TZS 800 000 000 (approx.. US$ 355 000) to TZS 3 500 000 000 (approx.. US$ 1 560 000) calculated on the combined ‘world-wide’ turnover or asset value of the merging parties.

Kenya

            Concurrent Jurisdiction in the Telecommunications Sector

In June 2017, Kenya’s High Court struck down legislative amendments which regulated the concurrent jurisdiction between the Kenya Communications Authority and the Competition Authority Kenya in respect of anti-competitive conduct in the telecommunications sector.

In terms of the Miscellaneous Amendments Act 2015, the Communications Authority was obliged to consult with the Competition Authority and the relevant government Minister in relation to any alleged anti-competitive conduct within the telecommunications sector, prior to imposing a sanction on a market player for engaging in such anti-competitive conduct.

The High Court, however, ruled that the Communications Authority is independent and that in terms of the powers bestowed on the Communications Authority by way of the Kenya Communications Act, the Communications Authority may independently make determinations against market participants regarding antic-competitive conduct, particularly in relation to complex matters such as alleged abuse of dominance cases.

Establishment of a Competition Tribunal

The Kenyan Competition Tribunal has now been established and the chairperson and three members were sworn in early June. The Tribunal will become the adjudicative body in relation to decisions and/or taken by the Competition Authority of Kenya.

The Operational Rules of the Tribunal have not yet been published but are expected to be gazetted soon.

Introduction of a Corporate Leniency Policy

The Competition Authority of Kenya (CAK) has finalised its Leniency Policy Guidelines, which provide immunity to whistle-blowers from both criminal and administrative liability. The Guidelines specifically extend leniency to the firm’s directors and employees as well as the firm itself.

Only the “first through the door” may qualify for immunity in respect of criminal liability, but second or third responds would be eligible for a 50% and 30% reduction of the administrative penalty respectively, provided that provide the CAK with new material evidence.

It should be noted, however, that receiving immunity from criminal prosecution is subject to obtaining consent from the Director of Public Prosecution as well. As per the procedure set out in the Policy Guidelines, the Director pf Public Prosecutions will only be consulted once a leniency applicant has already disclosed its involvement in the cartel and provided the CAK with sufficient evidence to prosecute the other respondents.

It is not clear what powers the Director of Public Prosecutions would have, particular in relation to the evidence which has been provided by the leniency applicant, should either the CAK or the Director refuse to grant immunity from criminal prosecution.

Namibia

Medical aid schemes

In a landmark judgment, the Namibian Supreme Court overturned the High Court’s decision in favour of the Namibian Association of Medical Aid Funds (NAMAF) and Medical Aid Funds (the respondents) finding that the respondents did not fall within the definition of an “undertaking” for the purpose of the Namibian Competition.

Despite the substantial similarities between the Namibian and the South African Competition Act, Namibia’s highest court took a very different interpretative stance to its South African counter-part and held that because the respondents did not “operate for gain or reward” they could not be prosecuted for allegedly having  engaged in collusive behaviour in relation to their ‘tariff setting’ activities in terms of which the respondents collectively  determined and published recommended bench-marking tariffs for reimbursement to patients in respect of their medical costs.

 

 

South African Annual Competition Conference 2017: Law versus Policy – A “watch this space” moment

During the final week of August 2017, a number of prominent antitrust practitioners, economists, academics and politicians gathered in Johannesburg for the 11th Annual Competition Law, Economics & Policy Conference (Conference).

The Conference attracted a variety of presenters, both local and international, to grapple and stimulate debate around a number of highly topical issues including ‘big data’, the use of algorithms and the development and success of tech mammoths such as Google and Uber.

South African politicians also took to the stage, including both the Minister of Economic Development, Mr Ebrahim Patel, and the South African Deputy President, Mr Cyril Ramaphosa.

The key message imparted by these two prominent politicians is that more needs to be done to tackle “high concentrations” within the South African economy. A message which has become somewhat of a rhetoric from politicians of late.

Minister Patel again emphasised that legislative changes will soon be brought into force which will assist the competition authorities in de-concentrating the economy and prosecuting alleged abuse of dominance cases in South Africa. It not yet clear whether Minister Patel intends introducing the “complex monopoly” provisions (which have already been passed by the legislature in 2009 but have not yet been brought into force) overnight in a similar manner as the criminal liability provisions were brought into effect or whether there are additional legislative amendments on its way which will provide the Competition Agencies with greater powers to “break up dominant firms”.

The Deputy President reaffirmed Minister Patel’s sentiment and stated that “the way the economy was structured in the past is a problem, which must be rectified through policy” and further added that “competition policy in South Africa cannot be limited merely to the promotion of market efficiency. It must be an instrument to effect fundamental economic and social change” (Our emphasis). Mr Ramaphosa did not, however, proffer any substantive recommendations on how best this should be achieved.

Both Minister Patel as well as Deputy President Ramaphosa spoke with high regard of the efforts of US president Theodore Roosevelt in deconcentrating the US economy decades ago through the so called “no-fault divorce” in terms of which US antitrust regulators could break up dominant companies in a sector whose structure they deemed anticompetitive. The Commissioner of the South African Competition Commission, Tembinkosi Bonakele further told a forum at the Gordon Institute of Business Science (GIBS) that the proposed amendments currently before Cabinet, included granting the Commission the power to apply measures to address concentrations and not to merely make recommendations once evidence of market concentration had been found.

Whatever proposals are ultimately brought to the table to tackle high levels of concentrations would need to take into account the fact that most companies achieve their dominance through efficiencies, innovation and risk taking in the first place which in turn has a positive impact on the economy.

Arguably, effective utilisation of state resources, which is often hampered by corruption and poor administration are far more detrimental to the economy and welfare of South Africans as a whole. South Africa Airways (SAA) is a case at hand. Despite having been found to have engaged in abuse of dominance practices (which led to both the imposition of an administrative penalty and civil follow-on damages). SAA’s current lack of efficiency does not stem from its dominance in the market, but is rather a result of poor leadership and administrative capabilities.

Without any concrete proposals or draft legislative provisions on the table for public comment as of yet, a key issue remains whether the envisaged proposals currently being considered will materially address the socio-economic challenges which South Africa faces and whether the resources dedicated to this cause could be better utilised elsewhere.

Moving to private enforcement, a key issue discussed during the Conference is the importance of civil damages (and collective redress) and its role within the sphere of competition law in South Africa. In this regard, Oxenham, Currie and Van der Merwe’s paper titled “Follow On Damages for Anticompetitive Conduct – A Need for Legislative Intervention?” is particularly enlightening.

In their Paper, the authors explore not only the framework in which civil follow on damages claims in South Africa should be assessed, but also explore some of the key practical issues which plaintiffs, defendants and the Courts are likely to grapple with in future cases. In particular, the Paper highlights key challenges such as: joint and several liability; the apportionment of damages between defendants; prescription and the timing of instituting complaints; the availability of indirect purchaser complaints; and access to information which will invariably shape the strategy and efficiency of a plaintiff’s damages case.

Furthermore, with follow on damages claims and class action litigation a novel but very real feature of South African law, perhaps now is the time that the South African policy makers and legislature should give more thought to providing guidance on key aspects relating to follow on civil redress.

Alleviating the challenges which plaintiffs are likely to face in instituting a damages claim may go further in achieving the very goals which Minister Patel and Deputy President Ramaphosa seek to achieve. The difficulty for the legislature, however, will be in finding an appropriate balance between the various competing interests – such as ensuring that any reform in relation to follow on redress does not deter or prejudice the Competition Commission leniency policy nor deter respondents from seeking to conclude expeditious settlements with the Commission.

Finally, ensuring substantive and inclusive public debate on the proposed policy reforms may go a long way in ensuring that whatever legislative intervention is pursued, the authorities will not be hamstrung by challenges to the legality of the legislative provisions as has been the case with previous amendments to the Competition Act.