Don’t wait for leniency… Lipimile signals delays

COMESA Chief Warns of Delayed Implementation of Leniency Policy

George Lipimile, CEO, COMESA Competition Commission

George Lipimile, Director, COMESA Competition Commission

In an interview with Concurrences, CCC Director George Lipimile stated cautiously that, while the agency had engaged a consultant to help it craft a regional leniency programme, it still had to “be discussed in detail with Member States. Given the different legal systems and the feedback coming from the consultations with Member States so far, this may take some time.”

Thus, “while there is no amnesty programme visible on the near-term horizon, the CCC’s novel cartel enforcement push poses particular concerns for undertakings operating in the COMESA region,” says Andreas Stargard, attorney with Africa advisory firm Pr1merio.  “Director Lipimile has expressed his agency’s plan — jointly with the World Bank organisation — to launch a project designed to combat cartel activity.  They propose to do so first, it seems, by piggy-backing off of other enforcers’ previous investigations, such as the South African Competition Commission’s cartel cases, and analysing whether those instances of foreign collusion could have harmful effects on the COMESA economies.”

The WRAP: a short COMESA retrospective


Issue 3 – October 2016

The editors and authors at AAT welcome you to the third edition of “The WRAP”: COMESA Competition Commission: What has taken place in past 10 months?


The author, Mr. Currie

In this instalment, Senior Contributor Michael James Currie takes a look back at the developments from the COMESA region in 2016.

As always, thank you for reading the WRAP, and remember to visit us at AAT for up-to-date competition-law news from the African continent.




Notifying African M&A – balancing burdens & costs

Merger filings in Africa remain costly and cumbersome

By AAT guest contributor Heather Irvine, Esq.

The Common Market for Eastern and Southern Africa Competition Commission (COMESA) recently announced that it has received over US$3 million in merger filing fees between December 2015 and October 2016.

heatherirvineAbout half of these fees (approximately $1.5 million) were allocated to the national competition authorities in various COMESA states. However, competition authorities in COMESA member states – including Kenya, Zambia and Zimbabwe – continue to insist that merging parties lodge separate merger filings in their jurisdiction. This can add significant transactional costs – the filing fee in Kenya alone for a merger in which the merging parties combined generate more than KES 50 billion (about US $ 493 million) in Kenya is KES 2 million (nearly US $ 20 000). Since Kenya is one of the Continent’s largest economies, significant numbers of global transactions as well as those involving South African firms investing in African businesses are caught in the net.

Merging parties are in effect paying African national competition authorities twice to review exactly the same proposed merger. And they are not receiving quicker approvals or an easier fling process in return. Low merger thresholds mean that even relatively small transactions, often with no impact on competition at all, may trigger multiple filings. There is no explanation for why COMESA member states have failed to amend their local competition laws despite signing the COMESA treaty over 2 years ago.

Filing fees are even higher if a proposed cross-border African merger transaction involves a business in Tanzania or Swaziland– the national authorities there have recently insisted that filing fees must be calculated based on the merging parties’ global turnover (even though the statutory basis for these demands are not clear).

The problem will be exacerbated even further if more regional African competition authorities, like the Economic Community of West African States (ECOWAS) and the proposed East African Competition authority, commence active merger regulation.

Although memoranda of understanding were recently signed between South Africa and some other relatively experienced competition regulators on the Continent, like Kenya and Namibia, there are generally few formal procedures in place to harmonise merger filing requirements, synchronise the timing of reviews or align the approach of the regulators to either competition law or public interest issues.

The result is high filing fees, lots of duplicated effort and documents on the part of merging parties and the regulators, and slow merger reviews.

If African governments are serious about attracting global investors, they should prioritise the harmonisation of national and regional competition law regimes.

Competition and Globalization in Developing Economies

Our Partner, Concurrences Review, has partnered with NYU Law, is hosting an à propos antitrust conference on Competition and Globalization in Developing Economies in New York

Topics & Panels:

  • Globalization and the Rise of Regionalism: TPP, ASEAN, COMESA, MINT and Coherence in the World

  • Pricing and Development Issues: Exploitation and Collusion

  • Mergers: Anatomy of a Clearance in Younger Jurisdictions

  • Innovation and Development: Licensing and Antitrust/IP Rules and Guidelines

  • Enforcers’ Roundtable: What’s under the Radar?

Speakers include:Charbit.jpeg


  • Tembinkosi Bonakele | Commissioner, South Africa Competition Commission, Pretoria

  • Dennis Davis | President, South African Competition Appeal Court, Cape Town

  • Jonathan Fried | Ambassador and Permanent Representative of Canada, WTO, Geneva

  • Frédéric Jenny | Chairman, OECD Competition Committee, Paris

  • William Kovacic | Non-Executive Director, Competition and Markets Authority, London

  • George Lipimile | Director, COMESA Competition Commission, Lusaka

  • Alejandro Sabido | Commissioner COFECE, Mexico City

  • Randolph W. Tritell | Director, Office of International Affairs, US FTC, Washington, DC


  • Harry First | Professor, NYU School of Law

  • Eleanor Fox | Professor, NYU School of Law

  • Daniel Rubinfeld | Professor, NYU School of Law


  • Alvaro Ramos | Head Global Antitrust, Qualcomm, San Diego
  • Sabine Chalmers | Chief Legal & Corporate Affairs Officer, Anheuser-Busch InBev, New York

  • Dina Kallay | Director, Intellectual Property & Competition, Ericsson, Washington, DC

  • Christopher Meyers | Associate General Counsel, Microsoft, Remond

This event will take place on Friday, October 28, 2016 from 8:30 AM to 6:30 PM at New York University School of Law.

You can see the full agenda and register online here.

Copperweld elsewhere: Why SA is not pursuing fisheries “cartel”

The concept of single economic entities and intra-company conspiracies


Kipiani and Tchapga: advancing competition law & economics in Cameroon

Competition Law conference provides most in-depth look at the state of Cameroonian antitrust law

Event organised by Dr. Patricia Kipiani and Prof. Tchapga of Primerio & CEMAC, the Cameroon school of business and its competition law section

What follows is an article that appeared in French in the Le Droit journal, written by Stéphane Ngoh, reprinted here with permission.  An English translation is below.  An interview with Dr. Kipiani related to the conference can be found here.  In it, she discusses the planned creation of a “Competition Observatory” for the country.

Le cabinet Primerio International a organisé un séminaire de sensibilisation aux enjeux du droit et de la politique de la concurrence au Cameroun et dans l’espace de la CEMAC. L’évènement lancé par le ministre du Commerce, M. Luc Magloire Mbarga Atangana s’est déroulé le 7 juillet 2016 au siège du GICAM à Douala.

Présenter la concurrence comme « un bien commun » à la collectivité et « renforcer la pédagogie de la concurrence dans ses dimensions juridiques et politiques» tels peuvent être les maitres mots du premier « rendez-vous de la concurrence» au Cameroun et en CEMAC impulsé par le cabinet d’expertise Primerio International et placé sous le thème «Du droit et de la politique de la concurrence au Cameroun et dans l’espace CEMAC ».  Comme pour en souligner toute l’importance, le ministre du Commerce du Cameroun, Luc Magloire Mbarga Atangana, a fait le déplacement de la capitale économique dans l’optique d’en présider le lancement officiel. Le Docteur en droit et avocate au barreau de Bruxelles, Mme Patricia Kipiani, qui représentait le cabinet Primerio International pour l’occasion a expliqué combien cette première édition des « rendez-vous de la concurrence », se voulait sérieuse. Toute chose ayant justifié l’association aussi bien des universitaires de tous bords, du groupement inter-patronal du Cameroun (Gicam) que des autorités publiques camerounaises. Les Chercheurs de l’Université de Paris 1 Panthéon-Sorbonne en France et les spécialistes du droit de la concurrence, le Professeur des universités Martine Behar-Touchais et l’enseignant-chercheur Laurent Vidal ont fait le déplacement du Gicam.

1425573796Le ministre du Commerce, qui intervient comme l’autorité publique de tutelle du secteur de la concurrence, a tenu à préciser que les rendez-vous de la concurrence ne pouvaient mieux tomber dans un contexte communautaire et camerounais situé à « la veille de l’entrée en vigueur des Accords de partenariat économique « APE », entre les pays ACP et l’UE dont le Cameroun est partie », ces accords qui impliquent une ouverture de l’économie imposent donc qu’un certain accent soit mis sur le droit et la politique de la concurrence. Au demeurant, le représentant de l’Etat du Cameroun à ce rendez-vous a tenu à réaffirmer la place reservée jusqu’ici à la concurrence, « notre conviction, a –t-il expliqué, est que le commerce a besoin d’un environnement sain et c’est la raison pour laquelle un arsenal des textes législatives ou règlementaires existe au Cameroun et cela témoigne de la volonté de l’état de réguler le secteur ». A l’appui de son affirmation, M. Luc Magloire Mbarga Atangana a soutenu que la volonté et la détermination du Cameroun à faire du droit de la concurrence un enjeu de poids, se traduit depuis des années. Pour s’en féliciter, il souligne que les premières velléités d’encadrement de la concurrence remontent aux années1990 et qu’autant les lois ont créé la Commission nationale de la concurrence (Cnc) autant des décrets  en ont fixés les contours organisationnels et structurels. Le président de ladite Commission Léopold Boumsong, qui était dans la suite du Mincommerce, a été appelé à présenter les aspects nationaux de la concurrence et précisément le rôle de la Commission nationale de la concurrence. Ce rôle, comme l’a martelé le ministre, doit s’attacher à « poursuivre et sanctionner les pratiques anticoncurrentielles, en s’appuyant sur des textes datant et nouveau à l’instar de la loi cadre protection sur la consommation, de la nouvelle loi portant organisation des activités commerciales ainsi que la loi sur commerce extérieur ».


cameroonLe président de la Cnc a précisé à l’égard des chefs d’entreprises qui emplissaient la salle du Gicam qu’il existe sommairement 3 types de pratiques qui ont « pour effet d’empêcher, de fausser ou de restreindre de manière sensible, l’exercice de la concurrence au niveau du marché intérieur » au sens de la loi n°98/013 du 14 juillet 1998 relative à la concurrence. Il s’agit des abus d’une entreprise ou d’un groupe d’entreprises en position dominante sur le marché, des fusions et acquisitions d’entreprises et aussi des accords anticoncurrentiels. L’un dans l’autre, il est apparu que les pratiques anticoncurrentielles au Cameroun sont constatées par procès-verbal dressé par les membres de la Commission suite aux enquêtes consécutives à une plainte d’une personne physique ou morale ou à celles initiées par eux-mêmes.

Par la suite, les aspects multilatéraux de la concurrence ont été évoqués au travers de la présentation du rôle de la Conférence des Nations Unies sur le Commerce et le Développement (CNUCED) en matière l’accompagnement des politiques de concurrence. L’économiste de la CNUCED, Yves Kenfack a découvert le code CNUCED de la concurrence dont il a salué la pertinence tout en regrettant que celui-ci ne soit pas contraignant pour les Etats signataires.

Un autre moment des échanges a porté sur les aspects croisés entre le point de vue de l’économiste et celui du juriste quant à la concurrence. C’est M. Flavien Tchapga, économiste, consultant lui aussi à Primerio International et professeur associé à l’Université Senghor d’Alexandrie, qui s’y est attelé face à l’auditoire de la salle des conférences du Gicam. L’intervention de ce dernier peut se ramener à une suggestion forte faisant suite à l’interrogation suivante : « peut-on réussir la sensibilisation sur la concurrence si l’on ne tient pas compte des spécificités de l’environnement local ? ». Réponse, en effet, dans un contexte où 9 entreprises sur 10 sont individuelles, il faut se méfier des formules des juristes qui sont souvent larges et complexifiées pour les économistes plus proches du terrain.

Au cours du rendez-vous de la concurrence, une table-ronde a été ouverte pour asseoir la dimension didactique de la rencontre. Les débats et les questions étaient placés sous la houlette de M. Martin Abega, administrateur de sociétés, ancien membre de la Commission nationale de la concurrence et Consul honoraire du Royaume des Pays-Bas au Cameroun.

En dernière analyse, les expériences pratiques de règlementations et de politiques de la concurrence en Europe et au Cameroun ont clairement été croisées par le biais de Martine Behar-Touchais et Laurent Vidal d’une part et de Me Abdoul Bagui d’autre part. Etant entendu qu’au Cameroun, la régulation est émiettée par secteur d’activités.

Ce sont concrètement toutes les difficultés liées au libre exercice de la concurrence qui ont été passées au crible. La contrebande, la persistance des monopoles dans certains domaines ou encore la contrefaçon relèvent de ces écueils épluchés par les soins des experts internationaux et locaux à l’instar des représentants du CNUCED, de CEMAC, de l’OHADA et surtout des entreprises camerounaises. Le Dr. Patricia Kipiani a expliqué qu’il était important que « les réflexions et les échanges reviennent sur les difficultés auxquelles se heurtent les entreprises, sur les difficultés liées à la concurrence déloyale, à leur impact sur le secteur informel et autres activités informelles des entreprises formelles. Et aussi qu’ un accent soit mis sur la réglementation et sur les politiques économiques susceptibles de promouvoir notre espace économique ».

Stéphane Ngoh

For our English readers, below is a Google Translate version in English of the article:

The international  firm Primerio organized an awareness seminar on issues of law and competition policy in Cameroon and in the CEMAC zone. The event launched by the Minister of Trade, Luc Magloire Mbarga Atangana Mr. took place July 7, 2016 at the headquarters of GICAM in Douala.

Introduce competition as a “common good” to the community and “strengthen the teaching of competition in its legal and political dimensions” — such are the watchwords of the first “meeting competition” in Cameroon and driven CEMAC by the consultancy firm Primerio International and under the theme “from the law and competition policy in Cameroon and in the CEMAC.” As if to emphasize the importance, the trade minister of Cameroon, Luc Magloire Atangana Mbarga, made the trip from the economic capital with a view to chair the official launch. The Doctor of Law and lawyer at the Brussels Bar, Patricia Kipiani, who represented the firm Primerio International for the occasion explained how this first edition of “appointments of competition”, was meant seriously. Anything that justified the association both academics of all stripes, the inter-group employers of Cameroon (Gicam) that the Cameroonian public authorities. The researchers from the University of Paris 1 Panthéon-Sorbonne in France and specialists from the competition law, the University Professor Martine Behar-Touchais and Laurent Vidal teacher-researcher made the trip from Gicam.

Minister of Commerce, which acts as a public authority supervising the sector to competition, has insisted that the appointment of the competition could not get better in a community and Cameroonian context located “on the eve of the entry into force of the economic partnership agreements ‘EPAs’, between the ACP countries and the EU which Cameroon is a party “, these agreements which involve opening up the economy therefore require that a certain emphasis on law and the competition policy. Moreover, the representative of the State of Cameroon to this appointment held to reaffirm the place reserved far in the competition, “our conviction has -t he explained, is that the trade needs a healthy environment and that is why an arsenal of legislative and regulatory texts exist in Cameroon and it demonstrates the willingness of the state to regulate the sector. “ In support of its contention, Luc Magloire Atangana Mbarga argued that the will and determination of Cameroon to the competition law of a weight issue, resulting in years. To be welcomed, he stressed that the first framework for competition ambitions date back to the 1990’s and that so many laws created the National Competition Commission (CNC) as decrees have laid the organizational and structural contours. The president said Leopold Commission Boumsong, who was later in the MINCOMMERCE, was called to present the national aspects of competition and specifically the role of the National Competition Commission. This role, as insisted the minister, must strive to “prosecute and punish anti-competitive practices, based on texts dating and new like the law under protection on consumption, the new law on the organization of business and the foreign trade Act. “


The president of the CNC said against business leaders who filled the room Gicam there summarily 3 types of practices which have “the effect of preventing, distorting or restricting significantly, the year of competition in the internal market “under law No. 98/013 of 14 July 1998 on competition. This is abuse of a company or group of companies in a dominant market position, mergers and acquisitions as well as anti-competitive agreements. One the other, it appeared that anti-competitive practices in Cameroon are recorded in minutes drawn up by the Commission of the members following the investigations following a complaint from a natural or legal person or those initiated by them -Same.

Thereafter, the multilateral aspects of competition were discussed through the presentation of the role of the United Nations Conference on Trade and Development (UNCTAD) in support for competition policy. The economist of UNCTAD, Yves Kenfack discovered the UNCTAD code of competition which he praised the relevance while regretting that it was not binding on the signatory states.

Another moment of trade covered the Crusaders aspects between the views of the economist and that of the lawyer about the competition. It was Mr. Flavien Tchapga, economist, consultant also to Primerio International and associate professor at the Senghor University of Alexandria, which it is harnessed facing the audience of the Gicam conference room. The intervention of the latter can be reduced to a strong suggestion in response to the following question: “can we succeed awareness on competition if it does not take into account the specificities of the local environment? “. Response, in fact, in a context where 9 out of 10 companies are individual, beware formulas lawyers who are often larger and more complex to the nearest economists ground.

During the appointment of the competition, a panel discussion was opened to establish the educational dimension of the encounter. The debates and issues were under the leadership of Mr. Martin Abega, corporate director, former member of the National Competition Commission and Honorary Consul of the Kingdom of the Netherlands in Cameroon.

Ultimately, the practical experiences of regulations and competition policies in Europe and Cameroon have clearly been crossed through Martine Behar-Touchais and Laurent Vidal one hand and Mr. Abdul Bagui other. It being understood that in Cameroon, regulation is broken by sector.

These are all practical difficulties related to the free exercise of competition that were screened. Smuggling, the persistence of monopolies in certain areas or counterfeiting within these pitfalls peeled for the service of international and local experts like the representatives of UNCTAD, CEMAC, OHADA and especially Cameroonian companies. Dr. Patricia Kipiani said it was important that “the reflections and exchanges back on the difficulties firms face, the difficulties related to unfair competition, their impact on the informal sector and other informal activities formal businesses. And also that an emphasis on regulation and economic policies that promote our economic space. “

Competition forum highlights antitrust enforcement, international cooperation

South Africa signs cooperation agreements with Russia and Kenya

Leading government officials presented their respective countries’ accomplishments in the antitrust arena at the 10th annual Competition Law, Economics & Policy Conference in Cape Town yesterday.

south_africaThe attendees ranged from the SA Minister of Economic Development, Ebrahim Patel, and the Commissioner of the Competition Commission, Tembinkosi Bonakele, to their Russian and Kenyan counterparts.  Kenya Competition Authority director general Francis Kariuki emphasised the officials’ desire to remove barriers to trade.  He was quoted as saying he looked forward to exchanging information on cross-border cartels, which affect both the South African and Kenyan economies: tsar_200“We have regional economic communities and regional trade. There are some infractions in South Africa which are affecting Kenya and vice versa. We want to join hands to do market enquiries and do research. This will inform our governments when they come up with policies.”

On the inside-BRICS front, the SA Commission signed an MoU with Russia, adding to Russia’s “rich and diverse bilateral agreements portfolio.”  The MoU is described as focussing particularly on pharmaceutical and automotive sectors, in which pending or future sectoral inquiries would see information-sharing between the Federal Antimonopoly Service (FAS) of Russia and the SACC, according to the FAS deputy chief Andrey Tsarikovskiy.

Patel talksMister Patel’s keynote address showed the glass half-full and half-empty, focussing in part on the need to “scale” the South African agency activity up to the level of the “success story” of domestic competition enforcement and its large caseload (quoting 133 new cartel cases initiated in the past year).

Never one to omit politicisation, Mr. Patel noted the perceived parallels he saw between South African history of concentrating economic power in the hands of a minority, raising indirectly the issue of public-interest concessions made in antitrust investigations, including M&A matters.  Mr. Patel clearly sees the SACC’s role as including a reduction in economic inequality among the populace, rather than being a neutral competition enforcer guided solely by internationally recognised legal antitrust & economic principles.  Both he and Commissioner Bonakele drew parallels between their anti-cartel enforcement and a purported reduction in the SA poverty rate of a whopping four tenths of a percent.



South African Competition Commission… More Dawn Raids!

By AAT Senior Contributor, Michael-James Currie.

On 28 September 2016, the South African Competition Commission (SACC) conducted a further set of dawn raids. This time, on various cargo shipping liners based in the provinces of Kwa-Zulu Natal and the Western Cape.

The SACC indicated that “Hamburg Sud South Africa (Pty) Ltd, Maersk South Africa (Pty) Ltd, Safmarine (Pty) Ltd, Mediterranean Shipping Company (Pty) Ltd, Pacific International Line South Africa (Pty) Ltd and CMA CGM Shipping Agencies South Africa (Pty) Ltd have engaged in collusive practices to, inter alia, fix the incremental rates for the shipment of cargo from Asia to South Africa in contravention of the Competition Act”.

The investigation is allegedly a result of a complaint received from a member of public.

south_africaThe SACC has not provided an indication of the period over which conduct took place and whether this investigation relates to historical or on-going conduct. This is an important consideration in light of the introduction of criminalisation of cartel conduct, which came into effect as of 1 May 2016. In terms of the Section 73A of the Competition Amendment Act, any director or person with management authority may be held criminally liable for ‘causing’ or ‘knowingly acquiescing’ in cartel conduct.

Since the notion of criminal liability was put raised as far back as 2008, there have been substantial concerns raised about the effectiveness of the SACC’s corporate leniency policy which in effect, offers immunity to a company who whistle blows, from an administrative penalty only. The CLP does not offer immunity to any individual from criminal prosecution, as the discretion to prosecute an individual under Section 73A, rests solely with the National Prosecuting Authority.

The interplay between the introduction of criminal liability and dawn raids will, in our view, be quite significant as there have been a number of respondents who have thought to approach the SACC for leniency, off the back of a dawn raid. A decision which a company may think twice about if its directors may potentially be held criminally liable.

Regardless of the impact which the criminalisation of cartel conduct may have on the whistleblowing regime, the SACC remains committed to utilising dawn raids as one of its most powerful investigative tools.

The SACC has been strong proponent of dawn raids and despite having conducted its first dawn raids in the early 2000’s, the past 18 months has seen a marked spike in the number of dawn raids conducted across a broad range of sectors.

The shipping industry in particular has been the subject of significant attention from the South African Competition Authorities and last year saw substantial administrative penalties, of over R95 million, levied by way of a settlement agreement on WWL and NYK Shipping Liners respectively for having engaged cartel conduct in relation to certain shipping routes. This investigation, however, remains on-going.

Namibian Competition Commission Conducts Dawn Raid in the Oil & Gas sector

namibiaBy AAT Senior Contributor, Michael-James Currie.

Dawn raids are gaining significant traction throughout the African agencies following the Namibian Competition Commission (NaCC) very recent (16 September 2016), raid conducted at the operations at Puma Energy in Windhoek. The raid follows the NaCC having received numerous third party complaints alleging that Puma Energy was abusing its dominance by engaging in excessive pricing practices in the aviation fuel supply market.

The NaCC had recently published Guidelines in relation to Restrictive Practices. The Guidelines focus primarily on the NaCC’s investigative powers and in particular, search and seizure operations. Africanantitrust suspected that the Guidelines would result in a move by the agency to be more proactive in its efforts to detect, prosecute and ultimately combat anti-competitive practices.

Africanantitrust had noted that search and seizure operations by competition law agencies across Africa were on the rise. The South African Competition Commission has drastically increased its utilisation of dawn raids as an investigative tool in its arsenal. The SACC has, furthermore, provided guidance and training to a number of other African jurisdictions respective agencies on search and seizure operations and how to conduct effective dawn raids under the auspices of the African Competition Forum.  Says John Oxenham, competition practitioner with Pr1merio: “2016 saw Kenya conduct its first dawn raid in the fertiliser sector as well as Zambia increasing the number of dawn raids conducted.”

The South African Competition Commission’s advocacy efforts should be considered in light of the number of recently concluded Memoranda of Understanding which the SACC has entered into with other regional agencies as well, including the NaCC.

In terms of the MoU with Namibia, it is envisaged that there will be greater cooperation in relation to information exchanges and assistance with common investigations between the NaCC and the SACC.

The NaCC is yet to prosecute an abuse of dominance case and we will ensure that Africanantrust continues to monitor this case and provide our followers with timeous updates should any significant further developments take place.

Administrative Penalties & Behavioural Remedies – Two Sides of the Same Coin?

By AAT Senior Contributor, Michael-James Currie.

In the wake of the dust settling around the recent settlement agreement reached between ArcelorMittal (AMSA) and the South African Competition Commission (SACC), it may be an opportune time to consider the appropriateness of behavioural penalties levied in respect of firms engaging in cartel conduct or abuse of dominance practices.

AAT Header squareIn terms of the AMSA settlement agreement, AMSA admitted to contravening the cartel provisions contained in the Competition Act and agreed to pay a R1.5 billion (in instalments of no less than R300 million per annum for five years) administrative penalty. In addition to the administrative penalty, AMSA also agreed to invest approximately R4,6 Million into the South African economy for the next 5 years (provided the prevailing economic conditions render such investment feasible) by way of CAPEX obligations.

Furthermore, a pricing remedy was imposed on AMSA in terms of which AMSA undertook not to generate earnings before interest and tax of more than 10% for the next five years (which could be amended on good cause shown, but was capped, in any event, at 15%).

The nature of the settlement terms as agreed to by AMSA is not, however, a novel feature in settlements before the South African Competition Authorities. In 2010, the Competition Commission settled its investigation in relation to Pioneer Foods’ activities in the maize and wheat milling, baking, poultry and eggs industries (the settlement came after the Competition Tribunal had already imposed a R197 million administrative penalty against Pioneer in respect of its participation in a bread cartel).

In terms of the settlement agreement, Pioneer undertook to:

  • pay R250 million as an administrative penalty to National Revenue Fund;
  • pay R250 million to create an Agro-processing Competitiveness Fund to be administered by the Industrial Development Corporation (IDC);
  • increase its capital expenditure by R150 million over and above its currently approved capital expenditure (capex) budget; and
  • cooperate with the Competition Commission in the ongoing investigations and prosecutions of the cases that are the subject of this settlement; and stopping anti-competitive conduct and implementing a competition compliance programme.

Furthermore, and more recently, the consent agreement with edible fats producer Sime Darby Hudson Knight (“Sime Darby”), is a further example of a consent order which included financial undertakings in addition to paying an administrative penalty.

In terms of this consent agreement, Sime Darby undertook to invest and establish a warehouse for the distribution of its products into territories which it had previously not distributed its products into, due to the market allocation agreement which formed the basis of the complaint. Sime Darby also committed to contributing to funding the entry of a BEE distributor.

What is evident from the above three examples is that over and above the administrative penalty which may be imposed on a respondent, the financial impact of the additional behavioural and public interest related conditions may substantially exceed the administrative penalty itself.

It is, therefore, an important factor for respondents who find themselves in settlement negotiations with the Competition Commission to consider alternative terms of settling a matter as opposed to merely focussing on the administrative penalty itself.

From an agency’s perspective, the costs associated with behavioural conditions must be carefully weighed up as they also tend to require ongoing, and occasionally extensive oversight by the authorities. Furthermore, it is important to ensure that behavioural remedies are not abused, both by the authorities and by respondents.

south_africaWhile settlement negotiations are inherently flexible, it is important that agencies ensure an objective and a transparent methodology in the manner in which they approach the quantification of a settlement agreement. This has certainty been strived for by the Competition Commission when it elected to publish Guidelines on the Determination of the Calculation of Administrative Penalties (Guidelines). The objectives of the Guidelines, may however, be undermined in light of the broader behavioural and public interest related conditions imposed in recent cases.

A clear and objective point of departure would be favourable for both the agency itself and the relevant respondent in being able to conclude settlement negotiation expeditiously.

A further important consideration, which is particularly highlighted in the AMSA settlement agreement, is whether the remedies provide for an adequate deterrent factor and/or address the relevant harm.

Importantly, in the AMSA matter, AMSA’s R4.6 million CAPEX expenditure investment was as a result of a complaint into alleged abuse of dominance. In terms of the settlement agreement, AMSA did not admit liability for having engaged in abuse of dominance practices.

In light of the fact that the Competition Commission generally requires an admission of liability before concluding a consent order, it is not clear to us, at this stage, why the Commission elected not to demand an admission of liability in relation to the abuse of dominance complaint.

It may be that the Commission did not wish to spend the significant resources in prosecuting an abuse of dominance case, or that the Commission took the view that any abuse of dominance finding would likely only be in respect of the general prohibition against exclusionary conduct, as per Section 8(c) of the Competition Act, which carries no administrative liability for a first time offence.

Accordingly, it may have been a strategic weighing up of the ‘costs versus likely penalty’ which shaped the Commission’s strategic decision.

Whether or not such a strategic decision is justified is not a particular focus of this article. What we do wish to highlight, however, is that absent an admission of liability, a third party who seeks to pursue follow-on damages will be precluded from bringing a civil damages claim against AMSA. This was confirmed by the Supreme Court of Appeal in the Premier Foods matter in 2015.

The Media 24 Case

Shifting our train of thought to another issue, although not unrelated, is the question as to what exactly constitutes an administrative penalty?

The question was raised, although ultimately not decided by the Competition Tribunal in the recent Media 24 predatory pricing case.

After having been found guilty by the Competition Tribunal, in 2015, for contravening section 8(c) of the Competition Act (for engaging in ‘predatory pricing’), a separate hearing was held to determine the appropriate sanction. As mentioned above, an administrative penalty is not permissible for a first time offence of section 8(c) of the Act.

At the hearing the Competition Commission had proposed, as one of its remedies that Media 24 undertake to establish a R10 million development fund to fund a new entrant into the market.

Media 24 objected to the proposed remedy and raised the argument that the remedy proposed by the Commission would effectively be an administrative penalty, which is not a permissible sanction in terms of the Competition Act.

The Competition Tribunal elected to evaluate the remedy from a practical perspective, finding that the proposed remedy would not be suitable or effective, but deliberately kept open the legal question as to whether or not a remedy which requires any financial commitment from the respondent would effectively amount to an administrative penalty.

The question is rather vexing and may require clarification in due course.

Assuming that the proposed remedy in the Media 24 case would indeed amount to an administrative penalty, the question would naturally arise whether a CAPEX undertaking, as was the case in the AMSA matter discussed above, would also be considered a form of an administrative penalty. If so, then due consideration should be had as to whether the aggregation of the ‘stated administrative penalty’ (i.e. the R1.5 billion in AMSA’s case) together with the behavioural remedies imposed in AMSA (a minimum of R4.6 billion), should be calculated for purposes of determining whether the statutory cap of 10% of a firm’s turnover has been exceeded.

Alternatively, if the Competition tribunal ultimately decides that the proposed remedy in Media 24 is not an administrative penalty as contemplated in terms of the Competition Act, then effectively, we may see an entire new paradigm in the manner in which firms are sanctioned for contravening the Competition Act. For instance, those provisions of the Competition Act which do not cater for an administrative penalty for a first time offence (i.e., certain vertical, horizontal and abuse of dominance practices), may in any event result in respondents paying substantial ‘penalties’ for contravening these provisions.

Furthermore, respondents may not be afforded the protection which the statutory cap places on administrative penalties. As noted above, a firm may be subjected to an administrative penalty which does not exceed 10% of its annual turnover, but the net effect of the respondent’s financial liability may indeed exceed the cap.

While we do not pronounce our views on this issue, suffice it to say that firms engaging with the Competition Authorities with a view of concluding a settlement agreement are entering into a ‘new world’ and there are a number of options, avenues and risks associated in ultimately negotiating a settlement.

Accordingly, the issues raised above may be particularly useful in the manner in which firms embark on their settlement strategies.