Commission goes after Dutch paint manufacturer in Uganda in supra-national enforcement
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with Primerio Ltd.: “Recently, the COMESA Competition Commission had become aware of press reports that AkzoNobel had withdrawn its Kansai/Sadolin licence in Uganda (a COMESA member state) and effectively entered into — or planned to enter into — a new agreement with an unnamed ‘local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.”