By AAT Senior Contributor Stephany Torres
On 28 January 2018 the Ethiopian Trade Competition and Consumer Protection Authority (“TCCPA”) filed charges against fourteen Ethiopian rebar, corrugated sheet, steel tube and pipe producers and seven rebar importers respectively for allegedly fixing prices in contravention of Article 7(1) of the Ethiopian Trade Competition and Consumer Protection Proclamation (“Article 7(1)”), which provides that “(1) An agreement between or concerted practice by, business persons or a decision by association of business persons in a horizontal relationship shall be prohibited if:…(b) it involves, directly or indirectly, fixing a purchase or selling price or any other trading condition, collusive tendering or dividing markets by allocating customers, suppliers territories or specific types of goods or services”.
It is worth mentioning that in most jurisdictions, which have an active competition law enforcement regime in place, ‘cartel conduct’ (i.e. price fixing, market allocation and/or collusion) is a per se prohibition in that the conduct is prohibited outright, without an examination of the actual effects on competition and without permitting a showing of net efficiency or other pro-competitive defensive arguments.
Where cartel conduct is prohibited per se, the relevant competition authorities require no further proof other than the existence of the agreement or concerted practice which underpins the conduct. The conduct is simply presumed to have negative effects on the relevant market.
Article 7(1) of the TCCPA, however, is not a per se prohibition and is based on the ‘rule-of-reason’ standard – effectively permitting respondents to lead evidence demonstrating that the alleged conduct can be justified by pro-competitive, technology or efficiency gain justifications which outweigh any anti-competitive effect.
From a policy perspective, Africa competition lawyer Michael-James Currie notes that the permissibility of the ‘rule of reason defence’ is largely due to the fact that a respondent who is found to have contravened Article 7(1) of the TCCPA is liable to a penalty calculated at fifteen percent of the respondent’s annual turnover. This is a prescribed penalty. For non-cartel conduct, the penalty ranges between 5-10%.
Of the aforementioned fourteen Ethiopian steel producers; three manufacture reinforcement bars, namely East Steel PLC, Habesha Steel Mills PLC and Saint Nail PLC. Six are involved in manufacturing corrugated sheets namely; Ethiopian Steel Profile, Ethiopian Steel PLC, Kombolcha Steel Products Industry PLC (KOSPI), a subsidiary of MIDROC Technology Group and Bazeto PLC and amongst the five manufacturers of steel tubes and pipes are Walia Steel Industry PLC and Mame Steel PLC.
The seven rebar importers accused of price fixing include Dag Trading PLC, Aberus PLC, Berhe Hagos PLC, Marka Trading, Beranea Yeshene and Haileselassie Amabye PLC.
Andreas Stargard, competition counsel with Primerio Ltd. notes that the trigger event for engaging in the alleged price fixing was the fifteen percent devaluation of the birr by the National Bank of Ethiopia (NBE) in October 2017 which may have influenced retailers and wholesalers to look for ways of recouping losses by raising prices for their goods and services.
It is, however, in fellow Primerio Director John Oxenham’s view, unlikely for a well-executed price-fixing cartel to be created ad hoc without any pre-existing information exchange structure. Therefore, pre-existing trade association, interest groups or other vehicles are commonly used as the enabling platform for competitors to engage in collusive conduct.
The defendants are scheduled to submit their response to the Tribunal on February 20, 2018.
The metal and related products sector is a priority sector in Ethiopia and the Ethiopian government is investigating a greater number of business entities involved in the production and importation of metal and metal related products who are also suspected of allegedly fixing prices.