Month: April 2023

CCC Celebrates ’10’ — a Decade of COMESA Competition Law

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Anniversary of CCC’s 2013 Creation to be Celebrated, Developments Discussed

Next week, African heads of state, ministers of trade and commerce, the secretary general of the 21-member state COMESA organization, Commissioners, and several heads of various competition agencies across the region, from Egypt to Eswatini & from Mauritius to Malawi, will join antitrust practitioners, legal experts, business people, and journalists in celebrating the occasion of the 10-year anniversary of the COMESA Competition Commission in Lilongwe, where the agency is headquartered.

Of course, AAT will be there to cover it.

As leaders of this august publication will know by now, our authors have followed the development of the CCC since its very beginning: from the nascent stages of having only a rudimentary staff and foundational rule documents, lacking sufficient guidance for practitioners and businesses alike, to the significant developmental stage under its first chief executive officer, Dr. Lipimile, who built out his enforcement team to coincide with the stellar growth of the CCC’s “one-stop-shop” merger notification statistics and attendant agency reviews (hiring economists and lawyers alike from across COMESA member nations) — and culminating, so far at least, in what we have come to call “CCC 2.0”: the latest iteration of the vastly successful multi-jurisdictional antitrust body, now led by its long-term member Dr. Willard Mwemba.

Under Mwemba’s aegis, the Commission has advanced well beyond a mere ‘rubber-stamping’ merger review body, as some had perceived the fledgling agency in its very early years (approx. 2013-15). The triple-C has since then begun to launch serious investigations into price-fixing, monopolization, attempted monopolization, gun-jumping, as well as market allocation schemes and secretly implemented transactions that parties had failed to notify.

While ‘antitrust is on our minds’, we note here for the record that, beyond its “competition” ambit that mostly remains in our focus at AAT, the CCC’s enforcement mission also includes a fairly large “consumer protection” brief, and the agency’s dedicated unit has investigated areas of consumer concern as broad as airline practices, imported faulty American baby powder, online ‘dark’ practices, pay-TV, and agricultural product quality disputes (milk and sugar come to mind) between Uganda and Kenya, to name only a few…

Our publication, together with several of the business journals and newspapers across the southeastern region of Africa, will report in great detail on the events, and possible news, to take place next week. Says Andreas Stargard, a competition practitioner with Primerio International:

“I look forward to hearing from these leaders themselves what they have accomplished in 10 years, and more importantly what they wish to accomplish in the near to mid-term future. In addition, I have a feeling that we may be treated to some truly newsworthy developments: I could imagine there being either confirmation or denials of the circulating rumour that the COMESA merger regime will soon become not only mandatory, but also suspensory. As most attorneys practicing in this arena know by now, the current Competition Regulations are not suspensory, which may be deemed too restrictive by the group’s Secretariat and its agency leadership in terms of its enforcement powers. After all, it is much more difficult to unscramble the egg than to never let it drop in the pan from the get-go!

Also, the CCC may reveal its plans in relation to a leniency programme for cartel conduct, which is plainly in order!”

Beyond that, Stargard surmises, participants at the almost week-long event may be treated to news about the CCC’s thoughts on digital markets, sectoral investigations, and the Commission’s upcoming “beyond-mere-merger” enforcement activities.

Criminal cartels & dilapidated energy networks: Will South Africa act?

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A true challenge to the impartiality of the South African Competition Authority: Eskom and its Criminal Supplier Cartels — Let’s wait and see what SACC does now

By Joshua Eveleigh

Will South Africa’s antitrust watchdog, under the aegies of its relatively new head Doris Tshepe, investigate and prosecute flagrant cartel conduct, when it is practically presented on a sliver platter by one of the CEOs of the (willing?) victims of said illegality…? Andre De Ruyter, former CEO of South Africa’s recently-infamous Eskom, is no stranger to the limelight – this is particularly true, following his scandalous (but not so surprising) bombshell allegations of deep-rooted and systemic corruption within the State-Owned Enterprise, together with ‘senior politicians’.

Even more recently, De Ruyter tested the antitrust waters and emphasised the existence of at least four cartels amongst coal mines in Mpumalanga (the Presidential Cartel, the Mesh-Kings Cartel, the Legendaries Cartel, and the Chief Cartel, respectively) intent on defrauding Eskom by, amongst a myriad other means, engaging in collusive tendering, so as to ensure that one of the cartel’s participants would ultimately be appointed as a lucrative vendor.

While there may not be any definitive or public available evidence, as of yet, the mere allegations of such cartels by the SOEs former CEO should at least raise enough red flags for South Africa’s Competition Commission. In this respect, section 4(1)(b)(iii) of the Competition Act expressly prohibits collusive tendering, forming part of the ‘cartel conduct’ category, the most egregious form of competition law contraventions due to their unnecessary raising of prices – of which may be passed down to end-consumers.  Mr. De Ruyter noted that the mere reality that cartel chiefs had ceased posting personal jet set lifestyle photos on social media was evidence of their having been alerted to the risks attendant to flagrant antitrust violations.

Given the current state of load-shedding, Eskom’s R423 billion indebtedness (as of March 2023) and the prejudicial impact that these factors are having on both business and personal livelihoods, the South African Competition Commission – theoretically in charge of cartels in the country — must surely regard the energy sector as a priority.  In this regard, one would expect a similar sense of urgency and emphasis that the Competition Commission has recently placed on the retail and grocery sectors, for the focus to be on South Africa’s energy sector.  After all, says Primerio partner John Oxenham, “this sector impacts every facet of commerce and consumer welfare.  If this was the case, the South African public could expect to see the prosecution and sanctioning of numerous cartels, each allowing for a maximum administrative penalty of 10% of the cartelist’s locally derived turnover as well as the potential for subsequent civil follow-on damages claims as well as criminal prosecutions.”

Oxenham’s competition-law colleague, Michael Currie, opines that, “[i]n the event that the Competition Commission does not investigate and prosecute against the coal mine cartels, such a position would largely reinforce the notion that some of the most unscrupulous of cartels are immune from prosecution, further entrenching the existence of cartels in South Africa’s most sensitive sectors.”

Market Inquiry here, Market Inquiry there, Market Inquiry everywhere! – 3 Market Inquiries in as Many Months

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By Joshua Eveleigh and Nicholas Petzwinkler

The South African Competition Commission (“SACC”) has not spared any time in demonstrating its bench strength by publishing three draft Terms of Reference for as many separate market inquiries within the first four months of 2023.

This article provides a brief overview in respect of the: Fresh Produce market inquiry (“FPMI”); Media and Digital Platforms market inquiry (“MDPMI”); and South African Steel Industry market inquiry (“SASMI”) and what this all means for firms across these varying sectors.

What is a Market Inquiry and what is its Purpose?

In brief, a market inquiry is an investigative tool used by the SACC to identify whether there are any aspects of a particular market that impedes, distorts or restricts competition by asking industry stakeholders for information regarding their business, its operations within a specific market as well as the market in general.

FPMI

On 14 February 2023, the SACC published the final Terms of Reference for the FPMI which seeks to identify and understand the state of competition within the industry, market features affecting pricing outcomes and the challenges faced by, in particular, small and emerging farmers.

The FPMI will focus on the following themes:

  1. Efficiency of the value chain, with an emphasis on the dynamics around fresh produce market facilities;
  2. Market dynamics of key inputs and its impact on producers; and
  3. Barriers to entry, expansion and participation.

The Terms of Reference also provide that the FPMI will focus on, in particular: apples, bananas, oranges / citrus, stone fruit, pears, avocados, grapes and nuts, potatoes, onions, tomatoes, sweetcorn, carrots and cabbage and will also extend to processed fruit and vegetables.

Most notably, the FPMI concerns the entire value chain, including inputs (such as fertiliser, agrochemicals and farming equipment), production, wholesalers, intermediaries, national fresh produce markets, distribution, marketing and retailers.

Given that the SACC views the fresh produce sector as a priority sector, it is foreseeable that the SACC will place increased scrutiny in its investigations across the value chain. This is particularly in light of recent and controversial Essential Food Price Monitoring Report which concluded that there were reasons to suspect that firms across the value chain may have engaged in opportunistic price increases

All Things Digital: MDPMI

On 17 March 2023, the SACC announced and published the draft Terms of Reference for the MDPMI.

The MDPMI appears to largely come off the back of several inquiries and investigations led by competition authorities globally, on the impact of digital platforms on news media publishers that use these platforms to distribute content online as well as the SACC’s recent Online Intermediation Platforms Market Inquiry (“OIPMI”) where the Publishers Support Services made submissions that the widespread shift towards digital news consumption has resulted in a substantial decline in advertising revenue.

The MDPMI will focus on whether there are any market features in digital platforms that distribute news media content which impede, distort or restrict competition, or undermine the purposes of the Competition Act, 89 of 1998 (“Competition Act”), and which have material implications for the news media sector of South Africa, which includes news publishers and broadcasters. The scope of the market inquiry will extend to the following digital platforms:

  1. Search engines (e.g. Google Search and Microsoft Bing);
  2. Social media sites (e.g. Meta);
  3. News aggregator sites and/or apps (e.g. Google News and Apple News);
  4. Video sharing platforms (e.g. YouTube and Tiktok);
  5. Generative AI services whether integrated into the above platforms or not (e.g. ChatGPT alone or integrated with Bing); and
  6. Other platforms identified in the course of the inquiry.

Evidently, the MDPMI will be far reaching and will also extend to emerging technologies, such as open AI search engines.

The draft Terms of Reference can be accessed here.

South African Steel Industry market inquiry (“Steel Industry Inquiry”)

On 07 April 2023, the SACC published the draft Terms of Reference for the Steel Industry Inquiry, and will focus particularly on inputs and raw materials (such as iron ore and coking oil) and the upstream primary steel production. The SACC notes specifically that:

Iron ore

  1. Based on 2018 estimates, the three largest market participants in the mining of iron ore account for more than 95% of total ore mined in the country with the largest participant having a market share in excess of 55% while the third-largest iron ore miner held a market share of approximately 15% which, alongside large levels of production, may result in a large degree of market power. The SACC also states that there is a need to assess the pricing mechanisms adopted by iron ore producers in South Africa to ensure the competitiveness of steel producers.
  2. It has received information that there were previously contractual arrangements in respect to allocations of capacity on the Sishen-Saldanha railway line which may result in competitive concerns. The SACC has also received complaints of differential pricing whereby larger rail customers are provided favourable rates in comparison to emerging miners.

Coking oil

  1. The SACC highlights that South African steel manufacturers rely heavily on imported coking oil which could negatively impact the sustainability of the local steel manufacturing market due to import taxes and which may allow local producers to set their prices at import parity levels.
  2. The SACC considers it important to determine whether, inter alia, there are any policy interventions to encourage the local production of coking oil and the entering of new market participants.

Upstream Primary Steel Production

  1. In its Terms of Reference, the SACC notes that there is a considerable degree of market concentration with there only being three blast furnace plants in South Africa (of which are all owned by one company). Additionally, there are six electric arc furnaces which are owned by six different companies.
  2. The SACC also notes that he pricing behaviour of upstream suppliers, in relation to the supply of long and flat steel, may have a direct impact on the ability of downstream metal fabricators to be competitive in their respective markets. Additionally, the SACC also identified that there may be high barriers to entry in the upstream level of steel production which has the ability to increase the capital requirements for entry and sustainability in various markets in the upstream level.

The Terms of Reference are open for public comment until 05 May 2023 and can be accessed here.

What do market inquiries mean for industry stakeholders?

As is evident from the scopes of the above market inquiries, market inquiries provide the SACC with broad and seemingly unfettered powers to investigate competitive dynamics within a particular sector.

More importantly, the Competition Act affords the SACC with the powers to publish binding recommendations to specifically redress any anticompetitive effects that it identifies within a market during the course of a market inquiry. In this respect, companies which may be approached by the SACC during the course of its investigations are encouraged to seek specialised competition law advice to ensure that the proper information and legal safeguards are provided to mitigate against the imposition of onerous industry recommendations.