Exclusive AAT interview: Bonakele on antitrust conferences

meet the enforcers

In our latest instalment of our Meet the Enforcers series, we speak with South African Competition Commissioner Tembinkosi Bonakele on the topic of hosting a series of academic & practitioner platforms to discuss cases and developments in competition-law enforcement.

This week, the South African Competition Commission and the Competition Tribunal successfully organised the 9th Annual Conference on Competition Law, Economics & Policy (as part of the 4th BRICS International Competition Conference), taking place in Durban, South Africa.

Commissioner Bonakele, the head of the SACC, discussed hosting the conference with AAT’s contributing author, Njeri Mugure, Esq.  According to his biography, Mr. Bonakele has been with the Commission for the past ten years. He briefly left the Commission in March 2013 and came back in October 2013 as Acting Commissioner. He has been in this position until his appointment as the Commissioner. Bonakele has occupied various positions in the Commission’s core divisions. He was appointed Deputy Commissioner in 2008, and prior to that worked as head of mergers, head of compliance and senior legal counsel respectively.

The AAT-exclusive interview follows:

Tembinkosi-Bonakele-Profile-Pic

AfricanAntitrust.com: South Africa has been participating in the BRICS International Competition Conference (“BRICS ICC”) since 2011, a year after she officially became a member of BRICS. This November the country will host the 4th of this biennial meeting in Durban. What are your goals for this year’s conference?

Tembinkosi Bonakele:

The theme for the BRICS International Competition Conference 2015 is “Competition and Inclusive”. This theme will enable the conference to explore the relationship between competition and growth, competition and employment, competition and inequality and competition and poverty. As with the previous conferences, the aim of the conference is to strengthen cooperation amongst BRICS countries in the area of competition regulation by creating a platform for sharing experiences. We also aim to use the conference to discuss a proposed Memorandum of Understanding between BRICS competition agencies. Finally, the conference is also a platform for both developed and developing countries to discuss competition policy and enforcement issues.

AfricanAntitrust.com: Speaking of Durban, some might have expected for the 9th Annual Competition Law, Economics and Policy Conference (“Annual Competition Conference”) and/or the BRICS ICC to be held in Pretoria, the capital city of South Africa.  Could you tell us why you chose to hold the two conferences in Durban?

Tembinkosi Bonakele:

We wanted a venue that would provide world class facilities for the conference as well as enjoyment for the delegates, and Durban ticks both boxes. The Kwazulu-Natal province, where Durban is situated, is home to rich natural resources, including Africa’s Big Five game and beautiful mountainous landscapes.

Durban itself is a diverse African city providing cultural diversity as well as a natural paradise known for its beautiful coastline beaches and subtropical climate. The City is also host to the largest and busiest harbor in Africa. The Inkosi Albert Luthuli International Convention Centre (Durban ICC), where the two conferences will be held, is the largest indoor conference facility in Africa.

The Commission has previously partnered with the KwaZulu-Natal Provincial Government, eThekwini (Durban) Municipality and the University KwaZulu-Natal on various activities.

AfricanAntitrust.com: In addition to hosting the Annual and the BRICS competition conferences, the South African Competition Commission (“the Commission”) along with Cresse and the University of Kwazulu-Natal will hold a joint workshop exploring areas such as collusions and cartels, unilateral and coordinated effects in mergers, the economics of exclusionary conducts, and use of economic evidence, among others. What do you hope this workshop will achieve?

Tembinkosi Bonakele:

The economic understanding of competition policy is constantly evolving. In the last two decades economists have developed new theories of harm and traditional views have changed significantly. The workshop will bring top quality instruction on the economics of competition to agency officials in South Africa and more broadly Africa, competition practitioners, academics and policy makers. I hope that everyone attending the workshop will walk away having learned something new about the economics of competition.

AfricanAntitrust.com: Speaking of the this year’s events, planning the joint workshop, the Annual Competition Conference and the BRICS ICC was a great undertaking, could you tell us why you decided to have the three events back to back and what audience each event is tailored to suit?

Tembinkosi Bonakele:

With the BRICS conference coming into South Africa was a great opportunity as so many people were interested to come. So many opinion makers, academics and practitioners were going to be in the country, so we organized all these events to take advantage of their presence, and the response was very positive. We also thought logistically it makes sense to have our annual conference organized back to back with BRICS, so we don’t get conference fatigued. In the end, all the events flow into each other.

The Joint Workshop is a technical training and knowledge sharing platform, looking at the latest thinking on various aspects of competition enforcement.

The conference is an annual academic platform to discuss cases and developments in competition law enforcement.

AfricanAntitrust.com: Turning to the BRICS International Competition Conference, in what way has this year’s agenda been informed by the previous three conferences? What impact do you think the previous conferences have had on antitrust discourse in BRICS and non-BRICS countries?

Tembinkosi Bonakele:

The previous conferences, hosted by the Federal Antimonopoly Services of Russia in 2009, the State Administration for Industry and Commerce of the People’s Republic of China in 2011 and Competition Commission of India in 2013, created a solid platform on which we can deepen our relations in the fi­eld of competition regulation.

South Africa has focused the conference on the relationship between growth and inclusivity. Furthermore, this year’s conference aims to institutionalize BRICS cooperation on competition matters, and move it beyond conferences. There is a proposed Memorandum and Understanding, as well as a joint research initiative.

AfricanAntitrust.com: There’s been a lot of debate surrounding public interest factors in merger review. What do you hope to achieve by including the topic to this year’s conference agenda?

Tembinkosi Bonakele:

It is important that BRICS countries weigh-in on this important debate. There is a divergence of views amongst many antitrust practitioners on the compatibility of antitrust issues with public interest issues, but everyone accept that there are public interest issues. The conference will deepen and broaden perspectives on the matter.

AfricanAntitrust.com: How do these engagements such as the BRICS conference and competition law enforcement in general benefit the ordinary South African?

Tembinkosi Bonakele:

The South African competition authorities were established as a package of reforms to transform the unequal South African economy to make it economy inclusive and ensuring that those who participate in it are competitive.

Through engagements such as the BRICS conference we’re able to discuss with our BRICS counterparts how to make our economies, which are similar, more efficient, competitive and inclusive.

The Commission has, in the past 16 years investigated and dismantled cartels from different sectors including construction, bread – a staple food for many South Africans, and cement. In the cement cartel, for instance, the Commission conducted a study post the cartel and discovered that we have saved consumers about R6 billion.

AfricanAntitrust.com: Mr. Bonakele, are there other topics you would have liked to address or comments you would like to add?

Tembinkosi Bonakele:

We see BRICS as an important and strategic platform where we advance arguments about the relationships between competition and other policy instruments that are very relevant in our developing countries.

As a collective, BRICS competition authorities are able to provide leadership in the international antitrust community on what it means to create and enforce competition law and policy in developing economies which come with their own particular challenges and opportunities. These perspectives will serve to enrich the global knowledge base in competition enforcement.

AfricanAntitrust.com: Thank you for taking the time to speak with me, Commissioner!

The interview was conducted by Ms. Mugure for AfricanAntitrust.com on 8 November 2015.

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MergerMania update: COMESA CCC clears 5 notified mergers

COMESA old flag color

COMESA CCC clears 5 notified mergers

At their July 29, 2015 meeting, COMESA Competition Commissioners Chikankheni, Langa, and Okilangole rendered decisions in five merger cases notified earlier in the spring.  The affected sectors are: Packaging (Nampak), Retail (Steinhoff), Academic Publishing (Springer Verlag), Telecom Towers (Eaton Towers), and Non-Alcoholic Beverages (Coca-Cola).

Ethos/Nampak MER/03/01/2015 SOM/8/2015 Decision/10/2015  29/07/2015
Steinhoff/Pepkor MER/03/02/2015 SOM/7/2015 Decision/9/2015  29/07/2015
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015 Decision/8/2015  29/07/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015 Decision/7/2015 29/07/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015 Decision/6/2015 29/07/2015

Our statistics (while discrepant with those identified by COMESA head of mergers Mr. Willard Mwemba) show the following numbers for COMESA notifications to date:

COMESA MergerMania July 2015

Number of merger notifications based on CCC-published notices

The Big Picture: Public-Interest Factors in Antitrust

AAT the big picture

Public-Interest Considerations in Competition Policy Take Center Stage… Once Again

By Michael Currie

An increasing trend in South Africa’s competition regulatory environment is the emphasis that the competition authorities and policy makers are placing on what is known as public-interest provisions. While we have authored a number of articles that have been published on African Antitrust highlighting our concern and disapproval of an overly-zealous reliance on public interest provisions, especially in the framework of merger control, the Competition Authorities have become increasingly bold in shaping there policies around public interest and industrial policy agendas.

In this article, we discuss the Vodacom/Neotel merger as well as COSATU’s response to the announcement that market inquiry will be conducted in the grocery retail sector, as these two developments personify the influence that Minister Patel has over the SACC’s policy and the very clear industrial policy agenda’s that Patel is using the SACC to promote.

In the past number of years in South Africa, public interest considerations have been no more prevalent than in merger control. While, to date, there has not been a merger prohibited based purely on public interest grounds, there have been a number of mergers which, despite no finding having been made that such a merger will lessen competition, have been approved subject to significantly onerous conditions, based on public-interest grounds.

south_africaThe Law

The South African Competition Act, 89 of 1998 (“Competition Act”) requires that the competition authorities consider the impact of a merger on certain public interest grounds, which are expressly listed in Section 12A of the Competition Act.

We have, on African Antitrust,[1] consistently stressed the inappropriateness of imposing burdensome conditions on mergers relating to public interest considerations, and raised the legitimate concerns that the South African Competition Authorities are increasingly being utilised as a mechanism by which to promote the government’s industrial policies.

Furthermore, conditions have been imposed on mergers without any substantial assessment done on balancing potential short term losses with long term gains.

Be that as it may, the conditions that have most commonly been imposed on mergers, based on public interest grounds, relates to employment. The impact of a merger on employment is one of the express public interest considerations that is contained in Section 12A.

What is deeply concerning, however, that as we will discuss below, the SACC has recently broadened the scope of public interest considerations to extend well past those grounds listed in Section 12A, effectively ensuring that when it comes to evaluating a merger on public interest grounds, the SACC is effectively, unrestricted.

Vodacom

Vodacom is South Africa’s largest mobile service provider and merging with Neotel would allow Vodacom to fast-track its rollout of a fixed line network.  The merger still needs to be approved by the South African Competition Tribunal (“SACT”).

On 30 June 2015, the SACC made recommendations to the SACT to approve the merger between Vodacom and Neotel, subject to stringent conditions.

The conditions recommended to be imposed on this merger will certainly ring alarm bells for all entities (especially large businesses which have a BEE shareholding) who are considering undertaking a merger in South Africa.

The SACC, who is of the view that the merger will substantially lessen competition in the market, has recommended that the following conditions to be imposed on the merger:

  • There be no retrenchments of Neotel employees;
  • That Vodacom invest R10 billion (approximately $1 billion) into data, connectivity and fixed line infrastructure; and
  • That Vodacom’s Black Economic Empowerment (“BEE”) shareholding is increased by R1.9 billion (the value of Neotel) multiplied by 19%.

The SACC’s recommendation that Vodacom’s BEE shareholding has to increase to a certain value is considerably worrisome, as it is very difficult, in our view, to justify the imposition of such a condition, in terms of the law or in terms of any social policy objective.

As noted above, the competition authorities are obliged, in terms of the Competition Act, to consider the impact that a merger may have on a number of public interest grounds. In terms of the Competition Act, the SACC and SACT, when evaluating a merger, must consider the impact that the merger will have on:

  • “A particular industry sector or region;
  • Employment;
  • The ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to become competitive; and
  • The ability of national industries to compete in international markets.”[2]

Simply put, there is in our view, no justifiable legal basis, upon which to impose a condition relating to the BEE shareholding as proposed by the SACC in this merger.

A Disconcerting Trend Away from Law & Economics

Regardless of whether the merging parties accept the SACC’s recommended conditions, the competition authorities are increasingly using conditions imposed in previous mergers, as precedent to justify and become increasingly ambitious when considering conditions to be imposed on any prospective transaction. Thus, even if the conditions imposed in this particular merger are not overly-burdensome on the parties themselves, it is most likely that the conditions, should they be approved by the SACT, will set new precedent for any future transactions.

The competition authorities are inadvertently creating a ‘threshold’ of conditions. This is evident by the way in which the Commission seems to default to a recommendation of a two-to-three year moratorium on retrenchments, whenever there is a concern arising or pressure placed on the SACC relating to retrenchments.

It is well noted that timing is of critical importance when it comes to the success of a implementing a merger. The fact that the SACC has quite brazenly taken upon itself, the duty to foster and advance the government’s socio-economic and industrial policies no doubt leads to greater uncertainty as to the nature of the conditions that may be imposed on a proposed merger.

In this regard it is worth noting that the SACC has published draft guidelines (currently for public comment) on the Assessment of Public Interest Provisions on Mergers (the “Guidelines”). While the Guidelines are still in draft form, like most of the SACC’s guidelines published to date, it allow for a significant degree of discretion on the part of the SACC.

The Guidelines were an attempt to provide greater clarity and certainty when it comes to assessing the impact that a merger may have on the public interest grounds listed in Section 12A of the Competition Act, however, the Guidelines do not provide guidance with respect to assessing the impact that a merger may have on grounds not listed in Section 12A.

Hence, despite the Guidelines seeking to add clarity and certainty to the issue, the SACC’s expansion of public-interest grounds has for all practical purposes brought us back to square one.

Another Market Inquiry: Grocery/Retail

As mentioned above, public-interest considerations have now been used as the catalyst to drive other competition objectives; most notably, the recently announced market inquiry into the grocery retail sector.

It has been our suspicion from the outset that the market inquiry into the retail sector is driven by an underlying desire to promote Patel’s industrial policies, rather than address any or understand the structure of the market to ensure more competitive market is advanced.

The response by one of South Africa’s largest trade unions, COSATU, has publicly proclaimed its support for the market inquiry, and the reasons advanced in support of the inquiry, very much confirms our suspicions.

In an article published on their website, COSATU has expressed a number of reasons why they support the inquiry. Unsurprisingly, few of the reasons put forward relate to a desire to better understand the functioning of the market from a competition perspective. Much like Mr Patel, the Minister of Economic Development, COSATU has viewed the market inquiry from a socio-economic paradigm as opposed to a competition one.

While the grocery retail market share is largely attributed to the four biggest retailers in the South Africa, the broad ambit of the inquiry coupled with Patel’s comments made in Parliament in which he stated that the retail sector was a great entry point for black South Africans should leave little doubt in any objective observer’s mind that the market inquiry into the grocery sector is steeped in promoting governments industrial policies through the channels of competition regulation.

It should also come as no surprise that Patel was previously a labour activist and previously headed the Southern African Clothing and Textile Workers Union (SACTWU).

COSATU has expressed its support for the market inquiry, largely because COSATU is of the view that the market inquiry will address a number of socio-economic concerns. The following statement made by COSATU clearly illustrates as much:

“It should also be noted that the grocery retail sector is characterized by precarious and atypical employment. Most workers in the sector do not enjoy their basic labour-related socio-economic rights. Negative practices such as labour broking, outsourcing, casualisation and low-pay are prevalent in the sector. COSATU strongly believes that this inquiry is essential for addressing the above-mentioned socio-economic trends.”[3]

The preamble to the Competition Act recognises that Apartheid created a certain concentration of market shares and that South Africa needs a greater spread of ownership. In no way, however, can competition law be used as policy to address, replace and undermine legislation and institutions designed specifically to address identified concerns. In other words, the claim made by COSATU that the market inquiry will address negative labour practices, shows a fundamental flaw in understanding the purpose and nature of competition law and policy.

South Africa has extensive labour legislation and a number of institutions that have been established to deal with negative labour practices.

Placing the responsibility of protecting our labour workforce beyond the scope of the Competition Act, would undermine the efforts of the legislature as well as the institutions entrusted in promoting and enforcing fair labour practices.

Furthermore, even if the market inquiry does in one way or another lead to a greater number of smaller independent retailers, it is difficult to foresee how this will benefit labour conditions. Large retailers’ employees generally belong to trade unions who can act as a voice on their behalf. Employees of small retailers have far less bargaining power.

While it may be that COSATU, as a trade union, need not be too concerned with competition issues as such, trade unions in general have played have had an increasingly significant influence on competition law policy.

It is imperative that an institution such as the SACC remain independent and impartial, yet the SACC’s willingness to align itself with the policies Patel is championing for undoubtedly risks the independence, proper functioning and impartiality of the SACC — a risk the SACC must ensure it protects itself against.


[1] See here, here, and here.

[2] Section 12A(3) of the Competition Act, 89 of 1998.

[3] http://www.cosatu.org.za/show.php?ID=10618#sthash.XLWeNExH.dpuf

AfricanAntitrust remembers Nelson Mandela

nelson-mandela-day

Without fanfare, the editors at AAT wish to remind our readers of the legacy of Nelson Mandela on the occasion of what would have been his birthday, a day which has become a day of service in the Republic of South Africa (see and on Twitter).

Without the graciousness and leadership of Mr. Mandela, the rule of law governing the country and the open discussions engendered on AAT & AAF would not be possible today.

As one journalist observed in 2013 upon the former President’s and civil-rights icon’s death:

Few world leaders can claim among their devotees a cast as diverse as the English monarch, the president of the Palestinian Authority, and Chinese human rights activists. In Beijing and Tel Aviv, Lagos and Havana, London and Washington, DC, many around the world awoke Friday morning with their leaders momentarily united by the loss of one of the 20th century’s most revered statesmen.

MergerMania: Are CCC notifications picking up pace unnoticed?

COMESA Competition Commission logo

COMESA Merger Mania

To answer our rhetorical question in the title above: We don’t believe so.  For the merger junkies among our readership, here is AAT’s latest instalment of “COMESA MergerMania” — AfricanAntitrust’s occasional look at merger matters reviewed by the young multi-jurisdictional competition enforcers in south/eastern Africa.  (To see our last post on COMESA merger statistics, click here).

COMESA publishes new Merger Filings, still fails to identify dates thereof

As nobody else seems to be doing this, let us compile the latest news in merger notifications to the COMESA Competition Commission.  Prior to doing so, however, we observe one item of utility and basic house-keeping etiquette, which we hope will be heeded in future official releases by the agency: Please note the dates of (and on the) documents being issued.  Using the date as a ‘case ID’ is insufficient in our view — the CCC’s current PDF pronouncements invariably remain un-dated, a practice which AAT deplores and which simply does not conform to international business (or government) standards.  So: please date your press releases, opinions, decisions, and notifications on the documents themselves.

We observe that the matters below have not yet been assigned final “case numbers” (at least not publicly) in the style typical of the CCC decisions in the past, namely sequential numbers per year, as they are currently under investigation and have not yet been decided.

We also note that one notification in particular appears to have been retroactively made in 2014, even though it is identified as merger no. 3 of 2015 (Gateway), a peculiarity we cannot currently explain.  Likewise, AAT wonders what the “44” stands for in its case ID (“12/44/2014”), we surmise it’s a typo and should be “14” instead.

Internal Case ID Statement of Merger
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015
Gateway/Pan Africa MER/12/44/2014 SOM/3/2015
Old Mutual/UAP MER/03/04/2015 SOM/2/2015
Zamanita /Cargill MER/03/03/2015 SOM/1//2015

Which brings us to the bi-monthly…

AAT COMESA Merger Statistics Roundup

COMESA Merger Statistics as of July 2015

COMESA Merger Statistics as of July 2015 (source: AAT)

CCOs say that with more investigations also comes (slightly) more money

deloittecompliance

In sync with greater enforcement: Firms’ compliance budgets grow

According to a recent survey, the budgets allocated to compliance have grown over the last year, including those of African participants in the study.  Consulting giant Deloitte has released its 2015 Compliance Trends report, the result of its survey in which 20 large corporations across Africa (out of 364 total qualified respondents) participated.

Below, we summarise some its key conclusions on…

The Role of the Chief Compliance Officer

Taken together, these statistics … suggest that most CCOs, especially those at larger corporations, now have an opportunity to participate in high-level discussions about corporate strategy, values, and culture.

The key items under the CCO’s responsibility were:

  1. compliance training,
  2. code of conduct, and
  3. whistleblower hotline.

Primerio director John Oxenham observes that, “unfortunately, the assessment of culture was perceived as the least important among the CCOs’ responsibilities.  This is a serious problem, as pointed out in prior articles emphasising the importance of a culture of compliance, rather than sterile top-down pronouncements that often go unheeded by mid-level management.”

African Companies

While firms from the continent have increased their compliance budgets (about 16% by 10 to 19%, and many more by 1 to 9% over the past year) along with their U.S. and European counterparts, they are perceived to be dilatory in their evaluation of their own compliance efforts and results, and lacking in their ability to make full use of their compliance efforts.  In short, many still (wrongly) view dollars spent compliance as a “grudge cost.”

Significant enforcement in Africa (both in the anti-corruption and competition-law domains) across various sectors of the economy (food, technology, construction, to name a few) have awakened many corporate boardrooms across Africa to the reality of effective home-grown government enforcement.

Information Technology and Compliance

IT Systems have not fared well in the latest report:

One possible disconnect emerges when asking CCOs about the IT systems they use to fulfill their missions: Most are not terribly confident in their IT systems’ ability to do the job. Only 32 percent of respondents were confident or very confident in their IT systems, down from 41 percent in 2014

Interestingly, smaller organisations with less than $5 billion in annual revenues showed higher levels of confidence in their IT systems when juxtaposed to their larger peers.

Infrastructure projects, competition & regulation: Tafotie on regional oversight

Africa-infrastructure

The necessity of strong regional regulatory oversight on infrastructure projects in Africa

RogerBy Roger Tafotie

Dr. Tafotie is a Pr1merio advisor with a legal & business focus on both African and European markets.  A member of the Luxembourg Bar, he is also a lecturer in law at the University of Luxembourg. His focus areas include project finance/public private partnerships, banking & finance, and corporate law.

In his latest paper on essential infrastructure development on the African continent, Roger not only embarks on a mission to clarify the valuable role of public-private partnerships (“PPPs”) — he also reminds us that, beyond “well-drafted projects contracts,” there must also be an “effective and efficient African regional regulatory oversight system, with clear roles and lines of command, that is able to protect against ills such as self-dealings and anti-competitive alliances or monopolies,” including “the monitoring of the tendering process against corruption.”

Enhanced competition and an effective oversight system to weed out corruption in the bidding (and execution) process not only protects the local, national or regional governmental issuer of the infrastructure PPP.  In order to keep all stakeholders, including global financing institutions or other private lenders, in a position of “acceptable risk,” a well-supervised competitive process is essential to tender selection and project execution.

You can find the full paper here, exclusively on AAT and on AAF.

Shipping Cartel Update: NYK settles in South Africa

south_africa

NYK Agrees To Pay R104 Million In Settlement Agreement

On 1 June 2015, it was announced that Japanese Shipping liner, NYK, had concluded a settlement agreement with the Competition Commission (the “Commission”) in the amount of R104 million (approximately $8 600 000), for contravening Sections 4(1)(b)(i),(ii) and (iii) of the Competition Act (“Competition Act”), 89 of 1998.

The listed sections relate to collusive conduct, including:

  • directly or indirectly fixing a purchase price or other trading condition;
  • dividing markets by allocating customers, suppliers or territorial or specific types of goods or services; and/or
  • collusive tendering.

The settlement follows an investigation by the Commission into the collusive behaviour of a number of shipping liners, namely Mitsui O.S.K Lines; Kawasaki Kisen Kaisha Ltd; Compania Sud Americana de Vapores; Hoegh Autoliners Holdings AS; Wallenius Wilhelmsen Logistics; Eukor Car Carriers; and NYK, in relation to allegedly fixed prices, divided markets and tendering collusively in respect of the provision of deep sea transportation services.

In terms of Competition Act, a settlement agreement must be made an order by the South African Competition Tribunal. The Order will of course also be made public.

It will be interesting to note that the new guidelines recently adopted by the Competition Commission, on the Calculation of Administrative Penalties is still relatively novel, and it will be interesting to see how and to what extent the Commission followed the Guidelines in reaching the settlement quantum.  As AAT has written previously on the topic:

The Guidelines set out a six step process to be used by the SACC  to calculate administrative penalties. The six steps are summarised below:

  1. An affected turnover in the base year is calculated;
  2. the base amount is a proportion of the affected turnover ranging from 0-30% depending on the type of infringement (the higher end of the scale being reserved for the more serious types of prohibited conduct such as collusion or price fixing);
  3. the amount obtained in step 2 is then multiplied by the number of years that the contravention took place;
  4. the amount in step 3 is then rounded off in terms of Section 59(20 of the Act which is limited to 10% of the firms turnover derived from or within South Africa;
  5. the amount in step 4 can be adjusted upwards or downwards depending on mitigating or aggravating circumstances; and
  6. the amount should again be rounded down in accordance with Section 59(2) of the Act if the sum exceeds the statutory limit.

It is important to note in the case of bid-rigging or collusive tendering, the affected turnover will be determined by calculating the value of the tender awarded. Thus, even where a firm deliberately ‘loses’ a tender, the firm will be subjected to an administrative penalty which calculates the value of the tender in the hands of the firm who ‘won’ the tender.

Put your drink down: Fair Competition Commission threatens to un-do Diageo beer deal

Bloomberg’s reports in an article published today that Tanzania’s Fair Competition Commission is threatening to undo the previously-approved merger between Nairobi-based East African Breweries Ltd.’s and Serengeti Breweries Ltd., alleging that the conditions laid out in the 2010 approval of the deal had not been honoured by the parties.

Apparently, notice was given to EABL in late April: “The commission has issued a notice of an intention to revoke its own decision with respect to the merger against EABL.”

EABL is majority-owned by Diageo Plc and is the largest regional brewer, whereas Serengeti was the #2 player pre-merger.  The FCC conditioned its approval on

(1) Diageo’s sale of a 20% stake in rival Tanzania Breweries Ltd., (2) compliance with a requirement that Serengeti achieve “potential growth that is well beyond the level it was able to achieve previously,” (3) the obligation to continue promoting Seregenti’s corporate identity for five years post-merger, (4) an agreement not to shutter any of Seregenti’s existing plants without prior FCC approval, and (5) the submission of annual progress reports of compliance with the investment strategy plan submitted during the application of the merger.

At issue in the current challenge by the Commission is condition no. 2, i.e., the growth-target requirement imposed on the parties.  Competition-law experts are puzzled by the FCC’s imposition of said condition, said John Oxenham of the Africa-focused Primerio consulting firm:

“Forcing a company to divest itself of a rival unit prior to acquiring a target entity is commonplace, and so is the requirement that certain brands must be maintained post-acquisition.  But it is highly unusual in my view to see a revenue growth-target imposed on merging parties by a government antitrust enforcer.”

While noting that he had not seen the precise wording of the “potential growth” condition imposed by the FCC in 2010, “[h]ow does the regulator account for outside macro-economic factors, increased competition from other players, and similar third-party effects that are outside the control of the merging entities?“, said Oxenham.

We wish to observe that the FCC’s web site itself has no update on the topic.  Its most recent press release is from 2014 and the last newsletter that is available online dates from 2013.

Competition Regulation & the ‘spaghetti bowl’ of regional African integration

AAT the big picture

Professor Tchapga on competition legislation in a future regionally integrated Africa

AAT’s own contributing author and Primerio consultant, Professor Flavien TCHAPGA has drafted a paper for the African Economic Conference in Johannesburg.  The conference is organized each year by AfdB, UNECA & UNDP.

We are proud to present his paper here (written in French), which is entitled “Perspective de la régulation concurrentielle des marchés dans la future zone de libre échange continentale en Afrique : Enjeux et défis“.

The concise and eminently readable expose deals with the current and proposed competition regulation in the growing African free-trade area.  It provides a comprehensive overview of, and new insights into, the ‘spaghetti bowl’ of African regional integration and the necessary (yet little developed) competition regulation that must go along with it.

We invite our readership, especially the francophone and francophile contingent, to download and peruse Professor Tchapga’s work.  His prior related work, also published here, has been on developing effective competition policies in Africa and on the inherent tension this effort faces, focused on the member countries of CEMAC and WAEMU.