Author: Editor

Editorial staff of AAT

Concentration and Participation in the South African Economy: Levels and Trends – SACC Publishes Report

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By Michael-James Currie & Gina Lodolo

On 7 December 2021, the Minister of Trade, Industry and Competition, Ebrahim Patel released a report titled “Measuring concentration and participation in the South African Economy: Levels and Trends”, accessible here (“Concentration Report”). This Concentration Report is the first of many as the Minster undertook to update the report bi-annually from hereon out.

The theme of the Concentration Report is centered on identifying and remedying:

  • Economic levels and trends that are skewed and don’t reflect South Africa’s population demographic; and
  • Entrenched leaders in certain sectors, which creates “inefficient concentration” by setting high barriers to entry thereby reducing competition, which, according to the Concentration Report, can lead to higher prices and lower investment in South Africa.

The Concentration Report highlights that concentrated markets are of a rising concern internationally, however, specifically in the South African context, the apartheid era created dominant firms that persist and prevent historically excluded persons from participating and gaining market share.

The Competition Commission (“SACC”) does however note that concentration does not automatically mean there is a lack of competition and there may be many instances where concentration will be for the benefit of the consumer and pro-competitive. In this regard pro-competitive concentration can be seen when innovation creates increased market size and economies of scale reduce prices for consumers. Further, the SACC notes that there are still gaps in the data, which will be addressed in the subsequent reports.

The Concentration Report highlights that the SACC will hereinafter be concentrating its efforts on markets that have been identified to contain a role player that is presumed dominant. In this regard, the sectors that have been identified as requiring increased scrutiny are:

  • Farming inputs;
  • Agro-processing;
  • Sin (alcohol and tobacco) industries;
  • Healthcare;
  • Communications;
  • Upstream steel value; and
  • Financial services

This increased scrutiny will be seen particularly in industries that require licenses to operate. This is of concern to the SACC because licensing can be used as a mechanism to spread out ownership, which may be curtailed by a merger, and the SACC has seen increased merger activity particularly in industries characterized by licensing requirements.

To conclude, it is vital to take cognizance of this Concentration Report because the SACC has highlighted that it will form the basis of strategic enforcement of the Competition Act 18 of 2018 (“Act”) and will lay the path for policy centered on a concentrated economy.  In this regard, we foresee closer scrutiny of role players with large market shares in the years to come, especially those players that are presumed to be dominant or expressly mentioned in the Concentration Report.

A further challenge that the Commission faces in tackling perceived high-levels of concentration, is balancing the clear socio-economic objectives with competition law goals and consumer welfare enhancing conduct. Although the Report acknowledges that high concentration does not mean the market is anti-competitive, the general policy of the Report is clearly aimed as protecting or promoting a designated group of competitors as opposed to the competitive process itself. This creates an inherent policy tension and requires very clear, transparent and quantifiable trade-offs.

As the Constitutional Court recently affirmed in the Mediclinic case, higher prices to consumers is not in the public interest. The converse is of course also true. Intervention in markets which may lead to adverse effects on consumer welfare would need to be weighed against the objective of “opening up” the market. Where healthy and efficient entry is permissible, that may well be consumer welfare enhancing but if remedial actions are deigned to simply protect inefficient market participants then interventionist measures are likely to amount to nothing more than a tax on large players which either ultimately gets passed on to consumers or discourages investment. It is absolutely critical to South Africa’s economy and to the integrity of the competition law regime that the latter consequences do not materialize.

You can access the summary report here: https://www.compcom.co.za/wp-content/uploads/2021/12/Concentration-Tracker-Summary-Report.pdf

New CCC Chief addresses World Competition Day, lays out future of COMESA antitrust policy

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As we previously reported, long-time COMESA Competition Commission executive, Dr. Willard Mwemba, was recently promoted to his new role of permanent CEO of the CCC, after having been appointed Acting Director in February of this year. In this new capacity, he recently gave a thus-far unreported speech on the occasion of “World Competition Day” on December 5th, 2021.

In his short address, Dr. Mwemba lays out the mid-term future he envisions for the antitrust policy under his aegis in the Common Market, as follows.

Highlighting the importance of competition law for efficient and fair markets, with the goal of benefiting businesses (as opposed to being perceived as an impediment to business interests), Mwemba mentions key building blocks of the CCC’s enforcement going forward. These include resale-price maintenance and exclusive-dealing enforcement (around 1-1:30 in the little-known video, which has thus far only garnered two dozen views on the YouTube platform and is not yet published on the CCC’s own web site). He then moves on to merger regulation (2:45 onward), and further discusses the importance of the effectiveness of the actual competition law itself — noting that the CCC plans to amend its Regulations and Guidelines within the next year (3:40). Noting that the CCC cannot undertake this process very well alone, Mwemba highlights the cooperative approach of the Commission, partnering with and relying on other groups and stakeholders (such as the COMESA Women in Business group, OECD, and others).

Mwemba notes that the CCC’s “focus for the year 2022 will be on strict enforcement, especially against blatant anti-competitive conduct and blatant violations of the COMESA Competition Regulations, and in this case I mean cartels.  It is said that cartels are the supreme evil of antitrust … because it robs consumers, government, and businesses of huge sums…  So in line with this theme, our focus for 2022 shall be on cartels, and we shall make sure that we weed out all possible or potential cartels operating in the Common Market.”

The CCC chief concludes his address by saying that competition authorities “are not there to frustrate businesses, we are not the enemy of business”; instead, he sees the CCC’s role to ensure that markets operate fairly for all — a welcome reminder to the southern and eastern African business community to understand and embrace the precepts of antitrust law as an efficiency-enhancing mechanism for trading in the Common Market.

Dr. Willard Mwemba confirmed as CEO

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APPOINTMENT OF DR WILLARD MWEMBA AS THE DIRECTOR AND CHIEF EXECUTIVE OFFICER OF THE COMESA COMPETITION COMMISSION

 November 15th, 2021  Competition CommissionFacebookTwitterShare

PRESS RELEASE

 APPOINTMENT OF DR WILLARD MWEMBA AS THE DIRECTOR AND CHIEF EXECUTIVE OFFICER OF THE COMESA COMPETITION COMMISSION

 The COMESA Competition Commission (the “CCC”) wishes to inform the general public that the COMESA Council of Ministers at its 42nd Meeting held on 9th November 2021 appointed Dr Willard Mwemba as its Director and Chief Executive Officer.

The Commission’s Board, Management and Staff members wishes to congratulate Dr Mwemba on his well-deserved appointment. Dr Mwemba has been with the CCC since January 2013 being its first Head of the Mergers and Acquisitions Department until his appointment as the Acting Director and Chief Executive Officer on 1 February 2021. He has acted in this capacity until 9 November 2021 when his appointment was confirmed. Prior to joining the CCC, Dr Mwemba was the Director of Mergers and Monopolies at the Competition and Consumer Protection Commission (CCPC), Zambia.

Dr Mwemba has been instrumental in the enforcement of competition and consumer laws both at national and regional level. At national level, he has assisted a number of national competition authorities in developing and operationalising their mergers and restrictive business practices divisions. At regional level, he has been instrumental in implementing and reforming the COMESA Competition Law regime.  He has written extensively on competition law and is widely consulted on the subject at global level.

Dr Mwemba holds several qualifications among them Bachelor’s degrees in Economics and Law from the University of Zambia. He also holds a Master’s degree in Competition Law from Kings College London. He further holds a PhD from the University of Cape Town specializing in competition law.

The Board of Commissioners, Management and Staff members of the CCC have great confidence in Dr Mwemba’s capabilities and wishes him well as he executes the mandate of enhancing intra-COMESA trade through the creation of competitive markets.

CCC draft Guidelines (no. 3/3): Penalties

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COMESA Competition Commission (“CCC”) seeks input on draft guidelines for determination of administrative penalties.

In this article in a three-piece series, we discuss the Determination of Administrative Penalties Guidelines draft, which has been published (in addition to the Hearing Procedure and Settlement Guidelines). The draft Guidelines comment period expired today, 12 November 2021.

The Guideline establishes a two-step methodology when determining a fine to be imposed on undertakings. The first step will see the Commission set a “base amount” for each undertaking or association of undertakings. The second step provides the Commission with the necessary discretion to adjust the base amount, either upwards or downwards, having consideration of any aggravating, mitigating or any other factors (Section 5(1)(a)-(b)).

The “base amount” will be set with reference to the undertaking’s turnover in the Common Market from the previous financial year and by applying the following methodology:

  • The base amount will be a proportion of the turnover and will depend on the nature, degree and gravity of the infringement and multiplied by the number of years of the infringement (Section 5(8)).
  • The Guideline deems the following as aggravating factors:
    • Nature and gravity of the infringement (Section 5(10)(a));
    • Duration of infringement(Section 5(10)(b));
    • Extend of consumers affected in the Member States and any action taken by the company to mitigate or remedy the damage suffered by consumers (Section 5(10)(c)).
  • The Guidelines propose the following base proportion of turnover to be applied:
    • Cartel conduct: a base of 5% of turnover;
    • Other horizontal conduct: a base of 4% of turnover;
    • Abuse of dominance: a base of 3% of turnover;
    • Restraints: a base of 2% of turnover;
    • Consumer protection violations: a base of 1% of turnover;
    • Mergers implemented in contravention of the Regulations: a base of 2% of turnover;
    • Failure to cooperate with the Commission: a base of 0.5% of turnover; and
    • Other infringements: a base of 0.5% of turnover.
  • The following aggravating circumstances may result in the increase of the base amount:
    • Continuation or repeat of the same or a similar infringement: basic amount will be increased by 3% of the amount of the fine for each infringement;
    • Refusal to cooperate with or obstruction of the Commission’s investigation: basic amount will be increased by 5% of the amount of the fine;
    • Where an undertaking is a leader in, or instigator of the infringement: basic amount will be increased by 4% of the amount of the fine.
  • The Commission may reduce the basic amount if the following mitigating factors exist:
    • Cooperation: decrease in the basic amount by 5% of the fine;
    • First offender: decrease in the basic amount by 3% of the fine;
    • Justifications on efficiency and consumer benefit: decrease in the basic amount by 0.5% of the fine;
    • Termination of the infringement: decrease in the basic amount by 0.5% of the fine;
    • Negligence: decrease in the basic amount by 0.1% of the fine; and
    • Extent of involvement in the infringement: decrease in the basic amount by 0.5% of the fine.

A reduction of a fine could be granted, upon request, solely on the basis of objective evidence that the imposition of the fine would irretrievably jeopardize the economic viability of the undertaking concerned and cause its assets to lose all their value (Section 5(21)).

COMESA Competition Commission logo

CCC draft Guidelines (no. 2/3): ‘Hearing Procedure’

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COMESA Competition Commission seeks input on Determination of Hearing Procedure Guidelines

By Gina Lodolo

We previously published an analysis of the regional antitrust enforcer’s recently-published “Settlement Guidelines”.

In this article, we briefly discuss the Hearing Procedure draft which has been published (in addition to the Administrative Penalties Procedure and Settlement Guidelines).  The draft Guidelines have been published for public stakeholder comments due by 12 November 2021. Fundamentally, the COMESA Competition Commission (“CCC”) emphasizes that, during its investigative proceedings, the principles of natural justice must be adhered to, in the sense that the parties have the right to be heard.

Hearings will be conducted during either of the following stages:

  1. The hearings during the investigations process;
  2. Hearing by the Director before publication of notice of compulsory recall of defective goods; and
  3. Hearing before the Committee for the Initial Determination (“Committee”) of cases.

The CCC notes that in regard to hearings for the initial determination of cases, hearings are not intended to be the major source of information because the primary method of information gathering will be gleaned from responses received from the
“Notice of Investigation” that will first be sent in terms of  Article 21(6)(a) and 22(1) of the Regulations.

When will the CCC hold hearings?

  1. May hold hearings during investigations (at any time);
  2. Shall hold a hearing:
    • Before making recommendations;
    • Before taking decisions; and
  3. (In its consumer-protection role only:) Before the CCC publishes a notice of a compulsory product recall.

Hearing procedure once it has been determined that a hearing will be held

  1. The CCC shall give fifteen working days notice to all of the parties involved;
  2. A notice will be published to invite interested parties;
  3. Notice of the main issue must be given within ten working days and will provide the main issues identified and the main questions that will be raised (any other questions may still be raised at the hearing as long as “they are reasonably related to the matter under investigation.”

During the Hearing

  1. The Committee will test the evidence before it and interrogate the CCC’s team that conducted the investigation.
  2. The party under investigation will also be provided the opportunity to:
    • Clarify and develop the evidence that it provided during the investigation;
    • Comment on and rebut evidence and information supplied by other parties; and
    • Make further representations, which may, in relevant cases, address the question of whether a practice has public benefits that may offset any adverse effects on competition.

After a Committee has been convened to hear the matter:

  1. Any party required to attend the hearing must be given twenty-one days’ notice of the hearing date.
  2. Upon application by a party, a pre-hearing can be requested to confirm that all of the parties can attend the hearing and have received all documentation relied on by the other party.

After the conclusion of the hearing, a decision will be made by the Committee within forty-five days. If the Committee finds that the respondent has breached the Rules or Regulations, in “appropriate instances” a remedy can be discussed.

Any party has a right of appeal and will do so in accordance with Rule 24(d), (e) and (f) of the COMESA Rules, 2004.

CCC seeks input on Settlement, other, Guidelines

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The Agency is seeking stakeholder comments with a deadline of Nov. 12th, 2021. The (draft) Settlement Guidelines are modeled expressly after European and Zambian precedent (as opposed to U.S.-American law, which is not mentioned as a source), and include key provisions that lay out the procedure envisioned by COMESA.

In this article, we discuss the Settlement Guidelines draft, which has been published (in addition to Hearing Procedure and Fines Guidelines). Key elements for a respondent party entering into the Settlement procedure outlined in the draft include:

  • Settlement (negotiations) may occur “before or after having sight of the Commission’s case.” (Section 3.7);
  • that any settlement, other than in Article 20 proceedings, must include an admission of liability (Section 4);
  • settlements are to achieve “procedural efficiency” and the “possibility of setting a precedent.”  (Ibid.);
  • a rather onerous 4-factor list of requirements demanded of parties opting for a settlement procedure, including (a) liability acknowledgement, (b) commitment to pay CCC’s fines or other remedies imposed pursuant to the Regulations (with an understanding that the party has been made aware of the maximum fine amount previously), (c) acknowledgement of procedural transparency, and (d) agreement not to seek additional access to the file or request further hearings on the matter. (Section 6);
  • both the CCC as well as the affected party may withdraw from the procedure, with notice (Ibid., points 3-6);
  • submissions made during the settlement procedure are not publicly available (nor to complainants), instead they are only made available for viewing (not copying) to other addressees of the investigation who are not settling (Ibid., point 7);
  • COMESA member state competition authorities (NCAs) will be sent copies of the settlement submissions, under the same safeguard rules (Ibid., point 8);

Section 8 covers CCC investigations pursuant to all Articles other than Art. 20, i.e., Arts. 18, 21, and 22 investigations brought by the Commission.  It lays out a time frame and procedure akin to what AAT perceives as a “quasi-leniency regime”, as it requires similarly onerous commitments: admission of liability, full disclosure of evidence related to the conduct at issue and its “implementation”, as well as a commitment to cease and desist from engaging in the conduct.  The respondent party is subject to strict gag orders of non-disclosure of materials obtained during the investigation and settlement procedure, and it may propose “undertakings” to the CCC, which the Commission is not obligated to accept (point 7).

COMESA Competition Commission logo

The draft Settlement Guidelines highlight “efficiency, absence of subsequent litigation, and savings on resources” as three incentives for settlement (Section 12), although it is unclear to us how the CCC envisions to achieve legal certainty as to the second factor, namely protecting the settling respondent(s) from future follow-on litigation in other jurisdictions outside COMESA.  Clarity in this regard will be required, as this promise appears to be unenforceable as an extraterritorial application of the COMESA Regulations and Guidelines.  

UPCOMING – Franklins & Primerio Hosted African Antitrust Event

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If you haven’t registered yet, there are a few more hours to go before the Primerio and Franklin société d’avocats (Law Firm) first, of a series, webinar on Regulatory and Investment Risks in Africa kicks off at 3pm CET/SAST: 9am ET on 13 October 2021.

This session will explore antitrust developments in Southern and Western Africa and will be held in English and in French.

See link below to register (for free).

Speakers include: Andreas Stargard John Oxenham Joël Rault Lionel Lesur and Jérôme Michel

Click HERE to register

Upcoming Free Webinar: Risk & Investment in Africa

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Hosted in partnership with Franklin Société d’avocats


When: 13 October 2021 at 15:00 CET/SAST (09:00 ET)
Where: Virtual
Registration: Click HERE to register (this event is free to attend)

About: Join Primerio and Franklin’s directors as they canvass a broad range of legal and regulatory risks in investing in Africa. This session will be held in both English and French.

Speakers: Jérôme Michel (Partner, Franklin); Joël Rault (Senior Advisor, Franklin); John Oxenham (Director, Primerio International); Lionel Lesur (Partner, Franklin); Andreas Stargard (Director, Primerio International)

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Kenya Antitrust Enforcer Reiterates Warning to Professional Associations

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By Ruth Mosoti, Esq.

The Competition Authority of Kenya (CAK, or the Authority) issued a public notice to members of professional associations who are seeking to set minimum chargeable fees for their members notifying them that they need to comply with the provisions of the Competition Act. The Competition Act (the Act) provides for parties to file an application for an exemption on behalf of any association whose agreements may contravene the Act. Notably, the determination of an exemption application factors in public-interest considerations. In addition to this, when an exemption is granted, the same is not perpetual the period of validity of the exemption is at the discretion of the Authority.

Regulation of professional bodies is governed by different sources under Kenyan law. This can occur either through statutory law or rules issued by the professional bodies themselves. In Kenya we have professional bodies regulated by statute and others are wholly self-regulatory. This in turn brings in the issue of self-regulation and regulation by statute. As such, if a professional body is allowed by law to prescribe fees applicable for certain services offered by members of that association. Therefore, in such an instance then the Authority cannot fault such an association because the actions of the association are sanctioned by the law. In such an instance, the correct course of action would be the Authority to first seek intervention from the courts to declare such activities authorized by the law as unlawful and if successful, then any future activities of the association that involve the prescription of fees will be subject to an exemption application.

In 2017, the Institute of Certified Public Accountants of Kenya (ICPAK) made an exemption application in regard to prescribing of fees charged by its members and the same was rejected by the Authority. Following the rejection of their application ICPAK has opted to bypass the Authority and has begun to push for the prescription of the fees through the law and in 2020, they published the proposed remuneration order. Similarly in 2020, the Engineers through the Engineers board of Kenya also have the draft scale of fees for professional engineering services.

As mentioned above, there is the issue of self-regulation versus regulation by statute. Relevant Kenyan law includes the Statutory Instruments Act, which provides for the making, scrutiny, publication and operation of statutory instruments. Statutory instruments include but are not limited to rules, guidelines or by-laws made in execution of a power conferred by an existing statute. It is important to mention the Statutory Instruments Act because under this law, all statutory instruments are required to carry out consultations with the Authority to establish whether the proposed instrument restricts competition. It is however unclear whether the opinion of the Authority matters because despite complying with this requirement. What would be interesting to watch for now is whether ICPAK is successful in its quest for setting of professional fees there being a gazette notice where the CAK rejected its exemption application over the same subject matter.

Associations that self-regulate fall squarely within the jurisdiction of the CAK and that is why the Authority has in the past successfully pursued contraventions by trade associations like in 2016, the association members in the advertising industry who were involved in price fixing were penalized. This can be compared to the activities of the Law Society of Kenya  which are governed by statutes which empower it to recommend to the Chief Justice fees to be charged in relation to certain services offered by its members.

In conclusion, while the CAK may be justified in its quest to reign in the behavior of professional associations that are engaged in conduct that may amount to price-fixing, there needs to be a balance in the approach the CAK takes, where protection of fair remuneration is taken into account while preventing what would amount to abusive conduct. That being said, the CAK should also consider challenging the other laws that are in place that allow the professional associations to engage in conduct that it believes should be subject to an exemption application.