Toyota’s distribution & pricing agreements under COMESA scrutiny

Regional bloc’s antitrust enforcer further steps up investigations in the Common Market

By Gina Lodolo
On 16 June 2022, the Common Market for Eastern and Southern Africa (“COMESA”)’s Competition Commission (“CCC”) provided notice, as required by Article 22 of the COMESA Regulations (“Regulations”), that it launched an investigation into Toyota Tsusho Corporation (“Toyota”) in case no. CCC/ACBP/NI/3/2022.


Where the CCC has reason to believe that competition in the Common Market has been restrained, Article 22 of the Regulations requires the entity involved to be notified of the investigation, and further requires the investigation to be completed within 180 days of the notification. In this regard, the Toyota investigation was launched following allegations that the company contravened Article 16 of the Regulations. Article 16 (generally covering ‘restrictive business practices’) prohibits agreements that “may affect trade between Member States; and have as their object or effect the prevention, restriction or distortion of competition within the Common Market”.


The specific conduct referred to by Dr. Willard Mwemba, the Director and Chief Executive Officer of COMESA — who has revitalised the relatively young antitrust authority’s conduct investigations and increased its caché internationally by following best practices and engaging competition practitioners globally in the agency’s development and capacity-building process — includes Toyota’s distribution agreements with its authorised distributors. These vehicle distributors sell Toyota cars, trucks, and spare parts across the region, within their contractually designated territories. In this regard, the CCC is now investigating suspicions that the distribution agreements violate Article 16 of the Regulations in various ways — they may:
• Provide prohibitions on authorised distributors to sell outside of allocated geographic areas;
• Prohibit authorised distributors from indirectly selling outside of allocated geographic areas through selling to third parties, who they suspect will sell or transfer to another territory; and
• Indicate resale price maintenance by providing prices of Toyota products in the Common Market.

Andreas Stargard, a competition partner at Primerio Ltd. said, “this development shows how ‘CCC 2.0’ is truly emerging as a fully-fledged African antitrust enforcement authority and not a mere merger ‘toll booth’ regulator, which it essentially was for the first few years of its existence. The CCC has come a long way from the early days and is now pursuing abuse-of-dominance cases that it would not have had the capacity to tackle a decade ago”. Stargard observes that the Toyota case is “now the 3rd announced anticompetitive-business practice investigation of the year 2022 so far,” which is an absolute record for the CCC. “We’re talking proper grey-market / parallel-export restriction and RPM investigations here, this is no longer just a merger-fee collections agency.”

The agency invites public comment and further insight into Toyota’s dealings by 30th of July. Interested parties are invited to make comments to the Commission by 30 July 2022.

Doris Tshepe to lead Africa’s major antitrust enforcer as of September 2022

On 9th June 2022, the Minister of Trade, Industry and Competition, Mr Ebrahim Patel, announced his decision to appoint Ms. Doris Tshepe as the new Commissioner of the South African Competition Commission (“SACC”). Ms Tshepe will succeed outgoing Commissioner Tembinkosi Bonakele.

Minister Patel’s announcement comes as somewhat of a surprise to observers, given Commissioner Bonakele’s nine-year tenure and instrumentality in increasing merger and cartel enforcement within South Africa, whilst also advocating and advancing the role of the ‘public interest’ in both of these aspects. Under the leadership of Commissioner Bonakele, the SACC has been considered widely as an agency of international importance.

Andreas Stargard and Outgoing Commissioner Tembinkosi Bonakele (South Africa)

Commissioner Bonakele’s successor, Ms Doris Tshepe, is a well-regarded attorney with extensive experience. Her legal practice spans over 20 years, during which she specialised in constitutional and administrative law, legislative drafting, media and communication law, commercial law, competition law and employment law.  Additionally, Ms Tshepe has significant investigatory experience, having been involved in the SACC’s previous market inquiries into the Liquid Petroleum Gas and Grocery Retail sectors as well as being a panel member for the recent Online Markets Inquiry. In addition to her investigative experience, Ms Tshepe also has legislative chops, having sat on a 2019 panel considering the recent amendments to the South African Competition Act.  Says John Oxenham, a South African antitrust attorney: “Future Commissioner Tshepe’s long history of working with the SACC and others to shape the current enforcement approach of the agency (as well as its trajectory for the future) indicates that the Commission’s focus will remain steady and sharp. I do not foresee any wavering in the course of the SACC’s currently robust operations, due to the transition in its leadership.”

Bearing Ms Tshepe’s investigative history in mind, we can generally expect her to continue Commissioner Bonakele’s strong enforcement initiatives. Having been appointed to the panel on the amendment of the Competition Act, there is also a reasonable likelihood that we will see the SACC continue implementing, if not increasing, its long-standing public-interest agenda – particularly given the transformative socio-economic objects of South African legislation, say the competition practitioners at Primerio Ltd.

Lastly, we note that not all is over at the SACC for “Tembi” — Minister Patel has stated that there are discussions with outgoing Commissioner Bonakele regarding the delegation of an appropriate set of responsibilities that would allow him to utilize his skills and experience in competition and public policy after his departure. Again, although the details of these responsibilities are unknown, Minister Patel’s statement emphasizes the increased shift towards a public-policy centric competition regime. 

Ms Tshepe is expected to assume her position as Commissioner of the Competition Commission during the course of September 2022.

Incoming Commissioner Doris Tshepe

African antitrust authority edges closer to becoming price regulator

The South African Competition Commission warns against unjustifiable price increases of basic foods, particularly edible oil

By Gina Lodolo and Nicola Taljaard

Recent increases in the prices of edible oils have been the focus of news reports. Some retailers have been garnering particular attention for limiting the amount of oil that can be purchased per consumer.

The Chief Economist of the South African Competition Commission (“SACC”), James Hodge, highlighted the price of oil increasing by 42% over a year. This is significant as it reflects 3%-5% of poorer households’ food budget. It has been reported that, although there were already market factors last year affecting the price of oil, the Russia-Ukraine war has certainly exacerbated the situation. Hodge warns, however, that retailers and edible oil companies alike should not unreasonably use the Russia-Ukraine war to raise prices to unjust levels by inflating their price increases more than necessary, thereby seeking to earn ‘excessive profits’.

The SACC will look into the issue more closely. If and when the SACC comes to the conclusion that companies profiteer from their customers, they will act accordingly.

Where costs go up, there may be justifiable increases in prices, however, its recent warning against unjustifiable increases indicates that it will act where prices increase beyond justifiable cost-increase levels. Accordingly, the SACC is considering items that indicate unusual increases, even when taking into consideration the prevailing inflationary environment.

To this effect, Hodge emphasised that the SACC makes use of its ‘monitoring unit’ which tracks price increases by comparing increases in wholesale prices to increases in retail prices.

The work of the monitoring unit is particularly timely in light of its recent Report on Essential Food Pricing Monitoring, which was released on 1 March 2022. The Report clearly communicated the SACC’s intention to start tracking price increases and monitoring dynamics prevalent in the South African food value chain, which made it apparent that the SACC is cognizant of the impact of the significant disruptions and events which have characterized the pandemic years. The SACC has identified this impact to reflect particularly through supply chain disruptions, trade restrictions, border closures and the like.  

Should the SACC suspect that retail price increases have surpassed wholesale price increases, complaints may be initiated by the SACC in terms of Section 49B of the Competition Act 89 of 1998. Thereafter, the complaint will be investigated in terms of Section 49B(3) of the Act to determine whether it will be referred to the Competition Tribunal for adjudication.   

And you thought attorneys were above the (antitrust) law…?

Namibian Competition Watchdog Probes Alleged Collusion Between Law Firm and Bank

Namibia’s Competition Commission (the “NaCC”) has begun a Section 33 investigation into the alleged exclusive-dealing arrangement in relation to property conveyancing between Bank Windhoek and the domestic law firm of Dr Weder, Kauta and Hoveka, which has offices in 4 cities and touts itself as being “widely respected and recognised for its professionalism and excellence in service provision.”

The purported deal requires those applying for a loan from Bank Windhoek to use the law firm’s conveyancing services, thereby allegedly excluding other attorneys, according to the NaCC’s formal statement announcing the investigation, which resulted from an apparent private complaint brought to the NaCC: “The agreement and its maintained exclusivity is said to limit competition and forecloses other independent service providers in the relevant market, which is provisionally defined as the provision of conveyancing services to Bank Windhoek-financed property transactions,” in violation of section 23 of the Namibian Competition Act. It is reported that the law firm has denied knowledge of the existence of any such agreement with the banking institution and has sought a copy of the document.

South African Competition Tribunal Hands Down Another Price-Gouging Case: Face Masks Supplier Fined Maximum Penalty

By Michael-James Currie and Nicola Taljaard

[Currie is a director at Primerio and Taljaard is a lawyer at Primerio]

On 28 April 2022, the South African Competition Tribunal (“Tribunal”) handed down a decision in which it found Tsutsumani Business Enterprises (“Tsutsumani”) had contravened the excessive pricing prohibition contained in section 8(1)(a) of the Competition Act (“Act”). The conduct relates to the supply of face masks by Tsutsumani to the South African Police Services (“SAPS”) during the early stages of the Covid-19 pandemic.

The case against Tsutsumani is the first time that the Commission has successfully prosecuted a company for price gouging in the context of a public procurement process. The Commission did, however, successfully prosecute two companies for supplying masks at excessive prices at a retail level. In 2020, the Tribunal, in Competition Commission v Babelegi Workwear and Industrial Supplies CC (“Babelegi) and Competition Commission of South Africa v Dis-Chem Pharmacies Limited (Dis-Chem) the Tribunal found the respondents guilty of excessive pricing. In the latter case, the Tribunal warned that ‘material price increases of essential items such as surgical masks, even in the short run, in a health disaster such as the Covid-19 outbreak, warrants its intervention.’ This warning has certainly proved to be a serious one in light of the Tsutsumani case.

Tsutsumani is a general trader who participated in a tender for the urgent supply of face masks to South African Police Services (“SAPS”) during the first hard lock-down in South Africa. The complaint, lodged by SAPS to the Commission on 5 May 2020, alleged that Tsutsumani had engaged in price gouging following a major and unprecedented surge in the demand for face masks.

The Tribunal recognized the precarious position SAPS found themselves in as it required nine million masks per month during the relevant period and found that Tsutsumani acted exploitatively towards the SAPS by quoting the State entity R16.25 million for a 500 000 bulk mask supply order during April 2020. The determination that this price was excessive was made following evidence being led showing that Tsutsumani added a mark-up of 87%, giving them a 46% gross margin per mask. The monetary reward amounted to approximately R5.3 million in excessive profits alone. In accordance with the fines prescribed by legislation, the Tribunal fined Tsutsumani the maximum administrative penalty of 10% of its relevant turnover, amounting to a total of R3 441 689.10.

Assessing the South African price gouging cases purely from a competition law point of view, the Tribunal’s price gouging cases do raise several concerns regarding the extent to which excessive pricing – or abuse of dominance cases more generally – may be prosecuted in future. Most notably, the earlier price gouging cases found a firm which had only a 5% market share to be dominant on the basis that the firm possessed “market power”, albeit for a very short period, as a result of the Covid 19 pandemic. Basic economic principles tell us that price is typically influenced by the demand-supply relationship. Assessing “market power” with reference to a very short time frame notionally means, therefore, that any factors which give rise to a demand surge or supply shortage, may confer “market power” on a firm who may be subject to scrutiny if they increase their prices subject to such demand/supply pressures. Such a short term approach to assessing market power also naturally excludes any assessment to consider likely market entry or incentives to increase supply to respond to the demand surge.

Although the Tribunal and the Competition Appeal Court sought to emphasise the unique market dynamics due to the pandemic, the economic and legal principles set out in these decisions could be expanded to other cases beyond circumstances as significant as a global pandemic. It would be preferable if there were clear rules published as to when firms (even small firms) are at risk by raising prices during a state of national disaster (such as those which were in fact published in South Africa but only after the alleged conduct subject to the price gouging cases took place). While one might have some sympathy for the competition authorities wanting to protect consumers during the pandemic, by departing from traditional approaches to assessing excessive pricing cases so as to address price gouging concerns risks potentially undermining certainty and makes it difficult for firms to internally assess their conduct against the relevant benchmarks. The enforcement and application of competition law, like all laws, should always strive to advance legal certainty. This is why deviating from a body of international precedent and best practice should not be easily departed from. If it was clear that price gouging cases such as those prosecuted to date were only applicable during states of National Disaster that would go a long way to providing such certainty. But there is no basis why complainants are not able to apply the principles set out in the price gouging cases to all sorts of market dynamics which may ordinarily lead to significant price increases. We have already noted the Commission’s public warning to domestic airliners not to increase prices when a certain airliner carrier had its licence temporarily suspended for a few days. A case entirely unrelated to the pandemic.

So, with a lower standard against which to prosecute excessive pricing cases and the introduction of a reverse onus on the respondent to demonstrate that its prices are not excessive (in particular instances), coupled with a potentially much lower threshold against which to find a firm is “dominant” than traditionally the case, we expect to see more excessive pricing complaints being pursued.


Gun-jumping in Morocco, Switzerland-style

In a relatively rare northwestern excursion on the continent, we are reporting today that the Moroccan competition authority (the Competition Council, or “CC”) based in Fez, which has operated only since late 2018, issued its first-ever gun-jumping fine to Swiss construction/chemicals firm Sika Aktiengesellschaft. Sika will have to pay (unless it exercises its right to a judicial appeal of this inaugural MCC decision, which it appears the company has waived and agreed to pay the) approx. $1m in fines, per the recent Article 19 fining decision made on April 28, 2022.

The underlying conduct consisted of Sika’s May 2019 acquisition of 100% of the capital and voting rights of its French competitor, Financière Dry Mix Solutions SAS, with business activities in and economic ties to Morocco, via its “Sodap” in-country subsidiary. Sika – the largest construction chemicals firm worldwide, according to its own marketing materials – likewise conducts business in Morocco, in addition to 100 other countries globally.

According to the MCC, the parties purportedly failed to notify the transaction pursuant to the mandatory provisions in Arts. 12-14 of the Moroccan competition act (Loi no. 104-12 of 2014) and thus caused the MCC to open its first gun-jumping investigation, leading to this — not insignificant — fine that has now been issued by the Council. The original liability finding was made previously, in MCC decision n°134/D/2021 (dated 6th December 2021).

Under the domestic merger-control regime, a notifiable transactions exists when:

  1. two or more previously independent undertakings merge;
  2. one or more persons, already controlling at least one undertaking, acquire, directly or indirectly, whether by purchase of securities or assets, by contract or by any other means, control of the whole or parts of one or more undertakings; and
  3. one or more undertakings acquire, directly or indirectly, whether by purchase of securities or assets, by contract or by any other means, control of the whole or parts of one or more other undertakings.

To avoid similar mishaps from happening in the future, the MCC — in collaboration with the General Confederation of Moroccan Enterprises (CGEM) — held a conference and issued a legal compliance guide for businesses active in Morocco in January 2022. The MCC’s president, Ahmed Rahhou, expressed his hope that the Guidebook would “allow companies to avoid being in breach of the law and to know their rights and duties especially in terms of competition law.”

COMESA antitrust workshop addresses AfCFTA

The COMESA Competition Commission (CCC), under the leadership of its CEO and Director Dr. Mwemba, organised its first “Emerging Trends in Competition and Consumer Law Enforcement in the Wake of Regional and Continental Integration” workshop in Zambia, targeting legal practitioners across and outside Africa. Its objective is to discuss various issues in competition and consumer protection law enforcement at national, regional and continental level including emerging issues such as the African Continental Free Trade Area (AfCFTA).

Michael Currie, a competition partner at Primerio, said of the event, “Great to be participating at the COMESA Competition Commission’s first Workshop dedicated specifically to legal practitioners, hosted here in Livingstone. It was informative, and simply good to be travelling, meeting old friends and colleagues and seeing world heritage sights all in a few days work. This is an important initiative by the CCC as it expands its advocacy and enforcement initiatives across the Common Market. Important topics on the agenda including updates on the CCC’s approach to penalties, settlement procedures and investigations as well as the more robust merger regime in place. Thank you Willard Mwemba for the invitation and congrats on a well-organised event!”

South African Competition Commission Prosecutes Facebook for Abuse of Dominance

By: Gina Lodolo

On 14 March 2022, the South African Competition Commission (“Commission”) referred a complaint against Meta Platforms Inc is the parent company of WhatsApp Inc (“WhatsApp”) and Facebook South Africa (hereafter jointly “Meta”), to the Competition Tribunal (“Tribunal”) for allegedly engaging in abuse of dominance.

The referral follows WhatsApp (as part of the  Meta group) attempting to off-board GovChat from the WhatsApp platform. GovChat is a chatbot service connecting government to millions of citizens on issues of public concern (e.g. information on COVID-19 vaccinations and social grants). GovChat is reliant on the WhatsApp platform to function and connect users, without which its entire existence will be prejudiced.

GovChat utilizes WhatsApp for their services due to WhatsApp’s scale and consumer reach, however, Meta has attempted to off-board GovChat by placing reliance on WhatsApp’s terms and conditions to enforce a restriction against monetisation of confidential information through the use of consumer data obtained on the platform.

In this regard, the Commissions media release notes that “Facebook has imposed and/or selectively enforced exclusionary terms and conditions regulating access to the WhatsApp Business API, mainly restrictions on the use of data”.

The selective enforcement by Meta and attempts to off-board GovChat from the WhatsApp platform, according to the Commission, potentially violates Section 8(d)(ii) of the Competition Act 89 of 1998 (as amended) (“Act”) which prohibits a dominant firm from abusing its dominance by “refusing to supply scarce goods or services to a competitor or customer when supplying those goods or services is economically feasible”. In the alternative, the Commission alleges that Meta has engaged in an exclusionary act or refused to give a competitor access to an essential facility when it is economically feasible to do so (under section 8(1)(b) or 8(1)(c) of the Act).

The Commission has requested the Tribunal to:

  1. Impose the maximum penalty permitted under the Act, being 10% of Meta’s turnover;
  2. Interdict Meta from off-boarding GovChat; and
  3. Declare void exclusionary terms and conditions that are selectively applied in a manner that prevents potential competition by restricting access to the WhatsApp platform for potential competitors.

In its media release, the Commission stated that “access to digital markets is dependent on access to digital platforms including as in this case, access to an important digital communication platform”.

Primerio Director, Michael-James Currie notes that this complaint referral follows an interim relief application whcih GovChat successfully obtained against Facebook and WhatsApp in the beginning of 2021 in terms of which WhatsApp was prohibited from off-boarding GovChat.

This case, says Currie also coincides with a very proactive drive by the Competition Commission to consider competitive effects in digital markets in South Africa.

The case also suggests that the Competition Commission considers the existing rules regarding abuse of dominance as being adequate to address competition concerns in the market.

For more background information click here

To access the Competition Commission media release, click here

SOUTH AFRICAN COMPETITION COMMISSION TO LITIGATE AGAINST THE EXCESSIVE PRICING OF BREAST CANCER TREATMENT DRUGS

By Joshua Eveleigh

On 08 February 2022, the Competition Commission (“Commission”) released a press statement indicating that it had referred a matter to the Competition Tribunal (“Tribunal”) for the prosecution of Roche Holding AG (“Roche AG”), and its subsidiaries, Roche Bassel and Roche South Africa.

The nature of the Commission’s referral is premised on allegations that Roche AG and its subsidiaries had imposed excessive prices for Trastuzumab, a breast cancer treatment drug, in contravention of section 8(1)(a) of the Competition Act 89 of 1998 (“Competition Act”). As a result of the alleged conduct, the Commission has estimated that an excess of 10 000 breast cancer patients were unable to afford Trastuzumab between the period of 2011 and 2019.

In its press statement, the Commission placed particular emphasis on the fact that the alleged conduct bore the greatest impact on poor women who “…cannot access essential treatment because they cannot afford to pay for it. This is so even for the minority of women who belong to medical schemes.”

Notably, the recent Constitutional Court decision in Competition Commission v Mediclinic (“Mediclinic”) has had a seemingly profound impact on the Commission’s approach towards the present matter. In Mediclinic, the Constitutional Court emphasised the importance of the Constitution when interpreting and adjudicating competition law – specifically in regard to section 27, the right to have access to health care services. In its judgment, the Constitutional Court referred to both the Tribunal and the Competition Appeal Court (“CAC”) as state institutions that have the obligation to facilitate the Bill of Rights and to promote the right of access to health services. As a result of the Mediclinic judgment, the Commission has stated that the alleged conduct results in the prevention of access to health services, in contravention of section 27(1)(a) of the Constitution.

Due to the egregious nature of the alleged conduct, the Commission states that it is seeking that the maximum penalty be imposed against Rosche AG and its subsidiaries. In this regard, section 59(2) of the Competition Act provides that the maximum administrative penalty that may be imposed “may not exceed 10 per cent of the firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year.”

The Commission’s referral to the Tribunal and the grounds on which it relies, emphasises the overarching significance of the Mediclinic judgment in that an alleged conduct’s impact on the Bill of Rights, and public policy considerations as a result, is now preeminent consideration to be had respect of all aspects of competition law.

Primerio International partner, Michael-James Currie says the South African Competition Commission has been one of the most active agencies globally insofar as prosecuting excessive pricing cases is concerned, but and have had limited success to date. Subsequent to the amendments to the Competition Act in 2018, there has not been a case that has been fully litigated before the adjudicative bodies.

It will be interesting to see how this case progresses and the extent to which non-traditional competition factors are ultimately taken into account in interpreting the scope and application of the excessive pricing provisions contained in the Competition Act.

South Africa: Motor vehicle finance institutions referred to the Competition Tribunal for alleged collusion

By Gina Lodolo

On 3 February 2022, the South African Competition Commission (“SACC”), released a press statement confirming that the SACC has made a referral to the Competition Tribunal (“Tribunal”) to prosecute FirstRand Bank Limited (“First Rand”), Wesbank, and Toyota Financial Services South Africa Limited (“TFS”) (jointly “Motor Vehicle Finance Institutions”) for allegations of a violation of Section 4(1)(b)(ii) of the Competition Act 89 of 1998, as amended (“Act”).

In this regard, Section 4(1)(b)(ii) of the Act provides that :

an agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if-(b) it involves any of the following restrictive horizontal practices: (ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services”

Generally, once the SACC has initiated a complaint and found that a prohibited practice has  been established, it must refer the complaint to the  Competition Tribunal. Wesbank (as a division of FirstRand) and TFS allegedly prevented competition by entering into a shareholders agreement containing non-compete clauses. The SACC press statement provides that the Motor Vehicle Finance Institutions allocated markets because they are ‘suppose to compete’, which means that they are firms in a horizontal relationship.  In particular, the shareholders agreement included clauses ‘that prohibit[ed] WesBank from offering vehicle finance to customers seeking to purchase vehicles at authorised Toyota dealerships’. Further, Wesbank was also prohibited from financing specific vehicles, being ‘the “new” TOYOTA, LEXUS and HINO vehicles and any “used” vehicles sold through any authorised Toyota dealership, except McCarthy Group’.

Should the Competition Tribunal indeed find that the Motor Vehicle Finance Institutions violated the Act, Section 59 of the Act provides that the Competition Tribunal can impose an administrative penalty of up to 10% of the firm’s annual turnover for engaging in a prohibited practice. Further, if the same firms are found to repeat the conduct, an administrative penalty for a repeat offence can be up to 25% of the firm’s annual turnover.  

Primerio Director Michael-James Currie notes that cartel conduct in South Africa constitutes a criminal offence and respondents found liable are also potentially at risk of follow-on civil damages.

To view the full press statement click here