Telecom adversaries to remain “principled” in their competing bids for 4G spectrum

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The telecoms are at it again, and MTN and Vodacom find themselves close together once more.  Last October, we reported on their being jointly targeted by competitor Cell C for predatory “on-net” pricing.  Today, the two top market players are both eyeing additional spectrum for high-speed LTE/4G wireless service — an asset that can potentially be obtained much more swiftly by acquiring an existing firm owning such spectrum, rather than ex ante licensing or bidding at public auction for frequency band… At the moment, Vodacom is attempting a 100% share acquisition of smaller rival Neotel — a deal that might include valuable frequency.

In a South African Tech Central report, MTN’s group CEO is quoted as saying that he would refrain from “automatically” challenging any such acquisition by his main rival:

Asked if MTN would object to a deal between Vodacom and Neotel at the Competition Commission, MTN Group CEO Sifiso Dabengwa said that the operator would not automatically do so. “The issue here is you can’t take a position because of where you are [in the market],” he said. “It has to be principled, no matter which side you’re on.”

It does not take a clairvoyant to see what is behind MTN’s self-imposed restraint: equal hunger for additional spectrum – and acquisitions – which it does not want to stifle by raising rash arguments of anti-competitive effects of the Vodacom/Neotel deal…

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SA Commission appoints mergers head; claims roster of “core” positions now filled

New head of mergers fills final “core” position according to Bonakele; replaces Ramburuth-appointed predecessor

Source: LinkedIn

New head of mergers at SA Competition Commission (Source: LinkedIn)

Following the by now fairly predictable fault lines of the Ramburuth-vs.-[others] staffing game at the Competition Commission, the agency’s crucial Mergers & Acquisitions division now also has a new head.  As of March 1, Hardin Ratshisusu is filling the post of Divisional Manager, after his predecessor Ibrahim Bah‘s departure in December last year created a three-month hiatus.

Bah, having worked at the Irish antitrust regulator for a while*, had been with the South African authority on-and-off since 2008, but had been Divisional Manager only for less than a year, holding the post since January 2013.  His successor Ratshisusu is likewise a former M&A veteran of the agency, having begun his career at the Commission as early as 2004 and with the division since December 2007 as a Senior Merger Analyst.  He also has recent private-practice experience outside government, which we view as a welcome feature on his C.V., in addition to his historical M&A expertise.

Mr. Ratshisusu’s self-description on his LinkedIn profile (with 22 endorsements from others as to M&A) is as follows:

“In the formative years, I started off as an enumerator for SA’s 2001 Census and then a research assistant at the University of Venda, whilst doing my post-graduate studies. I have since worked in the regulatory environment having held various positions at the Competition Commission of South Africa including being Senior Merger Analyst, Acting Divisional Manager of the Mergers and Acquisitions Division and Technical Consultant/Adviser to the Deputy Commissioner. I also had a stint in the economic regulatory division of Neotel (Pty) Ltd. This has given me exposure to a number of industries, including, construction, telecommunications, broadcasting, mining, chemicals, retailing and property. I now have expertise, garnered at both operation and strategic levels, in competition and regulatory economics, strategy, and governance.”

Mr. Ratshisusu’s appointment comes at a time of staffing difficulties at the authority, including most recently the departure of a senior Deputy Commissioner.   In its official release, the Commission’s Acting Commissioner Tembinkosi Bonakele is quoted as emphasizing the agency’s focus on getting past its recent personnel woes:

“I am pleased that we have now completed the task of filling all vacancies for the heads of the Commission’s core divisions. This will allow us to focus on fulfilling our strategic priorities”

We take it that any remaining open seats on the Commission’s org chart are, by logical inference, to be deemed “non-core” to the functioning of the agency.

The Acting Commissioner: Focusing on

The Acting Commissioner: Focusing on “strategic priorities”, such as the healthcare inquiry and other enforcement

* Mr. Bah co-authored an amusingly-titled mergers paper while at the Irish Competition Authority: “The Curious Tale of Pigs, Papers and Peru: Media Mergers in Ireland“.  It should not come as a surprise that AfricanAntitrust.com’s editors have a faible for anything that contains alliterations…

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Antitrust & Innovation series, part II: “Innovation: in the eye of the beholder?”

Two weeks ago, assistant Professor of Law (Tilburg Univ.) Sofia Ranchordas gave us a first glimpse into Innovation & Antitrust – a hot topic especially in the developing BRICS economies – in the opening salvo of her ongoing series of posts on the issue.

By: Sofia Ranchordás (Tilburg Univ. Law School)

new multi-part series

A multi-part series on Innovation & Antitrust

‘Innovation’: is it in the eye of the beholder?

In my first short working paper (‘Innovation, competition and IP in developing countries: convergence or customization?’) I questioned whether the globalization of competition and IP laws was pushing developing countries in the sense of convergence, and whether this tendency was beneficial for these countries’ quest for innovation. I also posed five guiding questions and invited the reader to think about the trichotomy ‘innovation/IP/competition laws’ in the context of developing countries. This second post addresses the first question and the point of departure of this analysis:

What is innovation?

A mere definition of ‘innovation’ does not provide a satisfactory answer to this question. Therefore, I will also discuss a number of topics and try to provoke further discussion on (i) the concept of innovation, (ii) the context-specificity of the concept; (iii) and some key drivers of innovation in developing countries.

Let’s ‘begin at the beginning’ and ‘go till we come to the end:[1] the ‘innovation’ that should be stimulated or safeguarded by competition or IP laws (or both) in African countries.

(i) Innovation: what’s in a name?

In the legal literature, ‘innovation’ is often imprecisely associated with the development of ‘something significantly new’: [2] what ‘does something new’ mean? New to whom? How new is new enough? ‘Innovation’ should be distinguished from ‘invention’: the conception of a new idea, a discovery or a unique finding. [3] A genius idea or a cutting-edge invention cannot be automatically qualified as ‘innovations’ before they are introduced in the marketplace. In simple terms, innovation is the ‘process of putting ideas into useful form and bringing them to the market’.[4] The innovator is the one that successfully manages to successfully concretize an idea, commercialize it, or in the case of social innovation, externalize it to society. The innovative ideas included in the concept of ‘innovation’ refer to new products, processes, services and public policies, which may have either a commercial goal or simply an altruistic aim to solve social problems. The core element of the concept of ‘innovation’ I would like to point out is therefore (a) the successful externalization and concretization of ideas. However,  an innovation must also be the (b) first concretization of these ideas.

(ii) Innovation: a context-specific concept?

How can we measure the newness element of innovation? Must this be the first externalization ever of a new idea translated into the commercialization of a new product? From an IP rationale, the answer would be yes: the first ever. However, we should ask ourselves whether this makes sense in Africa. Is the concept of ‘innovation’ context-specific? Is it in the ‘eye of the beholder’? Can we really expect poor countries to develop cutting-edge technology while their R&D spending is limited? We surely want to stimulate and safeguard the same type of innovation present in developed countries, but from a policy point of view, is this realistic?

 Innovation as a relative concept?  According to Srinivas/Schutz, innovation is contextual/sector-specific, i.e., innovation depends on the socioeconomic conditions it is embedded in and should therefore ‘meet the needs of the most people, especially in countries where innovation and poverty reside side by side’.[5] If we reflect upon this topic from the perspective of the stimulation and diffusion of the ‘innovation spirit’ and good innovation policies to African countries, we might want to adopt a less strict concept of innovation and content ourselves with a relative concept of innovation for these developing countries.

Inspired in the literature on policy diffusion, we might perhaps want to perceive innovation here as something that ‘it is new to the states adopting it, no matter how old the program may be or how many other states have adopted it’.[6] The facilitation of innovation in a different context might still pose important challenges to a developing country even if it has been implemented elsewhere. According to this perspective, the ‘newness’ of the innovation in question is not assessed in absolute terms but related to the experience and knowledge of the jurisdiction in question. This may mean that African innovators are allowed to stand in the shoulders of other innovators, ‘imitate them’ (?) and concretize their ideas within a circumscribed territory. This is perhaps easily applicable to innovative programs or policies, but should African countries not be stimulated to develop innovative products with their own resources and adapted to their local characteristics, even if they are similar to existing products in developed countries? (Potential IP concerns shall be discussed a few weeks in one of my next posts) While this less ambitious perspective of innovation takes into account the socioeconomic conditions of developing countries, it almost goes against the globalization trend that is fighting for convergences of laws and policies. In addition, a relative concept of innovation opens the door to free-riding and may not give incentives to the development of truly innovative products and processes.

Leaving IP and other legal concerns aside for now, I would like to introduce briefly some of the relevant incentives or favorable conditions to the emergence of innovation.

(iii) The drivers of innovation

Ashford/Hall argue that innovation is determined by three decisive factors that should be present at the firm and governmental levels: (a) willingness to innovate; (b) opportunity/motivation to do so; and (c) capacity to innovate.[7] I would like to mention an additional external driver: competition.

(a) Willingness to innovate refers to how firms and individuals perceive changes in production, understand technological or social problems, develop and assess alternative solutions for it. While this ambition may easily be found in developed countries, underdevelopment, limited capacity of higher education, and profound scarcity may affect this willingness to innovate.

(b) Opportunity and (c) capacity to innovation are influenced by external factors, including the regulatory conditions faced by firms. Ashford has claimed that regulation, by taking these elements into account, can create ‘an atmosphere conducive to innovation’.[8] Innovators in African countries face however here significant hurdles. Although governments are aware of the need to enhance their R&D spending, they still have not been able to find the adequate mix of regulatory instruments that can create a sound regulatory environment for innovation.[9]

(d) Competition: in simplistic terms, it is often argued that competition drives innovators because companies feel, on the one hand, the pressure to be more cost-efficient notably through the development of innovative production processes; on the other, to stand out of the crowd of competitors, differentiating their products from the existing ones and offering consumers innovative and better products. Innovative companies are those that leave their comfort zone and strive for better products and processes. However, leaving your comfort zone implies taking risks that developing countries might not be willing to embrace. Although ‘necessity is the mother of invention’, innovators in African countries might need a helping hand from their governments to solve the ‘innovation chasm’ that often characterizes them.[10] This ‘innovation chasm’ is currently affecting these last three drivers of innovation. Can law—particularly Antitrust & Competition laws—play a role here? Can laws provide wings to African innovators to fly in the direction of innovation? Or will innovators feel prisoned and palsied by these giant wings?[11]

This discussion will continue in the next post of this series: in the meantime, keep reading, discussing and searching for innovation…


[1] Adapted quote from Lewis Carroll, Alice’s Adventures in Wonderland (1865)

[2] Stefan Müller, ‘Innovationsrecht—Konturen einer Rechtsmaterie’ (2013) 2 Innovations- und Technikrecht 58, 60.

[3] Joseph Schumpeter, Capitalism, Socialism and Democracy (first published in 1939, Harper, 1942) Luke A. Stewart, ‘The Impact of Regulation on Innovation in the United States: A Cross-Industry Literature Review’, Information Technology & Innovation Foundation, 2010, paper commissioned by the Institute of Medicine Committee on Patient Safety and Health IT, available at www.iom.edu, 1.

[4] Eugene Fitzgerald; Andreas Wankerl; Carl J. Schramm, Inside Real Innovation: How the Right Approach Can Move Ideas from R&D to Market and Get The Economy Moving (Kauffman Foundation, World Scientific Publishing 2011) 2.

[5] Smita Srinivas, Judith Schutz, ‘Developing Countries and Innovation: Searching for a New Analytical Approach’ (2008) 30 Technology in Society 129.

[6] Jack L. Walker, ‘The Diffusion of Innovations among the American States’ (1969) 63(3) The American Political Science Review 880, 881.

[7] Nicholas A. Ashford; Ralph P. Hall, ‘The Importance of Regulation-Induced Innovation for Sustainable Development’ (2011) 3 Sustainability 270, 279.

[8] Nicholas A. Ashford; Christine Ayers; Robert F. Stone, ‘Using Regulation to Change the Market For Innovation’ (1985) 9 Harvard Environmental Law Review419, 422.

[9] See, for exemple, the Report by the SA Department of Science and Technology, ‘A knowledge-based economy. A ten-year plan for South Africa (2008-2018)’ available at http://www.esastap.org.za/download/sa_ten_year_innovation_plan.pdf

[10] Department of Science and Technology, ‘A knowledge-based economy. A ten-year plan for South Africa (2008-2018)’ available at http://www.esastap.org.za/download/sa_ten_year_innovation_plan.pdf

[11] Inspired in the English translation of ‘L’ albatros’ by Charles Baudelaire (Les Fleurs du Mal), by Jacques Le Jacques LeClercq, Flowers of Evil  (Mt Vernon, NY: Peter Pauper Press, 1958). The original verse is ‘Le Poète est semblable au prince de nuées (…) ses ailes de géant l´empêchent de marcher’.

South Africa Healthcare panel- a swing to the left?

While it certainly appears that the newly appointed panel to the first ever market inquiry into the South African private healthcare sector consists of a number of members who have a strong medical background, there is a concern, however, that this is significantly skewed in favour of those who have more of a public healthcare background.

This brings into question the degree to which the inquiry will be focused more on the question of accessibility of healthcare to all citizens (An aspect for which South African government has the main responsibility) on the one hand, and the perceived inefficiencies within the private healthcare sector where members/patients pay a premium for access to the latter.

The only economist on the panel is, interestingly, not from South Africa which may bring to question his ability to effectively understand the South African private healthcare sector, how it has evolved in the last two decades, particularly given the changes observed in regulations governing the different levels of the value chain.

A clear concern will be how well the panel will appreciate any commercial arguments, which would undoubtedly be brought forward by the industry, particularly providers.  At the end of the day these are private entities which rely on investors who seek certain levels of return, often irrespective of where those returns come from.

The Competition Commission should  be able to provide some assistance, however, given the level of attrition experienced at the Commission in the last 18 months the quality of those resources remains an issue.

A second aspect is the apparent exclusion of an assessment of the public sector.  Since government is ultimately tasked with providing healthcare services to the vast majority of unemployed in South Africa, these would be the very same majority which could never afford private healthcare today.  Ignoring the public sector is tantamount to ignoring the real issue.

The panel comprises of former Chief Justice Sandile Ngcobo, Professor Sharon Fonn, Dr Ntuthuko Bhengu, Dr Lungiswa Nkonki and Cornelis van Gent.  A brief overview of panel members is as follows:

  • Former Chief Justice Sandile Ngcobo served as the Chief Justice of the Constitutional Court from 2009 to 2011.
  • Professor Sharon Fonn is a medical doctor and registered public health specialist and she is currently the acting dean of the Faculty of Health Sciences at the University of the Witwatersrand.
  • Dr Nthuthuko Bhengu holds an MBChB and his most recent executive appointments have been with Metropolitan Health, Clinix Health Group and Biotech Laboratories.
  • Dr. Lungiswa Nkonki holds a PhD in health economics and is currently a senior lecturer at the University of Stellenbosch.
  • Cornelis van Gent is an economist with experience in competition economics, economic regulation and competition in healthcare markets.

The end of the zero-threshold contagion?

COMESA Competition Commission logo

COMESA Competition Commission‘s head of mergers foreshadows end of zero-threshold regime

Will the Commission soon find a cure to the contagion that has made the agency’s merger control the subject of heavy criticism by antitrust practitioners and and even ridicule by fellow enforcers? Willard Mwemba claims the agency has – after over a year of operating under the zero-threshold rule – “set the wheels in motion for the threshold to be raised.”  The Commission is reportedly working with the World Bank’s International Finance Corporation to determine what the proper notification thresholds should be.

We previously had this to say in November of last year:

[T]he dual dilemma of the “zero-threshold contagion” and the inordinately high filing fees currently affecting the CCC’s merger-control regime (and resulting in rather low merger-notification statistics of less than one per month) will continue to hamper the young agency and its customers for the foreseeable near-term future.

Depending on how swiftly the agency and its advisors at the IFC get things done – and the amendments actually get approved – it appears that our timing forecast was fairly accurate  (“COMESA merger rules to change in April 2014 at the earliest“).

S. African antitrust watchdog described as “toxic” by insider

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Trade union NEHAWU’s influence over agency staff cited as reason for departure

According to an excellent piece in the ZA Financial Mail – written by Andile Makholwa* and entitled “Competition Commission Bleeds Staff” – departing Acting Deputy Commissioner Trudi Makhaya has explained in detail her recent decision to leave the antitrust authority, describing a “toxic” work environment there since at least October 2013.  On the staffing front, Acting Commissioner Bonakele is quoted as regretting her departure, saying that “one of his priorities is to repair the fractured relations with senior managers and contain the staff exodus.” In the article, Makhaya is cited as bemoaning the increasing influence of NEHAWU (a powerful trade union) over the agency and its staff.

Ms. Makhaya (photo credit: Financial Mail)

While Ms. Makhaya has had her fair share of agit-prop P.R. published under her name (see, eg., her piece published this piece in the Daily Maverick, entitledThe temptations of neo-volkskapitalisme), her insider revelations of NEHAWU’s unduly high influence over the Commission are particularly interesting.

Many ZA commentators have lamented the increasingly pervasive sway that trade unions have in merger-control talks with the enforcer.  This is especially important in light of South Africa’s merger-control regime having express “public interest criteria” embedded in its legislation.

Two ZA antitrust lessons

  1. The legislation’s social agenda element, combined with the now confirmed unions’ influence over agency staff, may have resulted (and will likely result in the future, if unchecked) in extensive so-called “public-interest” conditions imposed on otherwise unproblematic transactions that pose no pure antitrust issues.
  2. The ZA Competition Commission has received extensive bad press of late.  Now, even insiders speak out about the (personnel, rather than structural) problems that have befallen the agency.  Specialist publications (such as Global Competition Review, which publishes a dedicated review and ranking of government antitrust enforcement agencies, in which the Commission used to fare rather well), as well as practitioners and the courts, may perceive these developments as significant steps backward for an institution that once was lauded as a shining example of developing competition-law authorities.  Even Acting Commissioner Bonakele admits that the authority is “in a rebuilding phase. All I can say is that the commission is losing a key staff member. It’s a setback. When you’re rebuilding an institution you need all hands on deck,” and the minister in chage (Patel) believes the Commission too independent.

 

* The author also wrote an interesting piece on the Competition Commission‘s sectoral health-care inquiry (we reported here and elsewhere) in last week’s FM.

Official closure schedule of COMESA – unique time table

COMESA Competition Commission logo

Note to practitioners: filings due on these unique closure dates, set by the COMESA Competition Commission‘s registrar’s office for 2014, will be due on the subsequent working day:

1. 1st January 2014- New Years’s Day
2. 15th January 2014- John Chilembwe day
3. 3rd March 2014- Martyrs Day
4. 18th April 2014- Good Friday
5. 21st April 2014- Easter Monday
6. 1st May 2014- Labour Day
7. 14th May 2014- Kamuzu Day
8. 20th May, 2014- General Elections
9. 7th July 2014- Independence Day
10. 15th October 2014- Mothers Day
11. 25th December 2014- Christmas

COMESA merger stats: January ’14 outperforms first 6 months of 2013

COMESA Competition Commission logo
Three merger notifications in one month set new record for COMESA Competition Commission.

After commenting on the rather lackluster statistics of the first 11 months A.D. 2013, we observed that some deal-making parties might be “flying under the radar” and asked the question:

Combine Point 4 above (low filing statistics) with the zero-threshold and low nexus requirements that trigger a COMESA merger notification, and the following question inevitably comes to mind: With such low thresholds, and the certain existence of commercial deal activity going on in the COMESA zone, why are there so few notifications?

Well, the young agency’s stats have picked up some steam in 2014, it would seem: based on a review of its online document repository, the CC has received a whopping three notifications in January alone.  They are, in chronological order:

  1. Mail & courier services: FedEx / SupaSwift – a transaction involving the acquisition of a South African courier with operations in multiple COMESA member states, Botswana, Malawi, Mozambique, Namibia, Swaziland and Zambia.
  2. Agricultural distribution and financial services: AgriGroupe / AFGRI Ltd. – Mauritian SPV AgriGroupe seems to be taking AFGRI (listed on the JSE) private.  The target has operations in multiple COMESA countries.
  3. Generic pharmaceuticals: CFR Inversiones SPA / Adcock Ingram Holdings Ltd. – Chilean CFR is buying all of South African off-patent pharmaceuticals manufacturer Adcock’s shares. Notably, the buyer has no COMESA activities; target is active in Kenya, Malawi, Rwanda, Sudan, Swaziland, Uganda and Zimbabwe.
(c) AAT

Merger notification stats for COMESA as of Feb. 2014

Take-aways:

  • Activity has increased dramatically.  Is it a coincidence & a statistically irrelevant blip on the radar screen?  This remains to be seen. The parties are – unlike last year’s – not “repeat parties” and therefore the increase in notifications seems to be natural/organic growth, if you will, rather than a case of the same bear falling into the same honey-trap multiple times…
  • The Competition Commission has listened to its critics (including this blog). Notably, the CC now clearly identifies the affected member-state jurisdictions in the published notice – a commendable practice that it did not follow in all previous instances, and which AAT welcomes.

Post-scriptum: Adding up the total 2013 tally of notifications, the Tractor & Grader Supplies Ltd / Torre Industrial Holdings transaction (notified after our prior statistics post in November 2013) brought the sum-total of COMESA merger filings to 11 for FY2013.

AAT launches multi-part “@innovation & #antitrust” series

Philips changed its company slogan from “We make things better” to “We create better ideas”

new multi-part series

Philips is but one of the companies – albeit a pioneer – that recognizes the crucial forward-looking importance of innovation.  Its CEO, Frans van Houten, has been quoted as saying: “Innovation is our lifeblood and will be the main driver of profitable growth going forward. … I intend to drive innovation with more intensity to help us win new customers.”

The U.S. Department of Commerce published a 2010 report claiming that 75% of U.S. economic growth since the end of World War II is attributable to innovation in technology.

Antitrust law is likewise cognizant of the uniqueness of ideas — the result of innovation — rather than old-fashioned brick-and-mortar “products & services”.  For instance, how do you define the relevant market for a merger of ideas-based companies?  The agencies have come to accept the existence of innovation markets almost two decades ago, in the mid-1990s (based on the original “R&D markets” concept of the 1980s, and driven in no insignificant part by the advent and meteoric rise of biotechnology patents).  The 2010 U.S. Horizontal Merger Guidelines now expressly incorporate the concept of innovating as a relevant metric of competitiveness into their language, notably at section 1 of the HMG: A transaction may have anti-competitive effects if it strengthens a firm’s market power by encouraging market participant(s) “to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.”

We at AAT are now previewing a series of posts on innovation & antitrust to be published during the spring and summer of 2014. They will be hash-tagged #AntitrustInnovation on Twitter.

You can read our first installment of the thematic collection here (last post on innovation, competition and IP in developing countries), written by contributing author and Tilburg University scholar Sofia Ranchordás.

We expect the series to engender active discussions with, and within, our readership, either via comments on this site or on Twitter.

Innovation, competition and IP in developing countries: convergence or customization?

Innovation, competition and IP in developing countries: convergence or customization?

Advance africanantitrust.com publication of working paper

By: Sofia Ranchordás (Tilburg Univ. Law School)

new multi-part series

new multi-part series on Innovation & Antitrust

Innovation: a path to long-term economic growth,[1]hope for economic recovery,[2] and a vital opportunity for economies in developing countries.[3] Innovation is the Holy Grail we would all like drink from. Individuals dedicate their lives to its pursuit, governments invest significant amounts of money in R&D, but despite decades of research on ‘the wealth of nations’, we remain with a poor perception of innovation as a ‘complex and mysterious phenomenon’[4] that should be stimulated, although no one knows very well how.[5]

Government intervention in itself is insufficient and it might rather have costly results, if incorrectly targeted.[6] This is particularly true when it comes to the inevitable relationship between legal conditions and innovation since the lack of an effective legal framework is in the poorest countries the main obstacle to innovation and consequently to economic growth.[7] In this context, during many years, law was simply told to stay away and admire it from a distance to avoid impeding innovation. However, beyond laboratories, laborious inventions and serendipitous discoveries, law can play a greater role than a mere walk-on in the ‘innovation film’. In fact, law can act as a ‘brakeman’ or ‘a driver’ of innovation.[8] Competition and IP law have been competing for the supporting role of ‘drivers of innovation’. Here this ‘innovation film’ does not take place in the EU or in the US, but in developing countries trying to promote domestic innovation while adopting competition laws and being forced to respect IP rights that incentivize innovation in the Western world. In such context, and before the audition starts, five questions must be posed: (i) What is innovation and what type of innovation do governments aim to promote? (ii) Should and can law in general interfere in the regulation of innovation? (iii) How can competition law play a role in the promotion of innovation? (iv) Should competition law not remain in the shadow of Intellectual Property (IP’) laws that are already designed to provide innovators with incentives or should it be the other way around? (v) Last but not the least, in the context of the problematic trichotomy antitrust/IP/innovation, should a customized approach be conceived for developing countries characterized by different socioeconomic conditions or should one plea for convergence?

In this article (and subsequently, expanded paper), I reflect upon the role of law, and particularly competition laws, in the promotion of innovation in developing countries and the problematic relationship between IP, competition laws and innovation. Up until now, (competition) law’s potential to drive innovation has been either closely associated with patent law[9] or analyzed on a mere casuistic basis in the setting of specific antitrust or mergers cases.[10] However, the enforcement of competition laws against unlawful monopolizing conduct plays in general an undeniable role in the promotion of innovation.[11] Competition law promotes innovation by removing barriers to freedom of choice, trade and market access and prevents the formation of monopolies or conditions in the marketplace susceptible of stifling the development of new products. This implies however analyzing the connection between the market structure and the ability to influence undertakings to innovate:[12] while in some cases, a large number of companies on the market may slow down innovation, in others, the lack of competitive pressure may reduce the incentives to innovate (e.g. international market of derived financial products).[13]

Although the debate on the promotion of innovation has been restricted to developed countries, the promotion of innovation is equally vital for developing countries, notably in Africa.[14] These countries are looking up to the EU and US and trying to adopt similar competition laws and policies.[15] What’s more, a number of developing countries have been deriving their antitrust legal frameworks from Western countries, as a result of trade agreements. Globalization appears to push developing countries in the sense of convergence, but is this tendency beneficial for these countries quest for innovation? Absolute convergence of antitrust enforcement might not suit the current economic stage of most developing countries, particularly in Africa. A ‘Western’ design of antitrust laws and policies might not fit the socioeconomic conditions of these countries. This might be particularly problematic when governments are struggling to promote local innovation but face inevitable IP constraints.

Reconciling the difficult relationship between antitrust and patent law can be particularly complex in African countries since patent policy has a significant impact on development. Although one might at first think that developing countries should emphasize patent policy, as they are considerably behind the global technological frontier and are craving domestic innovation, they cannot afford the short-term consumer welfare loss that must be incurred to generate patentee reward.[16] Some African countries like South Africa have been developing a solid IP regulatory framework so as to incentivize innovation,[17] but many lack the technological and financial capacity to invest in R&D. In such cases, access to protected technologies on reasonable terms may be the key to more domestic innovation. What does this mean for the trichotomy innovation-IP-competition? Although developing countries urgently require innovation,[18] should their competition authorities look less up to Western models and rather question whether they should sacrifice consumer welfare by upholding patent exploitation practices?

Instead of pushing developing countries toward convergence of global competition policy, the specific socioeconomic conditions of these countries should be taken into consideration. Thomas Cheng argues, rightly so one might say, that ‘antitrust principles and doctrines need to be tailored to domestic economic circumstances. Markets and economies function differently in developing countries and antitrust laws should reflect these differences.[19] This is a particularly important lesson for African countries as they are prone to imitate the approaches of developed countries without the required customization. Different suggestions have been advanced in the literature, such as the reduction of patent protection in developing countries, allowing even the imitation of foreign technology so that domestic innovators possess a technological basis they can further develop,[20] or the expansion of compulsory licensing beyond certain drugs for developing countries.[21]

This contribution aimed to draw attention to the challenging role of law as the driver (or at least guardian) of innovation in developing countries. Competition and IP laws both wish to share a supporting role in this ‘innovation film’ taking place in developing countries. Should they be granted this part in a context of convergence of laws and policies or should IP remain in the shadow in order to ensure that the innovation film can successfully be produced and released in the theaters? You decide who gets the part at this audition; however, recalling Eleanor Fox’ words ‘antitrust should not be used to protect David from Goliath, but it may be used to empower David against Goliath’.[22]

To be continued…


[1] Richard S. Whitt, ‘Adaptive Policymaking: Evolving and Applying Emergent Solutions for U.S. Communications Policy’ (2009) 61(3) Federal Communications Law Journal 485.

[2] BERR, ‘Regulation and Innovation: evidence and policy implications’, BERR Economics Paper No.4, 2008, iv.

[3] Jean-Eric Aubert, ‘Promoting Innovation in Developing Countries: A Conceptual Framework’ (2004) World Bank Institute, available at http://siteresources.worldbank.org/KFDLP/Resources/0-3097AubertPaper[1].pdf

[4] D. Augey, ‘Les mystères de l’innovation: le regard contemporain de l’économie et de la gestion’ (2013) In J. Mestre, & L. Merland, Droit et Innovation (Aix-en-Provence: Presses Universitaires d’Aix-Marseille) 89, 91.

[5] Joshua D. Sarnoff, ‘Government choices in Innovation Funding (with Reference to Climate Change)’ (2013) 62 Emory Law Journal, 1087.

[6] B. Frischmann, ‘Innovation and Institutions: Rethinking the Economics of U.S. Science and Technology Policy’ (2000) 24 Vermont Law Review, 347.

[7] Robert Cooter, ‘Innovation, Information, and the Poverty of Nations’ (2005) 33 Florida State University Law Review 373.

[8] W. Hoffmann-Riem, ‘Zur Notwendigkeit rechtswissenschaftlicher Innovationsforschung’, in D. Sauer, Christa Lang (Eds.), Paradoxien der Innovation: Perspektiven sozialwissenschaftlicher Innovationsforschung (Campus Verlag 1999). Wolfgang Hoffmann-Riem, ‘Rechtswissenschaftliche Innovationsforschung als Reaktion auf gesellschaftlichen Innovationsbedarf’, überarbeite Fassung eines Vortrages aus Anlass der Überreichung der Universitätsmedaille am 19.12.2000 in Hamburg, available at <http://www2.jura.uni-hamburg.de/ceri/publ/download01.PDF>.

[9] Atari Games Corp. v. Nintendo of Am., Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990). See Christine A. Varney, ‘Promoting Innovation Through Patent and Antitrust Law and Policy’ (2010), Department of Justice, Remarks as Prepared for the Joint Workshop of the U.S. Patent and Trademark Office, the Federal Trade Commission, and the Department of Justice on the Intersection of Patent Policy and Competition Policy: Implications for Promoting Innovation, available at http://www.justice.gov/atr/public/speeches/260101.pdf.

[10] David Bosco, Marie Cartapanis, ‘Droit de la concurrence et innovation’ (2013) in Jacques Mestre, Laure Merland (Eds.), Droit et Innovation (Presses Universitaires d’Aix-Marseille), 69. Pierre Larouche, ‘The European Microsoft Case at the Crossroads of Competition Policy and Innovation’ (2009) 75 (3) Antitrust Law Journal 933. François Lévêque, ‘Innovation, Leveraging and Essential Facilitaties: Interoperability Licensing in the EU Microsoft Case’ (2005) 28 World Competition 71.

[11] Douglas Rosenthal, ‘Do Intellectual Property Laws Promote Competition & Innovation?’ (2006) 7 Sedona Conference Journal 143.

[12] David Bosco, Marie Cartapanis, ‘Droit de la concurrence et innovation’ (2013) in Jacques Mestre, Laure Merland (Eds.), Droit et Innovation (Presses Universitaires d’Aix-Marseille), 69.

[13] COMP/M.6166, NYSE Euronext / Deutsche Börse.

[14] Smita Srinivas, Judith Sutz, ‘Developing countries and innovation: Searching for a new analytical approach’(2008) 30 Technology in Society 129.

[15] Thomas K. Cheng, ‘A Developmental Approach to the Patent-Antitrust Interface’ (2012) 33 Northwestern Journal of International Law and Business 1.

[16] Thomas K. Cheng, ‘A Developmental Approach to the Patent-Antitrust Interface’ (2012) 33 Northwestern Journal of International Law and Business 1, 3.

[17] Alexis Apostolidis, ‘IP Law in South Africa: Key Cases and Issues’ (2009) ASPATORE WL 2029096.

[18] There is a significant body of literature arguing that IP does not necessarily promote innovation. For an overview, see, e.g., B. Frischmann, ‘Innovation and Institutions: Rethinking the Economics of U.S. Science and Technology Policy’ (2000) 24 Vermont Law Review, 347. Julie E. Cohen, ‘Copyright, Creativity, Catalogs: Creativity and Culture in Copyright Theory’ (2007) 40 U.C. Davis L. Review 1151.

[19] Thomas K. Cheng, ‘A Developmental Approach to the Patent-Antitrust Interface’ (2012) 33 Northwestern Journal of International Law and Business 1’, 79.

[20] Thomas K. Cheng, ‘A Developmental Approach to the Patent-Antitrust Interface’ (2012) 33 Northwestern Journal of International Law and Business 1’, 4.

[21] Colleen Chien, ‘ Cheap Drugs at What Price to Innovation: Does the Compulsory Licensing of Pharmaceuticals Hurt Innovation?’ (2003) 18 Berkeley Technology Law Journal 853.

[22] Eleanor M. Fox, ‘ Economic development, Poverty and Antitrust: the Other Path’ (2007) 13 Southwestern Journal of Law and Trade in the Americas 211.