Author: Editor

Editorial staff of AAT

COMESA Competition Commission investigates football broadcasting rights

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COMESA old flag colorThe COMESA Competition Commission (CCC) recently announced that it will be investigating allegations of exclusionary conduct in relation to the Confederate of African Football’s (CAF) decision to extend an exclusive marketing of broadcasting rights and sponsorship agreement with Lagardère Sports in relation CAF tournaments.

It is not yet clear whether the CCC is investigating this matter as an ‘abuse of dominance’ case or rather, in terms of Article 16 of the CCC’s Rules, general restrictive practices.

COMESA Article 16 essentially precludes firms from implementing an agreement in the Common Market which has as its object or effect the distortion or prevention of competition in the Common Market, to the extent that it may restrict trade between member states.

The Registrar of the CCC, Meti Demissie Disasa, is quoted as saying: “The aim of the Commission’s investigation is to ensure that competition in the commercialisation and award of media and marketing rights for African Football tournaments is not undermined as a result of anti-competitive practices from market operators and that football fans can benefit from better and more coverage of the games and affordable viewing options.”

“Any agreement which contravenes Article 16 is automatically void. In light of the fact that the CAF agreement in question here is valuable and moreover only set to expire in 2028, a voiding of the contract by the CCC would likely be contested by the parties,” says competition practitioner Andreas Stargard.

cafsoccerThe CCC, which has to date largely focused on merger control, has certainly made clear strides to moving towards a greater enforcement role, as AAT first reported here. While there is still some ways to go, the current investigation follows the CCC’s announcement that it intends to conduct a market inquiry into the grocery retail sector and has also issued an announcement calling on all firms who may have exclusive agreements being implemented in the Common Market to disclose these agreements to the CCC in an effort to obtain authorisation (i.e., an exemption) from the CCC.  In 2016, Eveready applied to the CCC to have a number of distribution agreements “authorised” by the CCC.

The ECA and the CCC signed a Memorandum of Understanding in August 2016 which envisages increased cooperation between the two agencies including information exchanges.

In relation to the CAF complaint, the CCC received the complaint by the Egyptian Competition Authority (ECA) who is in turn also investigating this matter. This raises an interesting question as to whether or not the CCC has exclusive jurisdiction over this matter which, in terms of the CCC’s Rules, the CCC should have but other COMESA member-state competition authorities have challenged in the past.

UPDATE: the official CCC statement seeking stakeholder input includes the following passage regarding the agreements at issue:

It is alleged that on 12th June 2015, CAF entered into an agreement with Lagardère Sports S.A.S. for the exclusive commercialization of marketing and media rights of main regional football competitions in Africa, including the Africa Cup of Nations, African Nations Championship and African Champions League, for the period 2017 to 2028. CAF and Lagardère Sports S.A.S. are alleged to have previously entered into a similar commercialization agreement for marketing and media rights of CAF tournaments for the period 2009 to 2016. Consecutively and cumulatively, the length of the alleged exclusive agreement is twenty years. It should be noted that the commencement of investigations neither presupposes that the conduct being investigated is anti-competitive nor that any of the parties to the agreement has violated the Regulations. The Commission will, in accordance with the provisions of Part 3 of the Regulations, conduct an inquiry into the agreements concluded between CAF and Lagardère Sports S.A.S. to determine whether the alleged conduct has as its object or effect the prevention, restriction or distortion of competition in the Common Market or in a substantial part of it. In view of the foregoing, the Commission hereby gives notice to all interested stakeholders and the general public to submit their representations to the Commission … no later than 21st April 2017.

South African Airways (SAA) to pay $80 million in civil damages to competitor Comair for abuse of dominance

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-by Michael-James Currie

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A second civil damages award was recently imposed on South Africa’s national airline carrier, SAA, following on from the Competition Tribunal’s finding that SAA had engaged in an abuse of dominance.   The award in favour of Comair, comes after the first ever successful follow-on civil damages claim in South Africa (as a result of competition law violation) which related to Nationwide’s civil claim against SAA.  In the Nationwide matter, the High Court awarded , (in August 2016) damages to Nationwide in the amount of R325 million.   Comair claim for damages was based on the same cause of action as Nationwide’s claim. The High Court, however, awarded damages in favour of Comair of R554 million plus interest bring the total award to over a R1 billion (or about US$ 80 million).

Both damages cases entailed lengthy proceedings as Nationwide (and subsequently Comair) launched complaints, in respect of SAA’s abuse of dominance, to the South African Competition Commission as far back as 2003. Importantly, in terms of South Africa’s legislative framework, a complainant may only institute a civil damages claim based on a breach of the South African Competition Act if there has been an adverse finding either by the Competition Tribunal or the Competition Appeal Court.

The outcome of the High Court case is significant as the combined civil damages (both Nationwide’s and Comair’s) together with the administrative penalties imposed by the Competition Tribunal (in 2006) amounts total liability for SA is in excess of R1.5 billion.

Says John Oxenham, “Although the South African competition regime has been in place for more than 16 years and there have been a number of adverse findings against respondents by the competition authorities, have only been a limited number of civil follow-on damages cases.” This is largely due to the substantial difficulties (or perceived difficulties) a plaintiff faces in trying to quantify the damages, he believes. Follow-on damages claims for breaches of competition legislation are notoriously difficult to prove not only in South Africa but in most jurisdictions.

The recent Nationwide and Comair judgments, however, may pave the way and provide some important guidance to potential plaintiffs who are contemplating pursuing civil redress against firms which have engaged in anti-competitive conduct (including cartel conduct).

In this regard, the South African National Roads Agency (SANRAL) announced last year that it has also instituted a civil damages claim of approximately R700 million against a number of construction firms who had had been found by the Competition Authorities to have engaged in cartel conduct.  The SANRAL case will be the first damages claim, if successful, by a ‘customer’ against a respondent who has contravened the Competition Act in relation to cartel conduct (and not abuse of dominance as in the SAA case).

saaplaceThe only previous civil damages claim was in the form of a class action instituted by bread distributors and consumers in relation to cartel conduct involving plant bakeries. Although the class was ultimately successful in their certification application, the case provides no further guidance as to the quantification of damages as the respective parties have either settled their case or remain in settlement negotiations.

As the development of civil redress in South Africa develops in relation to cartel conduct, it will be particularly interesting to evaluate what the effect of civil damages may have on the Competition Commission’s Corporate Leniency Policy. The Commission’s leniency policy only offers immunity to a respondent who is “first through the door” from an administrative penalty. It does not extend immunity to a whistle-blower for civil damages or criminal liability. It is well understood that the Corporate Leniency Policy has been one of the Commission’s most effective mechanisms in identifying and successfully prosecuting firms which have engaged in cartel conduct.

In relation to the recent civil damages cases, John Oxenham, a Primerio director, notes that “Parties will have to strike a delicate balance whether to approach the Competition Commission for purposes of obtaining immunity from an administrative penalty, which is no doubt made all the more difficult following the R1.5 billion administrative penalty levied on ArcelorMittal in 2016 (the largest administrative penalty imposed in South Africa to date) will no doubt be of some import given that most of the conduct related to cartel conduct“.

Accordingly, in light of the introduction of criminal liability as of May 2016, the imposition of record administrative penalties, the risk substantial follow-on civil damages and the development of class action litigation, South Africa is now evermore a rather treacherous terrain for firms and their directors.

SOUTH AFRICA: ZUMA’S STATE OF THE NATION ADDRESS MAY BE HINT AT INTRODUCTION OF COMPLEX MONOPOLY PROVISIONS

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While the media headlines are largely filled with the disruptions that took place at the State of the Nation Address (SONA) by President Jacob Zuma on 9 February 2017, the President made an important remark which, if true, may have a significant impact on competition law in South Africa, particular in relation to abuse of dominance cases.

In this regard, the President stated that:

“During this year, the Department of Economic Development will bring legislation to Cabinet that will seek to amend the Competition Act. It will among others address the need to have a more inclusive economy and to de-concentrate the high levels of ownership and control we see in many sectors. We will then table the legislation for consideration by parliament.

In this way, we seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation.”

Patel talksNeither the President nor Minister Patel have given any further clarity as to the proposed legislative amendments other than Patel’s remarks early in January 2017 in which he stated that:

“The review covers areas such as the efficacy of the administration of the Competition Act, procedural aspects in the investigation and prosecution of offences, matters relating to abuse of dominance, more effective investigations against cartels and the current public interest provisions of the act.“

Says John Oxenham, a competition attorney who has closely followed the legislative and policy developments, “despite the broad non-committal remarks by Minister Patel, it is clear that the Minister is zealous in having the ‘complex monopoly’ provisions brought into force to address in order to address, what the Minister perceives to be, significant abuse of dominance in certain concentrated markets.”

In terms of the provisions, as currently drafted, where five or less firms have 75% market share in the same market, a firm could be found to have engaged in prohibited conduct if any two or more of those firms collectively act in a parallel manner which has the effect of lessening competition in the market (i.e. by creating barriers to entry, charging excessive prices or exclusive dealing and “other market characteristics which indicate coordinated behavior”).

white-collar-crimeDespite having been promulgated in 2009, the ‘complex monopoly’ provisions have not yet been brought into effect largely due to the concerns raised as to how these provisions will be enforced, says Primerio Ltd.’s Andreas Stargard: “It is noteworthy that the introduction of criminal liability for directors and persons with management authority who engage in cartel conduct was also promulgated in 2009, but surprised most (including the Competition Authorities) when it was quite unexpectedly brought into force in 2016.”

Minister Patel was no doubt a key driving force behind the introduction of criminal liability and it would, therefore, not be surprising if the complex monopoly provisions are brought into force with equal swiftness in 2017.

Kenya: CAK Formally Initiates a Market Inquiry into the Retail Sector

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On 27 January 2017, the Competition Authority of Kenya (CAK) exercised its powers in terms of section 18 (1) (a) of the Competition Act, 2010, to conduct a market inquiry into the branded retail sector.

The notice, as published in the Government Gazette and signed by CAK Director General Wang’ombe Kariuki stated that “the main objective of the study is to assess the state of competition in the market for branded retail by examining the multilayered structure of the market and the conduct of market players. The market inquiry will explore the dimensions and the intensity of competition between branded retailers and how these impact on price, quality and range of offerings to the Kenyan consumer.”

The CAK is the third African competition agency to conduct a market inquiry into the retail sector following inquiries in Botswana and South Africa.  The COMESA Competition Commission has also announced that it intends to conduct a market inquiry into the retail food sector, although to date the CCC has not formally initiated such an inquiry.

Unsurprisingly, the focus of the CAK’s inquiry is strikingly similar to the grocery retail market inquiry currently under way in South Africa, with both authorities focusing their attention on large retailers who allegedly engage in practices which distorts competition in the market.  In particular, the CAK will focus on the following issues:

  • the allocation of shelf space and the relative bargaining power between retailers and their suppliers;
  • the nature of and the extent of exclusive agreements at one stop shop destinations and their effects on competition;
  • the pricing strategies retailers employ especially in regards to responding to new entrants;
  • whether there are any strategic barriers to entry created by incumbent firms to limit entry in the market; and
  • the effect of the supermarkets branded products on competition.

The issues listed above are largely common focus areas in market inquiries conducted not only in Africa but also in a number of European countries including France, Germany, Italy, Turkey and the United Kingdom,

Interestingly, the CAK’s market inquiry goes broader than purely competition issues but also has an element of “consumer protection”. For instance, one of the practices which allegedly is a common feature in the industry is what is termed “dual pricing” – where Retailers display lower product prices on the shelf but which are higher at the till.

The CAK will also investigate the rate of recurrence of the sale of defective stock by retailers to consumers and how subsequent complaints by consumers are dealt with by retailers. The CAK intends to establish the proportion of retailers that have fully operational retail return policies and to what extent they are adhered to in an attempt to evaluate whether consumers are adequately protected.

Unlike the South African Competition Act, the Kenya Competition Act also contains specific consumer protection provisions which caters for unfair trade practices and transactions that affect consumer rights such as under-cutting and over-pricing of goods and services as well as the use of misleading information to sell goods and services. This is in addition to Kenya’s self-standing Consumer Protection Act which is governed by the Kenya Consumers Protection Advisory Committee (CPAC).

The CPAC is tasked with, inter alia, facilitating the “co-ordination and networking of consumer activities and the development of linkages with consumer organizations and the competent authorities and agencies locally and outside Kenya for the protection of consumer interests”. The CPAC is, therefore, responsible for monitoring and reviewing the trading and business practices relating to the supply of goods and services to consumers, and to activities related or ancillary thereto.

It remains to be seen to what extent the CPAC is actively involved in the CAK’s market inquiry, particularly in relation to the consumer protection provisions

Focusing our attention back to the competition law implications of the market inquiry, industry players across the retails chain should be particularly cognisant of the recent amendments to the Kenya Competition Act which introduced the concept of “abuse of buyer power”. Africanantitrust previously published an article by Michael-James Currie and Ruth Mosoti who noted that “it is not technically a requirement that a firm be ‘dominant’ in order to be considered to have “buying power”.

Furthermore, the introduction of the “abuse of buyer power” provisions was largely as a result of complaints received by the CAK in the retail sector, particularly by suppliers. In addition, the CAK may well have learnt from market inquiries conducted in other jurisdictions that absent any ‘dominance’ by retailers, there is a limited prospect of successfully prosecuting firms for engaging in practices which ay distort competition in the market. In this regard, Currie and Mosoti stated further that:

“the Kenyan Competition Authority may have thought to pre-empt this challenge and, therefore, included the “abuse of dominance” provisions without requiring a firm to actually be dominant for the provision to be triggered. Furthermore, the definition of “buying power” and the absence of any requirement that the conduct must in fact be anti-competitive may have been an attempt by the legislator to lower the threshold in an effort to assist a complainant in cases where a purchaser, such as a large retailer, exerts “buyer power”, but is not “dominant” in the market.”

Accordingly, in light of the broad scope of the CAK’s market inquiry coupled with the introduction of the ‘abuse of buyer power’ provisions, it is advisable for all players in the Kenyan retail sector to actively consider their business operations, not only from a competition perspective but also from a consumer protection perspective.

Antitrust Writing Awards 2017

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The 2017 Concurrences Antitrust Writing Awards received nominations for more than 600 papers. The Awards Editorial Committee has selected:

  • 66 academic articles
  • 91 business articles
  • 21 soft laws

Readers can vote online until February 1 for their favorite papers on the Awards website.

Free access to all these articles is temporarily being provided on the Awards website.

Results will be announced by former FTC Commissioner and renowned antitrust scholar Bill Kovacic and the Board members at the Gala Dinner on March 28, in Washington, D.C., the night before the ABA Spring Meeting.

Tickets for the Gala Dinner are available here.

Kenya: Recent Amendments to the Act adds an Interesting Dimension to the Abuse of Dominance Provisions

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Introduction of Abuse of ‘Buyer Power’ Provisions Muddies the Water

Ruth Mosoti

By Michael-James Currie and Ruth Mosoti

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In November last year, the editors of Africanantitrust indicated that a number of amendments to the Kenya Competition Act of 2010 were being proposed by way of the Competition Amendment Bill (Amendment Bill) in the article Competition Amendment Bill to bring about Radical changes to the Act

The Amendment Bill was assented to by the President in December 2016 and the amendments are, therefore, effective.

Although most of the amendments which are particularly noteworthy were addressed in the above article, a particularly noteworthy amendment, and very much the focus of this article, is the newly introduced prohibition of an abuse of “buyer power”. In this regard, Section 24 of the Act, which deals with abuse of dominance generally, has been amended to also cater for an abuse of “buyer power.”

Section 24 of the Act was, even prior to the introduction of “buyer power” a particularly challenging provision to interpret and it has not been clear how the provisions relating to an abuse of dominance would ultimately be assessed.

By way of background, the definition of “dominance” in the Act, effectively states that a firm will be considered dominant if that firm has greater than 50% market share

The Act goes on to list, without being exhaustive, a number of practices which would typically constitute an abuse of dominance including:

  • imposing unfair purchasing or selling prices;
  • limiting or restricting output, market access or technological advancements;
  • tying and/or bundling as part of contractual terms; or
  • abusing intellectual property rights.

The Act does not provide further guidance as to what would precisely constitute an “abuse” of dominance and under what circumstances a purchasing or selling price would be deemed to be “unfair”.

The abuse of dominance provisions do not necessarily, therefore, appear to be directly linked to the promotion or maintenance of competition in the market. Once it is shown that a firm has more than 50% market share, firms are in treacherous terrain as the threshold for engaging in “abuse” of dominance is relatively low when compared to many other comparable jurisdictions which generally cater for a rule of reason defence or at least provide greater guidance as to what conduct would constitute a per se violation.

By way of an example, in terms of the South Africa Competition Act, a dominant firm is per se prohibited from charging an “excessive price”. The South African Competition Act does, however, define an “excessive price” as one which “bears no reasonable relation to the economic value thereof”. Despite this definition, further guidance has been sought but the competition authorities as to what, in turn, constitutes a “reasonable” and “economic value.”

Over and above certain identified acts of abuse of dominance, the South African Competition Act also includes for a “catch-all” abuse of dominance provision. However, the conduct will only amount to an “abuse” if there is an anti-competitive effect which cannot be justified by a rule of reason analysis.

The comparison with the South African Competition Act is useful as the Kenyan Competition Act does not provide for a similar assessment as does its South African counter-part. For instance, it is not clear how predatory pricing or excessive pricing would be evaluated under the Kenyan Act. Presumably this would fall under the preclusion of charging an “unfair” selling price, which leads one back to the question as to what constitutes an “unfair” price.

In addition to the above, the recent addition of “buyer power” to the abuse of dominance provisions has added to the complexity and risk to firms on the procurement side.

“Buyer power” is defined as the “the influence exerted by an undertaking in the position or group of undertakings in the position of a purchaser of a product or service to obtain from a supplier more favourable terms, or to impose long term opportunity costs including harm or withheld benefit which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings.”

Furthermore, in considering whether a firm has “buyer power” the following factors will be considered:

  • the nature of the contractual terms;
  • the payment requested for access infrastructure; and
  • the price paid to suppliers.

Accordingly, the crux of the rather cumbersome definition is that an undertaking will only be considered to have “buying power” if that undertaking(s) has simultaneously actually abused its’ buying power. In other words, there is no distinction between what constitutes “buying power” and what constitutes an “abuse” of buying power. The Act’s definition of “buying power” is, therefore, all encompassing.

Although the above definition is somewhat unclear, it should be noted that the Competition Authority of Kenya, together with Parliament and other stakeholders intend developing rules which would hopefully clarify how these provisions will ultimately be evaluated.

A further important point to note is that it is not a requirement that a firm be ‘dominant’ in order to be considered to have “buying power”. Whether it was the intention of the legislator to require a firm to first be ‘dominant’ before it could be prosecuted for “abuse of buyer power” is not entirely clear. The definition of “buying power” is remarkably silent on this issue.

The fact that the preclusion of an abuse of buyer power necessitates that a firm be dominant could be inferred by the fact that provision is inserted under Section 24 (the abuse of dominance provisions).

However, the definition of “buyer power” caters for a situation where a group of undertakings, such as when a buying group, is formed, exert buyer power, the group commits an offence. Accordingly, it may have been that the legislator was contemplating a situation in which a group of undertakings, such as a buying group collectively meets the ‘dominance’ threshold (i.e. a greater than 50% market share).

Alternatively, it could have been the intention of the legislator that the abuse of buyer power has no direct link to dominance as such and that once a firm or group of firms satisfy the definition of “buyer power”, irrespective of their market shares, the provision is triggered.

In a number of developing countries such as Turkey, South Africa and Botswana have conducted market inquiries into the grocery retail sector. Although the focus of these inquiries are relatively broad, a common focus of all the market inquiries in this sector relates to the role that the large retailers play in the market. In particular, suppliers and competition agencies are often concerned with the buying power which large retailers could exert on suppliers and that the trading terms are unfair, particularly for smaller retailers who are not always in a position to pay for shelf space, access fees or offer the discounts demanded by the retailers.

In many instances, however, the large retailers are not ‘dominant’ and a complainant would need to demonstrate that the buying power exerted by the large retailer is in fact anti-competitive.

The Kenyan Competition Authority may have thought to pre-empt this challenge and therefore included the “abuse of dominance” provisions without requiring a firm to actually be dominant for the provision to be triggered. Furthermore, the definition of “buying power” and the absence of any requirement that the conduct must in fact be anti-competitive may have been an attempt by the legislator to lower the threshold in an effort to assist a complainant in cases where a purchaser, such as a large retailer, exerts “buyer power”, but is not “dominant” in the market.

The absence of any objective qualification to assess when a firm has exerted “buyer power” in an “unfair” manner may open the litigation floodgates. A further reason why it is important that the authorities publish rules to assist with the interpretation and implementation of the “abuse of buyer” power provisions.

In terms of enforcement, the Act was previously silent on the role of the Authority upon the conclusion of an abuse of dominance investigation and the only option lay on criminal prosecution of the offending undertaking. The recent amendments to the Act now allows the Authority to impose fines of up to 10% of the annual turnover of the offending undertaking(s).

South Africa: Competition Appeal Court Sends Strong “Passive Participation” Message

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Competitors Beware of Industry Gatherings

By Charl van der Merwe

On 19 December 2016, the South African Competition Appeal Court (CAC) handed down judgment in the Omnico (Pty) Ltd; Cool Heat Agencies (Pty) Ltd vs The Competition Commission & Others matter.

The judgment details an application brought by two respondents who sought to challenge the Competition Tribunal’s finding that their participation at industry association meetings amounted to cartel conduct, despite the appellants’ contention that they did not actively participate in any anticompetitive discussions and were effectively passive participants at the meetings.

The CAC had to decide on whether or not silent participation by firms at an industry  meeting or forum of competitors where cartel activity was discussed amounts to a contravention in terms of section 4(1)(b)(i) of the Competition Act, Act 89 of 1998 (“the Act”).

south_africaSection 4 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 – (a) it has the effect of substantially preventing, or lessening, competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect”.

The Appellants are wholesalers that supply bicycle and bicycle accessories to the retail trade. The appellants attended a series of industry meetings together with various retailers and wholesalers of bicycles and bicycle accessories to discuss ways in which retailers could increase retail margins. This the CAC found was achieved by the wholesalers agreeing to increase the Recommended Retail Price, (“RRP”) for the various products sold.

In this particular case, the RRP increase was scheduled to take place on the 1st of October.

Though the appellants both increased their RRP on the effective date, the crux of the matter and the point the appellants placed great reliance on was the contention that they never actively participated in the industry meetings.

smoke_filled_room_smallThe CAC in dismissing the appeal held that it was clear that there was a cartel and that due to the complex and clandestine nature of cartel conduct, the Commission merely had to show sufficient evidence that in its entirety proves that the appellants were part of that cartel. The Commission was not required to scrutinise and evaluate each and every activity or discussion at the various meetings, and it was up to the appellants to put forward rebuttal evidence to establish that their participation at the meetings lacked any intention on their part to be a party to the collusive conduct.

Andreas Stargard, a competition lawyer with Primerio Ltd., notes that, “importantly, the CAC confirmed that the standard of proof in competition law cases is lower than that of contract and common law — a wink and a nod may in the smoke-filled-room, under the right circumstances, be sufficient proof to show collusion among competitors.  To prove a cartel, there is no need to apply the rigid principles of contract law, determining whether a meeting of the minds was reached, or to prove formal offer and acceptance in order to show that a collusive agreement was reached.”

Furthermore, he says,“the CAC found that the evidence put forward by the Commission need only be ‘sufficiently precise, consistent and convincing’ — not necessarily the ‘clear and convincing‘ evidentiary standard generally required in terms of common law.”

In addition, the CAC noted that there is no need for a single pressing piece of conduct to show that an anticompetitive arrangement has been entered into, but that the authorities will consider the cumulative effect of conduct whether active or passive in order to determine whether, on a holistic approach, the respondents had entered into a collusive agreement.

The CAC held that although the appellants did not express agreement at the meeting, the appellants did not ‘publicly’ distance themselves from the collusive proposals put forward at the meetings.

Accordingly, the CAC found that:

  • there was consensus reached at the meeting and the appellants failed to distance themselves from the discussions;
  • neither appellants gave any indication that they disagreed with the consensus reached at the meeting nor that they would not proceed along the lines as agreed during the meeting;
  • that at the very least (without even increasing their prices on the effective date) the appellants would have passively benefitted from the conduct resulting from that collusive arrangement; and
  • that neither of the appellants placed any evidence before the CAC to prove that they priced independently.

In conclusion, therefore, it is clear that firms who attend industry association meetings, forums or the like, are obliged to take active steps to denounce any anticompetitive discussions which may have taken place at such meetings.

Once a firm is party to any anticompetitive discussions, the onus rests on that firm to actively distance itself from such discussions – this is so irrespective of whether a collusive arrangement is implemented or not. It is not clear what steps need to be taken to satisfactorily distance oneself from such discussions, although it must be a ‘public’ denouncement. This could be interpreted as indicating that firms may be obliged to report to the authorities any collusive arrangements which they wish to actively distance themselves from.

New Zambian Settlement Guidelines: A Risky Reprieve

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By AAT Senior Contributor, Michael-James Currie & Mweshi Mutuna, Pr1merio competition advocate (Zambia)

The Zambian Competition and Consumer Protection Commission (‘CCPC’) has recently published draft settlement guidelines (‘Draft Guidelines’) for respondents who have allegedly engaged in conduct in contravention of the domestic Competition and Consumer Protection Act (‘Act’).

zambiaThe Draft Guidelines have been published in addition to the ‘Leniency Programme’ as well as the ‘Fines Guidelines’ published earlier this year (as well as the 2015 Merger Guidelines), and essentially sets out a framework within which respondent parties may engage the CCPC for purposes of reaching a settlement agreement for alleged contraventions of the Act.

Notably, the Draft Guidelines will be binding on the CCPC which is an important aspect of ensuring a transparent and objective approach to settlement negotiations. Furthermore, the Draft Guidelines emphasise that respondents should be fully informed of the case against them prior to settling. In this regard, the Draft Guidelines provide for an initial stage of the settlement negotiations (essentially an expression of interest) which follows from a formal request by a firm expressing an interest to settle.

Should the CCPC decide to proceed with settlement negotiations, the CCPC must, within 21 days, provide the respondent party with information as to the nature of the case against the respondent. This includes disclosing the alleged facts and the classification of those facts, the gravity and duration of the alleged conduct, the attribution of liability (which we discuss further below) and the evidence relied on by the CCPC to support the complaint.

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The authors, Mr. Currie & Ms. Mutuna

The purpose of disclosing these facts to a respondent is to afford a respondent the opportunity to meaningfully consider and evaluate the case against it in order to make an informed decision whether to settle or not.

Assuming that an expression of interest in settling the matter is established by both parties, the CCPC will then proceed by requesting that the respondent provide a formal “settlement submission” within 15 days of the CCPC’s request. Included in the settlement submission, must be a clear and unequivocal acknowledgement of liability (which includes a summary of the pertinent facts, duration and the respondent’s participation in the anticompetitive conduct) and the maximum settlement quantum which the respondent is prepared to pay by way of an administrative penalty.

Should the CCPC accept the settlement submission, the CCPC will then commence with drafting and ultimately publishing a statement of objections (‘SO’) which essentially captures the material terms of the settlement submission. This is largely a necessary procedural step although the respondent party may object to the SO should it not correctly record the terms of the settlement agreement.

Following the publication of the SO, the CCPC will, subject to any challenges to the SO, proceed formally to make the settlement agreement a final decision as required by the Act.

Risky Business?

The above framework appears to be relatively straightforward and balanced, assuming that the parties in fact do reach a settlement agreement. The position is somewhat different in the event that settlement negotiations breakdown, particularly if the negotiations are already at a relatively advanced stage.

Most notably, settlement negotiations in terms of the Draft Guidelines are not conduced on a “without prejudice” basis. To the contrary, the Draft Guidelines states that the CCPC has the right to adopt a SO which does not reflect the parties’ settlement submission. In this event, the normal procedures for investigating and prosecuting a complaint as set out in the Act will apply.

In the event that the CCPC elects not to accept a settlement submission submitted by a respondent, the Draft Guidelines specifically state that “the acknowledgements provided by the parties in the settlement submission shall not be withdrawn and the Commission reserves the right to use the information submitted for its investigation”.

This paragraph is controversial as it places a substantial risk on a party making a settlement submission with no guarantee that the settlement proffer will be accepted by the CCPC, while at the same time, the respondent party exposes itself by making admissions which may be used against it in the course of a normal complaint investigation and determination by the CCPC.

Whether or not the financial incentive to respondents would entice a respondent to, nonetheless, engage in settlement discussions in terms of the Draft Guidelines is sufficient, only time will tell. In this regard, however, the Draft Guidelines state that a firm who settles with the CCPC prior to the matter being referred to the Board will be limited to a maximum penalty of up to 4% of the firm’s annual turnover. Should the firm settle after the matter has been referred to the Board, the maximum penalty will be capped at 7% of the firm’s annual turnover.

Multi-Party Settlements: the More the Better?

A further interesting and rather novel aspect to the Draft Guidelines is the provision made for tripartite settlement negotiations. In this regard, the Draft Guidelines cater for a rather unusual mechanism by which multiple respondents in relation to the same investigation may approach the CCPC for purposes of reaching a settlement agreement.

Although referred to as “tripartite” negotiations, the Draft Guidelines state that when the CCPC initiates proceedings against two or more respondents, the CCPC will inform a respondent of the other respondents to the complaint. Should the respondent parties collectively wish to enter into settlement negotiations, the respondents should jointly appoint a duly authorised representative to act on their behalf. In the event that the respondent parties do settle with the CCPC, the fact that the respondents were represented by a jointly appointed representative will not prejudice them insofar as the CCPC making any finding as to the attribution of liability between the respondents is concerned.

While joint representation may be suitable in the case of merger-related offences (which may have been what was envisaged by the drafters hence the reference to “tripartite” negotiations), we believe that it is hard to imagine that the drafters anticipated that, should respondents to a cartel be invited to settle the complaint against them, the cartelists would then be required to embark on further collaborative efforts: this time to engage collectively in formulating a settlement strategy and decide how they are ultimately going to ‘split the bill’ should a settlement agreement be reached.

The issue of a multi-party settlement submission is further complicated in the event that a settlement proffer is not accepted by the CCPC following a multiparty settlement submission. As mentioned above, the settlement submission must contain an admission of liability which, in the case of cartel conduct, would invariably amount to the parties to the settlement proposal admitting to engaging in cartel conduct by fixing prices or allocating markets, by way of example, between each other.

Although, the Draft Guidelines is a welcome endeavour to provide respondents with a transparent and objective framework to utilise when engaging with the CCPC for purposes of reaching a settlement, the uncertainty and risk which flows from a rejection of the settlement proffer may prove to be an impediment in achieving the very objectives of the Draft Guidelines.

In this regard, we understand that the CCPC is currently considering revised guidelines which hopefully address the concerns raised above.

 

Choice: A New Standard for Competition Law Analysis?

Posted on by Editor

AAT is pleased to announce publication of a new book on competition law & ‘choice’, aptly titled Choice: A New Standard for Competition Law Analysis?, which offers exhaustive and multifaceted discussions on the crucial concept of consumer choice and its relevance for modern competition law.  Our partner Concurrences Review has made it available at its Concurrences website and on Amazon.

Ten prominent authors offer eleven contributions that provide their varying perspectives on the subject of consumer choice.  Various aspects of consumer choice are covered, such as the concept of freedom of choice in the application of EU competition law; the antitrust enforcement application of consumer choice by agencies; the historical origin of consumer choice as a concept grounded in German ordoliberalism; the economic approach adopted as well as the use of consumer welfare and consumer choice in competition law to reconcile it with intellectual property law; consumer choice as a mean to facilitate convergence between varying jurisdictions, and so on.

 

Kenya: Competition Amendment Bill to bring about Radical changes to the Act

Posted on by Editor

kenyaThe Competition Authority of Kenya (CAK) has recently announced that a number of proposed amendments to the Competition Act are currently pending before the National Assembly for consideration and approval.

The proposed amendments are generally aimed at increasing sanctions and CAK’s authority to detect and prosecute anti-competitive behaviour as well as to ensure that parties provide the CAK with adequate and correct information to properly assess merger notifications.

  • Anti-competitive conduct

Importantly, the amendments seek to introduce a financial threshold for respondents who are found to have engaged in abuse of dominance practices. Currently, there is no administrative penalty for a abuse of dominance.

The amendments further include an administrative cap of 10% for engaging in cartel conduct.

Interestingly, the amendments also seek to introduce measures to protect suppliers from buying groups. Unlike the South African Competition Act which specifically precludes competitors from entering into an agreement or concerted practice which amounts to the fixing of a purchase price or trading condition, Kenya’s Competition Act does not have a similar express prohibition.

It is also not clear, at this stage, what the anti competitive effect of buying groups is having in Kenya. The CAK has, however, indicated that suppliers are often left short-changed as a result of buying groups not paying the suppliers. Whether this has or may have a foreclosure effect on suppliers is noy yet apparent.

In any event, the proposed solution is likely to be resolved through the development of guidelines rather than an amendment to the Act.

  • Mergers

A clear indication that the CAK is increasing its efforts to ensure that they are not merely a regulatory body which rubber stamps merger approvals is the proposed introduction of penalties for merging parties who submit incorrect information to the CAK during a merger filing.

In addition, in terms of Section 47 of the Competition Act, the CAK may revoke their decision to approve or conditionally approve a merger if the merger approval was granted based on materially incorrect or false information provided during the notification and/or the merger is implemented in contravention of any merger approval related conditions.  In terms of the amendments, the CAK is proposing the introduction of criminal liability for merging parties who implement a merger despite the CAK having revoked the merger.

Merging parties will, therefore, need to ensure that they adequately prepare and submit comprehensive merger filings.

As to the definition of what constitutes a “merger” for purposes of the Competition Act, the proposed amendments seek to clarify that a change of control can take place by the acquisition of assets.

  • Market inquiries

Section 18 of the Act is also to be amended to place an obligation on parties to provide the CAK with information during market inquiries.

We have not yet seen the CAK conduct a full blown market inquiry as has been the case in South Africa. In light, however, of the CAK and the South African Competition Commission’s (SACC) advocacy initiatives (readers wlll recall that the CAK and the SACC recently concluded a Memorandum of Understanding), the CAK may soon launch a market inquiry into priority sectors such as grocery retail and agro-processing.