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Editorial staff of AAT

Competition Commission Publishes ‘Public Interest Guidelines Relating To Merger Control’

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A perspective from private practice — the real cost of doing business in South Africa: Merger Control Disincentivizing Investment into the South African Economy

By Gina Lodolo, Joshua Eveleigh, and Nicola Taljaard

A Look Back:

South Africa has been trying to find the delicate balance between the promotion of public interest initiatives, attracting foreign investment and promoting the competitiveness of South Africa’s markets. In recent years, however, the South African Competition Commission (“Commission”) appears to have taken a more rigid approach towards requiring the promotion of public interest initiatives as an outcome of merger control investigations.  

At the outset, it is important to note that the Competition Act 89 of 1998 (“Act”) allows the Commission to impose conditions on mergers and acquisitions that are deemed to result in a substantial lessening of competition or detrimental to the public interest.

In 2019, the Act also underwent a significant amendment regarding the public interest provisions. In accordance with the transformative values under the Act’s preamble, the amendment aimed to ensure that competition authorities have regard to public interest factors when assessing mergers and acquisitions and, in particular, section 12A(3)(e) makes provision for the promotion of a greater spread of ownership with a view to increasing the levels of ownership by historically disadvantaged persons and employees.

While the Commission was not so emphatic on the promotion of HDP and/or employee ownership immediately after the 2019 amendments, the Commission has been taking an increasingly robust approach to the imposition of these public interest criteria. Most notably, this can be seen from the widely publicised Burger King decision where a merger that raised no competition concerns was prohibited for the first time, based solely on public interest concerns (namely a decreased HDP shareholding from 68% to 0%). While the decision was ultimately settled before being heard on request for consideration before the Tribunal, it certainly indicated the trajectory of the Commission’s approach. Since the Burger King decision, the Commission has increasingly taken a hard-line regarding transactions that are benign both from a competition and public interest perspective.

While the amendments to the Act symbolize a benevolent effort toward the transformative objectives that the competition authorities are mandated to develop, a great deal of uncertainty stemmed as a result. In practice, the Commission’s interpretation of section 12A(3)(e) of the amended Act has been to place a positive obligation on the merging parties, post transaction, to increase the merging parties’ HDP and/or employee shareholding, often times utilising a benchmark of 5%. This is irrespective of whether a transaction is benign from both a competition and public interest perspective.

Merging parties, legal representatives and regulatory authorities have also substantially debated the interpretation and effect of the amended public interest provisions. The primary argument that contrasts the Commission’s interpretation of the amended public interest provisions, however, provides that section 12A(3)(e) is only one factor for consideration in determining whether a transaction that would otherwise have an adverse effect on competition or other public interest grounds, should be allowed. Premised on this interpretation, the Commission would not be authorised to refuse a transaction if it cannot show an adverse effect on competition based on a holistic assessment of the public interest grounds delineated in section 12A(3).

The Commission’s application of the public interest provision has increasingly lacked clarity and predictability, thereby creating uncertainty in the merger review process, and making it challenging for businesses to plan and execute transactions with confidence. This is particularly so when transactions are subject to long-stop dates where protracted engagements and negotiations with the Commission risk the termination of the entire agreement. To circumvent the incurrence of frictional costs and risks of breaching any long-stop dates, private practitioners are experiencing an increased amount of global mergers carving-out (or at least considering to) the South African legs of those transactions.

Firms are often concerned about the potential dilution of existing shareholders’ equity, regardless of the size of the firm. Foreign investors may be concerned about the impact of the allocation of new shares to employees on their current ownership stakes, potentially reducing their control and influence over the merged entity.

Further uncertainty surrounded how the application of what appears to be a 5% public interest divestiture approach will apply in all circumstances. For example, it is unclear whether this would apply to all merging parties even if the two merging entities are wholly owned BBBEE entities. Furthermore, how should firms divest a 5% stake in the merged entity where the underlying transaction involves land and no employees? These are some examples of the difficult questions the Commission has yet to consider if it is to continue with the outright application of its interpretation of the Act.

In addition, by insisting on ownership-related commitments from merging parties, the Commission’s policy undermines the efficacy of the BEE framework, as parties are likely to take the view that any efforts to improve their BEE profiles outside of the ambit of the transaction may, on the Commission’s approach and assessment, carry very little weight. Accordingly, firms may start to favour an approach of decreasing their BEE efforts prior to transactions in preparation of having conditions imposed on them. Firms may also start to undervalue the target to account for additional public interest spend or carve out the South African part of the transaction to circumvent this cumbersome condition.

Over an extended period, the outcome becomes evident for South Africa – increased uncertainty and an impractical application of the Act will result in decreased in investment; potential prohibition of competitively benign mergers and increased transaction costs.

While the Commission’s approach is prima facie laudable, the unintended consequences may result in a counterintuitive outcome and cause greater long-term prejudice to the public interest and growth of the South African economy. This is particularly true in light of the much-needed foreign direct investment South Africa requires following the effects of Covid-19, greylisting and economic instability.

Introduction of Public Interest Guidelines

On 28 September 2023, the Commission released their ‘Draft Amended Public Interest Guidelines relating to Merger Control’ for public comment accessible here (“Public Interest Guidelines”).

On the same day, at the Commission’s 17th Annual Conference, the Minister of Trade, Industry and Competition (“DTIC”), Minister Ebrahim Patel, lauded the amendments to the Act and stated that the increasing imposition of public interest conditions on mergers has resulted:

  • in a contribution of R67 billion towards the local economy;
  • the saving of at least 236 000 jobs over a period of five years;
  • the creation of at least 22 000 jobs;
  • and 143 000 workers now being shareholders in companies.

While there have certainly been commendable strides towards the achievement of promoting the transformation of the local economy, the above statistics do not paint a full picture. While many firms will continue to consent to the public interest commitments suggested by the Commission, for fear of an outright merger prohibition, a number of firms would rather carve-out the South African leg of multi-jurisdictional deals. This, in itself, would stifle economic growth and adversely effect the public interest in the long-term (as consumers do not stand to enjoy the benefits of pro-competitive mergers).

The Public Interest Guidelines are intended to formalise the Commission’s policy approach discussed above when evaluating public interest factors.

We outline the pertinent aspects of the Public Interest Guidelines below:

Commission’s approach to public interest factors in merger control

Section 12A of the Competition Act provides that both the competition and public interest assessments carry equal weight in merger considerations.

Regardless of whether a merger is found to result in a substantial prevention or lessening of competition (“SPLC”), the Public Interest Guidelines provide that the Commission must still determine whether the merger is “justifiable on Public Interest grounds”. In this regard, the Commission will determine the effect of the merger on each of the public interest elements arising from the merger to determine the net effect of the merger on the public interest.

General approach to assessing public interest provisions

The Commission considers that a merger assessment requires a quantitative and qualitative determination into the merger’s likely effect on:

  1. a particular industrial sector or region;
  2. employment;
  3. the ability of small and medium businesses, or firms controlled or owned by historically disadvantaged persons, to effectively enter into, participate in or expand within the market;
  4. the ability of national industries to compete in international markets; and
  5. the promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market.

Where the Commission concludes that the merger will have a positive effect on one of the above factors, there will be no further assessment into that factor. Where, however, the Commission finds that one of the above factors is substantially negatively impacted by the merger, the Commission will consider remedies to address these adverse impacts.

Importantly, the Public Interest Guidelines provide that where a negative impact on a public interest factor cannot be remedied, the Commission may consider “equally weighty countervailing Public Interest factors that outweigh the negative impact identified” on a case-by-case basis.

Where a merger is found to positively impact a majority of the above public interest factors, these may be outweighed countervailed by a substantial negative effects from a single public interest factor.

Approach to induvial public interest factors

The Public Interest Guidelines provide guidance on how the Commission will assess each of the public interest factors. For purposes of this summary, we focus primarily on “the promotion of a greater spread of ownership…by [HDPs] and workers…” factor which has caused the greatest degree of uncertainty, transaction costs and protracted negotiations with the Commission. This factor stands out from the rest of the public interest factors as the Public Interest Guidelines make it clear that the Commission considers section 12A(3)(e) of the Competition Act to confer a “positive obligation on merging parties to promote or increase a greater spread of ownership, in particular by HDPs and/or Workers in the economy.” In this regard, the Commission regards every merger having an effect in South Africa as having to promote HDP and/or worker ownership and therefore assumes no neutral effect.

In light of the above, where a merger does not promote HDP and/or worker ownership, it will be regarded as having an adverse impact on that particular public interest factor and, if considered substantial enough, may render the merger unjustifiable on public interest grounds.

The Public Interest Guidelines go further so as to state that where a merger promotes HDP ownership, this would not preclude the Commission’s obligation to consider an increase of ownership by workers.

Where the Commission considers there to be a substantial negative effect on the promotion of HDP and/or workers, the following remedies may be imposed:

  1. concluding alternative ownership agreements with HDPs/Workers in either the acquiring, target or merged firm; and
  2. divestitures to HDP shareholders which would create a greater spread of ownership in another part of the business. Importantly, the Commission will generally require that these HDPs and/or workers are actively involved in the operations (ideally control should be conferred) of the divested business and are not merely passive or financial investors.

Where the Commission proposes that an ESOP be implemented, the following guidance is provided:

  1. where a merger results in a dilution of HDP and/or workers, the ESOP should remedy the full extent of the dilution;
  2. where the merger does not result in a dilution, the ESOP should “hold no less than 5% of the value/shares of the merged entity but may be required to hold a higher shareholding based on the facts of the case”.

Where the Commission proposed that an HDP transaction be concluded, it provided the following guidance of the principles that ought to apply:

  1. the HDP transaction should be no less than 25% +1 share and “should ideally confer control on the HDPs”;
  2. the merging parties will have discretion to choose the HDPs; and
  3. the merging parties must inform the SACC of the proposed HDP transaction prior to its implementation to assess compliance with imposed conditions.

Importantly, while the Public Interest Guidelines are not binding on the Commission, the Competition Tribunal or the Competition Appeal Court, they provide clarity on how the Commission intends on assessing mergers notified to it.

Despite an increase in certainty, the Public Interest Guidelines remain a cause for concern amongst the local and international private sectors as they have merely confirmed the policy approach that the Commission has increasingly been adopting in practice. In this regard, even where a foreign-to-foreign merger is notified to the Commission, it ought to consider how it can actively promote HDP and/or worker ownership and may become susceptible to ESOPs and/or HDP transactions in achievement of the Competition Act’s transformational objectives.

The Public Interest Guidelines are open for public comment until 28 October 2023 and are likely to be subject to extensive submissions.

Prohibiting a Merger Long in the Making: CCC’s First M&A Prohibition

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The COMESA Competition Commission Issues Its First Partial Refusal to Grant Merging Parties Permission to Consummate Merger

By Tyla Lee Coertzen

On 2 September 2023, the COMESA Competition Commission released its decision to prohibit the proposed acquisition by Akzo Nobel N.V (“AkzoNobel”) of Kansai Plascon East Africa Proprietary Limited (“KPEA”) and Kansai Plascon Africa Limited (“KPAL”) (the “Target Firms”). The CCC’s decision in this merger represents the first merger prohibition it has issued since its inception in 2013.

In terms of the proposed acquisition, AkzoNobel was set to acquire 83.31% of the issued share capital of KPAL and 100% of the issued share capital of KPEA from Kansai Paint Co. Ltd.

AkzoNobel is a Dutch multinational company active in the manufacture and sale of paints and coatings, with a presence in Egypt, Mauritius, Tunisia and Zambia and Zambia. In addition, AkzoNobel supplies paints to the Democratic Republic of the Congo, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Rwanda, Sudan and Zimbabwe.

The Target Firms are also active in the manufacture and supply of coating products. KPEA maintains a presence in Burundi, Kenya, Tanzania, Uganda and Zanzibar and operates five manufacturing plants, four of which are located within the Common Market (namely in Burundi, the Democratic Republic of the Congo, Malawi, Rwanda and Zambia). KPAL also has manufacturing plants in the Common Market, namely in Malawi, Zambia and Zimbabwe and derives turnover in Eswatini.

This would-be transaction has a somewhat convoluted history and was, by some observers’ interpretations, many years in the making.  As Andreas Stargard notes regarding our prior reporting, “this very publication has analysed the COMESA competition troubles of the merging paints makers of the recent past.  These have included failure-to-file mandatory notifications (and also here), as well as a paints cartel-conduct inquiry by the CCC, after Akzo and Kansai’s acquisitive hunger had initially begun in 2013 with disputes over use of the Sadolin brand in Uganda and elsewhere — coincidentally the same year the CCC became functional.”

In addition, notably, the same transaction was prohibited by the South African Competition Commission in late 2022 (which decision is currently being determined by the South African Competition Tribunal). The merger is also currently being assessed by the Namibian Competition Commission.

In its assessment of the market for the manufacture and supply of decorative paints, the CCC identified several competition concerns arising from the proposed merger. Specifically, it identified that the merger would result in a combination of two strong paint brands (namely Plascon and Dulux) and that there were no effective competitors present who would pose a real ability to counter the undue market power and unilateral conduct arising thereof.

While the merging parties proffered a number of commitments, the CCC found that such commitments would not sufficiently remedy the decrease in competition in the market (particularly in Eswatini, Zambia and Zimbabwe). The CCC thus outright prohibited the merger in these three Member States.

The CCC approved the merger in certain other jurisdictions subject to conditions proffered by the parties. Specifically, the parties are obliged to divest the Sadolin brand owned by AzkoNobel to an independent third-party competitor in Uganda within 6 months of the date of the CCC’s decision. In Malawi, the CCC approved the merger subject to a condition that the merging parties continue productions in the Malawi manufacturing plant for a period of three years after the CCC’s decision, in order to remedy the plant’s potential closure and job losses resulting thereof.

The CCC’s decision over this merger is a clear indication of the approach it will take to mergers which it believes will pose significant anti-competitive harm and competitive loss within the Common Market. Thus, the decision is an indication of CCC’s powers, adjudicative authority as well as its willingness to enforce its powers.

CAK imposes highest-ever cartel fine on 9 steel producers

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After about a two-year-long investigation, the Competition Authority of Kenya (CAK) has determined guilt and imposed record fines on nine steel manufacturing companies for their joint role in a price-fixing and output-restriction cartel. The fine — the highest-ever imposed by the CAK to date — was set at Ksh. 338,849,427 million (approx. U.S. $2.3m) in total.

Back in June 2022, Construction Kenya news outlet reported that the offices of 10 Kenyan steel suppliers had been ‘dawn-raided’ by the CAK on suspicion of price-fixing. “A number of senior officials at the companies, including chief executives, have been interrogated as part of the investigation triggered by builders who complained about excessive pricing of steel.” These raids in Nairobi, Mombasa and Kisumu had taken place in the preceding December, and in secret, the CAK’s investigation into the steel sector had already begun in August 2020, when the Authority conducted a sua sponte nationwide “covert field screening,” which indicated the presence of illegal coordination by the steel producers.

In their defense, the manufacturers initially claimed innocence and blamed the pandemic input-price increases, via their trade group’s spokesman, Kenya Association of Manufacturers Steel Sector Chair, Bobby Johnson: “We are bearing a huge cost to cushion consumers. The prices of billets have shot up because of the supply disruptions as well as fuel for heating the furnaces.”

However, CAK enforcement and compliance manager, Mr. Mokaya, was quoted as stating that the agency had received specific and clear evidence “of certain concerted practices including agreements on pricing. We conducted market screening and launched raids in December targeting over ten companies and the investigation is ongoing.”

Andreas Stargard, an antitrust attorney with Primerio Ltd. who frequently works on COMESA-region competition matters including Kenya with his local Nairobi colleagues, noted that “this cartel case comes on the heels of the CAK’s successful prosecution of the ‘paint cartel,’ which it brought to conclusion also during COVID, in February 2021, fining Crown Paint, Basco Products Ltd., Kansai Plascon and Galaxy Paints for price-fixing. It will not be interesting to see whether firms engaged in the construction industry — that is: direct purchasers of steel products from the cartelists — will attempt to recover any of the overcharges they were burdened with by the infringers…“

In theory, a person found guilty of the offence is liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or both. Kenyan billionaire Narendra Raval, whose steel firm Devki is among those found guilty of cartel conduct, will not have to see a (steel?) jail cell from the inside, however. As of now, only monetary fines have been imposed by the CAK.

Dr. Adano Wario, the CAK’s Acting Director-General, noted that these financial penalties were in proportion to the harm done by the offense: artificial increases in the cost of steel products harmed consumers by inflating construction costs of homes and state and local infrastructure projects, thus contributing further to the already high cost of living in the country:

“Cartels are conceived, executed, and enforced by businesses to serve their commercial interests, and to the economic harm of consumers. In this matter, the steel firms illegally colluded on prices and margins as well as output strategies. In a liberalized market like ours, the forces of supply and demand should signal prices, free from manipulative business practices. Agreements between competitors seek to defeat this fundamental facet of a free economy.”

Whether or not a “leniency” request was involved is unclear, but doubtful according to attorney Stargard: “We have seen conflicting reports as to the origins of this investigation: some sources point to construction firm, or developer, complaints that led to the CAK’s action. The Authority itself claims it conducted the industry investigation fully on its own accord, without prompting. Either way, there is no indication that one of the price-fixing group members cheated on its fellow cartelists by seeking amnesty from prosecution, which is most frequently the case in modern cartel cases.” He adds that the COMESA Competition Commission (“CCC”) may also find interest in the ongoing price hikes in various markets, as the agency had previously made cautionary remarks in the paints cartel (see article above) and was almost certainly apprised by the CAK of its ongoing investigation into the steel sector during the pendency of that matter: “We know for a fact that the CAK and the CCC are working hand-in-glove when in comes to investigating anti-competitive conduct. Indeed, this statement can be expanded to include not only East-African competition enforcement agencies, but all African authorities, and in fact many international antitrust watchdogs as well, with whom the COMESA enforcer has bi- and multi-lateral cooperation agreements and MOUs. Competition-law enforcement truly has become global, and escaping the watchful eye of the agencies is getting more difficult by the day.”

The affected companies are Devki Steel Mills, Doshi & Hardware Limited, Corrugated Steel Limited, Jumbo Steel Mills, Accurate Steel Mills Limited, Nail and Steel Products Limited, Brollo Kenya Limited, Blue Nile Wire Products Limited, and Tononoka Rolling Mills Ltd.

Sweeping Inquiry Sheds Light on Online Intermediation Platforms: Competition, Opportunity, and the Road Ahead

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By Tyla Lee Coertzen and Nicola Taljaard

On 31 July 2023, the South African Competition Commission (“SACC”) released its Final Report and Decision on the Online Intermediation Platforms Market Inquiry (“OIPMI”). The OIPMI was initially launched on 19 May 2021 and after a number of requests for information, public hearings, expert reports as well as comments and engagements with stakeholders, the SACC’s findings and recommendations have finally been concluded.

The SACC is empowered to conduct market inquiries according to section 43B(1)(a) of the Competition Act 89 of 1998 (as amended) where it has reason to believe that there are market features that may impede, distort or restrict competition in a particular market; or to achieve the objects and purposes of the Act (including participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”).

The Inquiry: A Timeline of Discovery and Discernment

  • May 2021: The kick-off. Release of the Statement of Issues (SOI), first round of Requests for Information (RFIs), and business user survey.
  • August 2021: Heating up with the release of the Further Statement of Issues (FSOI), second round of RFIs, and a refined business user survey.
  • November 2021: The public had their say with hearings and follow-up RFIs.
  • February 2022: Expert reports and in-camera hearings added a new dimension.
  • July 2022: Provisional Inquiry Report was published, provisional findings, and recommendations were made public.
  • August to December 2022: A flurry of submissions, stakeholder engagements, and follow-up RFIs.
  • January to July 2023: Engaging stakeholders on final findings and remedial actions, sealing the deal.

What Does It All Mean?

These findings focus on the various platform categories, including the mammoth influence of Google Search. The full extent of these actions requires deep exploration, but one thing is clear: the landscape of online intermediation platforms is about to shift.

During the launch of the OIPMI, the Minister Patel of the Department of Trade, Industry and Competition (“DTIC”) commended the SACC for its great effort and the high-quality product produced in the form of the OIPMI. He further noted that the government should consider taking an inclusive response to the findings and recommendations in the OIPMI.

The findings concluded, inter alia, that Google Search is vital as a means for consumers to access all platforms, and that its paid search alongside free results business model is disproportionately advantageous to larger and more established platforms. It also found that Booking.com’s practice of restricting hotel prices on certain online networks results in a restriction of competition and allows it to make more commission by making users reliant on it. eCommerce giant, Takealot, was found to have a conflict of interest due to its retail department competing with its marketplace sellers and causing detriment to the latter. Google Play and the Apple App stores were found to charge exorbitant fees to developers and on a global level, the platforms hampered the visibility of SA-paid apps. Food delivery platforms Uber Eats and Mr D Food were found to cause difficulty to their competitors because of the lack of openness regarding the surcharges charged on menus across their platforms, as well as the limitations put on national chain franchisees. Property advertisement platforms Property 24 and Private Property were further found to have hindered their competitors by providing low interoperability to competitors in respect of listings. Property 24, together with AutoTrader and Cars.co.za were also found to have hampered small estate agents and car dealers due to the discriminatory pricing implemented by these platforms.

To combat the effects of the findings, the SACC recommended the imposition of a number of remedial actions including consumer-aiding search filters, marketing incentives to purchase local goods, the removal of restrictive pricing clauses, the segregation of internal (competing) divisions, the removal of automatically directing mechanisms to larger players, disclosure clauses to consumers and other benefits to SMEs, HDPs and consumers.

All platforms will be provided a period within which to affect the remedial actions.

A New Chapter: Where Do We Go From Here?

This OIPMI hasn’t just been about pointing fingers and exposing flaws. It’s about shaping the future of a wide range of the economy. The implications are broad, affecting everyone from big tech to the small business owner striving to make a mark in a competitive world.

Michael-James Currie, Partner at Primerio, noted “The recommendations of the OIPMI are far reaching for online platforms. Regulators need to ensure that we do not undermine those who are growing and providing significant investment the digital market in a highly competitive market where firms are competing not only with established traditional retailers but also large international players. Likewise, South Africa cannot afford to signal to international players that their business models will be substantively undermined once they establish themselves in South Africa. This is particularly so if the Commission’s remedies are not informed by objective competition concerns.”

WomenAT Launches in South Africa: Connecting and Empowering Women Professionals

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African Antitrust editor

WomenAT, a platform dedicated to connecting and promoting women professionals worldwide, is set to launch in South Africa on 6 July 2023. The launch event represents a significant milestone for WomenAT as it expands its mission to empower women professionals in the field of competition policy and regulation. One of the key highlights of the event is a panel discussion centered around the role of competition policy and regulation in South Africa’s challenging economic climate. Esteemed facilitator Yasmin Carrim will lead the discussion, joined by industry experts who will provide valuable insights.

W@Competition, was initially launched in Brussels in 2016, drawing inspiration from the rich antitrust policy heritage of the city. Since then, it has successfully established national branches across Europe, including France, Germany, Italy, the Netherlands, Switzerland, Turkey, and the UK. The organization has further expanded its influence with regional branches in the CEE, Iberia, and Nordic regions. In the Americas, the Washington DC branch caters to women antitrust professionals in the US, Canada, Central, and South Americas.

Primerio South African directors, John Oxenham and Michael-James Currie says that “Primerio is a proud supporter of WomenAT and looks forward to more collaborative initiatives. We are particularly proud of the contribution and initiative demonstrated by Primerio’s Gina Lodolo and Jemma Muller, who are part of the Executive Committee of W@CompetitionZA and who contributed to making this timely event happen”.

The launch of WomenAT in South Africa signifies a major step towards empowering women professionals in the country’s competition policy and regulation sector. By facilitating connections, promoting knowledge-sharing, and advocating for gender diversity, WomenAT is poised to make a significant impact in fostering an inclusive and thriving professional community.

For those who are interesting in attending the event, please reach out to Gina or Jemma.

Nigerian antitrust regulator takes up digital money lenders

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FCCPC Resumes its Digital Money Lender Registration Process 

By Nicola Taljaard 

On 26 June 2023, the Federal Competition and Consumer Protection Commission (“FCCPC”) announced the resumption of registration of Digital Money Lenders (“DMLs”) under the Joint Regulatory and Enforcement Task Force’s Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022 (“Guidelines”).

In a statement signed by CEO and Executive Vice-Chairman Babatunde Irukera, the FCCPC stated that the decision to resume registration was in response to requests from both existing platforms that missed the earlier registration deadline set by the FCCPC and new businesses planning to enter the market. He explained that as part of the Joint Regulatory and Enforcement Task Force (“JRETF”), the FCCPC introduced the Guidelines to protect consumers’ rights and ensure responsible practices by digital money lenders, particularly in light of the increasing number of loan sharks and the like flooding Nigeria’s digital money market. The associated registration process/platform was also established.

The Guidelines initially required completion of the registration process by November 14, 2022, to continue operations and enjoy privileges such as access to Google Playstore and payment systems/gateways. The FCCPC, however, extended the deadline to January 31, 2023, and subsequently to March 27 of the same year.

Irukera further noted that, while the JRETF continues to work toward developing a more comprehensive and durable digital lending regulatory framework, the FCCPC remains inundated with applications for registration and thus, it will resume in accepting and approving eligible DML applications, from both businesses those that previously failed to register themselves on the basis of the initial Guidelines as well as new businesses seeking to enter the market. 

Nevertheless, Irukera cautioned that businesses that were removed from Google Playstore or halted transaction processing would only be registered after providing a statement that justifies their failure to complete the registration before the previous deadline. In addition,any late applications would be subjected to a late processing fee. 

Says Andreas Stargard, a partner with Primerio Ltd.: “This development shows that the FCCPC is not only a capable and multi-faceted (albeit young) agency, but also that it is highly attuned and quick to adapt to — in real life, and with real action taken — some of the digital-markets issues that seem to be the du jour topic of antitrust in 2023.” It shows the FCCPC’s commitment to continuously monitor the digital market and safeguard the rights of consumers against privacy violations, harassment, unconventional loan repayment strategies, and disclosed charges associated with loans.”

For the full list of DMLs that have received conditional and full approval, see here: https://fccpc.gov.ng/registration-status-for-digital-money-lenders-apps/

Competition Authority of Kenya exempts MSMEs from merger control provisions to stimulate economy

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Competition Authority adds exemptions to boost economic activity

By Joshua Eveleigh and Katia Lopes

In a recent speech by Kenya’s Minister of Finance, Professor Njuguna Ndung’u, it is clear that the Competition Authority of Kenya (“CAK”) will take active steps in promoting micro, small and medium-sized enterprises (“MSMEs”) in the local economy.

Firstly, to facilitate their growth and contribution, Professor Ndung’u, noted that government plans to ease the cost of doing business and to minimize compliance costs for MSMEs.  Specifically, the CAK will exempt MSMEs from having to notify otherwise mandatorily notifiable mergers to the CAK. By removing the significant regulatory hurdle of obtaining prior merger approval, and its associated costs, it is hoped that Kenya will see a promotion of start-up and digital businesses. This development is particularly important considering that Kenyan startups ranked second, in Africa, in terms of funding raised but fell behind other African jurisdictions when it came to acquisitions of MSMEs.  Fidel Mwaki, legal practitioner based in Nairobi, observes that “this is a positive move from the CAK that should hopefully bode well for MSME’s, many of whom are battling under the strain of increased taxation, inflation, and licensing requirements and will certainly benefit from the proposed waiver on merger notification fees.”  His Primerio colleague, attorney Diana Wariara, adds that “regulating buyer power remains a challenge for the agency.  A greater emphasis on audits and investigations may help strengthen the CAK’s enforcement mandate and ensure a level playing field and fair competitive practices within these sectors.”

In addition to merger exemptions and emphasising the CAK’s position as Eastern Africa’s lodestar in the enforcement of abuses of buyer power, the CAK will monitor and conduct surveillance audits, specifically in the manufacturing and agro-processing sectors, to further protect MSMEs from incidences of abuses of buyer power. Professor Ndung’u also noted that the CAK will implement codes of practice to ensure MSMEs in the retail and insurance sectors are protected from powerful buyers.

Lastly, Professor Ndung’u highlighted that the CAK will take measures to address the issues of price fixing by professional services, ensuring that fees and the quality of professional services remain competitive.

Given the pivotal role that MSMEs play in the Kenyan economy, comprising 98% of all local business entities and contributing approximately 24% of Kenya’s GDP, their promotion will be a welcome development among the local business community. In this respect, Professor Ndung’u’s speech demonstrates the CAK’s commitment towards ensuring a competitive marketplace that is free from abuses of dominance.

Important Regulations recently published by the Department of Trade Industry and Competition to prepare for the upcoming release of the SACC’s final recommendations in respect of its various market inquiries.

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By: Gina Lodolo

By way of background, the Competition Amendment Act 18 of 2018 (“Act”) included amendments to the powers of the South African Competition Commission (“SACC”) in respect of market inquiries.  In terms of the amended Section 43C of the Act, should the SACC find that there are features which have an adverse effect on competition, with particular regard to the “impact of the adverse effect on competition on small and medium businesses, or firms controlled or owned by historically disadvantaged persons”, the SACC must make recommendations, which will mitigate the adverse effects on competition.  The SACC’s remedial powers include, most notably under Section 43D(2) read with Section 60(2)(c), that the SACC can make a recommendation to the Competition Tribunal to order a divestiture in relation to such an adverse effect on competition identified in the market inquiry.

On 24 May 2023, the Minister of Trade, Industry and Competition published regulations titled ‘Regulations relating to appeals arising from market inquiries before the Competition Tribunal in terms of section 43F and Regulations relating to a divestiture recommendation by the Commission in terms of Section 43D(2) of the Competition Act, No.89 of 1998, as amended’ (“Regulations”), which took effect upon publication thereof, to govern the procedure that the SACC must follow when making such a recommendation to the Competition Tribunal to order a divestiture following a market inquiry, together with the rules for appealing a decision made by the SACC emanating from a market inquiry.  In this regard, where the SACC concludes in a market inquiry that a divestiture be recommended to the Competition Tribunal to make such an order, the SACC must file a notice of motion and affidavit providing:

  1. grounds for the recommendation;
  2. material facts;
  3. the law relied on by the SACC; and
  4. provide reasons for the divestiture being reasonable and practical.

The respondent will be provided with an opportunity to oppose the recommendation to the Competition Tribunal.

In respect of appealing a recommendation by the SACC emanating from a market inquiry, any person that is materially and adversely affected by a decision of the SACC in respect of remedial action taken by the SACC to remedy an adverse effect on competition, may appeal the decision by filing a Notice of Appeal. The Notice of Appeal must be filed within 25 business days after the affected organisation has received a notice from the SACC of the decision. While the evidence in the appeal will usually be confined to the market inquiry record, the Regulations do provide a number of exceptions.

The Regulations provide that the Notice of Appeal must contains the following:

‘(a) the determination or decision that is the subject of the appeal;

(b) whether the whole or part of the determination or decision is the subject of the

appeal;

(c) if only part/s of the determination or decision are being appealed against, which

part/s of the determination or decision are the subject of the appeal;

(d) the grounds on which the appeal is based; and

(e) the relief sought.’

For the full process governing the appeal, see here.

These Regulations are vital to be cognisant of as the SACC is currently in the process of undergoing various market inquiries, including the Fresh Produce Market Inquiry, the Media and Digital Platforms Market Inquiry, the South African Steel Industry Market Inquiry and most notably the Online Intermediation Platform Market Inquiry which is due to be completed on 30 June 2023 (after an extension was recently granted for the SACC to finalise the report and draft remedial actions and recommendations).

Primerio director, Michael-James Currie says given the SACC’s broad remedial powers following the conclusion of a market inquiry, coupled with a very different competition test to be used in market inquiries than the traditional SLC test, is likely to result in various market participants utilising the appeal procedures in the near future.

CCC Celebrates ’10’ — a Decade of COMESA Competition Law

Posted on by Editor

Anniversary of CCC’s 2013 Creation to be Celebrated, Developments Discussed

Next week, African heads of state, ministers of trade and commerce, the secretary general of the 21-member state COMESA organization, Commissioners, and several heads of various competition agencies across the region, from Egypt to Eswatini & from Mauritius to Malawi, will join antitrust practitioners, legal experts, business people, and journalists in celebrating the occasion of the 10-year anniversary of the COMESA Competition Commission in Lilongwe, where the agency is headquartered.

Of course, AAT will be there to cover it.

As leaders of this august publication will know by now, our authors have followed the development of the CCC since its very beginning: from the nascent stages of having only a rudimentary staff and foundational rule documents, lacking sufficient guidance for practitioners and businesses alike, to the significant developmental stage under its first chief executive officer, Dr. Lipimile, who built out his enforcement team to coincide with the stellar growth of the CCC’s “one-stop-shop” merger notification statistics and attendant agency reviews (hiring economists and lawyers alike from across COMESA member nations) — and culminating, so far at least, in what we have come to call “CCC 2.0”: the latest iteration of the vastly successful multi-jurisdictional antitrust body, now led by its long-term member Dr. Willard Mwemba.

Under Mwemba’s aegis, the Commission has advanced well beyond a mere ‘rubber-stamping’ merger review body, as some had perceived the fledgling agency in its very early years (approx. 2013-15). The triple-C has since then begun to launch serious investigations into price-fixing, monopolization, attempted monopolization, gun-jumping, as well as market allocation schemes and secretly implemented transactions that parties had failed to notify.

While ‘antitrust is on our minds’, we note here for the record that, beyond its “competition” ambit that mostly remains in our focus at AAT, the CCC’s enforcement mission also includes a fairly large “consumer protection” brief, and the agency’s dedicated unit has investigated areas of consumer concern as broad as airline practices, imported faulty American baby powder, online ‘dark’ practices, pay-TV, and agricultural product quality disputes (milk and sugar come to mind) between Uganda and Kenya, to name only a few…

Our publication, together with several of the business journals and newspapers across the southeastern region of Africa, will report in great detail on the events, and possible news, to take place next week. Says Andreas Stargard, a competition practitioner with Primerio International:

“I look forward to hearing from these leaders themselves what they have accomplished in 10 years, and more importantly what they wish to accomplish in the near to mid-term future. In addition, I have a feeling that we may be treated to some truly newsworthy developments: I could imagine there being either confirmation or denials of the circulating rumour that the COMESA merger regime will soon become not only mandatory, but also suspensory. As most attorneys practicing in this arena know by now, the current Competition Regulations are not suspensory, which may be deemed too restrictive by the group’s Secretariat and its agency leadership in terms of its enforcement powers. After all, it is much more difficult to unscramble the egg than to never let it drop in the pan from the get-go!

Also, the CCC may reveal its plans in relation to a leniency programme for cartel conduct, which is plainly in order!”

Beyond that, Stargard surmises, participants at the almost week-long event may be treated to news about the CCC’s thoughts on digital markets, sectoral investigations, and the Commission’s upcoming “beyond-mere-merger” enforcement activities.

Criminal cartels & dilapidated energy networks: Will South Africa act?

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A true challenge to the impartiality of the South African Competition Authority: Eskom and its Criminal Supplier Cartels — Let’s wait and see what SACC does now

By Joshua Eveleigh

Will South Africa’s antitrust watchdog, under the aegies of its relatively new head Doris Tshepe, investigate and prosecute flagrant cartel conduct, when it is practically presented on a sliver platter by one of the CEOs of the (willing?) victims of said illegality…? Andre De Ruyter, former CEO of South Africa’s recently-infamous Eskom, is no stranger to the limelight – this is particularly true, following his scandalous (but not so surprising) bombshell allegations of deep-rooted and systemic corruption within the State-Owned Enterprise, together with ‘senior politicians’.

Even more recently, De Ruyter tested the antitrust waters and emphasised the existence of at least four cartels amongst coal mines in Mpumalanga (the Presidential Cartel, the Mesh-Kings Cartel, the Legendaries Cartel, and the Chief Cartel, respectively) intent on defrauding Eskom by, amongst a myriad other means, engaging in collusive tendering, so as to ensure that one of the cartel’s participants would ultimately be appointed as a lucrative vendor.

While there may not be any definitive or public available evidence, as of yet, the mere allegations of such cartels by the SOEs former CEO should at least raise enough red flags for South Africa’s Competition Commission. In this respect, section 4(1)(b)(iii) of the Competition Act expressly prohibits collusive tendering, forming part of the ‘cartel conduct’ category, the most egregious form of competition law contraventions due to their unnecessary raising of prices – of which may be passed down to end-consumers.  Mr. De Ruyter noted that the mere reality that cartel chiefs had ceased posting personal jet set lifestyle photos on social media was evidence of their having been alerted to the risks attendant to flagrant antitrust violations.

Given the current state of load-shedding, Eskom’s R423 billion indebtedness (as of March 2023) and the prejudicial impact that these factors are having on both business and personal livelihoods, the South African Competition Commission – theoretically in charge of cartels in the country — must surely regard the energy sector as a priority.  In this regard, one would expect a similar sense of urgency and emphasis that the Competition Commission has recently placed on the retail and grocery sectors, for the focus to be on South Africa’s energy sector.  After all, says Primerio partner John Oxenham, “this sector impacts every facet of commerce and consumer welfare.  If this was the case, the South African public could expect to see the prosecution and sanctioning of numerous cartels, each allowing for a maximum administrative penalty of 10% of the cartelist’s locally derived turnover as well as the potential for subsequent civil follow-on damages claims as well as criminal prosecutions.”

Oxenham’s competition-law colleague, Michael Currie, opines that, “[i]n the event that the Competition Commission does not investigate and prosecute against the coal mine cartels, such a position would largely reinforce the notion that some of the most unscrupulous of cartels are immune from prosecution, further entrenching the existence of cartels in South Africa’s most sensitive sectors.”