Nigerian president, Bola Tinubu, yesterday appointed Mr. Tunji Bello to become the new Chief Executive Officer and Executive Vice-Chairman of the Federal Competition and Consumer Protection Commission (“FCCPC”), subject to review and a vote by the Senate, which is expected to pass without issue.
Observers are noting the relative lack of competition-law / antitrust experience of Mr. Bello (whose prior credentials include State Secretary and Environment Commissioner, both in Lagos State). Mr. Bello, a former journalist, is an unknown to most, if not all, competition-law practitioners. His Wikipedia entry describes him primarily in terms of his career as a journalist, which included international stints as “a Staff Writer with [the] St. Petersburg Times, Florida, US, and also [] US News & World Report, Washington DC in 1992.”
The formal press release (see below) seems to support this sentiment of a purely political appointment without any regard to prior competition-law or economics experience, as it appears to focus solely on “consumer protection” and the “safety of goods and services,” while failing to mention competition or antitrust even once.
We note that some commentators have pointed out, at the cynical end of the spectrum, that this appointment may be due to the FCCPC’s past successes in garnering massive fines (e.g., the $110 million fine imposed against BAT), under recently-dismissed predecessor Babatunde Irukera. Such financial windfalls for the government coffers have, these observers believe, turned the agency’s CEO job, into a highly coveted executive post, which had been temporarily held in an interim capacity by Dr. Adamu Abdullahi between January and Mr. Bello’s appointment yesterday.
AAT is hopeful that this is not the case, and that Mr. Bello will not turn the young and so-far highly-regarded FCCPC into a mere means to an end of generating revenue for the Nigerian government. We trust that the Commission will continue to uphold its mandate of competition-law enforcement and its high standard of excellence, thanks in large part to the leadership of Mr. Bello’s predecessor and the quality of the senior team members he had assembled to run the agency.
Press release:
President Bola Tinubu has approved the appointment of Mr. Olatunji Bello as the new Chief Executive Officer/Executive Vice-Chairman of the Federal Competition and Consumer Protection Commission (FCCPC), pending confirmation by the Senate.
Mr. Bello is a lawyer, administrator, and renowned journalist.
He is the former secretary to the Lagos State Government and holds a Master’s degree in International Law and Diplomacy from the University of Lagos. He studied Law at the same university and was called to the Nigerian Bar in 2002.
Mr. Bello began his career in journalism at the Concord Newspapers in 1985 and held the positions of Group Political Editor; Sunday Concord Editor, and Editor, National Concord.
He is a winner of the US Alfred Friendly Press Fellowship and was appointed the Chairman, Editorial Board of THISDAY Newspapers in 2001.
He also served as Commissioner for Environment under various administrations in Lagos State.
The President expects that the new Chief Executive Officer of this important agency will ensure the holistic realization of the Commission’s mandate of protecting and promoting the interest and welfare of Nigerian consumers, and ensuring the adoption of measures to guarantee the safety and quality of goods and services.
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:
a particular industrial sector or region;
employment;
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;
the ability of national industries to compete in international markets; and
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:
concluding alternative ownership agreements with HDPs/Workers in either the acquiring, target or merged firm; and
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:
where a merger results in a dilution of HDP and/or workers, the ESOP should remedy the full extent of the dilution;
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:
the HDP transaction should be no less than 25% +1 share and “should ideally confer control on the HDPs”;
the merging parties will have discretion to choose the HDPs; and
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.
The booming voice of eminent antitrust scholar and GW Law professor Bill Kovacic easily surmounted the small technical microphone glitches at COMESA’s celebration of its Competition Commission’s first 10 years in Malawi (#CCCat10years), giving the keynote address.
His accessible speech, given in front of a diverse audience comprised of senior ministers and policy makers, lawyers, enforcers, and media representatives, focused on practical examples covering three key topics of public expenditures, subsidies, and the removal of entry barriers.
On state spending, he noted the attendant “global epidemic of collusion and corruption”, in areas as simple, but important to development, as transportation infrastructure. “We don’t always need to debate ‘digital markets’ or ‘big tech’, we can also highlight the importance of basic road-building on increasing trade and measurably growing economies” across Africa. But these areas of public expenditures are invariably hampered by corrupt or collusive tendering and similar cartel conduct — important focus areas for the COMESA CCC to enforce.
In the area of public subsidies, Kovacic proposed a future collaborative working relationship between antitrust enforcers, legislators, and those ministries that allocate state subsidies, ideally to non-incumbents (giving the NASA vs. Space-X example to make his point) so as to enhance market entry.
The CCC should enhance market access by making barriers to entry “more porous” for newer small competitors, with Kovacic using the famous 1982 Bell Telephone/AT&T U.S. antitrust precedent to highlight the practical value of competition law to society and innovation of new, better, and cheaper products and services.
At today’s CCC Business Reporter Workshop, Senior M&A Analyst Sandya Booluck presented major plans to amend the regional trading bloc’s merger-control regime.
The most notable part of this “complete overhaul” of the CCC regime will be the likely change from the current non-suspensory to a suspensory merger notification scheme.
Says Primerio Ltd. antitrust counsel Andreas Stargard: “This change is, of course, still subject to approval by the CCC Board and the COMESA Secretariat Council of Ministers, but it is likely to pass in my personal opinion. This is especially true since, as former CCC Head Lipimile pointed out at today’s session, this change was in fact demanded by several of the NCAs of the COMESA member states, also in view of the Art. 24(8) referral procedure. It thus presumably enjoys broad support from the bloc’s leadership and will obtain a passing vote before the end of 2023!”
A brief note from the “front lines” of the COMESA Competition Commission’s 10-year anniversary event: Isaac Tausha, chief economist for research policy and advocacy, provides the following statistics — notably for the entire duration of the CCC’s life decade so far.
In short: Gone are the meager days of fledgling notifications to the CCC.
Statistics Since Inception
369 mergers and acquisitions assessed. (Total COMESA revenues of merging parties: US$210bn)
Over 40 Restrictive Business Practices assessed
Over 44 Consumer Protection cases handled
More than 12 market screenings and studies undertaken
3 businesses fined for non-compliance with the Regulations
Doing a “back of the envelope” estimate, we at AAT are calculating the total merger filing fees resulting from those 367 notified deals to be possibly north of $75 million$65 million, so on average $6.5m “income” for the CCC per year (half of which goes to the 21 member states, of course, under the Regulations). This is notably without taking into account fines, e.g., a recent $102,000+ fine for failure to notify (as in our reporting on the Helios Towers / Malawi case).
Dr. Chris Onyango (Dir. Trade, Customs and Monetary Affairs, COMESA)Dr. Lipimile (former CCC CEO). Mary Gurure (Head of Legal, CCC). Andreas Stargard (Editor, AAT).
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.
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.”
Today, the East African reported on a stunning admission by the Chief Executive Officer of Kenyan mobile telco heavyweight Safaricom (itself no stranger to AAT telco competition reporting and proprietor of the massive M-Pesa mobile money network across East Africa). In the article, fittingly entitled “Safaricom rules out price war in Ethiopian market“, the business report quotes Mr. Peter Ndegwa as saying:
“From a pricing perspective, our pricing strategy is generally to be either in line or just slightly at a premium, but not to go for any price competition. The intention is actually generally to be closer to what the main operator is offering, especially on voice.”
Safaricom’s senior exec made his curious confession on a recent investor call. Says Andreas Stargard, a competition attorney with Primerio: “On these investor conference calls, there are usually several analysts and reporters on the line, listening in, and they commonly are also recorded. This would mean there exist clear prima facie evidence and several witnesses to these statements, as reported by the East African source.” He adds: “It remains to be seen whether any of the several competent authorities will investigate Safaricom’s express statement of a de facto ‘non-compete’ between the Ethiopian incumbent and the Kenyan upstart,” with the former (Ethiotel) boasting 54m subscribers, as opposed to the latter’s mere 1m users in-country.
POSSIBLE INVESTIGATIONS
When asked which government authorities would be authorized to investigate Safaricom’s “no price war” policy expressed by Mr. Ndegwa, according to the newspaper, Mr. Stargard noted that, beyond the domestic Ethiopian telecoms regulator, there existed at least two (2) competent antitrust bodies with jurisdictional authority: “For any potentially anti-competitive conduct occurring in Ethiopia that may have a cross-border effect (as mobile telephony usually does — especially with a foreign, here Kenyan, operator involved as well), I could see either the Ethiopian Trade Competition and Consumer Protection Authority (“TCCPA”) or the supra-national COMESA Competition Commission (“CCC“) under Dr. Mwemba’s reinvigorated leadership stepping in.”
As the latter has made clear in several public pronouncements recently, the CCC is poised to continue its non-merger enforcement streak, that is: investigating and prosecuting restrictive business practices, such as cartels and cartel-like behaviour. “We call it, CCC 2.0,” Stargard adds half-jokingly. He notes that both the TCCPA and CCC have all the necessary legislative instruments in hand to proceed with a preliminary investigation on the basis of the above quotes published by the East African:
In Ethiopia, the TCCPA could argue that “expressly avoiding a price war” is possibly in violation of Article 7(1) of the Ethiopian Trade Competition and Consumer Protection Proclamation (“Article 7(1)”), which provides that “(1) An agreement between or concerted practice by, business persons or a decision by association of business persons in a horizontal relationship shall be prohibited if:…(b) it involves, directly or indirectly, fixing a purchase or selling price or any other trading condition, collusive tendering or dividing markets by allocating customers, suppliers territories or specific types of goods or services”.
For COMESA, the CCC has conceivably two legislative tools at its disposal: First, Art. 16 of the Regulations (“Restrictive Business Practices”) prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which (i) may affect trade between member states, and (ii) have as their object or effect the prevention, restriction or distortion of competition. Provision is then made (in Art. 19(4)) for the Article to be “declared inapplicable” if the agreement, decision or concerted practice gives rise to efficiencies and the like. Importantly, even though Art. 16 also applies to by-object practices, provision is made for an efficiency defence. Second, the CCC could resort to Art. 19 (“Prohibited Practices”), which focusses on “hard-core” cartel-like practices. Art. 19(2) provides that Art. 19 applies to agreements, arrangements and understandings, while sub-sections (1) and (3) provide that it is an offence for (actual or potential competitors) to fix prices, to big-rig or tender collusively, to allocate markets or customers, and the like.
DEFENCES
Safaricom and its domestic competitor (the government-owned, former absolute monopolist, Ethiotel) may of course offer — preemptively or otherwise — a pro-competitive explanation for their alleged “non-compete” agreement. However, in attorney Stargard’s view, such defences must be well-founded, non-pretextual, and they would be well-advised to have contemporaneous business records supporting any such defences at the ready, should an antitrust investigation indeed ensue.
“Indeed, it may appear to the authorities that Mr. Ndegwa’s quoted concession of ‘We won’t compete on price’ may be a sign of capitulation or at least a ‘truce’ between Safaricom and Ethiotel,” he surmises, “because as recently as mid-December [2022], the incumbent monopolist [Ethiotel] had threatened legal action against the Kenyan newcomer, claiming that Safaricom had ‘harrassed’ the incumbent’s customers and caused loss of service due to its actions.” An incoming competitor’s attempt at avoiding a civil lawsuit between it and would-be competitors would, of course, not constitute a legal defence to forming a (formal or informal) non-compete agreement on pricing, he adds.
“We have extensive experience counseling clients on how to successfully — and aggressively — defend against accusations of price-fixing, whether the allegations involve tacit collusion or express price or market-allocation cartel behaviour. While the parties here would likely not have a formalistic statute-of-limitations argument at their disposal, given the recent nature of the conduct at issue, I could imagine there being eminently reasonable ways of showing the harmless nature of the conduct underlying the, perhaps misleading, investor-call statements made by the executive,” he concludes.
PRICE-FIXING ALLEGATIONS LEAD TO THURSDAY’S DAWN RAIDS AT MAJOR SOUTH AFRICAN INSURANCE COMPANIES
By Michael-James Currie and Joshua Eveleigh
On 25 August 2022, the South African Competition Commission (“SACC”) announced that it was conducting so-called ‘dawn raids’ as part of an ongoing investigation into the industry, initiated in 2021. The raid took place simultaneously at 8 of South Africa’s major insurance firms: Discovery Limited; Hollard Insurance Group (Pty) Ltd; Momentum, a division of MNI Limited; Old Mutual Limited; BrightRock Life Limited; FMI, a division of Bidvest Life Limited; Professional Provident Society Limited, and South African National Life Assurance Company (Pty) Ltd (together, the “Insurance Firms”).
Notably, all of the Insurance Firms operate within the long-term insurance market.
The SACC’s decision to raid the premises of the Insurance Firms comes as the result of suspicions that the they had agreed to fix prices and/or trading terms in relation to certain investment products in contravention of section 4(1)(i) of the Competition Act, 89 of 1998 (“Competition Act”). Specifically, the SACC stated that it was in possession of information implicating the Insurance Firms in a scheme to share information regarding premium rates on risk-related products and fees for other investment products.
Says John Oxenham, a lawyer with Primerio Ltd., “[a]lthough dawn raids form part of the SACC’s ordinary evidence gathering procedure and is not indicative of the guilt of the Insurance Firms, the sharing of information would enable the coordination of increased prices.” Given that the clients of the Insurance Firms include both natural and juristic persons, the effect of the alleged conduct would have far-reaching and adverse effects on consumers, particularly where those consumers are sensitive to price increases. Continues attorney Oxenham: “In this respect, it would be unsurprising if the SACC were to continue on its path of highlighting ‘public-interest‘ objectives by pursuing the investigation against the Insurance Firms and seeking the maximum penalty in respect of a contravention of section 4(1)(b)(i) – 10% of the Firm’s annual turnover in and from South Africa, for first-time offenders.”
Mr. Oxenham’s colleague, Andreas Stargard, notes the size of the RSA insurance market, and points out that the dawn raids occurred across the entire geography of the Republic of South Africa: “South Africa alone makes up over two-thirds of all African insurance premiums continent-wide! Today, the SACC’s spokesperson Sipho Ngwema confirmed today that 5 sites were raided in Gauteng, 2 in the Western Cape, and 1 in KwaZulu-Natal. This simultaneous and unannounced action is testament to the Commission’s bench strength, no doubt assisted by local provincial law-enforcement authorities, as is usually the case across in antitrust raids across the globe, where the actual evidence-gathering procedure is not only undertaken by government competition lawyers, but rather significantly assisted by local police, sheriffs, or similar enforcement agencies”. Finally, Stargard notes, “it remains to be seen whether this raid occurred as a result purely of the agency’s prior sector investigation, or whether there was (or were) any whistleblower(s) seeking leniency for their participation in the alleged cartel conduct, thus enabling the SACC to pursue a targeted and well-founded raid.”
Interestingly, a U.S. consulting firm, McKinsey, which has been involved with several South African government agencies and quasi-governmental entities, recently published an article entitled “Africa’s insurance market is set for takeoff“, noting that the “African insurance market’s immaturity points to significant scope for growth”:
Africa’s insurance industry is valued at about $68 billion in terms of GWP and is the eighth largest in the world—although this is not equally distributed across the continent. Markets are inconsistent in terms of size, mix, growth, and degree of consolidation, with 91 percent of premiums concentrated in just ten countries. South Africa, the largest and most established insurance market, accounts for 70 percent of total premiums. Outside of South Africa, we see six primary insurance regions in Africa. In the Southern Africa region, 54 percent of premiums are for life insurance. Nonlife insurance, however, plays a larger role in anglophone West Africa, North Africa, East Africa, and even more so in francophone Africa
It remains to be seen whether the effect of today’s raids in the RSA will hinder the predicted “takeoff” of the insurance industry, or assist in its growth within permissible, lawful boundaries.
An AAT-exclusive first report on this — somewhat stunning — development follows below. More details to be published once they become available in a new post…
On August 8th, 2022, the CCC officially announced the formal withdrawal of its Practice Note No. 1 of 2021, which had clarified what it meant for a party to “operate” in the COMESA common market. The announcement mentions that it will (soon? how soon?) be replaced with a revised Practice Note — a somewhat unusual step, in our view, as the revised document could have, or should have, been published simultaneously with the withdrawal of the old one. Otherwise, in the “interim of the void,” legal practitioners and commercial parties evaluating M&A ramifications in the COMESA region will be left with no additional guidance outside the bloc’s basic Competition Regulations and Rules.
Of note, “this clarifying policy document did not stem from the era of Dr. Mwemba’s predecessor (CCC 1.0 as we are wont to call it), but it was already released under Willard’s aegis as then-interim director of the agency,” observes Andreas Stargard, a competition lawyer at Primerio Ltd. He continues: “Therefore, we cannot ascribe this most recent abdication to a change in personnel or agency-leadership philosophy, but rather external factors, such as — perhaps — the apparently numerous inquiries the CCC still received even after implementation of the Note.”
To remind our readers, we had previously reported on AAT as to this (now rescinded) note as follows (Feb. 11, 2021):
The COMESA Competition Commission (“CCC”) issued new guidance today in relation to its application of previously ambiguous and potentially self-contradictory merger-notification rules under the supra-national COMESA regime. As Andreas Stargard, a competition practitioner with Primerio notes:
“Thisnew Practice Noteissued by Dr. Mwemba is an extremely welcome step in clarifying when to notify M&A deals to the COMESA authorities. Specifically, it clears up the confusion as to the meaning of the term ‘to operate’ within the Common Market.
Prior conflicts between the 3 operative documents (the ‘Rules’, ‘Guidelines’, and the ‘Regulations’) had become untenable for practitioners to continue without clear guidance from the CCC, which we have now received. I applaud the Commission for taking this important step in the right direction, aligning its merger procedure with the principles of established best-practice jurisdictions such as the European Union.”
African Antitrust & Competition Law 