COMESA Competition Commission: 2019 Regional Sensitization Workshop

On 9-10 September 2019, the Comesa Competition Commission (CCC) hosted its 6th  “Regional Sensitization Workshop for Business Reporters on Competition Law and Trade Developments within the Common Market” workshop in Nairobi, Kenya as part of its advocacy initiative to promote competition law and enforcement activities across the COMESA region.

AfricanAntitrust, having attended last year’s event, was again invited to attend the event and senior contributor and competition lawyer, Michael-James Currie, attended the event on behalf of AAT and participated in a serious of panel discussions and informal interactive sessions with members of the CCC and Competition Authority of Kenya.

Attendees

The workshop was well attended with a year on year increase in attendees reflecting the importance and popularity of this initiative. The CCC should be congratulated on a well organized and structured workshop.

Patrick Okilangole, Board Chairperson of the CCC, opened the event by highlighting the importance of competitive domestic markets to  “realize the benefits of trade; multilateral and bilateral trade agreements recognize the need to guarantee that restrictive business practices do not hinder the positive effects of free trade”.

Protectionist policies was identified by Okilangole as one of the key impediments to effective regional growth and trade. More specifically, Okilangole highlighted the following consequences of protectionist policies:

“(i)     Ineffective competition policy frameworks. Over the past few years, competition law has been enacted in several Member States of the Common Market. However, in some countries, competition frameworks have included:

(ii)      unjustified and discretionary exemptions, for example, utilities managed by the state in key economic sectors,

(iii)     lack of sufficient investigative powers and tools in the current national and regional legislation to deter anticompetitive behaviour,

(iv)    lack of independency in decision making since competition agencies report to and their decisions may be vetoed by a ministry, and

(v)     significant government intervention in markets such as price controls in potentially competitive markets, controlling essential products, margins, and geographic areas.”

Okilangole reaffirmed the true hallmark of an effective competition law regime, namely that competition law should be focused on protecting the competitive process and not a particular competitor. “The rules are not meant to punish large companies on account of their size or commercial success. The key feature of the competition rules is to create a level playing field for all business players in the market.”

Okilangole’s remarks were echoed by the Chief Executive Officer of the CCC, George Lipimile who emphasised the need to move away from protectionist policies in order to realise the benefits that flow from increased regional trade.

Restrictive business practices, particularly abuse of dominance practices and collusion were identified by Lipimile as being particularly prevalent within COMESA and that increased enforcement activities are required, both by the CCC and regional agencies, to detect and prosecute anti-competitive behaviour.

The workshop was also used as an opportunity to present and engage on the CCC’s Guidelines on Restrictive Business Practices (which were approved in April 2019). The objective of the Guidelines is to provide greater clarity, predictability and transparency in relation to the analytical framework which will be used to evaluate alleged anti-competitive conduct. The Guidelines also provide greater guidance on the process and circumstances in which the CCC may grant exemptions.

The CCC was well represented (so to was the CAK) and senior investigators, analysts and members from the executive team provided useful insights into the enforcement activities of the CCC as well as what lay ahead in the pipeline. Attendees were invited to engage, debate and where appropriate raise concerns regarding the efficacy of competition law enforcement in COMESA. It is this willingness to be open and engage proactively with constructive criticism which is perhaps the hallmark of this CCC initiative and certainly welcomed by the attendees.

As to enforcement updates, the CCC put together comprehensive presentations both in relation to merger control and restrictive business practices more generally. We highlight some of the more noteworthy developments below.

Merger Control

Willard Mwemba, manager of mergers and acquisitions at the CCC, confirmed that over 230 transactions have been notified to the CCC between 2013 and July 2019. Of these, 17 were approved subject to conditions.

From a merger trend perspective, the CCC witnessed an increased shift in merger notifications in traditional sectors, such as agriculture and construction, to emerging sectors such as energy, banking and financial services with the most active member states including Kenya, Zambia, Mauritius, Zimbabwe and Uganda.

As to merger activity in COMESA, Mwemba confirmed that there has been a decrease in merger activity in the first half of 2019, largely as a result of a decrease in global activity and that the value of transactions that occurred within the first half of 2019 dropped from USD 527 billion to USD 319 billion for the same period in 2018. This is also consistent with the 19% decrease in the number of notifiable transactions globally.

The combined total turnover value of all mergers assessed by the CCC to date amounts to over USD 110 billion. Although 2019 figures were not presented, the CCC highlighted that total Foreign Direct Investment in COMESA grew in 2016 from USD 18.6 billion to USD 19.3 billion in 2017 representing nearly half of Africa’s total FDI inflows. Again, highlighting the significance of the COMESA market in the global space.

Enforcement Activities

Although the CCC has had an active merger control regime in place for many years, a number of commentators have raised the lack of robustly investigated and prosecuted abuse of dominance or cartel cases as a key hindrance to effective competition law enforcement in COMESA. While the CCC acknowledges that more should be done in this regard, below is a list of non-merger matters which the CCC has concluded in past three years:

Exemptions

Matter Sector Affected Member States
Assessment of the supply agreement between Eveready East Africa Limited and Supreme Imports Limited Lighting bulbs Burundi, DRC, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Uganda, Zambia
Assessment of the supply agreement between Eveready East Africa Limited and Sayyed Engineers Limited Writing implements East Africa
Assessment of the supply agreement between Eveready East Africa Limited and Chloride Egypt SAE Automotive Batteries Burundi, DRC, Ethiopia, Kenya, Rwanda, Uganda
Assessment of the Distribution Agreement between John Deere (Proprietary) Limited and AFGRI Zimbabwe Private Limited Agriculture Equipment Zimbabwe
Assessment of the Distribution Agreement between the Wirtgen Group and the Motor Engineering Company of Ethiopia Agriculture and Construction Equipment Ethiopia
Assessment of the Distribution Agreement between the Wirtgen Group and UMCL Limited Agriculture and Construction Equipment Comoros, Mauritius, Seychelles
Assessment of the Distribution Agreement between the Wirtgen Group and Sodirex SA, Madagascar Road Construction Machinery Madagascar
Application for the Joint Venture Agreement between Kenya Airways PLC, Koninklijke Luchvaart Maatscahppij NV (KLM) and Societe Air France SA Aviation Kenya
Assessment of the distribution agreements between Unilever Market Development (Pty) Limited and Distributors in the Common Market  FMCGs DRC, Madagascar, Mauritius,

Determination of Anti-Competitive Conduct: Procedure of Commission on its own volition

Matter Sector Affected Member States
Investigation into the Distribution Agreements entered into between Eveready East Africa Limited and Clorox Sub Saharan Africa Bleaching agents East Africa
Investigation into the Distribution Agreements entered into between Parmalat SA (Pty) Limited and its Distributors Milk and dairy products Eswatini, Malawi, Zambia and Zimbabwe
Investigation into the Distribution Agreements between Coca-Cola Beverages Africa and Distributors in the Common Market Non-alcoholic beverages Comoros, Ethiopia, Uganda

False or Misleading Representation 

Matter Sector Affected Member States
Misleading Advertising by Fastjet Airlines Limited Aviation Kenya, Uganda, Zambia, Zimbabwe

The CCC also confirmed that they are currently conducting a number of market screening initiatives across priority sectors. Following the conclusion of these screening exercises, the CCC will decide whether to prosecute any firms engaged in restrictive business practices.

As part of the CCC’s efforts in detecting and investigating anti-competitive behavior, the CCC has increased its collaborative efforts with domestic member agencies and has established the “Restrictive Business Practices Network” to increase the efficacy of cross-border cases.

Currie Panel Discussion

[Michael-James Currie speaking on a panel discussion on “How to improve the quality of reporting on regional integration and competition law related matters” facilitated by Mr Mwangi Gakunga from the Competition Authority of Kenya]

Conclusion

In light of the tripartite negotiations between SADC-EAC-COMESA as well as the negotiation of competition policy in terms of the African Continental Free Trade Agreement, it is imperative that the CCC develops an effective competition enforcement regime which assists and incentivizes free trade across the relevant markets. To do so, the CCC must be equipped with the necessary resources to ensure that it has the capacity to effectively execute its policies.

Despite the significant challenges faced by the CCC, it is encouraging to note that the CCC is taking a more robust approach to detecting and prosecuting anti-competitive practices in the COMESA market and are endeavoring to do so in accordance with international best practices.

If the CCC is able to deliver on the objectives and action items which were discussed in detail at the workshop, then there is every reasons to look forward to a more active CCC in the months to come with interesting cases likely to be brought to the fore.

 

 

 

 

 

 

 

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SOUTH AFRICA COMPETITION LAW: NEW REGULATIONS RE ACCESS TO RECORD

By Charl van der Merwe

The South African Minister of Economic Development, Ebrahim Patel (Minister) last week published the amended Regulation 15 of the Rules for the Conduct of Proceedings in the Competition Commission. The amended regulation is effective from date of publication being 25 January 2019.

The amended Regulation 15 has the effect of restricting access to the Commission’s record and preventing litigants from accessing the Commission’s record for purposes of preparing its defence in a legal matter before any court or administrative body (i.e. the Competition Tribunal).

In terms of the old Rule 15, any person had the right to request access to the Commission’s record, subject to certain rules regarding confidentiality and legal privilege. This led to various cases being brought before the Competition Tribunal and ultimately the Competition Appeal Court (CAC) where respondents requested access to the Commission’s record, prior to pleading and prior to discovery.

Issues regarding the proper interpretation of the old Rule 15 was finally settled by the CAC in the Standard Bank of South Africa Limited v the Competition Commission of South Africa (160/CAC/Nov17) case a mere four months prior to the Minister publishing the draft amended Regulation 15.  See AAT exclusive here

In summary, the CAC in Standard Bank confirmed its earlier judgement in the Group 5 case and held that any member of the public (regardless of whether it is also a litigant/respondent in proceedings before the Tribunal) must be granted access to the Commission’s record within a ‘reasonable time’. The CAC made clear that a member of the public’s right to access the Commission’s record should not be prejudiced by the fact that such an applicant is also a litigant.

Furthermore, the CAC also rejected the Commission’s argument that a reasonable time for purposes of producing its record to a litigant would be at the time of discovery (after pleadings have closed).

The amended Regulation 15 in direct conflict with the CAC’s ruling and further states that any record obtained in a manner that contravenes the Regulation 15 (i.e. in that the record was requested by and provided to a litigant) will not be admissible as evidence unless the court or administrative body finds that the exclusion of the record would be against the interests of justice.

In order to ensure compliance with the right to access to information in the Constitution, the amended Regulation 15 states that a litigant may request access or the production of the record through means of any other laws or rules of any court, including the Tribunal.

The Tribunal Rules deal only with information which has been submitted to the Tribunal and will not contain the Commission’s record prior to discovery (which is when the Commission contents a record must be made available to the respondents).

Furthermore, requiring a litigant to request access to the Commission’s record through means of the Promotion of Access to Information Act, 2002 (PAIA) is simply a shifting of the goalpost, effectively by passing the Competition Tribunal and CAC (which is bound by the CAC’s prior legal precedent). In terms of PAIA an individual or organisation (requester) must apply (by way of a specific form) to the relevant government body. If refused, the applicant must then request an internal appeal (which must be concluded within 30 days) and, only after the applicant has exhausted the internal appeal procedure, may the applicant apply to the High Court for access to the record.

The amended Regulation 15, therefore, effectively means that a litigant must now apply to the High Court (as opposed to the specialist Competition Tribunal and CAC) for access to the Commission’s record in instances where it is a litigant/respondent and where the Commission refuses to allow the litigant/respondent access to its record.

According to competition lawyer Michael-James Currie, while the amendment to Rule 15 is clearly motivated to preclude litigants accessing the Commission’s record prior to pleading, what is less clear is why granting litigants access to their record is such a contentious aspect from the Commission’s perspective. Presumably, the Commission  only refers cases for prosecution once it is in possession of sufficient evidence to sustain the allegations (at least on a prima facie basis). A respondent may, therefore, be better placed to gauge whether to oppose a complaint referral or settle the complaint referral once it has been provided with access to the record. This, says Currie, would go a long way to ensuring matters are resolved expeditiously as opposed to protracted litigation – particularly when the respondents’ representatives and decision makers have no knowledge of the alleged conduct or the conduct is historic, as firms are generally reluctant to settle a case unless they are fully aware of the evidence against it. Providing access to the Commission’s record would more likely result in the expeditious resolution of cases as opposed to being exploited by respondents. It will also ensure that the level of investigatory work is of the highest standard if respondents are granted access to the record prior to pleading.

Whether there are any constitutional challenges to the Regulations remains to be seen.