AAT exclusive, cartels, collusion, draft, legislation, settlement, Zambia

New Zambian Settlement Guidelines: A Risky Reprieve

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

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

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

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

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

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The authors, Mr. Currie & Ms. Mutuna

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

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

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

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

Risky Business?

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

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

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

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

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

Multi-Party Settlements: the More the Better?

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

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

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

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

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

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

 

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BRICS, cartels, collusion, COMESA, draft, leniency, leniency / amnesty, new regime, South Africa

Don’t wait for leniency… Lipimile signals delays

COMESA Chief Warns of Delayed Implementation of Leniency Policy

George Lipimile, CEO, COMESA Competition Commission

George Lipimile, Director, COMESA Competition Commission

In an interview with Concurrences, CCC Director George Lipimile stated cautiously that, while the agency had engaged a consultant to help it craft a regional leniency programme, it still had to “be discussed in detail with Member States. Given the different legal systems and the feedback coming from the consultations with Member States so far, this may take some time.”

Thus, “while there is no amnesty programme visible on the near-term horizon, the CCC’s novel cartel enforcement push poses particular concerns for undertakings operating in the COMESA region,” says Andreas Stargard, attorney with Africa advisory firm Pr1merio.  “Director Lipimile has expressed his agency’s plan — jointly with the World Bank organisation — to launch a project designed to combat cartel activity.  They propose to do so first, it seems, by piggy-backing off of other enforcers’ previous investigations, such as the South African Competition Commission’s cartel cases, and analysing whether those instances of foreign collusion could have harmful effects on the COMESA economies.”

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AAT exclusive, agriculture, BRICS, cartels, collusion, Patel, South Africa

Copperweld elsewhere: Why SA is not pursuing fisheries “cartel”

The concept of single economic entities and intra-company conspiracies

 
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Big Picture, BRICS, cartels, collusion, Extra-judicial Factors, Kenya, Patel, politics, public-interest, Russia, South Africa

Competition forum highlights antitrust enforcement, international cooperation

South Africa signs cooperation agreements with Russia and Kenya

Leading government officials presented their respective countries’ accomplishments in the antitrust arena at the 10th annual Competition Law, Economics & Policy Conference in Cape Town yesterday.

south_africaThe attendees ranged from the SA Minister of Economic Development, Ebrahim Patel, and the Commissioner of the Competition Commission, Tembinkosi Bonakele, to their Russian and Kenyan counterparts.  Kenya Competition Authority director general Francis Kariuki emphasised the officials’ desire to remove barriers to trade.  He was quoted as saying he looked forward to exchanging information on cross-border cartels, which affect both the South African and Kenyan economies: tsar_200“We have regional economic communities and regional trade. There are some infractions in South Africa which are affecting Kenya and vice versa. We want to join hands to do market enquiries and do research. This will inform our governments when they come up with policies.”

On the inside-BRICS front, the SA Commission signed an MoU with Russia, adding to Russia’s “rich and diverse bilateral agreements portfolio.”  The MoU is described as focussing particularly on pharmaceutical and automotive sectors, in which pending or future sectoral inquiries would see information-sharing between the Federal Antimonopoly Service (FAS) of Russia and the SACC, according to the FAS deputy chief Andrey Tsarikovskiy.

Patel talksMister Patel’s keynote address showed the glass half-full and half-empty, focussing in part on the need to “scale” the South African agency activity up to the level of the “success story” of domestic competition enforcement and its large caseload (quoting 133 new cartel cases initiated in the past year).

Never one to omit politicisation, Mr. Patel noted the perceived parallels he saw between South African history of concentrating economic power in the hands of a minority, raising indirectly the issue of public-interest concessions made in antitrust investigations, including M&A matters.  Mr. Patel clearly sees the SACC’s role as including a reduction in economic inequality among the populace, rather than being a neutral competition enforcer guided solely by internationally recognised legal antitrust & economic principles.  Both he and Commissioner Bonakele drew parallels between their anti-cartel enforcement and a purported reduction in the SA poverty rate of a whopping four tenths of a percent.

 

 

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BRICS, cartels, collusion, criminal AT, Dawn Raid, South Africa, Transportation, Uncategorized

South African Competition Commission… More Dawn Raids!

By AAT Senior Contributor, Michael-James Currie.

On 28 September 2016, the South African Competition Commission (SACC) conducted a further set of dawn raids. This time, on various cargo shipping liners based in the provinces of Kwa-Zulu Natal and the Western Cape.

The SACC indicated that “Hamburg Sud South Africa (Pty) Ltd, Maersk South Africa (Pty) Ltd, Safmarine (Pty) Ltd, Mediterranean Shipping Company (Pty) Ltd, Pacific International Line South Africa (Pty) Ltd and CMA CGM Shipping Agencies South Africa (Pty) Ltd have engaged in collusive practices to, inter alia, fix the incremental rates for the shipment of cargo from Asia to South Africa in contravention of the Competition Act”.

The investigation is allegedly a result of a complaint received from a member of public.

south_africaThe SACC has not provided an indication of the period over which conduct took place and whether this investigation relates to historical or on-going conduct. This is an important consideration in light of the introduction of criminalisation of cartel conduct, which came into effect as of 1 May 2016. In terms of the Section 73A of the Competition Amendment Act, any director or person with management authority may be held criminally liable for ‘causing’ or ‘knowingly acquiescing’ in cartel conduct.

Since the notion of criminal liability was put raised as far back as 2008, there have been substantial concerns raised about the effectiveness of the SACC’s corporate leniency policy which in effect, offers immunity to a company who whistle blows, from an administrative penalty only. The CLP does not offer immunity to any individual from criminal prosecution, as the discretion to prosecute an individual under Section 73A, rests solely with the National Prosecuting Authority.

The interplay between the introduction of criminal liability and dawn raids will, in our view, be quite significant as there have been a number of respondents who have thought to approach the SACC for leniency, off the back of a dawn raid. A decision which a company may think twice about if its directors may potentially be held criminally liable.

Regardless of the impact which the criminalisation of cartel conduct may have on the whistleblowing regime, the SACC remains committed to utilising dawn raids as one of its most powerful investigative tools.

The SACC has been strong proponent of dawn raids and despite having conducted its first dawn raids in the early 2000’s, the past 18 months has seen a marked spike in the number of dawn raids conducted across a broad range of sectors.

The shipping industry in particular has been the subject of significant attention from the South African Competition Authorities and last year saw substantial administrative penalties, of over R95 million, levied by way of a settlement agreement on WWL and NYK Shipping Liners respectively for having engaged cartel conduct in relation to certain shipping routes. This investigation, however, remains on-going.

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BRICS, cartels, collusion, fines, South Africa, Uncategorized

SOUTH AFRICA: RECORD-BREAKING FINE IMPOSED ON ARCELORMITTAL SOUTH AFRICA LIMITED

By AAT Senior Contributor, Michael-James Currie.

The Competition Commission and South African steel producer, ArcelorMittal South Africa Limited (ArcelorMittal), have agreed to settle six complaints against ArcelorMittal for R1.5 billion (approximately US$ 112 million), in what is the largest (agreed) administrative penalty imposed in South Africa.

The penalty (by consent order) represents just under 5% of ArcelorMittal total turnover (including chemicals) for 2015.

The allegations which were brought against ArcelorMittal included allegations of price fixing and market allocation in what was termed by the Competition Commission the “steel cartel”.

In terms of the settlement agreement, ArcelorMittal admitted to contravening section 4(1)(b) of the Competition Act and will pay not less than R300 million per annum for five years from 2017. Furthermore, ArcelorMittal has undertaken to invest approximately R4.6 million into the South African economy for the next 5 years (provided the prevailing economic conditions render such investment feasible). Interest will be charged on the outstanding amount, interest starting to run 17 months after the finalisation of the settlement agreement.

In addition to the cartel conduct, the Commission had also instituted a complaint alleging the dominant steel manufacturer had engaged in excessive pricing. Although ArcelorMittal did not admit to wrongdoing in relation to the abuse of dominance allegation, the parties nevertheless agree that ArcelorMittal would not generate earnings before interest and tax of over 10% for the next 5 years (subject to certain exceptions).

The Competition Commission’s press release states the following:

ArcelorMittal admits that it engaged in collusion with CISCO, Scaw and Cape Gate by fixing prices and discounts, allocating customers and sharing commercially sensitive information in the market for the manufacture of long steel products, in contravention of the Competition Act. ArcelorMittal also admits that it fixed the purchased price of scrap metal with Columbus Steel, Cape Gate and Scaw. In respect of the flat steel complaint and the Barnes Fencing complaints, ArcelorMittal admits the conduct as alleged by the Commission but does not admit that this conduct constituted a contravention of the Competition Act. In relation to the pricing complaint, ArcelorMittal does not admit that it acted in contravention of the Competition Act.

The investigation and settlement agreement follows a leniency application brought by another respondent, Scaw Metals.  There is little doubt that the Competition Commission’s corporate leniency policy has permitted the Commission to uncover and successfully prosecute a number of cartels.   As previously reported on AAT, the risk remains that the recent introduction of criminal liability (on directors or persons having management authority)  for engaging in cartel conduct, may dampen the use of the whistle-blower regime (absent any formal immunity from criminal prosecutions).

The settlement agreement does, however, bring finality to all six cases against ArcelorMittal.

In light of the very recent civil damages awarded in favour of Nationwide Airlines against South African Airways for abuse of dominance which led to loss of profits, it will be interesting to see whether any civil party elects to prosecute ArcelorMittal for the excessive pricing complaint. In terms of the South African Competition Act and a recent judgment by the Supreme Court of Appeal, it appears as if the door is closed on a civil litigant brining a civil damages claim against a respondent, based on a breach of the competition Act, if there has been no adverse finding made against such a respondent by the Competition Tribunal (or Competition Appeal Court) as per section 65 of the Competition Act.

The admission to having engaged in cartel conduct, may, however, expose ArcelorMittal to civil liability over and above the settlement agreement.

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cartels, collusion, East Africa, fines, Kenya

Billing the Billboard Bosses: Advertising trade association fixes prices, members pay fines

The Kenyan antitrust authority, CAK, recently closed its investigation into a classic price-fixing cartel involving the Outdoor Advertisers Association, resulting in a fine of Sh11.64 million (approx. $120,000) imposed on domestic advertising firms for fixing minimum prices of billboard space, reports the Kenya Gazette.  The affected companies include Magnate Ventures Limited (Sh5 million), A1 Outdoor Limited (Sh114,000), Live Ad Limited (Sh2.5 million) and Adsite Limited (Sh2.39 million), while four others had already settled with CAK previously (Consumer Link (Sh1.2 million), Look Media (Sh136,000), Firm Bridge Limited (Sh246,400) and Spellman Walkers Limited (Sh45,180)).  The remaining four trade association members will be fined forthwith.

kenyaNotes Andreas Stargard, a competition practitioner with Primerio Ltd., “[i]n this case — which really represents a classic minimum-price fixing arrangement among trade association members — the billboard owners agreed during a period of less than one year to set a minimum monthly price of Sh160,000 in large Kenyan markets, such as Nairobi.  Interestingly, they price-discriminated geographically within their cartel arrangement and fixed the corresponding fees in smaller markets at a slightly lower amount.”

The head of the CAK, Director-GeneralWang’ombe Kariuki, lamented that a trade group was being used to manipulate an otherwise competitive process of market forces yielding market prices, which he believed are approximately 20 to 25% lower than the fixed rates, based on post-investigation pricing.  Says Stargard:
“It is interesting to see that the CAK has  already followed up on this matter and has noticed an arguably direct empirical result, yielding a beneficial effect of a not insignificant price reduction in advertising costs in Nairobi.”
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