Zuku pay-TV launched complaint against DStv in Kenya
As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news. Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.
In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.
The CAK has not indicated whether it is investigating the complaint yet.
Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy
In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.
To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.
The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.
Self-reporting of “hard-core” competition-law offences (such as price-fixing cartel conduct, market division, bid rigging, or group boycotts among horizontal competitors) has long been a staple of antitrust enforcement in the most developed jurisdictions, including the United States and the European Union. In South Africa, cartel-whistleblowing leniency has just passed its 10th anniversary, and in the EU, the European Commission’s “Notice” on the non-imposition of fines in certain cartel cases (i.e., the EU’s leniency regime) recently celebrated its 18th birthday — nowadays, more than 75% of the EC’s cartel matters are uncovered thanks to one or many cartel members “snitching” on their counterparts, in exchange for full or partial amnesty from antitrust prosecution and attendant fines.
In Africa, Kenya (AAT archive on CAK issues here) is now becoming a new member of the “Leniency Club”, rewarding whistleblowers with eased penalties for volunteering relevant tips and information on the workings of the cartel. The CAK is acting to implement the provision of the Kenyan Finance Bill 2014, which allows it to terminate cartel investigations with lighter punishment for whistleblowers, all the way to a full pardon.
“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…”
The agency’s web site — which otherwise (unusually) refers to the Business Daily article quoted here, instead of issuing its own press release — tersely provides as follows:
Cartel firms get amnesty in new CAK regulation
The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.
The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.
Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.
The CAK’s Director General, Francis Wang’ombe Kariuki, is quoted as saying that the authority’s is merely awaiting Parliament’s amendment of the law, and that “[t]he settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts“.
Earlier this morning, the South African Competition Commission (“Commission”) has conducted dawn raids at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion.
Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles. Precision is an approved auto body repairer to Original Equipment Manufacturers (“OEMs”) such as Cadillac, Dodge, Chrysler, Fiat, Kia, Chevrolet, Toyota and Honda, while Eldan is an approved auto body repairer to OEMs such as Jeep, Fiat, Mitsubishi, Toyota, Honda and Nissan.
The VAAC is an assessment centre which renders vehicle assessment services to customers of both Precision and Eldan.
The Commission has indicated that the dawn raid operation forms part of its ongoing investigation into collusive conduct in the market for auto body repairs. The Commission has also indicated that it has reasonable grounds to believe that information relevant to this investigation is located on the premises of the two companies.
Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.
The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances. The Commission has confirmed that it has duly obtained the warrants which authorise it to search the offices of Precision, Eldan and VAAC from the North Gauteng High Court.
If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.
Following a four-year dawn raid “drought”, the immediately-previous dawn raid initiated by the Commission had been conducted in April 2014 at the offices of Unilever South Africa (Pty Ltd) and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.
The newly (permanently) appointed Competition Commissioner, Tembinkosi Bonakele, has referred to a “phased” implementation of the 2009 Competition Amendment Act. The legislation technically criminalised hard-core antitrust offences such as bid-rigging or price-fixing cartels. However, it has not yet been implemented or effectively signed into law.
According to a MoneyWeb/ZA report, both he and his boss, Economic Development Minister Ebrahim Patel, had discussions on how and when to implement “to ensure that the necessary institutional capacity is available to apply the amendments.” The initially effective provisions (relating to the SACC’s market-inquiry powers) went into effect last year, while the criminalisation provisions remain unimplemented.
In a somewhat remarkable and prudent self-assessment, the minister and SACC have now admitted that the Commission currently lacks “the institutional capacity needed to comply with the higher burden of proof in criminal cases,” according to the report.
One notable aspect of potential discord lies in not only in the different standard of proof in civil vs. criminal matters (“more probable than not” vs. “beyond a reasonable doubt”), but perhaps more importantly can be found on the procedural side, preventing rapid implementation of the law: There has been historic friction between various elements of the RSA’s police forces and (special) prosecutorial services, and the power to prosecute crimes notably remains within the hands of the National Prosecuting Authority, supported in its investigations by the South African Police Service.
Historical and Legislative Background – and a bit of Advice
Starting in the spring and summer of 2008, the rumoured legislative clamp-down on corrupt & anti-competitive business practices by the government made the RSA business papers’ headlines.
During a presentation I gave at a Johannesburg conference in September that year (“Criminalising Competition Law: A New Era of ‘Antitrust with Teeth’ in South Africa? Lessons Learned from the U.S. Perspective“), I quoted a few highlights among them, asking somewhat rhetorically whether these were the words of fearmongers or oracles?
“Competition Bill to Pave Way for Criminal Liability”
“Tough on directors”
“Criminalisation of directors by far most controversial”
“Bosses Must Pay Fines Themselves”
“New leniency regime to turn up heat on cartels”
“New era in the application of competition policy in SA”
“Likely to give rise to constitutional challenges”
“New Bill On Cartels is a Step Too Far”
“Fork out huge sums or face jail time if found guilty”
“Disqualification from directorships … very career limiting”
I also quoted international precedent-setting institutions and enforcers’ recommendations, all of which tended towards the positive effect of criminal antitrust penalties:
OECD, 3rd Hard-Core Cartel Report (2005):
Recommends that governments consider the introduction and imposition of criminal antitrust sanctions against individuals to enhance deterrence and incentives to cooperate through leniency programmes.
U.S. Department of Justice, Tom Barnett (2008):
“Jail time creates the most effective, necessary deterrent.”
“[N]othing in our enforcement arsenal has as great a deterrent as the threat of substantial jail time in a United States prison, either as a result of a criminal trial or a guilty plea.”
While the presentation contained a lot more detail, the key recommendations that I summarised would seem to continue to hold true today, and may serve as guide-posts for Commissioner Bonakele and the EDD ministry:
Cornerstones of a successful criminal antitrust regime
Crystal-clear demarcation of criminal vs. civil conduct
Highly effective leniency policy also applies to individuals
Standard of proof must be met beyond a reasonable doubt
No blanket liability for negligent directors – only actors liable
Plea bargaining to be used as an effective tool to reduce sentence
Clear pronouncements by enforcement agency to help counsel predict outcomes
Demarcation of criminal vs civil antitrust conduct in U.S.
According to the report, CAK Director General Francis Wang’ombe Kariuki said that “investigations are already being conducted in [the] transport, insurance, shipping, milling, banking, cement, sugar, health care and tea” sectors, pursuant to purported consumer complaints.
East Africa back on antitrust enforcer’s mat in hybrid unilateral / collusion case
The Competition Authority of Kenya (“CAK”) has alleged that Lafarge has engaged in price-fixing due to the company’s cross-shareholding in cement producer Eastern African Portland Company and Bamburi Cement. (Interestingly, http://www.lafarge.co.ke links to Bamburi Cement’s site).
The CAK is investigating whether Lafarge is responsible for an unwarranted concentration of economic power, given that Lafarge has a 41.7% interest in Eastern African Portland Company and a 58.9% interest in Bamburi Cement. A ruling as to whether Lafarge has “unwarranted concentration of economic power” is expected in June 2014. In the event that Lafarge is found guilty of the charge against it, the Kenyan Competition Authority could direct the Lafarge to sell assets in one of the two businesses. Furthermore, the directors could also be forced to pay up to USD115,000 in penalties or serve five years in prison if found guilty of price-fixing.
The CAK report comes four months after the Kenyan government, which together with the Kenyan National Social Security Fund, has a controlling stake of 52.3% in Eastern African Portland Company alleged that Lafarge tried to destabilise Eastern African Portland Company to protect Lafarge’s interests in Bamburi, the report noted. The CAK indicated that “cross-directorship could lead to price-fixing since this creates a position where a competitor is privy to the strategic decisions of another competitor. However, it is not conclusive that there is price-fixing going on.” Lafarge has stated its minority interest in Eastern African Portland Company is insufficient to enable Lafarge to exert control over it.
This allegation comes at an interesting time given the spotlight on Lafarge due to its proposed merger with cement producer Holcim, which has already triggered insider-trading investigations elsewhere. The proposed transaction will likely require notification in the European Union, United States, Russia, China, India, Morocco, South Africa and multi-national enforcer COMESA (which includes Kenya and would presumptively take priority over the CAK’s domestic review authority, although a jurisdictional fight between the two agencies would not be unheard of).
Following up on our initial DOJ extradition victory post last week, here is a more in-depth look at the recent developments in worldwide criminal antitrust cases, and notably their overlap with parallel corruption / fraud / FCPA investigations. Paul Hastings and Nortons Inc. – jointly covering North America, Europe, Asia, and Africa – have extensive experience handling the defense of competition-law and FCPA-based investigations into multi-national corporations and individual executives. The piece below was written by Jeremy Evans, partner in Paul Hastings’ D.C. office, and AAT editor Andreas Stargard, in Brussels.
The long-arm of the U.S. government and its increasing willingness to pursue foreign nationals for alleged violations of U.S. law was further in evidence last Friday when the Antitrust Division of the U.S. Justice Departmentannounced(press release here) that it had extradited Romano Pisciotti, an Italian national, from Germany to the U.S. on a charge filed more than 3½ years ago that he participated in a price-fixing cartel involving the sale of marine hose.
Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison
Pisciotti is the first foreign national to be extradited to the U.S. purely for an antitrust charge, although he joins a large number of foreign nationals in recent years to have been charged criminally by the Division in cartel cases, many of whom have agreed to plea deals requiring them to serve time in U.S. prisons. The Antitrust Division is not alone in its pursuit of foreign nationals; the Fraud Division of the Justice Department has also pursued extraditions of foreign nationals for violations of the Foreign Corrupt Practices Act (“FCPA”) in recent years. Indeed, Pisciotti follows his countryman Flavio Ricotti, who, in 2010, also was arrested in Germany and extradited to the U.S. following his indictment on an FCPA charge. It is clear that in both antitrust cartel and FCPA investigations, the U.S. government is growing ever-confident in its power and ability to bring uncooperative foreign executives to the U.S. to face criminal charges in the U.S., even for conduct that occurred outside the U.S.
The Marine Hose Investigation
Pisciotti’s extradition is the latest chapter in the long-running marine hose cartel investigation. In May 2007, the Antitrust Division arrested eight foreign nationals traveling on business in the U.S. and charged them for their roles in an antitrust conspiracy involving the sale of marine hose used to transport oil. The Division’s investigation was part of a multi-national law enforcement effort that included the European Commission and the U.K.’s Office of Fair Trading and much of the conduct at issue was alleged to have happened overseas. In the years that followed, the Antitrust Division secured over $54 million in fines from five companies, and nine individuals served jail time arising from their alleged involvement in the cartel. Two of these dispositions are worth particular note. The first involved the separate plea agreements by Bridgestone Corporation and Misao Hioki, a Japanese executive, each of which agreed to plead guilty to both an antitrust charge for involvement in the alleged conspiracy, as well as an FCPA charge relating to corrupt payments to government officials in various Latin American countries. These appear to be the only instances in which either a company or an executive has pled to both antitrust and FCPA charges arising from the same investigation. The second involved three British executives arrested in the U.S. at the onset of the investigation. Under a unique arrangement, the three were charged and sentenced by authorities in both the U.S. and the U.K., but the U.S. plea deals permitted them to return to the U.K. where they served their prison sentences concurrently.
Prior to Pisciotti’s extradition, the last criminal disposition involving an executive in the marine hose investigation occurred in 2009. But, what was not publicly known until recently is that the Antitrust Division had secured a sealed indictment of Pisciotti in August 2010 alleging that he rigged bids, fixed prices, and allocated markets in the sale of marine hose. It was this indictment that led to Pisciotti’s arrest in Germany last June and the subsequent extradition proceedings. The Division likely followed the same procedure that it did with Ricotti in the earlier FCPA case, using Pisciotti’s sealed indictment to obtain an Interpol red notice, effectively an international arrest warrant. Under the principle of reciprocal or dual criminality, countries often will only extradite individuals to the U.S. if an extradition treaty exists between the two countries that requires a person’s conduct to be a crime in both countries. Bid rigging is a criminal offense in Germany, thus ensnaring Pisciotti transiting through Germany on business travel and leading to his arrest in a country prepared to extradite him. Pisciotti was flown to Miami on Thursday and arraigned in federal court the following day. He now faces charges that could result in a maximum of 10 years in prison and $1 million in criminal fines.
The U.S. Government and the Ever-Shrinking World
Bill Baer, the assistant attorney general of the Antitrust Division, heralded Pisciotti’s “first of its kind extradition” as a “significant step” in the Division’s cooperation efforts with foreign antitrust enforcers. And, while it marks a new frontier for the Division, it can also be viewed as merely the latest example of the aggressive approach taken by the U.S. government in recent years toward foreign executives in international cartel and bribery cases. A little over a decade ago, the Division agreed to permit foreign executives in cartel cases to plead guilty and serve prison sentences of just a few months. But the more recent plea deals announced in seemingly ever-expanding auto parts cartel cases have seen well over twenty foreign executives face up to two years in jail.
Our experience in these and other cases also teaches that the Antitrust Division will routinely seek U.S. prison terms for conduct that occurred not merely partially or largely outside the U.S., but indeed was wholly undertaken on foreign soil. The example of Pisciotti’s extradition powerfully reaffirms that executives now must worry about the possibility of being extradited to the U.S. if they refuse to cooperate with the Antitrust Division and plead guilty in a cartel investigation, even in situations where the conduct at issue occurred exclusively or mostly overseas. This is in part because an increasing number of countries have criminalized antitrust conduct, or are in the process of doing so, meaning that there are now more jurisdictions than ever willing to extradite an executive for cartel offenses, either at home or when traveling abroad, even in situations where a sealed indictment may leave the executive ignorant of any potential risk.
These same government tactics exist in bribery and FCPA cases. Flavio Ricotti and Ousama Naaman are but two examples of foreign nationals who were extradited to the U.S. in the last five years to face FCPA charges, each apprehended overseas after the U.S. government obtained an indictment in federal court, and each charged based on conduct outside of the U.S. It appears that the U.S. government will continue to take an aggressive enforcement approach toward uncooperative executives, further highlighting the concern for senior foreign executives and their companies caught up in cartel and FCPA investigations.
In what may well affect African and other international price-fixers going forward, the spectre of U.S. extradition for criminal antitrust charges has been reinforced by the recent successful DOJ extradition request in the “Marine Hose” cartel. An Italian national was extradited from Germany to face bid-rigging charges.
Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison
“First-ever”?! Some readers may recall the carbon products cartel and a certain Mr. Ian Norris, the then-Morgan Crucible chief executive, who had been extradited from the U.K. to the United States back in 2010. Yet, that seven-year long procedure was based not a pure antitrust charge — rather, he was extradited on a technicality, if you will, namely the “obstruction of justice” charge, given the lack of reciprocal or dual criminality of the underlying price-fixing offense in the two countries at the time the competition offense had been committed in the early 1990s. Norris’ 1 1/2 year prison sentence ended in November 2011.
The Marine Hose cartel extradition is different: In this case, the DOJ succeeded, for the first time ever, in securing an extradition solely on a competition-law offense being charged.
WASHINGTON — Romano Pisciotti, an Italian national, was extradited from Germany on a charge of participating in a conspiracy to suppress and eliminate competition by rigging bids, fixing prices and allocating market shares for sales of marine hose sold in the United States and elsewhere, the Department of Justice announced today. This marks the first successfully litigated extradition on an antitrust charge.
Pisciotti, a former executive with Parker ITR Srl, a marine hose manufacturer headquartered in Veniano, Italy, was arrested in Germany on June 17, 2013. He arrived in the Southern District of Florida, in Miami, yesterday and is scheduled to make his initial appearance today in the U.S. District Court for the Southern District of Florida in Ft. Lauderdale, at 11:00 a.m. EDT.
“This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy,” said Assistant Attorney General Bill Baer in charge of the Department of Justice’s Antitrust Division. “This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”
Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. During the conspiracy, the cartel affected prices for hundreds of millions of dollars in sales of marine hose and related products sold worldwide.
According to a one-count felony indictment filed under seal on Aug. 26, 2010, and ordered unsealed on Aug. 5, 2013, in U.S. District Court in the Southern District of Florida, Pisciotti carried out the conspiracy by agreeing during meetings, conversations and communications to allocate shares of the marine hose market among the conspirators; use a price list for marine hose in order to implement the conspiracy; and not compete for customers with other marine hose sellers either by not submitting prices or bids or by submitting intentionally high prices or bids, all in accordance with the agreements reached among the conspiring companies. As part of the conspiracy, Pisciotti and his conspirators provided information received from customers in the United States and elsewhere about upcoming marine hose jobs to a co-conspirator who served as the coordinator of the conspiracy. That coordinator acted as a clearinghouse for bidding information that was shared among the conspirators, and was paid by the manufacturers for coordinating the conspiracy. The department said the conspiracy began at least as early as 1999 and continued until at least May 2007. Pisciotti was charged with joining and participating in the conspiracy from at least as early as 1999 until at least November 2006.
Pisciotti is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
As a result of the department’s ongoing marine hose investigation, five companies, including Parker ITR; Bridgestone Corp. of Japan; Manuli SPa of Italy’s Florida subsidiary; Trelleborg of France; and Dunlop Marine and Oil Ltd, of the United Kingdom, and nine individuals have pleaded guilty.
The investigation is being conducted by the Antitrust Division’s Washington Criminal I Section, the Defense Criminal Investigative Service (DCIS) of the Department of Defense’s Office of Inspector General, the U.S. Navy Criminal Investigative Service and the Federal Bureau of Investigation. The U.S. Marshals Service and other law enforcement agencies from multiple foreign jurisdictions are also investigating or assisting in the ongoing matter. The Criminal Division’s Office of International Affairs provided assistance.
Dawn Raids Rattle South African Consumer-Goods Brands
The South African Competition Commission (“Commission”) has confirmed that it has conducted such a dawn raid operation at Unilever South Africa (Pty Ltd) (“Unilever”) and Sime Darby’s respective South African offices during the morning of 03 April 2014.
Unilever is one of the largest fast-moving consumer goods companies in South Africa. Unilever’s business activities include laundry, skincare and cleansing, margarine, deodorants, household care, tea, hair care and ice cream. Household names which form part of the Unilever group include Sunlight, Knorr, Lipton, Ola and Omo.
Sime Darby is a Malaysia-based multinational company involved in sectors such as plantation, industrial equipment, motors, property and energy & utilities, with operations in more than twenty countries. It is the world’s top palm oil planter. Its South African operation, namely Sime Darby Hudson & Knight (Pty) Ltd, is located in Boksburg and it produces and sells premium fats and oils to bakery, food service industry and food manufacturers predominantly in South Africa.
“The Commission believes that the information that will be obtained from today’s operation will enable the Commission to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” Acting Commissioner Tembinkosi Bonakele said.
The Commission has indicated that this raid forms part of an ongoing investigation into collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers. The Commission has further indicated that it has reasonable grounds to believe that employees of Unilever and Sime Darby have information which is relevant to the investigation.
The last dawn raid was conducted on 06 May 2010 at the premises of four electrical cables manufacturers and suppliers based in Gauteng province, South Africa. The various premises were searched by the Commission on suspicions of price fixing, market allocation and collusive tendering. This was done subsequent to a complaint initiated by the Commissioner on 16 March 2010 against Aberdare Cables (Pty) Ltd, Alvern Cables (Pty) Ltd, South Ocean Electric Wire Company (Pty) Ltd and Tulisa Cables (Pty) Ltd.
Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.
The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances.
If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.
UPDATE: 23-April-2014:
Based on reporting in a BDLivestory, the Commission has said that it “is too early for the commission to say what data or documents were seized. Information and data are being analysed,” noting that it “believes that information that will be obtained from (the) operation will enable (it) to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” acting commissioner Tembinkosi Bonakele said. “However, as part of any investigation, we also wish to urge anyone, be it business or individuals, with further information to come forward and assist the commission in concluding this investigation.”
Acting competition commissioner Tembinkosi Bonakele. Picture: FINANCIAL MAIL
South African Breweries distribution case dismissed
The Competition Tribunal of South Africa has dismissed a monopolization case brought by the Competition Commission against South African Breweries (“SAB”). The Tribunal held that the Commission brought insufficient evidence to find that SAB acted in violation of the Competition Act. Particularly in light of the significant resources which the Commission expended on the matter, it is a disappointing loss for the agency.
The Commission had alleged that SAB’s distribution system prevented competition between firms that distributed SAB-branded beers, but the Commission made no case against 90 per cent of SAB’s distribution and focused its case on the system of appointed distributors. This would account for only 10 per cent of SAB’s method of beer distribution. The Commission claimed that SAB has a market share of about 90% of ‘clear beer’ in South Africa. It went on to claim that SAB restricted competition between its distributors as SAB would appoint distributors and allocate exclusive territories.
The Tribunal held that the distributors appointed by SAB were not adequately independent to be in competition with each other and therefore their conduct could not be seen as being restricted. The Tribunal held that SAB’s conduct did not amount to unjustified discrimination.
The decision marks the first occasion that the Tribunal has dealt with the treatment of non-compete restraints in dual distribution arrangements in South African competition law. In deciding the matter, the Tribunal also introduced the novel concept of a “separate basic economic unit“. This concept operates as a measure used to assess the level of independence distributors have from their suppliers, which means that there must be a certain level of independence between a supplier and a distributor in order to contravene the Act.
There has been no indication that the Commission intends to appeal the Tribunal’s dismissal.
African Antitrust & Competition Law 