Category: collusion

South Africa: Trilogy of Rulings Against the Competition Commission Demonstrates the Importance of Following Proper Procedure

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In three recent decisions, two by the Competition Tribunal and one by the Competition Appeal Court, a number of important procedural flaws were exposed in the manner in which certain complaints were initiated against various respondents. The Competition Appeal Court even made an adverse costs order against the Competition Commission in one of the cases. We discuss these important decisions below.

Misjoinder of Parent Company

The South African Competition Commission (“SACC”) had recently alleged that Power Construction (West Cape) Pty Ltd (“West Cape”) and Haw and Inglis (Pty) Ltd (“H&I”) colluded in respect of a tender submitted to South African National Roads Agency (SANRAL). The tender was in respect of maintenance services. The SACC alleges both parties had contravened section 4(1)(b)(ii) and (iii) of the South African Competition Act (the “Act”).  The parent company of West Cape, Power Construction (Pty) Ltd (“Power Construction”) was cited as a respondent on the basis that it would be liable to pay the administrative penalty. Power Construction, had engaged in “with prejudice” settlement negotiations.

The SACC refused the proffer and informed Power Construction that after having  considered the settlement proceed that it was clear that Power Construction and West Cape (being the subsidiary of Power Construction) shared a majority of their respective directors which, according to the SACC, was sufficient to implicate Power Construction in the alleged collusive conduct. Accordingly, the SACC alleged that any Administrative Should be calculated using the higher annual turnover figures of Power Construction.

Power Construction disputed this, arguing that it was never alleged by the SACC that Power Construction had contravened the Act. The SACC then opted to amend its referral to include Power Construction. On application to the South African Competition Tribunal (“Tribunal”), the Tribunal dismissed the proposed amendment on the basis that the SACC had failed to provide any material evidence to establish a prime facia case in favour the relevant amendment, stating that the burden remains on the applicant to prove that it is deserving of the amendment by putting sufficient factual allegations before the Tribunal.

In conclusion, the Tribunal also confirmed that the amendment could regardless have been rendered excipiable based on prescription. In this matter, the alleged conduct ceased more than three years prior to the Commission becoming aware of the conduct.

Prescription

In a further case, namely the Competition Commission and Pickfords Removals SA, regarding the interpretation of section 67(1) of the Act (namely that dealing with prescription), the Competition Appeal Court (“CAC”) was very recently called to decide on the correct date for the running of prescription in terms of section 67(1) of the Act.

The SACC (being the appellant in the matter), brought an appeal to the CAC after the Tribunal held that the complaint initiated by the SACC was time barred in terms of section 67 of the Act.

The SACC disputed this and submitted that prescription in terms of section 67 of the Act should only commence from the date on which the Commissioner or Complainant acquired knowledge of the prohibited practice and, alternatively, that the Tribunal has a discretion to condone non-compliance with this 3-year time period. The latter issue was central to the dispute.

The question was further complicated by the fact that the SACC filed two compliant initiations against the respondents. The SACC submitted that the so called ‘second initiation’ was merely an amendment to the first initiation. So the SACC argued, even if the time period had begun running when the practice had stopped, the time period in question would still not have expired.

In this regard, the CAC held that the SACC has the power to amend a compliant initiation and that it must be taken at its word on whether a second initiation is an amendment to the first or a separate and distinct complaint initiation. This is so, particularly where both complaint initiations concern the same conduct, in the same market and where the first complaint initiation states that the conduct is ongoing.

In relation to the issue of prescription, the CAC held that section 67 cannot be equated with section 12 of the South African Prescription Act which provides for prescription to commence  from the moment on which the “creditor acquires knowledge of the identity of the debtor and the relevant fact from which the debt arises”. Section 49B(1) of the Prescription Act provides for a much lower threshold, being the ‘reasonable suspicion of the existence of a prohibited practice’.

Accordingly, it must be accepted that the time bar in section 67 is intended to be a limitation of the Commissioner’s wide ranging powers (to prevent investigation into historic matters which are no longer in the public interest) and that the knowledge requirement contained in the Prescription Act cannot be read into this limitation as argued by the SACC. It follows then, based on this reasoning that there can similarly be no condonation by the Tribunal or the CAC on these matters.

For completeness sake, the CAC confirmed the general understanding that, for purposes of section 67, the alleged prohibited conduct will be deemed to have ceased on the date on which the respondent last benefited from the prohibited conduct (e.g. the date on which it last received payment under the agreement). In this regard, the Tribunal initially ordered the parties to produce evidence of the date on which the last payment was received. The CAC deemed this appropriate and opted not to interfere with this order.

Condonation and Costs

The Tribunal was also called recently upon to decide two interlocutory applications, the first being a condonation application brought by the SACC in terms of section 54 of the Act for the late filing of its revised trial bundle (containing an additional 1221 pages), which was opposed by the respondents (Much Asphalt and Roadmac Surfing) and finally a counter application for costs against the SACC.

In terms of the condonation application, the SACC sought to revise the trial bundle on the basis that the revised trial bundle contained documents which were essential to its case (which were inadvertently omitted from its initial bundle) and had been re-organized in a manner that was less burdensome for all the parties involved. In support, the SACC argued, that the respondents wouldn’t be prejudiced by the late filing as the extra documents had already been discovered.

The Tribunal confirmed that the test for condonation must be ‘good cause shown’ by the SACC which should be assessed on case by case basis. The Tribunal held that the SACC had not shown good cause in this matter as it had ample time to furnish the respondents with the revised bundle and further found that filing the revised bundle at the 11th hour was unnecessarily prejudicial to the respondents.

south_africaIn terms of applications for costs, the respondents sought an order for wasted costs in relation to the postponement due to the late furnishing of the bundle as well as the cost of defending the application for condonation. Importantly it should be borne in mind that the Tribunal does not as a matter of course make cost orders against the SACC.  In this regard, the Constitutional Court has previously held that the Tribunal does not have the powers to make adverse cost orders against the SACC, even where the SACC has abused its powers. The general rule is that the parties pay their own costs. The Tribunal may only make cost orders against third parties and, accordingly, dismissed the respondent’s application for costs.

John Oxenham, director of Primerio says that these cases demonstrate the objectivity and impartiality of the adjudicative bodies which is an encouraging sign for respondents who do not believe that the case brought against them is procedural or substantively fair.

Fellow competition lawyer, Michael-James Currie says it is unfortunate that only the Competition Appeal Court makes adverse costs rulings and that the Competition Tribunal is precluded from doing so. Adverse costs ruling against the SACC should be reserved for matters in which there was clear negligence in the manner in which a case was investigated, pleaded or prosecuted. Such costs orders would, however, go a long way in ensuring that parties and in particular the prosecution agency, does not refer cases  to the adjudicative bodies (which have limited prospects of success) with no downside risk in losing the case.

Oxenham shares Currie‘s sentiment and suggests that adverse costs orders against the Commission will likely result in a more efficient enforcement regime as cases will be settled more expeditiously and respondents will be more reluctant to oppose the Competition Commission’s complaints with the knowledge that the SACC is confident in its case and prepared to accept the risk of an adverse costs order.

[The Editor wishes to thank Charl van der Merwe for his contribution to this article]

 

 

Panel highlights SA Competition Amendment Bill’s pitfalls

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As AAT has reported on extensively, the South African Competition Amendment Bill, currently pending in Parliament, is likely to be adopted in short order in its current draft form.

It carries with it significant, and in our view, adverse, effects that will burden companies trying to conduct business or invest in South Africa. These burdens will be particularly onerous on foreign entities wishing to enter the market by acquisitions, as well as any firm having a market share approaching the presumptive threshold of dominance, namely 35%

On Wednesday, 17 October 2018, the law firms of Primerio and Norton Incorporated held an in-depth seminar and round-table discussion on the ramifications of the Competition Amendment Bill. The setting was an intimate “fireside chat“ with business and in-house legal representatives from leading companies, active across a variety of sectors in the South African economy.

Moderated and given an international pan-African perspective by Primerio partner Andreas Stargard, the panel included colleagues John Oxenham and Michael-James Currie, who delved into the details of the proposed amendments to the existing Competition Act, covered extensively by AAT here.

As of today, 18 October 2018, the Bill appears set to be promulgated.  The SA Parliament’s committee on economic development has rubber-stamped the proposed amendments after a prior committee walk-out staged by the opposition Democratic Alliance (DA), in opposition to the Bill. DA MP and economic development spokesperson Michael Cardo states:

“The ANC rammed the Competition Amendment Bill through the committee on economic development, and adopted a report agreeing to various amendments. To make sure they had the numbers for a quorum, the ANC bussed in two never-seen-before members to act as pliant yes men and women. Questions from the DA to the minister… This bill is going to have far-reaching consequences for the economy. It gives both the minister and the competition authorities a great deal of power to try and reshape the economy. It is unfortunate that the ANC, and the committee chair in particular, have suspended their critical faculties to force through this controversial bill and behaved like puppets on a string pulled by the minister of economic development.”

The Amendment Bill introduces significant powers for ministerial intervention and bestows greater powers on the Competition Commission, the investigatory body of the competition authorities in South Africa.

The panel discussion provided invaluable insights into the driving forces behind the Bill and ultimately what this means for companies in South Africa as it certainly won’t be business as usual if the Amendment Bill is brought into effect – particularly not for dominant entities.

[If you attended the panel discussion and would like to provide feedback to the panelists or would generally like to get in touch with the panelists, please send an email to editor@africanantitrust.com and we will put you in touch with the relevant individuals]

 

Namibian Competition Commission Investigates Pharmacies for Cartel Conduct

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The Namibian Competition Commission (NaCC) recently announced that it is investigating the pharmacy sector for allegedly fixing prices. The investigation is focused on the Pharmaceutical Society of Namibia (PSN) and over 200 of its members.

The allegations include, inter alia, that the PSN requires its members to impose a 50% mark-up on the dispensing of medicines and that the PSN disciplines members for deviating from the mark-up.

The investigation follows closely on the heels of an earlier announcement that the NaCC is investigating short term insurance companies for allegedly agreeing to cap maximum mark-up rates and maximum labour rates which panel beaters may charge for repairing vehicles.

The Namibian Competition Act prohibits agreements or concerted practices between competitors which have as their object or effect the prevention or lessening of competition in the market.

The recent activity by the NaCC is indicative of the NaCC’s intention to increase competition enforcement in the region and firms doing business in Namibia are increasingly required to self-assess their conduct to ensure compliance with domestic competition laws not only in Namibia but in most sub-Saharan countries.

Shipping cartels: BMW Pursues Civil Damages Claim against certain Carriers

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By Stephany Torres

BMW plans to lodge a claim in South Africa for damages against international car-carriers and shipping companies which have been found guilty or have pleaded guilty to competition law contraventions, including Japanese-based Mitsui O.S.K. Lines (“MOL”) and K-Line Shipping South Africa, the local subsidiary of Kawasaki Kisen Kaisha (“K-Line”), Norway’s Wallenius Wilhelmsen Logistics AS (“WWL”) and Nippon Yusen Kabushiki Kaisha (“NYK”).  BMW is seeking compensation for the losses it alleges to have suffered as a result of the anti-competitive price-fixing arrangements between the car carriers.

BMWship.jpgBMW’s case stems from an amnesty application, by which MOL approached the South African Competition Commission (“the Commission”) in terms of its Corporate Leniency Policy (“CLP”), which outlines a process through which the Commission may grant a self-confessing cartel member, who approaches the Commission first, immunity for its participation in cartel activity upon the cartel member fulfilling specific requirements which includes providing information and cooperating fully with the Commission’s investigation.  Says John Oxenham, a South African competition lawyer, “if the Commission grants an applicant what is called ‘conditional immunity’, a possible outcome is the complete avoidance of a fine, which could otherwise be calculated at up   to 10% of domestic revenues, including exports.”  That said, conditional antitrust immunity, does not offer full exoneration from potential other liability in respect of the conduct for which the Competition Commission granted immunity.

It is notable that MOL, NYK and WWL subsequently agreed to cooperate with the Commission in prosecuting K-Line.

On further investigation by the Commission it found that K-Line, MOL, NYK and WWL fixed prices, divided markets and tendered collusively in contravention of section 4(1)(b)(i), (ii) and (iii) of the Competition Act no 89 of 1998 in respect of the roll-on/roll-off (Ro-Ro) ocean transportation of Toyota vehicles from South Africa to Europe, the Mediterranean Coast of North Africa and the Caribbean Islands via Europe, West Africa, East Africa and the Red Sea.

The Commission’s investigation found that from at least 2002 to 2013 K-Line, MOL, NYK and WWL colluded on a tender issued by Toyota SA Motors (“TSAM”) to transport Toyota vehicles from South Africa abroad by sea.  The Commission further found that K-Line, MOL, NYK and WWL agreed on the number of vessels that they were to operate on the South Africa to Europe routes at agreed intervals or frequencies.

In addition, the Commission found that K-Line, MOL, NYK and WWL agreed on the freight rates that they were to charge TSAM for the shipment of Toyota vehicles.

International competition authorities including authorities in the US, Canada, Japan, China and Australia investigated this case and, in recent years, imposed large fines on the respective cartelists for engaging in market division and price fixing.  In February 2018, Wallenius Wilhelmsen agreed to pay a large fine to the EU.  Höegh Autoliners has reportedly been summoned to a court meeting in South Africa in March 2018.

 

Media cartel exposed and fined

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By AAT Senior Contributor Stephany Torres

Print media companies Independent Media and Caxton & CTP Publishers and Printers (“Caxton”) have agreed to pay an administrative penalties as well as an amount to the Economic Development Fund of over R8 million as part of two separate settlement agreements with the Competition Commission (“The Commission”) after admitting to fixing prices and trading conditions in contravention of section 4(1)(b)(i) of the Competition Act no. 89 of 1998 (“The Competition Act”).

Caxton owns local print media, including the Citizen newspaper and magazines Bona, Rooirose and Farmer’s Weekly, among others.  Independent owns newspapers The Star, Cape Times, Sunday Independent, among others and magazines GQ and GQ Style.

Attorneys from African competition law firm Primerio Ltd. report that this development follows from a 2011 investigation by the Commission into the matter where they found that, through the facilitating vehicle of the Media Credit CoOrdinators (“MCC”) organization, various media companies agreed to offer similar discounts and payment terms to advertising agencies that place advertisements with MCC members.  MCC accredited agencies were offered a 16.5% discount, while non-members were offered 15%.  In addition, the Commission found that the implicated companies employed services of an intermediary company called Corex to perform risk assessments on advertising agencies for purposes of imposing a settlement discount structure and terms on advertising agencies.  “The Commission found that the practices restricted competition among the competing companies as they did not independently determine an element of a price in the form of discount or trading terms”.

In a media release, the Competition Commission confirmed Caxton will pay a fine of R5 806 890.14, and R2 090 480.45 to the Economic Development Fund over three years.  It will also provide 25% bonus advertising space for every rand of advertising space bought by qualifying small agencies for three years, capped at R15 000 000 per annum.

Independent Media will pay an administrative penalty of R2 220 603 and will contribute R799 417 to the Economic Development Fund over a three-year period, and provide 25% bonus advertising space for every rand of advertising space bought by qualifying small agencies, over three years and capped at R5 000 000. Independent has also said it would obtain its own credit insurance so small agencies are not required to commit any securities or guarantees in order to book advertising space.

The Economic Development Fund is designed to develop black-owned small media or advertising agencies, which require assistance with start-up capital and will assist black students with bursaries to study media or advertising.

The agreements were confirmed as orders of the Competition Tribunal.

 

Enforcement Alert: MU Competition Commission to Permit Cartel Initiators to Seek Leniency

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The Competition Commission of Mauritius (CCM) has announced changes to its leniency programme. Though the CCM did have a functioning leniency programme in place since its inception in 2009, the it was often criticised as being inadequate.

Competition lawyer John Oxenham notes that under the existing programme, firms which were found to be cartel ‘initiators’ (an enterprise which has coerced others into a collusive agreement) did not qualify to receive any immunity or other benefit.

John Oxenham
John Oxenham

Oxenham believes that this had led to uncertainty and prevented companies from applying for leniency (which required full disclosure of anti-competitive conduct), as firms may be unsure whether or not they would be considered to be ‘instigators’ (and so be disqualified from receiving immunity from prosecution). This meant that firms often had to weigh the risk of being considered an ‘initiator’ against the risk of prosecution to ultimately decide on whether to apply for leniency.

The CCM had previously identified this aspect as a potential area of concern, which led to the temporary special amnesty programmes under which firms who believed themselves to be ‘initiators’ could apply for leniency. This, according to the CCM, led to various successful leniency applications and related prosecutions.

In its media release of 23 January 2018, CCM executive director Deshmuk Kowlessure stated that “[w]ith respect to leniency programmes, we have observed that several advanced competition authorities have adopted leniency for cartel initiators and coercers…” “Likewise, the CCM has taken a step beyond traditional leniency programmes and we are now extending the possibility for initiators or coercers to apply for leniency.”

The recent amendment, therefore, seeks to formalise the CCM’s previous (temporary) amnesty programme for ‘initiators’ by allowing them to approach the CCM for leniency in return for a 50% reduction in the administrative penalty otherwise payable, says fellow Primerio Ltd. antitrust attorney Andreas Stargard.  “This level of fine reduction is in line with what the CCM has been offering in the past to leniency applicants who were not ‘first through the door’.  Unlike certain other countries, such as the United States, where the Department of Justice offers leniency benefits only to the first successful applicant, Mauritius allows for successive, reduced penalties to subsequent amnesty seekers.”

Corporate leniency policies are widely considered to be the most effective tool in the prosecution of cartel conduct. The CCM’s decision to include ‘initiators’ among those eligible to participate, therefore, not only strengthens its leniency programme but is also a significant step towards the prosecution and enforcement of cartel conduct in Mauritius, as more leniency applications directly imply more prosecutions of fellow cartelists.

Oxenham notes that the inclusion of initiators into the CCM’s official corporate leniency policy is welcomed from a business perspective, as it alleviates the concerns prospective leniency applicants may have previously had: “It will certainly lead to an increase in the amount of leniency applications received by the CCM”.

According the CCM’s media release, its guideline for leniency applicants will be amended accordingly and an explanatory note will be made available on its website in due course.

Ethiopia Competition Agency Files Charges against Fourteen Metal Producers

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By AAT Senior Contributor Stephany Torres

On 28 January 2018 the Ethiopian Trade Competition and Consumer Protection Authority (“TCCPA”) filed charges against fourteen Ethiopian rebar, corrugated sheet, steel tube and pipe producers and seven rebar importers respectively for allegedly fixing prices in contravention 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”.

It is worth mentioning that in most jurisdictions, which have an active competition law enforcement regime in place, ‘cartel conduct’ (i.e. price fixing, market allocation and/or collusion) is a per se prohibition in that the conduct is prohibited outright, without an examination of the actual effects on competition and without permitting a showing of net efficiency or other pro-competitive defensive arguments.

Where cartel conduct is prohibited per se, the relevant competition authorities require no further proof other than the existence of the agreement or concerted practice which underpins the conduct.  The conduct is simply presumed to have negative effects on the relevant market.

Article 7(1) of the TCCPA, however, is not a per se prohibition and is based on the ‘rule-of-reason’ standard – effectively permitting respondents to lead evidence demonstrating that the alleged conduct can be justified by pro-competitive, technology or efficiency gain justifications which outweigh any anti-competitive effect.

From a policy perspective, Africa competition lawyer Michael-James Currie notes that the permissibility of the ‘rule of reason defence’ is largely due to the fact that a respondent who is found to have contravened Article 7(1) of the TCCPA is liable to a penalty calculated at fifteen percent of the respondent’s annual turnover. This is a prescribed penalty. For non-cartel conduct, the penalty ranges between 5-10%.

Of the aforementioned fourteen Ethiopian steel producers; three manufacture reinforcement bars, namely East Steel PLC, Habesha Steel Mills PLC and Saint Nail PLC.  Six are involved in manufacturing corrugated sheets namely; Ethiopian Steel Profile, Ethiopian Steel PLC, Kombolcha Steel Products Industry PLC (KOSPI), a subsidiary of MIDROC Technology Group and Bazeto PLC and amongst the five manufacturers of steel tubes and pipes are Walia Steel Industry PLC and Mame Steel PLC.

The seven rebar importers accused of price fixing include Dag Trading PLC, Aberus PLC, Berhe Hagos PLC, Marka Trading, Beranea Yeshene and Haileselassie Amabye PLC.

Andreas Stargard, competition counsel with Primerio Ltd. notes that the trigger event for engaging in the alleged price fixing was the fifteen percent devaluation of the birr by the National Bank of Ethiopia (NBE) in October 2017 which may have influenced retailers and wholesalers to look for ways of recouping losses by raising prices for their goods and services.

It is, however, in fellow Primerio Director John Oxenham’s view, unlikely for a well-executed price-fixing cartel to be created ad hoc without any pre-existing information exchange structure.  Therefore, pre-existing trade association, interest groups or other vehicles are commonly used as the enabling platform for competitors to engage in collusive conduct.

The defendants are scheduled to submit their response to the Tribunal on February 20, 2018.

The metal and related products sector is a priority sector in Ethiopia and the Ethiopian government is investigating a greater number of business entities involved in the production and importation of metal and metal related products who are also suspected of allegedly fixing prices.

Adverse effects of price-fixing: East Africa recognises drawbacks

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It is not really news, but worth mentioning as it is literally happening simultaneously: As the most developed antitrust enforcement jurisdiction in Africa, South Africa, charges ahead with heavy-handed actions, such as denying alleged currency manipulators “access to file” in the investigative process, or accusing two livestock-feed processors of colluding in the sales and pricing of animal feed ‘peel pulp’, the East African nations lag behind.

What is news, however, is that they have begun to recognise the shortcoming and the adverse effects of collusion and other anti-competitive conduct on their economies: Andreas Stargard, an antitrust lawyer with Primerio Ltd., notes that the head of the East African Community (EAC), Mr. Liberat Mfumukeko, recently addressed ongoing antitrust violations in the EAC: “The Secretary denounced anti-competitive practices (cartels and the like) as serious obstacles to obtaining foreign direct investment in the region.  Moreover, he recognised the violations as ‘impeding effective competition’ and thereby directly hurting African consumers,” says Stargard.

Mr Mfumukeko is quoted as stating: “The EAC markets pose challenges to investors and consumers including the charging of high prices arising from anti-competitive practices such as cartels. These practices impede effective competition in the markets.”

Within the EAC, Stargard notes, the primary jurisdictions with operational antitrust regimes are Kenya and Tanzania, with others such as Uganda lagging behind even farther, having no competition legislation or only having draft bills under review.  Most other nations lag behind, although, as Mr. Stargard observes, many are part of the broader COMESA competition regime.  “The COMESA rules, however, have thus far been enforced with a primary objective of merger regulation,” he says, “effectively failing to police any collusive conduct in the close to two dozen member states at all, despite the explicit prohibition thereof in the COMESA regulations.”

South African Competition Commission charges furniture removal company with record number of charges

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by Meghan Eurelle

The South African Competition Commission has charged Stuttaford Van Lines, a furniture removal company, with 649 counts of collusive tendering related to hundreds of tenders to transport government furniture. This the largest number of charges faced by a single company in the history of anti-cartel enforcement by the Commission.

The tenders include those issued by the Presidency, Parliament, the National Prosecuting Authority, the South African Secret Service, the South African Police Service, the South African Revenue Services and the Public Protector, among others.

It is likely that the case emanates from the 2010 complaint against the industry that uncovered widespread and deep rooted anti-competitive and collusive conduct in the furniture removal market. The Commission’s investigation revealed Stuttaford colluded with its competitors from at least 2007 through cover quotes.

All the companies alleged to have colluded with Stuttafords, such as JH Retief Transport, Cape Express Removals, Patrick Removals and De Lange Transport, have subsequently settled with the Commission but the case against Stuttaford has been referred to the Tribunal for adjudication.

The Commission is asking the Tribunal to fine the furniture removal company 10 percent of its annual turnover on each of the 649 charges. The Commission’s approach of seeking an administrative penalty in respect of each alleged contravention means that the 10% statutory cap will be applied, on the Commission’s version, for each contravention.

Namibian Supreme Court rules Competition Commission has no Jurisdiction Over Medical Aid Fund Members

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By AAT contributors Charl van der Merwe and Aurelie Cassagnes

On 19 July 2017, the Namibian Supreme Court, was tasked with settling a long standing dispute (not the first of its kind) as to whether or not the Respondents fell within the jurisdiction of the Namibian Competition Commission (NCC) in terms of the Namibian Competition Act of 2003 (Namibian Act). The case was brought on appeal by the Namibian Medical Aid Funds (NAMAF) and its members (collectively referred to as the Respondents).

After an investigation lasting a couple of years, the NCC announced in November 2015 that it had considered the behaviour of the Respondents in setting a “benchmark tariff” and found that the practice amounted to Price Fixing in contravention of section 23 of the Namibian Act. The Respondents, in pre-empting the commission’s planned litigation, disputed the NCC’s jurisdiction. The High Court found in favour of the NCC which led to the appeal by the Respondents to the Namibian Supreme Court.

Benchmark tariffs, in short, is a recommended fee, payable to doctors, at which medical aid expenses and consultations are covered. The issues surrounding benchmark tariffs has sparked debate across Africa with ‘those for’ arguing that without them, the medical profession would be “nothing short of economic lawlessness” whilst critics argue that it is “quietly killing off the health-care profession”.

The Namibian High Court, in finding against the Respondents, confirmed the NCC’s jurisdiction over the matter and ruled that determining and recommending a benchmark tariff for medical services was unlawful because it amounted to fixing a selling price. The court, in making its decision, held that “The funds’ activities in formulating a benchmark tariff were not ‘designed to achieve a non-commercial socioeconomic objective’. Rather, it was to produce and distribute wealth.” (Own emphasis)

The main issue to be decided on appeal by the Namibian Supreme Court, however, was not whether the benchmark tariff amounted to a contravention of the Namibian Act, but rather, whether the NCC had jurisdiction over the matter. In other words, whether the Respondents were included under the definition of ‘undertakings’ in terms of the Namibian Act.  Chapter 1 of the Namibian Act provides that:

An “’undertaking’ means any business carried on for gain or reward by an individual, a body corporate, an unincorporated body of persons or a trust in the production supply or distribution of goods or the provision of any service”

The Namibian Supreme Court found that the Respondents were not a “business carried on for gain or reward” and, therefore, were not subject to the provisions of the Namibian Act. As such, the Namibian Supreme Court overruled the High Court’s decision, leaving NAMAF and its members to continue the use of benchmark tariffs.

The South African Competition Tribunal (SACT) had similarly dealt with this issue in a series of Orders during the course of 2004 and 2005 (see the Hospital Association of South Africa and the Board of Healthcare Funders of Southern Africa). In this regard, the SACT found that the relevant medical schemes (the Respondents) fell within the ambit of the South African Competition Act 89 of 1998 (South African Act) and, accordingly, imposed an administrative penalty on the Respondents for “benchmarking tariffs”.

In its consent orders, the South African Competition Commission (SACC), despite mentioning that the Respondents were “an association incorporated not for gain in terms of the company laws in South Africa”, held that the Respondents are an association of firms that “determines, recommends and published tariffs to and/or for its members; and which recommendations has the effect of fixing a purchase price”

Furthermore, the SACC, condemned the ‘benchmarking tariffs system’ put in place by the Respondents and argued, despite the fact that the health care professionals were still largely free to determine their own fees, publishing these recommendations amounted to price-fixing which is a per se contravention in terms of section 4(1)(b) of the South African Competition Act.

Accordingly, the differing approaches in Namibia and South Africa come down to the interpretation of what entities fall within the umbrella of the respective Competition Acts.