COMESA news: Uganda gets on board, fields new CCC Board Chair

For the small but growing segment of COMESA Competition Commission observers in the world, some recent developments relating to a key member state may have gone unnoticed: the CCC held a training workshop for Ugandan officials, including over 110 ministerial District Commercial Officers, in sensitizing them to competition-law issues, spotting antitrust offences, and catalysing the enactment of robust competition legislation in the East African nation, whose GDP exceeds $25 billion and has exhibited consistent growth over the past several years.

CCC’s Uganda training workshop

Says Andreas Stargard, a competition partner with African boutique firm Primerio Ltd.:

This development of the CCC supporting domestic antitrust enforcement and legislative efforts is not only affirmatively required by the COMESA Treaty, obligating member states to enact legislation comporting with the CCC Regulations, but has long been foreshadowed by CCC officials.

For example, at this year’s region-wide sensitization workshop held by the CCC in Nairobi, Kenya, the agency’s leadership assured me personally that they would undertake these capacity-building programmes throughout COMESA member states, especially those with less-developed competition-law regimes, including Uganda.

CCC Board Chair Patrick Okilangole (Uganda)

Uganda is a key COMESA country that does not have a functioning antitrust enforcement body or underlying legislation.  Mr. Stargard adds that “the CCC’s choice of Uganda as a target jurisdiction may, in addition, also have been influenced by the fact that the current CCC Board Chairman is Patrick Okilangole, a Ugandan national,” whose appointment to the Commission’s Board was recently renewed in July.

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Competition Enforcement Update – Eastern & Southern Region

COMESA

The COMESA Competition Commission (CCC) has vowed to develop a system which will allow the CCC to have better oversight (to in turn ensure effective enforcement) over anti-competitive behaviour in member states.

This follows extensive research conducted by the CCC’s which indicates that anti-competitive practices are increasingly prevalent throughout its member states and is causing consumer harm.

George Lipimile, CEO of the CCC says that while protective measures put in place by national governments (aimed at shielding their companies from competition) is a serious threat to the region as cartels are prevalent is almost all sectors of the economy.

The CCC has also singled out the banking sector, stating that: “[w]e [CCC] have seen quite a lot of abuse in terms of non-disclosure of critical information to consumers”.

Andreas Stargard, antitrust lawyer at Primerio Ltd., attributes the increase in anti-competitive behaviour in the region to a lack of awareness of consumers’ rights groups to recourse under competition laws. “Antitrust is a comparatively new and developing phenomenon in most of the COMESA member states, and it will take time for local authorities to increase public awareness around the benefits of antitrust to consumers”, he says. “One way to increase such awareness is, of course, closer engagement of private legal consultants as well as media, whether online, print, or radio and television.”

The CCC has vowed to intensify efforts to increase awareness within member states and to ensure effective and robust enforcement of competition laws in the region.

KENYA
The Competition Authority of Kenya (CAK) has rejected a study (presented at the National Assembly Committee on Communication, Information and Innovation) by the Communications Authority which aims to introduce price capping in the telecommunications sector as a means to ‘remedy’ high concentration in the market.

In dismissing the study, the CAK Director General Kariuki Wang’ombe stated that “[i]t is important to highlight that dominance is not an illegality. What is an illegality is the abuse of dominance position. The intervention of a regulator should be informed by abuse of dominance position.”

Ruth Mosoti, a leading Kenyan competition practitioner, notes that the CAK, in an effort to steer clear of being considered a pricing regulator, “proposed that the Communications Authority focus on ensuring the sharing of resources by dominant firms (so as to ease barriers to entry and reduce switching costs so as to facilitate the entry and participation of competitors in the market) as opposed to setting a price cap.”

The CAK further urged the Assembly Committee to facilitate co-operation between the CAK and the Communications Authority in order to ensure effective regulation in the sector. “I request this committee to come up with a way of compelling the regulators to work together for the betterment of this sector. It might not be easy for only one regulator to regulate this sector. This issue is more of personal relationship,” Kariuki said.

Safricom Kenya CEO, in response, expressed his concerns stating that “[t]he operators who are seeking these interventions today will have been taught not to invest but instead to rely upon the infrastructure that is built by others. They will have been taught not to innovate as innovations will be served to them on a silver platter”.

NAMIBIA

Following an announcement by the Namibia Taxi and Transport Union (NTTU) that taxi fares will increase (following approval of its members at a joint meeting), the Namibia Competition Commission (NCC) warned the taxi operators to follow due process in seeking to introduce joint price increases to avoid falling foul of the Namibia Competition Act (Competition Act).

In terms of the Namibia Road Traffic and Transport Act (Transport Act), the Transport Board may endorse a collusive price increase in the industry (of not more than 10%). The NTTU has, however, announced that despite their understanding that the Transport Act stipulates that any fare increase should not be more than 10%, they will continue to implement the 50% price increase, with or without approval.

The NCC has, therefore, warned taxi operators that any collusive price increase (which is contrary to the Transport Act) will amount to a contravention of the Competition Act. The NNC released a statement saying “[t]axi operators who collusively and intentionally impose fixed taxi fare increases without following the due process set out in the Road Transport Act will render themselves liable in terms of the Competition Act and thereby attract a formal investigation which may lead to punitive civil and/or criminal sanctions”.

The NCC has previously resolved not to investigate Bus and Taxi Associations for price fixing, provided that such conduct was authorised under the Transport Act.

John Oxenham, also a director at Primerio Ltd. notes that the passenger transport is sector is increasingly considered a priority sector in Africa with Namibia’s neighbouring country, South Africa, having commenced a market inquiry into the public passenger transport sector which, inter alia, will assess the impact of ride-hail apps such as Uber on competition in the traditional taxi sector.

#COMESA21: New member states, new commissioners

#COMESA21

In a milestone enlargement of the (now formerly) 19-member COMESA region, Tunisia and Somalia have acceded to the trade bloc at the 20th COMESA Summit on 19th July 2018, creating #COMESA21 – Africa’s largest free trade region.

Their application to join had been pending since 2016.  Under the Treaty, the new members will be bound by the provisions of the Treaty and must deposit their formal instrument of acceptance of the terms of admission with the Secretary General, together with an instrument of accession pursuant to Articles 194 and 195 of the Treaty with regard to a State admitted to full membership.  Says Primerio’s Andreas Stargard, “with the privilege of membership comes the obligation of agreeing to abide by the antitrust rules promulgated under the COMESA Treaty.  This includes the Competition Commission’s procedural and substantive rules and notably its merger regulations.  It remains to be seen how the still weakened bureaucratic structure of the Somali Republic will be able to implement the strictures of a working competition-law regime…

Indeed, the CCC’s recent Notice No. 2/2018 provides that “the provisions of the COMESA Competition Regulations of 2004, and its accompanying rules, shall be enforceable in the territories of the Republic of Tunisia and the Federal Republic of Somalia with immediate effect.”

Personnel News 2018

In addition to gaining two new member states, COMESA also underwent personnel changes, adding an experienced antitrust practitioner, Zimbabwean Competition and Tariff Commission director, Ellen Ruparanganda, as one of the nine CCC commissioners, for a term of three years.  Besides Ms. Ruparanganda, Francis Lebon (Seychelles), Ali Hamadou Ali Kako (Djibouti), Thembelihle Dube (Eswatini, formerly Swaziland), Danson Buya Mungatana (Kenya), Michael Teklu Beyene (Ethiopia), Charlotte Wezi Malonda (Malawi), Islam Tagelsir Ahmed Alhasan (Sudan), and Brian Muletambo Lingela (Zambia) were also sworn in.

Business community embraces COMESA competition law: First-ever #CCCworkshop at full capacity

The first-ever COMESA-sponsored competition law workshop focussed solely on the business community, currently underway in Nairobi, Kenya, stretches the capacity of the Hilton conference room where it is being held.

The event’s tag line is “Benefits to Business.” Especially now, with the African continent sporting over 400 companies with over $500m in annual revenues, the topic of antitrust regulation in Africa is more pertinent than ever, according to the COMESA Competition Commission (CCC).

The head of the Zambian competition regulator (CCPC), Dr. Chilufya Sampa, introduced the first panel and guest of honour. He identified the threats of anticompetitive last behaviour as grounds for he need to understand and support the work of he CCC and its sister agencies in the member states.

With COMESA trade liberalisation, the markets at issue are much larger than kenya or other national markets. The effects of anticompetitive conduct are thus often magnified accordingly.

The one-stop shop nature of the CCC’s merger notification system simplifies and renders more cost-effective the transactional work of companies doing business in COMESA.

The Keynote speaker, Mr. Mohammed Nyaoga Muigai, highlighted the exciting future of the more and more integrated African markets, offering new challenges and opportunities. He challenged the audience to imagine a single market of over 750 million consumers. Companies will have to think creatively and “outside the box” in these enlarged common markets.

His perspective is twofold: for one, as a businessman and lawyer, but also as a regulator and board chairman and member of the Kenyan Central Bank. Effective competition policy (and access to the legal system) allows to prepare the ground for the successful carrying out of business in the common market. Yet, businesses must know what the regulatory regime actually is. Therefore, the duty of lawyers is to educate their clients about the strictures and requirements of all applicable competition law, across all COMESA member states.

After a group photo, the event continued with an informative presentation by Mr. Willard Mwemba on key facts that “companies should know” on merger control in the (soon enlarged to 21 member states, with the imminent addition of Tunisia and Somalia) COMESA region, starting with its historical roots in COMESA Treaty Article 55 and continuing through the current era since 2013 of the CCC’s regulatory oversight.

Willard Mwemba, Head of M&A at the CCC

He provided relevant merger statistics, jointly with Director of Trade affairs, Dr. Francis Mangeni, which were of great interest to the audience, followed by a discussion of substantive merger review analysis as it is undertaken by the Commission. The benefits of the “one-stop-shop” characteristic of CCC notification versus multiple individual filings were extolled and individual past M&A cases discussed.

AAT will live-update the blog as the event progresses.

Dr. Sampa, CCPC executive

Dr. Sampa, as head of the Zambian CCPC and a former CCC Board member, emphasized the importance for companies to have functioning and well-implemented antitrust compliance programmes in place.

A spirited discussion was had relating to the 30% market share threshold the Commission utilises to evaluate triggers for launching antitrust conduct investigations. Primerio’s Andreas Stargard argued for COMESA’s consideration of an increase in this trigger threshold to 40%, proposing that:

“Especially in an already concentrated market (where players possess majority shares anyway), a low initial share threshold is of little to no additional enforcement value. On the contrary, a low threshold may hamper vigorous competition by smaller to midsize competitors or newer entrants, who wish to grow their (previously innocuous) smaller share of the market but are simultaneously held back in their growth efforts by trying not to cross the 30% barrier so as not to attract the attention of the Commission.”

There was also an issue raised regarding private equity and non-profit / “impact investors” and the like having to bear the burden of notifications and ancillary fees in cases that are otherwise unobjectionable almost by definition (since the investors are not present on the market of the acquired entities in which they invest). Dr. Mangeni indicated that the CCC will investigate and consider whether a proposed change in the applicable Rules to account for this problem may be advisable in the future.

Mary Gurure, head of legal (CCC)

The CCC’s chief legal advisor, Ms. Mary Gurure, presented on conflict of laws issues within the COMESA regime, harmonisation of laws, and CCC engagements with individual member states on these issues.

Crucially, she also mentioned a novel initiative to replicate a COMESA-focused competition enforcer network, akin to the ECN and ICN groupings of international antitrust agencies.

Business panel #CCCworkshop 2018

The conference concluded with a business lawyer panel, in which outside counsel and in-house business representatives voiced their perspectives, largely focusing on the issue of merger notifications. These topics included the (1) burdens of having to submit certified copies of documents, (2) high filing fees (particularly in light of relatively low-value deals being made in the region), (3) comparatively low notification thresholds (e.g., the $10m 2-party turnover limit), (4) remaining, if minimal, confusion over multiple filing obligations, (5) questions surrounding the true nature of the “public interest” criterion in the CCC’s merger evaluation, which could benefit from further clarification via a Guideline or the like, and (6) the importance of predictability and consistency in rulings.

Panellists also commented on the positive, countervailing benefits of the one-stop-shop nature of the CCC, as well as highlighting the friendly nature of the COMESA staff, which permits consensus-building and diplomatic resolutions of potential conflicts.

Mr. Mwemba concluded the event by responding to each of the panel members’ points, noting that forum-shopping based on the costs of filing fees reflected a misguided approach, that the CCC may consider increasing filing thresholds, and that the CCC’s average time to reach merger decisions has been 72 (calendar) days.

COMESA competition workshops underway (#CCCworkshop)

CCC workshop participants

Events focus on media & business community’s understanding of competition rules and practical workload of CCC

Media

For two days this week, COMESA will hold its 5th annual “Regional Sensitization Workshop for Business Reporters“, focussed on provisions and application of the COMESA competition regulations and trade developments within the 19-country common market.

Over 30 journalists from close to a dozen countries are expected to participate in the event, held in Narobi, Kenya, from Monday – Tuesday.

AfricanAntitrust.com will cover all pertinent news emerging from the conference.  We will update this post as the conference progresses.

Speakers include a crème de la crème of East African government antitrust enforcement, including the CCC’s own Willard Mwemba (head of M&A), the CCC’s Director Dr. George Lipimile, and the Director and CEO of the Competition Authority of Kenya, Francis Wang’ombe Kariuki.  Topics will include news on the rather well-developed area of of mergerenforcement, regional integration & competition policy, as well as the concept of antitrust enforcement by the CCC as to restrictive business practices, an area that has been thus far less developed by the Commission in terms of visibility and actual enforcement, especially when compared to M&A.  We previously quoted Director Lipimile’s statement at a 2014 conference that, since the CCC’s commencement of operations “in January, 2013, the most active provisions of the Regulations have been the merger control provisions.”

Andreas Stargard, a competition practitioner, notes:

“We have been impressed with the Commission’s progress to-date, but remain surprised that no cartel cases have emerged from the CCC’s activities.  We believe that the CCC has sufficient capacity and experience now, in its sixth year of existence, to pursue both collusion and unilateral-conduct competition cases.

Personally, I remain cautiously optimistic that the CCC will, going forward, take up the full spectrum of antitrust enforcement activities — beyond pure merger review — including monopolisation/abuse of dominance cases, as well as the inevitable cartel investigations and prosecutions that must follow.”

The media conference will conclude tomorrow evening, June 26th.

Business Community

COMESA Competition Commission logoThe second event, also held in Nairobi, will shift its focus both in terms of attendees and messaging: It is the CCC’s first-ever competition-law sensitization workshop for the Business Community, to take place on Wednesday.  It is, arguably, even more topical than the former, given that the target audience of this workshop are the corporate actors at whom the competition legislation is aimed — invited are not only practicing attorneys, but also Managing Directors, CEOs, company secretaries, and board members of corporations.  It is this audience that, in essence, conducts the type of Mergers & Acquisitions and (in some instances) restrictive, anti-competitive business conduct that falls under the jurisdiction of Messrs. Lipimile, Mwemba, and Kariuki as well as their other domestic African counterparts in the region.

The inter-regional trade component will also be emphasized; as the CCC’s materials note, “we are at a historical moment in time where the Tripartite and Continental Free Trade Area agreements are underway. The objective of these agreements is to realize a single market. Competition law plays a vital role in the realization of this objective, therefore its imperative that journalists have an understanding of how competition law contributes to the Agenda.”

#LiveUpdates from the #CCCworkshop

Kenya perspective

Boniface Kamiti, the CAK representative replacing Mr. Kariuki at the event, noted that Africa in general and including the COMESA region “has a weak competition culture amongst businesses — which is why cartels are continuing in Africa, and the level of M&A is not at the level one would expect.”  This is why media “reporting on competition advocacy is very important, to articulate the benefits of competition policy and how enforcement activities further its goals, so the COMESA countries may be able to compete with other countries, including even the EU members, at a high level.”

He also highlighted — although without further explanation — the “interplay between the COMESA competition laws and those of the member countries; most people are not aware of that!”  This comment is of particular interest in light of the prior jurisdictional tension that had existed between national agencies and the CCC in the past regarding where and when to file M&A deals.  These “teething issues are now fully resolved”, according to Dr. Lipimile, and there are neither de iure nor any de facto merger notification requirements in individual COMESA member states other than the “one-stop shop” CCC filing (which has, according to Mr. Mwemba, reduced parties’ M&A transaction costs by 66%).

On the issue of restrictive trade practices (RTP), the CAK reminded participants that trade associations often serve to facilitate RTP such as price-fixing cartels, which are subject to (historically not yet imposed, nor likely to be) criminal sanctions in Kenya. It also observed that (1) manufacturers’ resale price maintenance (RPM) would almost always be prosecuted under the Kenyan Competition Act, and that (2) since a 2016 legislative amendment, monopsony conduct (abuse of buyer power) is also subject to the Act’s prohibitions.

Concluding, the CAK’s Barnabas Andiva spoke of its “fruitful” collaboration with the CCC on ongoing RTP matters, noting the existing inter-agency Cooperation Agreement. Added Mr. Mwemba, “we have approximately 19 pending RTP cases.”

CCC leadership perspective:  Nudging Uganda and Nigeria towards competition enforcement

CCC_Director

George Lipimile, CEO, COMESA Competition Commission

Dr. Lipimile took up Mr. Kamiti’s “weak African competition culture” point, noting the peculiar regional issue that “between poverty and development lies competition” to enhance consumer welfare.

He took the audience through a brief history of antitrust laws globally, and encouraged journalists to explain the practical benefits of “creating competitive markets” for the population of the COMESA region at large.

He called on Uganda and Nigeria to — finally — enact a competition law.  (AAT has independently reported on Uganda and also the EAC’s emphasis on its member nations having operational antitrust regimes.  We observe that Uganda does have a draft Competition Bill pending for review; a fellow Ugandan journalist at the conference mentioned that there has been some, undefined, progress made on advancing it in the Ugandan legislature.)  Dangote — the vast Nigerian cement conglomerate (see our prior article here) — and Lafarge played exemplary roles in Lipimile’s discourse, in which he commented that “they do not need protecting, they are large”, instead “we need more players” to compete.

Importantly, Dr. Lipimile emphasized that protectionism is anti-competitive, that “competition law must not discriminate,” and that its goal of ensuring competitive market behaviour must not be confused with the objectives of other laws that are more specifically geared to developing certain societal groups or bestow benefits on disadvantaged populations, as these are not the objectives of competition legislation.

The CCC also called on the press to play a more active role in the actual investigation of anti-competitive behaviour, by reporting on bid rigging, unreported M&A activity, suspected cartels (e.g., based on unexplained, joint price hikes in an industry), and the like.  These types of media reports may indeed prompt CCC investigations, Lipimile said.  Current “market partitioning” investigations mentioned by him include Coca Cola, SABMiller, and Unilever.

He concluded with the — intriguing, yet extremely challenging, in our view — idea of expanding and replicating the COMESA competition model on a full-fledged African scale, possibly involving the African Union as a vehicle.

CCC workshop participants

2018 CCC workshop participants

COMESA Trade perspective

The organisation’s Director of Trade & Commerce, Francis Mangeni, presented the ‘competition-counterpart’ perspective on trade, using the timely example of Kenyan sugar imports, the cartel-like structure supporting them, and the resulting artificially high prices, noting the politically-influenced protectionist importation limitations imposed in Kenya.

Dr. Mangeni opined that the CCC “can and should scale up its operations vigorously” to address all competition-related impediments to free trade in the area.

CCC Mergers

Director of M&A, Mr. Mwemba, updated the conference on the agency’s merger-review developments. He pointed to the agency’s best-of-breed electronic merger filing mechanism (reducing party costs), and the importance of the CCC’s staying abreast of all new antitrust economics tools as well as commercial technologies in order to be able to evaluate new markets and their competitiveness (e.g., online payments).

As Mr. Mwemba rightly pointed out, most transactions “do not raise competition concerns” and those that do can be and often are resolved via constructive discussions and, in some cases, undertakings by the affected companies. In addition, the CCC follows international best practices such as engaging in pre-merger notification talks with the parties, as well as follow-ups with stakeholders in the affected jurisdictions.

Key Statistics

Year-to-date (2018), the 24 notified mergers account for approximately $18 billion in COMESA turnover alone. Leading M&A sectors are banking, finance, energy, construction, and agriculture.

In terms of geographic origination, Kenya, Zambia, and Mauritius are the leading source nations of deal-making parties, with Zimbabwe and Uganda closely following and rounding out the Top-5 country list.

The total number of deals reviewed by the CCC since 2013 amounts to 175 with a total transaction value of US $92 billion, accounting for approximately $73.7 billion in COMESA market revenues alone. (The filing fees derived by the Commission have totaled $27.9 million, of which half is shared with the affected member states.)

All notified deals have received approval thus far. Over 90% of transactions were approved unconditionally. In 15 merger cases, the CCC decided to impose conditions on the approval.

Harmonising agricultural seed regulations across COMESA: COMSHIP Certification

COMSHIP advances bloc’s Certification Programme to next level

Announced in Lusaka by COMESA’s Assistant Secretary General in charge of Programmes, the long-awaited Regional Seed Certificates will be issued by member states’ national seed authorities, in an attempt to level the competitive playing field and establish guaranteed performance and yields of otherwise unpredictably performing seed products.  The COMESA programme requires verification that a registered seed lot in the region’s “Variety Catalogue” has been inspected to field standards and laboratory analysis.

Andreas Stargard

Andreas Stargard

“The COMESA Competition Commission (CCC) having approved no less than three major agricultural mergers over the past year (Bayer/Monsanto, Dow/DuPont, and Syngenta/ChemChina) — all of which involved significant seed production and R&D elements — the Regional Seed Certificate programme represents the next step in bringing to fruition the COMESA Seed Harmonisation Implementation Plan (COMSHIP), designed to align seed regulations within the trading bloc,” says Andreas Stargard, a competition lawyer with Primerio Ltd.  “The Secretariat’s stated goal of COMSHIP is not only to assure product quality and grow intra-bloc commerce, but also increase the extra-regional competitiveness of the trade group’s substantial seed industry,” in line with COMESA’s Seed Trade Harmonization Regulations of 2014.

COMESACCAccording to its own statements, whilst only five member countries (Burundi, Rwanda, Kenya, Uganda and Zimbabwe) have fully modelled their national seed laws on the COMESA Seed System, the group’s Seed Certification system is the first such “use and distribution of seed labels and certificates as a way of improving access to quality seeds in the region” anywhere in the world, based on a model suggested by the OECD.  The system will “impact virtually all of the approximately 130 million COMESA inhabitants, who stand to benefit, according to the group, from assured-quality improved seed production and usage, as well as a de-fragmentation of the historically rather localised, national markets for seeds,” commented Stargard.

Practically speaking, the seed certification labels will incorporate machine-readability, traceability, and security features, and will be printed in the COMESA official languages: English, French and Arabic.

COMESA to Introduce Seed Labels and Certificates to Boost regional Trade

Resale Price Maintenance in COMESA?

Second Non-Merger Investigation Opened by COMESA Enforcer

Coca-Cola’s Africa operations — recently sold in a majority shareholder exit in late 2016 by Anheuser-Busch InBev (which owned 54.5%) — were due for a major overhaul of the company’s long-term strategic plan to grow its market presence across Africa.  Yet, it is now under investigation for restrictive trade practices by the COMESA Competition Commission (“CCC”).

This is a first, of sorts: After the CCC’s original non-merger investigation into exclusive marketing practices of broadcasting rights and sponsorship agreements in relation to football tournaments (AAT reported here) ended — or hasn’t ended — with something of a thud (nothing having been reported by way of conclusion thereof), we and the world’s largest soft drink manufacturer are bracing ourselves for the outcome, if any, of the latest COMESA salvo delivered by the CCC to prove its worth to its Board.  (We surmise so as this latest, second-ever, non-merger investigation may have been prompted at least in part by the fact that the CCC’s budget was recently slashed by the regional body, and that the Commission wishes to reestablish itself in the eyes of the COMESA directorate as a worthwhile agency to fund and to bolster).

The COMESA “restrictive practices” investigation into Coca-Cola’s distribution agreements may come on the heels of its (announced, yet likely neither begun nor concluded) market enquiry into the grocery retail sector, similar to comparable market-wide investigations undertaken in Kenya and South Africa; moreover, the South African Competition Commission has likewise undertaken past investigations into restrictive vertical distribution practices engaged in by Coca-Cola in South Africa.

Actual or would-be soft drink competitors may have also brought claims of foreclosure to the CCC’s attention — likely alleging resale price maintenance, as well as possibly lack of access to key distributors due to Coca-Cola’s exclusive or quasi-exclusive contracts and the like.  According to the official COMESA Notice, the agency is investigating allegations against The Coca-Cola Company’s African subsidiary (Coca-Cola Africa (Proprietary) Limited) in relation to its distribution agreements with downstream entities in Ethiopia and Comoros, both of which are COMESA member states, albeit historically rather inactive when it comes to competition-law enforcement.

According to the antitrust-specialist publication Global Competition Review, the CCC has stated that Coca-Cola’s alleged restrictive conduct worked as planned only rarely in practice.  Yet, the agency’s spokesperson noted that the risk of anti-competitive effects remained real: “Coca-Cola is dominant in these countries, it is important that they do not abuse that dominance through distribution agreements which frustrate competition in the relevant markets”, the spokesperson said, according to GCR‘s reporting.  The magazine also quoted Pr1merio antitrust lawyer Andreas Stargard as saying that the CCC can issue injunctions and impose fines of up to 10% of Coca-Cola’s turnover in the common market for the year prior to the conduct.

Andreas Stargard

Andreas Stargard

Stargard tells AAT further that “[a]ny agreement contravening Article 16 of the COMESA Regulations is automatically void.  In addition, while the CCC is breaking new ground here (as it has not yet successfully brought any non-merger investigation to conclusion to date), the applicable Regulations foresee not only injunctive relief (cease-and-desist orders and conduct-based injunctions forcing the party to ‘take whatever action the Commission deems necessary to remove and/or diminish the effect of the illegal conduct’) but also fines, as cited above.  However, no such fine has yet been imposed in any anti-competitive conduct investigation by the CCC.”

He continues: “Under the COMESA Competition Regulations, the agency normally has an initial ‘consultative’ time period of 30-45 days to evaluate whether or not to launch a full-fledged investigation.  This period may include meetings with the concerned party or parties, any complainant, or other stakeholders.  Thereafter, if the Commission votes to open an investigation, the latter must be concluded within 180 days from the date of receipt of the request for the investigation, if it was brought by a complainant.  Here, the official Notice provides that an investigation was in fact opened, meaning the clock has begun ticking.”

Interested stakeholders have until February 28, 2018 to issue comments.

COMESA Competition Chief Approves of FDI, M&A Transactions

Lipimile Advocates for Foreign Direct Investment, Encouraging Acquisition-Hungry Multi-Nationals in Recent COMESA Trade Remarks

In a comment on the COMESA Simplified Trade Regime (STR) regional programme, recently being implemented locally in the border region between Rwanda and the DRC, George Lipimilie, the Chief Executive Officer of the COMESA Competition Commission, stated that the regional body’s “focus on free movement of goods has generally paid dividends resulting in [] a lot of cross-border mergers and acquisitions,” according to an article in the Rwanda New Times.

George Lipimile of the COMESA Competition Commission

It appears that the CCC chief is expressly favouring foreign direct investment into the region by way of mergers (or perhaps more accurately, acquisitions).  “This is particularly so where the ‘foreign’ (presumably implying non-COMESA) multi-national entity brings with it novel technologies or R&D to improve the market position of the local competitor,” according to Andreas Stargard, a Pr1merio Ltd. competition-law practitioner.

Of interest to M&A practitioners, Mr. Lipimile is quoted as saying: “There are situations when foreign companies use acquisitions to enter the market where you find a multinational company buying a local company which is good because it comes with a lot of technology.” (Emphasis added).

Mr. Lipimile was also rather specific about encouraging FDI in the region’s raw-materials sector from nation states other than the PRC: said Lipimile, “[w]e have seen China taking advantage of our raw materials and we hope more countries can follow suit.”

We note that the domain of international trade — specifically tariffs as barriers to trade — has historically not been within the jurisdictional purview of the COMESA Competition Commission, which was designed to be a competition-law enforcement body.  Technically, there exists the post of COMESA Director for Trade, Customs & Monetary Affairs, held by Dr. Francis Mang’eni and not by Mr. Lipimile.  The CCC, however, “has recently emerged to take a more active role within the COMESA architecture of regional enforcement institutions,” Mr. Stargard says.  He notes that Article 4 of the COMESA Treaty expressly provides that “[i]n the field of trade liberalisation and customs co-operation [the Member States shall] (a) establish a customs union, abolish all non-tariff barriers to trade among themselves”, and that the regional Competition Regulations expressly bestow the CCC with the authority to investigate and abolish all “anti-competitive practices affecting COMESA regional and international trade.”

Akzo rejects CCC notification request, claims no ‘failure-to-file’ in paint deal

Paint giant goes on offensive against COMESA request for retroactive merger filing

By AAT Editors

As AAT first reported here on Sept. 26, the COMESA Competition Commission has launched its first failure-to-file investigation into an M&A transaction (here, likely, a licensing deal), specifically involving Dutch commercial paint giant AkzoNobel and paint brand “Sadolin“.

sadolin.jpgToday’s news, reported in local Ugandan media, is that AkzoNobel’s Director for Decorative Paints in Sub-Saharan Africa, Johann Smidt, made strong comments at the “relaunch” of Sadolin Uganda, claiming that Akzo’s reassignment of the Sadolin brand name & distribution network to Crown Paints East Africa falls outside the CCC’s purview.”  This sentiment was echoed by Crown’s CEO, Rakesh Rao, saying that “[w]e do not have a merger going on; we are a fully independent plant, so COMESA does not come into the picture at all.

Competition lawyers caution that, on occasion, a business person’s notion of what constitutes a “notifiable transaction” can be at odds with the legal definition thereof, says Andreas Stargard,  an antitrust attorney with Primerio Ltd.

“Whilst they may not be a classic ‘merger’ or ‘acquisition’ in the eyes of the business people, certain types of exclusive licensing agreements or even patent or other IP [intellectual property] assignments may very well fall within the purview of competition regulators, including the COMESA Comp Com.,” said Stargard.

The facts surrounding the transaction itself are by all accounts, fairly confounding.  As best as one can interpret the media reports, the former AkzoNobel license agreement was one with an entity called “Sadolin East Africa” (SEA).  However, upon the purchase of SEA by Japanese company Kansai Plascon (AKA “Plascon Uganda” in the region), Akzo cancelled the agreement and has now entered into a new replacement license with Crown Paints (AKA Regal Paints).  It is the cancellation and reassignment that, according to two letters sent by the CCC on September 19th and 25th, requesting that the companies make retroactive merger-notification filings to bring them into belated compliance with the COMESA merger regime.

For now, we know that Akzo remains defiant (presumably basing its critical position on advice of legal counsel), with its local director stating that “whatever we have done to date has been within the laws of this country and this region”.

While some of Akzo’s statements were presumably vetted by antitrust counsel, others are at odds with a “good” antitrust story and appear to be less-carefully made proclamations: Akzo has said that “we believe that we are going to improve competition because we have a new player who is introducing a new product and an existing player, who is Sadolin and we will continue to be here,” yet its director also noted “that the war of words between Sadolin and Plascon had eaten into their market share and that this had influenced their quick agreement with Crown paints”.

As attorney Stargard observes, “it is usually not considered to be an effective antitrust defence to claim that a competitor has ‘eaten into your market share’, and that your actions that are now under investigation were motivated by said competition…”

M&A news: First publicly reported failure-to-file accusation in COMESA

Commission goes after Dutch paint manufacturer in Uganda in supra-national enforcement action threat

By AAT staff

The African expansion saga of Japanese paint manufacturer Kansai continues, albeit not in Southern Africa (after having travailed through a hostile takeover of South African paint company Freeworld Coatings and obtaining a majority stake in Zimbabwean competitor Astra Industries in 2010 and 2013, respectively): the current Kansai-related antitrust story is a COMESA one, which comes to us from East Africa.

As was reported back in 2013 in industry publication CoatingsWorld, Kansai had set its sights on expanding into Eastern Africa as well, focussing on the Sadolin brand (formerly owned by AkzoNobel and since its private equity buy-out produced under a continuing AkzoNobel licence and under the parent label Crown Paints).

This has now changed, says competition attorney Andreas Stargard with Primerio Ltd.: “Recently, the COMESA Competition Commission had become aware of press reports that AkzoNobel had withdrawn its Kansai/Sadolin licence in Uganda (a COMESA member state) and effectively entered into — or planned to enter into — a new agreement with an unnamed ‘local producer’.”

Mr. Stargard, who practices competition law with a focus on African companies and jurisdictions, points out that the COMESA merger-notification regime requires a mandatory filing under certain conditions, such as those affecting 2 or more member states and involving businesses with at least $10m in combined regional revenues.

“Whilst the COMESA review is non-suspensory (meaning the parties must notify, but can go ahead and implement the transaction prior to the termination of the CCC’s antitrust review), the notification itself is mandatory.  A failure-to-file can result in significant fines of up to 10% of combined turnover, as well as the regional annulment of the merger within the COMESA countries.

This is what has now happened with Mr. Lipimile’s Sept. 19th letter to AkzoNobel: the CCC chief warned the company that it would risk voiding any contracts if it failed to make a ‘curative’ retroactive filing by yesterday, Monday, 25 September 2017.”

The CCC’s letter to the Dutch paint giant reads in relevant part: “Kindly be informed that the COMESA competition commission has become aware through the media that Akzo Nobel Powder Coatings has entered into sales, manufacturing and distribution agreements with a local paint manufacturer in Uganda.  I wish to inform you that, mergers and any other forms of agreements between competitors are required to be notified to the Commission….without such notification, and subsequent approval by the Commission, such transactions are null and void ab initio and no rights or obligations imposed on the participating parties shall be legally enforceable in the Common Market.”

As to the likelihood of any notification having been made — or at least made satisfactorily and completely —  Andreas Stargard observes that:

“By any antitrust lawyer’s standards, scrambling to make a filing within less than a week, as seems to be required by George’s letter here, is a tall order — merger notifications usually require significant preparatory work, including data analysis, document collection, and interviews with the business people to advance to a final ‘filing’ stage.  To do so in 6 calendar days is extremely difficult.”

He concludes that, “as COMESA is still a relatively young regime in terms of merger filings — with few resources at hand to manage notifications in and of themselves, much less enforcement actions — we expect that the CCC and the parties will somehow arrive at an amicable settlement in this matter.”