First set of Merger Assessment Guidelines made available by CFTC

Posted on December 18, 2015 by Editor

Malawi Releases 2015 ‘Merger Assessment Guidelines’

By Michael J. Currie

A number of African jurisdictions have recently published guidelines relating to merger control (which we have reported here on Africanantitrust). During 2015, Malawi’s Competition and Fair Trading Commission (“CFTC”, whose web site appears to be down at the time of publication (http://www.cftc.mw), followed suit and published Merger Assessment Guidelines in 2015 (“Guidelines”) in order to provide some guidance as to how the CFTC will evaluate mergers in terms of the Competition and Fair Trading Act (“Act”).

Most significantly, the Guidelines have not catered for mandatorily notifiable merger thresholds which is unfortunate as most competition agencies as well as advocacy groups have recognised that financial thresholds is an important requirement to ensure that merger control regimes are not overly burdensome on merging parties.

Furthermore, the COMESA Competition Commission, to which Malawi is a member, published merger notification thresholds in 2015 in line with international best practice. It would be encouraged that the CFTC considers likewise publishing thresholds.

Other than the absence of any thresholds, the Guidelines contain substantively similar content to most merger control guidelines insofar as they set out the broad and general approach that the CFTC will take when evaluating a merger. We have, however, identified the following interesting aspects which emerge from the Guidelines which our readers may want to take note of:

The CFTC is entitled to issue a “letter of comfort” to merging parties. A letter of comfort is not formal approval, but allows the merging parties to engage conduct their activities as if approval has been obtained. Therefore, once a letter of comfort has been obtained, the parties may implement the merger. In terms of the Guidelines, a letter of comfort will only be issued once the CTFC is satisfied that any should their investigation reveal any potential competition law concerns, that those concerns will be able to be sufficiently addressed by merger related conditions. It is not clear whether a letter of comfort will be issued before the merger has been made public and therefore it is also unclear what the role of an intervening third party will be once a letter of comfort has been issued.

The merger filing fee is 0.05% of the combined turnover or assets of the enterprises’ turnover. The Guidelines do not specify that the turnover must be derived from, in, or into Malawi, although it is likely that this is indeed what was intended.

The Act and Guidelines make provision for what is becoming a common feature of developing countries competition laws, namely the introduction of so-called “public interest” provisions in merger control. The Guidelines, however, indicate that the CFTC does not consider these public interest provisions in quite as robust manner as the authorities do other countries including, inter alia, South Africa, Namibia, Zambia and Swaziland. In terms of the Guidelines, any public interest advantages or disadvantages is just one of the factors that the CFTC will consider, together with the traditional merger control factors. It is thus unlikely that a pro-competitive merger would be blocked purely on public interest grounds although this is notionally possible.

The Guidelines set out the following factors, combined with figures that are likely to be utilised when evaluating market concentration, which if exceeded, may increase the likelihood of the merger leading to a substantial lessening of competition:

Market Shares: 40% for horizontal mergers and 30% for non-horizontal mergers;
Number of firms in the market;
Concentration Ratios: CR3- 65%; or
The Herfindahl-Hirschman Index (“HHI”): HHI between 1000-2000 with delta 259; or HHI above 200 with delta 150. For non-horizontal mergers a merger is unlikely to raise competition concerns if the HHI is below 2000 post-merger.

MergerMania update: COMESA CCC clears 5 notified mergers

Posted on August 5, 2015 by andreasstargard

COMESA CCC clears 5 notified mergers

At their July 29, 2015 meeting, COMESA Competition Commissioners Chikankheni, Langa, and Okilangole rendered decisions in five merger cases notified earlier in the spring. The affected sectors are: Packaging (Nampak), Retail (Steinhoff), Academic Publishing (Springer Verlag), Telecom Towers (Eaton Towers), and Non-Alcoholic Beverages (Coca-Cola).

Ethos/Nampak	MER/03/01/2015	SOM/8/2015	Decision/10/2015	29/07/2015
Steinhoff/Pepkor	MER/03/02/2015	SOM/7/2015	Decision/9/2015	29/07/2015
Holtzbrinck PG/ Springer Science	MER/04/06/2015	SOM/6/2015	Decision/8/2015	29/07/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers	MER/04/05/2015	SOM/5/2015	Decision/7/2015	29/07/2015
Coca-Cola BAL/ Coca-Cola SABCO	MER/04/07/2015	SOM/4/2015	Decision/6/2015	29/07/2015

Our statistics (while discrepant with those identified by COMESA head of mergers Mr. Willard Mwemba) show the following numbers for COMESA notifications to date:

COMESA MergerMania July 2015 — Number of merger notifications based on CCC-published notices

Insight into COMESA thinking: CCC executives speak

Posted on August 4, 2015August 4, 2015 by Editor

COMESA officials’ pronouncements: merger enforcement #1, cartel ‘follow-on enforcement’, jurisdictional swamp

As other attendees of the 17 July 2015 regional sensitisation workshop have done, the Zimbabwean daily NewsDay has reported on the Livingstone, Zambia event — a session that has yielded a plethora of rather interesting pronouncements from COMESA Competition Commission (“CCC”) officials, including on non-merger enforcement by the CCC, as we have noted elsewhere.

In light of the additional comments made by CCC officials — in particular George Lipimile, the agency’s CEO, and Willard Mwemba, its head of mergers — we decided to select a few and publish the “AAT Highlights: COMESA Officials’ Statements” that should be of interest to competition-law practitioners active in the region (in no particular order):

M&A: CCC claims approval of 72 deals since 2014

Willard Mwemba is quoted as saying: “The commission has updated more than 72 mergers and the transaction represented more than $20 million. This money has been invested in the common market through mergers and acquisition.”

We do not know what it means to “update” a merger in this context. We presume it implies “cleared.”

This figure does not conform to the published statistics on the CCC’s web site, which show the following numbers, based on our latest internal tally, amounting to a total of 30 published notifications since 2013 versus a claimed 72 approved deals since only 2014:

COMESA merger statistics July 2015 — Number of merger notifications based on CCC-**published** notices

This discrepancy opens up the topic of transparency and proper documentation on the part of the CCC on its web site. The (undated, as we have observed) PDF notices of merger filings simply do not reflect this claimed number of actual merger approvals made by Mr. Mwemba. We hope that the CCC will enhance and better organise its online documentation of M&A activity. (Even the very first link to the “Explanatory Note” of mergers remains broken after months, as noted previously, simply leading to a blank page comically headlined “What is Merger?”).

We also wonder about the reference in Mr. Mwemba’s statement to “the transaction” valued at “more than $20m.” It may be unclear reporting on the part of NewsDay, or perhaps Mr. Mwemba was referring to a specific but unnamed transaction, presumptively in the mining industry. In any case, Mwemba highlighted the following sectors as key for COMESA M&A transactions: mining, pharmaceuticals, agriculture and energy.

Finally, the claimed CCC’s reduction of the the merger filing fees from half a million dollars “to $200,000” is a topic we shall discuss in a separate post.

Non-Merger Enforcement by COMESA

As we noted in yesterday’s post, the CCC’s head, executive director George Lipimile, foreshadowed non-merger enforcement by the agency, including an inquiry into the “shopping mall sector,” as well as cartel enforcement. On the latter topic, Mr. Lipimile highlighted cartels in the fertiliser, bread and construction industries as potential targets for the CCC — all of which, of course, would constitute a type of “follow-on enforcement” by the CCC, versus an actual uncovering by the agency itself of novel, collusive conduct within its jurisdictional borders, as John Oxenham, a director at Africa consultancy Pr1merio, notes.

“Here, in particular, the three examples given by Mr. Lipimile merely constitute existing cartel investigations that we know well from the South African experience — indeed, the SA Competition Commission has already launched, and in large part completed, its prosecutions of the three alleged cartels,” says Oxenham.

As AAT has reported since the 2013 inception of the CCC, antitrust practitioners have been of two minds when it comes to the CCC: on the one hand, they have criticised the COMESA merger notification regime, its unclear thresholds and exorbitant fees, in the past. On the other hand, while perhaps belittling the CCC’s merger experience, the competition community has been anxious to see what non-merger enforcement within COMESA would look like, as this (especially cartel investigations and concomitant fines under the COMESA Regulations) has a potentially significantly larger impact on doing business within the 19-member COMESA jurisdiction than merely making a mandatory, but simple, filing with an otherwise “paper tiger” agency. Says Andreas Stargard, also with Pr1merio:

“If the CCC steps up its enforcement game in the non-transactional arena, it could become a true force to reckon with in the West. I can envision a scenario where the CCC becomes capable of launching its own cartel matters and oversees a full-on leniency regime, not having to rely on the ‘follow-on enforcement’ experience from other agencies abroad. The CCC has great potential, but it must ensure that it fulfills it by showing principled deliberation and full transparency in all of its actions — otherwise it risks continued doubt from outsiders.”

COMESA Judge Proposes Judicial Enhancements

Justice Samuel Rugege, the former principal judge of the COMESA Court of Justice, is quoted as arguing against the COMESA Treaty’s requirement for exhaustion of local remedies prior to bringing a matter before the Court of Justice:

“I think that the rule ought to be removed and members should have access to the courts like the Ecowas Court of Justice. The matter has been raised by the president of the Court and the matter needs to be pursued. It is an obstacle to those who want to come and cannot especially on matters that are likely to be matters of trade and commercial interest. Commercial matters must be resolved in the shortest possible time as economies depend on trade,” Rugege said.

Justice Rugege also highlighted the potential for jurisdictional infighting in the COMESA region (see our prior reporting on this topic here), observing that said COMESA currently lacks any framework for coordinating matters involving countries that are part of both SADC and the COMESA bloc.

COMESA foreshadows first substantive sector study, potential cartel enforcement

Posted on August 3, 2015August 4, 2015 by Editor

Retail antitrust: “mushrooming” shopping malls vs. SMEs, and possible cartel follow-on enforcement on the horizon for CCC

As reported in the Swazi Observer and other news outlets, the COMESA Competition Commission (“CCC”) recently expressed an interest in investigating the effect that larger shopping malls have had on competition in the common market’s retail sector.

This is one of the first non-M&A investigations undertaken by the CCC, according to a review of public sources. While observers in the competition-law community have witnessed several merger notifications (and clearances) under COMESA jurisdiction, there has been no conduct enforcement by the young CCC to speak of. Indeed, CCC executive director George Lipimile stated at a conference in November 2014: “Since we commenced operations in January, 2013 the most active provisions of the Regulations has been the merger control provisions.” Andreas Stargard, an attorney with the boutique Africa consultancy Pr1merio, notes:

“Looking at the relative absence of enforcement against non-merger conduct (such as monopolisation, unilateral exclusionary practices, cartels, information exchanges among competitors or other conduct investigations), this new ‘shopping mall sectoral inquiry‘ may thus mark the first time the CCC has become active in the non-merger arena — a development worth following closely. Moreover, the head of the CCC also announced future enforcement action against cartels, albeit only those previously uncovered in other jurisdictions such as South Africa, it appears from his prepared remarks.”

The CCC’s interest in the mall sector was revealed during one of the agency’s “regional sensitisation workshops” for business journalists (AAT previously reported on one of them here). At the event, Lipimile is quoted as follows:

“The little shops in the locations seem to be slowly disappearing because everybody is going into shopping malls. And these shopping malls and the shops in them are mostly owned by foreigners.”

The investigation will take a sampling from the economies of several of the 19 COMESA member states and attempt to determine whether the “mushrooming” growth of shopping malls negatively affects local small and medium enterprises in the whole common market.

Rajeev Hasnah, a Pr1merio consultant, former Commissioner of the CCC and previously Chief Economist & Deputy Executive Director of the Competition Commission of Mauritius, commented that,

“Conducting market studies is one of the functions of the CCC and it is indeed commendable that the institution would contemplate on conducting such a study in the development of shopping malls across the COMESA region. I believe that this will then enable the institution to correctly identify and appreciate the competition dynamics in the operations of shopping malls and the impact they have on the economy in general. The study should also identify whether there are areas of concerns where the CCC could initiate investigations to enable competition to flourish to the benefit of businesses, consumers and the economy in general. We look forward to the undertaking of such a study and its findings.”

AAT agrees with this view and welcomes the notion of the CCC commencing substantive non-merger investigations. We observe, however, that the initial reported statements on the part of the CCC tend to show that there is the potential for dangerous local protectionist motives to enter into the legal competition analysis. As Mr. Lipimile stated at the conference:

“Though [the building of malls] might be seen as a good thing, it may negatively impact on our local entrepreneurship and might lead to poverty. Before shopping malls were built, local entrepreneurs realised sales from their products. Now malls are taking over. … [A] strong competition policy can be an effective tool to promote social inclusion and reduce inequalities as it tends to open up more affordable options for consumers, acting as an automatic stabiliser for prices”

That said, Mr. Lipimile also stated at the same event, quite astutely, that a “solid competition framework provides a catalyst to increase productivity as it generates the right incentives to attract the most efficient firms.” In the rational view of antitrust law & economics, if — after an objective review such as the study announced by the CCC — the “most efficient” firm happens to be a larger shopping mall that does not otherwise foreclose equally effective competition, then the Darwinian survival of the fittest in a market economy must not be impeded by regulatory intervention.

George Lipimile, CEO, COMESA Competition Commission

Mr. Lipimile himself seemed to agree in November 2014, when he said that the 19-member COMESA jurisdiction must have regard to “its trading partners [which] go beyond the Common Market hence, it requires consensus building and a balancing act.” At this time, “when regional integration is occupying the centre stage as one of the key economic strategies and a rallying point for the development of the African continent,” domestic protectionist strategies have no place in antitrust & competition law. Said Mr. Lipimile: “[R]egional integration can only be realized by supporting a strong competition culture in the Common Market,” which would not support a more reactionary, closed tactic of a regulatory propping-up of “domestic champions” versus more efficient foreign competition. As the CCC head recognised, “[t]he purpose of competition law is to facilitate competitive markets, so as to promote economic efficiency, thereby generate lower prices, increase choice and economic growth and thus enhance the welfare of the general community.”

MergerMania: Are CCC notifications picking up pace unnoticed?

Posted on July 17, 2015July 17, 2015 by andreasstargard

COMESA Merger Mania

To answer our rhetorical question in the title above: We don’t believe so. For the merger junkies among our readership, here is AAT’s latest instalment of “COMESA MergerMania” — AfricanAntitrust’s occasional look at merger matters reviewed by the young multi-jurisdictional competition enforcers in south/eastern Africa. (To see our last post on COMESA merger statistics, click here).

COMESA publishes new Merger Filings, still fails to identify dates thereof

As nobody else seems to be doing this, let us compile the latest news in merger notifications to the COMESA Competition Commission. Prior to doing so, however, we observe one item of utility and basic house-keeping etiquette, which we hope will be heeded in future official releases by the agency: Please note the dates of (and on the) documents being issued. Using the date as a ‘case ID’ is insufficient in our view — the CCC’s current PDF pronouncements invariably remain un-dated, a practice which AAT deplores and which simply does not conform to international business (or government) standards. So: please date your press releases, opinions, decisions, and notifications on the documents themselves.

We observe that the matters below have not yet been assigned final “case numbers” (at least not publicly) in the style typical of the CCC decisions in the past, namely sequential numbers per year, as they are currently under investigation and have not yet been decided.

We also note that one notification in particular appears to have been retroactively made in 2014, even though it is identified as merger no. 3 of 2015 (Gateway), a peculiarity we cannot currently explain. Likewise, AAT wonders what the “44” stands for in its case ID (“12/44/2014”), we surmise it’s a typo and should be “14” instead.

	Internal Case ID	Statement of Merger
Holtzbrinck PG/ Springer Science	MER/04/06/2015	SOM/6/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers	MER/04/05/2015	SOM/5/2015
Coca-Cola BAL/ Coca-Cola SABCO	MER/04/07/2015	SOM/4/2015
Gateway/Pan Africa	MER/12/44/2014	SOM/3/2015
Old Mutual/UAP	MER/03/04/2015	SOM/2/2015
Zamanita /Cargill	MER/03/03/2015	SOM/1//2015

Which brings us to the bi-monthly…

AAT COMESA Merger Statistics Roundup

COMESA Merger Statistics as of July 2015 (source: *AAT*)

Finally: One step forward for COMESA merger enforcement? New rules, new commissioners

Posted on April 14, 2015April 16, 2015 by andreasstargard

Clarification or not?

Amended Rules for Merger Notification

Repealing the oft-criticised original 2012 Rules on the Determination of Merger Notification Threshold, the COMESA Board of Commissioners approved on March 26, 2015 the new set of Amended Merger Rules. These are ostensibly meant to permit parties and their legal counsel a more meaningful determination of filing fees, notification thresholds, and calculation of parties’ revenue (and asset) valuation. Whilst many legal news outlets have reported (uncritically, as we fear) a high-level summary of these Rules, AAT undertook a critical review of them, and finds that many of the previously-identified flaws persist.

Filing Fee

The question of what parties had to pay in administrative fees to be permitted to file a merger notification with the Competition Commission was always in question (see here for AAT summaries of the issue). We have reported on examples of fees that came dangerously close to the original $500,000 maximum limit. Since then, the agency’s “Explanatory Note” (which still has a visible link on the Commission’s web site, but which happens to be an essentially “dead” web page, other than its amusing headline: “What is merger?“) attempted to clarify, and indeed informally change, the filing fee from a 0.5% figure to 0.01% of the parties’ annual COMESA-area turnover.

Where the filing fee stands now is, honestly, not clear to AAT. While other sources have reiterated the revised fee of 0.1% with a maximum of $200,000, we fail to see any information whatsoever about the filing fee in the (partial set, containing only ANNEX 2 of) the Amended Rules made available by COMESA on its site, despite their title containing the term “fees”. We have been able to determine, through some internet sleuthing on the COMESA site, that a document marked clearly as “DRAFT” does contain references to 0.1% and $200k maximum fees.

We note that we have now seen three different turnover percentage-based filing fees from COMESA: 0.01%, 0.1%, and 0.5%, as well as several different maxima. Which shall govern in the end remains to be seen. We do not envy those parties that have filed with COMESA and have paid the half-million dollar fee within the past 2 years, as we doubt they are entitled to restitution of their evident overpayment.

AAT predicts that this is where things will land, at 0.1% and $200,000, once the good folks at COMESA get around to actually editing the document and finalising their own legislation, so that practitioners and parties alike may have an original, statutory source document on which to rely

Our previous AAT advice has been very clear to companies envisaging a filing with COMESA: wait until the Commission and the Board clarify the regime in its entirety. Do not file for fear of enforcement, because there is little if any enforcement yet, and the utter lack of clarity – apparently even within the agency itself – on the actual thresholds and other rules provides ample grounds for a legal challenge to the “constitutionality,” if you will, of the entire COMESA merger regime.

Combined $50 million revenue threshold

What the 5-page document does show, however, is the new notification threshold embodied in Rule 4, which defines the threshold as follows:

Either (or both) of the acquiring and/or target firms must ‘operate’ [defined elsewhere] in at least two COMESA member states and have (1) combined annual turnover or assets of $50 million or more in the COMESA common market, AND (2) in line with the EU’s “two-thirds” merger rule, each of at least 2 parties to the merger must have at least $10 million revenue or assets within the COMESA zone, unless each of the merging parties achieves 2/3 or more of its aggregate revenue within one and the same member state.

The likewise-revised Form 12, the mandatory filing form, which is available in a scanned format (we hope this will be remedied and provided in more legible and native-electronic format soon by the secretariat) here, reflects the rules changes. It must be submitted at a minimum within “30 days of the merging parties’ decisions [sic] to merge.” The Competition Commission mus t make a decision within 120 days of receipt of (a complete) notification.

Interestingly, if the same two firms enter into multiple transactions within a 2-year period are to be treated “as one and the same merger arising on the date of the last transaction.” (See Rule 5, in a likely-misidentified subsection that is confusingly entitled 1.2.). Mimicking the EU Merger Regulation and Consolidated Jurisdictional Notice, the revised COMESA rules likewise contain special provisions for determining the revenues or assets of financial institutions (and their individual member-state branches’ income) as well as insurance companies.

Parents, sisters, subs: included.

Parent, sister and subsidiary entities are included in the revenue determination of the purchaser, to no surprise. However, unlike what has been reported in the media, again we fail to see the (entirely logical) exclusion of the target parent’s turnover in calculating total revenues, other than in section 3.16 of the August 2014 Guidelines (which provides: “the annual turnover and value of assets of a target undertaking will not, for the purposes of these Guidelines, include the annual turnover or value of assets of its parents and their subsidiaries under Section 3.15)(d)where, after the merger is implemented, such parents are not parents of (i) the target undertaking if it remains after the merger, or (ii) the merged undertaking in the case of an amalgamation or combination“).

We observe the obvious: the Guidelines have no binding legal effect.

The Amended Rules do however provide that state-owned enterprises do not have to include their “parental” governmental revenues; for instance, if a state-owned airline like Air Tanzania were to acquire its counterpart, such as Air Mauritius, in a hypothetical COMESA-reportable transaction, the parties would not be required to report the full tax income or other revenues of the Tanzanian and Mauritian governments, respectively, but only those of the actual state-owned entity and its subsidiaries.

COMESA's 18th Summit in Ethiopia

18th COMESA Summit in Ethiopia

Four New Commissioners

As AAT reported previously, the Addis Ababa COMESA summit also saw the election and confirmation of four new Competition Commissioners. We now have the full listing of the members, including the 4 new* ones (listed below in italics), whose term is for three years:

New 2015 Commissioners	Origin
Ali Mohammed Afkada	Djibouti
Amira Abdel Ghaffar*	Egypt
Merkebu Zeleke Sime*	Ethiopia
Francis Kariuki	Kenya
Matthews Chikankheni	Malawi
Georges Emmanuel Jude Tirant*	Seychelles
Thabisile Langa	Swaziland
Patrick Okilangole*	Uganda
Chilufya Sampa	Zambia

COMESA antitrust authority swears in 4 new commissioners

Posted on April 2, 2015July 23, 2015 by andreasstargard

Four new Commissioners sworn in – while COMESA’s own site fails to make announcement

We do not commonly report on news from the Seychelles here on AAT, but today, the Office of the President of the Seychelles has in fact beat AAT (as well as the COMESA Competition Commission itself (!)) to it: as the Office reports, the 18^th COMESA Summit, held on 30^th March 2015 in Addis Ababa, (a city that I have fallen in love with, by the way), saw the swearing-in of four new COMESA Competition Commissioners.

The summit also saw the swearing in of Mr. George Tirant, Chief Executive Officer of the Seychelles Fair Trading Commission. Mr. Tirant was appointed as a commissioner on the COMESA Competition Commission, alongside representatives from Egypt, Uganda and Ethiopia.

We have not yet identified the other new members that were sworn in this week, but in admitting so we note in the same breath that it is surprising for the authority itself not to have this relevant item anywhere on its site, neither in the News category nor anywhere else. Indeed, the reader looks in vain for even a cursory Press Release announcing that 4 new Commissioners were seated for a new term of 3 years each. COMESA’s site still shows the outdated list of its Commissioners (copied below the photo below).

Irregular? Perhaps. But then again, we are used to outages and unfortunately much worse from the COMESA Competition Commission web site.

AAT notes that, in addition to the four new competition commissioners, the 19-country IGO also welcomed new:

Judge President and Judges of the Appellate Division of the COMESA Court of Justice
Principal Judge and Judges of the First Instance Division of the COMESA Court of Justice
the COMESA Committee of Elders

COMESA's 18th Summit in Ethiopia — COMESA’s 18th Summit in Ethiopia

[Outdated] List of Commissioners from Comp Comm web site:

Commissioner Alexander Juvensio Kububa : Chairperson of the Board of Commissioners and former Chief Executive Officer of the Competition and Tariff Commission of Zimbabwe.
Commissioner Mathews Chikankheni: Vice Chairperson of the Board of Commissioner and President of the Malawi Confederation of Chamber of Commerce and Industry.
Commissioner Ali Mohamed Afkada: Inspector General des Services Judiciarisés’ de Djibouti.
Commissioner Daniel Phillip Gappy – Former Chief Executive Officer of Fair Trading Commission of Seychelles and Chief Executive Officer of Seychelles Licensing Authority.
Commissioner Rajeev Hasnah: former Deputy Director of Competition Commission of Mauritius.
Commissioner Francis Kariuki: Director General of Competition Authority of Kenya.Commissioner Rajeev Hasnah: Chief Economist and Deputy Executive Director of the Competition Commission of Mauritius.
Commissioner Thabisile Pearl Langa’: Chief Executive Officer of Swaziland Competition Commission.
Commissioner Rostom Omar: Former Legal Counselor of Egyptian Competition Commission.
Commissioner Chilufya Sampa: Chief Executive Officer of Competition Commission of Zambia

New COMESA merger approvals: stats and details

Posted on March 17, 2015March 18, 2015 by andreasstargard

COMESA publishes new Merger decisions

In the past week, the COMESA Competition Commission published the following decisions in its most recent merger cases, resulting from the CCC’s 14th meeting:

Case 1/15: Cannon (insurance) – decision time: 176 days – 4 member states affected.
Case 2/15: ImproChem (water treatment) – decision time: 166 days – 12 member states affected.
Case 3/15: Chlor Arkali (food-grade salt) – decision time: 135 days – 3 member states affected.

…and from its 15th meeting:

Case 4/15: Telkom SA (information and telecom technology) – decision time: 11 days (!) – 10 member states affected
Case 5/15: Platform Specialty Products (fungicides, herbicides, and insecticides) – decision time: 112 days – 9 member states affected

Of note are the following:

The record time — 11 calendar days — in which the CCC resolved the Telkom transaction in favor of the South African provider, which aquired a BBBEE entity, despite the fact that the affected geographies encompassed 10 COMESA member states.
The average time it took for the CCC to clear these 5 transactions was 120 days from notification to decision.
All 5 notified transactions were unconditionally approved.
The voting Commission members were, in all cases, Chilufya Sampa (Zambia), Thabisile Langa (Swaziland), and Alexander Kububa (Zimbabwe).

Finally, we observe that none of these merger matters presumptively benefitted from the upward-adjusted threshold (>$5 million), as they date to a pre-Assessment Guidelines era (see also here).

AAT’s updated COMESA merger statistics are thus as follows:

Meet the Enforcers: Companies Tribunal’s Prof. Kasturi Moodaliyar

Posted on March 9, 2015 by andreasstargard

Interview with Professor Moodaliyar marks second in AAT interview series highlighting African enforcers

In the second instalment of our Meet the Enforcers series, we speak with Prof. Kasturi Moodaliyar. An Associate Professor of Competition Law, she is part-time member at the Companies Tribunal; ICASA’s Complaints and Compliance Committee; and the Film and Publication Board Appeal Tribunal. She holds a B.Proc. LLB.LLM.(Natal), M.Phil (Cambridge), and Prog. Economics and Public Finance (UNISA)

As an academic in South Africa, focussing on competition law, how do you perceive the major differences and challenges that developing or younger antitrust-law jurisdictions are faced with, compared to more established ones? Specifically with regards to the Competition Commission, what is your assessment of its strengths and weaknesses?

The Commission has established a credible reputation in the area of anti-cartel enforcement and merger regulation. However, it has been less effective in addressing abuse of dominance. This is a risk as there is increasingly an expectation that the Commission address problems of single firm dominance in concentrated markets in the South African economy. If performance continues to lag in this area it will impact negatively on the perceived effectiveness of the Commission. While under-deterence of abuse of dominance reflects some limitations in the legislation it also highlights the challenge of resource constraints faced by the Commission. Such cases demand extensive legal and economic expertise – a shift of priorities to this area may impact performance of the Commission in areas in which it has traditionally had more success (cartel busting, mergers). The use of complementary tools like market inquiries and advocacy will be important and can asset the Commission – but also places a burden on resources.

Regarding staff turnover: Do you see the personnel turnover in recent history to be of sufficient magnitude to have an impact on the performance of the enforcement agency?

It is a worrying development although there are signs that it is starting to stabilise. Although key executives were lost there are still a number of highly experienced staff at the middle management level within the institution that must be nurtured and developed. Some have moved into executive level positions. This is a positive development but also points to a level go juniority in the executive which may impact on effectiveness. Will watch this space.

On Leadership: Do you consider it a benefit or a hindrance if leadership want to introduce their own philosophy of what competition law should seek to achieve on the agency’s activities during their tenure, or do you think that the law is sufficiently clear, such that leadership should focus on efficient and effective delivery of the service, and leave the interpretation to the Tribunal/courts.

It is natural that any leader will bring their own perspective to the role – this cannot be avoided. However, it will be important for the leadership to ensure that such perspectives do not undermine their objectives in giving effect to the mandate of the Commission – which is set down in the Competition Act. Fortunately there are checks and balances in the adjudicative process (Tribunal, rights of appeal) to ensure that these objectives are not contradicted.

Prioritisation: Every agency has budgetary constraints. What are the factors that you think should be most important in how cases are prioritised, should this be based on the developmental needs to society, particular sectors, or even particular areas of the law. What do you think of the prioritisation of recent Section 8 cases, SAB (10 years on an issue that has been extensively sanitised by foreign agencies), Gold Reef News (de minimis), and Sasol Polymers (niche, with limited potential for downstream beneficiation)?

The Commission’s stated prioritisation principles seem reasonable (as they appear in annual reports). However, there is somewhat of a disjuncture between the principles and the outcomes – particularly with respect to abuse of dominance cases. In fact, the outcomes in respect of anti-cartel enforcement have been largely consistent with the application of the Commission’s prioritisation principles – so credit is deserved here. However, new thinking around prioritisation is needed for abuse of dominance cases. In this regard there needs to be a better integration between the Commissions’s policy and research activity, the use of market inquiries and its advocacy with its planning and actions around enforcement against abuse of dominance.

Do you believe that the Competition Tribunal has a role in relation to broader competition advocacy initiatives in South Africa by way of the decisions made?

Advocacy is primarily a function of the Competition Commission, not the Tribunal. The Tribunal must first and foremost safeguard the integrity of its adjudicative function by ensuring impartiality in its decision making processes. There is no harm done though if the Tribunal makes a contribution to the such initiatives as a bi-product of good decisions.

How important, in your view, is the political independence of competition enforcers?

It is very important if the integrity and effectiveness of the agency is to be upheld.

Comparing merger review in an African jurisdiction (any jurisdiction) with that of other competition enforcement agencies worldwide, where do you see the key differences?

A significant difference does appear to be the elevated status of public interest issues in merger proceedings.

What is your view about the elevation of non-competition assessments above those of pure competition tests in merger review? Is it good for the adjudication of competition matters generally?

It is not a problem in and of itself, and is to be expected given various developmental challenges. However, public interest considerations should not trump core competition concerns. In other words, agencies should strive to achieve consistency between the ‘pure’ competition policy objectives (competitive market structures, efficient outcomes etc) and public interest considerations. However, significant dangers arise when public interest objectives conflict with competition policy objectives. Where there are conflicts, alternative policy mechanisms should be considered so that agencies can focus on core non-conflicting objectives. Otherwise they may end up achieving nothing by trying to please everyone. This also means that the public interest considerations that do fall within the mandate of competition agencies should be carefully circumscribed.

What skills would you encourage regional African practitioners focus in on for purposes of developing antitrust advocacy in the region?

They should build a technocratic and professional staff with strong legal and economic skills. These core functions should also be supported by strong policy research and analysis skills – also of the technocratic professional (rather than political) variety. As an academic in this field I would also encourage ongoing training to strengthen those research, investigative and analytical skills.

Thank you, Professor Moodaliyar.

Meet the Enforcers: COMESA’s Rajeev Hasnah, 1st in exclusive AAT interview series

Posted on November 18, 2014November 18, 2014 by Editor

New AAT interview series highlights individual African competition enforcers

In the first instalment of our new Meet the Enforcers series, we speak with Rajeev Hasnah, CFA, who is a sitting Commissioner of the COMESA Competition Commission. In our exclusive interview, we discuss the CCC’s merger review practice, its revised Guidelines, young history and achievements, and seek practitioner guidance.

You are an economist by training and currently a sitting COMESA Competition Commissioner. As the young agency is about to celebrate its 2nd anniversary, what do you consider to be the CCC’s biggest achievement to date?

According to me, it is the fact that the CCC is effectively enforcing the COMESA Competition Regulations since it started operating in January 2013. It is indeed a commendable achievement given that the current Board of Commissioners sworn-in in October 2011. In 2012, the CCC worked on the drafting of the guidelines, in consultation with various stakeholders, and under the advice of other competition experts.

The institution also established a good working relationship with national authorities across COMESA and beyond, and proved its credibility and effectiveness as a regional competition authority within the business and legal communities globally. The rather high number of merger notifications with a COMESA dimension already adjudicated to-date (around 50) is testimony to the success of the CCC being an effective competition law enforcer in its still early days.

Comparing the CCC merger review in practice with that of other competition enforcement agencies worldwide, where do you see the key differences?

Nowadays it is getting harder to talk about differences in any field of economic activity in this increasingly globalised world. In my view, the key principles and the application of the Competition Law in the COMESA region do not differ significantly either from that of the national authorities or other major jurisdictions across the globe. The assessment of “substantial lessening of competition” as the underlying fundamental test in merger reviews is at the core of the evaluation conducted by the CCC as well.

Does the multi-national nature of the CCC (akin to the European Commission) make the substantive work more difficult?

It is definitely not an easy feat to enforce the COMESA Competition Regulations across 19 different countries, each with its own economic, legal and cultural environments. Yet, under the leadership of the current Chairman, Alex Kububa and Director/CEO of the CCC, George Lipimile, a good working relationship and collaboration has been established with the different national authorities across the COMESA region, which facilitates an effective enforcement of the Competition Regulations. This also ensures that the CCC has a good perspective of the individual local realities, which is no doubt a key element to assess the impact on competition at the regional level.

What prompted the re-drafting of the CCC Merger Guidelines, and why was the indirect path of an administrative guidelines interpretation of the verb “to operate” chosen to elevate the review thresholds, as opposed to increasing the thresholds in the underlying Rules themselves?

It is not uncommon that an authority reviews its guidelines as it gains experience in enforcing the law. Any changes or further clarifications are geared toward ensuring that the business and legal communities as well as competition economics experts have a good understanding of how the Regulations are enforced by the CCC. This indeed shows that the CCC stands ready to ensure an improved clarity of its enforcement of the Competition Regulations among its key stakeholders.

The relevant paragraphs defining the verb “to operate” in the Merger Guidelines, should not be construed as a review of the merger notification thresholds per se. The latter has its own procedures regarding any likely review. The definition in the Merger Guidelines is rather to ascertain whether the said undertaking is construed to be effectively operating in a Member State or not.

Do you have advice for African practitioners counselling their clients on whether or not to notify a merger to the CCC?

Taking into consideration the rise in the enactment and enforcement of a competition policy regime across various jurisdictions and at the level of regional trading blocs as well, one can safely say that a competition authority is here to stay and to enforce the law as prescribed.

One of the key considerations in doing business is a proper assessment of the risks the undertaking faces or could potentially face and the implementation of a suitable actionplan to deal with these risks. I believe that non-notification of a notifiable COMESA dimension merger to the CCC should not be construed as carrying a low probability of being detected by the CCC and certainly not a low impact one for the undertaking.

What is your view about the elevation of non-competition assessments above those of pure competition tests in merger review? Is it good for the adjudication of competition matters generally?

Some jurisdictions consider public interests as important, while some don’t. This is normally provided for or not in the respective laws, and whichever is the case, as adjudicators, we need to follow what is prescribed in the Regulations.

It is also important to note that in practice, the enforcement of competition law can be defined as being the conduct of economic analysis within a legal framework. Both the economic analysis and legal framework evolve accordingly in line with the development of the jurisdiction’s economy. We can take the examples of more mature competition policy regimes which started with the consideration of non-competition issues in merger review, to then afterwards moving to assessing only competition matters. As such, each jurisdiction has its own specificities that it needs to take into consideration, though these are bound to evolve with time.

By way of background, how did you get into antitrust/competition law & economics?

I am an economist and a Chartered Financial Analyst (CFA) by training, and prior to joining the antitrust world I was an investment professional. Four years ago I had the choice between acquiring experience in private equity or joining the nascent competition law enforcement team of the Competition Commission of Mauritius as its Chief Economist/Deputy Executive Director, working with the then Executive Director, John Davies. I chose the latter for its excellent combination of applied microeconomics and law.

What was the path that took you to working for competition enforcement agencies?

I started as a macroeconomist working in London for an economic consultancy firm in the city, where I was advising traders and asset managers. I then moved on to financial investing in an investment management firm and to corporate finance in one of the largest conglomerates in Mauritius. So I came to the antitrust world as a business/investment practitioner with a strong background and experience in applied economic and financial analysis.

Having seen the world from the private sector side, I acquired an edge in the application of competition economics in my previous role as a Chief Economist/Deputy Executive Director and as a current Commissioner at the COMESA Competition Commission.

What skills would you encourage regional African practitioners focus on for purposes of developing antitrust advocacy in the COMESA region?

Having previously led the Competition Culture project for the International Competition Network (ICN) Advocacy Working Group (AWG), I am now one of the strong proponents of the importance of advocacy to develop and maintain a strong competition culture within society.

Ensuring that advocacy activities are properly designed and tailored to meet the requirements of the target group is crucial. Equally important is to ability to communicate in a very simple and easy to understand language, adapted to meeting the target audience’s expectations.

Thank you, Mr. Hasnah.

African Antitrust & Competition Law

News & Analysis of competition-law developments from the Leading African Antitrust Resource

Category: COMESA