Kenya Antitrust Enforcer Reiterates Warning to Professional Associations

Posted on October 6, 2021 by Editor

By Ruth Mosoti, Esq.

The Competition Authority of Kenya (CAK, or the Authority) issued a public notice to members of professional associations who are seeking to set minimum chargeable fees for their members notifying them that they need to comply with the provisions of the Competition Act. The Competition Act (the Act) provides for parties to file an application for an exemption on behalf of any association whose agreements may contravene the Act. Notably, the determination of an exemption application factors in public-interest considerations. In addition to this, when an exemption is granted, the same is not perpetual the period of validity of the exemption is at the discretion of the Authority.

Regulation of professional bodies is governed by different sources under Kenyan law. This can occur either through statutory law or rules issued by the professional bodies themselves. In Kenya we have professional bodies regulated by statute and others are wholly self-regulatory. This in turn brings in the issue of self-regulation and regulation by statute. As such, if a professional body is allowed by law to prescribe fees applicable for certain services offered by members of that association. Therefore, in such an instance then the Authority cannot fault such an association because the actions of the association are sanctioned by the law. In such an instance, the correct course of action would be the Authority to first seek intervention from the courts to declare such activities authorized by the law as unlawful and if successful, then any future activities of the association that involve the prescription of fees will be subject to an exemption application.

In 2017, the Institute of Certified Public Accountants of Kenya (ICPAK) made an exemption application in regard to prescribing of fees charged by its members and the same was rejected by the Authority. Following the rejection of their application ICPAK has opted to bypass the Authority and has begun to push for the prescription of the fees through the law and in 2020, they published the proposed remuneration order. Similarly in 2020, the Engineers through the Engineers board of Kenya also have the draft scale of fees for professional engineering services.

As mentioned above, there is the issue of self-regulation versus regulation by statute. Relevant Kenyan law includes the Statutory Instruments Act, which provides for the making, scrutiny, publication and operation of statutory instruments. Statutory instruments include but are not limited to rules, guidelines or by-laws made in execution of a power conferred by an existing statute. It is important to mention the Statutory Instruments Act because under this law, all statutory instruments are required to carry out consultations with the Authority to establish whether the proposed instrument restricts competition. It is however unclear whether the opinion of the Authority matters because despite complying with this requirement. What would be interesting to watch for now is whether ICPAK is successful in its quest for setting of professional fees there being a gazette notice where the CAK rejected its exemption application over the same subject matter.

Associations that self-regulate fall squarely within the jurisdiction of the CAK and that is why the Authority has in the past successfully pursued contraventions by trade associations like in 2016, the association members in the advertising industry who were involved in price fixing were penalized. This can be compared to the activities of the Law Society of Kenya which are governed by statutes which empower it to recommend to the Chief Justice fees to be charged in relation to certain services offered by its members.

In conclusion, while the CAK may be justified in its quest to reign in the behavior of professional associations that are engaged in conduct that may amount to price-fixing, there needs to be a balance in the approach the CAK takes, where protection of fair remuneration is taken into account while preventing what would amount to abusive conduct. That being said, the CAK should also consider challenging the other laws that are in place that allow the professional associations to engage in conduct that it believes should be subject to an exemption application.

Thursday webinar: Calling Out COVID Corruption & Why We Need Whistleblower Regimes

Posted on November 2, 2020 by Editor

“Calling Out COVID Corruption: Why the pandemic requires robust Whistleblower regimes to combat corruption – lessons from abroad”

Primerio Ltd. and Constantine Cannon LLP are pleased to invite you to what promises to be a lively & informative seminar on whistle-blowing, corruption, and lessons learned from the pandemic.

With Panelists Zanele Mbuyisa – Counsel PPLAAF, John Oxenham- director Primerio, Mary Inman – partner Constantine Cannon Llc, Bill Kovacic – GWU Professor and non-executive director of the UK Competition and Markets Authority, Glynnis Breytenbach – former prosecutor for the South African National Prosecuting Authority (NPA) & a member of parliament for the Democratic Alliance (DA), Johannes Stefansson – “Fish Rot” Whistleblower.

This webinar is part of a 2 part series dedicated to whistleblowing, fraud and corruption during COVID 19: the panels will include politicians, lawyers and whistleblowers. The discussion will touch on all aspects of the importance of instilling a whistleblowing regime in corporate, government and other pertinent spheres of society.

Winds of Change? DOJ approach to compliance & lessons for South Africa

Posted on December 14, 2019 by Editor

By Jemma Muller, Junior Contributor

In July 2019, the U.S. Department of Justice Antitrust Division announced new steps towards incentivizing antitrust compliance programs. According to the new model, compliance programs will be evaluated by the Division’s Prosecutors at the charging and sentencing stage in order to make a determination whether or not to recommend a sentencing reduction founded on a company’s efficacious antitrust compliance program.

This transition away from the pure all-or-nothing corporate leniency approach, towards a more inclusive view of all circumstances relevant to the antitrust violation, had been over five years in the making, says Andreas Stargard, a competition practitioner: “For years, this change was debated by experts at conferences and round-table discussions. Moreover, senior DOJ leadership had been hinting strongly at embracing this more holistic approach, such as Bill Baer in his 2014 Georgetown Law speech and various other enforcers over time. The current administration has merely sealed the deal,” he notes, pointing to Assistant Attorney General Makan Delrahim’s July speech entitled “Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs.” Mr. Delrahim noted that ‘the Antitrust Division is committed to rewarding corporate efforts to invest in and instill a culture of compliance’, and in doing so takes cognizance of company’s efforts to invest substantially in vigorous compliance programs (Justice News, ‘Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement’, 11 July 2019). Mr. Stargard notes that the Antitrust Division is not truly breaking new ground here, as other countries such as Great Britain and France have long advocated for, and recognized the value of, voluntary programs. In addition, similar changes in government attitudes vis-à-vis internal corporate compliance regimes have already occurred in other divisions of the Department of Justice, such as the Fraud and Criminal divisions. “Indeed, even Mr. Delrahim acknowledged the long U.S. history of recognizing that ‘prevention is better than a cure’ by invoking Benjamin Franklin’s famous catchphrase in his speech,” he says.

Incentivizing a compliance program is beneficial for consumers as well as companies, as a company with an effective compliance program is likely to detect violations more promptly, thus not only curtailing the resultant harm from the violations, but also allowing those companies the most probable chance of being the first to partake in and secure corporate leniency. The stance in this approach therefore seeks to ensure prevention, and as a result less ensuing harm, which translates into less efforts and resources spent on enforcement.

To guide prosecutors in evaluating compliance programs, three essential questions should be asked, namely;

“(1) Is the corporation’s compliance program well designed?

(2) Is the program being applied earnestly and in good faith?

(3) Does the corporation’s compliance program work?”

It is also useful that guidance is given on what elements an effective antitrust compliance program consists of in order for a company to structure its program accordingly. These elements consist of:

The design and completeness of the program;
The corporation’s principles of compliance;
The resources allocated to antitrust compliance and those responsible for compliance;
Risk assessment procedures;
Training and communication to employees on compliance;
Techniques for monitoring and auditing;
Reporting procedures;
Incentives for compliance as well as a discipline framework; and
Procedures for remediation.

It is important to note that a comprehensive compliance program does not in itself guarantee a sentencing reduction, as Antitrust Division prosecutors are generally tasked with having a holistic outlook, i.e., taking into account all of the specific facts of each case. Said Delrahim: “The Antitrust Division’s new approach to compliance programs should not be misconstrued as an automatic pass for corporate misconduct.”

With regards to administrative penalties specifically, the new model provides for a possible statutory fine reduction for a company’s recurrence prevention efforts. In considering a reduction, prosecutors will take cognizance of measures taken by a company in discipling those responsible for a particular violation, as well as measures taken to ensure such a violation does not reoccur. Here, prosecutors will consider: the steps senior management has taken to revise the compliance program, as well as the involvement in training and incentivizing compliance; improvements to the pre-existing compliance program; if no compliance program is in place then the design of a compliance program; and lastly the enforcement and/or creation of disciplinary procedures.

Do these winds of change blow all the way east, across the Atlantic, and reach African shores? Unlike the U.S., South Africa does not — thus far — have a similar approach to incentivizing compliance programs. This means that the cited benefits of incentivizing compliance programs are not necessarily gained. If South African authorities were to implement a similar approach, it would encourage a culture of compliance; it would be beneficial for companies and consumers; and it would assist companies in designing and implementing effective compliance programs which would assist in early detection of violations and thereby assist those companies wishing to apply for corporate leniency in being the first in line potentially to receive immunity.

Gun jumping: Record antitrust fine for failure to notify merger

Posted on April 13, 2016April 13, 2016 by Editor

S.A. Competition Tribunal imposes record fine for missed merger filing in healthcare

By AAT guest author Meghan Eurelle

On 7 April 2016, the South African Competition Tribunal (“Tribunal”) confirmed that merger parties Life Healthcare Group Proprietary Limited and Joint Medical Holdings Limited had entered into a consent agreement with record-breaking consequences. The two hospital groups admitted to not complying with the Competition Act, 1998 (“the Act”) by failing to notify the competition authorities of their merger and to obtain the required approval prior to the merger being implemented; and subsequently agreed to jointly pay an administrative penalty of 10 million Rand, or approximately U.S. $690,000. (Interestingly, the parties also conceded that they were guilty of fixing the price of services back in 2004 but the Tribunal dropped these charges.)

gunjumping The R10-million administrative penalty is a record amount for gun-jumping, or the failure to notify the competition authorities of a merger. Previously, the highest penalty for a failure to notify was just over R1-million. The new record penalty follows numerous warnings by the Competition Commission (“Commission”) that it intended to materially increase penalties for failure to notify mergers — says Andreas Stargard, an antitrust practitioner with Pr1merio advisors, “South Africa has a suspensory merger-notification system, like most international antitrust regimes do. And unlike other African countries, such as Senegal or Mauritius, the domestic S.A. competition legislation prohibits transacting parties from effecting the transfer of control or beneficial ownership prior to obtaining clearance from the authorities.”

In terms of the Act, transactions that are defined as “intermediate mergers” and “large mergers” must be notified to the Commission and may only be lawfully implemented if it has been approved, with or without conditions, by the relevant competition authorities. Small mergers do not have to be notified in the ordinary course and may be implemented without approval unless required by the Commission.

Merger notification thresholds in South Africa remain as follows:

	Acquiring and Target firm (merger group)		Target firm
Large Merger	Combined assets and/or turnover of at least R6.6-billion.	AND	Assets and/or turnover of at least R190-million.
Intermediate Merger	Combined assets and/or turnover equals or exceeds R560-million but is less than R6.6-billion.	AND	Assets and/or turnover equals or exceeds R80-million but is less than R190-million.
Small Merger	Combined assets and/or turnover of less than R560-million.	OR	Assets and/or turnover of less than R80-million.

In light of the above, it serves as an important reminder to parties that they ensure compliance with the competition authorities and the Act so as to avoid costly consequences.

CCOs say that with more investigations also comes (slightly) more money

Posted on July 13, 2015 by andreasstargard

In sync with greater enforcement: Firms’ compliance budgets grow

According to a recent survey, the budgets allocated to compliance have grown over the last year, including those of African participants in the study. Consulting giant Deloitte has released its 2015 Compliance Trends report, the result of its survey in which 20 large corporations across Africa (out of 364 total qualified respondents) participated.

Below, we summarise some its key conclusions on…

The Role of the Chief Compliance Officer

Taken together, these statistics … suggest that most CCOs, especially those at larger corporations, now have an opportunity to participate in high-level discussions about corporate strategy, values, and culture.

The key items under the CCO’s responsibility were:

compliance training,
code of conduct, and
whistleblower hotline.

Primerio director John Oxenham observes that, “unfortunately, the assessment of culture was perceived as the least important among the CCOs’ responsibilities. This is a serious problem, as pointed out in prior articles emphasising the importance of a culture of compliance, rather than sterile top-down pronouncements that often go unheeded by mid-level management.”

African Companies

While firms from the continent have increased their compliance budgets (about 16% by 10 to 19%, and many more by 1 to 9% over the past year) along with their U.S. and European counterparts, they are perceived to be dilatory in their evaluation of their own compliance efforts and results, and lacking in their ability to make full use of their compliance efforts. In short, many still (wrongly) view dollars spent compliance as a “grudge cost.”

Significant enforcement in Africa (both in the anti-corruption and competition-law domains) across various sectors of the economy (food, technology, construction, to name a few) have awakened many corporate boardrooms across Africa to the reality of effective home-grown government enforcement.

Information Technology and Compliance

IT Systems have not fared well in the latest report:

One possible disconnect emerges when asking CCOs about the IT systems they use to fulfill their missions: Most are not terribly confident in their IT systems’ ability to do the job. Only 32 percent of respondents were confident or very confident in their IT systems, down from 41 percent in 2014

Interestingly, smaller organisations with less than $5 billion in annual revenues showed higher levels of confidence in their IT systems when juxtaposed to their larger peers.

Put your drink down: Fair Competition Commission threatens to un-do Diageo beer deal

Posted on June 30, 2015June 30, 2015 by andreasstargard

Bloomberg’s Felix Njini reports in an article published today that Tanzania’s Fair Competition Commission is threatening to undo the previously-approved merger between Nairobi-based East African Breweries Ltd.’s and Serengeti Breweries Ltd., alleging that the conditions laid out in the 2010 approval of the deal had not been honoured by the parties.

Apparently, notice was given to EABL in late April: “The commission has issued a notice of an intention to revoke its own decision with respect to the merger against EABL.”

EABL is majority-owned by Diageo Plc and is the largest regional brewer, whereas Serengeti was the #2 player pre-merger. The FCC conditioned its approval on

(1) Diageo’s sale of a 20% stake in rival Tanzania Breweries Ltd., (2) compliance with a requirement that Serengeti achieve “potential growth that is well beyond the level it was able to achieve previously,” (3) the obligation to continue promoting Seregenti’s corporate identity for five years post-merger, (4) an agreement not to shutter any of Seregenti’s existing plants without prior FCC approval, and (5) the submission of annual progress reports of compliance with the investment strategy plan submitted during the application of the merger.

At issue in the current challenge by the Commission is condition no. 2, i.e., the growth-target requirement imposed on the parties. Competition-law experts are puzzled by the FCC’s imposition of said condition, said John Oxenham of the Africa-focused Primerio consulting firm:

“Forcing a company to divest itself of a rival unit prior to acquiring a target entity is commonplace, and so is the requirement that certain brands must be maintained post-acquisition. But it is highly unusual in my view to see a revenue growth-target imposed on merging parties by a government antitrust enforcer.”

While noting that he had not seen the precise wording of the “potential growth” condition imposed by the FCC in 2010, “[h]ow does the regulator account for outside macro-economic factors, increased competition from other players, and similar third-party effects that are outside the control of the merging entities?“, said Oxenham.

We wish to observe that the FCC’s web site itself has no update on the topic. Its most recent press release is from 2014 and the last newsletter that is available online dates from 2013.

Massmart reinstate retrenched employees

Posted on August 21, 2014 by Editor

south_africa

Employee action taken after competition ruling

Following the March 2012 merger between Wal-Mart and Massmart, the Competition Appeal Court (“CAC”) ordered, as one of the merger conditions, that Massmart re-employ 503 former staff members who were retrenched in 2009 and 2010 as a result of the then proposed merger.

However, it would now appear as though Massmart has failed to comply with the condition. Reportedly, former employees of Massmart have lodged a complaint with Competition Commission (“the Commission”) relating to concerns over Massmart’s non-compliance of this condition.

Following the complaint, the Commission conducted a series of meetings with the South African Commercial Catering and Allied Workers Union (“SACCAWU”) and Massmart. The Commission concluded that Massmart had not complied with the condition imposed by the CAC and found that approximately 217 of the former employees had not been reinstated.

Following negotiations between the Commission, SACCAWU and Massmart, it was found that although Massmart had allegedly sent initial reinstatement offer letters out to former employees, many former employees, allegedly, did not receive the letter.

It was agreed that Massmart would re-employ 61 former employees, who had not received the letter, with 6 months back pay. In addition, Massmart would also re-employ at least 94 former employees, who had received the letter and had not responded to the letter, with 3 months back pay, if such employees accepted the offer by 30 September 2014.

Massmart is required to provide feedback relating to the progress of the implementation of the plan to the Commission over the coming months.

COMESA Competition Commission web site hacked?

Posted on March 17, 2014March 18, 2014 by Editor

Attack shows risk of unauthorized disclosure of confidential commercial party information

COMESA site hacked with Indonesian love poem

It would appear that the young pan-African antitrust enforcement agency’s web site has been hacked. The headline on the COMESA Competition Commission’s (“CCC”) home page today seems to indicate a relationship with a web site bearing the Indonesian TLD (top-level domain) “.ID”, and looks like gibberish at first glance.

Then, after some digging, AAT’s editors believed that it might in fact be a tribute or memorial of sorts to the missing crew and passengers of flight MH 370, given the Indonesian language of the text and the disappearance of the jetliner in the Viet-Indo-Malaysian region’s equivalent of the Bermuda Triangle. The relationship with COMESA escaped us, however. Yet, upon a final review of the Google Translate result, we can confirm that this is unfortunately not the case. Instead, it appears to be a (fairly amateurish) love poem (full text in GoogleTranslate’s English below).

With all this wind-up, here comes the real point in the story. We perceive this hacking event as evidence of a real risk that highly confidential party information (stemming from COMESA merger reviews or other competition investigations) may be vulnerable to accidental or intentional disclosure to unauthorized third parties. In the United States, the agencies’ unwarranted disclosure of confidential data took center stage in the 2007 aftermath of the $1/2 billion Whole Foods / Wild Oats merger, during which the FTC had accidentally submitted an insufficiently redacted PDF document to the electronic U.S. court filing system ECF, spilling the secret data guts of the case. The Washington Post reported on the story here — just as we are now alerting current or potential future parties to CCC merger reviews regarding the apparently deficient safeguards in the competition enforcer’s electronic systems. We advise all such interested parties to enquire with the Competition Commission precisely which steps are being taken to ensure the safety of their confidential submissions to the agency.

We also note that the CCC’s site has a very publicly visible page for access to “PRIVATE” documents, protected only by (it would seem) a most simple username/password combination. The site even allows for a cookie-based “Remember Me” function. The privacy risks here are manifold, as any e-security expert worth her salt can attest to: Should this “private” document repository contain confidential party information, and if the main home page of the agency has already been subject to a (successful) attack, it is no stretch to imagine that access may have equally been gained to the purportedly private document storage folder on the site.

AAT has contacted the CCC’s web master and leadership, Messrs. George Lipimile and Willard Mwemba, to inquire further about the details of this apparent safety breach. We will report on their response here once we have heard back from them.

Should readers have any other information on the goings-on at the CCC or its web site, we always appreciate hearing from you, either by way of e-mail or in the comments section to this article.

Full text of COMESA site as of 17. March 2014 (all day) – (update 18. March: the text is still up on the site at 16:40 GMT):

Andika curhatan Dot ID

This heart is sick when you kianati
This heart is fragile when you leave
But this heart grateful you have introduced the meaning of a broken heart

I can still smile while getting bad grades
I can still smile when dropped
But I would not be smiling if it can not meet you

You introduced me to a love
But you were also introduced me to breakup

I’ve never know a woman like you
I also have never loved a woman like you
And I’ve never felt hurt because of you

None other than the beautiful scenery seen
None other than the beautiful singing heard
And no one has to know you regret

This heart will smile with you when both
And this will be a pensive moment waiting to hear from you

SA telecoms firm implements antitrust settlement terms

Posted on January 22, 2014January 23, 2014 by andreasstargard

south_africa

According to a report by ITweb Business, the South African incumbent R16 billion telecommunications giant Telkom Limited (no stranger to this blog) has now taken steps to implement its landmark June 2013 settlement in a margin-squeeze and monopolization case brought by the South African Competition Commission (the “Commission”).

The settlement was finalized by the Competition Tribual on 18 July 2013. Its terms include, importantly for the latest job-related and divisional developments at Telkom, the functional separation between the company’s retail and wholesale divisions, in addition to other pricing commitments, a fine, and ongoing monitoring obligations under the guidance of the Commission. As reported today, the company has now also issued and implemented a new antitrust/competition compliance policy, its so-called “Competition Settlement Code of Conduct Policy,” reportedly a whopping 25-page document.

In this latest round of compliance efforts, Telkom’s CEO Sipho Maseko is said to have sent out communications to all staff, attempting to alleviate media reports about potential large-scale job cuts. He is cited as follows: “While I can’t predict the future, I can unhesitatingly say the 12 months that lie ahead will be demanding. Challenges await, of this we can be certain. We will have to be on top of our game and tackle the issues that influence our business with focus and purpose if we are to unlock our full potential.”

African Antitrust & Competition Law