Big Picture, consumer protection, event, South Africa, Zambia

Competition Law Africa conference 2021 / this Tuesday

The Informa Competition Law Africa conference is back with a vengeance this year, albeit still held virtually due to the pandemic.

The overview can be found here, and the more detailed agenda here.

Speakers include South African enforcer Hardin Ratshisusu, COMESA chief Willard Mwemba, the OECD’s competition expert Frederic Jenny, Mahmoud Momtaz, head of the Egyptian competition authority, Lufuno Shinwana, senior legal counsel on competition issues for Anheuser-Busch Inbev, Ntokozo Mabhena, Anglo American’s Legal Advisor, and Maureen Mwanza, head of legal for the Zambian CCPC.

Primerio partner, Andreas Stargard, will host the afternoon panel on Vertical Restraints, interviewing Okikiola Litan, Senior Counsel, Commercial and Competition Law, with Coca-Cola Hellenic Bottling Company.

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AAT exclusive, consumer protection, Kenya

Let them eat bread: Consumer protection in Kenya

On May 24, 2021, the Competition Authority of Kenya (CAK or Authority) issued a notice to the manufacturers of bread on how to label the breads sold to consumers. The CAK claimed the producers were in contravention of Section 55 of the Competition Act 12 of 2012 (“Act”). Section 55(a)(i) of the Act states that “a person commits an offence when, in trade in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, he— (a) falsely represents that— (i) goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use” . The This section found application in, inter alia,  relation to the labelling of FMCG such as bread sold to consumers.

The CAK’s first concern was that the labels on the bread were illegible, thereby denying the consumer sufficient information. Second, the producers were directed to adjust the information on the wrappers from “Best before” to “Sell by” to indicate the date of expiration. This adjustment will make this information clearer to the consumers, according to the Authority. Sources close to the investigation stated that bread manufacturers had taken liberties with proper labeling previously and had been ‘mischievous’ with labels, as they initially placed the expiration date on the disposable part of the wrapper, thereby depriving consumers of reliable information after opening the packaging. Thereafter, upon being directed by the regulator that the information should be on the actual bread wrapper, the manufacturers purportedly caused the printing of the information to be illegible.

Regarding the issue of weight and ingredients, the bread manufacturers now have an obligation to indicate the correct weight as well as the ingredients of their breads. It was found that some breads alleged to have milk or butter while in reality they did not. Such conduct by manufactures amount to false information. This is itself a breach of the law under both the Competition Act and the Standards Act.

The CAK has the overarching consumer protection mandate, as provided under the Constitution and the Competition Act of Kenya. While carrying out this consumer protection mandate, the Authority must consult with the Kenya Bureau of Standards in all matters involving definition and specification of goods and the grading of goods by quality. Indeed in 2016, the Authority entered into a memorandum of understanding (MOU) to enhance cooperation with Kenya Bureau of Standards. Section 60 (1) of the Competition Act also makes it an offence for any person to supply goods which do not meet the consumer information standards prescribed by law.

Ruth Mosoti, a competition and consumer protection attorney with Primerio Ltd. in Nairobi, notes that the Authority’s chief “essentially informed the producers that compliance with the law was not a pick-and-choose buffet style option. In this instance, the consumer information standard is defined under the Standards Act and that is why the bread manufacturers have been directed to comply as Authority head Mr. Wang’ombe Kariuki correctly put it.” Kariuki stated: “manufacturers have no latitude to elect which laws to adhere to”.  The specific standards in question refer to labeling.

The Authority has taken a soft enforcement approach with a focus on compliance rather than imposing the maximum penalty as prescribed by law. Contraventions of the consumer protection provisions attract a penalty of a maximum of ten million Shillings ($100,000) or imprisonment for a term not exceeding five years. One can only assume that the assertion by the Authority that no actual harm to consumers had been recorded yet as a result of the contraventions by the bread manufacturers must have influenced this soft-enforcement approach.

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consumer protection, mergers, South Africa

The price might be right, but simmer down: a “Yup” is still required from competition authorities in Mr. Price’s strategic Yuppiechef acquisition

By Gina Lodolo and Estelle Naude


South Africans have been left with dropped jaws at the news that Mr Price Group has entered into an agreement to acquire the local Yuppiechef, known for their quirky, luxury kitchenware.


The owners of Yuppiechef are certainly pleased with their agreement with Mr Price Group to have 100% of their issued share capital acquired in cash for around R470 million and stated that “the timing is right for Yuppiechef to move forward with its growth ambitions with a partner who has a shared vision and the resources to help achieve this. I am excited about our future as a part of the Mr Price Group. They are a business which prides themselves on innovation and growth and we are strategically aligned in our plans. We share similar cultures and values which will make this an easy fit for both parties.”

According to Mr Price Group, the acquisition will provide the opportunity for Mr Price Group to expand their market share by reaching a high-end customer base in the kitchen appliance department, as well as expand their product variety from that which is already part of the Mr Price Group offering. Yuppiechef has a larger online presence than Mr Price Group, as such, Mr Price Group will reap competitive benefits from the online presence of Yuppiechef, which will enable them to become a more effective competitor with the likes of inter alia, Takealot.


According to the voluntary announcement from Mr Price Group regarding the acquisition of Yuppiechef, “the targeted effective date is subject to the fulfilment of both regulatory and commercial suspensive conditions which includes competition authority approval.” As such, it is important to note that section 13(3) of the Competition Act 89 of 1998 (“Act”) states that “the parties to an intermediate or large merger may not implement that merger until it has been approved, with or without conditions, by the Competition Commission.” Thereafter, according to section 12A(2) of the Competition Amendment Act 18 of 2018 (“Amendment Act”), a proposed merger must be evaluated on both competition and public interest grounds.


Accordingly, although South Africans are excited about the success story of the local Yuppiechef start-up, it is important to note that the proposed acquisition is still subject to scrutiny from the competition authorities before implementation of the merger can take effect.


Further, Yuppiechef is not the only home-grown retail store that Mr Price Group has sunk it’s teeth into as they seem untouched by the COVID-19 pandemic in their acquisition of Power Fashion, which was approved by the Competition Tribunal in March 2021. The acquisition of Power Fashion, with 170 retail stores, places Mr Price Group in an even stronger competitive position against the likes of Pep and JAM Clothing. According to the South African Primerio team, this acquisition places Mr Price Group in a strategic position to compete more vehemently with the lower end market, while Mr Price Group’s proposed acquisition of Yuppiechef places Mr Price Group in a position to access the higher end market. It seems that Mr Price Group intends to diversify its market share to such an extent that they are able to access the entire market, being both the lower end and the higher end consumer through the acquisition of Power Fashion and proposed acquisition of Yuppiechef respectively. The large scope of retail outlets provided by Power Fashion allows Mr Price Group to expand their physical store offering, while the online retail side will soon be catered for by the acquisition of YuppieChef.


According to Moneyweb the Mr Price Group’s JSE listing is “around 64% up on a year ago when South Africa went into its first Covid-19 lockdown”. Accordingly, Mr Price Group’s diversification and broader acquisition of market share may be one of the reasons that Mr Price Group finds itself at a stock high, unfettered by effects of the COVID-19 pandemic.

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consumer protection, new regime, Nigeria

Nigerian competition authorities finally established

The Federal Government of Nigeria inaugurates the Federal Competition & Consumer Protection Commission (“FCCPC”) and the Competition & Consumer Protection Commission Tribunal (“CCPT”) 

By Gina Lodolo

The Federal Government inaugurated the governing board of the FCCPC together with that of the CCPT, in order to ensure that consumer protection is placed at the forefront in giving effect to Nigeria’s developmental goals.  The board was inaugurated by the Minister of Industry Trade and Investment, Otunba Adeniyi Adebayo on the 4th of March 2021.

Section 4 of the Federal Competition and Consumer Protection Act, 2018 (“Act”) provides that in the establishment of a Governing Board charged with the administration of affairs of the Federal Competition and Consumer Protection Commission, the Board shall “consist of 8 Commissioners made up of a Chairman, a Chief Executive who shall also be the Executive Vice Chairman, two executive Commissioners and four non-executive commissioners”.

According to Section 5 of the Act, the Board members are appointed by the President from the six geo-political zones in the country, subject to confirmation by the Senate. Each Commissioner shall serve for a term of 4 years. The term may only be renewed by the President for a further term of 4 years.

The responsibilities of the FCCPC will be, inter alia, to monitor staff performance, financial reporting and to ensure accountability.  The FCCPC has been established as a policy-making body as gleaned from Minister Adebayo who stated that the agency “as the highest policy-making body, [… is] expected to ensure that the Federal Government’s mandate is achieved”.  Mr. Emeka Nwankpa, Chairman of FCCPC’s board, said that “the board was the first of its kind in the commission [and] appealed to the government to give the team the necessary support in order to function effectively”. Hajia Sharatu Shafi, Chairman of the CCPT board, said “the tribunal would ensure thorough and timely adjudication to ensure that Nigerians get value for their money and enjoy all privileges and protection”.

Minister Adebayo stated that the “present administration has zero tolerance for any form of corruption and this stance must not be compromised in any way”.  Further, “government will punish any corrupt practices perpetrated  by any board members as well as the management team.”

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AAT exclusive, agriculture, consumer protection, COVID-19, excessive pricing, Grocery Retail Market Inquiry, South Africa

Healthy foods & price-gouging during Pandemic?

High ginger, garlic and lemon prices have left a sour taste in mouths of South Africans

By Gina Lodolo and Jemma Muller

The exorbitant and rapid increase in prices of ginger, garlic and lemon, that which spans up to 300%, has been the source of much public outcry and regulatory concern over the past few months. The question remains whether the price increases by massive retailers can be justified or whether they should be considered as excessive?

The Consumer and Customer Protection and the National Disaster Regulations and Directions (the “Regulations”), which came into effect in March 2020, were put in place to consider inter alia when a price is excessive.  They empower the South African Competition Commission (“SACC”) and National Consumer Commission (“NCC”) to investigate and prosecute cases of price-gouging.  Contraventions may result in penalties of up to ZAR 1 million or 10% of annual turnover. According to the NCC, price gouging is defined as “an unfair or unreasonable price increase that does not correspond to or is not equivalent to the increase in the cost of providing that good or service.”

The NCC has launched an investigation under the Consumer Protection Act into potential contraventions of the COVID-19 Regulations against major retailers such as Woolworths, Pick ‘n Pay, Shoprite, Spar, Food Lovers market, Cambridge Foods and Boxers Superstores. According to the Regulations, and in terms of section 120(1)(d) of the Consumer Protection Act, a price increase of a goods, including inter alia “basic food and consumer items”, which does not correspond to the increase in cost of supplying such goods, or increases in the net margin or mark-up on the good(s) which exceeds the average margin or mark-up on the said good in the three month period before 1 March 2020 is “unconscionable, unfair, unreasonable and unjust and a supplier is prohibited from effecting such a price increase”.

The preferred tools of the COVID-19 Regulations relating to excessive pricing seem to be predominantly similar to competition policy and its associated institutions. Upon assessing an increase in pricing to determine whether the increase is excessive, the test would be whether the prices were increased due to cost-based increases (such as reduced supply due to an increase in import costs as the domestic currency get weaker) as opposed to price increases only due to a demand increase (such as more consumers buying ginger as an immune booster during the COVID-19 pandemic). When assessing exploitative conduct, it is more likely to establish that there has been an abuse of dominance when a firm is dominant or enjoys great market power.

It has appeared that the trend in the increase of ginger and garlic retail prices is that the allegedly exploitative conduct no longer originates from only one dominant player as such (eg. only Spar) but rather affects shops in the whole of South Africa. The price increases have sparked outrage with consumers who are driving shop-to-shop in an attempt to purchase ginger or garlic at a lower, or somewhat ‘standard’ pre-COVID-19, price.

As stated above, increasing prices will be seen as excessive when the increase is due only to an increase in demand. Retailers have claimed that the increase is not only because of rising demand but also due to an actual decrease in the product supply.  It is therefore pertinent to determine the extent to which the supply has been reduced in relation to the increased demand. This would require a proportionality balance, as shops would have to prove to the competition authorities that the increase of pricing is only due to the decrease in supply. Extortionary pricing above and beyond that would demonstrate an increase of pricing due to the increase of demand, and as such would fall foul of the  Competition Act and the Regulations cited above.

The rising prices in garlic and ginger have been on the SACC’s radar since July 2020, when it concluded a consent agreement with Food Lovers Holdings whereby the retailer agreed to immediately halt excessively pricing its ginger products at one of its stores. Notwithstanding this fact, the subsequent regulation and enforcement of ginger and garlic prices by the SACC under Regulations has become somewhat tricky due to the fact that the products are not considered to be essential products under the COVID-19 Regulations.

The SACC previously found that the increases in prices were largely attributed to the rise in costs experienced by retailers and they found no evidence of price gouging targeted at taking advantage of the constrained mobility of consumers or shortages during the pandemic. What the SACC found to be concerning, however, were the high pre-disaster margins on products such as ginger and garlic, which have largely been maintained throughout the pandemic by retailers raising their prices for the goods as the costs were increasing. Accordingly, as mentioned above, although the SACC did not find evidence of price gouging, it did find possible contraventions of the Consumer Protection Act and as such, referred the potential contraventions to the NCC to investigate further.

A spokesperson for the SACC, Siyabulela Makunga has stated the following:

We also appreciate the changes in demand for garlic and ginger, but it is our view the price of ginger and garlic have [sic] increased astronomically at retailers. We don’t think that the increased demand in ginger justified the price of up to R400 a kilogram…

John Oxenham, an R.S.A. competition lawyer with Primerio Ltd., notes that “the prosecution of the matter demonstrates the respective authorities’ commitment to priority sectors and an unbridled effort to root out any form of price-gouging.”

To conclude, market power of the implicated retailors has likely been increased due to the reduced availability of substitutes for customers as a majority of retailers have introduced a dramatic price increase. The investigation launched by the NCC is, however, a step in the right direction to protect consumers who have been left with very limited choices in the widespread steep increase in price of ginger and garlic.

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consumer protection, COVID-19, South Africa

South African Competition Enforcement: a Juxtaposition.

AAT has previously reported on the South African “Consumer and Customer Protection and National Disaster Management Regulations and Directions” (Pricing Regulations) which came into force on 19 March 2020.

The Pricing Regulations provide the temporary framework within which excessive or unfair price increases will be assessed during the national state of disaster. Further, to give effect to the Pricing Regulations, the South African Competition Commission (SACC) and Competition Tribunal (Tribunal), both made specific provision to prioritize and prosecute matters arising out of the Pricing Regulations, on an urgent basis.

Following the publication of the Pricing Regulations, the SACC has reportedly received a myriad of complaints arising out of alleged breaches of the Pricing Regulations and, in order to effectively respond, has allocated its resources almost exclusively to dealing with such cases.

Notably, a large majority of these have not been referred to the Tribunal and, in some instance, the SACC has opted to, instead, resolve such allegations through direct and informal engagement with the relevant parties. In this regard, the SACC has taken the approach of liaising with industry players proactively, in order to greenlight pricing and other potentially anticompetitive conduct. This can be compared to the efforts of other international agencies who have undertaken to, on an expedited basis, consider and approve ‘waiver requests’. While firms may take comfort in the fact that the SACC will not prosecute firms who have cooperated in this informal manner, balancing cooperation with the right against self-incrimination may be a risky exercise for firms, particularly where such engagement takes place informally, without the advice of counsel.

Even so, there can be little doubt that the SACC, like its international counterparts, are wearing two hats, presenting firms with temporary but valuable measures to successfully navigate the uncertainty of a national state of disaster. The various exemptions published in terms of the Competition Act is a further such example.

In wearing the hat of enforcement, the SACC has concluded various settlements by way of consent orders, with small independent retailers and pharmacies emanating from the Pricing Regulations.

The most notable of these include a consent order, reached with face mask and protective gear distributor, Matus, following an investigation undertaken by the SACC which found that Matus increased the prices of dust masks (FFP1 and FFP2) for the relevant period, causing its gross profit margins to be markedly inflated. Matus, in the consent order, admitted to inflating its gross profit margins although it denied having contravened any laws (likely on the basis that it may not be dominant in any specific market, as required for a contravention of Section 8 of the Competition Act) and agreed to:

  • Pay an administrative penalty of R5.9 million;
  • Contribute R5 million to the Covid-19 Solidarity Fund;
  • Reduce its gross profit margin on dust masks to an acceptable level for the national disaster period (linked to an assurance that its gross profit margins for essential products will not be increased above that which was applicable on 16 February 2020).

The SACC has also, to date, referred and litigated two complaints before the Tribunal in terms of the Tribunal’s expedited Rules for Covid-19 Excessive Pricing Complaint Referrals (Tribunal Rules). These are:

Babelegi Workwear Overall Manufacturers & Industrial Supplies CC (Babelegi) – The SACC alleged that Babelegi increased the prices of facial masks for the period, earning a mark-up of over 500%, in contravention of the Pricing Regulations (and section 8 of the Competition Act).

Dis-Chem Pharmacies Limited (Dis-Chem) – The SACC alleged that Dis-Chem increased prices on surgical face masks (with increases between 43% and 261%) for the period February 2020 to March 2020, in contravention of the Pricing Regulations (and section 8 of the Competition Act).

The Dis-Chem matter has been interesting for a variety of reasons and is considered to be the ‘seminal case’ on prosecution in terms of the Pricing Regulations, with the SACC openly declaring that a “clear message must be sent that deters all other firms and Dis-Chem again from engaging in the same conduct”.

Dis-Chem is disputing its dominance in the relevant markets as well as the lawfulness of its decision to raise prices, arguing that it faced increased input costs and supply shortages which led to temporary price increases from all of its competitors and that Dis-Chem’s price adjustment was lower than that of other retailers.

From a procedural perspective, the matter has re-emphasized the need for compliance with the temporary Tribunal Rules, which provides for significantly reduced time periods, including that a respondent has 72 hours from service of the complaint referral in which to file a copy of their answering affidavit. Dis-Chem requested a one week extension for filing its answering affidavit, citing prejudice as a result of the complex nature of cases of excessive pricing and the severity of the penalty which may ultimately be imposed. The request was opposed by the SACC and Dis-Chem was forced to adhere to the shortened time period. Judgment is currently pending.

Competition agencies and advisors, globally, have stressed the pitfalls and advantaged of competition law during the state of disaster. A quick glance at enforcement statistics both now and following, for example the 2008 global financial crises, show that firms which have attempted to take advantage of consumers by flouting competition compliance during these times, have faced severe and endured consequences; economic and financial conditions cannot be used ex post to justify otherwise anticompetitive conduct.

Having said that, the proactive role played by the SACC also present opportunities for firms to utilize and take advantage of the temporary measures put in place by the SACC to green-light conduct which may otherwise be considered problematic.

The rules of the game have most certainly changed and, with it, there will be both winner and losers. A proactive approach to competition law compliance during these times, when perhaps firms are faced with more pressing concerns, may make all the difference.

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Botswana, consumer protection, fines, Kenya, legislation, leniency, market study, Mauritius, mergers, mobile, new regime, RPM, South Africa, Tanzania, Telecoms, Uncategorized, WRAP (the)

The African WRAP – SEPTEMBER 2017 Edition

Since our June 2017 Edition of the African WRAP, we highlight below the key competition law related topics, cases, regulatory developments and political sentiment across the continent which has taken place across the continent in the past three months. Developments in the following jurisdictions are particularly noteworthy: Botswana, Kenya, Mauritius, Namibia, Tanzania and South Africa.

[AAT is indebted to the continuous support of its regular contributors and the assistance of Primerio’s directors in sharing their insights and expertise on various African antitrust matters. To contact a Primerio representative, please visit Primerio’s website]


Botswana: Proposed Legislative Amendments

Introduction of Criminal Liability

The amendments to the Competition Act will also introduce criminal liability for officers or directors of a company who causes the firm to engage in cartel conduct. The maximum sanctions include a fine capped at P100 000 (approx. US$10 000) and/or a maximum five year prison sentence.

Fines for Prior Implementation

Once finalised, the legislative amendments will also introduce a maximum administrative penalty of up to 10% of the merging parties’ turnover for implementing a merger in contravention of the Act. This would include ‘gun-jumping’ or non-compliance with any conditions imposed on the merger approval.

Restructuring of the Authorities

Proposed legislative amendments to the Botswana Competition Act will likely result in the Competition Commission’s responsibilities being broadened to include the enforcement of consumer protection laws in addition to antitrust conduct.

Furthermore, there is a significant restructuring of the competition agencies on the cards in an effort to ensure that the Competition Authority – which will become the Competition and Consumer Authority (CCA) – is independently governed from the Competition Commission. Currently, the Competition Commission governs the CA but the CA is also the adjudicative body in cases referred to the Commission by the CA.

The proposed amendments, therefore, seek to introduce a Consumer and Competition Tribunal to fulfil the adjudicative functions while an independent Consumer and Competition Board will take over the governance responsibilities of the ‘to be formed’ CCA.

South Africa

Information Exchange Guidelines           

The Competition Commission has published draft Guidelines on Information Exchanges (Guidelines). The Guidelines provide some indication as to the nature, scope and frequency of information exchanges which the Commission generally views as problematic. The principles set out in the Guidelines are largely based, however, on case precedent and international best practice.

The fact that the Commission has sought to publish formal guidelines for information exchanges affirms the importance of ensuring that competitors who attend industry association meetings or similar forums must be acutely aware of the limitations to information exchanges to ensure that they do not fall foul of the per se cartel conduct prohibitions of the Competition Act.

Market Inquiry into Data Costs

The Competition Commission has formally initiated a market inquiry into the data services sector. This inquiry will run parallel with the Independent Communications Authority of South Africa’s market inquiry into the telecommunications sector more broadly.

Although the terms of reference are relatively broad, the Competition Commission’s inquiry will cover all parties in the value chain in respect of any form of data services (both fixed line and mobile). In particular, the objectives of the inquiry include, inter alia, an assessment of the competition at each of the supply chain levels, with respect to:

  • The strategic behaviour of by large fixed and mobile incumbents;
  • Current arrangements for sharing of network infrastructure; and
  • Access to infrastructure.

There are also a number of additional objectives such as benchmarking the standard and pricing of data services in South Africa against other countries and assessing the adequacy of the regulatory environment in South Africa.

Mauritius

Amnesty re Resale Price Maintenance

The Competition Commission of Mauritius (CCM) has, for a limited period of four months only, granted amnesty to firms who have engaged in Resale Price Maintenance. The amnesty expires on 7 October 2017. Parties who take advantage of the amnesty will receive immunity from the imposition of a 10% administrative penalty for engaging in RPM in contravention of the Mauritius Competition Act.

The amnesty policy followed shortly after the CCM concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).

The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and 4 007 110.00 respectively for each contravention.

Please see AAT’s featured article here for further information on Resale Price Maintenance under Mauritian law

Tanzania

Merger and Acquisition Threshold Notification

The Fair Competition Commission has published revised merger thresholds for the determination of mandatorily notifiable thresholds. The amendments, which were brought into effect by the Fair Competition (Threshold for notification of Merger) (Amendment) Order published on 2 June 2017, increases the threshold for notification of a merger in Tanzania from TZS 800 000 000 (approx.. US$ 355 000) to TZS 3 500 000 000 (approx.. US$ 1 560 000) calculated on the combined ‘world-wide’ turnover or asset value of the merging parties.

Kenya

            Concurrent Jurisdiction in the Telecommunications Sector

In June 2017, Kenya’s High Court struck down legislative amendments which regulated the concurrent jurisdiction between the Kenya Communications Authority and the Competition Authority Kenya in respect of anti-competitive conduct in the telecommunications sector.

In terms of the Miscellaneous Amendments Act 2015, the Communications Authority was obliged to consult with the Competition Authority and the relevant government Minister in relation to any alleged anti-competitive conduct within the telecommunications sector, prior to imposing a sanction on a market player for engaging in such anti-competitive conduct.

The High Court, however, ruled that the Communications Authority is independent and that in terms of the powers bestowed on the Communications Authority by way of the Kenya Communications Act, the Communications Authority may independently make determinations against market participants regarding antic-competitive conduct, particularly in relation to complex matters such as alleged abuse of dominance cases.

Establishment of a Competition Tribunal

The Kenyan Competition Tribunal has now been established and the chairperson and three members were sworn in early June. The Tribunal will become the adjudicative body in relation to decisions and/or taken by the Competition Authority of Kenya.

The Operational Rules of the Tribunal have not yet been published but are expected to be gazetted soon.

Introduction of a Corporate Leniency Policy

The Competition Authority of Kenya (CAK) has finalised its Leniency Policy Guidelines, which provide immunity to whistle-blowers from both criminal and administrative liability. The Guidelines specifically extend leniency to the firm’s directors and employees as well as the firm itself.

Only the “first through the door” may qualify for immunity in respect of criminal liability, but second or third responds would be eligible for a 50% and 30% reduction of the administrative penalty respectively, provided that provide the CAK with new material evidence.

It should be noted, however, that receiving immunity from criminal prosecution is subject to obtaining consent from the Director of Public Prosecution as well. As per the procedure set out in the Policy Guidelines, the Director pf Public Prosecutions will only be consulted once a leniency applicant has already disclosed its involvement in the cartel and provided the CAK with sufficient evidence to prosecute the other respondents.

It is not clear what powers the Director of Public Prosecutions would have, particular in relation to the evidence which has been provided by the leniency applicant, should either the CAK or the Director refuse to grant immunity from criminal prosecution.

Namibia

Medical aid schemes

In a landmark judgment, the Namibian Supreme Court overturned the High Court’s decision in favour of the Namibian Association of Medical Aid Funds (NAMAF) and Medical Aid Funds (the respondents) finding that the respondents did not fall within the definition of an “undertaking” for the purpose of the Namibian Competition.

Despite the substantial similarities between the Namibian and the South African Competition Act, Namibia’s highest court took a very different interpretative stance to its South African counter-part and held that because the respondents did not “operate for gain or reward” they could not be prosecuted for allegedly having  engaged in collusive behaviour in relation to their ‘tariff setting’ activities in terms of which the respondents collectively  determined and published recommended bench-marking tariffs for reimbursement to patients in respect of their medical costs.

 

 

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consumer protection, EU

Choice: A New Standard for Competition Law Analysis?

AAT is pleased to announce publication of a new book on competition law & ‘choice’, aptly titled Choice: A New Standard for Competition Law Analysis?, which offers exhaustive and multifaceted discussions on the crucial concept of consumer choice and its relevance for modern competition law.  Our partner Concurrences Review has made it available at its Concurrences website and on Amazon.

Ten prominent authors offer eleven contributions that provide their varying perspectives on the subject of consumer choice.  Various aspects of consumer choice are covered, such as the concept of freedom of choice in the application of EU competition law; the antitrust enforcement application of consumer choice by agencies; the historical origin of consumer choice as a concept grounded in German ordoliberalism; the economic approach adopted as well as the use of consumer welfare and consumer choice in competition law to reconcile it with intellectual property law; consumer choice as a mean to facilitate convergence between varying jurisdictions, and so on.

 

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consumer protection, dominance, Nigeria, no antitrust regime, trade associations

Drastic price increase could be sign of collusion or dominance: Dangote in Nigeria

Close-knit trade group and dominant cement manufacturer prove to be (price-)explosive combination

 Our friends at Songhai Advisory, a business intelligence firm covering key parts of Africa, have released a brief market-intel note addressing the 44% price hike of cement in Nigeria, led by the country’s (and indeed soon also the continent’s) dominant manufacturer, the Dangote group.

Any discussion of Nigeria — still Africa’s largest economy measured by GDP — in the competition-law context must begin with the surprising fact that the country’s political leadership still has failed to institute any antitrust regime.  Says Andreas Stargard, an attorney with Africa-focused Pr1merio law group:

“As the continent’s economic leader, Nigeria is a lone beacon of failure to police anti-competitive practices, whereas a multitude of significantly smaller African jurisdictions have had competition laws for years or even decades.  The recent price developments of Nigerian concrete are merely one example of the negative impact on consumers where there are no antitrust rules in effect.  Notably, an industry trade association also appears to be involved here, so from the competition point of view, we are dealing not only with one dominant entity (Dangote) but also an efficient and time-tested mechanism of information-sharing among direct competitors (trade groups).

 

The price increase covered the entire Nigerian cement market, according to Songhai and other media reports: cement prices of the members of the Cement Manufacturers Association of Nigeria (CMAN) rose over the course of a month by 44% from US$5 to $7 per 50kg.  Adds Stargard, “any competent antitrust enforcer would look into such a price hike.  Given the absence of competition law enforcement in Nigeria, it is likely that no investigation will take place, and civil suits are highly unlikely, in light of the lack of antitrust laws and the political connections at play here.”  In the words of Songhai’s reporting: “When Dangote decides to push its price up or down, others tend to follow.”  Yet, the researchers also quote a source at Sokoto Cement, one of Dangote’s main rivals, as describing power generation costs and foreign-exchange fluctuations as the actual drivers behind the drastic recent cement price increases.

 

 

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Big Picture, consumer protection, ECONAfrica, full article, Kenya, Morocco, politics, public-interest, South Africa

Antitrust in the Digital Economy: Fighting Inequality?

AAT the big picture

HOW CAN COMPETITION LAW ENFORCEMENT IN THE DIGITAL ECONOMY HELP IN THE FIGHT AGAINST POVERTY?

By DWA co-founder and visiting AAT author, Amine Mansour* (re-published courtesy of Developing World Antitrust’s editors)

When talking about competition law and poverty alleviation, we may intuitively think about markets involving essential needs. The rise of new sectors may however prompt competition authorities to turn their attention away from these markets. One of those emerging sectors is the digital economy sector. This triggers the question of whether the latter should be a top priority in competition authorities’ agenda. The answer remains unclear and depends mainly on the potential value added to consumers in general and the poor in particular[1].

Should competition authorities in developing countries focus on digital markets?

Obviously, access to computer and technology is not a source of poverty stricto sensu. In the absence of basic needs, strategies focusing on digital sectors may prove meaningless. In practice, the last thing people living in extreme poverty will think about is gaining digital skills. Their immediate needs are embodied in markets offering goods and services which are basic necessities. The approach put forward by several Competition authorities in developing countries corroborates this view. For instance, in South Africa, digital markets are not seen as a top priority. Instead, the South African competition authority focuses on food and agro-processing, infrastructure and construction, banking and intermediate industrial products.

There are however compelling arguments to be made against such position. Most importantly, although access to technology and computers is not a source of poverty, such an access can be a solution to the poverty problem. In fact, closing the digital gap by providing digital skills and making access to technology and Internet easier can help the low income population when acting either as entrepreneurs or consumers. In both cases competition law can play a decisive role.

The low income population acting as consumers

First, when acting as consumers, people with low income can enjoy the benefits of new technology-based entrant. Thanks to lower costs of operation, lower barriers to entry and (almost) infinite buyers, these new operators have changed the competitive landscape by aggressively competing against traditional companies. These features have helped them not only extending existing products and services to low-income consumers but also making new ones available for them. Better yet, in some cases increased competition coming from technology-based companies motivates traditional business forms to adapt their offer to low-income consumers so as to face this new competition and remedy shrinking revenues. Perhaps, the most noteworthy aspect of all these evolutions, is that these new entrants have, in some instances, been able to challenge incumbents’ position by driving prices downward to levels unattainable by traditional companies without scarifying their profitability.

A shining example of all this dynamic is the possibility for low-income consumers to engage, thanks to some mobile companies, in financial transaction without the need to pass through the traditional stationary banking infrastructure. For instance, in Kenya, M-PESA a mobile money transfer service that has over 22 million subscribers[2] and around 40,000 agents (around 2600 Commercial bank branches)[3] changed the life of million of citizens. The service enables clients to deposit cash into their M-PESA accounts, send or transfer money to any other mobile phone user, withdraw cash and complete other financial transactions. A farmer in a remote area in Kenya can send or receive money by simply using his mobile phone. In this way, M-PESA can act as a substitute to personal bank accounts. This experience shows how the digital economy helps overcoming the prohibitive costs of reaching low-income customers and thus raising living standards.

On that basis, we can easily imagine the counter-argument incumbent companies might put forward. In this regard, unfair competition and the need for regulation to preserve policy objectives are often in the forefront. However, there is a great risk that these arguments are simply used to restrict market entry and impede competition from those new players.

In fact, this kind of arguments do not always reflect market reality. For example, in some remote geographic areas, traditional companies and the new ones based on the digital/internet space do not even compete directly against each other. Accordingly, regulation intended to protect policy goals has no role to play given that the affected consumers are out of the reach of the traditional business. In the M-PESA example, it may be possible to argue that any operator engaging in financial transactions should observe the regulatory restrictions that apply to the banking sector in order to ensure that policy objectives such as the stability of the banking system or the protection of consumer savings are preserved. However, applying such a reasoning will leave a large part of consumers with no alternative given the absence of a banking infrastructure in remote areas. The unfair competition and regulation arguments may only hold in cases where consumers are offered alternatives capable of providing an equivalent service.

This shows the need to proceed cautiously by favoring an evidence-based approach to the ex-post use of the regulation argument by incumbent operators. This is however only one of different facets of the interaction between the competitive impact of companies based on the internet-space, the regulatory framework and the repercussions for people with low income[4].

The low income population acting as entrepreneurs

Second, the focus on digital markets as way to alleviate poverty is further justified when low-income people act as entrepreneurs. In fact, digital markets are distinguished from basic good markets in that they may act as an empowering instrument that encourages entrepreneurship.

More precisely, the digitalization of the economy results in an improved access to market information which in turn may benefit entrepreneurs especially the poor whether they intervene in the same market or in a different one. Practice is replete with cases where, for instance, a downstream firm heavily relies for its production/operation on services or products offered by an upstream company operating in a digital market. Similarly, in a traditional and somewhat caricatural way, a small-scale farmer may use VOIP calls to obtain market information or directly contact buyers suppressing the need for a middleman.

However, we can well imagine the disastrous consequences for these small-scale farmers or the downstream firm if mobile operators decide to block access to internet telephony services such as Skype or WhatsApp based on cheap phone calls using VOIP (this is what actually happened in Morocco). In such a case, the digitalization of the economy has clearly contributed to greatly lowering the costs of communication and distribution. However, low income entrepreneurs are prevented from benefiting of these low costs, which are a key input to be able to compete in the market.

The major difficulty here lies in the fact that, when low income people act as entrepreneurs, it is likely that they organize their activities in small structures. This result in relationships and structures favorable to the emergence of exploitative abuses. Keeping digital markets clear from obstructing anticompetitive practices is thus indispensable to ensure that small existing or potential competitors are not prevented from competing. This might not be easily achieved given that competition authorities’ focus is sometimes more on high profile cases.

*Co-editor, Developing World Antitrust

[1] Intervention may also be justified by the institutional significance argument. This significance lies in the fact that those markets are growing ones and challenging the common ways of both doing business and applying competition rules which in turn make it crucial for authorities to intervene by drawing the lines that ensure the right conditions for those market to grow and develop.

[2] http://www.safaricom.co.ke/about-us/about-safaricom

[3] http://www.safaricom.co.ke/personal/m-pesa/get-started-with-m-pesa/m-pesa-agents

[4] For instance, it possible to think of the same problem from an ex-ante point of view highlighting incumbent firms’ efforts to block any re-examination of the regulatory standards that apply to the concerned sector (no relaxation of the quantitative and qualitative restrictions). This aspect has more to do with the advocacy function of competition authorities.

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