Category: distribution

Sweeping Inquiry Sheds Light on Online Intermediation Platforms: Competition, Opportunity, and the Road Ahead

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By Tyla Lee Coertzen and Nicola Taljaard

On 31 July 2023, the South African Competition Commission (“SACC”) released its Final Report and Decision on the Online Intermediation Platforms Market Inquiry (“OIPMI”). The OIPMI was initially launched on 19 May 2021 and after a number of requests for information, public hearings, expert reports as well as comments and engagements with stakeholders, the SACC’s findings and recommendations have finally been concluded.

The SACC is empowered to conduct market inquiries according to section 43B(1)(a) of the Competition Act 89 of 1998 (as amended) where it has reason to believe that there are market features that may impede, distort or restrict competition in a particular market; or to achieve the objects and purposes of the Act (including participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”).

The Inquiry: A Timeline of Discovery and Discernment

  • May 2021: The kick-off. Release of the Statement of Issues (SOI), first round of Requests for Information (RFIs), and business user survey.
  • August 2021: Heating up with the release of the Further Statement of Issues (FSOI), second round of RFIs, and a refined business user survey.
  • November 2021: The public had their say with hearings and follow-up RFIs.
  • February 2022: Expert reports and in-camera hearings added a new dimension.
  • July 2022: Provisional Inquiry Report was published, provisional findings, and recommendations were made public.
  • August to December 2022: A flurry of submissions, stakeholder engagements, and follow-up RFIs.
  • January to July 2023: Engaging stakeholders on final findings and remedial actions, sealing the deal.

What Does It All Mean?

These findings focus on the various platform categories, including the mammoth influence of Google Search. The full extent of these actions requires deep exploration, but one thing is clear: the landscape of online intermediation platforms is about to shift.

During the launch of the OIPMI, the Minister Patel of the Department of Trade, Industry and Competition (“DTIC”) commended the SACC for its great effort and the high-quality product produced in the form of the OIPMI. He further noted that the government should consider taking an inclusive response to the findings and recommendations in the OIPMI.

The findings concluded, inter alia, that Google Search is vital as a means for consumers to access all platforms, and that its paid search alongside free results business model is disproportionately advantageous to larger and more established platforms. It also found that Booking.com’s practice of restricting hotel prices on certain online networks results in a restriction of competition and allows it to make more commission by making users reliant on it. eCommerce giant, Takealot, was found to have a conflict of interest due to its retail department competing with its marketplace sellers and causing detriment to the latter. Google Play and the Apple App stores were found to charge exorbitant fees to developers and on a global level, the platforms hampered the visibility of SA-paid apps. Food delivery platforms Uber Eats and Mr D Food were found to cause difficulty to their competitors because of the lack of openness regarding the surcharges charged on menus across their platforms, as well as the limitations put on national chain franchisees. Property advertisement platforms Property 24 and Private Property were further found to have hindered their competitors by providing low interoperability to competitors in respect of listings. Property 24, together with AutoTrader and Cars.co.za were also found to have hampered small estate agents and car dealers due to the discriminatory pricing implemented by these platforms.

To combat the effects of the findings, the SACC recommended the imposition of a number of remedial actions including consumer-aiding search filters, marketing incentives to purchase local goods, the removal of restrictive pricing clauses, the segregation of internal (competing) divisions, the removal of automatically directing mechanisms to larger players, disclosure clauses to consumers and other benefits to SMEs, HDPs and consumers.

All platforms will be provided a period within which to affect the remedial actions.

A New Chapter: Where Do We Go From Here?

This OIPMI hasn’t just been about pointing fingers and exposing flaws. It’s about shaping the future of a wide range of the economy. The implications are broad, affecting everyone from big tech to the small business owner striving to make a mark in a competitive world.

Michael-James Currie, Partner at Primerio, noted “The recommendations of the OIPMI are far reaching for online platforms. Regulators need to ensure that we do not undermine those who are growing and providing significant investment the digital market in a highly competitive market where firms are competing not only with established traditional retailers but also large international players. Likewise, South Africa cannot afford to signal to international players that their business models will be substantively undermined once they establish themselves in South Africa. This is particularly so if the Commission’s remedies are not informed by objective competition concerns.”

Do antitrust settlements require an admission of guilt? Appellate body says “no”, overrules CID

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Barring an application for review to the community’s highest court, decisions by the COMESA Competition Commission and its CID (Committee for Initial Determinations) are reviewed by the COMESA Appeals Board (“CAB”). In other words, the CAB is the crucial mid-layer of appellate review in antitrust matters across the COMESA region.

The CAB recently published its important December 2022 ruling in the CAF / Confédération Africane de Football matter. The CAF case is noteworthy in at least 3 respects, says Andreas Stargard, a competition attorney with Primerio International:

“For one, it deals with one of the CCC’s very first cases involving anti-competitive business practices; heretofore, virtually all decisions by the Commission involved pure merger matters.

Second, the CAB ruling is important in that it lays the groundwork for future settlements (or commitments) between the Commission and parties accused (but not yet found guilty) of violations of the COMESA competition regulations.

Lastly, the Appeals Board highlights the importance of issuing well-reasoned, written decisions, on which the parties (and others) can rely in the future. The CAB has made clear what we at Primerio have long advocated for: a competition enforcer must articulate clearly and state fully all of the reasons for its findings and ultimate decision(s). This is necessary in order for readers of the written opinion to evaluate the factual and legal bases for each. The CAB has now expressly held so, which is a welcome move in the right direction for COMESA litigants!”

In an ironic twist in the 5-year saga of the CAF investigation by the CCC, the Commission and the parties themselves had reached an agreed settlement, according to whose terms the parties did not admit guilt, yet agreed to (and in fact anticipatorily did) cease and desist from performing under their sports-marketing contract, which was essentially torn up by the commitment decision. Yet, to the surprise of the CCC and the private parties under investigation, in the summer of 2022 the CID refused to sign off on the settlement, due to the sole (otherwise unexplained) reason that there was a lack of an admission of guilt. The parties sought reconsideration on various grounds, which the CID again refused a second time. These rulings were then appealed — successfully — to the CAB, which quashed the CID’s unsubstantiated determinations and gave effect to the parties’ previously-reached settlement agreement with the CCC.

The full decision — which deals in detail with the CAF’s distribution agreements for the commercialization of marketing and media rights in relation to sports events — can be accessed on AAT’s site, see below.

comesa-appeals-board-decision-in-caf.pdfDownload

Toyota’s distribution & pricing agreements under COMESA scrutiny

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Regional bloc’s antitrust enforcer further steps up investigations in the Common Market

By Gina Lodolo
On 16 June 2022, the Common Market for Eastern and Southern Africa (“COMESA”)’s Competition Commission (“CCC”) provided notice, as required by Article 22 of the COMESA Regulations (“Regulations”), that it launched an investigation into Toyota Tsusho Corporation (“Toyota”) in case no. CCC/ACBP/NI/3/2022.


Where the CCC has reason to believe that competition in the Common Market has been restrained, Article 22 of the Regulations requires the entity involved to be notified of the investigation, and further requires the investigation to be completed within 180 days of the notification. In this regard, the Toyota investigation was launched following allegations that the company contravened Article 16 of the Regulations. Article 16 (generally covering ‘restrictive business practices’) prohibits agreements that “may affect trade between Member States; and have as their object or effect the prevention, restriction or distortion of competition within the Common Market”.


The specific conduct referred to by Dr. Willard Mwemba, the Director and Chief Executive Officer of COMESA — who has revitalised the relatively young antitrust authority’s conduct investigations and increased its caché internationally by following best practices and engaging competition practitioners globally in the agency’s development and capacity-building process — includes Toyota’s distribution agreements with its authorised distributors. These vehicle distributors sell Toyota cars, trucks, and spare parts across the region, within their contractually designated territories. In this regard, the CCC is now investigating suspicions that the distribution agreements violate Article 16 of the Regulations in various ways — they may:
• Provide prohibitions on authorised distributors to sell outside of allocated geographic areas;
• Prohibit authorised distributors from indirectly selling outside of allocated geographic areas through selling to third parties, who they suspect will sell or transfer to another territory; and
• Indicate resale price maintenance by providing prices of Toyota products in the Common Market.

Andreas Stargard, a competition partner at Primerio Ltd. said, “this development shows how ‘CCC 2.0’ is truly emerging as a fully-fledged African antitrust enforcement authority and not a mere merger ‘toll booth’ regulator, which it essentially was for the first few years of its existence. The CCC has come a long way from the early days and is now pursuing abuse-of-dominance cases that it would not have had the capacity to tackle a decade ago”. Stargard observes that the Toyota case is “now the 3rd announced anticompetitive-business practice investigation of the year 2022 so far,” which is an absolute record for the CCC. “We’re talking proper grey-market / parallel-export restriction and RPM investigations here, this is no longer just a merger-fee collections agency.”

The agency invites public comment and further insight into Toyota’s dealings by 30th of July. Interested parties are invited to make comments to the Commission by 30 July 2022.

Competition enforcer terminates RPM investigation into Coca-Cola

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COMESA’s second restrictive trade practices investigation ends inconclusively

Having now concluded two non-merger cases (the first was an exclusivity issue in football broadcasting and sponsorship agreements, see here), the COMESA Competition Commission’s (“CCC”) second investigation into restrictive vertical distribution practices engaged in by Coca-Cola and its distributors has culminated in somewhat of an indeterminate ending.

No fines were imposed, and the Coca-Cola parties agreed to eliminate the price-maintenance clause from their distribution contracts, as well as committing to implementing a generic compliance programme.

Says Andreas Stargard, a competition practitioner with Primerio Ltd., in an in-depth analysis of the short Decision (dated 6th December 2018, but only released recently):

I am very disappointed in this missed opportunity.  The Decision lacks intellectual rigour and avoids critical detail, to assist practitioners or business going forward in any meaningful way.

This investigation began in earnest well over a year ago, when the CCC opened formal Article 22 proceedings against the parties in January 2018.  In its disappointingly short 9-paragraph decision, lacking any degree of detailed reasoning, factual or legal analysis underlying its conclusions, the Commission has now determined the following:

  1. The relevant product market is the sale of non-alcoholic carbonated beverages.  I note that the wording of this definition would presumably include sparkling mineral water, which appears to be an outlier from the ‘soft drinks’ category that is actually at issue here (“Coke,” Fanta,” “Sprite,” etc.).
  2. A relevant geographic market was notably not defined at all (!).  The absence of this key dimension is unfortunate — it is not in accordance with established competition-law principles, as market power can only be measured in well-defined product and geographic markets.  While the decision mentions the countries in which the parties are active, it fails to identify whether each country was viewed as a relevant sub-market, or whether Coca-Cola’s market power (or dominance) was assessed across the entire COMESA region.  This appears to be a glaring oversight.
  3. The CCC found relatively low entry barriers, as well as apparently actual “new product” entry (NB: does “new product” imply products by a new or different competitor?).
  4. Yet, despite ‘non-prohibitive’ entry barriers, the Commission somehow views the mere fact that the respondent’s brands “continued to command a majority share of the relevant markets” (NB: where is the plural (‘markets’) coming from here? I thought there was only a single market for ‘non-alcoholic carbonated beverages’?) as leading to a finding of dominance.
  5. Crucially, the actual conduct complained-of (the vertical restraints, the alleged RPM, etc.) is barely identified and lacks any significant detail.  Paragraph 7 merely provides that there are “clauses which stipulate the profit margins to be enjoyed by the distributors, as well as the commission at different levels of the market. … [and] vertical restraints which constrain the distributors’ conduct in the relevant markets” (note the plural again).  This absence of key information — ‘what were these so-called vertical restraints’? how were distributors constrained in their conduct? — in an official ‘Decision’  by the enforcement agency wholly fails to assist businesses seeking antitrust guidance for operating within the legal boundaries in the COMESA region.
  6. Finally, the CCC’s overall conclusion is rather weak: the Decision states that the Commission merely “registered its concern that the stipulation of prices [I thought it was profit margins?] may have anti-competitive effects in the market [back to a single market?].”  To address these ‘potential’ ‘concerns’, Coca-Cola appears to have voluntarily committed to removing the offending contract language and instituting a (wholly undefined) “compliance program” that exclusively concerns Part III of COMESA’s regulations.

In sum, Coca-Cola seems to have got away easy here: no fine was imposed at all (which could have been as much as 10% of the parties’ COMESA revenues), a limited, voluntary training exercise was agreed, as was the removal of the RPM provision.

The CCC, on the other hand, missed a truly golden opportunity to draft a more well-reasoned decision.  Its 9-paragraph reasoning (which notably concludes with a finding of actual dominance nonetheless!) can literally fit on a single page… Remember: resale price maintenance is considered in many jurisdictions to be a “hard-core” offence, and is often deemed per se illegal.  In this regard, the Decision likewise fails to make any mention of the relevant legal standard under the COMESA Regulations for evaluating the RPM (and the other unidentified, vertical) conduct.

Andreas Stargard
Andreas Stargard

The flaws outlined above — from the lack of geographic market definition, missing market share data and other highly relevant details, zero explanation of why low entry barriers somehow did not preclude a finding of dominance, use of tautological and circuitous verbiage (“restraints which constrain“?) — preclude this “conduct” case,  notably already a rarity in the CCC’s portfolio, to be a lightning rod for the assent of the COMESA Competition Commission to become a respected competition enforcer.  This was a chance for the agency to be placed on the radar screen of international businesses, agencies and practitioners, to be seen together on the map with its respected peer antitrust enforcers such as the South African Competition Commission — yet, it was a chance unfortunately missed…

 

Kenya Enforcement Alert: Diageo’s sub settles distribution case, and more…

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Restrictive Practices

The Competition Authority of Kenya (CAK) recently announced that it had entered into a settlement agreement with local beer producer Kenya Breweries Limited (KBL), a subsidiary of UK Diageo’s East African Breweries Ltd (EABL).

The settlement follows from an investigation by the CAK in terms of section 21 of the Competition Act (12 of 2010) wherein the CAK had found that KBL’s distribution agreements with its downstream distributors – which provides for inter alia, territorial exclusivity  – is anti-competitive and may lead to the lessening of intra-brand competition.

The settlement was reached in terms of section 38 of the Competition Act and requires that KBL establish an internal compliance policy and review and amend the problematic and restrictive clauses in its agreements with distributors.

Michael-James Currie, an African focused competition lawyer, says that the decision is particularly important for companies which use third parties to execute their distribution strategies as the majority of distribution agreements contain restrictions of some kind (often transported from international distribution agreements) which will need to be assessed against the standards of the Competition Act in Kenya as the CAK is actively focusing on these types of restrictive verticals arrangements.

Abuse of Dominance

Styles Industries (Darling Kenya)

Braids supplier, Styles Industries Ltd (Styles) has been found guilty by the CAK for abuse of dominance in contravention of Section 24 of the Competition Act.

The CAK launched an investigation into Styles on the basis of a complaint received by a competitor in the market, Solpia Kenya, claiming that Styles had abused its dominance by imposing unfair selling prices and conditions on suppliers who sell its products.

The CAK’s investigation found that Styles had abused its dominance by imposing unfair trading conditions on its downstream suppliers which it sought to enforce through threatening its downstream suppliers with account closure, removal of discounts and refusal to supply products.

The CAK is currently in negotiations with the parties and have indicated that its finding could result in Styles paying the complainant an amount in damages and/or a fine Sh10 million. In terms of Section 54(3) of the Competition Act, the relevant individuals within Styles could further face imprisonment for a period of up to 5 years.

Kaluworks

The CAK dismissed an abuse of dominance case against cookware manufacturer, Kaluworks Limited (Kaluworks).

The case emanated from a complaint by rival company, Sufuria World (Sufuria) in which it was alleged that Kaluworks had refused to sell to them certain aluminum circles which it required for purposes of manufacturing its aluminum cooking ports. This, Sufuria claimed, amounted to an abuse of dominance in terms of section 23 and 24 of the Competition Act.

The CAK, however, found that the conduct did not amount to abuse of dominance under the Competition Act as Sufuria had other options available to it in that it had the ability to replicate the technologies used by Kaluworks to produce the aluminum circles (as other manufacturers have done) or it could increase its order volumes in order to make it economically feasible for Kaluworks to supply it with the aluminum circles.

This finding was based on the representations made by Kaluworks that:

  • it primarily produces aluminum circles for in-house production for a variety of its own cookware products intended for local and export markets; and
  • it could only manufacture the aluminum circles to third parties where such third parties placed an order which met certain minimum quantities that would guarantee optimal scale of production

In supporting its findings, the CAK stated that in assessing the conduct of a dominant firm and whether it amounts to a ‘refusal to deal’, “is necessary to prove indispensability of the facility to the operation of the complainant or other third parties as arbitrary intervention may hurt innovation.”

Market Inquiries

Transport Inquiry

The CAK has recently announced that it has initiated a ‘regional study’ in the Shipping, Trucking and Haulage industry in Kenya, Uganda, Rwanda and Burundi.

According to the announcement, the objective of the inquiry is to identify and remedy features of the market and trade practices which are anti-competitive and which impedes the national and intra-regional trade which in terms slows the potential growth of the manufacturing sector in Kenya.

Leasing Sector

The CAK has further announced a market study into the leasing sector which it will be conducting in conjunction with the Financial Sector Deepening (FSD) Kenya.

The objective of the market study is to assess the level of competition in the sector and to identify areas of concern in order to enhance competition in the market by facilitating SME entrants into the market.

John Oxenham, director at African antitrust advisory firm Primerio, says that market inquiries can be used very effectively, however, they are resource intensive and in order to achieve there objectives must be concluded expeditiously. The CAK should be cognizant of the challenges and experiences of the South African Competition Commission (SACC) where the market inquiries are not being concluded timeously.

[The editor wishes to thank Charl van der Merwe for his contribution to this update]

Resale Price Maintenance in COMESA?

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Second Non-Merger Investigation Opened by COMESA Enforcer

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

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

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

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

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

Andreas Stargard
Andreas Stargard

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

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

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

Namibia Competition Commission: New Franchise Laws to Address Anti-Competitive Concerns

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By AAT Senior Contributor, Michael-James Currie

The CEO of the Namibian Competition Commission (NCC), Mr. Mihe Gaomab II, recently announced that the NCC has made submissions to the Minister of Trade and Industry in relation to proposed legislation which will regulate franchise models in Namibia.

Currently, there is no specific ‘franchise law’ in Namibia and moreover, franchisees are not required to apply to the Minister of Trade and Industry for registration of an ‘approval’ licences. Accordingly, there is minimal regulatory oversight in respect of franchise models.

While recognising the benefits of franchise models, the NCC is, however, concerned that there are a number of franchises in Namibia which may be anti-competitive in that the franchisor-franchisee relationship creates certain barriers to entry.

The NCC has specifically identified the practice, by way of an example, whereby certain franchisors deliberately ensure that there is a lack of competition between franchisees in the downstream market. The rationale behind this commercial strategy is allegedly so that the franchisor may extract greater royalties or franchise fees from the respective franchisees, as the franchisee is assured of a lack of competition.

The NCC views this practice as well as a various similar practices as potentially anti-competitive as the structure of certain franchise models may result in collusion between franchisees.

Unlike a number of jurisdictions, including South Africa, however, collusive conduct is not prohibited per se and a franchise agreement or model will, therefore, only amount to a contravention of the Namibia Competition Act if there is (or likely to be) an anti-competitive effect which cannot be justified or outweighed by other pro-competitive or efficiency arguments (i.e. rule of reason arguments).

The rule of reason analysis also extends to ‘minimum resale price maintenance’ (MRPM) under Namibian competition law. Again, unlike the position in South Africa, MRPM is not a per se prohibition (i.e. there is rule of reason defence available to a respondent). MRPM in terms of the South African Competition Act is a controversial topic as in many instances, the very success of a franchise model is dependent on uniformity in pricing across all franchisees. Furthermore, issues such as protecting brand reputation are also generally acceptable commercial practices which may amount to a contravention due to the strict application of the MRPM provisions under South African law.

In Namibia, franchisors therefore have somewhat more flexibility when recommending minimum resale prices than their South African counterparts. It should be noted, however, that the NCC is monitoring franchise models closely to ensure that franchisors do not overstep the mark by implementing a franchise model which has as its object or effect, the lessening of competition in the market.

CCC Begins Conduct Enforcement & Activates Its Exemption Regime for Potentially Anti-Competitive Agreements

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Parties Start Discussing Business Practices with COMESA’s CCC

As AAT reported recently — see “Growing Pains: From One-Trick Pony to Full-Fledged Enforcer?” — the COMESA Competition Commission (CCC) has begun to move from being a pure merger-control administrator to becoming a full-fledged antitrust enforcer.  The CCC issued a Notice calling on firms to notify the CCC of any agreements (both historic and forward-looking) that may be anti-competitive, for the purpose of having such agreements ‘authorised’ or ‘exempted’ under Article 20 of the COMESA Competition Regulations.  (More details on that regime are in our June article, referenced above.)

Eveready products (sample)
Eveready products (sample)

AAT has now learned that several companies have taken the agency up on its Exemption proposal: Andreas Stargard, a competition practitioner with Primerio Ltd. observes that the CCC’s announced “leniency ‘window’ to incentivise firms to come forward and obtain an exemption” has closed at this point in time, although he expressed doubt that the relatively short one-month period was sufficient and will likely be extended.  Says Stargard: “We are seeing several parties, both global & local companies, who are beginning to take the CCC’s non-merger enforcement seriously.  These undertakings are considering to obtain advance clearance of their business practices under the Commission’s Notice procedure.”  One such example, he adds, is Kenya’s financially embattled Eveready East Africa: it has reportedly sought CCC approval of its agreements with international manufacturers for the importation and distribution within the COMESA common market of their diverse products, ranging from batteries to fountain pens to CloroCOMESA old flag colorx-brand chemicals.  The Commission has invited “general public and stakeholders” for comments according to its formal statement.

In light of these developments, Stargard advises that:
“multi-national firms operating within COMESA or jointly with a COMESA-based importer or other domestic business partner should consider engaging counsel to evaluate their practices, and if they may fall within Article 16 of the Regulations, consider approaching the CCC for an authorisation letter.”

 

Mobile phone provider loses antitrust appeal

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malawi

 

 

Mobile phone provider loses antitrust appeal

Airtel Malawi Limited, a company incorporated under the Companies Act, engaged in the provisions of mobile phone and telecommunication services in Malawi has lost its appeal against the decision of the Competition and Fair Trading Commission regarding its application for authorisation of an exclusive distribution arrangement.

In a letter dated 28 May 2013, Airtel applied to the commission for the authorisation of an exclusive dealership agreement with its distributors in respect of the sale of its recharge vouchers and other products. This application is in line with section 44 of the Competition and Fair Trading Act Cap 48:09 of the Laws of Malawi.

Due to the fact that Airtel’s exclusive dealership agreement with its distributors contained a clause to ensure that the Distribution Sales Accountants are employed exclusively to undertake Airtel’s sales activities, the Commission refused its approval. The Commission provided its reasoning in a letter to Airtel dated 1st August 2013, specifically stating that the clause “would negatively affect competition in the distribution of mobile products particularly in rural areas.”

Airtel filed an appeal at the High Court Commercial Division against the Commssion’s order that required the company to remove or amend the clause in issue. Airtel submits that the Commission cannot reasonably expect it to appoint Distributor Sales Accountants who will be engaged in accounting for the sales of Airtel’s competitiors in the market.

Delivering his ruling on the 10th of February 2013, Justice Mtambo upheld the decision of the commission and found the justification for the rejection of Airtel’s application for the approval of distributorship agreement to be reasonable. Justice Mtambo went further and stated that, “it is after all the Appellant who is attempting to regulate the business affairs and conduct of its distributors who are independent businesspersons just because the Appellant has dominance on the market.”

 

The court also ruled that it was within the mandate of the Competition and Fair Trading Commission to require companies that use exclusive distribution arrangements in the distribution of their products or services to amend their standard agreements.