Zuku pay-TV launched complaint against DStv in Kenya
As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news. Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.
In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.
The CAK has not indicated whether it is investigating the complaint yet.
Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy
In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.
To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.
The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.
South Africa takes on more price regulation in planned amendment to Competition Act
BDLive’s Carol Patonreports that Economic Development Minister Ebrahim Patel – with whose involvement in competition policy AAT readers are well aware from reading our site – has further strengthened his grip on the country’s competition authorities. He is said to be drafting amendments to the Competition Act in relation to dominant firms’ “excessive pricing” practices. The amendments are to be introduced to Parliament in 2015.
The article quotes Mr. Patel’s Sunday interview, in which he said:
“The past five years indicated that we are serious about dealing with cartels. But the challenge that we have had is that the economy still has many formal monopolies or upstream producers who are able to impose high prices on downstream manufacturers. We have got to move with greater urgency to tackle the structural challenges. Giving a dominant player the right to set its own price results is an unfairness. In the Sasol example, part of the remedy is for the firm to work with the competition authorities to develop a soft version of price regulation.”
Price regulation is an absolute taboo in U.S. antitrust law, and even under more interventionist and public-policy influenced EU standards, explicit price regulation is not practiced in the bloc’s 28 member states. Sasol, the giant South African oil company, is said to be aware of the government’s plans, saying: “setting prices, in particular of traded goods, invariably leads to unsatisfactory outcomes. South Africa’s joining the World Trade Organisation in 1995 took us forward to opening the economy to compete internationally, with prices being brought in line with international prices. Regulating prices to below gate price, is unlikely to lead to building long-term competitive industries.”
Lots AAT news this Monday, from Sudan/COMESA to South Africa
Visa facilitator backed by one branch of government & investigated by another
In substantive antitrust news, the South African Competition Commission is reported to be investigating alleged abuses of market dominance by VFS Global in the visa support services market to foreign embassies.
VFS is a worldwide outsourcing and technology services specialist for diplomatic missions and governments.
The firm has now drawn the potential ire of the Commission, as it is now apparently the only outlet for foreigners to apply for South African visas and work permits, as well as for South African citizens to obtain entry visas for multiple countries abroad.
The irony here that we at AAT perceive is that the monopoly position of VFS appears to be based on the new immigration regulations imposed by the ZA government itself (notably the Department of Home Affairs) earlier in 2014: According to a report, the company had recently opened the doors of its multiple offices across the country — “The Pretoria (Gauteng), Rustenburg (North West) and Kimberley (Northern Cape) centres were the first to open on Monday, 2 June. It is envisaged that the last office will be opened on 23 June.”
The investigation – to be confirmed by the Commission this week, as it potentially launches a full-on formal inquest – was purportedly initiated by a competitor complaint from company Visa Request, claiming damage to its competing business flowing from the governmentally-imposed dominant position of VFS’s (allegedly pricier) services…
Commission stays course on Sasol
In more ZA news, Competition Commissioner Tembinkosi Bonakele is staying the agency’s strong course on the excessive-pricing fine imposed on Sasol, which is said to be appealing its R543 fine that had been upheld by the country’s Competition Tribunal, and which Commissioner Bonakele thinks “should be bigger”…
The S.A. Competition Tribunal is hearing the excessive-pricing portion (which was not settled) of the Commission‘s claims against the refining & steel giant this month. The relevant legal underpinning of the case is the provision against excessive pricing by a dominant firm. Precedent has declared prices excessive that “bear no reasonable relation to the economic value of the good or service” at issue. Pheeew. Facts. Economics. Nice. Looks like a coming battle of the experts to me…
By comparison, in the U.S., antitrust law of course does not forbid “excessive pricing.” While setting and reaping apparently high prices may be indicative of monopoly power, such acts are not in themselves anti-competitive or illegal in the States. In Verizon v. Trinko, the U.S. Supreme Court held famously that:
The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth.
Interestingly, there is a notable history of failures in the area of ‘excessive pricing’ complaints in South Africa, as well, despite the statutory legitimisation of the cause of action. In the prior ArcelorMittal and Telkom cases, the Commission and/or Tribunal lost in the end, either at trial or on appeal to the Competition Appeal Court. That Court had found, in the ArcelorMittal case, that the antitrust watchdogs could not use the ‘excessive pricing’ provision of the statute to combat perceived anti-competitiveness in the “market structure rather than price level.”
Today, Bonakele is quoted as follows:
“These are different times. I can promise you this matter is not going to disappear. Sasol is out of touch if it believes it can win the matter on the basis of technical legal arguments. This issue has to be resolved either through competition law or through government policy.
The issue in this case is fundamental to the development of our economy. We are dealing with resources that should be available to promote that development. The government plays an important role in the country’s industrialisation, and I believe it will be very interested in the progress of this case.”
COMESA’s costly courthouse
While the COMESA organisation has had trouble in the virtual world this year, its real-world endavours appear to be prospering: Its shiny new courthouse, built to the tune of over $4 million (equivalent to only 8 merger filing fees), has opened its doors. The country’s Minister of Justice, Mohamed Bushara Dosa, last week handed over to the COMESA Secretariat-general the Khartoum-based court premises.
The court will notably hear antitrust and merger cases that are appealed from the organisation’s Competition Commission.
The glimmering COMESA court house in Sudan, built to the tune of $4.1 million
South African justice ministry’s highest-ranking member calls for strengthened competition enforcement against “monopoly pricing” and creation of “black bourgeoisie”
In an apparently rambling discourse, covering a vast swathe of subject-matter, South Africa‘s Justice Minister Jeff Radebe has been quoted as calling not only for the dismantling of the “over-concentrated” economy “in the hands of a few large companies,” but also for the creation of a “black bourgeoisie,” purportedly to counter-act the remaining racial imbalance in the country’s economic structure, according to an article in the South African Times Live:
On promoting competition in the economy, Radebe said the Competition Act would be strengthened to prevent monopoly pricing of goods such as steel and heavy chemicals.
This would make local manufacturing more competitive, and support infrastructure investment.
“The competition authorities will be further developed to act against cartels and ensure public interests are adequately protected in mergers and acquisitions.”
… Radebe was heckled from opposition benches when he said the emphasis would be on “creating black industrialists in productive sectors of the economy, and developing a patriotic black bourgeoisie”.
He broke from his prepared speech and asked, to laughter: “Why should it only be white bourgeoisie?“
Is a “bourgeoisie” reconcilable with populist politics (and competition law)?
One cannot help but wonder what the connection between the elimination of the so-called “white bourgeoisie” and the reduction of “over-concentration” in the economy may be, if any.
Moreover, AAT respectfully expresses its doubt whether creating a “bourgeoisie” — any bourgeoisie (wholly regardless of its race) — is in the general population’s interests, as the Minister seems to think (“It is a people’s plan which has been adopted by the majority of our people and stakeholders. We are therefore calling on all South Africans to rally behind the implementation of the plan, including labour, business and civil society”). As another article on the topic points out,
In Marxist philosophy, the termbourgeoisiedenotes the social class who owns the means of production and whose societal concerns are the value of property and the preservation of capital, in order to ensure the perpetuation of their economic supremacy in society.
The prototypical bourgeois: Molière’s Monsieur Jourdain, the protagonist of the play Le Bourgeois gentilhomme (1670)Radebe’s vision of a better & more competitive society? Replace Monsieur Jourdain with a new version of Sandton’s bourgeoisie?
Antitrust plan unclear
How the SA antitrust watchdogs (the Competition Commission and the Competition Tribunal) were going to be “further developed” – structurally, scope/jurisdictionally, personnel-based or otherwise – was not immediately clear.
The remarks were part of the minister’s statement in the parliamentary opening debate on the president’s state-of-the-nation address.
Justice Minister Jeff Radebe (Image via Times Live, by: SYDNEY SESHIBEDI)
Abdou Kolley, Minister of Trade and Employment, gave a Tuesday speech addressing his competition agency’s tourism market study, undertaken according to section 15(k) of the Competition Act, attempting to garner support for the benefits of free-market competition. “Competition does not emerge on its own”, noting that the GCCPC’s enforcement and oversight activities were necessary to lower entry barriers and assure the absence of illegal price-fixing and other illicit conduct.
“The GCCPC is mandated by the competition Act 2007 to pursue any evidence of cartels, abuses of dominance and other illegal anti-competitive activities in any sector of the economy and I am confident that they will continue to do so.”
Minister Kolley
The Director General of the Gambia Tourism Board, Benjamin Robert, was quoted as agreeing with the minister, saying that the GCCPC’s report was “timely” and noted that the domestic tourism industry possessed certain characteristics of dominance in some sectors, with over 50% market share by some market players.
A report by the South African Citizen discusses the language barriers still present in the Republic today.
The piece, entitled “Tribunal struggles with Afrikaans” by Antoinette Slabbert, notes that the RSA Competition Tribunal has decided to have testimony given in Afrikaans transcribed, together with its English translation, “to ensure the court properly captures what a witness was trying to say.”
The underlying case is the Competition Commission’s case against Media24, alleging an abuse of dominance by squeezing its competitor, Gold-Net News, out of the market for advertising in community newspapers in the Free State Gold Fields between 2004 and 2009.
The Citizen reports:
Tribunal chairperson Norman Manoim asked whether Van Eck would mind testifying in English, since he was concerned about the quality of the translation of her responses the previous day. Media24′s legal team objected, saying Van Eck was already assisting the tribunal by taking questions in English.
The legal representative of the commission pointed out that Van Eck’s English was good. Both legal teams shared Manoim’s concern about the English interpretations. Van Eck said she prefered testifying in her home language to better express herself.
Earlier, Wian Bonthuyzen, Van Eck’s former manager and a key witness, switched from Afrikaans to broken English during his testimony, after another interpreter failed to properly convey his responses to the tribunal.
According to the report, CAK Director General Francis Wang’ombe Kariuki said that “investigations are already being conducted in [the] transport, insurance, shipping, milling, banking, cement, sugar, health care and tea” sectors, pursuant to purported consumer complaints.
The Commission’s main document on the “stakeholder engagement meeting last week states as follows regarding its theories of harm:
[I]n order for the market inquiry to make determinations, it has developed a set of ideas or hypothesis about how harmful competitive effects might arise in the relevant markets under consideration. These ideas are generally referred to as “theories of harm”.
‘It is important to emphasise that these theories of harm are simply hypotheses, or tools, that will enable us to identify whether there are features or a combination of features that may prevent, distort, or restrict competition in the private healthcare markets. Theories of harm are not findings of harm; but are simply analytical tools to guide our analysis. They will be deepened and revised as the inquiry’s thinking develops,’ adds former Chief Judge Ngcobo.
Public comments, and timetable
The agency is “inviting stakeholders to make further comments” on its theories of harm, noting that:
The inquiry is set to follow a very precise and tight administrative timetable which is mindful of the timelines for gathering information including an invitation for written submissions, public hearings, site visits, seminars, and workshops and conducting surveys. Broadly, key milestones will include the issuing of information requests no later than 01 August 2014. The first round of public hearings will take place between 01 March 2015 to 30 April 2015 then from May 2015, the inquiry will analyse and review the information gathered. Presently, the panel aims to make provisional findings and recommendations available for public comment in October 2015.
More countries may enter the mix of players – but at the platform level, competition may have stagnated
As we reported last month, the mobile payments sector is going gangbusters on the African continent. Kenya is ahead of the game, but other countries are closing in.
Kenya itself is considered by many to be at the forefront of the African mobile-payments universe, with its M-Pesa mobile-currency system often touted as the most developed mobile-payment system in the world. The Economist asked rhetorically: “Why does Kenya lead the world in mobile money?”, pointing out that roughly 25% of Kenya’s GDP flows through the mobile service, with over 17 million users in Kenya alone. The WorldBank has commented that “Mobile payments go viral [with] M-PESA in Kenya.”
Earlier this week, South African media outlet Business Tech published an interesting comparative piece on the issue, entitled “Africa leads in mobile banking“. The article shows (also graphically, see below) how and South Africa are close rivals to the Kenyan leadership in the mobile payments industry:
Image credit: Business Tech
What triggered the article is the release of the MEF-Africa reporton mobile payments on the continent, which provides much of the content of the Business Tech piece.
One of the key developments highlighted is that M-Pesa’s platform may soon see a major upgrade in South Africa (where it is run by Vocadom and Nedbank), according to the article, linking the system directly with the brick-and-mortar banks’ platforms. This may either (1) cement the relative market dominance of M-Pesa or (2) spur further innovation and enhance the overall competitiveness of the still rather young industry.
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,” reportedlya 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 