Category: draft

Don’t wait for leniency… Lipimile signals delays

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COMESA Chief Warns of Delayed Implementation of Leniency Policy

George Lipimile, CEO, COMESA Competition Commission
George Lipimile, Director, COMESA Competition Commission

In an interview with Concurrences, CCC Director George Lipimile stated cautiously that, while the agency had engaged a consultant to help it craft a regional leniency programme, it still had to “be discussed in detail with Member States. Given the different legal systems and the feedback coming from the consultations with Member States so far, this may take some time.”

Thus, “while there is no amnesty programme visible on the near-term horizon, the CCC’s novel cartel enforcement push poses particular concerns for undertakings operating in the COMESA region,” says Andreas Stargard, attorney with Africa advisory firm Pr1merio.  “Director Lipimile has expressed his agency’s plan — jointly with the World Bank organisation — to launch a project designed to combat cartel activity.  They propose to do so first, it seems, by piggy-backing off of other enforcers’ previous investigations, such as the South African Competition Commission’s cartel cases, and analysing whether those instances of foreign collusion could have harmful effects on the COMESA economies.”

Namibia: NaCC issues Guidelines on Restrictive Practices

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By Michael-James Currie

In April 2016, the Namibian Competition Commission (NaCC) finalised its guidelines on restrictive practices (Guidelines) in terms of chapter three of the Namibian Competition Act. The Guidelines focus in particular on the investigatory powers and procedures to be utilised by the NaCC during its investigations into restrictive practices.

The Namibian Competition Act contains most of the traditional antitrust prohibitions in relation to restrictive conduct. These include ‘agreements’ or ‘concerted practices’ between firms in a horizontal or vertical relationship which have the “object” or “effect” of substantially lessening competition in the market.

The Competition Act does not, from a plain reading of the language, impose a per se prohibition for ‘hardcore’ cartel conduct. The Guidelines, however, confirm that certain practices such as ‘hardcore cartel conduct’ and ‘minimum resale price maintenance’ will be considered per se to be anticompetitive. It is unclear, however, whether this per se contravention should rather serve as a presumption that the conduct is anti-competitive which may affect the onus of proof, rather, as in the South African context where the Act makes it clear that the effect of hardcore cartel conduct is irrelevant.

Furthermore, there is no express provision which deals with ‘rule of reason’ defences, however, the Guidelines confirm that efficiency or pro-competitive features of the alleged anti-competitive conduct, may outweigh any anti-competitive effect. It should be noted, however, that even if there was no anti-competitive effect, if the objective of the conduct was to engage in an anti-competitive agreement or concerted practice, a respondent may still be liable. Accordingly, conduct must not only be shown not to have an anti-competitive effect, but must also be properly ‘characterised’ as not being anti-competitive, in order to avoid liability.

The Namibian Competition Act also prohibits abuse of dominance conduct. The Act does not contain thresholds or criteria for deterring when a firm would be considered ‘dominant’, however, in term of the Competition Commission’s Rules, a firm:

  • will be considered dominant if it has above a 45% market share;
  • will be presumed dominant if it has between 35-45% market share (unless it can show it does not have market power); or
  • has a market share of less than 35%, but has market power.

Although the abuse of dominant provision is intended to prohibit a broad range of potential anti-competitive conduct, the Act in particular, notes the following conduct which, if a firm is dominant, is restricted:

  • “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
  • limiting or restricting production, market outlets or market access, investment, technical development or technological progress;
  • applying dissimilar conditions to equivalent transactions with other trading parties; and
  • making the conclusion of contracts subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject-matter of the contracts.”

Importantly, the Namibian Competition Act does not state that the conduct identified above must lead to a substantial-lessening of competition in the market. Furthermore, in terms of the Guidelines, the NaCC not only considers the conduct of and individual firm, but also considers the conduct of a “number of connected undertakings acting collectively” for purposes of considering whether there has been an “abuse of dominance”.

It should be noted that the Namibian Competition Act does cater for exemptions from the application of Chapter 3 (i.e. restrictive practices) and sets out in some detail the requirements and terms upon which an exemption may be granted.

As noted above, however, the most elements contained in the Guidelines relate to the NaCC’s investigatory powers.

In terms of the Namibian Competition Act, the NaCC may initiate a complaint or may elect to investigate a third party complaint.

The NaCC‘s investigatory powers include the power to conduct search and seizure operations. Importantly, the NaCC may take into possession any evidence which, in its opinion, will assist in the investigation. This is so even if such evidence would not be admissible as evidence in a court of law. For purposes of obtaining witness statements, however, a witness has the same rights and privileges as a witness before a court of law.

The Guidelines also confirm that the NaCC is not entitled to peruse or seize “legally privileged” documents unless privilege is waived. Interestingly, the Guidelines do not appear to protect communication between in-house legal and the firm and refers to legally privileged communication as that between “lawyer and client” only.

Search and seizure operations must be conducted in terms of a valid search warrant.

The Guidelines also contains further guidance on various topics and caters for a number of procedural aspects which must be adhered to (as well as the prescribed forms which should be utilised in certain circumstances) in relation to, inter alia the following:

  • initiating complaint;
  • applying for an exemption;
  • requesting an advisory opinion;
  • handling and the use of ‘confidential information’;

The Guidelines is no doubt a stern indication that the NaCC is preparing to heighten its intensity in terms of investigating and prosecuting restrictive practices. Since inception, the NaCC has dealt with over 450 merger cases, but has only handled approximately 40 restrictive practice complaints.

Furthermore, and in line with the NaCC’s newly adopted 5 year ‘Strategic Plan (2015-2020), the NaCC is growing in confidence and competence and firms should be aware that the NaCC will look to utilise the dawn raids provisions when necessary.

Namibian Competition Act to be Amended

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By Michael-James Currie

The Namibian Competition Commission (“NaCC”) has recently confirmed that the NaCC has submitted proposals to the Ministry of Industrialisation, Trade and SME Development (“Ministry”) relating to possible amendments to the Namibian Competition Act.

namibiaAAT does not yet know exactly what the nature and scope of the proposed amendments are, although the NaCC has indicated that the current Act, which was promulgated in 2003, is out of date and does not sufficiently cater for Namibia’s context (relating both to Namibia’s economic and socio-economic environment).

Furthermore, the NaCC has indicated that the amendments are aimed at increasing the NaCC’s enforcement capabilities and address ‘loopholes’ in the current Act.

In this regard, Minister Calle Schlettwein under whose portfolio the NaCC falls, stated that: “I am made to understand that in the years ahead, the Commission will focus on moving forward as a highly competent and equipped market regulator, especially in addressing market distortions on monopolistic and collusive behaviour and inefficiencies on price formation processes in the country that impact on the consumer welfare and the broader structure of the economy.  To this end, its activities are to be driven by the adoption of a National Competition Policy as well as revisions to the Competition Act.”

As Andreas Stargard notes, ‘[i]t would not be surprising if the proposed amendments related to “complex monopolies” and the introduction of criminal sanctions for cartel conduct,’ as this would be in line with the amendments made to the South African Competition Act (although not yet in force).  “Moreover, the Namibian commission will also likely cater for so-called ‘public interest’ elements in its enforcement strategy, as we have seen in several African jurisdictions.”  Stargard’s law partner at Pr1merio, John Oxenham, likewise emphasises “the strong ties between the two respective competition authorities” in southern Africa:

“The NaCC has often taken the lead from the South African competition authorities in respect of the interpretation and enforcement of competition law matters. The Namibian Competition Act is also largely moulded around the South African Competition Act.”

The strong links between the two respective authorities culminated in the signing of a Memorandum of Understanding under the heading, “In the field of competition law, enforcement and policy”MOU-COMPETITION-COMMISSION-SOUTH-AFRICA-and-NAMIBIAN-COMPETITION-COMMISSION

The spokesperson for the NaCC has said that “the aim of the review is to strengthen the enforcement capabilities and machinery of the commission and to close loopholes that exist within the current law.  Our Competition Act is similar, in many ways, to that of South Africa and the amendment thereof will only raise our standards to international best practices but within the context of Namibia.”

Schlettwein is on record as saying: “I am made to understand that in the years ahead, the Commission will focus on moving forward as a highly competent and equipped market regulator, especially in addressing market distortions on monopolistic and collusive behaviour and inefficiencies on price formation processes in the country that impact on the consumer welfare and the broader structure of the economy.

“To this end, its activities are to be driven by the adoption of a National Competition Policy as well as revisions to the Competition Act.”

In sum, given that the proposed introduction of a “complex monopolies” offence and criminal sanctions in South Africa has led a number of practioners in that country questioning the constitutionality or the practicality of the these amendments, it will be interesting to see whether the NaCC takes these concerns into consideration assuming we at AAT are indeed correct that these are the amendments which the NaCC is also proposing to introduce.

Competition & the Public Interest

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The public-interest saga continues: South African antitrust & inclusiveness

More on the revised Guidelines for the public-interest assessment in southern African’s largest economy… By AAT guest author Anne Brigot-Laperrousaz.

In December 2015, the South African Competition Commission (the “Commission”) issued revised guidelines for the assessment of public interest provisions in mergers (the “Guidelines”). This document is a further step in a long process aiming at ensuring better efficiency in the Commission’s evaluation of mergers. One of the main rationale is that informed parties will be able to anticipate the documentation and data to be transmitted to the Commission in view of obtaining its approval. Transparency, predictability and clarity, all of them fundamental aspects of legal certainty, shall result in reduction of delays and enhancement of legitimacy of the Commission’s decisions.

In January 2015, the Commission issued a first draft of those Guidelines, open to comment by stakeholders. Several bodies answered positively to this initiative, including law firms (Bowman Gilfilan, Baker & McKenzie, …), companies (Vodacom, Tabacks), international associations (International Bar Association) and policy research centers (UK Center for Competition Policy). The December 2015 Guidelines are the result of this broad enquiry, and the final version open to comments until the 29th January 2016.

Public-interest considerations abroad

Firstly, the international perspective on public interest considerations in the assessment of mergers might offer an interesting insight to the question.

In Europe, at Community level, the EU Merger Regulation (the “EUMR”) prevents the European Commission to assess non-competition considerations in its analysis of the proposed transaction. Indeed, Article 2 EUMR sets out a test based exclusively on the potential “significant impediment to effective competition”, and the available remedies when the merger might result in such an impediment.

Yet Article 21(4) EUMR allows interventions of Member States to protect three determined types of public interests, namely, public security, plurality of the media and prudential rules. Exceptionally, the European Commission may allow a national measure aimed at protecting a different legitimate interest, although this procedure is rarely used. In any case, the measures taken shall be compatible with the general principles and provisions of European Union law.

A major difference between EU and US competition laws is that the former was meant to serve as a tool to achieve a State union, whereas the latter intervened in an already federated region. This feature arguably plays a significant role in the importance attached to further political aims in the elaboration of the competition framework, although this feature did appear at the first stages of the US.

Two US institutions are today in charge of reviewing the competitive effects of mergers: the Antitrust Division of the US Department of Justice, and the Federal Trade Commission. Those two institutions act as competition regulators, focusing exclusively on the competition aspects of targeted operations. Other public policy interests, related to specific sectors, might be analysed and taken into account under the responsibility of other US agencies, such as the Federal Communication Commission or the Federal Reserve and the Federal Deposit Insurance Corporation. Such agencies therefore act as sector or industry regulators.

To the extent that the South African Competition Act (1998) (the “Act”) gives a particularly important role to public interest criteria in merger controls, the need for transparency and clarity in the Commission’s assessment mergers is all the more crucial.

south_africaZA: The integration of stakeholders’ comments by the Competition Commission

As for the general observations on the January 2015 guidelines, some constants remain in most of the stakeholders’ commentaries.

This is so in particular as regards evidential requirements, that is, the type and nature of information that would generally be required from the merging parties. Although the Guidelines do provide a relatively detailed and insightful perspective on the Commission’s methodology in assessing mergers, it does not appear that they answer this recurrent request, even in the form of non-exhaustive references to specific documents.

Tembinkosi Bonakele, the South African Competition Commissioner, had the following to say on the topic, when interviewed for AAT’s Meet the Enforcers:

It is important that BRICS countries weigh-in on this important debate. There is a divergence of views amongst many antitrust practitioners on the compatibility of antitrust issues with public interest issues, but everyone accepts that there are public interest issues. The conference will deepen and broaden perspectives on the matter. …

 

Tembinkosi-Bonakele-Profile-PicThe South African competition authorities were established as a package of reforms to transform the unequal South African economy to make it economy inclusive and ensuring that those who participate in it are competitive.

Through engagements such as the BRICS conference we’re able to discuss with our BRICS counterparts how to make our economies, which are similar, more efficient, competitive and inclusive.

A second concern regards the issue of “balancing” competition and other public policy interests. The different nature of those matters, implying various qualitative and quantitative methods of assessment, arguably makes this task “inherently arbitrary”. This is even more so in presence of the broad and general principles addressed by the Act, and that the Guidelines arguably ought to determine and circumscribe. In their revised version, although some further precisions on the process and the determining factors of the Commission’s assessment have been added, some grey areas remain. For instance, some commentators have highlighted the fact that as regards the effect of the merger on a particular industrial sector or region, the Commission “may consider any public interest argument in justification of the substantial negative effect arising as a result of the merger on an industrial sector or region” (Guidelines, §7.2.4.2). It is our view that this wording is all too broad and undetermined to provide useful guidance to practitioners, and ensure a transparent and consistent analysis by the Commission. Not to mention that, as noted by the International Bar Association, the Act limits the Commission’s jurisdiction in evaluating public interest matters in merger reviews. This reference to “any public interest” arguably overlooks the Commission’s limited jurisdiction. Unfortunately, this comment does not seem to have been taken into account in the drafting of the revised version.

The same analysis can be made of the use of such concepts as causality, for example, which is not clearly defined. Furthermore, the Guidelines often provide for the possibility to prove that the effect “results or arises from” the merger, together with the requirement of a causal link, undermining the precise and strict legal requirements that are entailed by the notion of causality (see §7.2.2.1). In other instances, the Commission will merely “consider whether the employment effects are in any way linked to the intentions […] of the acquiring group”, which broadens unreasonably the scope of analysis.

Overall, when considering the clarifications that were called for in various submissions from stakeholders, it appears that in most cases, where the comments have been echoed in the revised Guidelines, the drafting committee has hidden the difficulties rather than going further in its analysis.

For instance, several commentators have expressed their surprise at the principle stated in the January 2015 version of the Guidelines, in the section dedicated to the general approach to assessing public interest provisions, that when the Commission found that the public interest effects were neutral, it would balance the negative and positive effects (§6.6). Indeed, the concept lacked clarity, and does not appear in the revised Guidelines.

Yet, some more substantial comments, in that they pointed to more potentially noxious loopholes, have apparently been disregarded. This is the case of the consequences of the finding of negative competition and public policy effects, a situation where the Commission does not seem to consider the possibility to justify and find remedies. It appears that the result would be a forthright prohibition of the transaction, even if other ways could have existed.

More generally, the perspective on the matters at stake seems to be rather hostile. For instance, in cases where negative public interest effects have been identified, the Commission “may consider imposing remedies or prohibiting the merger depending on the substantiality of the public interest effects”. It may be considered that a more relevant criterion might have been the existence and efficiency of potential remedies, rather than the substantiality of the negative effects at stake. Indeed, although the substantial character of the adverse effects might be a suitable criterion to set the standard of analysis, it does not easily justify to disregard possible remedies, which seems to be the result of the present wording.

Similarly, the Guidelines seem to set the existence of a positive competition finding as a threshold to its analysis. It has been advocated that a more suitable logic would be that the starting point is the absence of any prevention or lessening of competition, which would be more in line with both the Act and the role it affords to public policy concerns, and international best practice.

Conclusion

As noted by the International Competition Network, “the legal framework for competition law merger review should focus exclusively on identifying and preventing or remedying anticompetitive mergers. A merger review law should not be used to pursue other goals”.

Since the introduction of public policy issues in merger control is broadly considered to require cautiousness and measure, it is questionable if the revised Guidelines abide by this general principle of predictability and transparency as regards those matters. Although clear efforts have been made, the public policies at stake do not appear to have been sufficiently identified and articulated with what should remain the fundamental purpose of merger control, that is, the competitive effects of the transaction at stake.

That is particularly so in view of the nature of the Commission, which has no particular expertise in the public policy matters that it his charged to assess. As it is the case in other jurisdictions, such as the UK, it may be useful to create the possibility for the Commission to obtain input from other specialised government agencies or department, although through a transparent and public process which would prevent any diversion of the Act and the Commission’s purposes.

Kenya competition landscape active

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kenya

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.