Category: East Africa

CCC workshop participants

COMESA competition workshops underway (#CCCworkshop)

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Events focus on media & business community’s understanding of competition rules and practical workload of CCC

Media

For two days this week, COMESA will hold its 5th annual “Regional Sensitization Workshop for Business Reporters“, focussed on provisions and application of the COMESA competition regulations and trade developments within the 19-country common market.

Over 30 journalists from close to a dozen countries are expected to participate in the event, held in Narobi, Kenya, from Monday – Tuesday.

AfricanAntitrust.com will cover all pertinent news emerging from the conference.  We will update this post as the conference progresses.

Speakers include a crème de la crème of East African government antitrust enforcement, including the CCC’s own Willard Mwemba (head of M&A), the CCC’s Director Dr. George Lipimile, and the Director and CEO of the Competition Authority of Kenya, Francis Wang’ombe Kariuki.  Topics will include news on the rather well-developed area of of mergerenforcement, regional integration & competition policy, as well as the concept of antitrust enforcement by the CCC as to restrictive business practices, an area that has been thus far less developed by the Commission in terms of visibility and actual enforcement, especially when compared to M&A.  We previously quoted Director Lipimile’s statement at a 2014 conference that, since the CCC’s commencement of operations “in January, 2013, the most active provisions of the Regulations have been the merger control provisions.”

Andreas Stargard, a competition practitioner, notes:

“We have been impressed with the Commission’s progress to-date, but remain surprised that no cartel cases have emerged from the CCC’s activities.  We believe that the CCC has sufficient capacity and experience now, in its sixth year of existence, to pursue both collusion and unilateral-conduct competition cases.

Personally, I remain cautiously optimistic that the CCC will, going forward, take up the full spectrum of antitrust enforcement activities — beyond pure merger review — including monopolisation/abuse of dominance cases, as well as the inevitable cartel investigations and prosecutions that must follow.”

The media conference will conclude tomorrow evening, June 26th.

Business Community

COMESA Competition Commission logoThe second event, also held in Nairobi, will shift its focus both in terms of attendees and messaging: It is the CCC’s first-ever competition-law sensitization workshop for the Business Community, to take place on Wednesday.  It is, arguably, even more topical than the former, given that the target audience of this workshop are the corporate actors at whom the competition legislation is aimed — invited are not only practicing attorneys, but also Managing Directors, CEOs, company secretaries, and board members of corporations.  It is this audience that, in essence, conducts the type of Mergers & Acquisitions and (in some instances) restrictive, anti-competitive business conduct that falls under the jurisdiction of Messrs. Lipimile, Mwemba, and Kariuki as well as their other domestic African counterparts in the region.

The inter-regional trade component will also be emphasized; as the CCC’s materials note, “we are at a historical moment in time where the Tripartite and Continental Free Trade Area agreements are underway. The objective of these agreements is to realize a single market. Competition law plays a vital role in the realization of this objective, therefore its imperative that journalists have an understanding of how competition law contributes to the Agenda.”

#LiveUpdates from the #CCCworkshop

Kenya perspective

Boniface Kamiti, the CAK representative replacing Mr. Kariuki at the event, noted that Africa in general and including the COMESA region “has a weak competition culture amongst businesses — which is why cartels are continuing in Africa, and the level of M&A is not at the level one would expect.”  This is why media “reporting on competition advocacy is very important, to articulate the benefits of competition policy and how enforcement activities further its goals, so the COMESA countries may be able to compete with other countries, including even the EU members, at a high level.”

He also highlighted — although without further explanation — the “interplay between the COMESA competition laws and those of the member countries; most people are not aware of that!”  This comment is of particular interest in light of the prior jurisdictional tension that had existed between national agencies and the CCC in the past regarding where and when to file M&A deals.  These “teething issues are now fully resolved”, according to Dr. Lipimile, and there are neither de iure nor any de facto merger notification requirements in individual COMESA member states other than the “one-stop shop” CCC filing (which has, according to Mr. Mwemba, reduced parties’ M&A transaction costs by 66%).

On the issue of restrictive trade practices (RTP), the CAK reminded participants that trade associations often serve to facilitate RTP such as price-fixing cartels, which are subject to (historically not yet imposed, nor likely to be) criminal sanctions in Kenya. It also observed that (1) manufacturers’ resale price maintenance (RPM) would almost always be prosecuted under the Kenyan Competition Act, and that (2) since a 2016 legislative amendment, monopsony conduct (abuse of buyer power) is also subject to the Act’s prohibitions.

Concluding, the CAK’s Barnabas Andiva spoke of its “fruitful” collaboration with the CCC on ongoing RTP matters, noting the existing inter-agency Cooperation Agreement. Added Mr. Mwemba, “we have approximately 19 pending RTP cases.”

CCC leadership perspective:  Nudging Uganda and Nigeria towards competition enforcement

CCC_Director
George Lipimile, CEO, COMESA Competition Commission

Dr. Lipimile took up Mr. Kamiti’s “weak African competition culture” point, noting the peculiar regional issue that “between poverty and development lies competition” to enhance consumer welfare.

He took the audience through a brief history of antitrust laws globally, and encouraged journalists to explain the practical benefits of “creating competitive markets” for the population of the COMESA region at large.

He called on Uganda and Nigeria to — finally — enact a competition law.  (AAT has independently reported on Uganda and also the EAC’s emphasis on its member nations having operational antitrust regimes.  We observe that Uganda does have a draft Competition Bill pending for review; a fellow Ugandan journalist at the conference mentioned that there has been some, undefined, progress made on advancing it in the Ugandan legislature.)  Dangote — the vast Nigerian cement conglomerate (see our prior article here) — and Lafarge played exemplary roles in Lipimile’s discourse, in which he commented that “they do not need protecting, they are large”, instead “we need more players” to compete.

Importantly, Dr. Lipimile emphasized that protectionism is anti-competitive, that “competition law must not discriminate,” and that its goal of ensuring competitive market behaviour must not be confused with the objectives of other laws that are more specifically geared to developing certain societal groups or bestow benefits on disadvantaged populations, as these are not the objectives of competition legislation.

The CCC also called on the press to play a more active role in the actual investigation of anti-competitive behaviour, by reporting on bid rigging, unreported M&A activity, suspected cartels (e.g., based on unexplained, joint price hikes in an industry), and the like.  These types of media reports may indeed prompt CCC investigations, Lipimile said.  Current “market partitioning” investigations mentioned by him include Coca Cola, SABMiller, and Unilever.

He concluded with the — intriguing, yet extremely challenging, in our view — idea of expanding and replicating the COMESA competition model on a full-fledged African scale, possibly involving the African Union as a vehicle.

CCC workshop participants
2018 CCC workshop participants

COMESA Trade perspective

The organisation’s Director of Trade & Commerce, Francis Mangeni, presented the ‘competition-counterpart’ perspective on trade, using the timely example of Kenyan sugar imports, the cartel-like structure supporting them, and the resulting artificially high prices, noting the politically-influenced protectionist importation limitations imposed in Kenya.

Dr. Mangeni opined that the CCC “can and should scale up its operations vigorously” to address all competition-related impediments to free trade in the area.

CCC Mergers

Director of M&A, Mr. Mwemba, updated the conference on the agency’s merger-review developments. He pointed to the agency’s best-of-breed electronic merger filing mechanism (reducing party costs), and the importance of the CCC’s staying abreast of all new antitrust economics tools as well as commercial technologies in order to be able to evaluate new markets and their competitiveness (e.g., online payments).

As Mr. Mwemba rightly pointed out, most transactions “do not raise competition concerns” and those that do can be and often are resolved via constructive discussions and, in some cases, undertakings by the affected companies. In addition, the CCC follows international best practices such as engaging in pre-merger notification talks with the parties, as well as follow-ups with stakeholders in the affected jurisdictions.

Key Statistics

Year-to-date (2018), the 24 notified mergers account for approximately $18 billion in COMESA turnover alone. Leading M&A sectors are banking, finance, energy, construction, and agriculture.

In terms of geographic origination, Kenya, Zambia, and Mauritius are the leading source nations of deal-making parties, with Zimbabwe and Uganda closely following and rounding out the Top-5 country list.

The total number of deals reviewed by the CCC since 2013 amounts to 175 with a total transaction value of US $92 billion, accounting for approximately $73.7 billion in COMESA market revenues alone. (The filing fees derived by the Commission have totaled $27.9 million, of which half is shared with the affected member states.)

All notified deals have received approval thus far. Over 90% of transactions were approved unconditionally. In 15 merger cases, the CCC decided to impose conditions on the approval.

Restriction on parallel imports gets red-lighted by CAK

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Enforcement Update: Kenya Exemption Applications

The Competition Authority of Kenya (“CAK”) recently issued a press release on its two decisions to reject exemptions applications under sections 25 and 26 of the Kenyan Competition Act 12 of 2010. The CAK rejected applications by WOW beverages (a leading distributor in the alcoholic beverages industry) and the Institute of Certified Public Secretaries (a professional body, hereafter “ICPS”).

WOW beverages filed an exemption application to the CAK, which would have allowed it to secure contracts with seven international suppliers to import and distribute exclusively 214 premium wine and spirit brands in Kenya. WOW beverages argued that the proposed exclusive contracts were necessary to protect its investment and would protect consumers from defective products, and guarantee accountability in the event that such products enter the Kenyan market. The CAK rejected this argument stating: “The Authority [CAK] is of the opinion that parallel imports, through legal channels, are likely to bring more benefits to Kenyan consumers, including the enhancement of intra-brand competition which often leads to lower prices.”

The CAK’s decision on the application brought by ICPS (which was one of the first professional bodies to attempt to obtain an exemption to set fee guidelines) made it clear that there was no evidence to suggest that fixing prices for auditing services will improve the profession or prevent its decline and, instead, it is likely to eliminate the incentive to offer quality services. Interestingly, the CAK went a step further to state that “price fixing by professional associations extinguish[es] competition with no plausible public benefits” and went on to warn other professions that “the decision to reject the institute’s exemption application sends a strong message to professional bodies that fee guidelines decrease competition, reduce innovation and efficiencies, and limit customer choices”.  This likely follows from the recent increase in exemption applications brought by other professional bodies in Kenya such as the Institute of Certified Public Accountants of Kenya and the Law Society of Kenya (which has a remuneration order). The CAK’s decisions on these applications are likely to be published in short order.

With increased awareness of competition law in Kenya, more entities are applying to the CAK for exemptions primarily to ensure that they are not found to be engaging in anticompetitive conduct, where the penalty can be up to 10% of the turnover of the entity.

According to practicing Kenyan antitrust lawyer, Ruth Mosoti, the CAK has powers to allow an entity to engage in what would ordinarily be considered anticompetitive conduct.  The Act provides a framework on how such applications are to be determined “but, most importantly, the benefits must outweigh the competition concerns and meet the public-interest requirement.  The competition authority also appears to put great emphasis on espousing international best practices.  It is therefore important when one is making such an application to ensure that the same is backed by international best practices.”

Andreas Stargard, Ms. Mosoti’s colleague at Primerio Ltd., echoes her sentiments.  He notes that the CAK follows in the well-tread footsteps of other international competition enforcers, which have dealt with antitrust exemption applications for decades: “Similar to the European Commission in its past rulings on meritless Article 101(3) exemption requests, the CAK has diligently applied common-sense competition principles in these two recent cases.”  Stargard advises that other companies or trade groups wishing to seek reprieve from the Kenyan Act should consider certain key factors first before approaching the CAK:

First, ask yourself whether the proposed conduct for which you seek an exemption contributes to improving something other than your own bottom line (such as innovation that benefits others, or efficiency or a reduction in emissions, etc.), and consider whether consumers at large receive share of the resulting benefits.

In addition, just as with traditional joint-venture analysis, be prepared to articulate how the proposed agreement or restriction is absolutely indispensable to obtaining these benefits and accomplishing the stated economic goal.

Finally, seek competent legal advice from experts, who will be able to provide a professional evaluation whether or not the agreement you seek to exempt is likely to qualify under the criteria of sections 25 and 26 of the Act — or whether the CAK will rule against it, finding that an exclusivity clause or or restriction you seek will more likely than not eliminate competition.

For more on recent exemption application see our related articles, exclusively at AAT: Seeking Exemptions From Resale Price Maintenance Rules and Airlines Seek Antitrust Exemption: Kq-Cak Application Pending

 

 

 

New Kenya domestic merger thresholds proposed, limiting notifications

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The Competition Authority of Kenya (“the CAK”) has issued a new proposal introducing financial thresholds for merger notifications which will exempt firms with less than 1 billion Kenyan Shillings (KSh)(approximately US$10 million) domestic turnover from filing a merger notification with the CAK.

Currently, it is mandatory to notify the CAK of all mergers, irrespective of their value.  According to Stephany Torres of Primerio Limited, this may deter investments in Kenya as the merger is subject to delays and additional transaction costs for the merging parties while the CAK assesses it.

In terms of the new proposal notification of the proposed merger to the CAK is not required where the parties to the merger have a combined annual turnover and/or gross asset value in Kenya, whichever is the higher, of below KSh500 million (about US$5 million or South African R60 million).

Mergers between firms which have a combined annual turnover or gross asset value, whichever is the higher, in Kenya of between KSH 500 million and KSH 1 billion may be considered for exclusion.  In this case, the merging parties will still need to notify the CAK of the proposed merger.  The CAK will then make the decision as to whether to approve the merger or whether the merger requires a more in depth investigation.

It is mandatory to notify a merger where the target firm has an annual revenue or gross asset value of KSh 500 million, and the parties’ combined annual turnover and/or gross asset value, whichever is the higher, meets or exceeds KSh 1 billion.

Notwithstanding the above, where the acquiring firm has an annual revenue or gross asset value, whichever is the higher, of KSH 10 billion, and the merging parties operate in the same market and/or the proposed merger gives rise to vertical integration, then notification to the CAK is required regardless of the value of the target firm.  However, if the proposed merger meets the thresholds for notification in the supra-national Common Market for Eastern and South Africa (“COMESA”), then the CAK will accede to the jurisdiction of the COMESA Competition Commission (“CCC”) and the merging parties would not have to file a merger with the CAK.

COMESA is a regional competition authority having jurisdiction over competition law matters within its nineteen member states, of which Kenya is one.

It is worth mention that Kenya is also a member state of the East African Community (“the EAC”).  As AAT reported recently, the East African Community Competition Authority (“the EACCA”) became operational in April 2018 and its mandate is to investigate competition law matters within its five partner states  (Burundi, Kenya, Rwanda, Tanzania and Uganda).  There is no agreement between the CAK and EACCA similar to the one between the CAK and CCC, and it uncertain how mergers notifiable in both Kenya and the EAC will be dealt with.

 

EAC antitrust enforcement finally a reality: supra-national body carries out market enquiries

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12 years in the making, East African regional competition-law enforcer now operational

By Stephany Torres

The East African Community Competition Authority (“the EACCA”) has finally become operational, after years of starts and spurts, having had its original Commissioners appointed (and half-million US$ budget approved) over 2 years ago.  The EACCA will focus on investigating firms and trade associations suspected of engaging in price fixing in contravention of the EAC Competition Act 2006 (the “EAC Act”), and proceed under its 2010 Competition Regulations.  The East African Community (“EAC”) is a regional intergovernmental organisation of 5 partner states, comprising Burundi, Kenya, Rwanda, Tanzania and Uganda (South Sudan will be covered at a later stage, as it is not fully integrated into the EAC).  The EACCA, therefore has jurisdiction in all the five partner states.  EAC headquarters are located in Arusha, Tanzania.

Now, as of April 2018, the EACCA is said to be undertaking its first market enquiries in selected industries, according to Lilian Mukoronia, the Authority’s deputy registrar.

As we mentioned in the fall of 2017, the success of the EACCA’s activities will also be dependent on the EAC’s member countries’ level of and commitment to domestic competition-law enforcement: “Only two out of the EAC’s six member states — namely Kenya and Tanzania — currently have working antitrust enforcement authorities,” according to competition & antitrust practitioner Andreas Stargard.  “That said — in a fashion rather similar to other supra-national enforcers, such as COMESA’s CCC or the European Commission — the EACCA will oversee competition-law matters that have a regional dimension, implying that there must be economic consequences reaching well beyond domestic borders before the regional body steps in to investigate,” he says.

There is thus no technical need for all of its partner states to have enacted competition laws and created institutions to enable the EACCA to implement its regional mandate.  Moreover, each member state gets to nominate one EACCA commissioner, the current panel of whom were approved by the group’s Council of Ministers and sworn into office in 2016.

The EAC Act, which came into force in December 2014, mandates the EACCA to promote and protect fair competition in the EAC and to provide for consumer welfare.  The EAC Act prohibits, amongst other things, anti-competitive trade practices and abuse of market dominance.  It provides for notification of mergers and acquisitions, notification of subsidies granted by partner states, and regulates public procurement.

Seeking exemptions from Resale Price Maintenance rules

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Kenya’s RPM regime of exemptions to floor price-fixing regulations

The Kenya Ships Contractors Association (KSCA) recently became the latest in a long line of industry associations that have approached the Competition Authority of Kenya (CAK) for an exemption to set minimum prices.  Other recent applicants include the Law Society of Kenya (LSK); the Institute of Certified Public Accountants of Kenya (ICPAK), the Institute of Certified Public Secretaries of Kenya (ICPSK) and the Institute of Surveyors of Kenya.

kenyaSection 21 of the Kenyan Competition Act 12 of 2010 (the Act) prohibits firms or associations from entering into any agreement that “involves a practice of minimum resale price maintenance” (‘RPM’).

Under sections 25 and 26 (read jointly), however, firms or associations may apply to the CAK to be exempted from this prohibition by way of an application to the CAK in the prescribed form, especially in instances where they believe there are exceptional and compelling reasons (of public policy) justifying setting such resale price floors.

In evaluating requests for exemption, the CAK will consider whether the granting of an exemption will promote exports, bolster declining industries or, more generally, the potential benefits outweigh the cost of a less competitive environment due to the RPM conduct.

Kenyan competition lawyer Ruth Mosoti, with Primerio Ltd., notes that, “although each exemption will be considered on its own merits, the CAK’s recent decisions in applications of a similar nature seem to have created a precedent unfavourable to the KSCA’s request being approved.” In this regard, the CAK in the ICPAK application rejected the application and stated that the “[i]ntroduction of fee guidelines will decrease competition, increase costs, reduce innovation and efficiencies and limit choices to customers and is in fact likely to raise the cost of accountancy services beyond the reach of some consumers”.

The CAK’s Director General, Mr. Wang’ombe Kariuki has now issued a notice requesting input from the public regarding the application.

Akzo rejects CCC notification request, claims no ‘failure-to-file’ in paint deal

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Paint giant goes on offensive against COMESA request for retroactive merger filing

By AAT Editors

As AAT first reported here on Sept. 26, the COMESA Competition Commission has launched its first failure-to-file investigation into an M&A transaction (here, likely, a licensing deal), specifically involving Dutch commercial paint giant AkzoNobel and paint brand “Sadolin“.

sadolin.jpgToday’s news, reported in local Ugandan media, is that AkzoNobel’s Director for Decorative Paints in Sub-Saharan Africa, Johann Smidt, made strong comments at the “relaunch” of Sadolin Uganda, claiming that Akzo’s reassignment of the Sadolin brand name & distribution network to Crown Paints East Africa “falls outside the CCC’s purview.”  This sentiment was echoed by Crown’s CEO, Rakesh Rao, saying that “[w]e do not have a merger going on; we are a fully independent plant, so COMESA does not come into the picture at all.”

Competition lawyers caution that, on occasion, a business person’s notion of what constitutes a “notifiable transaction” can be at odds with the legal definition thereof, says Andreas Stargard,  an antitrust attorney with Primerio Ltd.

“Whilst they may not be a classic ‘merger’ or ‘acquisition’ in the eyes of the business people, certain types of exclusive licensing agreements or even patent or other IP [intellectual property] assignments may very well fall within the purview of competition regulators, including the COMESA Comp Com.,” said Stargard.

The facts surrounding the transaction itself are by all accounts, fairly confounding.  As best as one can interpret the media reports, the former AkzoNobel license agreement was one with an entity called “Sadolin East Africa” (SEA).  However, upon the purchase of SEA by Japanese company Kansai Plascon (AKA “Plascon Uganda” in the region), Akzo cancelled the agreement and has now entered into a new replacement license with Crown Paints (AKA Regal Paints).  It is the cancellation and reassignment that, according to two letters sent by the CCC on September 19th and 25th, requesting that the companies make retroactive merger-notification filings to bring them into belated compliance with the COMESA merger regime.

For now, we know that Akzo remains defiant (presumably basing its critical position on advice of legal counsel), with its local director stating that “whatever we have done to date has been within the laws of this country and this region”.

While some of Akzo’s statements were presumably vetted by antitrust counsel, others are at odds with a “good” antitrust story and appear to be less-carefully made proclamations: Akzo has said that “we believe that we are going to improve competition because we have a new player who is introducing a new product and an existing player, who is Sadolin and we will continue to be here,” yet its director also noted “that the war of words between Sadolin and Plascon had eaten into their market share and that this had influenced their quick agreement with Crown paints”.

As attorney Stargard observes, “it is usually not considered to be an effective antitrust defence to claim that a competitor has ‘eaten into your market share’, and that your actions that are now under investigation were motivated by said competition…”

EAC poised to pressure remaining members into antitrust enforcement

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By AAT staff

On the heels of the COMESA Competition Commission launching its first-ever “failure-to-file” merger investigation, the East African Community (EAC) Competition Authority is poised to dip its toes into the waters of being operational — but it will require its member states to have active enforcement programmes of their own, says the agency head.

There are hurdles to the regional body of the African Great Lakes, as Andreas Stargard, a competition lawyer with a focus on Africa, points out: only two out of the EAC’s six member states — namely Kenya and Tanzania — currently have working antitrust enforcement authorities.  Having only one-third of a supra-national organisation’s members being versed in competition enforcement is a hindrance to the EAC Authority’s competence and pragmatic effectiveness, said chairman of the Board of Commissioners, Sam Watasa at the agency’s 2nd meeting at the organisation’s Arusha headquarters.  He is quoted as saying:

“Kenya and Tanzania have operational National Competition Agencies, Rwanda and Burundi had enacted laws but are yet to be operationalised. In Uganda there was a draft Competition Bill.”

M&A news: First publicly reported failure-to-file accusation in COMESA

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Commission goes after Dutch paint manufacturer in Uganda in supra-national enforcement action threat

By AAT staff

The African expansion saga of Japanese paint manufacturer Kansai continues, albeit not in Southern Africa (after having travailed through a hostile takeover of South African paint company Freeworld Coatings and obtaining a majority stake in Zimbabwean competitor Astra Industries in 2010 and 2013, respectively): the current Kansai-related antitrust story is a COMESA one, which comes to us from East Africa.

As was reported back in 2013 in industry publication CoatingsWorld, Kansai had set its sights on expanding into Eastern Africa as well, focussing on the Sadolin brand (formerly owned by AkzoNobel and since its private equity buy-out produced under a continuing AkzoNobel licence and under the parent label Crown Paints).

This has now changed, says competition attorney Andreas Stargard with Primerio Ltd.: “Recently, the COMESA Competition Commission had become aware of press reports that AkzoNobel had withdrawn its Kansai/Sadolin licence in Uganda (a COMESA member state) and effectively entered into — or planned to enter into — a new agreement with an unnamed ‘local producer’.”

Mr. Stargard, who practices competition law with a focus on African companies and jurisdictions, points out that the COMESA merger-notification regime requires a mandatory filing under certain conditions, such as those affecting 2 or more member states and involving businesses with at least $10m in combined regional revenues.

“Whilst the COMESA review is non-suspensory (meaning the parties must notify, but can go ahead and implement the transaction prior to the termination of the CCC’s antitrust review), the notification itself is mandatory.  A failure-to-file can result in significant fines of up to 10% of combined turnover, as well as the regional annulment of the merger within the COMESA countries.

This is what has now happened with Mr. Lipimile’s Sept. 19th letter to AkzoNobel: the CCC chief warned the company that it would risk voiding any contracts if it failed to make a ‘curative’ retroactive filing by yesterday, Monday, 25 September 2017.”

The CCC’s letter to the Dutch paint giant reads in relevant part: “Kindly be informed that the COMESA competition commission has become aware through the media that Akzo Nobel Powder Coatings has entered into sales, manufacturing and distribution agreements with a local paint manufacturer in Uganda.  I wish to inform you that, mergers and any other forms of agreements between competitors are required to be notified to the Commission….without such notification, and subsequent approval by the Commission, such transactions are null and void ab initio and no rights or obligations imposed on the participating parties shall be legally enforceable in the Common Market.”

As to the likelihood of any notification having been made — or at least made satisfactorily and completely —  Andreas Stargard observes that:

“By any antitrust lawyer’s standards, scrambling to make a filing within less than a week, as seems to be required by George’s letter here, is a tall order — merger notifications usually require significant preparatory work, including data analysis, document collection, and interviews with the business people to advance to a final ‘filing’ stage.  To do so in 6 calendar days is extremely difficult.”

He concludes that, “as COMESA is still a relatively young regime in terms of merger filings — with few resources at hand to manage notifications in and of themselves, much less enforcement actions — we expect that the CCC and the parties will somehow arrive at an amicable settlement in this matter.”

Adverse effects of price-fixing: East Africa recognises drawbacks

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It is not really news, but worth mentioning as it is literally happening simultaneously: As the most developed antitrust enforcement jurisdiction in Africa, South Africa, charges ahead with heavy-handed actions, such as denying alleged currency manipulators “access to file” in the investigative process, or accusing two livestock-feed processors of colluding in the sales and pricing of animal feed ‘peel pulp’, the East African nations lag behind.

What is news, however, is that they have begun to recognise the shortcoming and the adverse effects of collusion and other anti-competitive conduct on their economies: Andreas Stargard, an antitrust lawyer with Primerio Ltd., notes that the head of the East African Community (EAC), Mr. Liberat Mfumukeko, recently addressed ongoing antitrust violations in the EAC: “The Secretary denounced anti-competitive practices (cartels and the like) as serious obstacles to obtaining foreign direct investment in the region.  Moreover, he recognised the violations as ‘impeding effective competition’ and thereby directly hurting African consumers,” says Stargard.

Mr Mfumukeko is quoted as stating: “The EAC markets pose challenges to investors and consumers including the charging of high prices arising from anti-competitive practices such as cartels. These practices impede effective competition in the markets.”

Within the EAC, Stargard notes, the primary jurisdictions with operational antitrust regimes are Kenya and Tanzania, with others such as Uganda lagging behind even farther, having no competition legislation or only having draft bills under review.  Most other nations lag behind, although, as Mr. Stargard observes, many are part of the broader COMESA competition regime.  “The COMESA rules, however, have thus far been enforced with a primary objective of merger regulation,” he says, “effectively failing to police any collusive conduct in the close to two dozen member states at all, despite the explicit prohibition thereof in the COMESA regulations.”

Kenya Corporate Leniency Policy: Immunity for both Administrative and Criminal Liability on the Table

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By Michael-James Currie

The Competition Authority of Kenya (CAK) has finalised its Leniency Policy Guidelines (Guidelines) as published in the Government Gazette in May 2017. This follows amendments to the Kenyan Competition Act which now caters for the imposition of a maximum administrative penalty of 10% of a respondent’s turnover if found to have engaged in cartel conduct.

Unlike its South African counter-part, the CAK has sought to provide immunity to whistle-blowers who are “first through the door” from both criminal and administrative liability. A key proviso in respect of obtaining immunity from criminal liability, however, is that the Director of Public Prosecution must concur with the CAK.

The South African Competition Commission’s Corporate Leniency Policy only offers immunity in respect of administrative penalties. Accordingly, directors who caused or knowingly acquiesced in cartel conduct may be criminally prosecuted under South Africa’s leniency policy despite being the whistle-blower.

It should be noted that the CAK will only engage the Director of Public Prosecution when granting conditional immunity. At this stage of the leniency application, the applicant would already have had to disclose its involvement in the cartel conduct and provide the CAK with substantial evidence of the relevant conduct sufficient to establish a contravention of the Competition Act.

Accordingly, the Guidelines do not cater for the possibility that the Director of Public Prosecution may not be willing to forego criminal prosecution in respect of the leniency applicant. It is, therefore, not clear whether the evidence which was disclosed to the CAK as part of a leniency application may be used against the applicant should the Director of Public Prosecution not grant immunity in respect of criminal liability.

In this regard, it would have been useful if the Guidelines catered for this risk. For instance, by expressly affirming that the Director of Public Prosecution would abide by the CAK’s recommendations unless there are compelling reasons not to. Absent this assurance, potential leniency applicants may be reluctant to approach the CAK for leniency until there is, at the very least, a clear indication of the Director of Public Prosecutions involvement in this process.

A welcome feature of the CAK’s Guidelines, however, is that fact that the Guidelines specifically extend leniency to a firm as well as to the firm’s directors and employees. The inherent conflict which may arise between the interests of the company versus the interests of the relevant directors, therefore, has been removed.

A further significant aspect of the Guidelines is that the Guidelines do not limit the granting of leniency (in respect of administrative penalties) to the respondent who is ‘first through the door’ only. A second or third respondent would also be eligible for a reduction of the administrative penalty of 50% and 30% respectively, provided the CAK is provided with material “new evidence”. Only a respondent who is ‘first through the door’, however, will qualify for immunity in respect of criminal liability – provided the respondent is not the “instigator” of the cartel.

The Guidelines also provide a framework which sets out the process which must be followed in applying for leniency including the steps which must be taken in respect of ‘marker’ applications.

As to who may apply for leniency, it is noteworthy that while a parent company is entitled to apply for leniency on behalf of its subsidiary, the reverse is not true on the basis that a subsidiary does not control the parent company. Accordingly, in fully fledged joint ventures for example, only one of the parties to the JV may apply for leniency (to the extent that the JV contravenes the Competition Act) and, therefore, the parent company should be the entity applying for leniency and not the legal entity which is in fact the party to the JV.

[Michael-James Currie is a competition law practitioner practicing in South Africa as well as the broader African region]