The first half of 2017 has been an exciting one from a competition law perspective for a number of African countries. As certain agencies have taken a more robust approach to enforcement while others have been actively pursuing or developing their own domestic competition law legislation. Further, there is an increasingly prevalent interplay between domestic laws with regional competition law and policy in an effort to harmonise and promote regional integration.
In this addition of the WRAP, we highlight some of the key antitrust developments taking place across the continent. The editors at AAT have featured a number of articles which provide further insight and commentary on various topics and our readers are encouraged to visit the AAT Blog for further materials and useful updates.
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Grocery Market Inquiry
On 27 January 2017, the Competition Authority of Kenya (CAK) exercised its powers in terms of section 18 (1) (a) of the Competition Act, 2010, to conduct a market inquiry into the branded retail sector.
The key issues which the CAK’s will focus on during the inquiry include:
- the allocation of shelf space and the relative bargaining power between retailers and their suppliers;
- the nature of and the extent of exclusive agreements at one stop shop destinations and their effects on competition;
- the pricing strategies retailers employ especially in regards to responding to new entrants;
- whether there are any strategic barriers to entry created by incumbent firms to limit entry in the market; and
- the effect of the supermarkets branded products on competition
The Kenya Competition Act (Act) has undergone a number of amendments in the past year.
Most notably, however, section 24 of the Act, which deals with abuse of dominance generally, has been amended to also cater for an abuse of “buyer power”.
Without being exhaustive, a number of practices which would typically constitute an abuse of dominance include:
- imposing unfair purchasing or selling prices;
- limiting or restricting output, market access or technological advancements;
- tying and/or bundling as part of contractual terms; or
- abusing intellectual property rights.
In terms of the definition of “dominance” in the Act, a firm will be considered dominant if that firm has greater than a 50% market share.
The amendment, as drafted, raises a number of concerns as previously noted on AAT.
Merger control – Prior Implementation
On 17 February 2017, the Competition Authority of Botswana (CA) prohibited a merger between Universal House (Pty) Ltd and Mmegi Investment Holdings (Pty) Ltd.
The CA prohibited the merger on the grounds that the transaction was likely to lead to a substantial prevention or lessening of competition in the market. In particular, the CA held that the “market structure in the provision of commercial radio broadcasting services will be altered, and as such raises competition and public interest concerns”.
At the stage of ordering the divestiture, a suitable third party had not yet been identified and the merging parties were obliged to sell the 28.73 shares to a third party “with no business interests affiliated in any way with the acquiring entity”. The divestiture was also to take place within three months of the CA’s decisions and, should the thresholds be met for a mandatorily notifiable merger, the CA would require that the proposed divestiture also be notified.
Follow-on Civil Liability
A second civil damages award was imposed in 2017 on South Africa’s national airline carrier, SAA, following the Competition Tribunal’s finding that SAA had engaged in abuse of dominance practices, in favour of Comair. This award comes after the first ever successful follow-on civil damages claim in South Africa (as a result of competition law violation) which related to Nationwide’s civil claim against SAA. In the Nationwide matter, the High Court awarded, (in August 2016) damages to Nationwide in the amount of R325 million. Comair claim for damages was based on the same cause of action as Nationwide’s claim. The High Court, however, awarded damages in favour of Comair of R554 million plus interest bring the total award to over a R1 billion (or about US$ 80 million).
Please see AAT’s featured article here for further insights into this case.
The SACC published a notice in the Government Gazette on 10 May 2017, indicating that it will conduct a market inquiry into the Public Passenger Transport sector (PPT Inquiry) which is scheduled to commence in June 2017.
The PPT inquiry, is expected to span two years and will involve public hearings, surveys and meetings with stakeholders which will cover all forms of (land-based) public passenger transport. The SACC indicated in its report that “…it has reason to believe that there are features or a combination of features in the industry that may prevent, distort or restrict competition, and / or to achieve the purpose of the Competition Act”.
The South African Competition Commission (SACC) recently published draft guidelines for determining the administrative penalty applicable for prior implementing a merger in contravention of the South African Competition Acts’ merger control provisions (the Draft Guidelines).
In terms of the penalty calculations, the Draft Guidelines prescribe a minimum administrative penalty of R5 million (USD 384 615) for the prior implementation of an intermediate merger and a R20 million (USD 1.5 million) penalty for implementing a large merger prior to being granted approval. The Draft Guidelines cater further for a number of aggravating or mitigating factors which may influence the quantum of the penalty ultimately imposed.
The Egyptian Competition Authority (ECA), has also referred the heads of the Confederation of African Football (CAF) to the Egyptian Economic Court for competition-law violations relating to certain exclusive marketing & broadcasting rights. This follows the COMESA Competition Commission also electing to investigate this conduct.
In addition, it has been reported that the ECA has initiated prosecution of seven companies engaged in alleged government-contract bid rigging in the medical supply field, relating to hospital supplies.
Minimum resale price maintenance
In a landmark judgment, the Competition Commission of Mauritius (CCM) recently concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).
The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and Rs4 007 110.00 respectively for each contravention.
Please see AAT’s featured article here for further information.
The global trend in competition law towards granting immunity to cartel whistleblowers has now been embraced by the Competition Commission of Mauritius (CCM). The CCM will also grant temporary immunity (during the half-year period from March 1 until the end of August 2017) not only to repentant participants but also to lead initiators of cartels, under the country’s Leniency Programme.
The COMESA Competition Commission (CCC) announced early 2017 that it will be investigating allegations of exclusionary conduct in relation to the Confederate of African Football’s (CAF) decision to extend an exclusive marketing of broadcasting rights and sponsorship agreement with Lagardère Sports in relation CAF tournaments.
Please see AAT’s featured article here for more information.
What to look out for?
The Competition and Consumer Protection Commission (CCPC) published series of guidelines and policies during 2016. These included adopting a formal Leniency Policy as well as guidelines for calculating administrative penalties.
In addition, the CCPC also published draft “Settlement Guidelines” which provides a formal framework for parties seeking to engage the CCPV for purposes of reaching a settlement. The Settlement Guidelines present a number of practical challenges as currently drafted. One example is that the guidelines don’t cater or seem to recognise “without prejudice” settlement negotiations.
It is anticipated that the draft Settlement Guidelines will be formally adopted this year.
Please click here to read the feature article on AAT.
In April 2017, the CEO of the Namibian Competition Commission (NCC), Mr. Mihe Gaomab II, 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.
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.
For further commentary on this development, please see AAT’s featured article.
Nigeria remains, for now, one of the few powerhouse African economies without any antitrust legislation. The Federal Competition and Consumer Protection Bill of 2016, however, recently made it past the initial hurdle of receiving sufficient votes in the lower House of Representatives. The Bill is, therefore, expected to be brought into effect during the latter part of 2017 or early 2018.
The Minister of the Department of Economic Development, who has fulfills the oversight function of the South African Competition Authorities, has announced that a market inquiry will be conducted in relation to the “high costs of Data” in South Africa.
This would be the fifth formal market inquiry since the Competition Act was amended to afford the Competition Commission with formal powers to conduct market inquiries.
Complex monopoly provisions
Both Minister Patel and the President have announced that the Competition Act will undergo further legislative amendments in order to address perceived high levels of concentration in certain industries.
In this regard, it is likely that the competition amendment act’s provisions relating to abuse of dominance and complex monopolies, which was drafted in 2009, will be brought into effect.
In terms of the provisions, as currently drafted, where five or less firms have 75% market share in the same market, a firm could be found to have engaged in prohibited conduct if any two or more of those firms collectively act in a parallel manner which has the effect of lessening competition in the market (i.e. by creating barriers to entry, charging excessive prices or exclusive dealing and “other market characteristics which indicate coordinated behavior”).
Please see AAT’s feature article here for further commentary.