#COMESA21: New member states, new commissioners

#COMESA21

In a milestone enlargement of the (now formerly) 19-member COMESA region, Tunisia and Somalia have acceded to the trade bloc at the 20th COMESA Summit on 19th July 2018, creating #COMESA21 – Africa’s largest free trade region.

Their application to join had been pending since 2016.  Under the Treaty, the new members will be bound by the provisions of the Treaty and must deposit their formal instrument of acceptance of the terms of admission with the Secretary General, together with an instrument of accession pursuant to Articles 194 and 195 of the Treaty with regard to a State admitted to full membership.  Says Primerio’s Andreas Stargard, “with the privilege of membership comes the obligation of agreeing to abide by the antitrust rules promulgated under the COMESA Treaty.  This includes the Competition Commission’s procedural and substantive rules and notably its merger regulations.  It remains to be seen how the still weakened bureaucratic structure of the Somali Republic will be able to implement the strictures of a working competition-law regime…

Indeed, the CCC’s recent Notice No. 2/2018 provides that “the provisions of the COMESA Competition Regulations of 2004, and its accompanying rules, shall be enforceable in the territories of the Republic of Tunisia and the Federal Republic of Somalia with immediate effect.”

Personnel News 2018

In addition to gaining two new member states, COMESA also underwent personnel changes, adding an experienced antitrust practitioner, Zimbabwean Competition and Tariff Commission director, Ellen Ruparanganda, as one of the nine CCC commissioners, for a term of three years.  Besides Ms. Ruparanganda, Francis Lebon (Seychelles), Ali Hamadou Ali Kako (Djibouti), Thembelihle Dube (Eswatini, formerly Swaziland), Danson Buya Mungatana (Kenya), Michael Teklu Beyene (Ethiopia), Charlotte Wezi Malonda (Malawi), Islam Tagelsir Ahmed Alhasan (Sudan), and Brian Muletambo Lingela (Zambia) were also sworn in.

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Ethiopia Competition Agency Files Charges against Fourteen Metal Producers

By AAT Senior Contributor Stephany Torres

On 28 January 2018 the Ethiopian Trade Competition and Consumer Protection Authority (“TCCPA”) filed charges against fourteen Ethiopian rebar, corrugated sheet, steel tube and pipe producers and seven rebar importers respectively for allegedly fixing prices in contravention of Article 7(1) of the Ethiopian Trade Competition and Consumer Protection Proclamation (“Article 7(1)”), which provides that “(1) An agreement between or concerted practice by, business persons or a decision by association of business persons in a horizontal relationship shall be prohibited if:…(b) it involves, directly or indirectly, fixing a purchase or selling price or any other trading condition, collusive tendering or dividing markets by allocating customers, suppliers territories or specific types of goods or services”.

It is worth mentioning that in most jurisdictions, which have an active competition law enforcement regime in place, ‘cartel conduct’ (i.e. price fixing, market allocation and/or collusion) is a per se prohibition in that the conduct is prohibited outright, without an examination of the actual effects on competition and without permitting a showing of net efficiency or other pro-competitive defensive arguments.

Where cartel conduct is prohibited per se, the relevant competition authorities require no further proof other than the existence of the agreement or concerted practice which underpins the conduct.  The conduct is simply presumed to have negative effects on the relevant market.

Article 7(1) of the TCCPA, however, is not a per se prohibition and is based on the ‘rule-of-reason’ standard – effectively permitting respondents to lead evidence demonstrating that the alleged conduct can be justified by pro-competitive, technology or efficiency gain justifications which outweigh any anti-competitive effect.

From a policy perspective, Africa competition lawyer Michael-James Currie notes that the permissibility of the ‘rule of reason defence’ is largely due to the fact that a respondent who is found to have contravened Article 7(1) of the TCCPA is liable to a penalty calculated at fifteen percent of the respondent’s annual turnover. This is a prescribed penalty. For non-cartel conduct, the penalty ranges between 5-10%.

Of the aforementioned fourteen Ethiopian steel producers; three manufacture reinforcement bars, namely East Steel PLC, Habesha Steel Mills PLC and Saint Nail PLC.  Six are involved in manufacturing corrugated sheets namely; Ethiopian Steel Profile, Ethiopian Steel PLC, Kombolcha Steel Products Industry PLC (KOSPI), a subsidiary of MIDROC Technology Group and Bazeto PLC and amongst the five manufacturers of steel tubes and pipes are Walia Steel Industry PLC and Mame Steel PLC.

The seven rebar importers accused of price fixing include Dag Trading PLC, Aberus PLC, Berhe Hagos PLC, Marka Trading, Beranea Yeshene and Haileselassie Amabye PLC.

Andreas Stargard, competition counsel with Primerio Ltd. notes that the trigger event for engaging in the alleged price fixing was the fifteen percent devaluation of the birr by the National Bank of Ethiopia (NBE) in October 2017 which may have influenced retailers and wholesalers to look for ways of recouping losses by raising prices for their goods and services.

It is, however, in fellow Primerio Director John Oxenham’s view, unlikely for a well-executed price-fixing cartel to be created ad hoc without any pre-existing information exchange structure.  Therefore, pre-existing trade association, interest groups or other vehicles are commonly used as the enabling platform for competitors to engage in collusive conduct.

The defendants are scheduled to submit their response to the Tribunal on February 20, 2018.

The metal and related products sector is a priority sector in Ethiopia and the Ethiopian government is investigating a greater number of business entities involved in the production and importation of metal and metal related products who are also suspected of allegedly fixing prices.

Resale Price Maintenance in COMESA?

Second Non-Merger Investigation Opened by COMESA Enforcer

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

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

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

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

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

Andreas Stargard

Andreas Stargard

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

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

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

COMESA antitrust authority swears in 4 new commissioners

COMESA out of service

Four new Commissioners sworn in – while COMESA’s own site fails to make announcement

We do not commonly report on news from the Seychelles here on AAT, but today, the Office of the President of the Seychelles has in fact beat AAT (as well as the COMESA Competition Commission itself (!)) to it: as the Office reports, the 18th COMESA Summit, held on 30th March 2015 in Addis Ababa, (a city that I have fallen in love with, by the way), saw the swearing-in of four new COMESA Competition Commissioners.

The summit also saw the swearing in of Mr. George Tirant, Chief Executive Officer of the Seychelles Fair Trading Commission. Mr. Tirant was appointed as a commissioner on the COMESA Competition Commission, alongside representatives from Egypt, Uganda and Ethiopia.

We have not yet identified the other new members that were sworn in this week, but in admitting so we note in the same breath that it is surprising for the authority itself not to have this relevant item anywhere on its site, neither in the News category nor anywhere else.  Indeed, the reader looks in vain for even a cursory Press Release announcing that 4 new Commissioners were seated for a new term of 3 years each. COMESA’s site still shows the outdated list of its Commissioners (copied below the photo below).

Irregular?  Perhaps.  But then again, we are used to outages and unfortunately much worse from the COMESA Competition Commission web site.

AAT notes that, in addition to the four new competition commissioners, the 19-country IGO also welcomed new:

  • Judge President and Judges of the Appellate Division of the COMESA Court of Justice
  • Principal Judge and Judges of the First Instance Division of the COMESA Court of Justice
  • the COMESA Committee of Elders
COMESA's 18th Summit in Ethiopia

COMESA’s 18th Summit in Ethiopia

[Outdated] List of Commissioners from Comp Comm web site:

  1. Commissioner Alexander Juvensio Kububa : Chairperson of the Board of Commissioners and former Chief Executive Officer of the Competition and Tariff Commission of Zimbabwe.
  2. Commissioner Mathews Chikankheni: Vice Chairperson of the Board of Commissioner and President of the Malawi Confederation of Chamber of Commerce and Industry.
  3. Commissioner Ali Mohamed Afkada: Inspector General des Services Judiciarisés’ de Djibouti.
  4. Commissioner Daniel Phillip Gappy – Former Chief Executive Officer of Fair Trading Commission of Seychelles and Chief Executive Officer of Seychelles Licensing Authority.
  5. Commissioner Rajeev Hasnah: former Deputy Director of Competition Commission of Mauritius.
  6. Commissioner Francis Kariuki: Director General of Competition Authority of Kenya.Commissioner Rajeev Hasnah:  Chief Economist and Deputy Executive Director of the Competition Commission of Mauritius.
  7. Commissioner Thabisile Pearl Langa’: Chief Executive Officer of Swaziland Competition Commission.
  8.  Commissioner Rostom Omar: Former Legal Counselor of Egyptian Competition Commission.
  9. Commissioner Chilufya Sampa: Chief Executive Officer of Competition Commission of Zambia