AAT, East Africa, Kenya, mergers, Uncategorized

KENYA: AIRTEL//TELKOM KENYA MERGER CONDITIONS TAKEN ON APPEAL

By Ruth Mosoti

In December 2019, the CAK approved the merger between two Kenyan telecom firms, Airtel and Telkom Kenya, subject to a number of wide ranging conditions.

The merging parties, however, were not satisfied with the conditions and have decided to take the CAK’S decision on review to the Competition Tribunal. Kenya’s Competition Tribunal was fully constituted and became operational in May 2019 after four members were appointed to the panel.

In terms of  the Kenyan Competition Act, any party aggrieved by a decision of the CAK in relation to a merger has 30 days to file for a review of that merger before the Tribunal. The 30 days period commences from the date the CAK’s decision is published in the gazette. Accordingly, although the merger was formally approved in October 2019, the merging parties had to wait until December 2019 for the gazette, containing the CAK’s decision, to be published before a notice for review could be filed.

The Tribunal has a broad range of powers and may overturn, amend or confirm the decision of the CAK. The Tribunal may also, if it considers it appropriate to do so, refer the matter back to the CAK for reconsideration of certain issues.

Turning to the conditions themselves, one of the contentious conditions relates to having the spectrum revert back to the government upon expiry of the merging parties’ license.

This is concerning as it is the Communications Authority of Kenya that issues and renews licences. The spectrum allocation by Communication Authority is an asset in the hands of the holder. Assuming that the spectrum is being utilized in accordance with the licence, ordinarily renewal is guaranteed.

The CAK’s decision that the license must revert back to the government is concerning as it seems to overlap with the Communications Authority’s mandate. John Oxenham, a director of Primerio, says that the interplay and conflict between the roles of competition and communications agencies are not unique to Kenya. In South Africa there have also been a number of issues which have raised as to which agency is best suited to assess ‘competition law matters’. A memorandum of understanding between the South African Competition Commission and the Independent Communications Authority of South Africa (ICASA) has been concluded in an effort to ensure consistency and enhanced collaboration between the two agencies in this regard.

The CAK’s conditions in this merger seem to be at odds with the CAK’s approach adopted in previous matters. For instance, when Yui exited the Kenyan market, both Airtel and Safaricom acquired Yu’s assets (including licenses). Although Safaricom had a larger chunk of the 2G spectrum, the CAK did not seem to take Safaricom’s market size into account when these assets were acquired. Perhaps the CAK appreciates that there was a missed opportunity.

This is will be the Tribunal’s first opportunity to review the CAK’s decision relating to a  merger and it will be interesting to see how robustly the Tribunal scrutinizes the CAK’s decision with reference to economic evidence. As competition lawyer Michael-James Currie points out, unfortunately, the CAK does not publish detailed reasons which underpin its decisions and it is, therefore, often difficult to fully appreciate the CAK’s reasoning or assess whether the CAK’s decision is sufficiently supported by the underlying evidence. Hopefully the Tribunal’s reasons in this matter will be more comprehensive, thereby contributing positively to creating precedent.

Currie also points out that the CAK imposed a public interest condition relating to a moratorium of any merger specific retrenchments for a two year period. The merging parties are appealing this condition as well and have proposed that the moratorium be reduced to 12 months. The role of public interest factors in merger control has been materially influenced by the South African merger control regime where employment related conditions are a common feature in merger conditions. Moreover, two year moratoriums is usually the ‘benchmark’ standard although moratoriums ranging from 3-5 years have also been imposed on parties in South Africa. It will be interesting to gauge the Tribunal’s approach to public interest factors and whether we will see a unique approach to the assessment of such conditions or whether the Tribunal is likely to follow the South African approach.

[Ruth is a Primerio competition law practitioner based in Nairobi, Kenya.]

 

 

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AAT exclusive, Angola, Botswana, Grocery Retail Market Inquiry, Kenya, Nigeria, South Africa, Uncategorized

Key African Antitrust Highlights of 2019 and What to Keep Tabs on for 2020

The level of antitrust enforcement across Africa has increased markedly over the past decade and with more jurisdictions coming on stream and establishing competition law regimes, the role of antitrust laws and the risk of non-compliance is becoming more pronounced than ever before.

Pan-African competition lawyer, Michael-James Currie, says that the role and applicable standards relating to competition law enforcement in developing countries is more divergent from those established in the more developed jurisdictions. A one-size fits all approach to competition law compliance is becoming less feasible – particularly as the role of public interest or non-traditional competition law factors are increasingly being taken into account in competition policy and legislation. Likewise, the thresholds for establishing “dominance” is generally lower across many of the African jurisdictions than those generally utilised in the United States or Europe and firms’ therefore need to be mindful that the traditional assessments of welfare (whether it is total welfare or consumer welfare) is not necessarily the benchmark. The focus of addressing perceived high levels of concentration in the market and opening up the market to smaller players is hallmark of a number of the more developed African agencies – particularly South Africa and Kenya.

Primerio Director, John Oxenham, says that the next decade of competition law enforcement in Africa is likely to be particularly important as the continent moves closer towards establishing the African Continental Free Trade Agreement. The harmonisation between regional bodies and domestic regimes remains an important challenges facing many agencies and this will become all the more relevant as member states negotiate an appropriate competition law framework suitable for the Continent.

Africanantitrust has throughout 2019 provided our readers with updates, opinion pieces and articles capturing the key competition law developments across Africa as they occur and our editors are committed to continuing doing so in 2020.

To start off the year, the editors at AfricanAntitrust provide a snapshot of the key highlights of 2019 as well as some of the most important developments to be expected in 2020 (although there will no doubt be many more).

Nigeria’s new Commission and the recent release of foreign merger control guidelines

In January 2019 the Federal Competition and Consumer Protection Act (the “Act”) was signed into law in Nigeria.

Nigeria did not have a dedicated competition law regime until then. The Act, which is not too dissimilar from the South African Competition Act, will regulate inter alia merger control, cartel conduct, restrictive vertical practices and abuse of dominance.

The Act is not currently being enforced as the Federal Competition and Consumer Commission (the “Commission”) is yet to be formally established although this is expected to take place soon.

In relation to mergers, section 2(3)(d) of the Act empowers the Commission to have regulatory oversight over all indirect transfers/ acquisitions of assets or shares which are located outside of Nigeria, and which results in the change of control of a Nigerian business.

Pursuant to the above-mentioned clause, on 13 November 2019, the Commission published the “Guidelines on the Simplified Process for Foreign to Foreign Mergers with a Nigerian Component”. The Guidelines specifies the type of information which is required in respect of the merging parties, as well as the mandatory supporting documentation which should accompany a filing. Furthermore, the Guidelines assist parties to a foreign to foreign merger by providing explicit rules on how the merger is to be treated, notified as well as the simplified procedure with regards to the merger.

Primerio director, Andreas Stargard notes that the implementation of the Guidelines will be interesting as the Guidelines are the first of its kind in Africa and is largely influenced by the European merger control regime.

The Guidelines also provide information regarding filing fees – although the calculation of filing fees remains somewhat unclear and requires further clarification.

Kenya’s Buyer Power Provisions

In Kenya, the Competition Amendment Act (the Amendment Act) has provided a new provision, Section 24A, which deals with buyer power.

Abusive “buyer power” is now expressly prohibited and any person who engages in such conduct will be considered to have committed an offence. Such an offence carries the penalty of a fine not exceeding 10 million shillings or imprisonment not exceeding 5 years. The abuse of buyer power is, therefore, viewed as a serious offence.

The “abuse of buyer power” is defined in Section 24A (2) of the Amendment Act as the influence exercised by a purchaser to gain more favourable terms, or imposing:

long-term opportunity cost including harm or withheld benefit, which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings”.

In determining whether an abuse of buyer power exists, the Authority will take into account;

  • the nature and determination of contract terms between the concerned undertakings;
  • the payment requested for access to infrastructure; and
  • the price paid to suppliers as stated in section 24A (5) of the Amendment Act.

The above mentioned provision will likely have the effect of affording suppliers greater protection, particularly small suppliers who have a weak bargaining power in comparison to powerful and dominant purchasers. It is furthermore important to protect such suppliers as the negative effects of the abuse of buyer power are often transferred to consumers, for example high prices.

Most notably, as Michael-James Currie has previously pointed out when critically assessing the new buyer power provisions, it is not a prerequisite to prove that the respondent is “dominant” before the provisions of section 24A(2) may be applicable. Rather, the provision considers the bargaining power between a particular supplier and customer. This provision may be particularly harmful to consumer welfare if suppliers who negotiate favourable prices with suppliers which are passed on to consumers, are deterred from doing so due to the risks associated with contravening this provision.

Recent amendments in the Botswana competition landscape

The Botswana Competition Amendment Act recently came into force on 2 December 2019, and is expected to transform competition law in Botswana in various respects, particularly in terms of horizontal restrictive practices, abuse of dominance, exemptions and merger penalties.

Oxenham says that the previous Act did not provide for criminal liability in respect of cartel conduct, however, under Section 26 of the Amendment Act this position has changed. In terms of the Amendment Act, any director or employee who is found to have engaged in restrictive horizontal practices is liable to a fine not exceeding P100 000 or to a term of imprisonment not exceeding five years or to both.

With respect to abuse of dominance, the Act previously did not list particular conduct that was considered to be an abuse of dominance. The Amendment Act provides clarity on the type of conduct that is likely to be considered abusive. The clarification is welcomed and will hopefully ensure greater compliance since undertakings now have the tools to foster a better understanding of what constitutes abuse of dominance and are better placed to ensure that their conduct does not fall foul of the prohibition.

The Amendment Act also caters for exemptions. The terms and conditions of any exemptions will be determined by the Authority who will take both competition law and public interest factors into account when assessing whether to grant an exemption.

In relation to penalties for gun-jumping (i.e. merger implementation prior to approval), the Amendment Act provides much needed clarity. Section 58(3) of the Acts states that implementing a merger without prior approval by the Authority will attract a fine not exceeding 10% of the consideration or the combined turnover of the parties involved in the merger – whichever is greater. Merging parties are, therefore, advised to ensure timeous notification is made in respect of any merger which meets the thresholds for a mandatory filing to seek merger approval in Botswana.

The Amendment Act has also introduced a provision regarding the consideration of a rejected merger.  Parties can apply for reconsideration of a merger within 14 days from the date of rejection. Such a provision provides the parties with an additional opportunity to provide oral evidence which is also a positive development.

Angola’s competition regime coming on stream

The Competition Act in Angola is now fully in force. The Competition Regulatory Authority (the “CRA”) is responsible for prosecuting offences. Conduct which occurred prior to the establishment of the Authority may still be prosecuted in certain circumstances.

The Competition Act prohibits both horizontal and vertical agreements that restrict competition in the Angolan market. Accordingly, undertakings have to be cautious in relation to the types of agreements they enter into as it may result in liability and prosecution by the CRA. The Act does however provide for exemptions from the prohibitions with the exception of abuse of dominance and abuse of economic dependence. Exemptions are only available upon application and the parties must demonstrate that they comply with certain conditions in order to be granted an exemption.

Importantly, Angola’s Competition Act creates a formal merger control regime. Mergers will now be subject to prior notification to the CRA and they have to meet certain specified requirements. The thresholds requiring prior notification are the following:

  • the creation, acquisition or reinforcement of a market share which is equal to or higher than 50% in the domestic market or a substantial part of it; or
  • the parties involved in the concentration exceeded a combined turnover in Angola of 3.5 billion Kwanzas in the preceding financial year; or
  • the creation, acquisition or reinforcement of a market share which is equal to or higher than 30%, but less than 50% in the relevant domestic market or a substantial part of it, if two or more of the undertakings achieved more than 450 million Kwanzas individual turnover in the preceding financial year.

Mergers must not hamper competition and must be consistent with public interest considerations such as:

  • a particular economic sector or region;
  • the relevant employment level;
  • the ability of small or historically disadvantaged enterprises to become competitive; or
  • the capability of the industry in Angola to compete internationally.

The sanctions for non-compliance with the Act’s merger provisions could result in the impositions of fines of 1%-10% of a company’s turnover for the preceding year, as well as other conditions which the Authority deems appropriate. Should a party fail to comply with relevant sanctions or conditions imposed by the Authority or provide with false information, the Authority may levy periodic penalty payments of up to 10% of the merging party’s average turnover daily.

South Africa

  • Amendment Act

In February 2019, the Competition Amendment Act was signed into law and is widely regarded as the most significant amendments to the South African Competition Act in two decades.

The majority of the provisions contained in the Amendment Act have been brought into force. Those amendments – particularly those relating to buyer power, price discrimination and national security approval regarding foreign mergers are expected to be brought into effect in 2020.

Some important aspects of the Amendment Act include:Mergers involving foreign acquiring firms :

The President is to establish a Committee which will be mandated to consider the implementation of mergers which involve a foreign acquiring firm and the potential adverse effect of the merger on the national security interests of the Republic. Essentially this means that a foreign acquiring firm is required to notify both the Competition Commission, as well as file a notice with the Committee. Security interests are broadly defined.

Buyer power

The insertion of Section 8(4)(a) essentially prohibits a dominant firm from requiring or imposing unfair prices or other trading conditions on a supplier that is a small and medium business (“SMEs”) or a firm controlled or owned by historically disadvantaged persons (“HDPs”). This section also introduces a reverse onus on the dominant firm to prove that its trading terms or conditions are not unfair nor that there has been any attempt to refuse to deal with a supplier in order to circumvent the operation of this clause.

The regulations regarding Buyer Power are currently only applicable to the following sectors:

  • Agro-processing;
  • Grocery retail; and
  • Online intermediation services.

Price discrimination

In determining price discrimination by a dominant firm, the Amendment Act has created two parallel self-standing tests. The Act has retained the traditional test for price discrimination which requires proof of a substantial lessening of competition, but has also prohibited a dominant firm from engaging in price discrimination which impedes the ability of Small or Medium Enterprises (“SMEs”) or firms controlled by historically disadvantaged persons (HDPs) from “participating effectively” in the market. Dominant firms are also not allowed to avoid or refuse selling goods or services to SMEs or firms owned or controlled by HDPs to circumvent the section. Significantly, and unlike the traditional price discrimination provision, Section 9(1)(a)(ii) does not require a complainant to prove any anti-competitive effects or consumer welfare effects.

Penalties

The Amendment Act has removed the “yellow-card” principle and administrative penalties will be imposed for any contravention. Previously, penalties for first-time offences were only applicable to cartel conduct, minimum resale price maintenance and certain abuse of dominance conduct (such as excessive pricing or predation).

Mergers

The role of public interest factors in the merger control assessment has become more prominent by firstly elevating the standard of public interest factors to equal footing with traditional competition law factors (i.e. SLC tests) and also broadening the public interest grounds which must be taken into consideration to specifically include transformation objectives.

  • Important cases

In December 2019, the South African Competition Appeal Court heard the appeal from the Tribunal in relation to the “Banking Forex” Matter.

Oxenham says that this case raises a number of jurisdictional issues in relation to the scope and powers of the South African Competition Authorities to impose penalties on foreign firms for engaging in cartel conduct outside of South Africa. Both personal jurisdiction and subject matter jurisdiction is being contested.

  • Market Inquiries

In 2019, the Commission fully utilized its powers in Section 43A-G and 23 in initiating and conducting market inquiries as well as its duty to remedy adverse effects on competition. Three market inquiries were conducted in 2019, namely:

  • The Health Market Inquiry;
  • The Grocery Retail Market Inquiry; and
  • The Data Services Market Inquiry

The implementation of the Commission’s recommendations of the abovementioned market inquiries will likely be a controversial topic, and much push-back is expected from parties implicated in the recommendations.

 

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AAT, buyer power, East Africa, Kenya, Uncategorized

KENYA: COMPETITION AMENDMENT BILL INTRODUCES ONEROUS BUYER POWER PROVISIONS

* By Ruth Mosoti

In July 2019, the Competition Amendment Bill was gazetted and looks on course to be adopted by Parliament.

There are several proposed amendments to the current Competition Act although the focus of the Amendments, most notably, relates to the introduction of buyer power provisions which is a self -standing prohibition and does not require a complainant to first establish a dominance on the part of the buyer.

In regard to buyer power, the majority of the substantive provisions in the current  “Buyer Power Guidelines” previously published by the Competition Authority of Kenya (CAK) have been mirrored in the Act. We summarize below some of the features that the Bill seeks to introduce to the Act in regard to buyer power include:

  1. Introduction of a ‘buyer power code of practice’, developed by the CAK in consultation with stakeholders, relevant government agencies and the Attorney General;
  2. The CAK will have power to impose reporting measures on sectors that experience or are likely to experience abuse of buyer power reporting and prudential requirements, in addition to this, these sectors may be required to develop their own binding code of practice;
  3. The Bill proposes minimum requirements for an agreement between a buyer undertaking and a supplier undertaking. The amendment also provides that this agreement does not have to be in writing;
  4. A new section 29A (which is controversial as it appears to be aimed at the advocates remuneration order) is introduced that targets Professional Associations whose rules offend the provisions of the Competition Act and provides for the persons who will be held responsible for any guidelines that are issued by the association.
  5. It is notable that there are no monetary administrative sanctions introduced by these provisions rather non-compliance attracts criminal sanctions.

The Bill, if passed into law, will positively impact the enforcement of buyer power provisions as the  gap on the substantive provisions on the enforcement of buyer power provisions will be filled.

Michael-James Currie, a pan-Africa competition law practitioner notes that that the Buyer Power principles are similar to those typically found in consumer protection legislation and there are no clear benchmarks (such as a substantial lessening of competition) against which to measure or assess the alleged buyer power. The criteria for determining whether buyer power amounts to an contravention is guided by principles of fairness and reasonableness rather than any economic benchmark. This makes compliance as well as objective decision making all the more difficult. John Oxenham, director at Primerio echoes these sentiments and states that from a traditional competition law perspective, buyer power generally only raises concerns in the event that the buyer concerned is able to exercise a substantial degree of market power.

Currie suggests that absent a clear threshold as to what would trigger an offence in terms of the new buyer power provisions, coupled with the criminal liability (which includes a maximum prison sentence of five years), is particularly onerous on firms seeking to comply with the competition legislation. Currie suggests that it would be preferable to change the liability to an administrative penalty as opposed to a criminal offence so as not to hamper or overly prejudice firms operating in the market.

 

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AAT, East Africa, fines, Kenya, mergers, Uncategorized

Enforcement Update: Kenya Competition Authority imposes administrative penalty for gun-jumping (prior implementation of a merger)

  • update by Michael-James Currie

In September 2019, the Competition Authority of Kenya (CAK) formally penalised two merging parties for having implemented a transaction without having obtaining the requisite prior regulatory approval.

The trigger for mandatory notification in this case was a change from joint control to sole control when Patricia Cheng acquired an additional 50% of the shareholding in Moringa School.

The maximum penalty which may be imposed for prior implementation is 10% of the parties’ combined turnover in Kenya. In this case, the CAK imposed a nominal penalty (approximately USD 5000) in light of the parties having voluntarily notified the CAK of their failure to obtain prior approval, having co-operated with the CAK’s investigatory agency and after having subsequently assessed the transaction, the CAK concluded that the merger was unlikely to have any adverse effects on competition and would have positive public interest benefits.

The public interest benefits included the fact that the school would offer coding technology to over 1000 students and employees over 100 staff members.

In light of the mitigating factors, the CAK found that the penalty was balanced taking into account principles of deterrence and proportionality of the infringement.

The case is noteworthy not only because it signals a clear message from the CAK that the prior implementation of mergers will attract penalties (which are likely to increase substantially as firms ought to have greater awareness of the merger control regime in Kenya) but also confirms that a move from sole to joint control of an entity or, as in this case, a move from joint to sole control, requires mandatory notification to the CAK.

The CAK has one of the most effective merger control regimes in Africa and is increasingly becoming a more robust competition agency from an enforcement perspective.

[Michael-James Currie is a competition lawyer practising across the majority of sub-Saharan African jurisdictions]

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AAT, AAT exclusive, Access to Information, COMESA, commissioners, dominance, EAC, East Africa, exemptions, Kenya, market study

COMESA Competition Commission: 2019 Regional Sensitization Workshop

On 9-10 September 2019, the Comesa Competition Commission (CCC) hosted its 6th  “Regional Sensitization Workshop for Business Reporters on Competition Law and Trade Developments within the Common Market” workshop in Nairobi, Kenya as part of its advocacy initiative to promote competition law and enforcement activities across the COMESA region.

AfricanAntitrust, having attended last year’s event, was again invited to attend the event and senior contributor and competition lawyer, Michael-James Currie, attended the event on behalf of AAT and participated in a serious of panel discussions and informal interactive sessions with members of the CCC and Competition Authority of Kenya.

Attendees

The workshop was well attended with a year on year increase in attendees reflecting the importance and popularity of this initiative. The CCC should be congratulated on a well organized and structured workshop.

Patrick Okilangole, Board Chairperson of the CCC, opened the event by highlighting the importance of competitive domestic markets to  “realize the benefits of trade; multilateral and bilateral trade agreements recognize the need to guarantee that restrictive business practices do not hinder the positive effects of free trade”.

Protectionist policies was identified by Okilangole as one of the key impediments to effective regional growth and trade. More specifically, Okilangole highlighted the following consequences of protectionist policies:

“(i)     Ineffective competition policy frameworks. Over the past few years, competition law has been enacted in several Member States of the Common Market. However, in some countries, competition frameworks have included:

(ii)      unjustified and discretionary exemptions, for example, utilities managed by the state in key economic sectors,

(iii)     lack of sufficient investigative powers and tools in the current national and regional legislation to deter anticompetitive behaviour,

(iv)    lack of independency in decision making since competition agencies report to and their decisions may be vetoed by a ministry, and

(v)     significant government intervention in markets such as price controls in potentially competitive markets, controlling essential products, margins, and geographic areas.”

Okilangole reaffirmed the true hallmark of an effective competition law regime, namely that competition law should be focused on protecting the competitive process and not a particular competitor. “The rules are not meant to punish large companies on account of their size or commercial success. The key feature of the competition rules is to create a level playing field for all business players in the market.”

Okilangole’s remarks were echoed by the Chief Executive Officer of the CCC, George Lipimile who emphasised the need to move away from protectionist policies in order to realise the benefits that flow from increased regional trade.

Restrictive business practices, particularly abuse of dominance practices and collusion were identified by Lipimile as being particularly prevalent within COMESA and that increased enforcement activities are required, both by the CCC and regional agencies, to detect and prosecute anti-competitive behaviour.

The workshop was also used as an opportunity to present and engage on the CCC’s Guidelines on Restrictive Business Practices (which were approved in April 2019). The objective of the Guidelines is to provide greater clarity, predictability and transparency in relation to the analytical framework which will be used to evaluate alleged anti-competitive conduct. The Guidelines also provide greater guidance on the process and circumstances in which the CCC may grant exemptions.

The CCC was well represented (so to was the CAK) and senior investigators, analysts and members from the executive team provided useful insights into the enforcement activities of the CCC as well as what lay ahead in the pipeline. Attendees were invited to engage, debate and where appropriate raise concerns regarding the efficacy of competition law enforcement in COMESA. It is this willingness to be open and engage proactively with constructive criticism which is perhaps the hallmark of this CCC initiative and certainly welcomed by the attendees.

As to enforcement updates, the CCC put together comprehensive presentations both in relation to merger control and restrictive business practices more generally. We highlight some of the more noteworthy developments below.

Merger Control

Willard Mwemba, manager of mergers and acquisitions at the CCC, confirmed that over 230 transactions have been notified to the CCC between 2013 and July 2019. Of these, 17 were approved subject to conditions.

From a merger trend perspective, the CCC witnessed an increased shift in merger notifications in traditional sectors, such as agriculture and construction, to emerging sectors such as energy, banking and financial services with the most active member states including Kenya, Zambia, Mauritius, Zimbabwe and Uganda.

As to merger activity in COMESA, Mwemba confirmed that there has been a decrease in merger activity in the first half of 2019, largely as a result of a decrease in global activity and that the value of transactions that occurred within the first half of 2019 dropped from USD 527 billion to USD 319 billion for the same period in 2018. This is also consistent with the 19% decrease in the number of notifiable transactions globally.

The combined total turnover value of all mergers assessed by the CCC to date amounts to over USD 110 billion. Although 2019 figures were not presented, the CCC highlighted that total Foreign Direct Investment in COMESA grew in 2016 from USD 18.6 billion to USD 19.3 billion in 2017 representing nearly half of Africa’s total FDI inflows. Again, highlighting the significance of the COMESA market in the global space.

Enforcement Activities

Although the CCC has had an active merger control regime in place for many years, a number of commentators have raised the lack of robustly investigated and prosecuted abuse of dominance or cartel cases as a key hindrance to effective competition law enforcement in COMESA. While the CCC acknowledges that more should be done in this regard, below is a list of non-merger matters which the CCC has concluded in past three years:

Exemptions

Matter Sector Affected Member States
Assessment of the supply agreement between Eveready East Africa Limited and Supreme Imports Limited Lighting bulbs Burundi, DRC, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Uganda, Zambia
Assessment of the supply agreement between Eveready East Africa Limited and Sayyed Engineers Limited Writing implements East Africa
Assessment of the supply agreement between Eveready East Africa Limited and Chloride Egypt SAE Automotive Batteries Burundi, DRC, Ethiopia, Kenya, Rwanda, Uganda
Assessment of the Distribution Agreement between John Deere (Proprietary) Limited and AFGRI Zimbabwe Private Limited Agriculture Equipment Zimbabwe
Assessment of the Distribution Agreement between the Wirtgen Group and the Motor Engineering Company of Ethiopia Agriculture and Construction Equipment Ethiopia
Assessment of the Distribution Agreement between the Wirtgen Group and UMCL Limited Agriculture and Construction Equipment Comoros, Mauritius, Seychelles
Assessment of the Distribution Agreement between the Wirtgen Group and Sodirex SA, Madagascar Road Construction Machinery Madagascar
Application for the Joint Venture Agreement between Kenya Airways PLC, Koninklijke Luchvaart Maatscahppij NV (KLM) and Societe Air France SA Aviation Kenya
Assessment of the distribution agreements between Unilever Market Development (Pty) Limited and Distributors in the Common Market  FMCGs DRC, Madagascar, Mauritius,

Determination of Anti-Competitive Conduct: Procedure of Commission on its own volition

Matter Sector Affected Member States
Investigation into the Distribution Agreements entered into between Eveready East Africa Limited and Clorox Sub Saharan Africa Bleaching agents East Africa
Investigation into the Distribution Agreements entered into between Parmalat SA (Pty) Limited and its Distributors Milk and dairy products Eswatini, Malawi, Zambia and Zimbabwe
Investigation into the Distribution Agreements between Coca-Cola Beverages Africa and Distributors in the Common Market Non-alcoholic beverages Comoros, Ethiopia, Uganda

False or Misleading Representation 

Matter Sector Affected Member States
Misleading Advertising by Fastjet Airlines Limited Aviation Kenya, Uganda, Zambia, Zimbabwe

The CCC also confirmed that they are currently conducting a number of market screening initiatives across priority sectors. Following the conclusion of these screening exercises, the CCC will decide whether to prosecute any firms engaged in restrictive business practices.

As part of the CCC’s efforts in detecting and investigating anti-competitive behavior, the CCC has increased its collaborative efforts with domestic member agencies and has established the “Restrictive Business Practices Network” to increase the efficacy of cross-border cases.

Currie Panel Discussion

[Michael-James Currie speaking on a panel discussion on “How to improve the quality of reporting on regional integration and competition law related matters” facilitated by Mr Mwangi Gakunga from the Competition Authority of Kenya]

Conclusion

In light of the tripartite negotiations between SADC-EAC-COMESA as well as the negotiation of competition policy in terms of the African Continental Free Trade Agreement, it is imperative that the CCC develops an effective competition enforcement regime which assists and incentivizes free trade across the relevant markets. To do so, the CCC must be equipped with the necessary resources to ensure that it has the capacity to effectively execute its policies.

Despite the significant challenges faced by the CCC, it is encouraging to note that the CCC is taking a more robust approach to detecting and prosecuting anti-competitive practices in the COMESA market and are endeavoring to do so in accordance with international best practices.

If the CCC is able to deliver on the objectives and action items which were discussed in detail at the workshop, then there is every reasons to look forward to a more active CCC in the months to come with interesting cases likely to be brought to the fore.

 

 

 

 

 

 

 

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AAT, AAT exclusive, East Africa, fraud/corruption, jurisdiction, Kenya, mergers, mobile, public-interest, Telecoms, Uncategorized

Kenyan Competition Watchdog suspends Telkom Kenya / Airtel deal

Multiple regulatory agencies, competitor complaints and public interest concerns has posed a significant impediment to the proposed merger between Telkom Kenya and Airtel.

The Competition Authority of Kenya (CAK) recently announced that the Kenyan Ethics and Anti-Corruption Commission (EACC) is investigating Telkom Kenya amidst allegations of corruption in relation to historic transactions which gave rise to the current shareholding in Telkom Kenya.

The CAK’s decision to suspend the assessment of the merger was announced approximately a week after the Communications Authority of Kenya also suspended its assessment of the transaction pending the outcome of the EACC’s investigation.

The Communications Authority’s investigation will likely include an assessment of a complaint filed with the agency by Safaricom, a competitor to the merging parties.

Furthermore, the deal was also opposed by certain Telkom employees, ostensibly on the basis that their jobs were at risk should the deal go ahead.

Accordingly, the parties appear to have a long road ahead of them before clearance to implement the deal is granted.

The proposed transaction has no doubt attracted an additional degree of scrutiny as the telecom sector in Kenya is a significant market and there have been a number of disputes regarding the CAK’s jurisdiction to assess anti-competitive conduct, particularly abuse of dominance conduct, in this sector. A study into the telecom sector prepared by the Communications Authority was presented to Parliament in 2018. The CAK objected to the findings and remedial actions contained in the report which the CAK argued would amount to “price regulating” by the Communications Authority. Instead, the CAK urged the Communications Authority to focus rather on features of the market which raise barriers to entry or preclude effective competition between competitors.

While Parliament has, as far back as 2015, urged the Communications Authority to consult the CAK before making any determination regarding a telecom service providers’ “dominance”, subsequent litigation led to a High Court ruling in 2017 which confirmed that the Communications Authority’s powers vis-à-vis competition related matters remain vested exclusively with the Communications Authority.

The concurrent jurisdiction between the CAK and the Communication’s Authority has created somewhat of an enforcement discord – at least in so far as assessing abuse of dominance cases are concerned.

The fact that both the CAK and the Communications Authority have decided to suspend their assessments of the proposed merger following the outcome of the EACC’s investigation suggests that the outcome of the EACC’s investigation is relevant to both the CAK and Communication Authority analysis of the proposed transaction. This in turn, seemingly appears that there is at least an overlap in relation to the key issues under assessment by the respective agencies. Assuming there is indeed an overlap between the CAK and the Communication Authority’s assessment of the proposed transaction that naturally raises the risk of having two agencies come to different conclusions based on the same facts.

Telkom Kenya, however, remain confident that the merger will ultimately be cleared by all regulators.

Telkom Kenya have indicated that the merger will have significant pro-competitive and pro-public interest benefits which will have a positive impact on employees (and the market more generally). Whether the CAK conducts a comprehensive assessment between the short term negative impact on employment versus long term positive impact remains to be seen.

Assuming the proposed deal does not raise any traditional competition issues, it cannot therefore be ruled out that the transaction will be approved subject to public interest related conditions regarding retrenchments and/or re-employment obligations.

Whatever decision is ultimately reached, one hopes that the authorities will publish detailed reasons based on a robust assessment of the evidence in order to provide greater objectivity and transparency as to the analysis which is undertaken by the CAK when analyzing a merger – both from a competition and public interest perspective.

The CAK has in the past number of years have made significant positive strides forward in this regard and is deserved of the recognition it receives as one of the most active and robust competition authorities in Africa.

[Michael-James Currie is senior contributor to AAT and a practicing competition lawyer who has assisted clients with competition law related matters in multiple jurisdictions across Africa]

 

 

 

 

 

 

 

 

 

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East Africa, ECONAfrica, ECOWAS, Egypt, Extra-judicial Factors, jurisdiction, Kenya, legislation, Meet the Enforcers, mergers, new regime, Nigeria, no antitrust regime, Patel, predatory pricing, Price fixing, Protectionism, public-interest, South Africa, Tanzania, Uncategorized, Unfair Competition

Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?

To all our Africanantitrust followers, please take note of the upcoming American Bar Association webinar on 2 July 2019 (11amET/4pmUK/5pm CET) titled:

“Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?”

In what promises to be a highly topical (telecon) panel discussion, Eleanor Fox, Andreas Stargard, John Oxenham, Amira Abdel Ghaffar and Anthony Idigbe will:

  • provide critical commentary of the most recent developments in antitrust policy across the African continent;
  • highlight the most significant legislative amendments and enforcement activities in Africa; and
  • analyze some of the key enforcement decisions.

South Africa, Nigeria, Egypt, COMESA and Kenya are among the key jurisdictions under the microscope.

Practitioners, agency representatives, academics and anyone who is an antitrust enthusiast will find this webinar to be of great interest. Not to mention companies actually active or looking to enter the African market place.

For details on how to participate, please follow this Link

 

 

 

 

 

 

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