Category: legislation

Malawi: More than CCCC HQ. A short Retrospective on Mergers in Malawi.

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Updated Malawi Merger Control Thresholds

By Michael Williams

Malawi’s new Competition and Fair Trading Act came into effect in 2024 (“2024 Act”).[1]  While this lags behind one of the best-known competition authorities in Malawi, namely COMESA’s Competition and Consumer Protection Commission (“CCCC”) headquartered in Lilongwe to the tune of over a decade, the domestic antitrust regime is being reinforced, as this legislative update shows. And with this latest edition, it is firmly in place when it comes to those national merger-control matters that escape the one-stop-shop of the CCCC. The Competition and Fair Trading Commission of Malawi (“CFTC”) stated that the goal of the 2024 Act is to:

  1. supplement certain areas that the previous Act lacked; and
  2. improving effective enforcement.

Several notable changes were included in the 2024 Act, particularly in respect of the introduction of a suspensory merger control regime. 

The 2024 Act also introduces a public interest test that the CFTC must apply when evaluating whether a proposed merger can or cannot be justified. This public interest test includes several factors including the effect of the potential transaction on:

  • specific industrial sectors or regions; 
  • employment levels; and 
  • the saving of a failing firm.

The CFTC has also been granted the power to impose administrative orders on parties who violate the 2024 Act, which include administrative penalties of up to 10% of a firm’s annual turnover or 5% of an individual’s income. 

The CFTC can also levy orders to redress wrongdoing, such as instructing refunds, exchange or return of defective products, and termination of unfair and exploitative contracts.

These increased powers come after the High Court of Malawi Civil Division ruled in the 2023 case of CFTC v Airtel Malawi that the CFTC lacked the authority to impose fines under the 1998 Act.[2]

To supplement the 2024 Act, the Minister recently published a Government Notice[3] that provides for the financial thresholds for mandatory merger notifications as well as an overview of other fees payable to the CFTC.

THE FINANCIAL THRESHOLDS FOR MANDATORY MERGER NOTIFICATIONS

Any transaction exceeding the following financial threshold will require prior approval from the CFTC before implementing:

  1. The combined annual turnover or combined value of assets whichever is higher, in, into, or from Malawi, equals to or exceeds MWK 10 billion (approximately USD 5 800 000); or
  2. The annual turnover of a target undertaking, in, into, or from Malawi, equals to or exceeds MWK 5 billion (approximately USD 3 000 000).

FEES PAYABLE TO CFTC FOR COMPETITION FILINGS 

The Government Notice sets the merger application fee payable at 0.5% of the combined annual turnover or total assets whichever is higher of the merging parties derived from Malawi. It is important to note that the Government Notice does not specify a maximum fee payable.

OTHER FEES PAYABLE TO THE CFTC

  1. Application for an Authorization of an Agreement at MWK 10 million (approximately USD 5 800) an agreement, a class of agreements under section 24(1) of the 2024 Act or an agreement which, any person who proposes to enter into, or carry out an agreement which, in that person’s opinion, is an agreement affected or prohibited by the 2024 Act. Importantly, an ‘agreement’ is defined in the 2024 Act, being: “any agreement, arrangement or understanding, whether oral or in writing, or whether or not the agreement is legally enforceable or is intended to be legally enforceable”
  2. Application for Negative Clearance at MWK 10 million (approximately USD 5 749,49) for any party to a merger transaction seeking clarification as to whether the proposed merger requires the formal approval of the CFTC or whose proposed merger is subject to review by the CFTC.
  3. Training on Competition & Consumer Protection at MWK 5 million per training package (approximately USD 3 000);
  4. Non-Binding Advisory Opinions for SMEs: MWK 200 000,00 (approximately USD 115); Micro-enterprises: MWK 100 000,00 (approximately USD 58); Other businesses: MWK 500 000,00 (approximately USD 300).

CONCLUSION

This supplementation by the Government Notice to the 2024 Act is of utmost importance for businesses and competition law practitioners operating within the jurisdiction of Malawi to ensure smooth transactions and to avoid statutory sanctions.

[1] Competition and Fair Trading Act No. 20 of 2024

[2] Competition and Fair Trading Commission v Airtel Malawi Ltd. & Anor. (MSCA Civil Appeal 23 of 2014) [2018] MWSC 3

[3] Government Notices No. 76 and No. 77 of 2024

Malawi Revamps its Antitrust Laws: Suspensory Merger Control and More

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Not only did the Malawian government revise its 26 year-old competition law, but it effectively repealed the old statutory regime under the “Competition and Fair Trading Act”, and it has now enacted its replacement, the so-called “Competition and Fair Trading Act of 2024.”

Says Andreas Stargard, who practices competition law with Primerio Intl., “the new regime had been in the works for several years, with input from the broader international and pan-African competition communities, both private and academic, as well as from fellow antitrust enforcers across the globe. We are pleased to see this revision effort come to fruition in the form of the CFTA 2024, which notably introduces a suspensory merger-control provision — meaning companies that meet the Malawian thresholds for notifying their M&A activity must put on hold the closing of their deal until it is cleared by the authority, the CFTC.”

Parties considering entering into transactions affecting the Malawian market should note, Stargard observes, that Malawi is part of the COMESA competition-law area, “which would require firms to consider whether or not there is a COMESA community dimension to their transaction, thereby possibly negating one or more domestic filings with [National Competition Authorities], and instead making a ‘one-stop-shop’ notification to the CCC.” Coincidentally, the COMESA Competition Commission is also headquartered in the Malawian capital, Lilongwe, so “parties can expect there to be extensive collaboration between the supra-national CCC enforcement teams and the CFTC’s domestic-focussed antitrust lawyers,” Mr. Stargard surmises.

The in-depth text of the Malawian press release is as follows:

 ENTERING INTO FORCE OF THE NEW COMPETITION AND FAIR TRADING ACT 

You will recall that the Competition and Fair Trading Commission (CFTC) has been reviewing the Competition and Fair Trading Act (CFTA) of 1998 in order to fill the existing gaps and enhance its effective enforcement. The CFTC is pleased to announce that the process of repealing the CFTA of 1998 was completed and it has been replaced with a new legislation, the Competition and Fair Trading Act of 2024. 

The new legislation was passed by Parliament on 5th April, 2024, and was assented to by the State President, His Excellency, Dr Lazarus Chakwera on 19th May 2024. In accordance to Section 1 of CFTA of 2024, The new Act shall come into force on a date to be appointed by the Minister, by notice published in the Gazette. The Competition and Fair Trading Act of 2024, therefore, comes into force today, 1st July, 2024, following the gazetting of the notice, signed by the Minister of Trade and Industry, Hon. Sosten Gwengwe, MP, which appoints this date. 

CFTC is extremely pleased with this development as it signals an end to some of the enforcement challenges the institution was facing with regard to the enforcement of the old Act due to the gaps in some of the key provisions in the law. In addition, the CFTA needed to be aligned with the recent developments in the enforcement of competition 

and consumer protection law, reflective of the current market dynamics in the economy. Furthermore, the CFTA required to be aligned with international best practices in the enforcement of competition and consumer protection. 

In order to address these gaps, there are several changes that have been made to the CFTA of 2024. Below is a highlight of some of the key changes: 

i. Competition Regulation 

The major change that has been brought in is on Suspensory Merger Notification. The 1998 CFTA provided for voluntary notification of mergers and acquisitions; which meant that mergers having potential harm to competition process and consumer welfare could be effected without seeking authorisation from the CFTC. The new CFTA has made notification of mergers and acquisitions mandatory, based on determined thresholds. 

The new Act has also expanded on the provisions on anticompetitive business practices, to make it very encompassing but also effective to regulate and enforce. These areas include: restrictive business practices; collusive conducts (cartels); abuse of market power; but also mergers and acquisitions. 

ii. Consumer Protection 

The CFTA of 1998 narrowly defined the term “Consumer”. The definition under the old Act left out some stakeholders that are equally affected by unfair trading practices, which include: consumers of technology, consumers of digital products, beneficiary consumers, but also other users of goods or services for purposes of production of other goods or services. For this reason, various vulnerable groups that did not fall within that narrow definition were not effectively protected from unfair trading practices 

The CFTA of 2024 has also brought in several types of unfair trading practices that were not included in the CFTA of 1998. Among others, these include the following: 

 failure to give warranty or guarantee on goods for long term use; 

 improper or insufficient labelling of products; 

 failure to disclose material information about the products supplied; 

 engaging in excessive or exploitative pricing of the products. 

 imposition and implementation of unfair terms in consumer contracts. 

iii. Abuse of Buyer Power 

The CFTC of 1998 focused on abuse of supplier (seller) power and not the abuse that may arise from powerful or dominant buyers. This made it difficult to deal with malpractices by buyers, including those involved in buying farm produce from farmers. 

The CFTA of 2024 has included various provisions to redress malpractices resulting from abuse of buyer power. The Act has expressly prohibited the powerful and dominant companies that purchase agriculture produce from the farmers not to engage in any anticompetitive and exploitative conducts. For example, the Act prohibits, among others, the following conducts: 

 delays in payment of suppliers, without justifiable reason, in breach of agreed terms of payment; 

 unilateral termination or threats of termination of a commercial relationship, without notice or on an unreasonably short notice period, and without an objectively justifiable reason; 

 refusal to receive or return any goods or part thereof without justifiable reason, in breach of the agreed contractual terms; 

 transfer of commercial risks meant to be borne by the buyer to the suppliers; 

 demands for preferential terms unfavourable to the suppliers; 

 demanding limitations on supplies to other buyers; 

 reducing prices by a small, but significant, amount where there is difficulty in substitutability of alternative buyers or reducing prices below competitive levels; or 

 bidding up prices of inputs by a buyer enterprise with the aim of excluding competitors from the market. 

iv. Penalties for Violations 

Under the CFTA of 1998, when the Commission found a business enterprise in breach, it had been imposing fines, which were provided for under Section 51. However, in 2023, in the matter of CFTC v Airtel Malawi Plc, the Court ruled that the said provision does not empower the CFTC to impose fines, on the grounds that the violations were designated as being criminal in nature. Specifically, under section 51 of the CFTA of 1998, the provision for imposing the fines was combined with sanctioning of an imprisonment sentence of up to 5 years. The ruling in the CFTC v Airtel Malawi Plc case, thus weakened the regulatory mandate of the CFTC. In addition, the 1998 CFTA did not provide for aggravating and mitigation factors for the Commission to consider in coming up with fines and/or orders. 

The CFTA of 2024 gives express powers to the CFTC to issue Administrative Orders, which include imposing fines on errant enterprises. Under the new Act, the fines to be imposed will be (i) up to 5% of annual turnover if it is an individual; or (ii) up to 10% of annual turnover if it is a company. The determination of the fines will depend on the applicable aggravating and mitigating factors. There are also various Orders that the CFTC can impose which are meant to redress the malpractices. These include orders to: give refunds, return or exchange defective products, withdraw false advertisements, supply the advertised/promised goods and services, and cancel unfair and exploitative contracts. 

v. Suitability and Independence of Commissioners for the CFTC 

As adjudicators of cases, the Commissioners of the CFTC are required to be sufficiently scrutinized for their qualification and suitability for their functions, but also guarantee utmost independence. Under the provisions of the CFTA of 1998, the Commissioners were not thoroughly subjected to scrutiny of Parliament once appointed, to determine their qualification and suitability for their office. Similarly, the Commissioners independence as adjudicators was not guaranteed under the old law. The CFTA of 2024 has provided that, as a way of ascertaining the Commissioners’ suitability and ensuring independence, their appointment and removal from office will be subjected to the scrutiny of the Public Appointments Committee of Parliament. 

In view of the foregoing, the CFTC would like to call upon business enterprises, consumers and the general public to take notice of the new legislation, and particularly take consideration of the provisions that have been brought into the CFTA of 2024. Furthermore, the CFTC would like to advise the business enterprises to adopt voluntary compliance with competition and fair trading laws at all times, so as not to be found in breach of the law. 

For media enquiries on this statement, contact Innocent Helema on 0880725075 or email innocent.helema@cftc.mw. 

LLOYDS VINCENT NKHOMA 

CHIEF EXECUTIVE OFFICER 

Draft Vertical Restraints Regulations: what is an SPLC for purposes of section 5(1)?

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By Joshua Eveleigh

On 03 June 2024, the Department of Trade, Industry and Competition (“DTIC”) published the draft Vertical Restraints Regulations (“Draft Regulations”) with the intention of providing a non-exhaustive list of factors to assist in determining whether a restrictive vertical practice, contravenes section 5 of the Competition Act, 89 of 1998 (“Competition Act”).

The current framing of section 5(1) of the Competition Act is broadly framed in that:

“An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect.” (own emphasis)

In this regard, the non-exhaustive list contained in Draft Regulations look to provide clarity in respect of which arrangements may result in a substantial prevention or lessening of competition (“SPLC”) within a particular market, including:

  • The nature of any restraint and the exclusivity (if any) of such restraint;
  • the duration of the restraint and any rights of renewal;
  • practical implementation of the agreement;
  • the nature of the good or service subject to the restraint, including the level in the supply chain and the maturity of that particular market;
  • the individual market shares of the contracting parties;
  • whether one (or more) of the parties is an important competitor within one level of the value chain;
  • barriers to entry and the likelihood of entry;
  • the strength and importance of inter/intra-brand competition and both levels of the supply chain;
  • the extent of participation of SMEs and/or HDPs firms in market;
  • whether there are parallel networks of similar vertical restraints amongst competing buyers or supplers, and whether the agreement contributes to the cumulative effect of this network of agreements; and
  • whether the vertical relationship is a franchise arrangement.

The Draft Regulations go further as to provide a list of instances which would be regarded as resulting in a “strong likelihood” of a SPLC. These include, inter alia, restrictions on:

  • active and passive sales, particularly within the context of distribution agreements;
  • the ability of a buyer to manufacture, purchase, sell or resell goods and services after termination of the agreement; and
  • buyers of online intermediation platforms being, directly or indirectly obliged, not to offer, sell or resell goods or services to end-users under more favourable conditions via competition online intermediation services, otherwise known as ‘wide’ most favoured nation (“MFN”) clauses.

As section 5(1) of the Competition Act exists as a rule-of-reason prohibition, firms may justify any vertical agreement which results in a SPLC on the fact that the anticompetitive effect is outweighed by other technological, efficiency or pro-efficiency gains. One aspect where firms typically fall short is that they fail to provide any objective quantification of such gains and why/how these outweigh the perceived anticompetitive effect. In this regard, the Draft Regulations also provide a list of non-exhaustive factors to assist in the rule-of-reason aspect of section 5(1), these include:

  • if the alleged gains have been quantified;
  • if it can be shown the customers or end-consumers benefit from the alleged gains; and
  • whether the agreement promotes the participation of SMEs and/or HDPs in the market.

Interestingly, the Draft Regulations was also accompanied with a memorandum, elaborating on certain aspects or factors contained in the Draft Regulations. Notably, the accompany memorandum states:

“Dominance by one of the firms to the vertical agreement or practice is not required for the agreement to be assessed under section 5. Where one of the firms to the agreement or practice is dominant in a relevant market, the conduct may also be assessed under both sections 5 and 8 of the [Competition Act]”

While ‘dominance’ is not strictly required for a contravention of section 5 of the Competition Act, it is commonly accepted that an SPLC, as required by section 5(1), is unlikely to occur unless one or more parties to the vertical agreement have market power (i.e., the ability to act independently of their competitors, suppliers and/or customers). Where it can be established that a firm to the vertical agreement has market power, the conduct is more likely to be considered under the abuse of dominance provisions of the SA Competition Act.[1]

Accordingly, the SACC should be careful to assume that there has been an SPLC just because the nature of a vertical arrangement aligns with one of the ‘non-exhaustive factors’ identified in the Draft Regulations. This would clearly have unfair effects on firms investigated or prosecuted against.

Interestingly, the SACC has included wide MFN clauses into the ambit of the Draft Regulations, most likely pursuant to its findings in the Online Intermediation Platform Market Inquiry which found that these clauses prevented competition. The SACC imposed remedial action on several platforms to remove wide MFN clauses from their agreements with other firms. While the SACC’s position to date is that wide MFN clauses are anticompetitive, these arrangements would still be subject to a rule-of-reason analysis – however, given the SACC’s explanation in the accompanying memorandum (explained above) platforms should be concerned that they will be prevented from implementing MFN clauses despite them having no significant market share or market power.

In sum, while the Draft Regulations are welcomed in certain respects it appears that the non-exhaustive factors look to forego the SACC’s obligation to establish that a vertical arrangement has, in fact, resulted in an SPLC by conducting the necessary economic assessments. If successful, the section 5(1) net will be cast significantly wider than what it is currently.

[1]             Luke Kelly et al ‘Principles of Competition Law in South Africa’ at 113.

“So Much Abuse”: Overhaul of Competition Law Shifts from ‘Buyer Power’ to ‘Superior Bargaining Position’ Abuse

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AAT discusses how the Kenyan antitrust watchdog, CAK, is seeking input on its recently released draft amendments

By Joshua Eveleigh

On 28 May 2024, the Competition Authority of Kenya (“CAK”) published a request for public comment on its ‘Draft Competition (Amendment) Bill, 2024’ (the “Amendment Bill”). The Amendment Bill seeks, most notably, to broaden the scope of the Competition Act to include ‘digital activities’ and to replace the recently included ‘abuse of buyer power’ prohibition with an ‘abuse of superior bargaining position.

Digital Activities

The Amendment Bill defines ‘digital activities’ as:

“the provision of a service by means of the internet, or provision of digital content, for the benefit of business consumers or other consumers (whether paid for or otherwise and whether or not such activity is multisided), and may include —

  • online intermediation services, including online marketplaces and app stores;
  • online search engines;
  • online social networking services;
  • video-sharing platform services;
  • independent interpersonal communication services;
  • operating systems;
  • cloud computing services; and
  • online advertising services”

Moreover, the new law would broaden the assessment for effects on competition or a firm’s dominance provided for in the Competition Act to include the following:

  • in the context of digital activities, where dominance can be established even with market shares below forty percent, the Authority shall consider factors that typically grant significant market position, whether they arise from the digital activity being performed in one or multiple markets;
  • direct and indirect network effects and the entry barriers arising in connection with those network effects;
  • economies of scale and scope enjoyed by the undertaking, including with regard to the undertaking’s access to data relevant for competition;
  • switching costs for users and the ability and propensity for users to multihome; and
  • competitive pressure driven by innovation;
  • the importance of the intermediary services provided by the undertaking for accessing supply and sales market, including with reference to the size of the undertaking and the number of business and individual users it has and the period over which that level of importance has been held.

Says Andreas Stargard, a partner in Primerio’s competition-law group, “[e]vidently, the CAK is joining the global trend in regulating online marketplaces and firms. Our Kenyan colleagues expect more enforcement against firms that are active within the digital space – particularly given the CAK’s focus on the online sector in its past market studies and investigations.”

The inquiries mentioned include:

Abuse of Superior Bargaining Position

The Amendment Bill also seeks to remove the ‘abuse of buyer power’ prohibition, despite it only being included subsequent to recent amendments to the Competition Act in 2019. Interestingly, this change also comes after the CAK’s recent success in enforcing the newly-implemented buyer power provision, including:

  • the CAK’s announcement that it was able to recover reneged payments worth KES38 million from twenty motor vehicle repairers and five motor vehicle assessors in favour of 1, 000 Kenyans;[1]
  • its settlement with Unilever Kenya Limited resulting in the revision of payment terms for a number of its suppliers; and
  • the High Court of Kenya’s recent finding that Majid Al Futtaim Hypermarkets Limited had abused its buyer power in respect of its commercial relationship with Orchards Limited, confirming the finding of Kenya’s Competition Tribunal.

Now, in lieu of the perhaps more narrowly perceived Buyer-Power clause, the Amendment Bill seeks to include an entirely new section 40A to the Competition Act, prohibiting the abuse of a ‘superior bargaining position’, defining it as:

“the ability of an undertaking to control, direct, define or determine the conditions of business operations with counterparties which are favourable to itself without reference to the undertaking’s dominant market position or market power in the relevant market;” (our emphasis)

While the proposed definition is clear in that a firm need not be dominant or have market power to have a ‘superior bargaining position’, the Amendment Bill provides that the CAK must consider the following factors in determining whether a superior bargaining position in fact exists:

  • the degree of dependence by the affected undertaking or undertakings on transactions with the party under investigation;
  • the position of the undertaking in the market;
  • the possibility of the affected undertaking to change its business counterpart; and
  • whether the party under investigation is an unavoidable trading partner or a critical business partner in the relevant market.

Additionally, the Amendment Bill looks to broaden the conduct which would trigger an abuse of a superior bargaining position from what is already included in what may trigger an abuse of buyer power. These additional categories include, inter alia:

  • unilateral variation of contractual terms, conditions, or other rules associated with the transaction or service without prior notification to the counterparties;
  • unreasonable collection and/or processing of data of the counterparty;
  • imposing unduly difficult conditions for the termination of service; and
  • obstruction of business activities or interference in the counterpart’s management of its business.

Notably, an abuse of superior bargaining position attracts the same penalties as the current abuse of buyer power provision, that being a period of imprisonment not exceeding five years or a fine not exceeding KES 10 million shillings, or both.

Looking Ahead

“It is clear that the CAK is looking to broaden the ambit of its enforcement initiatives. In this regard, we note that the ‘abuse of superior bargaining position’ is largely identical to the current abuse of buyer power framework. It is likely, therefore, that the CAK is looking to translate its recent success against ‘buyers’ to firms at all levels of the supply chain, irrespective of whether they in a position of supplier or purchaser,” says Mr. Stargard.

Following this approach, it appears to us that the abuse of dominance provisions in the Competition Act have been given something of a ‘downgrade’. Specifically, it is not apparent to the author why a disgruntled firm (or the investigating CAK) would rely on the existing abuse of dominance provisions (and thereby needing to actually establish a firm’s dominance) when the would-be plaintiff could rely solely on the incredibly broad superior bargaining position provision — which notably does not require a showing of dominance or market power.

We are also interested to see whether the proposed superior bargaining provision will have an ‘opening the floodgates’ type effect if and when implemented. In this regard, it appears that an economic dependence argument would be relevant in determining whether a firm has a superior bargaining position. Absent a dominance requirement, the CAK may well be inundated with complaints from disgruntled contracting parties. 

[1] CAK, Newsletter Issue No.9 (2022), at 3. Available at: https://cak.go.ke/sites/default/files/2022-06/CAK%20Newsletter%20Issue%209.pdf

CCC Celebrates ’10’ — a Decade of COMESA Competition Law

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Anniversary of CCC’s 2013 Creation to be Celebrated, Developments Discussed

Next week, African heads of state, ministers of trade and commerce, the secretary general of the 21-member state COMESA organization, Commissioners, and several heads of various competition agencies across the region, from Egypt to Eswatini & from Mauritius to Malawi, will join antitrust practitioners, legal experts, business people, and journalists in celebrating the occasion of the 10-year anniversary of the COMESA Competition Commission in Lilongwe, where the agency is headquartered.

Of course, AAT will be there to cover it.

As leaders of this august publication will know by now, our authors have followed the development of the CCC since its very beginning: from the nascent stages of having only a rudimentary staff and foundational rule documents, lacking sufficient guidance for practitioners and businesses alike, to the significant developmental stage under its first chief executive officer, Dr. Lipimile, who built out his enforcement team to coincide with the stellar growth of the CCC’s “one-stop-shop” merger notification statistics and attendant agency reviews (hiring economists and lawyers alike from across COMESA member nations) — and culminating, so far at least, in what we have come to call “CCC 2.0”: the latest iteration of the vastly successful multi-jurisdictional antitrust body, now led by its long-term member Dr. Willard Mwemba.

Under Mwemba’s aegis, the Commission has advanced well beyond a mere ‘rubber-stamping’ merger review body, as some had perceived the fledgling agency in its very early years (approx. 2013-15). The triple-C has since then begun to launch serious investigations into price-fixing, monopolization, attempted monopolization, gun-jumping, as well as market allocation schemes and secretly implemented transactions that parties had failed to notify.

While ‘antitrust is on our minds’, we note here for the record that, beyond its “competition” ambit that mostly remains in our focus at AAT, the CCC’s enforcement mission also includes a fairly large “consumer protection” brief, and the agency’s dedicated unit has investigated areas of consumer concern as broad as airline practices, imported faulty American baby powder, online ‘dark’ practices, pay-TV, and agricultural product quality disputes (milk and sugar come to mind) between Uganda and Kenya, to name only a few…

Our publication, together with several of the business journals and newspapers across the southeastern region of Africa, will report in great detail on the events, and possible news, to take place next week. Says Andreas Stargard, a competition practitioner with Primerio International:

“I look forward to hearing from these leaders themselves what they have accomplished in 10 years, and more importantly what they wish to accomplish in the near to mid-term future. In addition, I have a feeling that we may be treated to some truly newsworthy developments: I could imagine there being either confirmation or denials of the circulating rumour that the COMESA merger regime will soon become not only mandatory, but also suspensory. As most attorneys practicing in this arena know by now, the current Competition Regulations are not suspensory, which may be deemed too restrictive by the group’s Secretariat and its agency leadership in terms of its enforcement powers. After all, it is much more difficult to unscramble the egg than to never let it drop in the pan from the get-go!

Also, the CCC may reveal its plans in relation to a leniency programme for cartel conduct, which is plainly in order!”

Beyond that, Stargard surmises, participants at the almost week-long event may be treated to news about the CCC’s thoughts on digital markets, sectoral investigations, and the Commission’s upcoming “beyond-mere-merger” enforcement activities.

New Guidelines on the Exchange of Competitively Sensitive Information: 5 years with little change?

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South African antitrust enforcer releases Amended Guidelines

By Joshua Eveleigh and Jemma Muller

On 12 September 2022, the Competition Commission of South Africa (“Commission”) published the Guidelines on the Exchange of Competitively Sensitive Information between Competitors under the Competition Act No. 89 of 1998 (the “Amended Guidelines”).

The original Guidelines were released for comment on 14 July 2017; they were created to provide guidance to industry stakeholders on when information exchanges between competitors should be considered harmful to competition (and thus fall foul of the Competition Act) and when they could be considered efficiency-enhancing. The creation of the Guidelines was a welcomed development, as it sought to provide industry stakeholders with insight as to how the Commission will assess whether a particular information exchange between competitors amounts to an antitrust violation, specifically a contravention of section 4 of the Competition Act.

The Amended Guidelines have now been published to address certain concerns raised by industry stakeholders in relation to their first iteration.

Notably, the originally published draft was reported to have received substantive comments from industry stakeholders relating to:

  1. what constitutes “commercially sensitive information”;
  2. the broadness of the Guidelines and lack of safe harbours within them;
  3. additional guidance as to the type of information competitors may lawfully share;
  4. industry-specific concerns; and
  5. public announcements.

Whilst acknowledging that the first iteration of the Guidelines was overly broad, the Commission states that this was an intentional decision.  Notably, the  Amended Guidelines remain just as broad, with the Commission rather opting to determine market-=specific safe harbours on a case-by-case basis.

Additionally, the Commission — now under the aegis of its new head, Doris Tshepe — has chosen to exclude from the Amended Guidelines any discussion of complex topics (such as price signalling, joint ventures, cross-directorship and shareholding, requests for quotations, market studies and benchmarking), instead deciding to rule on these issues on an ad hoc basis.

One substantive difference between the original and Amended Guidelines is the recent departure from the term “commercially sensitive information” to the newly adopted “competitively sensitive information”. In this respect, only information that is likely to have an effect on competition is prohibited in terms of the Guidelines, including: prices, customer lists, production costs, quantities, turnovers, sales, capacities, qualities, marketing plans, risks, investments, technologies, research and development programmes and their results.

While the narrowing of the scope of the amended Guidelines to “competitively sensitive information” and the decision to provide more focused guidance to industry associations ought to be a welcome change, it is likely that stakeholders will continue to perceive the Amended Guidelines as overly broad. In this regard, the Commission has seemingly ignored stakeholders’ previous comments to the original Guidelines, particularly in relation to a lack of safe harbours and industry-specific concerns. In this respect, the Amended Guidelines continue to have little impact on a firm’s ability to self-regulate its conduct in compliance with the Competition Act.

The Amended Guidelines are open for public comment until 04 November 2022 and can be accessed here.

Breaking: CCC withdraws its recent Merger Practice Note

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An AAT-exclusive first report on this — somewhat stunning — development follows below. More details to be published once they become available in a new post…

On August 8th, 2022, the CCC officially announced the formal withdrawal of its Practice Note No. 1 of 2021, which had clarified what it meant for a party to “operate” in the COMESA common market. The announcement mentions that it will (soon? how soon?) be replaced with a revised Practice Note — a somewhat unusual step, in our view, as the revised document could have, or should have, been published simultaneously with the withdrawal of the old one. Otherwise, in the “interim of the void,” legal practitioners and commercial parties evaluating M&A ramifications in the COMESA region will be left with no additional guidance outside the bloc’s basic Competition Regulations and Rules.

Of note, “this clarifying policy document did not stem from the era of Dr. Mwemba’s predecessor (CCC 1.0 as we are wont to call it), but it was already released under Willard’s aegis as then-interim director of the agency,” observes Andreas Stargard, a competition lawyer at Primerio Ltd. He continues: “Therefore, we cannot ascribe this most recent abdication to a change in personnel or agency-leadership philosophy, but rather external factors, such as — perhaps — the apparently numerous inquiries the CCC still received even after implementation of the Note.”

To remind our readers, we had previously reported on AAT as to this (now rescinded) note as follows (Feb. 11, 2021):

The COMESA Competition Commission (“CCC”) issued new guidance today in relation to its application of previously ambiguous and potentially self-contradictory merger-notification rules under the supra-national COMESA regime. As Andreas Stargard, a competition practitioner with Primerio notes:

“This new Practice Note issued by Dr. Mwemba is an extremely welcome step in clarifying when to notify M&A deals to the COMESA authorities. Specifically, it clears up the confusion as to the meaning of the term ‘to operate’ within the Common Market.

Prior conflicts between the 3 operative documents (the ‘Rules’, ‘Guidelines’, and the ‘Regulations’) had become untenable for practitioners to continue without clear guidance from the CCC, which we have now received. I applaud the Commission for taking this important step in the right direction, aligning its merger procedure with the principles of established best-practice jurisdictions such as the European Union.”

S.A. considers non-binding advisory opinions (again)

Posted on by Editor

The South African Competition Act and the re-emergence of non-binding advisory opinions: Draft regulations published for comment

By Jemma Muller and Estelle Naude

After the suspension of the Competition Commission’s (“Commission”) advisory service in 2018, following the Constitutional Court’s decision in Hosken Consolidated Investments Limited v The Competition Commission, the regulation of non-binding advisory opinions is once again on the Commission’s agenda.

On the 23rd of March 2021, the Proposed Regulations on Non-Binding Advisory Opinions (“Proposed Regulations”) were published for comment by the Department of Trade, Industry and Competition (“DTIC”) in Gazette 44310 GoN 248. The public have been afforded until 23 April 2021 to provide their comment on the Proposed Regulations.

These Draft Regulations are centered around three important aspects of non-binding advisory opinions, namely:

  • How one can request a non-binding advisory opinion from the Commission;
  • The legal status of a non-binding advisory opinion; and
  • The fees payable if one requests a non-binding advisory opinion.

When requesting a non-binding advisory opinion, the requesting party will have to provide the Commission with a fairly comprehensive set of information, including, inter alia, the requesting party’s name, the market(s) in which it operates, the reasons for seeking a non-binding advisory opinion, the nature of the legal advice requested, appropriate information to allow the Commission to determine whether the requesting party falls within one of the entities exempt from paying a fee, and any other facts, information and documents which would enable to the Commission to provide a non-binding advisory opinion.

The Proposed Regulations serve as a vital tool for parties to receive guidance from the Commission pertaining to their compliance with the Competition Act No. 89 of 1998, as amended (the “Act”). Obtaining guidance from the Commission, for example on whether a proposed merger is notifiable, could not only prevent the party concerned from facing penalties for contravening the Act, but also save time and resources and negate the need for paying a filing fee (although requesting a non-binding advisory opinion does attract a fee in certain circumstances, which is discussed more fully below).

Notwithstanding the above, the information that the requesting party is required to disclose to the Commission may have the unintended consequence of discouraging parties from utilizing the advisory function for fear of confidentiality concerns. In this respect, section 44 of the Act is relevant and states the following:

“1(a) A person, when submitting information to the Competition Commission or the Competition Tribunal, may identity information that the person claims to be confidential information.

…

(2) The Competition Commission is bound by that a claim contemplated in subsection (1), but may at any time during its proceedings refer the claim to the Competition Tribunal to determine whether or not the information is confidential information” (our emphasis)

On the 23rd of March 2021, the DTIC also published for comment amendments to forms, rules and regulations of the Commission in Gazette 44309 GoN 247 (available at https://www.gov.za/sites/default/files/gcis_document/202103/44309gon247.pdf) which deals with, inter alia, an amended Rule 15A which pertains to access to confidential information submitted to the Commission. Rule 15A states:

“(1) Before the Commission makes the determination contemplated in section 44(3) of the Act in respect of information submitted to the Commission under a confidentiality claim, the Commission must:

(a) issue a Notice of intention to make a determination in Form CC 23 to the claimant and the Respondent; and

(b) allow the claimant and the Respondent 5 business days to make representations to the Commission.

(2) Within 5 business days after the Commission makes its determination in terms of section 44(3), an aggrieved person may refer the Commission’s decision to the Tribunal in accordance with the Tribunal’s rules.” (our emphasis)

According to the Proposed Regulations, the Commission is permitted, upon receipt of a request for a non-binding advisory opinion, to determine whether the issues subject to the request should be dealt with in an investigation or any other process under the Act. Additionally, a non-binding advisory opinion cannot fetter the discretion of the Commission while it exercises its functions in terms of the Act. As with the information the requesting party is required to disclose to the Commission, this provision may serve to deter businesses from utilizing this advisory function for fear that information disclosed may later be used by the Commission in an investigation. In this regard, section 45A of the Act states:

“1(a) When making any decision in terms of this Act, the Competition Commission, subject to paragraph (b), may take confidential information into account in making its decision.”

This also raises the question on the status of confidential information submitted to the Commission pursuant to a non-binding advisory opinion, which the Commission later declines to issue an opinion on. According to the Proposed Regulations, if the Commission declines to issue an opinion, it must refund the fee paid by the requesting party if it appears the issues underpinning the advisory opinion will undermine the objectives of the Act.

Importantly, a request by medium enterprises and other market participants for a non-binding advisory opinion must be accompanied by a fee of R20 000 and R50 000 respectively. This is a notable increase from the fees the Commission previously charged under Rule 10.4 of the Conduct of Proceeding in the Competition Commission, which was a fee of R2500 payable by the requesting party.

While the proposed fee structure is a noticeable increase from the fees previously payable under Rule 10.4, the penalties for contravening the Act as well as merger filing fees prescribed by the Act can be far more costly than the cost of requesting a non-binding advisory opinion. It is also noteworthy that the Proposed Regulations expressly exclude certain entities from paying a fee, namely:

  • Constitutional institutions;
  • Departments;
  • Major public entities;
  • Micro enterprises;
  • Non-profit organizations;
  • Other public entities; and
  • Small enterprises.

It could be argued that the exclusion of the abovementioned entities from paying a fee may open the floodgates for requests for non-binding advisory opinions to the Commission, which could overburden an already inundated Commission.

In terms of the legal status of non-binding advisory opinions, the Proposed Regulations make it clear that the opinion has no binding legal effect on the Commission, the Competition Tribunal or the Competition Appeal Court.

The Proposed Regulations, while still in draft form, represent an important competition law development in South Africa and provide parties with much needed guidance, particularly in light of the complexities and legal nuances brought about by the recent amendments to the Act. Furthermore, the Proposed Regulations are largely in line with recent trends in promoting competition law compliance through competition advocacy as opposed to enforcement mechanisms.

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

Posted on by Editor

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

 

 

 

 

 

 

Moroccan telecom sector gets competition regulation

Posted on by Editor

AAT has learned that the fledgling Moroccan antitrust regime, which has never quite come off the ground, is now being supplemented in a sector-specific regulation, namely the recently gazetted Droit [Law] no. 121.12.

The new law supplements the competition guidance specifically for telecommunications carriers, including high-speed internet and fibre-optic cable service providers, without repealing the main piece of antitrust legislation (Law no. 104.12 on the Freedom of Prices and Competition), whose key regulatory body — the Competition Council (Conseil de la Concurrence) — only recently became active in December 2018.  Law 121.12 now confers full investigative authority to the National Telecommunications Regulatory Agency (ANRT), which it enables to review complaints of anti-competitive behaviour, roaming agreements between competitors, and the like.

Andreas Stargard, a competition practitioner with Primerio, notes that “the law is primarily focussed on conduct issues and does not cater for any transactional / merger regulation, which remains the province of Law 104.12 and its crucial (and much debated) ‘40% domestic market share’ hurdle for notifications in the Kingdom.”  Stargard notes that the Competition Council’s web site is still — despite the agency’s recent personnel appointments — merely an “empty store-front of a site, without any substantive content.”

The new telecom-specific regulation is likely to have an impact on, and was influenced by, the limited state of play in the sector, which has been dominated for decades by state monopoly Maroc Telecom, whose would-be competitors such as Orange and Inwi have recently filed complaints against the dominant firm, mostly for refusals to deal, being denied access to indispensable networks, roaming agreements, and the like.

Says Stargard: “The new law will take such disputes out of the lengthy judicial process in court and allow the ANRT to investigate and render decisions on its own, including the power to fine up to 5% of a company’s turnover.”

We will update AAT once further details become available.