AAT exclusive, cartels, collusion, East Africa, Kenya, leniency, leniency / amnesty, Price fixing, Whistleblower reward

New Antitrust Whistleblower Reward Scheme: Are ‘Paltry’ Rewards & Anonymity Enough?

As of January 1st, 2021, Kenya’s competition-law enforcer, the Competition Authority of Kenya (CAK), started benefitting from its new “Informant Reward Scheme” (IRS). The IRS encourages “confidential informants” — often also referred to as “whistleblowers” — privy to inside information about antitrust offenses to come forward and report the illicit conduct to the Authority.

The IRS incentivizes informants with promises of anonymity as well as — rather modest, as we will see — monetary rewards: the CAK vows to maintain the confidentiality of the informant’s identity, and provides for up to Sh1,000,000 (approximately US$9,100 at today’s Fx rate).

Andreas Stargard, a competition lawyer active on the African continent, has delved more deeply into the CAK’s enabling “Guidelines” document, trying to ascertain the precise contours of the IRS program. He reports as follows:

AfricanAntitrust.com: “Who is eligible to participate in the IRS?”

Andreas Stargard: “What we know from the implementing Guidelines, and also from Director General Kariuki‘s speech on the IRS, is that only third parties or those individuals playing merely a remote and peripheral role in relation to the anti-competitive conduct are eligible to benefit from the IRS. This means that a 3rd-party customer, or a non-executive employee such as a secretary or copy clerk of the offending company, may report wrongdoing under the IRS.”

AAT: “What about insiders with executive authority, then?”

Stargard: “Similar to Western countries’ antitrust regimes, those individuals can still report illicit conduct by their employers, but they would have to resort to the Kenyan leniency process as opposed to the Informant Reward Scheme.”

AAT: “Understood. Are there other, similar whistleblower schemes in existence?”

Stargard: “Yes. We recently held a very timely webinar with leading international and African experts on the topic of whistleblowing, which I moderated. A recording of it is available on the web. Whistleblowing has become an important piece of the enforcement puzzle for many governmental authorities around the globe, not only on competition issues. In Kenya, specifically, President Kenyatta recently doubled the rewards for tax-fraud whistleblowers, who are now entitled to receive up to Sh5,000,000 ($45,000), and the country’s revenue service implemented the so-called iWhistle portal to allow informants to report tax fraud anonymously.”

AAT: “Speaking of money, what is your take on the amount of the offered reward under the terms of the IRS?”

Stargard: “Frankly speaking, one million Kenyan shillings is a paltry sum. I cannot comprehend how reporting a competition-law violation such as a price-fixing cartel that may cost the Kenyan economy and its consumers billions in losses is deserving of 5-times less reward than an informant reporting an individual’s tax fraud to the revenue service, which may cause significantly less injury to the government purse than an international cartel of corporates…”

AAT: “Strong words.”

Stargard: “I’m serious. Compare and contrast the meager sum of not even US$10,000 maximum IRS reward with the potential 5-year prison sentence liability for executives convicted of collusion! There is simply no comparison…”

AAT: “In a perfect world, what would you change about the Kenyan whistleblower scheme?”

Stargard: “If I had had any input into the process of devising the IRS Guidelines, I would have ensured that the maximum reward amount be commensurate with the economic harm and financial damage done by cartels — in short, I would raise the IRS reward to an un-capped straight-up percentage portion of the fines recovered by the CAK. The more, the better for everyone.”

AAT: “Do you have any parting words or final observations on the IRS program for our readers?”

Stargard: “Well, for starters, it is not too late to implement changes to the regime. The CAK (and the legislature, to the extent necessary) can easily increase the maximum reward, as I proposed earlier. I am certain that it would yield better results than the current Sh1m cap, which can easily be ‘outbid’ by an already-corrupt employer, seeking to ‘buy’ its employees’ loyalty! So, Mr. Kariuki, if you’re reading this interview, I’d strongly suggest considering an increase in the reward.

Secondly, from our international experience, we know one thing about ‘secret’ informant schemes: One key element of any successful whistleblower regime (besides ensuring adequate rewards) is the strictest maintenance of confidentiality of the informant’s identity. I realize that section ‘F’ of the Guidelines assures the public that anonymity will be guaranteed and that the CAK will ‘take utmost care to ensure that the identity of the confidential informant is not disclosed.’ However, as an attorney, I can only say that the proof is in the pudding. We will have to wait for the first proceedings pursuant to IRS-provided reports, in order to determine whether or not the whistleblowers’ anonymity will indeed be preserved successfully in practice. That said, I look forward to advising clients on the many issues that are likely going to arise from the Scheme!”

AAT: “Thank you for your time and insights on this new development!”

CAK Director General Wang’ombe Kariuki
Standard
cartels, collusion, legislation, leniency, leniency / amnesty, Mauritius

Enforcement Alert: MU Competition Commission to Permit Cartel Initiators to Seek Leniency

The Competition Commission of Mauritius (CCM) has announced changes to its leniency programme. Though the CCM did have a functioning leniency programme in place since its inception in 2009, the it was often criticised as being inadequate.

Competition lawyer John Oxenham notes that under the existing programme, firms which were found to be cartel ‘initiators’ (an enterprise which has coerced others into a collusive agreement) did not qualify to receive any immunity or other benefit.

John Oxenham

John Oxenham

Oxenham believes that this had led to uncertainty and prevented companies from applying for leniency (which required full disclosure of anti-competitive conduct), as firms may be unsure whether or not they would be considered to be ‘instigators’ (and so be disqualified from receiving immunity from prosecution). This meant that firms often had to weigh the risk of being considered an ‘initiator’ against the risk of prosecution to ultimately decide on whether to apply for leniency.

The CCM had previously identified this aspect as a potential area of concern, which led to the temporary special amnesty programmes under which firms who believed themselves to be ‘initiators’ could apply for leniency. This, according to the CCM, led to various successful leniency applications and related prosecutions.

In its media release of 23 January 2018, CCM executive director Deshmuk Kowlessure stated that “[w]ith respect to leniency programmes, we have observed that several advanced competition authorities have adopted leniency for cartel initiators and coercers…” “Likewise, the CCM has taken a step beyond traditional leniency programmes and we are now extending the possibility for initiators or coercers to apply for leniency.”

The recent amendment, therefore, seeks to formalise the CCM’s previous (temporary) amnesty programme for ‘initiators’ by allowing them to approach the CCM for leniency in return for a 50% reduction in the administrative penalty otherwise payable, says fellow Primerio Ltd. antitrust attorney Andreas Stargard.  “This level of fine reduction is in line with what the CCM has been offering in the past to leniency applicants who were not ‘first through the door’.  Unlike certain other countries, such as the United States, where the Department of Justice offers leniency benefits only to the first successful applicant, Mauritius allows for successive, reduced penalties to subsequent amnesty seekers.”

Corporate leniency policies are widely considered to be the most effective tool in the prosecution of cartel conduct. The CCM’s decision to include ‘initiators’ among those eligible to participate, therefore, not only strengthens its leniency programme but is also a significant step towards the prosecution and enforcement of cartel conduct in Mauritius, as more leniency applications directly imply more prosecutions of fellow cartelists.

Oxenham notes that the inclusion of initiators into the CCM’s official corporate leniency policy is welcomed from a business perspective, as it alleviates the concerns prospective leniency applicants may have previously had: “It will certainly lead to an increase in the amount of leniency applications received by the CCM”.

According the CCM’s media release, its guideline for leniency applicants will be amended accordingly and an explanatory note will be made available on its website in due course.

Standard
AAT, East Africa, fines, Kenya, legislation, leniency, leniency / amnesty, Uncategorized

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

By Michael-James Currie

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

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

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

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

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

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

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

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

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

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

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

Standard
BRICS, cartels, collusion, COMESA, draft, leniency, leniency / amnesty, new regime, South Africa

Don’t wait for leniency… Lipimile signals delays

COMESA Chief Warns of Delayed Implementation of Leniency Policy

George Lipimile, CEO, COMESA Competition Commission

George Lipimile, Director, COMESA Competition Commission

In an interview with Concurrences, CCC Director George Lipimile stated cautiously that, while the agency had engaged a consultant to help it craft a regional leniency programme, it still had to “be discussed in detail with Member States. Given the different legal systems and the feedback coming from the consultations with Member States so far, this may take some time.”

Thus, “while there is no amnesty programme visible on the near-term horizon, the CCC’s novel cartel enforcement push poses particular concerns for undertakings operating in the COMESA region,” says Andreas Stargard, attorney with Africa advisory firm Pr1merio.  “Director Lipimile has expressed his agency’s plan — jointly with the World Bank organisation — to launch a project designed to combat cartel activity.  They propose to do so first, it seems, by piggy-backing off of other enforcers’ previous investigations, such as the South African Competition Commission’s cartel cases, and analysing whether those instances of foreign collusion could have harmful effects on the COMESA economies.”

Standard
AAT exclusive, COMESA, distribution, East Africa, Kenya, leniency / amnesty, new regime, notification

CCC Begins Conduct Enforcement & Activates Its Exemption Regime for Potentially Anti-Competitive Agreements

Parties Start Discussing Business Practices with COMESA’s CCC

As AAT reported recently — see “Growing Pains: From One-Trick Pony to Full-Fledged Enforcer?” — the COMESA Competition Commission (CCC) has begun to move from being a pure merger-control administrator to becoming a full-fledged antitrust enforcer.  The CCC issued a Notice calling on firms to notify the CCC of any agreements (both historic and forward-looking) that may be anti-competitive, for the purpose of having such agreements ‘authorised’ or ‘exempted’ under Article 20 of the COMESA Competition Regulations.  (More details on that regime are in our June article, referenced above.)

Eveready products (sample)

Eveready products (sample)

AAT has now learned that several companies have taken the agency up on its Exemption proposal: Andreas Stargard, a competition practitioner with Primerio Ltd. observes that the CCC’s announced “leniency ‘window’ to incentivise firms to come forward and obtain an exemption” has closed at this point in time, although he expressed doubt that the relatively short one-month period was sufficient and will likely be extended.  Says Stargard: “We are seeing several parties, both global & local companies, who are beginning to take the CCC’s non-merger enforcement seriously.  These undertakings are considering to obtain advance clearance of their business practices under the Commission’s Notice procedure.”  One such example, he adds, is Kenya’s financially embattled Eveready East Africa: it has reportedly sought CCC approval of its agreements with international manufacturers for the importation and distribution within the COMESA common market of their diverse products, ranging from batteries to fountain pens to CloroCOMESA old flag colorx-brand chemicals.  The Commission has invited “general public and stakeholders” for comments according to its formal statement.

In light of these developments, Stargard advises that:
“multi-national firms operating within COMESA or jointly with a COMESA-based importer or other domestic business partner should consider engaging counsel to evaluate their practices, and if they may fall within Article 16 of the Regulations, consider approaching the CCC for an authorisation letter.”

 

Standard
cartels, collusion, dominance, draft, East Africa, Kenya, legislation, leniency / amnesty, Media, Telecoms, Uncategorized

Kenya competition landscape active

kenya

Zuku pay-TV launched complaint against DStv in Kenya

As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news.  Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.

In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.

The CAK has not indicated whether it is investigating the complaint yet.

Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy

In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.

To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.

The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.

Standard
cartels, collusion, COMESA, criminal AT, Kenya, leniency / amnesty, new regime, Uncategorized

Antitrust amnesty: new regime to go online soon

kenya

Kenya to become latest competition jurisdiction with cartel leniency scheme

As Mugambi Mutegi of the Business Daily reports, Kenya is the latest antitrust jurisdiction to embrace a self-reporting leniency programme.

Mr Wang’ombe Kariuki, director of the CAK

Self-reporting of “hard-core” competition-law offences (such as price-fixing cartel conduct, market division, bid rigging, or group boycotts among horizontal competitors) has long been a staple of antitrust enforcement in the most developed jurisdictions, including the United States and the European Union.  In South Africa, cartel-whistleblowing leniency has just passed its 10th anniversary, and in the EU, the European Commission’s “Notice” on the non-imposition of fines in certain cartel cases (i.e., the EU’s leniency regime) recently celebrated its 18th birthday — nowadays, more than 75% of the EC’s cartel matters are uncovered thanks to one or many cartel members “snitching” on their counterparts, in exchange for full or partial amnesty from antitrust prosecution and attendant fines.

The Competition Authority of Kenya (CAK) has recently upped its rhetoric, threatening criminal sanctions against various business sectors’ potential cartel members and disputing jurisdiction of the multi-national, but still feeble, COMESA competition authority in merger cases.

In Africa, Kenya (AAT archive on CAK issues here) is now becoming a new member of the “Leniency Club”, rewarding whistleblowers with eased penalties for volunteering relevant tips and information on the workings of the cartel.  The CAK is acting to implement the provision of the Kenyan Finance Bill 2014, which allows it to terminate cartel investigations with lighter punishment for whistleblowers, all the way to a full pardon.

“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…”

The agency’s web site — which otherwise (unusually) refers to the Business Daily article quoted here, instead of issuing its own press release — tersely provides as follows:

Cartel firms get amnesty in new CAK regulation

The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.

The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.

Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.

The CAK’s Director General, Francis Wang’ombe Kariuki, is quoted as saying that the authority’s is merely awaiting Parliament’s amendment of the law, and that “[t]he settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts“.

Standard