AAT exclusive, new regime, no antitrust regime, public-interest, South Africa

Book Review: “Making Markets Work for Africa: Markets, Developments and Competition Law in Sub-Saharan Africa” by Eleanor M. Fox and Mor Bakhoum

Thanks to the diverse and on-going commitments by our contributors, AfricanAntitrust is considered the leading resource tracking competition law developments across the continent. AfricanAntitrust has, over the past number of years published numerous articles, updates and expression pieces by numerous contributors both in an effort to ensure our readership remains up to date on all regulatory developments in Africa, and also to stimulate robust debate on competition policy and enforcement across the continent.

Developing countries have unique socio-economic issues and market dynamics which many have argued justify a unique approach to the role competition law policy should play.

The editors at AfricanAntitrust were, therefore, particularly interested in the book authored by well-known Professor, Eleanor Fox and co-author Mor Bakhoum . AAT is honoured to have been requested to provide a book review and indebited to John Oxenham, Andreas Stargard and Michael-James Currie for their commentary below.

The book’s title Making Markets Work for Africa: Markets, Developments and Competition Law in Sub-Saharan Africa provides significant insight into its subject matter and the topics covered. As an introductory remark, the content provides a concise but necessary introduction to the social, political and economic challenges which underpin most sub-Saharan jurisdictions. Readers who may not be familiar with the jurisdictions covered in the book will find this useful for purposes of contextualising the competition policy debate and the nuances which underpin this debate.

After sketching an overview of the economic and political background, the authors go on to detail the relevant competition laws and the application thereof across the sub-Saharan jurisdictions.

The authors have, usefully, selected certain key enforcement activities in each of the jurisdictions covered in an effort to demonstrate the robustness of the respective agencies’ enforcement activities.

The authors then do a neat job of teeing up the crux of the debate, should competition law in developing countries converge towards a ‘global standard’ (which in this context refers primarily to US and EU precedent) or rather, do market and socio-political challenges which are often unique to most sub-Saharan countries, require a different set of rules, benchmarks or policy outlooks to competition policy and enforcement. In this regard, the authors provide a useful platform for debate among competition lawyers, economists, academics and law makers alike.

The book was not intended to provide a complete and robust assessment of the multitude of policy options available when developing competition law. Further, the authors have elected not to engage in a highly technical critique or assessment of the key decisions which have shaped competition policy across the African continent. Rather, the authors highlight the need to consider and debate different policies.

The authors correctly highlight South Africa as the “golden standard” insofar as competition law enforcement in developing countries is concerned – particularly in relation to the role of public interest enforcement in merger reviews. The authors discuss the seminal case in this regard, namely the Walmart/Massmart merger, as the foundation from which numerous subsequent mergers have been approved subject to public interest related conditions.

While the Walmart/Massmart merger was finally approved in 2013, the authors may consider, in subsequent editions, whether the substantial litigation and interventionist risks which are inherent in assessing public interest factors in competition law enforcement (particularly merger control) can be quantified. A departure from traditional competition law standards and precedent, particularly with the introduction of subjective considerations, is likely to increase the scope for litigation and interventionist strategies which may hinder the very objectives sought to be advanced.

The authors do, however, recognise that when assessing competition policy, one must consider the objectives of the policy against its practical enforcement – particularly in light of the principle of rule of law and sound economic analysis. The book certainly does not profess to ignore these and at numerous instances expressly or implicitly acknowledges that a transparent and objective competition enforcement regime is critical.

With the “hipster antitrust” movement ostensibly gaining traction in the US and EU, South Africa (and indirectly Africa more generally) it would appear there is a more mainstream deviation from traditional competition law enforcement. It certainly suggests a uniform standard in competition policy may become even more difficult to sustain. Alternatively, it may be the inherent complexity and trade-offs which are always at play in developing competition policy which may in fact necessitate a form of convergence. The authors give some insight into these trade-offs and the various factors which legislators and practitioners should take into account.

The authors also raise a number of issues which are often left out of the policy debate, yet play a crucial role in the efficacy of competition law enforcement in developing countries.

Factors such as political interference, corruption (as an overarching concern) and the limited resources available to many African competition agencies contribute to certain markets remaining inaccessible to new entrants and preclude efficiencies from materialising to the benefit of consumers. The authors point out, quite correctly, that judgments or decisions by agencies are often entirely devoid of substantive reasons let alone robust economic analysis.

The above recognition further reinforces the need for objectivity and transparency in developing competition enforcement regime.

Finally, readers will find the authors’ discussion on the regional blocs in Africa (COMESA, SADC, EAC) and explore the level of harmonisation between these regional blocs and their respective members states.

The timing of the book in this regard could not be more apposite in light of the current negotiations regarding a uniform African competition policy as contemplated by the African Continental Free Trade Agreement.

We congratulate the authors on this important and well researched text.

 

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AAT exclusive, dominance, new regime, South Africa, Uncategorized

CRESSE CONFERENCE GREECE 2019: SOUTH AFRICAN AMENDMENT ACT

Africanantitrust regular contributors John Oxenham, Michael-James Currie and Stephany Torres (Primerio and Nortons Inc) authored and presented a paper on the role of non-competition law factors in competition law enforcement at the 2019 CRESSE Conference in Rhodes Island, Greece in early July 2019.

Motivated by the recent, but significant, amendments to South Africa’s Competition Act, the timing of the authors’ paper could not have been better scripted. The Amendment Act was brought into effect on 12 July 2019 – a week after presenting the paper to an esteemed delegation of competition law practitioners and economists.

The paper, titled “South African Competition Law – The role of non-competition factors in enforcing unilateral conduct: Forging ahead or falling behind?” explores the socio-economic context and objectives which underpin the recent amendments to South Africa’s legislation and highlights the expansion of what is often termed “public interest” considerations in competition law enforcement beyond merger control.

Most notably, the authors contextualise the policy debate before providing an in-depth discussion of the new thresholds and standards against which certain abuse of dominance conduct will now be assessed.

The Amendment Act introduces a public interest standard, namely what the effect of certain conduct by dominant entities will have on the ability of “small, medium businesses and businesses owned by previously disadvantaged persons” to participate effectively in the market”.

Looking specifically at the price discrimination and buyer power provisions, the paper notes that, notwithstanding the noble objectives of the Amendment Act, there are potentially a number of unintended consequences which require further deliberation so as not to dampen pro-competitive conduct.

In relation to the price discrimination provisions, the authors conclude that:

Accordingly, in light of:

  • the low market share threshold applicable to “dominant” entities;
  • the uncertainty regarding the threshold that must be met in order to sustain a case of prohibited price discrimination;
  • the evidentiary burden on a respondent to essentially prove a negative in relation to section 9(3); and
  • the threat of an administrative penalty for a first-time offence (potentially on both the South African business and its parent),

the price discrimination provisions pose a material risk to companies in South Africa who have a market share above 35%.”

As part of the presentation of the paper, it was noted that competition policy globally is constantly evolving. Issues such as “big data” and “data protection” have called on antitrust commentators to question whether the existing laws remain adequate to address broader consumer harm concerns. In South Africa, the authors point out that while the South African competition agencies have traditionally turned to European and US precedent in relation to antitrust enforcement, the socio-economic factors which have shaped competition policy in South Africa (at least from Government’s perspective) is unique and constitutes a substantial departure from more established jurisdictions.

Competition policy globally is, therefore, likely to be more divergent than convergent in the next few years.

In concluding, the authors point to the inordinate responsibility placed on the shoulders of the competition agencies in South Africa to exercise their discretion and develop a body of precedent as soon as possible that would hopefully provide practitioners and business with a more objective and transparent benchmark against which to assess their conduct. A task which could prove highly complex as the authorities will inevitable need to develop an objective basis for quantifying public interest considerations – an inherently subjective exercise.

To obtain a copy of the paper, please email the AAT editor by following the contact link below.

 

 

 

 

 

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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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ACF, COMESA, ECOWAS, Gambia, Gambia (The), new regime, state aid

ECOWAS creates functional antitrust commission

While the ECOWAS competition regime is not new in and of itself (it was adopted in 2008), the actual operationalization of the ECOWAS Regional Competition Authority (ERCA) is — its inaugural ceremony in took place this past Tuesday in The Gambia, 11 years after its technical launch (although it was established jointly with the adoption of the ECOWAS competition legislation, it remained non-operational for over a decade).  Its mission is to enforce the multi-national body’s Regional Competition Policy Framework (RCPF).

ERCA’s efforts will be supported by the twin launch of the ECOWAS technical committee meeting of national  trade and competition representatives to assist in implementing the RCP, including both its competition/antitrust as well as consumer protection mandates.

ERCA is a specialized, autonomous quasi-judicial body designed to help promote regional economic growth and competitiveness in the ECOWAS common market.

Andreas Stargard, a competition law practitioner with a focus on African antitrust issues, noted that the ECOWAS rules, while not enforced in practice until now, will reflect more of a European approach to competition regulation, as “they include provisions to evaluate and render invalid certain types of governmental support for domestic champion companies and industries, akin to the EU model of ‘state aid’ rules, which do not always form part of antitrust regimes globally.  This makes sense, in our view, in the African context, however, as most domestic economies on the continent have long been subject to state-owned monopoly enterprises and so-called national champions — one need not look further than the various large African state-owned airlines, for example.”

He concluded that two key issues remain to be seen, once ERCA launches its first investigations and brings enforcement actions: “First, with the increasing number of regional enforcers, how will jurisdictional overlaps be resolved, both regional/national, as well as regional/regional, conflict?  Many ECOWAS members are also part of other African multi-national organizations that have some form of competition or consumer protection regulations as part of their mandate, such as the west African monetary union.  Second, what will the be the degree — if any — of ‘public interest’ considerations that may be in play for the 15-member state body’s antitrust enforcement, perhaps copying many of its African sister commissions’ approach…”

Time will tell…

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AAT, meddling, mergers, new regime, Patel, public-interest, South Africa, Uncategorized

Minister Ebrahim Patel will no longer be a Member of Parliament: What does this mean for Competition Policy in South Africa?

According to recent reports, Minister of the Department of Economic Development, Ebrahim Patel, will not be sworn in as a member of Parliament despite initially being listed on the African National Congress’ (ANC) Members of Parliament list.

[see https://www.businesslive.co.za/bd/politics/2019-05-15-ebrahim-patel-and-senzeni-zokwana-fail-to-make-it-back-to-parliament/%5D

Since Cyril Ramaphosa was voted as the ANC’s President, and hence South Africa’s President, there had been increasing speculation regarding where Minister Patel would complement Ramaphosa’s economic policies. With many political commentators initially expected Ramaphosa to relieve Patel of his position as the Minister of Economic Development soon after taking over the presidency reins, it appeared that Patel had convinced Ramaphosa that he was an integral part of the team. Patel even accompanied Ramaphosa as part of the “special economic envoy” on a series of international road shows promoting and encouraging foreign investment in South Africa.

At this stage it is not clear what the reasons are for Patel not forming part of the ANC’s list of Members of Parliament (a prerequisite to serving as a Cabinet Minister unless Patel serves as one of the two non-MP’s allowed to serve in Cabinet) ). Following the national elections on 8 May 2019, however, Ramaphosa has indicated that he is intent on reducing the size of the Cabinet which would necessarily require various government departments and portfolios to be consolidated. It may be that the Department of Economic Development (EDD) is consolidated with the Department of Trade and Industry (DTI). If this were the case, the South African competition authorities would then also fall under the auspices of the DTI and no longer under the EDD. Many of our readers may recall that the competition authorities previously fell under the policy stewardship of the DTI.

While it may be too early to speculate what the ramifications of Patel’s departure could mean for competition policy and enforcement in South Africa, John Oxenham, director at Primerio, says that “Minister Patel was one of the key proponents behind elevating the role of public interest considerations in merger control. The minister’s intervention in numerous transactions, particularly international deals has resulted in public interest conditions, the scope and nature of which, pushed the outer most limits of what is appropriate in competition policy when assessed against international standards”.

Minister Patel’s reputation for engaging in robust opposition to mergers prompted Ab-Inbev directors to engage directly with Patel rather than the Competition Commission in order to secure public interest related conditions which would placate the Minister – all in the hope of ensuring that the transaction sales through the merger control process unchallenged. Which it largely did.

Fellow competition lawyer, Michael-James Currie, says that another key element of Patel’s departure relates to the Competition Amendment Act which was signed into law by President Ramaphosa in February 2019. Currie says that “although the Act has been signed into law, the enforcement of a number of the provisions of the Amendment Act remains unclear. For example, there are draft guidelines published in relation to the “price discrimination” and “buyer power” provisions of the Amendment Act which completely do away with any standard of “adverse effect on competition” and even the “consumer welfare” standard is of no relevance when small, medium or historically disadvantaged persons may be affected. Currie says Patel’s departure may spark a fresh round of debate and submissions in relation to the draft regulations. Submissions which previously appeared to largely be ignored by Patel.”

Oxenham echoes Currie’s sentiments and is of the view that the Amendment Act, which was largely driven by Patel, may ultimately be interpreted and enforced by the competition agencies in a manner which is more consistent with international best practice. Of course, this would depend on who replaces Patel and whether there is a different policy view as to the role of competition law in South Africa by Patel’s successor.

A key concern raised by numerous commentators is that the subjectivity of public interest assessments together with the increasing intervention by the executive to extract non-merger specific public interest related conditions, particularly in foreign transactions, does little to boost South Africa’s image as being open to foreign investment.

While the on-going debate of the role of public interest considerations in merger control will continue well beyond Patel’s tenure as Minister of the EDD, the entire South African competition community will be watching closely Ramaphosa’s final Cabinet announcement as this would likely be the clearest indication of whether we could expect a material policy direction change fin South Africa insofar as competition law enforcement is concerned.

 

 

 

 

 

 

 

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AAT exclusive, merger documentation, mergers, new regime, Nigeria

Plus ça change… Merging parties should continue as before in Nigeria

FCCPA in effect – but not quite, as FCCPC not yet fully operational

As AAT reported previously, the landmark Federal Competition & Consumer Protection Act (FCCPA) that suddenly went into effect in Nigeria earlier this year has not quite been operationalised.  Notably, the agency that is supposed to be tasked with enforcing the FCCPA, the Federal Competition & Consumer Protection Commission (FCCPC) is currently “undergoing construction”, so-to-speak.  An African competition-law practitioner with Primerio notes that “apparently there has been some political wrangling around the constituents of the FCCPC’s Board,” which is unsurprising, to say the least.  One might be inclined to say, Plus ça change, plus c’est la même chose…, as politics has always played a major role in Nigerian enforcement.

That said, the AAT editor does understand that, at a minimum, the Director General of the existing Consumer Protection Council, Babatunde Irukera, will serve in some capacity with the FCCPC — it is unknown whether the remaining 5 CPC commissioners will likewise continue to act for the FCCPC or not.  (Screenshots of his Twitter account below, indicating a full-blown transition from the CPC to the FCCPC).

One indication of the lack of the FCCPC’s operational status when it comes to mergers is that its web site (presumably soon to be http://fccpc.gov.ng/) still yields an error message.  Another is a recent joint statement issued by the SEC and its yet-to-be-established counterpart, which provides in relevant part as follows:

In order to ensure continuing and seamless commercial transactions and market operations, SEC and FCCPC have come to a mutual understanding with respect to these transactions within the transition period, which pursuant to this notice commences immediately, and shall remain in force until otherwise discontinued by further Advisory or Guidance.

During this transition period, starting today, May 3rd, 2019:

  • All notifications or fillings will be reviewed under existing SEC Regulations, Guidelines and Fees.
  • Notifications will be filed at FCCPC OR SEC/FCCPC Interim Joint Merger Review Desk at SEC.
  • All applicable fees will be paid to the FCCPC.
  • SEC and FCCPC will jointly review notifications and FCCPC will convey decisions with respect to the notifications.

Notifications previously received by SEC, but yet to be decided, will be subject to the interim process above and FCCPC will convey the decisions accordingly.

We will update AAT’s readership with new intel as soon as it becomes available.  For the time being, the status quo remains largely intact.  Says Andreas Stargard, an antitrust practitioner:

For now, merger parties should proceed as before, namely: analyse your transaction under the Investment & Securities Act (ISA), and file with either the SEC or the FCCPC — some advise to file with the SEC for the time being, if applicable, as the lack of full operational status of the FCCPC does not bode well for procedural thoroughness or guaranteed document retention in this early phase.  That said, if your transaction has a longer time horizon, with closing potentially several months down the road, your counsel should take into account the very real possibility of there being a notification under the FCCPA, even if none was required under the ISA.  I expect the FCCPC to set merger notification thresholds very soon.”

Osayomwanbor Bob Enofe, an academic and proponent of the Nigerian competition law notes, however, that the current interim arrangement “only suggests to me that the SEC currently leads, concerning merger enforcement in Nigeria, rather than clarifying that the FCCPC is not existent (especially given the transitional period established by the two Commissions).”  He continues: “The erstwhile CPC might be revamped to reflect a more competition-law cognisant staff base,” noting that “various competition law offences now exist in Nigeria,” of which cartel conduct is punishable not only my monetary fines but also criminally under the FCCPA.

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AAT exclusive, COMESA, Comoros, distribution, dominance, Ethiopia, exclusivity, new regime, RPM

Competition enforcer terminates RPM investigation into Coca-Cola

COMESA’s second restrictive trade practices investigation ends inconclusively

Having now concluded two non-merger cases (the first was an exclusivity issue in football broadcasting and sponsorship agreements, see here), the COMESA Competition Commission’s (“CCC”) second investigation into restrictive vertical distribution practices engaged in by Coca-Cola and its distributors has culminated in somewhat of an indeterminate ending.

No fines were imposed, and the Coca-Cola parties agreed to eliminate the price-maintenance clause from their distribution contracts, as well as committing to implementing a generic compliance programme.

Says Andreas Stargard, a competition practitioner with Primerio Ltd., in an in-depth analysis of the short Decision (dated 6th December 2018, but only released recently):

I am very disappointed in this missed opportunity.  The Decision lacks intellectual rigour and avoids critical detail, to assist practitioners or business going forward in any meaningful way.

This investigation began in earnest well over a year ago, when the CCC opened formal Article 22 proceedings against the parties in January 2018.  In its disappointingly short 9-paragraph decision, lacking any degree of detailed reasoning, factual or legal analysis underlying its conclusions, the Commission has now determined the following:

  1. The relevant product market is the sale of non-alcoholic carbonated beverages.  I note that the wording of this definition would presumably include sparkling mineral water, which appears to be an outlier from the ‘soft drinks’ category that is actually at issue here (“Coke,” Fanta,” “Sprite,” etc.).
  2. A relevant geographic market was notably not defined at all (!).  The absence of this key dimension is unfortunate — it is not in accordance with established competition-law principles, as market power can only be measured in well-defined product and geographic markets.  While the decision mentions the countries in which the parties are active, it fails to identify whether each country was viewed as a relevant sub-market, or whether Coca-Cola’s market power (or dominance) was assessed across the entire COMESA region.  This appears to be a glaring oversight.
  3. The CCC found relatively low entry barriers, as well as apparently actual “new product” entry (NB: does “new product” imply products by a new or different competitor?).
  4. Yet, despite ‘non-prohibitive’ entry barriers, the Commission somehow views the mere fact that the respondent’s brands “continued to command a majority share of the relevant markets” (NB: where is the plural (‘markets’) coming from here? I thought there was only a single market for ‘non-alcoholic carbonated beverages’?) as leading to a finding of dominance.
  5. Crucially, the actual conduct complained-of (the vertical restraints, the alleged RPM, etc.) is barely identified and lacks any significant detail.  Paragraph 7 merely provides that there are “clauses which stipulate the profit margins to be enjoyed by the distributors, as well as the commission at different levels of the market. … [and] vertical restraints which constrain the distributors’ conduct in the relevant markets” (note the plural again).  This absence of key information — ‘what were these so-called vertical restraints’? how were distributors constrained in their conduct? — in an official ‘Decision’  by the enforcement agency wholly fails to assist businesses seeking antitrust guidance for operating within the legal boundaries in the COMESA region.
  6. Finally, the CCC’s overall conclusion is rather weak: the Decision states that the Commission merely “registered its concern that the stipulation of prices [I thought it was profit margins?] may have anti-competitive effects in the market [back to a single market?].”  To address these ‘potential’ ‘concerns’, Coca-Cola appears to have voluntarily committed to removing the offending contract language and instituting a (wholly undefined) “compliance program” that exclusively concerns Part III of COMESA’s regulations.

In sum, Coca-Cola seems to have got away easy here: no fine was imposed at all (which could have been as much as 10% of the parties’ COMESA revenues), a limited, voluntary training exercise was agreed, as was the removal of the RPM provision.

The CCC, on the other hand, missed a truly golden opportunity to draft a more well-reasoned decision.  Its 9-paragraph reasoning (which notably concludes with a finding of actual dominance nonetheless!) can literally fit on a single page… Remember: resale price maintenance is considered in many jurisdictions to be a “hard-core” offence, and is often deemed per se illegal.  In this regard, the Decision likewise fails to make any mention of the relevant legal standard under the COMESA Regulations for evaluating the RPM (and the other unidentified, vertical) conduct.

Andreas Stargard

Andreas Stargard

The flaws outlined above — from the lack of geographic market definition, missing market share data and other highly relevant details, zero explanation of why low entry barriers somehow did not preclude a finding of dominance, use of tautological and circuitous verbiage (“restraints which constrain“?) — preclude this “conduct” case,  notably already a rarity in the CCC’s portfolio, to be a lightning rod for the assent of the COMESA Competition Commission to become a respected competition enforcer.  This was a chance for the agency to be placed on the radar screen of international businesses, agencies and practitioners, to be seen together on the map with its respected peer antitrust enforcers such as the South African Competition Commission — yet, it was a chance unfortunately missed…

 

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