Category: new regime

The Big Picture (AAT): East Africa & Antitrust Enforcement

Posted on by Editor

AAT the big picture

East-Africa & Antitrust: Enforcement of EAC Competition Act

By AAT guest author, Anne Brigot-Laperrousaz.

Introduction: Back in 2006…

The East African Community (the “EAC”) Competition Act of 2006 (the “Act”) was published in the EAC Gazette in September 2007. The Act was taken as a regulatory response to the intensification of competition resulting from the Customs Union entered into in 2005. This was the first of the four-step approach towards strengthening relations between member States, as stated in Article 5(1) of the Treaty Establishing the EAC.

Challenges facing the EAC

As John Oxenham, an Africa practitioner with advisory firm Pr1merio, notes, “10 years have passed since the adoption of the EAC Act, yet it remains unclear when (and if) the EAC will develop a fully functional competition law regime.”

The EAC Competition Authority (the “Authority”) was intended to be set up by July 2015, after confirmation of the member States’ nominees for the posts of commissioners. Unfortunately Rwanda, Uganda and Burundi failed to submit names of nominees for the positions available, and the process has become somewhat idle, leaving questions open as to future developments.

The main challenges facing the EAC identified by the EAC’s Secretariat is firstly, the implementation of national competition regulatory frameworks in all member States; and secondly, the enhancement of public awareness and political will[1].

The first undertaking was the adoption of competition laws and the establishment of competition institutions at a national level, by all member states, on which the sound functioning of the EAC competition structure largely relies.

Apart from Uganda, all EAC member States have enacted a competition act, although with important discrepancies as to their level of implementation at a national level.

The second aspect of the EAC competition project is the setting up of the regional Competition Authority, which was to be ensured and funded by all members of the EAC, under the supervision of the EAC Secretariat. Although an interim structure has been approved by member States, the final measures appear to be at a deadlock.

As mentioned, the nomination of the commissioners and finalisation of the setting up of the EAC Competition Authority came to a dead-end in July 2015, despite the $701,530 was set aside in the financial budget to ensure the viability of the institution[2]. It is widely considered, however, that this amount is still insufficient to ensure the functionality of the Competition Authority.  Andreas Stargard, also with Pr1merio, points out that “[t]he EAC has been said to be drafting amendments to its thus-far essentially dormant Competition Act to address antitrust concerns in the region.  However, this has not come to fruition and work on developing the EAC’s competition authority into a stable body has been surpassed by its de facto competitor, the COMESA Competition Commission.”

Furthermore, inconsistencies among national competition regimes within the EAC are an important impediment to the installation of a harmonised regional enforcement. Finally, international reviews as well as national doctrine and practice commentaries have highlighted the lack public sensitization and political will to conduct this project.

A further consideration, as pointed out by Wang’ombe Kariuki, Director-General of the Competition Authority of Kenya, is the challenge posed by the existence of the Common Market for Eastern and Southern Africa (“COMESA”).

Conclusion

The implementation of the EAC has not seen much progress since its enactment, despite its important potential and necessity[3]. It therefore remains to be seen how the EAC deals with the various challenges and whether it will ever become a fully functional competition agency.

A quick summation of the status of the national laws of the various EAC members can be seen below. For further and more comprehensive assessments of the various member states competition law regimes please see African Antitrust for more articles dealing with the latest developments.

EAC Member States Status

Tanzania

The Tanzanian Fair Competition Act (the “FCA”) was enacted in 2003, along with the institution of a Commission and Tribunal responsible for its enforcement. The FCA became operational in 2005. Tanzania’s competition regime was analysed within the ambit of an UNCTAD voluntary peer review in 2012[4]. The UNCTAD concluded that Tanzania had overall “put in place a sound legal and institutional framework”, containing “some of the international best practices and standards”.

This report, however, triggered discussions on major potential changes to the FCA, which would impact, in particular, institutional weaknesses and agency effectiveness[5]. One of the most radical changes announced consisted in the introduction of criminal sanctions against shareholders, directors and officers of a firm engaged in cartel conduct[6], although there is no sign that this reform will be adopted.

Kenya

Kenya, following a 2002 OECD report[7] and the European Union competition regulation model, replaced its former legislation with the 2010 Competition Act, which came into force in 2011, and established a Competition Authority and Tribunal. Under the UNCTAD framework, the 2015 assessment of the implementation of the recommendations made during a voluntary peer review conveyed in 2005[8] was generally positive. It was noted, however, that there was an important lack of co-operation between the Competition Authority and sectoral regulators, and that there was a need for clear merger control thresholds[9].

Burundi

Burundi adopted a Competition Act in 2010, which established the Competition Commission as the independent competition regulator. To date, the Act has not yet been implemented, and accordingly no competition agency is in operation[10].

A 2014 study led by the Burundian Consumers Association (Association Burundaise des Consommateurs, “Abuco”) (which was confirmed by the Ministry of Trade representative) pointed to the lack of an operating budget as one of the main obstacles to the pursuit of the project[11].

Rwanda and Uganda

Rwanda enacted its Competition and Consumer Protection Law in 2012, and established the Competition and Consumer Protection Regulatory Body.

As for Uganda, to date no specific legal regime has been put in place in Uganda as regards competition matters, although projects have been submitted to Uganda’s cabinet and Parliament, in particular a Competition Bill issued by the Uganda Law Reform Commission, so far unsuccessfully.

 

Footnotes:

[1] A Mutabingwa “Should EAC regulate competition?” (2010), East African Community Secretariat

[2] C Ligami, “EAC to set up authority to push for free, fair trade” (2015), The EastAfrican

[3] O Kiishweko, “Tanzania : Dar Praised for Fair Business Environment” (2015), Tanzania Daily News

[4] UNCTAD “ Voluntary Peer Review on competition policy: United Republic of Tanzania” (2012), UNCTAD/DITC/CLP/2012/1

[5] S Ndikimi, “The future of fair competition in Tanzania” (2013), East African Law Chambers

[6] O Kiishweko, “Tanzania: Fair Competition Act for Review’ (2012), Tanzania Daily News.

[7] OECD Global Forum on Competition, Contribution from Kenya, “ Kenya’s experience of and needs for capacity building/technical assistance in competition law an policy “ (2002), Paper n°CCNM/GF/COMP/WD(2002)7

[8] UNCTAD, “ Voluntary Peer Review on competition policy: Kenya” (2005), UNCTAD/DITC/CLP/2005/6

[9] MM de Fays, “ UNCTAD peer review mechanism for competition law : 10 years of existence – A comparative analysis of the implementation of the Peer Review’s recommendations across several assessed countries” (2015)

[10] Burundi Investment Promotion Authority “Burundi at a Glance – Legal and political structure”, http://www.investburundi.com/en/legal-structure

[11] Africa Time, “Loi sur la concurrence : 4 ans après, elle n’est pas encore appliquée” (Competition Law : 4 years after, it is still not implemented) (2014), http://fr.africatime.com/burundi/articles/loi-sur-la-concurrence-4-ans-apres-elle-nest-pas-encore-appliquee

COMESA acknowledges low merger filing stats

Posted on by Editor

2015 figures plummet 66% year-over-year

Going from 44 notifications in 2014 to 15 filings last year, the Competition Commission of the COMESA common-market area has seen a dramatic decline in merger filings.

Says Andreas Stargard, a competition lawyer with Africa advisory firm Pr1merio:

“These statistics are akin to the agency’s inaugural year — a slump that can only be explained by one of two likely underlying rationales:

Andreas Stargard, editor
A. Stargard

(1) Potential filers have begun to follow widespread advice from legal counsel that effectively admonishes would-be notifying parties not to do so until COMESA establishes a more robust enforcement and notification regime; or (2) — and this is the CCC’s preferred official explanation — the increased filing thresholds as of March 2015 caused fewer transactions to be caught in the mandatory filing net of the regulator.”

Of further concern, Stargard notes, is that the supporting merger documents made available by the CCC do not reflect the purported official statistics.  This fact is reflected in the MergerMania article published on AAT last August..  “For each and every one of the 15 filings identified by the Commission in its official statement, we should be able to see the underlying SOM [statement of merger] and the concomitant Decision — ideally published contemporaneously with the occurrence of each relevant event,” he says.  “Unfortunately, on the CCC merger site, two merger filings are missing entirely (numbers 9 and 10), and the others are commonly published many months after the public-comment deadline for the transactions has long expired.”

To date, a parsing of the (available) 2015 statistics shows that 3 of 15 cases actually went into Phase Two review, Stargard observes.  “This would generally imply a more serious concern raised by the authority in terms of the effect on competition post-merger.  Here, however, it is quite unclear what the potential threat to competition in, for example, a purely private-equity deal would be.  The official decision (no. 15, from November 2015) fails to even hint at a possible threat — as one would commonly expect from a PE to PE transaction, which usually raises little to no antitrust eyebrows…”

Our updated AAT COMESA MergerMania statistics are therefore as follows (again noting the fact that AAT bases its count on only the official, published and available merger documents, instead of relying on mere press release-based summaries published by the CCC).  We also note that to date, 2016 has seen one “merger inquiry notice,” namely of the Dutch Yara / Zambian Greenbelt fertiliser deal.  The public-comment period for that transaction expires on January 22, 2016.

Number of merger notifications based on CCC-published notices
Number of merger notifications based on CCC-published notices

The full text of the COMESA release follows below:

During the year 2015, the Commission assessed and cleared 15 merger transactions. The transactions involved sectors such as insurance, food additives, water treatment, agro-chemical, banking, telecommunication, non alcohol-ic beverage, publishing, packaging and retail. The Commission handled 12 merger notifications in the year 2013 and 44 merger notifications in the year 2014. The Pie Chart below shows the number of mergers handled by the Commission from inception to date.

COMESA merger statistics (official graphic)

As shown in the pie chart the Commission dealt with more mergers in 2014 as compared to 2013 but this trend has gone down in 2015. This trend may be attributed to the supposition that in 2013, the Commission had just commenced operations and therefore some stakeholders were not immediately aware of its existence and operations. By 2014, most stake-holders had become aware of the Commission and its operations, hence the significant increase in the number of mergers notified. The significant reduction in 2015 can be attributed to the supposition that the merger notification thresholds approved by the Council of Ministers on 26 March 2015 which has resulted in smaller mergers escaping the notification. Before 26 March 2015, the merger notification thresholds were Zero hence all mergers were notifiable regardless of size.

Can antitrust law ensure a competitive Kenyan marketplace?

Posted on by Editor

Competition law as a tool for promoting consumer welfare & maintaining a competitive market in Kenya 

By contributing author Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

The core aim of enforcing competition law revolves around balancing between beneficial market power and market power that is detrimental to consumer welfare. Market power can be defined as the ability of a firm to raise and maintain price above the level that would prevail under competitive market conditions, without being destabilised by consumers switching to other products/services or new competitors entering the same market. Often the actual price is above cost leading to high profits for the firm with market power. In practice, the pursuit of market dominance can be a great incentive for investment, cost efficiency and innovation. Therefore, the acquisition of a dominant position through superior product or customer services, better pricing, innovation, efficiency and investment is not illegal. Only the abuse of dominance is prohibited. Where a firm exercises market power, competition law functions to protect the openness of the market by ensuring that the dominant firm does not impose unfair trading conditions for actual or potential competitors, or abuse its intellectual property rights. It also intervenes to prevent direct harm to consumer welfare through conduct or transactions that limit output or production artificially in order to price-fix.

Merger control is another important function of competition law and policy, that is designed to prevent positions of market power from being established through acquisition, unless there is a strong economic efficiency rationale that will mitigate for the loss of competition between the merging firms. A company should therefore earn market power and not simply buy out competitors.

Thus, an important ideal of competition policy is to promote a contestable market for as long as it promotes consumer welfare, and a feasible market structure for a particular sector of the economy. In a contestable market, the sunken costs required to join the sector are negligible and other entry barriers are so low that the threat of new entrants is sufficient to check the conduct of the incumbent firm with market power. The costs of exiting the market are also negligible.

In relation to competitors, competition law cannot intervene on behalf of a particular firm in the market, without taking into account the broader effects of the conduct in question on competition in the relevant market. A firm would have to show, on the face of it, that its competitors in that market are engaged in concerted or collusive practices. For instance, competitors can tacitly seek to exercise market power through anti-competitive agreements that enable them to concentrate the market. This often results in one or more firms becoming large enough to be in a position to affect the market’s outcomes in a manner that causes consumer welfare or public interest to be compromised.

Under these circumstances, competition law intervenes and investigates to ensure that there is no unwarranted concentration of economic power in a particular market through collusive agreements between competitors. Unwarranted concentrations of economic power exist where there is cross-directorship or sharing of a senior employee or executive between two distinct firms providing substantially similar goods or services, and whose combined market share is more than 40%. Competition legislation regulates this conduct because it often results in board decisions being made that could lead to collusion among the firms involved, such as price fixing and dividing markets, thereby lessening competition.

kenya

For instance, in Kenya, the cement sector has been under investigation for unwarranted concentrations of economic power. Although there are a number of cement-producing companies in the market, the dominant multinational firm – Lafarge Limited, has a 58.6% stake in the leading producer, Bamburi Cement Limited and a 42% shareholding in another leading company, East African Portland Cement Limited. Market concentration concerns have arisen because Bamburi Cement Limited, which has a market share of 39%, has had cross-directorship with the 3rd largest producer in the market – East African Portland Cement Limited to an extent that may dampen competition. Kenya’s cement prices have been the second highest out of six eastern and southern African countries including South Africa, Zambia and Tanzania between 2000-2014 according to a sector report. In 2014, the Kenyan government recommended that Lafarge dilute its shareholding in East African Portland Cement Limited. However, it was not conclusive whether price fixing was going on.

On the other hand, Kenya’s cement sector may experience increased competition from imports as a result of the East African Community (EAC) reducing the common external tariff (CET) on cement from 35% to 25% through an EAC gazette notice of February 2015. Cement has also been removed from the list of sensitive products that require protection until domestic industries can compete according to the same gazette notice. Although local cement producers are protesting the move, consumers stand to gain, as the liberalized market will lead to lower prices of the commodity, and possibly have a positive impact on the construction industry.

Two new COMESA competition commissioners seated

Posted on by Editor

COMESA grows to 11-member Commission

Numerous in personnel, yet still displaying a dearth of actual case-law development even in merely the one area in which the COMESA Competition Commission has been active — mergers — the agency recently appointed two new (indeed, additional, as the number grew from 9 to 11) Commissioners for the standard term of three years.

Competition practitioner John Oxenham, a director at Africa consultancy Pr1merio, identified them as Trudon Nzembela Kalala from the Democratic Republic of the Congo, and Kowlessur Deshmuk, Executive Director of the Competition Commission of Mauritius.  Oxenham notes that neither country enjoyed representation between the April announcement of 4 new commissioners and December 8 (see also April 15 AAT story on the agency’s prior appointments).

COMESA's 18th Summit in Ethiopia

Name Member State
Ali Mohammed Afkada Djibouti
Trudon Nzembela Kalala DRC
Amira Abdel Ghaffar Egypt
Merkebu Zeleke Sime Ethiopia
Francis Kariuki Kenya
Matthews Chikankheni Malawi
Kowlessur Deshmuk Mauritius
Georges Emmanuel Jude Tirant Seychelles
Thabisile Langa Swaziland
Patrick Okilangole Uganda
Chilufya Sampa Zambia

Protecting competition vs. competitors: Calls for an EAC competition regime

Posted on by Editor

Protecting competition vs. competitors: Calls for an EAC competition regime

In an opinion piece by Elizabeth Sisenda, a competition lawyer at the Centre for International Trade, Economics and Environment, the author calls for region-wide adoption, implementation, and enforcement of competition law, for the greater good of local business in the East African Community.  While generally in favour of increased competition-law recognition in Africa, we at AAT believe that there may be a protectionist undertone in the editorial, however:

Ms. Sisenda notably writes, “The EU has been negotiating a bilateral agreement with the EAC … Local firms stand to lose to foreign firms with greater capacity under the agreement in agriculture, retail, horticulture, fisheries, textile and clothing, dairy, and meat — if adequate safeguards are not established under the agreement.  This brings to light the need to enhance a competitive regional economy within the EAC through the implementation of a regional competition law regime to protect consumers and small enterprises from unfair business practices.

As antitrust attorneys will be quick to point out, pure competition law does not invariably act to protect small companies against so-called “unfair” competition by larger (or foreign) entities.  Granted, certain abuses of dominance or — of course — cartelist conduct is prohibited by proper antitrust legislation.  However, the mere arrival of a more powerful competitor in a local economy does not amount to “unfair competition” per se.  If a larger company can source its products and inputs at a lower cost than a local, established entity (say, Wal Mart compared to a ‘mom-and-pop’ corner store), this may hurt the incumbent but is not necessarily unlawful.

Calls for “African” competition enforcement must be careful not to commingle the notions of protectionism of domestic incumbents with actual competition-law enforcement.

UPDATE: Ms. Sisenda, the author of the original article, wishes to clarify that by “adequate safeguard” her intention was not protectionism but ensuring that dominant firms do not undertake anti-competitive practices such as price-fixing, raising barriers to entry or other illicit conduct.  She is clear in disavowing any notion of protectionism that AAT might have perceived, noting that “By using the term ‘unfair business practices,’ I did not impute any regulatory measures to prop local entities and lock out foreign firms. I simply meant abuse of dominance by more capable foreign firms such as predatory pricing.”

Andreas Stargard, a partner at Africa advisory practice Pr1merio, agrees with Miss Sisenda on two key points, however.  Says Stargard:

The author correctly notes that “there is still a quest for protectionism by the governments of some of the EAC member states.”  Truly anti-competitive practices must be curbed, whereas the inefficient protection of smaller incumbent domestic companies versus more efficient new entrants must not be encouraged.  In the words of one influential court, over 53 years ago, good antitrust laws are designed to protect “competition, not competitors”…

Moreover, Ms. Sisenda rightly points to the great need within the EAC (and elsewhere in Africa) for “capacity-building at the national and regional level in support of the … competition regime, which might involve training personnel on competition law and policy and its enforcement.”  Workshops and publications such as AfricanAntitrust.com aid greatly in these efforts, including raising awareness of the need for proper competition-law enforcement, what it can do and also what it cannot accomplish on its own.

The EAC Competition Authority has an interim organisational structure & budget and is expected to start being operational next year.

PS: we note that Ms. Sisenda also raised, in our follow-up conversation with her, some notable questions that we invite our readers or future contributing authors (maybe Ms. Sisenda herself?) to address:

  • In your view, are there any parameters to antitrust such as exemptions granted under legislation for the purpose of promoting economic efficiency (be it allocative or productive) that are justified?
  • Is there a place for economic regulation in antitrust?

Continue reading “Protecting competition vs. competitors: Calls for an EAC competition regime” →

Insight into COMESA thinking: CCC executives speak

Posted on by Editor

COMESA old flag color

COMESA officials’ pronouncements: merger enforcement #1, cartel ‘follow-on enforcement’, jurisdictional swamp

As other attendees of the 17 July 2015 regional sensitisation workshop have done, the Zimbabwean daily NewsDay has reported on the Livingstone, Zambia event — a session that has yielded a plethora of rather interesting pronouncements from COMESA Competition Commission (“CCC”) officials, including on non-merger enforcement by the CCC, as we have noted elsewhere.

In light of the additional comments made by CCC officials — in particular George Lipimile, the agency’s CEO, and Willard Mwemba, its head of mergers — we decided to select a few and publish the  “AAT Highlights: COMESA Officials’ Statements” that should be of interest to competition-law practitioners active in the region (in no particular order):

M&A: CCC claims approval of 72 deals since 2014

Willard Mwemba is quoted as saying: “The commission has updated more than 72 mergers and the transaction represented more than $20 million. This money has been invested in the common market through mergers and acquisition.”
We do not know what it means to “update” a merger in this context.  We presume it implies “cleared.”
This figure does not conform to the published statistics on the CCC’s web site, which show the following numbers, based on our latest internal tally, amounting to a total of 30 published notifications since 2013 versus a claimed 72 approved deals since only 2014:
COMESA merger statistics July 2015
Number of merger notifications based on CCC-published notices
This discrepancy opens up the topic of transparency and proper documentation on the part of the CCC on its web site.  The (undated, as we have observed) PDF notices of merger filings simply do not reflect this claimed number of actual merger approvals made by Mr. Mwemba.  We hope that the CCC will enhance and better organise its online documentation of M&A activity.  (Even the very first link to the “Explanatory Note” of mergers remains broken after months, as noted previously, simply leading to a blank page comically headlined “What is Merger?”).
We also wonder about the reference in Mr. Mwemba’s statement to “the transaction” valued at “more than $20m.”  It may be unclear reporting on the part of NewsDay, or perhaps Mr. Mwemba was referring to a specific but unnamed transaction, presumptively in the mining industry.  In any case, Mwemba highlighted the following sectors as key for COMESA M&A transactions: mining, pharmaceuticals, agriculture and energy.
Finally, the claimed CCC’s reduction of the the merger filing fees from half a million dollars “to $200,000” is a topic we shall discuss in a separate post.

Non-Merger Enforcement by COMESA

As we noted in yesterday’s post, the CCC’s head, executive director George Lipimile, foreshadowed non-merger enforcement by the agency, including an inquiry into the “shopping mall sector,” as well as cartel enforcement.  On the latter topic, Mr. Lipimile highlighted cartels in the fertiliser, bread and construction industries as potential targets for the CCC — all of which, of course, would constitute a type of “follow-on enforcement” by the CCC, versus an actual uncovering by the agency itself of novel, collusive conduct within its jurisdictional borders, as John Oxenham, a director at Africa consultancy Pr1merio, notes.
“Here, in particular, the three examples given by Mr. Lipimile merely constitute existing cartel investigations that we know well from the South African experience — indeed, the SA Competition Commission has already launched, and in large part completed, its prosecutions of the three alleged cartels,” says Oxenham.
As AAT has reported since the 2013 inception of the CCC, antitrust practitioners have been of two minds when it comes to the CCC: on the one hand, they have criticised the COMESA merger notification regime, its unclear thresholds and exorbitant fees, in the past.  On the other hand, while perhaps belittling the CCC’s merger experience, the competition community has been anxious to see what non-merger enforcement within COMESA would look like, as this (especially cartel investigations and concomitant fines under the COMESA Regulations) has a potentially significantly larger impact on doing business within the 19-member COMESA jurisdiction than merely making a mandatory, but simple, filing with an otherwise “paper tiger” agency.  Says Andreas Stargard, also with Pr1merio:
“If the CCC steps up its enforcement game in the non-transactional arena, it could become a true force to reckon with in the West.  I can envision a scenario where the CCC becomes capable of launching its own cartel matters and oversees a full-on leniency regime, not having to rely on the ‘follow-on enforcement’ experience from other agencies abroad.  The CCC has great potential, but it must ensure that it fulfills it by showing principled deliberation and full transparency in all of its actions — otherwise it risks continued doubt from outsiders.”

COMESA Judge Proposes Judicial Enhancements

Justice Samuel Rugege, the former principal judge of the COMESA Court of Justice, is quoted as arguing against the COMESA Treaty’s requirement for exhaustion of local remedies prior to bringing a matter before the Court of Justice:
“I think that the rule ought to be removed and members should have access to the courts like the Ecowas Court of Justice. The matter has been raised by the president of the Court and the matter needs to be pursued. It is an obstacle to those who want to come and cannot especially on matters that are likely to be matters of trade and commercial interest. Commercial matters must be resolved in the shortest possible time as economies depend on trade,” Rugege said.
Justice Rugege also highlighted the potential for jurisdictional infighting in the COMESA region (see our prior reporting on this topic here), observing that said COMESA currently lacks any framework for coordinating matters involving countries that are part of both SADC and the COMESA bloc.

CEO Calls for Introduction of Nigerian Competition Law

Posted on by Editor

 

“Too huge to be monopolised”? — Orkeh cites business need for Nigerian competition law

The Managing Director and Chief Executive Officer of African Cable Television, Mr. Godfrey Orkeh, was interviewed recently in Lagos, Nigeria, and discussed a topic we at AAT have previously addressed: The need for Africa’s largest economy to enact antitrust laws.  ACTV (pronounced “active”) began its service in December 2014 and has faced an uphill battle in entering the pay-TV marketplace.

As John Oxenham, a founding director of Pr1merio, the Africa-focussed legal advisory firm and business consultancy, points out: “In April of 2014, Nigeria surpassed South Africa as the continent’s largest economy, yet it still lacks any enforceable antitrust provision in its statutes.” (See Economist Apr. 12, 2014: “Africa’s New Number One“).

nigeria

Even prior to Nigeria’s rise to become the continent’s premier economy in terms of GDP, we published several calls for a Nigerian competition law. For example, in our article “Another call for Competition Law in Nigeria: Privatization of Electricity,” AAT contributor Chinwe Chiwete wrote:

The way forward still remains for Nigeria to have a Competition Law as the basic legal framework upon which other sector regulations can build upon.

Chilufya Sampa, a former COMESA Competition Commissioner and currently the Executive Director of the Zambian Competition & Consumer Protection Commission, said that antitrust law in Africa’s largest economy “would be great indeed,” noting the “many benefits in having a competition law.”

Pr1merio director Andreas Stargard likewise promoted the idea of establishing an antitrust regime in West Africa’s dominant economy. He wrote in an article aptly entitled “Nigerian antitrust?“:

Today, AfricanAntitrust adds its voice to the steady, though infrequent, discussion surrounding the possibility of a Nigerian competition-law regime.  In our opinion, it is not a question of “if” but “when”, and perhaps more importantly, “how“?

“If”: it is a virtual certainty that sooner or later, the drivers of growth in the Nigerian economy (innovators, IPR owners and applicants, upstarts, and foreign investment) will succeed in their demands for an antitrust law to be enacted.

“When”: it’s been debated in Nigeria since at least 1988; there was another push in the right direction in 2002; and, since then, at least a steady trickle of intermittent calls for a central antitrust regulator, often coming loudest from the outside (as does this post). This general time line coincides with that of other developing or now emerging competition-law jurisdictions, and we believe it is now a question of years, not decades, until a Nigerian Sherman Act will see the legislative light of day. Our (admittedly unscientific) prediction is that Nigeria will have a competition-law regime prior to 2020. (Note: the latest of up to six bills introduced to date, the Competition and Consumer Protection Bill, has been languishing in the Nigerian Senate since 2009).

“How”: this is the kicker — the most interesting bit of the Groundhog Day story this would otherwise be and remain. The intriguing part about reigniting the discussion surrounding Nigerian antitrust law is that we now live in the age of COMESA and more importantly here, the COMESA CCC (Competition Commission).

This opens up new opportunities that may not have been envisaged by others in the 1990s or 2000s. For example: will the economies of West Africa band together and create a similar organisation, notably with “legal teeth”, which might include provisions for a centralised enforcement of antitrust? Will it be under the auspices of ECOWAS or UEMOA? A monetary union has been known to be an effective driver of ever-increasing competition-law enforcement elsewhere in the world (hint: Brussels)…

If the answer to these crucial questions is “no”, what are the consequences to the Nigerian economy? Will Nigeria continue on its path to outsider status when it comes to healthy economic regulation — despite its powerhouse status in sub-Saharan Africa? Will this add to the disincentive against increased foreign investment, akin to the prevalent oil and diesel-stealing that occurs ’round-the-clock and in the open? Will businesses — other than former state monopolies, now privatised and firmly in the hands of oligarchs, or cartelists — continue to accept being deprived of the economic fruit of their labour, without protection from certifiably anti-competitive behaviour? Will other state agencies continue to step in and act as quasi-enforcers of antitrust, as they have done in the past (the Air Cargo cartel is an example), filling the void of a central competition commission?

Godfrey-Orkeh
Chief Executive Officer of African Cable Television, Mr. Godfrey Orkeh

Below, we excerpt a few of Mr. Orkeh’s pertinent comments on the issue, in which he discusses the lack of any monopolisation offence under Nigerian law and the high barriers of entry in the television and media sector he and his company have faced while challenging the incumbent domestic TV provider.

The number one challenge in the industry is that there is no regulation, NBC is doing its best but there is no act of law that backs the activities up. Before the last government handed over, there was a bill that was being pushed, [competition-law] bill like what we find in Europe that nobody can own 100 per cent of an industry, if you grow beyond a particular size, for instance when Microsoft, Google among others grew beyond a certain size, they were stopped to allow room for other players. There is no such law right now in Nigeria so it is a big barrier; it is only legislature that can change that. … This is good for the economy and the customers.

We knew there is a monopolistic tendency in the market, the existing structure in the legislature of Nigeria allows a dominant player to take advantage of the environment, before we came to the market. There was no pay TV offering PVR for the middle class and for you to get decoder with PVR you have to cough out about N70, 000 but we are saying with N15, 000 you can have a PVR. And content-wise there was a lot of exclusivity which is going to be difficult for one person to break. Beyond this, we will develop the market for our self, develop a niche for our self because right now the tendency is also thriving in the industry, Nigeria with a population of about 170 million, 26 million households with television, but the market is so huge. There is still a huge market that is not being addressed, we are here to capture that niche market and grow it. … [] Nigerians are the only ones that can take a stand as far as monopoly is concerned, and we have started seeing that in recent social media reactions about what is happening in the industry.  If we don’t have a choice there will always be a monopoly even if it is only a player that is that market, but you’ve created an avenue for two to three players to play in the market, there would be options like what we see in the telecoms sector, where I can port my number, which I believe has  taken efficiency to another level. So we are getting to a point where with digitisation every Nigerian would be exposed to as many channels as possible.  But the fact remains that the market is a huge segment. It is too huge to be monopolised.

Outside of AAT’s own resources on the prospect of a future Nigerian antitrust law, we refer our readers to the following resources for further reading on this topic:

  1. http://www.globalcompetitionforum.org/regions/africa/Nigeria/antitrust%20article.pdf
  2. http://afro-ip.blogspot.be/2011/11/iprs-and-competition-law-nigerian.html
  3. http://www.cuts-ccier.org/7up4/NTW-Nigeria_media.htm

MergerMania: Are CCC notifications picking up pace unnoticed?

Posted on by andreasstargard
COMESA Competition Commission logo

COMESA Merger Mania

To answer our rhetorical question in the title above: We don’t believe so.  For the merger junkies among our readership, here is AAT’s latest instalment of “COMESA MergerMania” — AfricanAntitrust’s occasional look at merger matters reviewed by the young multi-jurisdictional competition enforcers in south/eastern Africa.  (To see our last post on COMESA merger statistics, click here).

COMESA publishes new Merger Filings, still fails to identify dates thereof

As nobody else seems to be doing this, let us compile the latest news in merger notifications to the COMESA Competition Commission.  Prior to doing so, however, we observe one item of utility and basic house-keeping etiquette, which we hope will be heeded in future official releases by the agency: Please note the dates of (and on the) documents being issued.  Using the date as a ‘case ID’ is insufficient in our view — the CCC’s current PDF pronouncements invariably remain un-dated, a practice which AAT deplores and which simply does not conform to international business (or government) standards.  So: please date your press releases, opinions, decisions, and notifications on the documents themselves.

We observe that the matters below have not yet been assigned final “case numbers” (at least not publicly) in the style typical of the CCC decisions in the past, namely sequential numbers per year, as they are currently under investigation and have not yet been decided.

We also note that one notification in particular appears to have been retroactively made in 2014, even though it is identified as merger no. 3 of 2015 (Gateway), a peculiarity we cannot currently explain.  Likewise, AAT wonders what the “44” stands for in its case ID (“12/44/2014”), we surmise it’s a typo and should be “14” instead.

Internal Case ID Statement of Merger
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015
Gateway/Pan Africa MER/12/44/2014 SOM/3/2015
Old Mutual/UAP MER/03/04/2015 SOM/2/2015
Zamanita /Cargill MER/03/03/2015 SOM/1//2015

Which brings us to the bi-monthly…

AAT COMESA Merger Statistics Roundup

COMESA Merger Statistics as of July 2015
COMESA Merger Statistics as of July 2015 (source: AAT)

Proliferation of active multi-nation competition regimes continues

Posted on by andreasstargard

6-member East African Community (EAC) to finalise competition law amendments

The EAC, a regional intergovernmental organisation comprising Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan, is said to be drafting amendments to its thus-far essentially dormant regional fair Competition Act (dating back to 2006, EAC Competition Act 2006, 49 sections) to address antitrust concerns in the region.  The EAC’s legislative body is in the final stages of completing its work on the East African Community Competition (Amendment) Bill (2015).

In a 2010 paper, Alloys Mutabingwa (then Deputy Secretary General of the EAC Community Secretariat) writes:

As the EAC begins the implementation of the Common Market, one is pushed to wonder, which kind of competition do we currently have in the East African Community? Is it the kind of competition that constantly pushes companies to innovate and reduce prices? Does it increase the choice of products and services available to EAC consumers? Or, is it the type of competition that is defined by companies colluding to highjack the market? The answer lies somewhere in the middle but one thing is certain, with the intensification of competition in the EAC there will be frictions between companies across the region as they seek to gain advantage over their competitors.

In this short and worthwhile read, he stresses the importance of having a multi-national competition framework vs. a purely domestic network of independent enforcers.  Mr. Mutabingwa uses the example of the merger case of East African Breweries and South African Breweries, in which the Kenyan and Tanzanian competition authorities were “allowed by law to handle national practices only.”

According to an October 2014 article, “statistics show that the EAC’s total intra-regional trade soared from $2 billion in 2005 to $5.8 billion in 2012, while the total intra-regional exports grew from $500 million to $3.2 billion in the period under review.”  The  piece quotes an EAC competition official as saying that the enforcement agency would be online by December 2014.

In addition to the EAC efforts, a report also states that the head of economic affairs of the Tanzanian Fair Competition Tribunal (FCT), Nzinyangwa Mchany, recently emphasised the importance of member-state level enforcement, such as that of the country’s FCT and FCC, “to increase efficiency in the production, distribution and supply of goods and services to Tanzanians,” especially in economies that were centrally planned until only a few decades ago, and which have had to struggle with the ill after-effects of unregulated trade liberalisation and privatisation of state-owned enterprises.

Finally: One step forward for COMESA merger enforcement? New rules, new commissioners

Posted on by andreasstargard

COMESA old flag color

Clarification or not?

Amended Rules for Merger Notification

Repealing the oft-criticised original 2012 Rules on the Determination of Merger Notification Threshold, the COMESA Board of Commissioners approved on March 26, 2015 the new set of Amended Merger Rules. These are ostensibly meant to permit parties and their legal counsel a more meaningful determination of filing fees, notification thresholds, and calculation of parties’ revenue (and asset) valuation.  Whilst many legal news outlets have reported (uncritically, as we fear) a high-level summary of these Rules, AAT undertook a critical review of them, and finds that many of the previously-identified flaws persist.

Filing Fee

The question of what parties had to pay in administrative fees to be permitted to file a merger notification with the Competition Commission was always in question (see here for AAT summaries of the issue).  We have reported on examples of fees that came dangerously close to the original $500,000 maximum limit.  Since then, the agency’s “Explanatory Note” (which still has a visible link on the Commission’s web site, but which happens to be an essentially “dead” web page, other than its amusing headline: “What is merger?“) attempted to clarify, and indeed informally change, the filing fee from a 0.5% figure to 0.01% of the parties’ annual COMESA-area turnover.

COMESA explanatory note

Where the filing fee stands now is, honestly, not clear to AAT.  While other sources have reiterated the revised fee of 0.1% with a maximum of $200,000, we fail to see any information whatsoever about the filing fee in the (partial set, containing only ANNEX 2 of) the Amended Rules made available by COMESA on its site, despite their title containing the term “fees”.  We have been able to determine, through some internet sleuthing on the COMESA site, that a document marked clearly as “DRAFT” does contain references to 0.1% and $200k maximum fees.

We note that we have now seen three different turnover percentage-based filing fees from COMESA: 0.01%, 0.1%, and 0.5%, as well as several different maxima.  Which shall govern in the end remains to be seen.  We do not envy those parties that have filed with COMESA and have paid the half-million dollar fee within the past 2 years, as we doubt they are entitled to restitution of their evident overpayment.

AAT predicts that this is where things will land, at 0.1% and $200,000, once the good folks at COMESA get around to actually editing the document and finalising their own legislation, so that practitioners and parties alike may have an original, statutory source document on which to rely

Our previous AAT advice has been very clear to companies envisaging a filing with COMESA: wait until the Commission and the Board clarify the regime in its entirety.  Do not file for fear of enforcement, because there is little if any enforcement yet, and the utter lack of clarity – apparently even within the agency itself – on the actual thresholds and other rules provides ample grounds for a legal challenge to the “constitutionality,” if you will, of the entire COMESA merger regime. 

Combined $50 million revenue threshold

What the 5-page document does show, however, is the new notification threshold embodied in Rule 4, which defines the threshold as follows:

Either (or both) of the acquiring and/or target firms must ‘operate’ [defined elsewhere] in at least two COMESA member states and have (1) combined annual turnover or assets of $50 million or more in the COMESA common market, AND (2) in line with the EU’s “two-thirds” merger rule, each of at least 2 parties to the merger must have at least $10 million revenue or assets within the COMESA zone, unless each of the merging parties achieves 2/3 or more of its aggregate revenue within one and the same member state.

The likewise-revised Form 12, the mandatory filing form, which is available in a scanned format (we hope this will be remedied and provided in more legible and native-electronic format soon by the secretariat) here, reflects the rules changes.  It must be submitted at a minimum within “30 days of the merging parties’ decisions [sic] to merge.”  The Competition Commission mus t make a decision within 120 days of receipt of (a complete) notification.

Interestingly, if the same two firms enter into multiple transactions within a 2-year period are to be treated “as one and the same merger arising on the date of the last transaction.” (See Rule 5, in a likely-misidentified subsection that is confusingly entitled 1.2.). Mimicking the EU Merger Regulation and Consolidated Jurisdictional Notice, the revised COMESA rules likewise contain special provisions for determining the revenues or assets of financial institutions (and their individual member-state branches’ income) as well as insurance companies.

Parents, sisters, subs: included.

Parent, sister and subsidiary entities are included in the revenue determination of the purchaser, to no surprise.  However, unlike what has been reported in the media, again we fail to see the (entirely logical) exclusion of the target parent’s turnover in calculating total revenues, other than in section 3.16 of the August 2014 Guidelines (which provides: “the annual turnover and value of assets of a target undertaking will not, for the purposes of these Guidelines, include the annual turnover or value of assets of its parents and their subsidiaries under Section 3.15)(d)where, after the merger is implemented, such parents are not parents of (i) the target undertaking if it remains after the merger, or (ii) the merged undertaking in the case of an amalgamation or combination“).

We observe the obvious: the Guidelines have no binding legal effect.

The Amended Rules do however provide that state-owned enterprises do not have to include their “parental” governmental revenues; for instance, if a state-owned airline like Air Tanzania were to acquire its counterpart, such as Air Mauritius, in a hypothetical COMESA-reportable transaction, the parties would not be required to report the full tax income or other revenues of the Tanzanian and Mauritian governments, respectively, but only those of the actual state-owned entity and its subsidiaries.

COMESA's 18th Summit in Ethiopia

18th COMESA Summit in Ethiopia

Four New Commissioners

As AAT reported previously, the Addis Ababa COMESA summit also saw the election and confirmation of four new Competition Commissioners.  We now have the full listing of the members, including the 4 new* ones (listed below in italics), whose term is for three years:

New 2015 Commissioners Origin
Ali Mohammed Afkada Djibouti
Amira Abdel Ghaffar* Egypt
Merkebu Zeleke Sime* Ethiopia
Francis Kariuki Kenya
Matthews Chikankheni Malawi
Georges Emmanuel Jude Tirant* Seychelles
Thabisile Langa Swaziland
Patrick Okilangole* Uganda
Chilufya Sampa Zambia