COMESA competition workshops underway (#CCCworkshop)

CCC workshop participants

Events focus on media & business community’s understanding of competition rules and practical workload of CCC

Media

For two days this week, COMESA will hold its 5th annual “Regional Sensitization Workshop for Business Reporters“, focussed on provisions and application of the COMESA competition regulations and trade developments within the 19-country common market.

Over 30 journalists from close to a dozen countries are expected to participate in the event, held in Narobi, Kenya, from Monday – Tuesday.

AfricanAntitrust.com will cover all pertinent news emerging from the conference.  We will update this post as the conference progresses.

Speakers include a crème de la crème of East African government antitrust enforcement, including the CCC’s own Willard Mwemba (head of M&A), the CCC’s Director Dr. George Lipimile, and the Director and CEO of the Competition Authority of Kenya, Francis Wang’ombe Kariuki.  Topics will include news on the rather well-developed area of of mergerenforcement, regional integration & competition policy, as well as the concept of antitrust enforcement by the CCC as to restrictive business practices, an area that has been thus far less developed by the Commission in terms of visibility and actual enforcement, especially when compared to M&A.  We previously quoted Director Lipimile’s statement at a 2014 conference that, since the CCC’s commencement of operations “in January, 2013, the most active provisions of the Regulations have been the merger control provisions.”

Andreas Stargard, a competition practitioner, notes:

“We have been impressed with the Commission’s progress to-date, but remain surprised that no cartel cases have emerged from the CCC’s activities.  We believe that the CCC has sufficient capacity and experience now, in its sixth year of existence, to pursue both collusion and unilateral-conduct competition cases.

Personally, I remain cautiously optimistic that the CCC will, going forward, take up the full spectrum of antitrust enforcement activities — beyond pure merger review — including monopolisation/abuse of dominance cases, as well as the inevitable cartel investigations and prosecutions that must follow.”

The media conference will conclude tomorrow evening, June 26th.

Business Community

COMESA Competition Commission logoThe second event, also held in Nairobi, will shift its focus both in terms of attendees and messaging: It is the CCC’s first-ever competition-law sensitization workshop for the Business Community, to take place on Wednesday.  It is, arguably, even more topical than the former, given that the target audience of this workshop are the corporate actors at whom the competition legislation is aimed — invited are not only practicing attorneys, but also Managing Directors, CEOs, company secretaries, and board members of corporations.  It is this audience that, in essence, conducts the type of Mergers & Acquisitions and (in some instances) restrictive, anti-competitive business conduct that falls under the jurisdiction of Messrs. Lipimile, Mwemba, and Kariuki as well as their other domestic African counterparts in the region.

The inter-regional trade component will also be emphasized; as the CCC’s materials note, “we are at a historical moment in time where the Tripartite and Continental Free Trade Area agreements are underway. The objective of these agreements is to realize a single market. Competition law plays a vital role in the realization of this objective, therefore its imperative that journalists have an understanding of how competition law contributes to the Agenda.”

#LiveUpdates from the #CCCworkshop

Kenya perspective

Boniface Kamiti, the CAK representative replacing Mr. Kariuki at the event, noted that Africa in general and including the COMESA region “has a weak competition culture amongst businesses — which is why cartels are continuing in Africa, and the level of M&A is not at the level one would expect.”  This is why media “reporting on competition advocacy is very important, to articulate the benefits of competition policy and how enforcement activities further its goals, so the COMESA countries may be able to compete with other countries, including even the EU members, at a high level.”

He also highlighted — although without further explanation — the “interplay between the COMESA competition laws and those of the member countries; most people are not aware of that!”  This comment is of particular interest in light of the prior jurisdictional tension that had existed between national agencies and the CCC in the past regarding where and when to file M&A deals.  These “teething issues are now fully resolved”, according to Dr. Lipimile, and there are neither de iure nor any de facto merger notification requirements in individual COMESA member states other than the “one-stop shop” CCC filing (which has, according to Mr. Mwemba, reduced parties’ M&A transaction costs by 66%).

On the issue of restrictive trade practices (RTP), the CAK reminded participants that trade associations often serve to facilitate RTP such as price-fixing cartels, which are subject to (historically not yet imposed, nor likely to be) criminal sanctions in Kenya. It also observed that (1) manufacturers’ resale price maintenance (RPM) would almost always be prosecuted under the Kenyan Competition Act, and that (2) since a 2016 legislative amendment, monopsony conduct (abuse of buyer power) is also subject to the Act’s prohibitions.

Concluding, the CAK’s Barnabas Andiva spoke of its “fruitful” collaboration with the CCC on ongoing RTP matters, noting the existing inter-agency Cooperation Agreement. Added Mr. Mwemba, “we have approximately 19 pending RTP cases.”

CCC leadership perspective:  Nudging Uganda and Nigeria towards competition enforcement

CCC_Director

George Lipimile, CEO, COMESA Competition Commission

Dr. Lipimile took up Mr. Kamiti’s “weak African competition culture” point, noting the peculiar regional issue that “between poverty and development lies competition” to enhance consumer welfare.

He took the audience through a brief history of antitrust laws globally, and encouraged journalists to explain the practical benefits of “creating competitive markets” for the population of the COMESA region at large.

He called on Uganda and Nigeria to — finally — enact a competition law.  (AAT has independently reported on Uganda and also the EAC’s emphasis on its member nations having operational antitrust regimes.  We observe that Uganda does have a draft Competition Bill pending for review; a fellow Ugandan journalist at the conference mentioned that there has been some, undefined, progress made on advancing it in the Ugandan legislature.)  Dangote — the vast Nigerian cement conglomerate (see our prior article here) — and Lafarge played exemplary roles in Lipimile’s discourse, in which he commented that “they do not need protecting, they are large”, instead “we need more players” to compete.

Importantly, Dr. Lipimile emphasized that protectionism is anti-competitive, that “competition law must not discriminate,” and that its goal of ensuring competitive market behaviour must not be confused with the objectives of other laws that are more specifically geared to developing certain societal groups or bestow benefits on disadvantaged populations, as these are not the objectives of competition legislation.

The CCC also called on the press to play a more active role in the actual investigation of anti-competitive behaviour, by reporting on bid rigging, unreported M&A activity, suspected cartels (e.g., based on unexplained, joint price hikes in an industry), and the like.  These types of media reports may indeed prompt CCC investigations, Lipimile said.  Current “market partitioning” investigations mentioned by him include Coca Cola, SABMiller, and Unilever.

He concluded with the — intriguing, yet extremely challenging, in our view — idea of expanding and replicating the COMESA competition model on a full-fledged African scale, possibly involving the African Union as a vehicle.

CCC workshop participants

2018 CCC workshop participants

COMESA Trade perspective

The organisation’s Director of Trade & Commerce, Francis Mangeni, presented the ‘competition-counterpart’ perspective on trade, using the timely example of Kenyan sugar imports, the cartel-like structure supporting them, and the resulting artificially high prices, noting the politically-influenced protectionist importation limitations imposed in Kenya.

Dr. Mangeni opined that the CCC “can and should scale up its operations vigorously” to address all competition-related impediments to free trade in the area.

CCC Mergers

Director of M&A, Mr. Mwemba, updated the conference on the agency’s merger-review developments. He pointed to the agency’s best-of-breed electronic merger filing mechanism (reducing party costs), and the importance of the CCC’s staying abreast of all new antitrust economics tools as well as commercial technologies in order to be able to evaluate new markets and their competitiveness (e.g., online payments).

As Mr. Mwemba rightly pointed out, most transactions “do not raise competition concerns” and those that do can be and often are resolved via constructive discussions and, in some cases, undertakings by the affected companies. In addition, the CCC follows international best practices such as engaging in pre-merger notification talks with the parties, as well as follow-ups with stakeholders in the affected jurisdictions.

Key Statistics

Year-to-date (2018), the 24 notified mergers account for approximately $18 billion in COMESA turnover alone. Leading M&A sectors are banking, finance, energy, construction, and agriculture.

In terms of geographic origination, Kenya, Zambia, and Mauritius are the leading source nations of deal-making parties, with Zimbabwe and Uganda closely following and rounding out the Top-5 country list.

The total number of deals reviewed by the CCC since 2013 amounts to 175 with a total transaction value of US $92 billion, accounting for approximately $73.7 billion in COMESA market revenues alone. (The filing fees derived by the Commission have totaled $27.9 million, of which half is shared with the affected member states.)

All notified deals have received approval thus far. Over 90% of transactions were approved unconditionally. In 15 merger cases, the CCC decided to impose conditions on the approval.

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The African WRAP – JUNE 2017 edition

The first half of 2017 has been an exciting one from a competition law perspective for a number of African countries. As certain agencies have taken a more robust approach to enforcement while others have been actively pursuing or developing their own domestic competition law legislation. Further, there is an increasingly prevalent interplay between domestic laws with regional competition law and policy in an effort to harmonise and promote regional integration.

In this addition of the WRAP, we highlight some of the key antitrust developments taking place across the continent. The editors at AAT have featured a number of articles which provide further insight and commentary on various topics and our readers are encouraged to visit the AAT Blog for further materials and useful updates.


AAT is indebted to the continuous support and assistance of Primerio and its directors in sharing their insights and expertise on various African antitrust related matters. To contact a Primerio representative, please see the Primerio brochure for contact details. Alternatively, please visit Primerio’s website


 

Kenya

Grocery Market Inquiry

On 27 January 2017, the Competition Authority of Kenya (CAK) exercised its powers in terms of section 18 (1) (a) of the Competition Act, 2010, to conduct a market inquiry into the branded retail sector.

The key issues which the CAK’s will focus on during the inquiry include:

  1. the allocation of shelf space and the relative bargaining power between retailers and their suppliers;
  2. the nature of and the extent of exclusive agreements at one stop shop destinations and their effects on competition;
  3. the pricing strategies retailers employ especially in regards to responding to new entrants;
  4. whether there are any strategic barriers to entry created by incumbent firms to limit entry in the market; and
  5. the effect of the supermarkets branded products on competition

Legislative amendments

The Kenya Competition Act (Act) has undergone a number of amendments in the past year.

Most notably, however, section 24 of the Act, which deals with abuse of dominance generally, has been amended to also cater for an abuse of “buyer power”.

Without being exhaustive, a number of practices which would typically constitute an abuse of dominance include:

  1. imposing unfair purchasing or selling prices;
  2. limiting or restricting output, market access or technological advancements;
  3. tying and/or bundling as part of contractual terms; or
  4. abusing intellectual property rights.

In terms of the definition of “dominance” in the Act, a firm will be considered dominant if that firm has greater than a 50% market share.

The amendment, as drafted, raises a number of concerns as previously noted on AAT.

Botswana

Merger control – Prior Implementation

On 17 February 2017, the Competition Authority of Botswana (CA) prohibited a merger between Universal House (Pty) Ltd and Mmegi Investment Holdings (Pty) Ltd.

The CA prohibited the merger on the grounds that the transaction was likely to lead to a substantial prevention or lessening of competition in the market. In particular, the CA held that the “market structure in the provision of commercial radio broadcasting services will be altered, and as such raises competition and public interest concerns”.

At the stage of ordering the divestiture, a suitable third party had not yet been identified and the merging parties were obliged to sell the 28.73 shares to a third party “with no business interests affiliated in any way with the acquiring entity”. The divestiture was also to take place within three months of the CA’s decisions and, should the thresholds be met for a mandatorily notifiable merger, the CA would require that the proposed divestiture also be notified.

South Africa

Follow-on Civil Liability

A second civil damages award was imposed in 2017 on South Africa’s national airline carrier, SAA, following the Competition Tribunal’s finding that SAA had engaged in abuse of dominance practices, in favour of Comair. This award comes after the first ever successful follow-on civil damages claim in South Africa (as a result of competition law violation) which related to Nationwide’s civil claim against SAA.  In the Nationwide matter, the High Court awarded, (in August 2016) damages to Nationwide in the amount of R325 million.   Comair claim for damages was based on the same cause of action as Nationwide’s claim. The High Court, however, awarded damages in favour of Comair of R554 million plus interest bring the total award to over a R1 billion (or about US$ 80 million).

Please see AAT’s featured article here for further insights into this case.

Market Inquiries

The SACC published a notice in the Government Gazette on 10 May 2017, indicating that it will conduct a market inquiry into the Public Passenger Transport sector (PPT Inquiry) which is scheduled to commence in June 2017.

The PPT inquiry, is expected to span two years and will involve public hearings, surveys and meetings with stakeholders which will cover all forms of (land-based) public passenger transport. The SACC indicated in its report that “…it has reason to believe that there are features or a combination of features in the industry that may prevent, distort or restrict competition, and / or to achieve the purpose of the Competition Act”.

Legislative amendments

The South African Competition Commission (SACC) recently published draft guidelines for determining the administrative penalty applicable for prior implementing a merger in contravention of the South African Competition Acts’ merger control provisions (the Draft Guidelines).

In terms of the penalty calculations, the Draft Guidelines prescribe a minimum administrative penalty of R5 million (USD 384 615) for the prior implementation of an intermediate merger and a R20 million (USD 1.5 million) penalty for implementing a large merger prior to being granted approval. The Draft Guidelines cater further for a number of aggravating or mitigating factors which may influence the quantum of the penalty ultimately imposed.

Egypt

Investigations

The Egyptian Competition Authority (ECA), has also referred the heads of the Confederation of African Football (CAF) to the Egyptian Economic Court for competition-law violations relating to certain exclusive marketing & broadcasting rights. This follows the COMESA Competition Commission also electing to investigate this conduct.

In addition, it has been reported that the ECA has initiated prosecution of seven companies engaged in alleged government-contract bid rigging in the medical supply field, relating to hospital supplies.

Mauritius

Minimum resale price maintenance

In a landmark judgment, the Competition Commission of Mauritius (CCM) recently concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).

The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and Rs4 007 110.00 respectively for each contravention.

Please see AAT’s featured article here for further information.

Leniency Policy

The global trend in competition law towards granting immunity to cartel whistleblowers has now been embraced by the Competition Commission of Mauritius (CCM). The CCM will also grant temporary immunity (during the half-year period from March 1 until the end of August 2017) not only to repentant participants but also to lead initiators of cartels, under the country’s Leniency Programme.

COMESA

The COMESA Competition Commission (CCC) announced early 2017 that it will be investigating allegations of exclusionary conduct in relation to the Confederate of African Football’s (CAF) decision to extend an exclusive marketing of broadcasting rights and sponsorship agreement with Lagardère Sports in relation CAF tournaments.

Please see AAT’s featured article here for more information.

What to look out for?

Zambia

Guidelines

The Competition and Consumer Protection Commission (CCPC) published series of guidelines and policies during 2016. These included adopting a formal Leniency Policy as well as guidelines for calculating administrative penalties.

In addition, the CCPC also published draft “Settlement Guidelines” which provides a formal framework for parties seeking to engage the CCPV for purposes of reaching a settlement. The Settlement Guidelines present a number of practical challenges as currently drafted. One example is that the guidelines don’t cater or seem to recognise “without prejudice” settlement negotiations.

It is anticipated that the draft Settlement Guidelines will be formally adopted this year.

Please click here to read the feature article on AAT.

Namibia

In April 2017, the CEO of the Namibian Competition Commission (NCC), Mr. Mihe Gaomab II, announced that the NCC has made submissions to the Minister of Trade and Industry in relation to proposed legislation which will regulate franchise models in Namibia.

While recognising the benefits of franchise models, the NCC is, however, concerned that there are a number of franchises in Namibia which may be anti-competitive in that the franchisor-franchisee relationship creates certain barriers to entry.

The NCC has specifically identified the practice, by way of an example, whereby certain franchisors deliberately ensure that there is a lack of competition between franchisees in the downstream market. The rationale behind this commercial strategy is allegedly so that the franchisor may extract greater royalties or franchise fees from the respective franchisees, as the franchisee is assured of a lack of competition.

The NCC views this practice as well as a various similar practices as potentially anti-competitive as the structure of certain franchise models may result in collusion between franchisees.

For further commentary on this development, please see AAT’s featured article.

Nigeria

Nigeria remains, for now, one of the few powerhouse African economies without any antitrust legislation. The Federal Competition and Consumer Protection Bill of 2016, however, recently made it past the initial hurdle of receiving sufficient votes in the lower House of Representatives.  The Bill is, therefore, expected to be brought into effect during the latter part of 2017 or early 2018.

South Africa

Market inquiries

The Minister of the Department of Economic Development, who has fulfills the oversight function of the South African Competition Authorities, has announced that a market inquiry will be conducted in relation to the “high costs of Data” in South Africa.

This would be the fifth formal market inquiry since the Competition Act was amended to afford the Competition Commission with formal powers to conduct market inquiries.

Complex monopoly provisions

Both Minister Patel and the President have announced that the Competition Act will undergo further legislative amendments in order to address perceived high levels of concentration in certain industries.

In this regard, it is likely that the competition amendment act’s provisions relating to abuse of dominance and complex monopolies, which was drafted in 2009, will be brought into effect.

In terms of the provisions, as currently drafted, where five or less firms have 75% market share in the same market, a firm could be found to have engaged in prohibited conduct if any two or more of those firms collectively act in a parallel manner which has the effect of lessening competition in the market (i.e. by creating barriers to entry, charging excessive prices or exclusive dealing and “other market characteristics which indicate coordinated behavior”).

Please see AAT’s feature article here for further commentary.

Pan-African Antitrust Round-Up: Mauritius to Egypt & Tunisia (in)to COMESA

A spring smorgasbord of African competition-law developments

As AAT reported in late February, it is not only the COMESA Competition Commission (CCC), but also the the Egyptian antitrust authorities, which now have referred the heads of the Confederation of African Football (CAF) to the Egyptian Economic Court for competition-law violations relating to certain exclusive marketing & broadcasting rights.  In addition, it has been reported that the Egyptian Competition Authority (ECA) has also initiated prosecution of seven companies engaged in alleged government-contract bid rigging in the medical supply field, relating to hospital supplies.

Nigeria remains, for now, one of the few powerhouse African economies without any antitrust legislation (as AAT has reported on here, here, here and here).

But, notes Andreas Stargard, an antitrust attorney with Primerio Ltd., “this status quo is possibly about to change: still waiting for the country’s Senate approval and presidential sign-off, the so-called Federal Competition and Consumer Protection Bill of 2016 recently made it past the initial hurdle of receiving sufficient votes in the lower House of Representatives.  Especially in light of the Nigerian economy’s importance to trade in the West African sphere, swift enactment of the bill would be a welcome step in the right direction.”

The global trend in competition law towards granting immunity to cartel whistleblowers has now been embraced by the Competition Commission of Mauritius (CCM), but with a twist: in a departure from U.S. and EU models, which usually do not afford amnesty to the lead perpetrators of hard-core antitrust violations, the CCM will also grant temporary immunity (during the half-year period from March 1 until the end of August 2017) not only to repentant participants but also to lead initiators of cartels, under the country’s Leniency Programme.

The Executive Director of the CCM, Deshmuk Kowlessur, is quoted in the official agency statement as follows:

‘The policy worldwide including Mauritius, regarding leniency for cartel is that the initiators of cartel cannot benefit from leniency programmes and get immunity from or reduction in fines. The amnesty for cartel initiatorsis a one-off opportunity for cartel initiators to benefit from immunity or up to 100% reduction in fines as provided for under the CCM’s leniency programme. The amnesty is a real incentive for any enterprise to end its participation in a cartel. In many cases it is not clear for the cartel participant itself as to which participant is the initiator. The participants being unsure whether they are an initiator finds it too risky to disclose the cartel and apply for leniency. The amnesty provides this unique window of 6 months where such a cartel participant can apply and benefit from leniency without the risk of seeing its application rejected on ground of it being an initiator.’

 

COMESA Competition Commission logoFinally, COMESA will grow from 19 to 20 member states, welcoming Tunisia at the upcoming October 2017 summit: the official statement notes that “Tunisia first applied for observer status in COMESA in 2005 but the matter was not concluded. In February, 2016 the country formally wrote to the Secretary General making inquiries on joining COMESA. This set in motion the current process towards its admission. once successfully concluded, Tunisia will become the 20[th] member of COMESA.”

This means that within 6 months of accession to the Common Market, Tunisia’s business community will be bound by the competition regulations (including merger control) enforced by the CCC.  Speaking of the CCC, the agency also recently entered into a Memorandum of Understanding with the Mauritian CCM on March 24, facilitating inter-agency coordination.  In addition, the Zimbabwean Competition and Tariff Commission (CTC) will host a national sensitisation workshop on COMESA competition policy on May 16, 2017 in Harare, purportedly as a result of “over 50 transactions involving cross-border mergers notified” to the CCC involving the Zimbabwean market.  “The main objective of the national workshop is to raise awareness among the key stakeholders and business community in Zimbabwe with regards to the provisions and implementation of COMEA competition law,” the CTC noted in a statement.

 

Drastic price increase could be sign of collusion or dominance: Dangote in Nigeria

Close-knit trade group and dominant cement manufacturer prove to be (price-)explosive combination

 Our friends at Songhai Advisory, a business intelligence firm covering key parts of Africa, have released a brief market-intel note addressing the 44% price hike of cement in Nigeria, led by the country’s (and indeed soon also the continent’s) dominant manufacturer, the Dangote group.

Any discussion of Nigeria — still Africa’s largest economy measured by GDP — in the competition-law context must begin with the surprising fact that the country’s political leadership still has failed to institute any antitrust regime.  Says Andreas Stargard, an attorney with Africa-focused Pr1merio law group:

“As the continent’s economic leader, Nigeria is a lone beacon of failure to police anti-competitive practices, whereas a multitude of significantly smaller African jurisdictions have had competition laws for years or even decades.  The recent price developments of Nigerian concrete are merely one example of the negative impact on consumers where there are no antitrust rules in effect.  Notably, an industry trade association also appears to be involved here, so from the competition point of view, we are dealing not only with one dominant entity (Dangote) but also an efficient and time-tested mechanism of information-sharing among direct competitors (trade groups).

 

The price increase covered the entire Nigerian cement market, according to Songhai and other media reports: cement prices of the members of the Cement Manufacturers Association of Nigeria (CMAN) rose over the course of a month by 44% from US$5 to $7 per 50kg.  Adds Stargard, “any competent antitrust enforcer would look into such a price hike.  Given the absence of competition law enforcement in Nigeria, it is likely that no investigation will take place, and civil suits are highly unlikely, in light of the lack of antitrust laws and the political connections at play here.”  In the words of Songhai’s reporting: “When Dangote decides to push its price up or down, others tend to follow.”  Yet, the researchers also quote a source at Sokoto Cement, one of Dangote’s main rivals, as describing power generation costs and foreign-exchange fluctuations as the actual drivers behind the drastic recent cement price increases.

 

 

More Criminal Anti-Cartel Enforcement in Africa? Some Thoughts on Nigeria

By AAT guest author, Osayomwanbor Bob Enofe, Sutherland School of Law Doctoral Scholar, UCD.

We recently wrote about the landmark enactment of the new South African competition legislation that makes hard-core price-fixing a criminal offence, subjecting cartelists to up to 10 years imprisonment.  Nigeria is usually not on the radar of antitrust practitioners, however, and certainly not in the criminal sense, either.  As regular readers of AAT know, the Republic of Nigeria has featured occasionally in our posts despite not having a functioning antitrust regime, yet.  As editor and Pr1merio director Andreas Stargard wrote in an article entitled “Nigerian antitrust?“, scholars and political activists alike have promoted the idea of establishing an antitrust regime in West Africa’s dominant economy: ‘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“?’

Today, contributing author Bob Enofe adds his voice to the mix, and we are publishing one of his articles that originally appeared on Robert Connolly’s cartel capers blog.

Criminal Antitrust in Nigeria?

nigeriaThe Federal Republic of Nigeria is currently in the process of enacting a competition law, including to criminalise cartel activity amongst competitors. While such is in line with moves made by various other jurisdictions and theories of ‘rational actor’, sanction and deterrence, on ground realities suggest that criminalisation where transplanted might be seriously flawed.

From the late 1990s, and particularly in the year 2000, the Federal Government of Nigeria commenced moves to enact a Competition Law. Under such law, business cartel activity defined as agreements between competitors, aimed at distorting the process of competition and generating monopolistic rents, would be criminalised. The ‘Federal Competition Bill, 2002’, an executive bill drafted by the Nigerian Bureau of Public Enterprises (BPE), was titled: “a Bill for an Act to provide necessary conditions for market competition and to stimulate creative business activities, protect consumers, and promote the balanced development of the natural economy, by prohibiting restrictive contracts and business practices that substantially lessened competition”. It was also to be a Bill to regulate “possible abuses of dominant positions by businesses, and anti-competitive combines, and to establish the Federal Competition Commission, for effective implementation and enforcement of all the provisions of the bill”.  According to relevant sections of the bill, cartel agreements amongst competitors, including price fixing, bid rigging and market division, were also to be expressly criminalised. Clearly a robust and comprehensive bill, 16 years after introduction to the Nigerian National Assembly, the bill remains to be passed into law. Several amendments have since been presented, together with other bills presented by lawmakers. In every case, such bills have either stalled at first reading stage, or in certain cases disappeared from the legislative process. In one of such instances, an amendment of the above bill (The Federal Trade and Competition Commission Bill, 2006) was “vehemently” objected to by distinguished Senators, prompting governmental withdrawal. Amongst reasons advanced for the reception accorded the bill included that there was no need for a distinct ‘competition commission’, in the face of an already existent consumer protection council in Nigeria; other legislators simply complained about a proliferation of “too many commissions” in the country. Commentators have alluded to overt ignorance and lack of particular inclination for the subject, on the part of Nigerian Senators, as in reality underlining the reception accorded the bill.

In a paper recently presented at the #SLSA2016, ‘Developing Countries, Nigeria, and Cartel Criminalisation: of Transplantation and Desirability’ I had outlined how Nigeria’s attempt to introduce a competition law, and in particular criminalise cartel activity, reveals a (marked) lack of societal inclination towards competition law and prior poor advocacy on the part of government. Social norms are crucial to the effectiveness of law reform. Desirable social norms ensures amongst other things that prohibited conduct will be reported and discovered, even without direct enforcement or investigativeBob Enofe intervention, thereby complementing stretched law enforcement efforts.[1] Such also imply that prosecutors will be willing to enforce and vigorously police provisions of the law where passed, and in the case of the judiciary, stringent sentences will also be applied—or at least not deliberately avoided—so as to facilitate the deterrence potential of the applicable law. Perhaps most crucially for Nigeria, existence of such norms also mean that law makers are incentivised to support reform efforts, while the chances of ‘hijack’ by private interests will be slim. Absent such norms the chances of Nigeria’s competition and cartel criminalisation law, even when passed, could be (remarkably) marginal.

Heightened advocacy, together with a careful selection of test cases once the law is enacted is advanced as capable of remedying the above situation. In the face of sub-par institutions characteristic of the Nigerian context however (including severe limitations in the operation of the rule of law), abilities to so ‘guide’ social norms will be in reality seriously limited. An online petition regarding corruption amongst Nigerian senators, for example, reflect in part difficulties that could frustrate transplantation of cartel criminalisation, absent independent, effective, anti-corruption reforms in the country.

Neoliberal theories of rational actors, sanction and deterrence, imply to large extents a similar existence of contexts as have underlined effectiveness in western societies. In many cases, on the ground realities suggest that theories where transplanted, could be seriously flawed.

As I have argued in another paper currently under review (details to be communicated soon, hopefully!), one size cannot fit all- with developing countries and cartel criminalisation, the point gains extra force. To the extent that fines and other administrative means of enforcement are limited in ability to effectively curtail cartel practices, suggests a need for continuation of relevant research. Criminalisation hardly represents the ‘Golden Fleece’.

Footnote:

[1] See Stephan, Andreas, ‘Cartel laws undermined: Corruption, social norms, and collectivist business cultures’ (2010) Journal of Law and Society 345-367, See Maher, Imelda, The Institutional Structure of Competition Law, in Dowdle, Gillespie and Maher (eds) Asian Capitalism and the Regulation of Competition: Towards a Regulatory Geography of Global Competition Law (Cambridge University Press, 2013) 55, See Gal, Michal  ‘The Ecology of Antitrust: Preconditions for Competition Law Enforcement in Developing Countries.’ (2004) Competition, Competitiveness and Development 20-38.

CEO Calls for Introduction of Nigerian Competition Law

 

“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

Investment in Africa: Changing landscape, new hurdles

Questioning African antitrust growth prospects: Slowdown in economic investment (both organic and outside investment) may affect functioning of competition law on the continent

Recent developments in Africa have many scratching their heads and wondering whether the formerly wondrous economic-growth engine of the vastly resource-rich and otherwise economically still undervalued continent will soon experience a slowdown, if not come to a halt altogether.

For one, in April 2014, Nigeria surpassed South Africa as the continent’s largest economy (see Economist Apr. 12, 2014: “Africa’s New Number One“).  This is a significant milestone for the former, and a setback for the latter — an economy that was 8 times the size of the Nigerian economy only 20 years ago, yet is now suffering from stagnating GDP, reeling from corruption allegations amongst its current leadership, undergoing a closely-watched presidential election process, and whose ruling ANC party is facing a heretofore unprecedented backlash and torrent of criticism.

Source: The Economist

Not only South Africa has weakened, politically and economically, however.  Events such as the Northern Nigerian wave of violence – with sectarian Boko Haram forcefully displaying the impotence of the central Nigerian government of a weakened president Goodluck Jonathan – fuel the fire of outside investors’ mistrust of African stability and their concomitant reluctance to make good on prior investment promises.  As The Economist notes in the article quoted above: “it is not a place for the faint-hearted” to invest, even though it highlights the successful Nigerian business ventures of outsiders such as Shoprite, SABMiller, and Nestlé.  Bloomberg BusinessWeek quotes Thabo Dloti, chief executive officer of South Africa’s fourth-largest insurer Liberty Holdings Ltd. (LBH), as saying: “It does slow down the plans that we have, it does put out the projections that we have by a year or two.”

http://www.stanlib.com/EconomicFocus/Pages/InterestingChart112SouthAfricaneconomyvsNigerianeconomy.aspx

Nigerian vs. RSA GDP
Source: http://www.stanlib.com

Likewise, multi-national organisations such as COMESA and its competition enforcement body, are undergoing significant changes (such as, currently, an opaque process of raising the heretofore insufficient merger-filing thresholds), shockingly successful web attacks on their data, and a resulting dearth of transactions being notified.  Elsewhere in developing economies, recent political turmoil has likewise led observes to comment on the negative spillover effect from political & social spheres into the economy (e.g., Financial Times, May 8, 2014: “Political crisis further dents prospects for Thai economy“).

Impact on antitrust practice

The upshot for competition-law practitioners and enforcers alike is rather straightforward, AAT predicts: more hesitation around African deals being done means fewer notifications, less enforcement, and overall lower billings for firms.

The flip side of the coin – as is usually the case in the economic sine curve of growth and slowdowns – is the commonly-observed inverse relationship of M&A and criminal antitrust: while we may see fewer transactions in the short term, the incidence of cartel behaviour and commercial bribery & government-contract fraud cases will likely increase.

More or less competition in African mobile payments sector?

south_africakenyanigeria

More countries may enter the mix of players – but at the platform level, competition may have stagnated

As we reported last month, the mobile payments sector is going gangbusters on the African continent.  Kenya is ahead of the game, but other countries are closing in.

Kenya itself is considered by many to be at the forefront of the African mobile-payments universe, with its M-Pesa mobile-currency system often touted as the most developed mobile-payment system in the world.  The Economist asked rhetorically: “Why does Kenya lead the world in mobile money?”, pointing out that roughly 25% of Kenya’s GDP flows through the mobile service, with over 17 million users in Kenya alone.  The WorldBank has commented that “Mobile payments go viral [with] M-PESA in Kenya.”

Earlier this week, South African media outlet Business Tech published an interesting comparative piece on the issue, entitled “Africa leads in mobile banking“.  The article shows (also graphically, see below) how  and South Africa are close rivals to the Kenyan leadership in the mobile payments industry:

Image credit: Business Tech

What triggered the article is the release of the MEF-Africa report on mobile payments on the continent, which provides much of the content of the Business Tech piece.

One of the key developments highlighted is that M-Pesa’s platform may soon see a major upgrade in South Africa (where it is run by Vocadom and Nedbank), according to the article, linking the system directly with the brick-and-mortar banks’ platforms.  This may either (1) cement the relative market dominance of M-Pesa or (2) spur further innovation and enhance the overall competitiveness of the still rather young industry.

Another call for Competition Law in Nigeria: Privatization of Electricity

The Privatization of the Electricity Sector in Nigeria

By Chinwe Chiwete
nigeria
The full implementation of the Electric Power Sector Reform has been a key priority for the administration of President Goodluck Jonathan in Nigeria. As noted in the Roadmap for Power Sector Reform, for over two decades, the stalled expansion of Nigeria’s grid capacity, combined with the high cost of diesel and petrol generation has crippled the growth of the country’s productive and commercial industries. The Federal Government was therefore determined to pursue the fundamental changes to the ownership, control and regulation of the sector as outlined in the National Electric Power Policy (2001) and enshrined in the Electric Power Sector Reform (EPSR) Act of 2005.

The power sector reform was structured into several phases starting with the creation of the Power Holding Company of Nigeria (PHCN) as the holding company of the assets of the defunct NEPA. The PHCN was subsequently unbundled into 18 successor companies which paved the way for the privatization program. On the 30th September 2013, the Federal Government formally handed over the unbundled Power Holdings Company of Nigeria, PHCN, to private organizations that bought it. Licenses and share certificates were handed over to these investors, an event which has ushered in a new beginning for Nigerians.

With the entrance of private players into the power sector, the possibility of market manipulation and other abuses cannot be overruled; consequently, consumers need to be adequately protected from these private sectors who are essentially profit driven. Till date, the Nigerian Competition Bill is yet to be passed into law meaning that competition related issues in the power sector will be regulated by the Nigeria Electricity Regulatory Commission (NERC or Commission) as the regulator of the power sector established under the EPSR Act. The EPSR Act empowered the NERC to monitor the Nigeria electricity supply industry with regards to its potential for additional competition and to monitor electricity businesses and markets to determine whether there is or may be an abuse of market power and where such exist take the appropriate actions which include issuing a cease order and imposing fines.

Clearly Nigeria seems to be adopting more of sector regulation of competition as against speeding up actions on the pending Competition Bill. This can also be seen from other existing laws for example, the Securities and Exchange Commission (SEC) regulates competition in terms of mergers and acquisitions as provided under the Investments and Securities Act 2007 (ISA) while the National Communication Commission (NCC) regulates competition in the telecommunication sector. Even though sector regulation may sometimes be necessary particularly for issues peculiar to that sector, there are disadvantages one of which is that the government may be less inclined to promulgate the pending Competition Bill which will leave many vital sectors unregulated. In addition, one foresees a case of over-regulation for certain sectors in the event that Competition Law finally comes into force. To address the possible conflict and power tussle between these sectoral regulators and the Commission created by the Competition Bill, the Federal Competition Bill at least made a comforting provision to the effect that the Commission created under the Bill will coordinate the activities of sectoral regulators as they relate to, or may impact on, competition with a view to maintaining coherence in policy implementation.

The privatisation exercises no doubt hold many advantages for Nigerians; however, more harm will be done if these private sectors are not well regulated. 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.

S.A. dominance in the Nigerian mobile telecom market? MTN concerned.

nigeriasouth_africa

AllAfrica.com reports that South African telecom giant MTN is in discussions with Nigeria’s Communications Commission (“NCC”) (again, note that Nigeria doesn’t have a competition law regime) relating to its 44% market share in mobile telephony in the country.

The NCC published its report in PDF format on its web site. The report, entitled “Determination of Dominance in Selected Communications Markets in Nigeria“, states in relevant part:

Nigeria is the fastest growing telecommunications market in Africa, rising from a meagre 500,000 telephone subscribers in 2001 to over 108 million as at December 2012 …

As the news report states, MTN is not accused of any abuse of its market power — that is, the hallmark of a unilateral / dominance case, abuse of dominance, is apparently yet absent from the NCC’s phantom case against the provider. What the NCC is worried about inter alia, however, is the preferential treatment given to MTN’s own customers and calls amongst that group. That’s interesting, because many providers across the world have similar “in-network” call rates (indeed, often even free allowances for in-network calls) without triggering antitrust review. The NCC does not perceive dominance issues in fixed voice or mobile data market segments. Rather than relying on the investigated operators’ submissions (proposing, among other things, to use a simple Herfindahl-Hirschman Index determination to see if the market segments were ‘concerntrated’), the NCC’s report lays out quite nicely how it used a “Structure‐Conduct‐Performance (SCP) model”.

The SCP model postulates that the structure of a market determines to large extent the conduct of the participants in the market, which in turn, influences the performance of the firms within the market with respect to profitability and efficiency.

We’ll see where this one goes. Perhaps it simply serves to reinforce our prior question: Is it not time for Nigeria to have its own, proper competition-law regime?