South Africa: Telkom agrees to penalty

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South Africa’s incumbent telecommunications infrastructure provider, Telkom Limited, has agreed to pay R449 million ($49m) to the South African Competition Commission (the “Commission”) to settle allegations that Telkom had abused its dominant market position. The company statement can be found here.

In August 2012, the Competition Tribunal (the “Tribunal“) levied the R449 million fine against Telkom for abusing its dominant position between 1994 and 2004, after the Commission received complaints from, inter alia, the South African Value Added Networks Services.

Telkom subsequently appealed the Tribunal’s decision to the Competition Appeal Court (“CAC“) which the Commission followed with its own appeal to the CAC seeking to increase the fine to R3 billion ($327m). The settlement agreement will effectively result in the parties withdrawing their appeal and/or cross-appeal and cover their own costs. In terms of the agreement, Telkom will pay 50% of the fine within six months and the balance within 18 months.

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S.A. mobile operator escapes antitrust investigation

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South African mobile phone and data provider Cell C has managed to avoid a potential Competition Commission investigation upon having changed its text-message (SMS) pricing scheme.  The industry group that was slated to bring a formal complaint, WASPA (no kidding, that’s their actual acronym), decided not to lodge the complaint in light of the less discriminatory pricing of Cell C’s bulk SMS rates.

Ironic? S.A. & Russia to “influence” platinum market “without cartel”

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South Africa and Russia plan to “influence” global platinum market “without cartel” — [it escapes the author how this is possible].

Russia and South Africa, who together hold approximately 80% of worldwide platinum reserves, have signed a provisional agreement to co-ordinate efforts to control the global platinum market. Details of the plan emerged at the fifth summit of emerging economies of Brazil, Russia, India, China and South Africa (“BRICS”), held in Durban, South Africa last week.

South Africa is the world’s largest producer of platinum, controlling approximately 70% market share, whilst Russia is the world’s top palladium producer, accounting for approximately 40% of the palladium market; Russia notably also holds a further 10% of the platinum market. The two countries jointly possess almost complete market dominance over platinum. The only other significant reserve of platinum that has been extracted outside of Russia and South Africa is in Canada’s Yukon territory, accounting for approximately 3% of the worldwide reserves. In recent years, platinum producers have faced rising production costs and a drop in prices, due to poor demand for the metal.

Therefore, as Russian Natural Resources Minister Sergey Donskoy explained the purpose of the provisional agreement, “Our goal is to co-ordinate our actions accordingly to expand the markets. The price depends on the structure of the market, and we will form the structure of the market.”

South African Mining Minister Susan Shabangu confirmed the plan with Russia, saying: “We’re not really controlling the market” and We want to contribute without creating a cartel, but we want to influence the markets.” The South African Department of Trade and Industry Director-General, Lionel October, said, in support of other comments by Shabangu that “We will give access to minerals and then incentivise companies to add value locally.”

Russia and South Africa’s plans may be derailed due to competition concerns, however.  For example, previous attempts at consolidation within the platinum industry have raised red antitrust flags and were ultimately abandoned. In 1996, Lonmin and Gencor lost an appeal against a European Commission decision blocking the planned merger of their South African platinum mines (Case No. IV/M.619, Commission decision of April 24, 1996). This was the first E.C. decision prohibiting a merger on collective dominance grounds. The Court of First Instance (now called the EU’s General Court) upheld the decision of the Commission, validating its concerns that the merger would result in collective global platinum market dominance (Case T-102/96).

SACC gets 2 new interim deputy commissioners

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According to a statement released by South African Economic Development minister Patel and other online sources (among them polity.org.za and AllAfrica) the South African Competition Commission has appointed two interim deputy commissioners to serve 6-month terms.

The South African Economic Development Department’s statement identifies the two new deputy commissioners as “advocate Oliver Josie and Trudi Makhaya“.

It is noteworthy that both are being recruited from the existing but recently dwindling ranks of the SACC.  We previously reported about one of Ms. Makhaya’s recent competition-focused articles here.

The official statement continues:

“The interim appointments will ensure an uninterrupted service by the Competition Commission, which has a critical role to play in advancing an inclusive economy, promoting competition, combating abuse of market power and supporting job creation and small business development”.

S.A. Competition Tribunal confirms 2 new settlements

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South Africa’s highest governmental competition authority, the Competition Tribunal, has approved two settlement agreements reached by the lower Competition Commission with Air Products South Africa and MVA Bricks / MVA Stene, respectively.

These relate to collusive behaviour in various business sectors, including the building sector which had been investigated by the antitrust watchdog for an extensive period of time.

The former settlement requires Air Products to pay a penalty of almost R2.8 million (about USD300,000) for purported market allocation between it and Sasol Chemical Industries in the industrial gases market. The undertaking published a press release, noting that:

“Air Products has agreed to amend the suite of agreements with Sasol to remove any provisions that contravene the Competition Act; to develop, implement and monitor a (renewed and enhanced) competition law compliance programme incorporating corporate governance designed to ensure that its employees, management, directors and agents do not engage in future contraventions of the Competition Act; and to refrain from engaging in anti-competitive conduct in the future.

“Air Products intends to implement further internal measures to inculcate an increased awareness of the Competition Act and to ensure compliance with the competition laws of South Africa going forward, to ensure that no further inadvertent contraventions of the Competition Act take place.”

The latter settlement with MVA Bricks calls for a R672 565 penalty for collusion between MVA and Aveng Africa in the market for generic paving blocks.

South African market-inquiry provision comes into effect

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President Jacob Zuma has signed the market inquiry provisions of the South African Competition Amendment Act of 2009 (“Amendment Act”) into force today, 8 March 2013.

The president set 1 April 2013, as the date on which section 6 of the Amendment Act will become effective.

Section 6 empowers the S.A. Competition Commission (“Commission”) to conduct an inquiry into the general state of competition in any market in South Africa, without referring to specific prohibited conduct or a particular firm.  Under this provision, the Commission may initiate a market inquiry when it has reason to believe that any features of an identified market may be distorting or restricting competition in that market, e.g., where a market is not functioning optimally, but where no prohibited conduct, such as cartel activity, has been identified.

Section 6 also regulates how the Commission may conduct such market inquiries.  More specifically, the Commission may use its powers to request information from firms but may not use its search and seizure (i.e., dawn raid) powers to gather information for a market inquiry.

At the conclusion of the market inquiry, the Commission must publish its findings and may also make recommendations to the Minister of Trade and Industry or other regulatory authorities relating to any competition matters identified.

S.A. Clears 3-to-2 Infant Nutrition Merger with Remedies

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The South African Competition Tribunal has green-lighted the almost $12bn (R106bn) Nestlé/Pfizer deal, which will combine the largest and 3rd-largest infant-nutrition companies in the South African republic, leaving competitor Aspen in second place.

The conditions imposed by the Tribunal echo those accepted by the E.U., the Australian and other authorities, which require the merged entity to license certain of its brands to independent third parties, for up to 10 years post-closing, in order to stimulate and maintain a competitive marketplace.

To seasoned antitrust practitioners, certain aspects of the deal ring a bell — although the outcome is diametrically different (except for Mexico, where the transaction has been rejected thus far by the authorities): I speak of the Heinz/Beech-Nut U.S. deal in 2000, where the FTC blocked the deal. In the agency’s view at the time, the only competitive constraint, according to the FTC, was the Gerber company, which would have been the sole effective remaining competitor. For a retroactive analysis on this, see here for one of the voting Commissioner’s point of view. The FTC promptly sued to block the 3-to-2 “Baby Food” deal, as it became known in the antitrust world, and ultimately prevailed both at the court level and, in the end result, with the parties’ abandonment of the merger while an appeal was pending.

In conclusion, it appears that the efficiencies defence, creative design of remedies (e.g., licensing), and overall agency outlooks have changed in more than a decade, after all.