Pioneer Hi-Bred completes acquisition of South African seed company

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South African seed business Pannar and DuPont seed unit Pioneer Hi-Bred finally overcame regulatory roadblocks to Pioneer’s majority stake acquisition in the pan-African seed business of Pannar.  They have completed the acquisition.

The world’s #2 seed producer, Pioneer, now owns 80% of Pannar after closing of the transaction.  The deal had been long in the making, as it was announced almost three years ago, in September 2010.  Yet, the parties failed to convince the South African Competition Commission of the neutrality of its competitive effects on the South African seed market, which is estimated at $450 million.  The Commission rejected the deal, sending the parties back to the drawing board (and to several rounds of appeals before the South African appellate courts and tribunals).

The business rationale for Pioneer is a three-way race with competitors: according to Pioneer’s deal statement, there are approximately 75 million acres (or 30 million hectares) available for corn / maize production on the African continent.  And with a rapidly growing population and economies, African nations, their cattle, and their consumers will constitute ready buyers for maize and corn-derivative products.

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South Africa: Telkom fined again…

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South Africa’s Competition Tribunal had a busy week last week tasked with considering the proposed penalties for the various construction companies and also confirming the second significant administrative penalty on South Africa’s incumbent provider of fixed line telecommunication services, Telkom.  In terms of the second order, Telkom has agreed to pay an administrative penalty of R200m and committed to separate its wholesale and retail divisions, in order to reduce the wholesale and retail prices of its products to the value of R875m over five years.

Telkom, was previously before the Tribunal in relation to a further abuse of dominance matter and was fined R449m.  Telkom had appealed the finding but recently withdrew its appeal against the fine which related to allegations of an abuse of dominance in the telecommunications market between 1999 and 2004, a period in which it was a monopoly provider of telecoms facilities in the country. The fine was much less than the R3bn that the commission had initially requested.

In relation to the second order, the Commission found (following receipt of a significant amount of information from Telkom’s downstream competitors) that Telkom had engaged in a so-called “margin squeeze” by billing licenced operators excessive fees for bandwidth and for a product called IPLC (international private leased circuit). The pricing was set at levels that precluded cost-effective competition with Telkom’s retail internet access and services available via a leased line or ADSL access.

In terms of the settlement, Telkom has agreed to reduce prices on specific product lines that had been implicated in the complaints before the commission over the next three financial years, with no increases in the final two years in which the agreement remains in place.

Telkom has also committed itself to a weighting of 70% price reduction in its wholesale division and 30% in its retail division to eliminate any margin squeeze while ensuring that wholesale products savings are passed on to the benefit of its consumers.

It will also embark on a roll-out of strategic points of presence in the public sector at its own cost and discuss the specific needs of state departments with the Department of Communications.

Botswana opens probe into pay-TV provider MultiChoice

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According to Botswana publication Mmegi, the domestic competition authority** has opened a probe into business practices surrounding MultiChoice’s so-called “bouquets” of pay-TV programs.  (Personally, I’d call it a bundle or package.  Maybe the local euphemism authority could look into the “bouquet” moniker, as well).

The paper reports that MultiChoice has over 6 million Botswanan customers (one of whom purportedly filed the formal complaint with the competition authority) and “has maintained a stranglehold” on the pay-TV segment.  The complaint appears to focus on pricing and dominance abuses by the provider.  There is also a South African probe into MultiChoice’s alleged abuse of a dominant position, as we reported last month.

**That’s their official link, but it seems to be parked, or dead.  Ironically, the competition authority’s Facebook page (!) appears live and well.  Here’s a photo of, presumably, the staff.

South African Constitutional Court rules on appropriate test for class action relief for damages

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ZA Constitutional Court broadens ambit of class-action relief

As previously reported, the Supreme Court of Appeal (the “SCA”) handed down two judgments, in November 2012, in respect of the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products. The appeals were brought by a bread distributor in the Western Cape (the “distributor” application) and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

The distributors and consumers sought, separately and on appeal to the SCA, to certify three classes, one in respect of the distributors and two in relation to the consumer case. The consumers sought a certification of two classes: Class 1 – all persons who purchased the bread of the three Respondents in the Western Cape Province during the period 18 December 2006 to 6 January 2009; and Class 2 – all persons who purchased the bread of the three Respondents in Gauteng, Free State, North – West or Mpumalanga Province during the period 1 September 2999 to 6 January 2009. The respondents in the appeal were three bread producers, namely Pioneer Foods, Tiger Consumer Brands Limited and Premier Foods Limited.

The SCA upheld the appeal only in relation to the certification of consumer Class 1, and dismissed the consumer Class 2 certification application as well as the certification of the distributor’s class. In a landmark decision, the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution recognized that it would be the most appropriate means of litigating the claims of the members of the class. The decision, per Wallis JA, laid down criteria for class action claims (these included certification, a class definition, a cause of action, a triable issue, common issues of fact or law and a representative who did not have a conflict). Furthermore, in highlighting the importance of the certification process, it set out further requirements that should be met in order to succeed with an application for certification of a class.

The distributors subsequently sought leave to appeal the decision of the SCA. Today, on 27 June 2013, the Constitutional Court handed down a judgment upholding the appeal against the SCA’s distributor decision. The majority judgment, written by Jafta J, stated that the standard for determining whether to permit the certification of a class is to determine whether the institution of the class action, while taking account the requirements laid down by Wallis JA, is in the “interests of justice.”  Accordingly, the requirements for seeking class action relief have been diluted somewhat and greater discretion is given to the court which will consider the certification application, as “[a]ccess to courts is fundamentally important to our democratic order.”

The Court admonished trial courts not to limit certification only to those cases in which strictly all factors enunciated in the Bread decisions were present:

“These requirements must serve as factors to be taken into account in determining where the interests of justice lie in a particular case.  They must not be treated as conditions precedent or jurisdictional facts which must be present before an application for certification may succeed. The absence of one or another requirement must not oblige a court to refuse certification where the interests of justice demand otherwise.”

In a separate concurring judgment, Froneman J noted that the development of the common law to make provisions for class actions in non-constitutional matters was a valuable contribution to the law and provided courts with flexible guidelines to apply in applications for the certification of class actions. Froneman J was, however, of the opinion that the test applied by the SCA was too stringent in not recognising opt-in class relief and secondly in finding that the distributor did not have a legally tenable claim due to the pass-on problem in competition matters.

The Constitutional Court, in the distributor case, has also broadened the ambit of class action relief in recognising opt-in class actions (rather than simply the opt-out class actions accepted by the SCA) and by lowering the threshold required for certification more generally.  On the pass-on front, it also viewed the existence of cognisable damages suffered by intermediate bread distributors – and not only end-user consumers – as “potentially plausible” (echoing somewhat the U.S. Supreme Court in Twombly).

All of the above will have ramifications for future competition-law damages actions.

Soccer fields, SRAM, and Sotheby’s? Fast-track settlements in ZA construction probe yield €113m

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What do soccer stadiums, LCD panels, and lysine** have in common?  Price-fixing might be one answer.  Record antitrust fines might be another, closely related, response.

The South African Competition Commission (“Commission”) has obtained settlements of 1.5 billion rand or about €113 million with up to 15 construction companies.  This constitutes, by our reckoning, a new record for the Commission.

The fast-track settlement procedure used by the agency (in all but 3 cases, in which the accused firms chose not to pursue fast-tracking) shortened the time necessary to reach finality on the deals.  It also allows the Commission to free up its manpower resources to work on other matters, since maintaining full-fledged investigations in all of the now-settled cases would have been a long and arduous process for all parties involved — as we reported previously on AfricanAntitrust.com here and here, the scope of the ZA construction-sector bid-rigging investigation has ballooned beyond even the wildest dreams of enforcers.

The Commission’s press release sheds further light on the breakdown of the fines per party, covering conduct since September 2006 in over 300 instances of bid-rigging:

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Post-scriptum: The fines, although record-setting, are lower than expected by investors.  Consequently, shares in the affected undertakings have soared 1-3%, as reported by BusinessReport here.

** Sorry – I strayed a bit from the original alliterative title here.  (Otherwise, I could not have made the “record fines” point…)

South Africa: MultiChoice may face competition authorities for abuse of dominance

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On Digital Media (“ODM”), owner of TopTV, has filed a complaint with the South African Competition Commission (“Commission”) against the Naspers controlled company, MultiChoice (which owns DStv as well as SuperSport) alleging abuse of dominance.

ODM alleges that SuperSport unfairly refused to share rights to all Premier Soccer League (“PSL”) matches from 2011 until 2016 with ODM. ODM submits that there is “not another sports broadcaster in the world today that enjoys a similar level of dominance to that of SuperSport” and has accused MultiChoice of contravening the Competition Act 89 of 1998 (“Act”) by refusing to give it access to, what ODM believes, is an “essential facility”, when it is feasible to do so.

The ODM complaint was lodged with the Commission several months ago following a statement made in parliament by Communications Minister Dina Pule, that the Minister would issue a policy directive to the Independent Communications Authority of South Africa to address competition in the broadcasting sector.

Commission spokesman, Keitumetse Letebele, said that the complaint is still being processed by the Commission’s screening unit who will write a recommendation to the Commissioner to either drop the case or pursue further investigation.

Class Actions in South Africa?

Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment in Pioneer Foods last year and the effects it has on South Africa’s jurisprudence & business community.

The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).

For more information, a full schedule, and to RSVP & sign up,

please visit the event page here.

Background:

On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).

The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:

  • there must be an objectively identifiable class;
  • a cause of action must exist which raises a triable issue;
  • there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
  • there must be appropriate procedures for distributing damages to the members of the class; and
  • the representatives must be suitable to conduct the litigation on behalf of the class.

The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements. Accordingly, the SCA remitted the matter back to the WCHC.

ArcelorMittal, Telkom, now Sasol? “Excessive pricing” case going to trial in South Africa

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Settling the South African Competition Commission’s case against alleged collusion in the polypropylene market [for no less than R111 million] back in 2010 was not to be the end of Sasol‘s long antitrust journey in the polymers world.

The S.A. Competition Tribunal is hearing the excessive-pricing portion (which was not settled) of the Commission‘s claims against the refining & steel giant this month.  The relevant legal underpinning of the case is the provision against excessive pricing by a dominant firm.  Precedent has declared prices excessive that “bear no reasonable relation to the economic value of the good or service” at issue.  Pheeew.  Facts.  Economics.  Nice.  Looks like a coming battle of the experts to me…

By comparison, in the U.S., antitrust law of course does not forbid “excessive pricing.”  While setting and reaping apparently high prices may be indicative of monopoly power, such acts are not in themselves anti-competitive or illegal in the States.  In Verizon v. Trinko, the U.S. Supreme Court held famously that:

The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth.

Interestingly, there is a notable history of failures in the area of ‘excessive pricing’ complaints in South Africa, as well, despite the statutory legitimisation of the cause of action.  In the prior ArcelorMittal and Telkom cases, the Commission and/or Tribunal lost in the end, either at trial or on appeal to the Competition Appeal Court.  That Court had found, in the ArcelorMittal case, that the antitrust watchdogs could not use the ‘excessive pricing’ provision of the statute to combat perceived anti-competitiveness in the “market structure rather than price level.”

We will, of course, report on the ongoing trial and ultimate outcome of this high-profile case, as it unfolds.

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

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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?

South Africa targets private healthcare sector in CC’s ‘market investigation’

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As reported today by Reuters and SA MoneyWeb, the South African government has announced that the South African Competition Commission will launch an investigation into the private healthcare sector. This is part of a larger initiative to conduct so-called “market inquiries,” on which we previously reported here and here, and which are a direct consequence of the March 2013 effective date of the South African Competition Amendment Act of 2009.

The Economic Development Minister Ebrahim Patel said that “[v]arious stakeholders have raised concerns about pricing, costs and the state of competition and innovation in private healthcare.”

Likely affected companies are all major players in the healthcare industry, including providers such as Life Healthcare, Mediclinic International and Netcare Ltd.