Media cartel exposed and fined

By AAT Senior Contributor Stephany Torres

Print media companies Independent Media and Caxton & CTP Publishers and Printers (“Caxton”) have agreed to pay an administrative penalties as well as an amount to the Economic Development Fund of over R8 million as part of two separate settlement agreements with the Competition Commission (“The Commission”) after admitting to fixing prices and trading conditions in contravention of section 4(1)(b)(i) of the Competition Act no. 89 of 1998 (“The Competition Act”).

Caxton owns local print media, including the Citizen newspaper and magazines Bona, Rooirose and Farmer’s Weekly, among others.  Independent owns newspapers The Star, Cape Times, Sunday Independent, among others and magazines GQ and GQ Style.

Attorneys from African competition law firm Primerio Ltd. report that this development follows from a 2011 investigation by the Commission into the matter where they found that, through the facilitating vehicle of the Media Credit CoOrdinators (“MCC”) organization, various media companies agreed to offer similar discounts and payment terms to advertising agencies that place advertisements with MCC members.  MCC accredited agencies were offered a 16.5% discount, while non-members were offered 15%.  In addition, the Commission found that the implicated companies employed services of an intermediary company called Corex to perform risk assessments on advertising agencies for purposes of imposing a settlement discount structure and terms on advertising agencies.  “The Commission found that the practices restricted competition among the competing companies as they did not independently determine an element of a price in the form of discount or trading terms”.

In a media release, the Competition Commission confirmed Caxton will pay a fine of R5 806 890.14, and R2 090 480.45 to the Economic Development Fund over three years.  It will also provide 25% bonus advertising space for every rand of advertising space bought by qualifying small agencies for three years, capped at R15 000 000 per annum.

Independent Media will pay an administrative penalty of R2 220 603 and will contribute R799 417 to the Economic Development Fund over a three-year period, and provide 25% bonus advertising space for every rand of advertising space bought by qualifying small agencies, over three years and capped at R5 000 000. Independent has also said it would obtain its own credit insurance so small agencies are not required to commit any securities or guarantees in order to book advertising space.

The Economic Development Fund is designed to develop black-owned small media or advertising agencies, which require assistance with start-up capital and will assist black students with bursaries to study media or advertising.

The agreements were confirmed as orders of the Competition Tribunal.

 

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SA Airlink referred to Tribunal for Engaging in Alleged Excessive and Predatory Pricing Conduct

By Stephany Torres

The Competition Commission (Commission) has referred SA Airlink, a privately owned regional feeder airline, to the Competition Tribunal (Tribunal) for prosecution on charges of excessive and predatory pricing in relation to a specified domestic route in South Africa (Johannesburg-Mthatha).  The Commission was prompted to investigate the matter after receiving complaints lodged by Khwezi Tiya‚ Fly Blue Crane and the OR Tambo District Chamber of Business between 2015 and 2017.

The Commission found SA Airlink to be dominant in the market for the provision of flights on the Johannesburg-Mthatha route and further found that SA Airlink contravened the Competition Act by abusing this dominance from September 2012 to August 2016 by charging excessive prices on the route to the detriment of consumers in contravention of Section 8(a) of the Competition Act no 89 of 1998 (“the Competition Act”).  The Competition Act defines an “excessive price” as a price for a good or service “which bears no reasonable relation to the economic value of that good or service and is higher than the value referred to in 8(a)”.

SA country flag outlineAn additional requirement which the Commission will need to demonstrate in order to succeed with an excessive pricing complaint is that the “excessive pricing” was to the detriment of consumers.  In this regard the Commission found that consumers would have saved between R89 million and R108 million had SA Airlink not priced excessively on this route.  Furthermore, lower prices would also have resulted in more passengers traveling by air on the route‚ possibly contributing to the local economy of Mthatha.

The Commission also found SA Airlink to have engaged in predatory pricing to exclude a competitor from the market in contravention of section 8(c) and Section 8(d)(iv) of the Competition Act. In this regard, the Commission alleges that prior to Fly Blue Crane entering the market, SA Airlink had charged excessive prices. When Fly Blue Crane entered the route, SA Airlink allegedly reduced its prices below its average variable costs and average avoidable costs for some of its flights and then subsequently, after Fly Blue Crane stooped flying the relevant route, SA Airlink reverted to their alleged excessive prices.

The Commission went further to say that the effect of the predation is also likely to deter future competition on this route from other airlines which would also be to the detriment of consumers.

The Competition Act provides for an administrative penalty of up to 10% of SA Airlink’s annual turnover for contravention of Section 8. The Commission stated that “it will seek the maximum administrative penalty before the Tribunal”.

In addition‚ the Commission has asked the Tribunal “to determine other appropriate remedies in order to correct the conduct“.

Michael-James Currie, a competition lawyer, notes that “in addition to the potential administrative liability, should SA Airlink be found by the Tribunal to have abused its dominance, SA Airlink may also face civil damages claims similar to those which Nationwide and Commair successfully instituted against South African Airways (SAA) following the Tribunal’s decision that SAA had engaged in abuse of dominance conduct”.

John Oxenham, a director of Primerio and editor of the recently published book “Class Action Litigation in South Africa”, states that “this case may potentially also result in class action litigation if the Commission is correct in its quantification of the harm caused to consumers”.

The Competition Commission’s case against Airlink comes at an interesting juncture in light of the recently published Competition Amendment Bill. Andreas Stargard, also a director at Primerio notes that the underlying motivation for the proposed amendments to the abuse of dominance provisions is to assist the Commission in prosecuting dominant firms (by placing the onus on a dominant firm to demonstrate that its conduct is pro-competitive). The case against Airlink, however, will be decided in terms of the current regime as the Amendment Bill has not yet been brought into effect.

For further information and insight into excessive pricing and predatory pricing cases in South Africa, AAT has previously published papers on the Competition Appeal Court’s decision in Sasol (the seminal excessive pricing case in South Africa) and the Media 24 cases (the first successfully prosecuted case based on a predation theory of harm).

 

 

South African Competition Tribunal Rules against Wal-Mart in South Africa on “Exclusive Leases”

By Michael-James Currie

On 13 February 2018, the South African Competition Tribunal ruled against Massmart Holdings, a subsidiary of Wal-Mart in relation to a complaint filed by Massmart against three of South Africa’s largest grocery retailers (as well as the South African Property Owners Association – who did not actively participate in the hearing).

The history of the complaint dates back to 2014, when Massmart submitted a complaint to the Competition Commission alleging that the exclusive lease agreements which the respondents had concluded with the relevant landlords in respect of shopping malls were exclusionary and contravened the South African Competition Act. The Competition Commission elected not to refer the matter to the Competition Tribunal and dismissed Massmart’s complaint based on a lack of evidence demonstrating any anti-competitive effects.

Massmart proceeded to refer the complaint itself to the Competition Tribunal in 2015 (which is permissible only if the Competition Commission elects not to refer the matter to the Tribunal) on the basis that the respondents had contravened Section 5(1) of the Competition Act — which prohibits any vertical arrangement which has anti-competitive effects and which cannot be outweighed by pro-competitive efficiency enhancing justifications.

Massmart’s case against the respondents was essentially that the respondent retailers had entered into long term lease agreements with landlords of various shopping centres which contained exclusivity provisions effectively precluding (or limiting) competing retailers from entering that same shopping centre.  In other words, the crux of Massmart’s complaint was that Massmart could not enter into a number of shopping centres in a manner which would enable Massmart to compete with the incumbent retailers.

Although the respondents raised a number of exceptions to the Massmart complaint (including the “non-citation” of the relevant landlords who are parties to the respective lease agreements), the Tribunal did not need to rule on these exceptions. The Tribunal dismissed the complaint on the basis that Massmart did not prove that the exclusivity provisions contained in the lease agreements resulted in anti-competitive effects in the relevant market.

In conducting its assessment, the Tribunal considered whether the “exclusive leases” are likely to either:

  1. have an adverse impact on consumer welfare; or
  2. lead to the foreclosure of a rival in the market.

Central to the Tribunal’s assessment was the appropriate definition of the “relevant market”. In this regard, the Tribunal found that Massmart had not properly demonstrated that each shopping mall constituted a separate geographic market.

Assuming that the relevant geographic market is the boundaries of a shopping mall,  the Tribunal went on to state that Massmart’s complaint was not supported by sufficient evidence to demonstrate that there would be a “substantial lessening of competition” in that market. In this regard, the Tribunal confirmed that the mere exclusion of a rival does not equate to a “substantial lessening of competition” – particularly if there is at least one other competitor in the relevant market – which based on the evidence appeared to be the case in a number of circumstances.

In relation to an alternative proposition put forward by Massmart, the Tribunal considered whether the “exclusive leases” would lead to anti-competitive effects in the “national market”. Again, the Tribunal found that there was insufficient evidence pleaded to demonstrate that there was a substantial lessening of competition on the national market. Importantly, however, the Tribunal indicated that the respondent retailers appear to impose a competitive constraint on each other in the national market – assuming that there is in fact a competition dimension at a ‘national level’.

The Tribunal’s decision does not therefore go as far as confirming that ‘exclusive leases’ between retailers and shopping malls are inherently pro-competitive, but rather that parties seeking to demonstrate the anti-competitive effects of the ‘exclusivity arrangements’ must do so with credible theories of harm which is supported with the necessary evidence.

The Tribunal’s decision comes at an interesting juncture in light of the current market inquiry being conducted by the Competition Commission in the grocery retail sector. One of the key objectives of the market inquiry is to assess the anti-competitive effects of “exclusive leases”. The Competition Commission is scheduled to finalise its market inquiry in 2018 following which the SACC will make recommendations to Parliament to remedy any potential anti-competitive features of South Africa’s grocery retail sector.

In relation to international precedent, the UK’s competition agency adopted a view that “exclusive leases” are not anti-competitive per se but rather that the duration of the exclusivity provisions contained in lease agreements should be curtailed. Accordingly, exclusivity provisions in the UK are limited to five years. The Australian agency (the ACCC), after conducting a public inquiry into various features of the grocery retail sector, concluded that exclusive lease provisions may be justified in ‘developing areas’ but are unlikely to be justified in ‘metropolitan areas’.

Accordingly, it remains to be seen whether the Competition Commission will propose that any remedial action be taken to address exclusive leases agreements in the context of the South African grocery retail sector (following the conclusion of the market inquiry) or whether Massmart (and/or other complainants) will look to reformulate a complaint to the Tribunal and focus on specific shopping malls as opposed to an overarching complaint against the existence of exclusivity provisions.

Importantly, however, in light of the Tribunal’s finding that Massmart was not able to sufficiently plead and support an argument that the exclusive leases were likely to lead to anti-competitive effect in any defined market, it was unnecessary to consider whether there are any pro-competitive arguments or economic justifications which would outweigh any anti-competitive effects.

[Michael-James Currie is an admitted attorney of the High Court of South Africa and advises clients on competition law matters across sub-Saharan Africa]

South African Competition Tribunal Finds in Favour of Ster-Kinekor in Market Allocation Case

The South African Competition Tribunal (“the Tribunal”) last week dismissed a complaint referred to it by the Competition Commission (“the Commission”) in 2009 which alleged that two rival cinemas, Primedia’s Ster-Kinekor Theatres and Avusa’s Nu-Metro Entertainment (Pty) Ltd, which operate in the market for the exhibition of films at the V&A Waterfront shopping complex in Cape Town, engaged in market allocation by agreeing not to screen the same film genres in contravention of section 4(1)(b)(ii) of the Competition Act[1].

The Commission initiated the complaint after Avusa applied for conditional immunity and provided evidence of the existence of a settlement agreement, which was made an order of court in 1998, between Nu Metro and Ster-Kinekor. In terms of the settlement agreement, Ster-Kinekor agreed not to exhibit any films identified as “commercial films” and Nu Metro would not exhibit any films identified as “art films” at the V&A waterfront.

The two companies first signed the ‘non-compete’ settlement agreement in May 1998, before section 4 of the Competition Act (which prohibits cartel conduct) became effective. Section 4 of the Competition Act only became effective as at 1 September 1999.

The Tribunal dismissed the complaint on the basis that the settlement agreement was concluded before the Competition Act came into operation and Ster-Kinekor and Nu Metro could only be found guilty of a contravention if there was evidence of actions or discussions between them directed at actually implementing the agreement after the Competition Act came into force.

In this regard cross-examination of witnesses revealed that while leniency applicant Nu Metro had attempted to invoke the settlement once after the Competition Act came into force, Ster-Kinekor employees “did not know about the… agreement, did not implement it, and had not implemented it before”, the Tribunal stated.

The Tribunal did not deal with Primedia’s other defence that no relief could be granted against Primedia because Primedia had only purchased Ster-Kinekor in 2008, so could not be liable for the actions of its predecessor.

John Oxenham, a South African competition lawyer, said that “the case confirms that the Competition Act does not apply retrospectively and some form of understanding or agreement (in essence a “new” agreement) needs to arise between the parties after the Act came into force for the conduct to be unlawful”.  He believes that although the Tribunal mentioned that there needs to be some implementation of the agreement after the Competition Act came into force, what they are actually saying or should be saying is that it is not the implementation which is necessary but the arising of a “new” agreement between the parties which is essential.

Section 4(1)(b)(ii) of the Competition Act is a per se offence and an agreement does not need to be implemented in order to contravene the market allocation prohibitions.

Accordingly, the Tribunal has to some extent blurred the distinction between a ‘lack of implementation’ and the duty to distance oneself from a ‘prohibited agreement’.

 

Merger Control: Public Interest & SINOPEC/Chevron

When the Stick is Greater than the Carrot

While China Petroleum & Chemical Corporation (Sinopec), and global commodities trader and miner Glencore are the front runners in a bid to buy Chevron’s South African Business (Chevron SA), it appears that Sinopec has managed to edge ahead after the Chinese firm has agreed to a number of public interest conditions in an effort to placate the South African Minister of Economic Development, Ebrahim Patel (Patel) and avoid ministerial intervention before the Competition Tribunal’s (the agency responsible for approving the merger) hearing.

PublicInterestpic.jpgThe South African Competition Commission (SACC), responsible for investigating and making recommendations to the Tribunal, recently published its recommendation in relation to the proposed Sinopec-Chevron deal. Unsurprisingly, consistent with large mergers (particularly by foreign acquiring firms) – the SACC’s recommendations contain a number of non-merger specific public interest conditions. A feature of South African merger control which has become increasingly prevalent in recent years (refer to the AB-InBev/SAB or the SAB/Coca-Cola mergers) – largely as a result of Minister Patel’s ‘direct’ involvement in the merger control process.

It is not yet cast in stone that Sinopec will in fact be the acquiring entity as the minority shareholders in Chevron SA enjoy a right to first refusal. Regardless of the entity who is ultimately successful in acquiring Chevron SA (Chevron has confirmed that the proposed deal with Glencore is also currently before the SACC), the South African government has set its price for investing in South Africa, as confirmed by Minister Patel’s following statement:

Government will not choose to whom Chevron sells control of Chevron South Africa, but we will ensure that proper public interest conditions, in line with the Competition Act, should apply to whoever is the successful bidder,”

Apart from the significant Ministerial intervention and the direct influence this has on the SACC’s independent investigation and review of a merger, a particularly contentious issue in relation to the imposition of public interest conditions relates to the Minister’s comment that the public interest conditions are “in line with the Competition Act”.

Although conditions regarding employment falls within the scope of section 12A(3) of the South African Competition Act, the remainder of the recommendations made by the SACC in casu goes beyond what was envisaged by the legislature in Section 12A(3) of the Competition Act. In this regard, the conditions recommended by the SACC include inter alia the following:

  • Sinopec must set up its head office in South Africa in order for it to co-ordinate and oversee its operations in South Africa and to use South Africa as the platform to oversee its operations throughout Africa;
  • Sinopec undertakes not to retrench any of its employees, in perpetuity;
  • Sinopec agrees to invest further in Chevron’s Cape Town refinery;
  • Sinopec undertakes to make a significant investment over and above the current investment plans of Chevron South Africa;
  • Sinopec must upgrade Chevron South Africa’s operations and expand its refinery capacity in South Africa;
  • Sinopec undertakes to maintain Chevron SA’s current baseline number of independently owned petrol stations;
  • Where independently owned petrol stations are to be established, Sinopec must ensure that Chevron SA will give preference to small businesses, especially black-owned businesses;
  • Sinopec must ensure that Chevron will favour small businesses in granting rights in respect of any new retailer owned petrol stations.
  • Sinopec must also ensure that Chevron will increase its level of supplies of (liquefied petroleum gas) to black-owned businesses, following the expiration of current contractual arrangements; and
  • Sinopec must promote the export and sale of South African manufactured products for sale in China through its service stations network in China.

More specifically, Minister Patel requires that Sinopec makes a R6bn Capex investment, commits to increasing the level of BEE ownership in Chevron SA from 25% to 29% and, an all-time favourite condition, establish a development fund worth R200m.

As John Oxenham, Director of Primerio notes, the absence of merger specificity together with the imposition of public interest conditions which go far beyond the specified grounds listed in the Competition Act has been consistently criticised for resulting in uncertainty, delays and costs in the merger review process. It also sends a message to entities that South Africa is open to business… on condition (at a time when our economy could do with every bit of foreign direct investment).

Regardless of the criticism levelled against the role of public interest conditions in merger control proceedings, the prevalence of public interest conditions is set to play and even greater role in merger control (and competition enforcement more generally) should the Competition Amendment Bill be brought into effect.

John Oxenham further notes: “The Competition Amendment Bill has broadens the scope of the SACC’s powers with regards to public interest, to include the ability of small businesses to enter into, participate in and expand within the relevant market and the promotion of a greater spread of ownership.”

Practising competition law attorney, Michael-James Currie states: “The Bill has clearly sought to strengthen and codify the role of public interest conditions in merger control and expressly elevates public interest considerations to the same status as pure competition issues – the fact that the Bill specifically broadens the scope and role of public interest conditions brings into question whether the proposed conditions in the Chevron deal are in fact “in line with the (current) Competition Act”.

Competition law enforcement in South Africa is set for a significant shake-up to the extent that the Amendment Act is brought into effect – which is likely to occur in 2018. For further insight and commentary to the Amendment Bill, please see an AAT exclusive article here.

One message which business is desperately shouting across at the South African Government at the moment is “policy certainty!”  However, the SACC’s recommendation in casu and the proposed changes to the Competition Act is a move in the opposite direction as it seeks to place a great deal of discretion in the hands of a few key policy decision makers (namely the Minister of the Department of Economic Development and the SACC’s Commissioner). Discretion, exercised in a subjective manner, runs very much contrary to policy certainty – which, in light of an imminent cabinet reshuffle under new ANC President Cyril Ramaphosa’s leadership, may be of particular concern.

Although the Tribunal ultimately needs to approve the merger, the Tribunal is reluctant to intervene in proceedings which are uncontested – which Minister Patel knows all too well. Accordingly, as a crafty negotiator, Minister Patel is well aware that parties in the position of Sinopec have one of two options, agree to the public interest conditions and expedite the merger review or proceed with a contested hearing which will most likely be opposed by the Minister.

Despite calls for a more consistent, certain and transparent application of competition law in South Africa, however, there seems to be a move away from international best practice and competition law enforcement in South Africa and once the Amendment Act is brought into effect, there is a material risk that political influence will undermine the independence, impartiality and effective enforcement of competition law in South Africa to subjective, unqualified and discretion based enforcement.

[The ATT editors wish to thank Charl van Merwe for his assistance with drafting this article]

The New South African Competition Amendment Bill – What it Means for Business

By Michael-James Currie currie2

Background

On 1 December 2017, the Minister of Economic Development (under whose auspices the South African competition authorities fall), Ebrahim Patel, published draft amendments to the South African Competition Act [PDF], 89 of 1998 (Act) for public comment.

The proposed amendments (Amendments) to the Act, which principally aim to address concentration in the market, go well beyond pure competition issues and bestow a significant public-interest mandate on the competition authorities.

In this regard, Minister Patel has remarked that the old, i.e., current, Act “was focused mainly on the conduct of market participants rather than the structure of markets, and while this was part of industrial policy, there was room for competition legislation as well”.

south_africaPatel’s influence in advancing his industrial-policy objectives through the utilisation of the public-interest provisions in merger control are well documented. AAT contributors have written about the increasing trend by the competition authorities in merger control to impose public-interest conditions that go well beyond merger specificity – often justified on the basis of the Act’s preamble which, inter alia, seeks to promote a more inclusive economy.  The following extracts from the introduction to the Amendments indicate a similar, if not more expansive, role for public interest considerations in competition law enforcement:

“…the explicit reference to these structural and transformative objectives in the Act clearly  indicates that the legislature intended that competition policy should be broadly framed, embracing both traditional competition issues, as well as these explicit transformative public interest goals”.

The draft Bill focuses on creating and enhancing the substantive provisions of the Act aimed at addressing two key structural challenges in the South African economy: concentration and the racially-skewed spread of ownership of firms in the economy.

The role of public interest provisions in merger control have often been criticised, predominantly on the basis that once the agencies move away from competition issues and merger specificity and seek conditions that go beyond that which is strictly necessary to remedy any potential negative effects, one moves away from an objective standard by which to assess mergers. This leads to a negative impact on costs, timing and certainty – essential factors for potential investors considering entering or expanding into a market.

As John Oxenham, director of Pr1merio states, “from a policy perspective it is apparent that consumer-welfare tests have been frustrated by uncertainty”. In this regard, the South African authorities initially adopted a position in terms of which competition law played a primary role, with public-interest considerations taking second place.  Largely owing to Minister Patel’s intervention, the agencies have recently taken a more direct approach to public-interest considerations and have effectively elevated the role of public-interest considerations to the same level as pure competition matters – particularly in relation to merger control (although we have seen a similar influence of public-interest considerations in, inter alia, market inquiries and more recently in the publishing of industry Codes of Conduct, e.g., in the automotive aftermarkets industry).

Minister Patel speaks

Minister Patel speaks

The current amendments, however, risk elevating public-interest provisions above those of competition issues. The broad remedies and powers which the competition agencies may impose absent any evidence of anti-competitive behaviour are indicative of the competition agencies moving into an entirely new ‘world of enforcement’ in what could very likely be a significant ‘over-correction’ on the part of Minister Patel, at the cost of certainty and the likely deleterious impact on investment.

The proposed Amendments, which we unpack below, seem to elevate industrial policies above competition related objectives thereby introducing a significant amount of discretion on behalf of the agencies. Importantly, the Amendments are a clear departure from the general internationally accepted view that that ‘being big isn’t bad’, but competition law is rather about how you conduct yourself in the market place.

The Proposed Amendments

The Amendments identify five key objectives namely:

(i) The provisions of the Competition Act relating to prohibited practices and mergers must be strengthened.

(ii) Special attention must be given to the impact of anti-competitive conduct on small businesses and firms owned by historically disadvantaged persons.

(iii) The provisions relating to market inquiries must be strengthened so that their remedial actions effectively address market features and conduct that prevents, restricts or distorts competition in the relevant markets.

(iv) It is necessary to promote the alignment of competition-related processes and decisions with other public policies, programmes and interests.

(v) The administrative efficacy of the competition regulatory authorities and their processes must be enhanced.

At the outset, it may be worth noting that the Amendments now cater for the imposition of an administrative penalty for all contraventions of the Act (previously, only cartel conduct, resale price maintenance and certain abuse of dominance conduct attracted an administrative penalty for a first-time offence).

Secondly, the Amendments envisage that an administrative penalty may be imposed on any firm which forms part of a single economic entity (in an effort to preclude firms from setting up corporate structures to avoid liability).

We summarise below the key proposed Amendments to the Competition Act.

Abuse-of-Dominance Provisions

Excessive pricing

  • The evidentiary onus will now be on the respondent to counter the Competition Commission’s (Commission) prima facie case of excessive pricing against it.
  • The removal of the current requirement that an “excessive price” must be shown to be to the “detriment of consumers” in order to sustain a complaint.
  • An obligation on the Commission to publish guidelines to determine what constitutes an “excessive price”.

Predatory Pricing

  • The introduction of a standard which benchmarks against the respondents own “cost benchmarking” as opposed to the utilisation of more objective standards tests.
  • The benchmarking now includes reference to “average avoidable costs” or “long run average incremental costs” (previously the Act’s only tests were marginal costs and average variable costs).

General Exclusionary Conduct

  • The current general exclusionary conduct provision, Section 8(c), will be replaced by an open list of commonly accepted forms of exclusionary conduct as identified in Section 8(d).
  • The definition of exclusionary conduct will include not only “barriers to entry and expansion within a market, but also to participation in a market”.
  • The additional forms of abusive conduct will be added to Section 8(d):
    • prevent unreasonable conditions unrelated to the object of a contract being placed on the seller of goods or services”;
    • Section 8(1)(d)(vii) is inserted to include the practice of engaging in a margin squeeze as a possible abuse of dominance;
    • Section (1)(d)(viii) is introduced to protect suppliers to dominant firms from being required, through the abuse of dominance, to sell their goods or services at excessively low prices. This addresses the problem of monopsonies, namely when a customer enjoys significant buyer power over its suppliers”.

Price Discrimination

  • The Amendment will look to expand Section 9 of the Act to prohibit price discrimination by a dominant firm against its suppliers.
  • An onus of proof has been shifted on to the respondent to demonstrate that any price discrimination does not result in a substantial lessening of competition.

Merger-Control Provisions

  • Introduction of certain mandatory disclosures relating, in particular, to that of cross-shareholding or directorship between the merging parties and other third parties.
  • Introduction of provisions which essentially allow the competition authorities to treat a number of smaller transactions (which fell below the merger thresholds), which took place within three years, as a single merger on the date of the latest transaction.
  • Introduction of additional public-interest grounds which must be taken into account when assessing the effects of a merger. These relate to “ownership, control and the support of small businesses and firms owned or controlled by historically disadvantaged persons”.

Market Inquiries

  • Granting the Commission powers to make orders or impose remedies (including forced divestiture recommendations which must be approved by the Tribunal) following the conclusion of a market inquiry (previously the Commission was only empowered to make recommendations to Parliament).
  • The introduction of a new competition test for market inquiries, namely whether any feature or combination of features in a market that prevents, restricts or distorts competition in that market constitutes an “adverse effect” (a significant departure from the traditional “substantial lessening of competition” test).
  • Focussed market inquiries are envisaged to replace the “Complex Monopoly” provisions which were promulgated in 2009 but not yet brought into effect.

Additional Amendments

  • Empowering the Commission to grant leniency to any firm.
  • This is a departure from the current leniency policy, under which the Commission is only permitted to grant leniency to the ‘first through the door’.

What does this all mean going forward?

The above proposed amendments are not exhaustive. In addition to above, it is apparent that Minister Patel envisages utilising the competition agencies and Act as a “one-stop-shop” in order to address not only competition issues but facilitate increased transformation within the industry and to promote a number of additional socio-economic objectives (i.e., to bring industrial policies within the remit of the competition agencies).

In a move which would may undermine the independence and impartiality of the competition agencies, the Amendment also intends providing the responsible “Minister with more effective means of participating in competition-related inquiries, investigations and adjudicative processes”.

The amendments also strengthen the available interventions that will be undertaken to redress the specific challenges posed by concentration and untransformed ownership”.

Competition-law observers interviewed by AAT point out that the principle of separation of powers is a fundamental cornerstone of the South African constitutional democracy and is paramount in ensuring that there is an appropriate ‘checks and balances’ system in place. It is for this reason that the judiciary (which in this context includes the competition agencies) must remain independent, impartial and act without fear or favour (as mandated in terms of the Act).

The increased interventionist role which the executive is envisaged to play, by way of the Amendments, in the context of competition law enforcement raises particular concerns in this regard.  Furthermore, the increased role of public-interest considerations effectively confers on the competition agencies the responsibility of determining the relevant ambit, scope and enforcement of socio-economic objectives. These are broad, subjective and may be vastly different depending on whether one is assessing these non-competition objectives in the short or long term.

Any uncertainty regarding the relevant factors which the competition authorities ought to take into account or whose views the authorities will be prepared to afford the most weight too, risks trust being lost in the objectivity and impartiality of the enforcement agencies. This will have a direct negative impact on the Government’s objective in selling South Africa as an investor friendly environment.

In addition, as Primerio attorney and competition counsel Andreas Stargard notes, the “future role played by the SACC’s market inquiries” is arguably open to significant abuse, as “the Competition Commission has broad discretion to impose robust remedies, even absent any evidence of a substantial lessening of competition.”

  • Mr. Stargard notes that the draft Amendment Bill, in its own words in section 43D (clause 21) “places a duty on the Commission to remedy structural features identified as having an adverse effect on competition in a market, including the use of divestiture orders. It also requires the Commission to record its reasons for the identified remedy. … These amendments empower the Commission to tailor new remedies demanded by the findings of the market inquiry. These remedies can be creative and flexible, constrained only by the requirements that they address the adverse effect on competition established by the market inquiry, and are reasonable and practicable.”
Andreas Stargard

Andreas Stargard

Although the Amendments recognise that concentration in of itself is not in all circumstances to be construed as an a priori negative, the lack of a clear and objective set of criteria together with the lower threshold (i.e., “adverse effect”) which must be met before the competition authorities may impose far-reaching remedies, coupled with the interventionist role which the executive may play (particularly in relation to market inquiries), may have a number of deterrent effects on both competition and investment.

Mr. Stargard notes in this regard that the “approach taken by the new draft legislation may in fact stifle innovation, growth, and an appetite for commercial expansion, thereby counteracting the express goals listed in its preamble:  Firms that are currently sitting at a market share of around 30% for instance may not be incentivised to obtain any greater accretive share for fear of being construed as holding a dominant market position, once the 35% threshold is crossed“.

The objectives to facilitate a spread of ownership is not a novel objective of the post-Apartheid government and a number of pieces of legislation and policies have been introduced in order to facilitate the entry of small previously disadvantaged players into the market through agencies generally better equipped to deal with this. These policies, in general, have arguably not led to the government’s envisaged benefits. There may be a number of reasons for this, but the new Amendments do not seek to address the previous failures or identify why various other initiatives and pieces of legislation such as the Black Economic Empowerment (BEE) legislation has not worked (to the extent envisaged by Government). Furthermore, the Tribunal summed up this potential conflict neatly in the following extract in the Distillers case:

Thus the public interest asserted pulls us in opposing directions. Where there are other appropriate legislative instruments to redress the public interest, we must be cognisant of them in determining what is left for us to do before we can consider whether the residual public interest, that is that part of the public interest not susceptible to or better able to be dealt with under another law, is substantial.”

Perhaps directing the substantial amount of tax payers’ money away from a certain dominant state-owned Airline – which has been plagued with maladministration – and rather use those funds to invest in small businesses will be a better solution to grow the economy and spread ownership to previously disadvantaged groups than potentially prejudicing dominant firms which are in fact efficient.

Furthermore, ordering divestitures requires that there be a suitable third party who could effectively take up the divested business and impose a competitive constraint on the dominant entity. It seems inevitable that based on the proposed Amendments the competition authorities will be placed in the invidious position of considering a divestiture to an entity which may not yet have proven any successful track record. The Amendments do not provide guidance for this and although the competition authorities have the necessary skills and resources to assess whether conduct has an anti-competitive effect on the market, it is less clear whether the authorities have the necessary skills to properly identify a suitable third party acquirer of a divested business.

In addition and importantly, promoting competition within the market achieves public interest objectives. Likewise, anything which undermines competition in the market will have a negative impact on the public interest considerations.

John Oxenham

John Oxenham

As John Oxenham and Patrick Smith have argued elsewhere, “competition drives a more efficient allocation of resources, resulting in lower prices and better quality products for customers. Lower prices typically result in an expansion of output. Output expansion, combined with the effect of lower prices in respect of one good or service frees up resources to be spent in other areas of the economy. The result is likely to be higher output and, most importantly for emerging economies, employment”.

While it is true that ordinarily, a decrease in concentration and market power should result in an increase in employment we have not seen a comprehensive assessment of the negative costs associated with pursuing public interest objectives. Any weakening of a pure competition test must imply some costs in terms of lost efficiency, or less competitive outcome, which is justified based on a party’s perspective of a particular public interest factor. That loss in efficiency and less competitive outcome is very likely to have negative consequences for consumers, growth, and employment. Accordingly, the pursuit of “public-interest factors” might have some component of a loss to the public interest itself. We have not seen that loss in efficiency (and resultant harm to the public interest, as comprehensively understood) meaningfully acknowledged in the proposed Amendments.

A further risk to the broad and open ended role which public interest considerations are likely to play in competition law matters should the Amendments be passed is a significant risk of interventionism by third parties (in particular, competitors, Trade Unions and Government) who may look to utilise the Act to simply to harass competitors rather than pursue legitimate pro-competition objectives. The competition authorities will need to be extra mindful of the delays, costs and uncertainty which opportunistic intervention may lead to.

Although there are certain aspects of the Amendments which are welcomed, such as limiting the timeline of market inquiries, from a policy perspective the Amendments appear to go far beyond consumer protection issues in an effort to address certain socio-economic disparities in the South African economy, and may, in fact very likely hinder the development of the economy.

Based on the objectives which underpin the Amendments, it appears as if the Department of Economic Development is focused on dividing the existing ‘economic pie’ rather than on growing it for the benefit of all South Africans.

From a competition law enforcement perspective, however, firms conducting business in South Africa are likely to see a significant shake-up should the Amendments be brought into effect as a number of markets have been identified as highly concentrated (including, Communication Energy, Financial Services, Food and agro-processing, Infrastructure and construction, Intermediate industrial products, Mining, Pharmaceuticals and Transport).

[To contact any of the contributors to this article, or should you require any further information regarding the Amendment Bill, you are welcome to contact the AAT editors at editor@africanantitrust.com]

Concurrences: Interview with Commissioner Bonakele

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Antitrust in Developing Countries: Competition Policy in a Politicised World

Our friends at Concurrences Review are hosting the fourth edition of the joint conference co-organized by Concurrences & New York University School of Law, in New York City on October 27, 2017.

Tickets and more information can be obtained here.

Below is the interview of Tembinkosi Bonakele (Commissioner, South African Competition Commission) by Ioannis Lianos (Professor, University College London). The two will participate in the conference panel “Impact of the New Nationalism on Competition and Economic Development in Developing Countries.”

Interview between Prof. Lianos and Commissioner Bonakele

© Concurrences

Competition authorities are increasingly interested in assessing the effects of mergers or other conduct on innovation. How is this concern over the promotion of innovation affecting the substance of competition law enforcement, and in particular the extraterritorial application of competition law, as innovation is often taking place in the context of global value chains? How should one resolve conflicts over competing visions over the impact of competition on innovation, as it seems to be, for instance, the case between the EU and the US, and possibly BRICS countries?

One of the aims of competition law is to encourage innovation. Firms and individuals are incentivised to innovate due to the protection conferred on their innovations by intellectual property laws (IP). Therefore, at least theoretically, competition and IP laws ought to be complementary. However, the conflicts between competition law and innovation/IP laws are increasingly coming into sharp focus within the context of global value chains. One such example is the recent global mega-mergers in the seeds and agro-chemicals sectors. These mergers illustrate how multinationals can leverage their significant innovation and research resources by extending their IP protections through ‘ever-greening’ of patents, reciprocal IP cross licensing arrangements with close rivals, joint ventures and collaborative research and development. This level of collaboration suggests that the seed/agro-processing markets are likely more concentrated than is currently understood. From a policy perspective, competition authorities in both the EU and US seem supportive of this level of concentration based on the theory that such concentration increases innovation, notwithstanding their (unintended) global unilateral effects to which developing countries are especially vulnerable, given the centrality of agriculture for the sustenance of communities in their economies. The vulnerability of developing countries is further exacerbated by the fact that they are trying to regulate multinationals which have access to resources that dwarf the GDPs of many developing countries, and are able to lobby hard politically, against any interventions aimed at their activities.

Against this backdrop, the way forward for BRICS and other developing countries is to continue efforts to establish their own research platforms to enable the true impacts of the trade-off between innovation and competition law to be better understood from a developing country perspective. Furthermore, there is scope for greater global co-ordination amongst competition law agencies to ensure that global transactions are investigated and remedied in a co-ordinated manner.

Broader public policy concerns, than consumer welfare narrowly defined, are increasingly taken into account by various competition law systems around the world, in both developing and developed countries when assessing mergers and, in some instances, anticompetitive conduct. There is also increasing demand for a broader canvas of principles and values in order to assess business conduct, as this is demonstrated by the development of the concepts of “social” and “green” capitalism. Should competition law authorities explore more systematically this trend and eventually move to a public interest standard in assessing anticompetitive conduct, at least in some economic sectors (for instance involving primary goods, such as food, shelter, or with considerable environmental impact etc.)? What would be the implications for the global governance of antitrust?

Many countries already apply tests beyond the typical competition law tests in merger assessments, but they do not declare those tests in an open and transparent way. In contrast, South Africa’s merger regulation explicitly includes a public interest test and guidelines have been issued setting out how the test will be applied during merger assessment.

Should public interest cover some old and emerging social issues such as green issues or the environmental impact on food security, shelter and so on? I think there is scope for these to be part of an assessment of merger transactions, but their location need not necessarily be with a competition agency and they can be properly assessed through a different regulatory agency in a transparent manner. Countries should be allowed to structure their agencies the way they deem fit.

Within South Africa’s context, in order to address historical inequalities and economic and political imbalances, competition legislation specifically provides for both competition law and public interest standards in the merger assessment process. It bears specific mention that the courts have recently confirmed that both the competition law and public interest tests are of equal prominence in any merger determination process. In a developmental context, economic exclusion exacerbates inequality, poverty and unemployment and competition policy in conjunction with industrial policy (introduced through public interest) can break down barriers to entry and unleash innovation and new entry, which are pivotal to the unleashing of economic growth and development.

Although public interest considerations in merger assessment would appear, largely, the preserve of developing countries, developed countries and most notably, the European Union, seem to be re-considering their stance towards public interest considerations in merger assessment. Moreover, the impact of globalisation appears to be giving rise to a new wave of ‘new nationalism’ in developed countries (and the United States is no exception). This has ushered in more inward looking perspectives to international trade and ironically, may give rise to the use of public interest considerations in ‘tit for tat’ exchanges in transactions taking place within an increasingly geopolitical context. Thus, the implications for the global governance of anti-trust may be convergence.

In recent years the competition authorities of BRICS countries and other large emergent economies have been increasingly active in competition law enforcement, adjudicating high profile cases of global importance. The experience gained may be a source of inspiration for competition authorities in other emergent and developing countries, and could also be an important source of learning and wisdom for the competition authorities in developed countries. Do you consider that BRICS and other larger emergent competition authorities should strive to ensure global convergence with the EU and/or US models of competition law, as this is put forward by some, or should they opt for different models, experimentation being an important source of collective learning for both developing and developed countries? Should convergence, or experimentation, be the main/driving principle for the global governance of competition law? 

In the developed world, competition law is applied within a context in which it is presumed that markets are naturally competitive, self-correcting and don’t require policy interventions to address failures. However, that presumption cannot hold true in a developing country context where markets are undeveloped, highly concentrated, non-inclusive and unemployment and inequality are high. In this ‘developmental context’ competition law is applied within a context in which it is presumed that firms with market power exploit it. Therefore, in developmental context, competition law more than just efficiency, but human and socio-economic development as well.

Rather than seeking convergence with developed country perspectives on competition law, developing countries need to play a more prominent role in understanding how competition law policy can be used to address poverty, inequality and unemployment. This will require developing countries through the auspices of representative regional platforms such as BRICS, to enhance co-operation, share experiences and develop legal and competition law expertise from a developmental perspective.

Thus, it is important to appreciate that approaches to competition law in the developed and developing worlds are diverse and that divergence should be tolerated and informed by context. This does not take away the need for global co-operation and sharing best practices. There are also instances where harmonisation may be desirable, like in regions with or striving for common markets.

Adverse effects of price-fixing: East Africa recognises drawbacks

It is not really news, but worth mentioning as it is literally happening simultaneously: As the most developed antitrust enforcement jurisdiction in Africa, South Africa, charges ahead with heavy-handed actions, such as denying alleged currency manipulators “access to file” in the investigative process, or accusing two livestock-feed processors of colluding in the sales and pricing of animal feed ‘peel pulp’, the East African nations lag behind.

What is news, however, is that they have begun to recognise the shortcoming and the adverse effects of collusion and other anti-competitive conduct on their economies: Andreas Stargard, an antitrust lawyer with Primerio Ltd., notes that the head of the East African Community (EAC), Mr. Liberat Mfumukeko, recently addressed ongoing antitrust violations in the EAC: “The Secretary denounced anti-competitive practices (cartels and the like) as serious obstacles to obtaining foreign direct investment in the region.  Moreover, he recognised the violations as ‘impeding effective competition’ and thereby directly hurting African consumers,” says Stargard.

Mr Mfumukeko is quoted as stating: “The EAC markets pose challenges to investors and consumers including the charging of high prices arising from anti-competitive practices such as cartels. These practices impede effective competition in the markets.”

Within the EAC, Stargard notes, the primary jurisdictions with operational antitrust regimes are Kenya and Tanzania, with others such as Uganda lagging behind even farther, having no competition legislation or only having draft bills under review.  Most other nations lag behind, although, as Mr. Stargard observes, many are part of the broader COMESA competition regime.  “The COMESA rules, however, have thus far been enforced with a primary objective of merger regulation,” he says, “effectively failing to police any collusive conduct in the close to two dozen member states at all, despite the explicit prohibition thereof in the COMESA regulations.”

South Africa: Merger Thresholds and Filing Fees Increased

As of 1 October 2017, the recently revised merger thresholds which were published by way of Government Gazette will become effective.

The large merger thresholds have remained unchanged, however, the thresholds for an intermediate merger (which requires mandatory merger notification if met) have been amended as follows:

The combined threshold has been increased to R600 million (approx.US$46 million) R560 million).  The combined threshold for an intermediate merger relates to either the combined turnover of the merging parties’ South African specific turnover or the merging parties combined asset value in South Africa.

The lower merger threshold (i.e. the target’s thresholds) for an intermediate merger has also been increased from R80 million to R100 million (approx. US$7.6 million) For purposes of the lower merger threshold, however, either the turnover or the asset value of the target entity is utilised.

The large merger thresholds remain unchanged with a combined threshold of R6.6 billion (approx. US$500 million) and the target’s threshold at R190 million (approx.US$14.6 million)

For purpose of both the intermediate and large merger thresholds, any combination of the South African specific turnover or asset value of the merging parties which exceed the thresholds will require a mandatory merger notification. In other words, the combined large merger threshold will be met if the acquiring firm’s asset value combined with the target firm’s turnover exceeds R6.6 billion.

In addition to the merger thresholds, the merger filing fees have also been increased and the new filing fees are:

  • Intermediate merger: R150 000
  • Large merger: R500 000

The merger thresholds were previously revised in 2009 and as John Oxenham, Director of Primerio Ltd., comments “increasing the target’s thresholds for purposes of an intermediate merger will assist in ensuring that transactions which are highly unlikely to result in any anti-competitive effects are subject to the merger control process“. Oxenham also points out that it is noteworthy that the filing fees have increased by 50% in respect of intermediate mergers and more than 40% for large mergers.

In addition to the mandatorily notifiable thresholds, Michael-James Currie notes that “the South African Competition Commission may call for the notification of any transaction which does not meet the intermediate merger thresholds (i.e. a small merger) within 6 months after the transaction has been implemented should the Commission be of the view that the small merger raises competition or public interest concerns“.

[For legal advice, please contact a Primerio representative]

 

The African WRAP – SEPTEMBER 2017 Edition

Since our June 2017 Edition of the African WRAP, we highlight below the key competition law related topics, cases, regulatory developments and political sentiment across the continent which has taken place across the continent in the past three months. Developments in the following jurisdictions are particularly noteworthy: Botswana, Kenya, Mauritius, Namibia, Tanzania and South Africa.

[AAT is indebted to the continuous support of its regular contributors and the assistance of Primerio’s directors in sharing their insights and expertise on various African antitrust matters. To contact a Primerio representative, please visit Primerio’s website]


Botswana: Proposed Legislative Amendments

Introduction of Criminal Liability

The amendments to the Competition Act will also introduce criminal liability for officers or directors of a company who causes the firm to engage in cartel conduct. The maximum sanctions include a fine capped at P100 000 (approx. US$10 000) and/or a maximum five year prison sentence.

Fines for Prior Implementation

Once finalised, the legislative amendments will also introduce a maximum administrative penalty of up to 10% of the merging parties’ turnover for implementing a merger in contravention of the Act. This would include ‘gun-jumping’ or non-compliance with any conditions imposed on the merger approval.

Restructuring of the Authorities

Proposed legislative amendments to the Botswana Competition Act will likely result in the Competition Commission’s responsibilities being broadened to include the enforcement of consumer protection laws in addition to antitrust conduct.

Furthermore, there is a significant restructuring of the competition agencies on the cards in an effort to ensure that the Competition Authority – which will become the Competition and Consumer Authority (CCA) – is independently governed from the Competition Commission. Currently, the Competition Commission governs the CA but the CA is also the adjudicative body in cases referred to the Commission by the CA.

The proposed amendments, therefore, seek to introduce a Consumer and Competition Tribunal to fulfil the adjudicative functions while an independent Consumer and Competition Board will take over the governance responsibilities of the ‘to be formed’ CCA.

South Africa

Information Exchange Guidelines           

The Competition Commission has published draft Guidelines on Information Exchanges (Guidelines). The Guidelines provide some indication as to the nature, scope and frequency of information exchanges which the Commission generally views as problematic. The principles set out in the Guidelines are largely based, however, on case precedent and international best practice.

The fact that the Commission has sought to publish formal guidelines for information exchanges affirms the importance of ensuring that competitors who attend industry association meetings or similar forums must be acutely aware of the limitations to information exchanges to ensure that they do not fall foul of the per se cartel conduct prohibitions of the Competition Act.

Market Inquiry into Data Costs

The Competition Commission has formally initiated a market inquiry into the data services sector. This inquiry will run parallel with the Independent Communications Authority of South Africa’s market inquiry into the telecommunications sector more broadly.

Although the terms of reference are relatively broad, the Competition Commission’s inquiry will cover all parties in the value chain in respect of any form of data services (both fixed line and mobile). In particular, the objectives of the inquiry include, inter alia, an assessment of the competition at each of the supply chain levels, with respect to:

  • The strategic behaviour of by large fixed and mobile incumbents;
  • Current arrangements for sharing of network infrastructure; and
  • Access to infrastructure.

There are also a number of additional objectives such as benchmarking the standard and pricing of data services in South Africa against other countries and assessing the adequacy of the regulatory environment in South Africa.

Mauritius

Amnesty re Resale Price Maintenance

The Competition Commission of Mauritius (CCM) has, for a limited period of four months only, granted amnesty to firms who have engaged in Resale Price Maintenance. The amnesty expires on 7 October 2017. Parties who take advantage of the amnesty will receive immunity from the imposition of a 10% administrative penalty for engaging in RPM in contravention of the Mauritius Competition Act.

The amnesty policy followed shortly after the CCM 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 4 007 110.00 respectively for each contravention.

Please see AAT’s featured article here for further information on Resale Price Maintenance under Mauritian law

Tanzania

Merger and Acquisition Threshold Notification

The Fair Competition Commission has published revised merger thresholds for the determination of mandatorily notifiable thresholds. The amendments, which were brought into effect by the Fair Competition (Threshold for notification of Merger) (Amendment) Order published on 2 June 2017, increases the threshold for notification of a merger in Tanzania from TZS 800 000 000 (approx.. US$ 355 000) to TZS 3 500 000 000 (approx.. US$ 1 560 000) calculated on the combined ‘world-wide’ turnover or asset value of the merging parties.

Kenya

            Concurrent Jurisdiction in the Telecommunications Sector

In June 2017, Kenya’s High Court struck down legislative amendments which regulated the concurrent jurisdiction between the Kenya Communications Authority and the Competition Authority Kenya in respect of anti-competitive conduct in the telecommunications sector.

In terms of the Miscellaneous Amendments Act 2015, the Communications Authority was obliged to consult with the Competition Authority and the relevant government Minister in relation to any alleged anti-competitive conduct within the telecommunications sector, prior to imposing a sanction on a market player for engaging in such anti-competitive conduct.

The High Court, however, ruled that the Communications Authority is independent and that in terms of the powers bestowed on the Communications Authority by way of the Kenya Communications Act, the Communications Authority may independently make determinations against market participants regarding antic-competitive conduct, particularly in relation to complex matters such as alleged abuse of dominance cases.

Establishment of a Competition Tribunal

The Kenyan Competition Tribunal has now been established and the chairperson and three members were sworn in early June. The Tribunal will become the adjudicative body in relation to decisions and/or taken by the Competition Authority of Kenya.

The Operational Rules of the Tribunal have not yet been published but are expected to be gazetted soon.

Introduction of a Corporate Leniency Policy

The Competition Authority of Kenya (CAK) has finalised its Leniency Policy Guidelines, which provide immunity to whistle-blowers from both criminal and administrative liability. The Guidelines specifically extend leniency to the firm’s directors and employees as well as the firm itself.

Only the “first through the door” may qualify for immunity in respect of criminal liability, but second or third responds would be eligible for a 50% and 30% reduction of the administrative penalty respectively, provided that provide the CAK with new material evidence.

It should be noted, however, that receiving immunity from criminal prosecution is subject to obtaining consent from the Director of Public Prosecution as well. As per the procedure set out in the Policy Guidelines, the Director pf Public Prosecutions will only be consulted once a leniency applicant has already disclosed its involvement in the cartel and provided the CAK with sufficient evidence to prosecute the other respondents.

It is not clear what powers the Director of Public Prosecutions would have, particular in relation to the evidence which has been provided by the leniency applicant, should either the CAK or the Director refuse to grant immunity from criminal prosecution.

Namibia

Medical aid schemes

In a landmark judgment, the Namibian Supreme Court overturned the High Court’s decision in favour of the Namibian Association of Medical Aid Funds (NAMAF) and Medical Aid Funds (the respondents) finding that the respondents did not fall within the definition of an “undertaking” for the purpose of the Namibian Competition.

Despite the substantial similarities between the Namibian and the South African Competition Act, Namibia’s highest court took a very different interpretative stance to its South African counter-part and held that because the respondents did not “operate for gain or reward” they could not be prosecuted for allegedly having  engaged in collusive behaviour in relation to their ‘tariff setting’ activities in terms of which the respondents collectively  determined and published recommended bench-marking tariffs for reimbursement to patients in respect of their medical costs.