Category: South Africa

Public Interest Factors in African Competition Policy

Posted on by andreasstargard

Author and economist Patrick Smith recently published “Public Interest Factors in African Competition Policy“ in The African and Middle Eastern Antitrust Review 2014.  The consideration of public interest factors in competition law inquiries has generated much debate over the past few years. Several high profile cases have illustrated the potential for competition decisions,
and in particular merger inquiries, to be significantly affected by non-competition public interest issues.

Our readers have free access to the full PDF.

The Review is published by Global Competition Review and is available online at: http://globalcompetitionreview.com/reviews/59/the-african-middle-eastern-antitrust-review-2014

This year’s issue of the Review also features two other AfricanAntitrust.com writers: contributing author, Chabo Peo, whose piece on competition law in Botswana is available at the GCR web site, as well as editor John Oxenham‘s piece on cartels in South Africa, available here.

A full list of contributors to our site can be found at: https://africanantitrust.com/about/

In-house competition counsel joins leading African antitrust blog

Posted on by andreasstargard
We are pleased to present the latest addition to the ranks of AAT authorship: Mark Griffiths.

Mark Griffiths is Competition Counsel for Barclays Africa Group and is accountable for competition risk management across the African continent for Barclays.  Mark is heavily involved in antitrust and merger matters across twelve African jurisdictions with active competition authorities.  He has been involved in a number of pivotal developments across the region.

Prior to his appointment with the Barclays Group in 2007, he was a senior associate (admitted as a solicitor of the Senior Courts of England and Wales) in the EU and Competition practice of Clifford Chance (London).  He also previously worked for DG Competition at the European Commission as well as being specialist legal advisor to the House of Lords EU Select Committee on the EU Financial Services Action Plan.

Mark is a regular contributor to a range of legal journals as well as a regular speaker on African competition law at local and international conferences. Mark has attended meetings of the International Competition Network as a NGA. He has an LLB (University of Southampton, UK) and an LLM in European Law (College of Europe, Bruges, Belgium).

A full list of contributors to our site is available here: https://africanantitrust.com/about/

Balancing Public Interest Merger Considerations with the Quest for Certainty

Posted on by andreasstargard

AAT editor John Oxenham‘s paper on “Balancing Public Interest Merger Considerations with the Quest for Multi-Jurisdictional Merger Control Certainty” in the “US-China Law Review.”

Our readers have free access to the full PDF.

Abstract:

The growing importance of public interest considerations, and the uncertainty that it creates, in South Africa and other sub-Saharan jurisdictions, including Zambia, Namibia and Botswana, pose an additional challenge for merging entities attempting to coordinate multi-jurisdictional merger notifications. These difficulties were, most recently, brought to the fore during the much publicized and highly opposed proceedings involving Wal-Mart’s takeover of the South African listed retailer Massmart. While the growing importance of public considerations increases the complexity and cost of multi-jurisdictional merger filings, the author suggests that these challenges can be countered by addressing public interest considerations as an integral part of submissions in support of merger filings in the sub-Saharan African region

Competition economist joins panel of AfricanAntitrust.com blog authors

Posted on by andreasstargard

Patrick Smith is a partner at RBB Economics.  Previously a chemical engineer, Patrick applies economics, econometrics and industrial expertise to competition policy, litigation and arbitration.

He has testified and consulted to parties, agencies and interveners in high-profile, complex and multi-jurisdictional proceedings over the past decade.  These include leading roles in cases such as:

Syniverse/MACH, Bread, Universal/EMI, Gold Circle/Kenilworth Racing, Thaba Chueu/SamQuarz, First Quantum v DRC, Pioneer/Pannar, Sun Capital/DSP, Dow/Rohm & Haas, InBev/Anheuser Busch, ABF/GBI, Polymers and Inco/Falconbridge.

Patrick is a regular speaker on antitrust economics at conferences and seminars around the world.

We look forward — as do you, we expect — to reading Patrick’s insightful takes on competition law & economics!

Patrick Smith, RBB, author
Patrick Smith, RBB, author (South Africa)

A full list of contributors to our site is available here: https://africanantitrust.com/about/

Quo vadis? Political interventionism in South African competition law

Posted on by oxenhamjmj
There has been a somewhat startling demonstration of diverging views regarding interventionism in competition matters between emerging and established jurisdictions.

During the recent BRICS international competition conference, held in New Delhi over the last few days, FTC chairwoman Edith Ramirez had sought to steer emerging economies away from mixing industrial policy with antitrust law. She indicated that “proper goals of competition law were best solved when a competition authority is focused on competition effects and consumer welfare, and when its analysis is not “interrupted to meet social and political goals.” (Ramirez cited the well-known case of the Wal-Mart / Massmart merger during which a number of South African government departments had intervened and extracted significant non-competition centric conditions from the merging parties as an example of permitting non-competition factors to intervene in the merger-review process to an undue degree).

Juxtapose this with the comments made at the very same conference, by the newly appointed interim South African Competition Commissioner, Tembinkosi Bonakele. Bonakele had the following to say during an interview regarding the independence of the competition authorities in South Africa:

“In a country which suffers from 35 per cent unemployment, there are increasingly calls for the authority to consider job creation and the development of local industries in its investigation and merger reviews. This is not an unreasonable call. While competition authorities should not be beholden to the government neither can they be loose cannons who claim independence without accountability. Competition policy cannot exist in isolation and each BRICS enforcer faces the need to balance competition law with its government’s political and economic policies. Competition authorities cannot afford to shy away from the debate.”

ppt

A number of practitioners have keenly been awaiting Bonekele’s views on the independence of the Competition Commission in the light of the untimely and suspicious departure of the previous commissioner, Shan Ramburuth (in what many commentators have described as evidence of pure uninterrupted interventionism by the Department of Economic Development). It is, particularly, in light of the cloud surrounding (and possible political element involved in) his predecessor’s removal, that these comments of the South African competition commissioner are all the most startling. It is worrying that the prevalent view in developing economies (after all, the venue at issue here was a BRICS conference) appears to open the door for greater non-antitrust intervention rather than less government meddling.

It is certainly the view of the author of this piece — a presentation given this fall at the Inaugural Global Mergers Conference in Paris (Concurrences/Paul Hastings) — that the South African competition authority should rather seek to assert its independence rather than tolerate what appears to be an ever increasing amount of political interventionism.

Resisting price controls in S.A. health-care markets

Posted on by andreasstargard

south_africa

BusinessDay Live reports on competition-law related remarks made by Anthony Norton at the annual conference of the Hospital Association of South Africa in Cape Town this week.

The newspaper quotes Mr. Norton as counseling against regulating prices in private healthcare, opposing the calls made by the South African Department of Health for such regulation:

“It seems a contradiction in terms that the competition authority, which has a mandate of pursuing free and fair competition in markets with one set of tools, would simultaneously intervene in markets through price setting. … It will be critical for the credibility of the findings that everybody who participates in the process feels that it has been fair, objective and impartial.”

The remarks come ahead of the start of the pre-announced healthcare market inquiry by the country’s antitrust watchdog, the South African Competition Commission, whose findings are expected to be published by the end of 2014.

Antitrust plaintiff-focussed symposium goes off-topic, turns racial

Posted on by andreasstargard

south_africa

Race becomes issue at competition-law conference in South Africa

According to several reports, the issue of race came to the fore during a discussion of illegal cartel conduct in South Africa at a recently held plaintiffs’ firm symposium (organised by Hausfeld LLP and Abrahams Kiewitz).  Quoting from Amanda Visser’s BDLive article entitled “Cartels blamed on white men in dark suits” (23 Oct. 2013):

The Black Business Council has come out against cartels in South Africa, with CEO Xolani Qubeka, blaming the practice on “highly educated white male executives in dark suits”.

Mr Qubeka’s comments at a symposium on cartel collusion came after the recent outcry over collusion and cartel activities in the construction industry.

… Mr Qubeka said the Black Business Council aims not only to rid the country of collusive behaviour, but also to instigate criminal cases against the key architects, masquerading as corporate managers, who are committing fraud.

“Consumers in South Africa cannot continue to be abused by highly educated white male executives in dark suits who lock themselves in dark rooms plotting how they can maximise their wealth through self-serving fraudulent schemes against the entire nation,” he said.

Sounds like the infamous old saying about equating cartels to “men in smoke-filled back rooms” — only with more incendiary overtones… Ironically, the speaker Mr. Qubeka (who did not complete high school and is an outspoken critic of the S.A. Black Economic Empowerment (BEE) agenda, according to a May 2013 Sunday Times profile and other articles) used to be a Director of South African telecommunications giant MTN — a corporation that has had its own fair share of competition-based complaints and investigations, as we have reported on this blog.

We observe that the conference-sponsoring Hausfeld firm has historically been perceived as opposing racism and, indeed, has helped pursue claims (including pro bono matters) on behalf of groups suffering from discrimination, such as Holocaust survivors.  The firm is currently involved in more traditional plaintiff litigation matters in South Africa, including several miners’ class-action lawsuits against their employers, AngloGold Ashanti  Limited (formerly Anglo American), Harmony Gold Mining Company Limited, and Goldfields Limited (based on diseases allegedly contracted by the class members).  The firm is also involved, again jointly with Abrahams’, in the bread price-fixing class action in South Africa.

Michael Hausfeld
Source: Getty Images via ZIMBIO

AfricanAntitrust.com has an unwritten policy of not commenting on issues irrelevant to antitrust or competition law (that would be: race) and instead staying on topic (that would be: antitrust and competition law).

So: no comment from us on this one…

South Africa’s mobile operators under attack for discriminatory “on-net” pricing

Posted on by andreasstargard

south_africa

Cell C (one of South Africa’s top 3 mobile telecommunications providers) has filed a complaint against competitors MTN and Vodacom with the Competition Commission, according to its press statement dated October 9, 2013

What appears to be the crux of the Cell C complaint is a predatory pricing argument against MTN and Vodacom — a type of claim that is, generally speaking, not an easy one to make.  Complaining to an antitrust regulator or a court that a rival is charging too low a price for competing services is generally a no-go of an antitrust argument.  You are essentially telling the judge: “my rivals out-compete me! Help me raise prices!”

To make out a successful case for truly anti-competitive predatory conduct, you would normally (e.g., in the U.S. or in the EU) have to prove (1) dominance, (2) true below-cost pricing (the economic measure of which is subject to debate, on top of that), (3) a likelihood of success in the subsequent recoupment of any losses incurred, and potentially, depending on your jurisdiction, (4) predatory intent by the dominant firm.

Interestingly, the complaint may have received well-timed (or perhaps too well-timed?) support from the South African Independent Communications Authority (ICA).  The ICA recently announced plans to reduce the so-called “mobile termination rates” by 75%, from 40 to 10 South African cents within 2 years.  This would, we expect, reduce the current differential between on- and off-rate calls.

This of course bodes well for Cell C, as the company has openly stated its desire, according to another report, for “a flat rate” — i.e., termination rates of zero.  In its October 11, 2013, proposal to cut termination rates drastically, the ICA tellingly concludes “that competition in the wholesale voice call termination markets … is ineffective owing to inefficient pricing.”  (Draft Regulation at section 5.)  The regulator purportedly used the hypothetical monopolist test to define and evaluate the relevant markets.  Violations of the proposed rate reductions would carry penalties of Rand 500,000 to R1m.

Vodacom is the largest S.A. mobile carrier by number of subscribers, ahead of MTN and Cell C.  MTN — itself no stranger to these blog pages — is the dominant mobile carrier on the African continent, however, and has been accused previously of leveraging its power elsewhere to gain or maintain dominance in other jurisdictions.

According to an article that appeared in the South African journal MoneyWeb, Cell C’s CEO Alan Knott-Craig has complained publicly at an industry conference that its competitors (Vodacom and MTN) are abusing their purported dominant market positions with far lower on-net call rates than off-net rates (i.e., rates to numbers outside the proprietary mobile network).

According to the complainant’s press statement, the key argument “relates to the manner in which the dominant incumbents discriminate between their on-net and off-net effective prices, which has a dramatic and direct impact on smaller operators’ ability to acquire new customers.  The two dominant incumbents discount their effective on-net prices substantially while charging a premium for their customers to call off-net. This amounts to discriminatory pricing and is without doubt anti-competitive when adopted by dominant operators.”

South Africa- Supreme Court of Appeal upholds Competition Commission appeal relating to investigatory powers

Posted on by oxenhamjmj

The Supreme Court of Appeal (the “SCA”) upheld an appeal against a judgment of the Competition Appeal Court invalidating a complaint referred to the Competition Tribunal (the “Tribunal”) by the Competition Commission (the “Commission”) against cartel activity allegedly entered into by Yara South Africa (Pty) Ltd (“Yara”) and Omnia Fertilizer Ltd (“Omnia”).

The dispute in this matter arose out of a complaint lodged with the Commission, citing Sasol Chemical Industries Proprietary’ (“Sasol”) for imposing unfair price increases in respect of certain raw materials it supplied to the complainant company. The complainant elaborated upon its complaint by way of an affidavit which explained the price increases with reference to a cartel which Sasol was alleged to have entered into with Yara and Omnia. Pursuant to the complaint, the Commission conducted an investigation which confirmed both the price increase allegations made against Sasol and the claims of cartel activity made against Sasol, Omnia and Yara. As a result, the Commission referred the complaints relating to both price increases and cartel activity to the Tribunal for adjudication.

The legality of this referral formed the substance of the dispute. Omnia argued that the initial complaint brought to the Commission was directed against Sasol alone and, further, was limited to Sasol’s conduct as it related to price increases. Omnia disputed the lawfulness of the referral insofar as the Commission had, under the auspices of the original complaint directed at Sasol, sought to refer Omnia’s conduct to the Tribunal absent a separate complaint initiation. Omnia contended that, in order for the referral of this further complaint to have been lawful, it ought to have been separately initiated by the Commission.

The SCA confirmed Omnia’s position, and that the complaint referred to the Tribunal indeed extended beyond the cause of action raised by the original complaint. However, the SCA went further and stated that complaints made by private persons may well trigger separate complaints and, in such cases, the Commission need only decide to initiate a new complaint, investigate that complaint and, if appropriate, refer that complaint to the Tribunal. The SCA confirmed that the process may be both informal and tacit. Further, should the Commission already have enough information to warrant a referral, the intervening investigation can be cursory. The SCA found that the requirements for valid initiation and referral had been satisfied on the facts of this case.

The SCA’s decision will embolden the Commission to proceed with a number of complaint referrals which were left pending the outcome of the matter.

Potential strike at S. Afr. Competition Commission? SA union calls on minister to intervene

Posted on by andreasstargard

south_africa

South African workers’ union NEHAWU has called on Minister of Economic Development Ebrahim Patel to undertake several actions related to the Competition Commission in order to avert a strike amongst its workers.

The National Education Health & Allied Workers’ Union (NEHAWU) has been a rather vocal critic of the South African Competition Commission and its management in the past.  They now cite the high turnover rate at the Commission as evidentiary support for their claims that the Commission is not “following proper procedures and the flouting of the Commission’s internal policies“.  Among the former Commission staff who have reportedly left are “former Deputy Commissioner and the Chief Economist,” as well as “several other divisional managers, including the Chief Financial Officer.”

Among the union’s current demands on the minister to remedy the purportedly dire situation at the Commission are the following:

  • The reinstatement of two employees that have been unfairly suspended from work in a manner which is inconsistent with the policies of the Competition Commission.
  • The call for the minister to intervene to stop the acts of victimisation and abuse of power by managers at the CC.
  • Call on the minister to open the appointment of the new Deputy Commissioners.
  • Call on the minister to ensure that the correct recruitment processes and policies are followed in the appointment of senior managers.
  • Call on the minister to make the outcomes of his two investigations into corporate governance at the Competition Commission available to employees.
  • Call on the minister to respond to complaints lodged with him against the Competition Commissioner and management.

NEHAWU claims that it represents “over 70% of the employees of the Commission” has threatened to “explore our legal options including a possible withdrawal of our labour”.