In a milestone enlargement of the (now formerly) 19-member COMESA region, Tunisia and Somalia have acceded to the trade bloc at the 20th COMESA Summit on 19th July 2018, creating #COMESA21 – Africa’s largest free trade region.
Their application to join had been pending since 2016. Under the Treaty, the new members will be bound by the provisions of the Treaty and must deposit their formal instrument of acceptance of the terms of admission with the Secretary General, together with an instrument of accession pursuant to Articles 194 and 195 of the Treaty with regard to a State admitted to full membership. Says Primerio’s Andreas Stargard, “with the privilege of membership comes the obligation of agreeing to abide by the antitrust rules promulgated under the COMESA Treaty. This includes the Competition Commission’s procedural and substantive rules and notably its merger regulations. It remains to be seen how the still weakened bureaucratic structure of the Somali Republic will be able to implement the strictures of a working competition-law regime…”
Indeed, the CCC’s recent Notice No. 2/2018 provides that “the provisions of the COMESA Competition Regulations of 2004, and its accompanying rules, shall be enforceable in the territories of the Republic of Tunisia and the Federal Republic of Somalia with immediate effect.”
Personnel News 2018
In addition to gaining two new member states, COMESA also underwent personnel changes, adding an experienced antitrust practitioner, Zimbabwean Competition and Tariff Commission director, Ellen Ruparanganda, as one of the nine CCC commissioners, for a term of three years. Besides Ms. Ruparanganda, Francis Lebon (Seychelles), Ali Hamadou Ali Kako (Djibouti), Thembelihle Dube (Eswatini, formerly Swaziland), Danson Buya Mungatana (Kenya), Michael Teklu Beyene (Ethiopia), Charlotte Wezi Malonda (Malawi), Islam Tagelsir Ahmed Alhasan (Sudan), and Brian Muletambo Lingela (Zambia) were also sworn in.
Landlocked and Oil-Rich South Sudan Joins Free-Trade Zone
As South Sudan was officially admitted to the East African Community (EAC) as its sixth member in Arusha (Tanzania), on Wednesday, March 2, the beleaguered nation joined a free-trade zone that will allow it to benefit from more open labour movement, less restrictions on capital flows and other increased economic integration. The other member states are Tanzania, Kenya, Uganda, Burundi, and Rwanda. After integration with S. Sudan — the youngest nation on Earth — the region will have a population of an estimated 163 million.
John Oxenham, of Pr1merio Africa advisors, says: “South Sudan’s former institutional weaknesses were (apparently, despite the ongoing civil strife in the country) sufficiently remedied that the EAC governing body saw fit to grant the application for admission that had been pending since 2011. Basic governance principles must be met for EAC membership, and we are not even talking competition-law here…”
As the EAC charter provides, all members must demonstrate and strive to achieve “good governance including adherence to the principles of democracy, the rule of law, accountability, transparency, social justice, equal opportunities, gender equality, as well as the recognition, promotion and protection of human and peoples’ rights in accordance with the provisions of the African Charter on Human and Peoples’ Rights.” (EAC Treaty, Chapter 2 Article 6 (d)).
Setting aside civil-rights concerns or worries about political instability, the integration of an oil-rich nation may ultimately benefit its neighbouring fellow EAC members, such as Kenya and Uganda. It remains to be seen whether integrating a less-than-stable country into the EAC zone will harm the competition legislation the region enacted in 2006. As AAT author Elizabeth Sisendapointed out recently, the organisation “has been setting up the mechanisms for its enforcement to-date through capacity building and mobilizing resources. In 2010, the EAC subsequently enacted competition regulations to assist in implementing the Act. One of the main challenges that has been encountered in the EAC with regards to the implementation of competition law and policy has been the unique economic and market structure of the member states. The majority of the EAC member states are economies that are transitioning from state-regulation to liberalization.”
We note that S. Sudan’s northern neighbour, the Republic of [the] Sudan, is currently a COMESA member state and thereby subject to the COMESA competition-law regulations and related merger-notification regime. South Sudan has, since at least the 2012 talks in Uganda, likewise been in negotiations with the COMESA governing bodies to discuss accession to that free-trade zone.
6-member East African Community (EAC) to finalise competition law amendments
The EAC, a regional intergovernmental organisation comprising Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan, is said to be drafting amendments to its thus-far essentially dormant regional fair Competition Act (dating back to 2006, EAC Competition Act 2006, 49 sections) to address antitrust concerns in the region. The EAC’s legislative body is in the final stages of completing its work on the East African Community Competition (Amendment) Bill (2015).
In a 2010 paper, Alloys Mutabingwa (then Deputy Secretary General of the EAC Community Secretariat) writes:
As the EAC begins the implementation of the Common Market, one is pushed to wonder, which kind of competition do we currently have in the East African Community? Is it the kind of competition that constantly pushes companies to innovate and reduce prices? Does it increase the choice of products and services available to EAC consumers? Or, is it the type of competition that is defined by companies colluding to highjack the market? The answer lies somewhere in the middle but one thing is certain, with the intensification of competition in the EAC there will be frictions between companies across the region as they seek to gain advantage over their competitors.
In this short and worthwhile read, he stresses the importance of having a multi-national competition framework vs. a purely domestic network of independent enforcers. Mr. Mutabingwa uses the example of the merger case of East African Breweries and South African Breweries, in which the Kenyan and Tanzanian competition authorities were “allowed by law to handle national practices only.”
According to an October 2014 article, “statistics show that the EAC’s total intra-regional trade soared from $2 billion in 2005 to $5.8 billion in 2012, while the total intra-regional exports grew from $500 million to $3.2 billion in the period under review.” The piece quotes an EAC competition official as saying that the enforcement agency would be online by December 2014.
In addition to the EAC efforts, a report also states that the head of economic affairs of the Tanzanian Fair Competition Tribunal (FCT), Nzinyangwa Mchany, recently emphasised the importance of member-state level enforcement, such as that of the country’s FCT and FCC, “to increase efficiency in the production, distribution and supply of goods and services to Tanzanians,” especially in economies that were centrally planned until only a few decades ago, and which have had to struggle with the ill after-effects of unregulated trade liberalisation and privatisation of state-owned enterprises.
VFS is a worldwide outsourcing and technology services specialist for diplomatic missions and governments.
The firm has now drawn the potential ire of the Commission, as it is now apparently the only outlet for foreigners to apply for South African visas and work permits, as well as for South African citizens to obtain entry visas for multiple countries abroad.
The irony here that we at AAT perceive is that the monopoly position of VFS appears to be based on the new immigration regulations imposed by the ZA government itself (notably the Department of Home Affairs) earlier in 2014: According to a report, the company had recently opened the doors of its multiple offices across the country — “The Pretoria (Gauteng), Rustenburg (North West) and Kimberley (Northern Cape) centres were the first to open on Monday, 2 June. It is envisaged that the last office will be opened on 23 June.”
The investigation – to be confirmed by the Commission this week, as it potentially launches a full-on formal inquest – was purportedly initiated by a competitor complaint from company Visa Request, claiming damage to its competing business flowing from the governmentally-imposed dominant position of VFS’s (allegedly pricier) services…
Commission stays course on Sasol
In more ZA news, Competition Commissioner Tembinkosi Bonakele is staying the agency’s strong course on the excessive-pricing fine imposed on Sasol, which is said to be appealing its R543 fine that had been upheld by the country’s Competition Tribunal, and which Commissioner Bonakele thinks “should be bigger”…
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.”
Today, Bonakele is quoted as follows:
“These are different times. I can promise you this matter is not going to disappear. Sasol is out of touch if it believes it can win the matter on the basis of technical legal arguments. This issue has to be resolved either through competition law or through government policy.
The issue in this case is fundamental to the development of our economy. We are dealing with resources that should be available to promote that development. The government plays an important role in the country’s industrialisation, and I believe it will be very interested in the progress of this case.”
COMESA’s costly courthouse
While the COMESA organisation has had trouble in the virtual world this year, its real-world endavours appear to be prospering: Its shiny new courthouse, built to the tune of over $4 million (equivalent to only 8 merger filing fees), has opened its doors. The country’s Minister of Justice, Mohamed Bushara Dosa, last week handed over to the COMESA Secretariat-general the Khartoum-based court premises.
The court will notably hear antitrust and merger cases that are appealed from the organisation’s Competition Commission.