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$ 15 600 000) 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.

 

 

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Mauritius competition watchdog places mobile operators under scrutiny

Mauritius competition watchdog places mobile operators under scrutiny

Julie Tirtiaux writes about an investigation by the CCM into allegedly discriminatory mobile pricing policies by the two main mobile operators in the island nation of about 1.2 million.

On 27 August 2015, the Competition Commission of Mauritius (“CCM”) announced an investigation against two major mobile operators, Emtel and Orange. The CCM has identified similar concerns to those examined in other jurisdictions such as France and South Africa, related to the exclusionary effects of discriminatory pricing policy for calling services.

Price discrimination triggered the investigation

The CCM is concerned that the two major mobile telephony operators may be discriminating between tariffs for calls made between subscribers within the same network (“on-net calls”) and calls to subscribers from other competing networks (“off-net calls”). This raises the question as to why off-net calls are charged at higher rates when compared to on-net calls.

The table below sets out the respective call tariffs charged by Emtel, one of the respondents in the current CCM investigation.[1]

Call direction Per second tariff (Rs) Per Minute (Rs)
Emtel to Emtel Voice call 0.02 1.2
Emtel to Emtel Video call 0.02 1.2
Emtel to other mobile operators 0.06 3.6
Emtel to Fixed land line 0.0575 3.45
Emtel to Emtel Favourite Num 0.016 0.96

The CCM suspects that the higher prices for off-net calls may not be objectively justified by cost differentials. This potential discrimination could thus be “preventing, restricting or distorting competition in the local mobile telephony sector, which ultimately could deter or slow investment, innovation and growth in the sector”.[2] It is argued that such conduct raises a strategic barrier for new and small mobile operators to enter and expand within the mobile market, as rational consumers would likely be inclined to choose the operator which already has a large user base.

mauritius

In other words, this allegedly discriminatory pricing policy for calling services could lead to exclusionary conduct by the duopoly of Emtel and Orange and consequently to the infringement of Section 46(2) of the Mauritius Competition Act of 2007.[3] However, such an infringement will have to be proved by the CCM, as the presence of on-net/off-net price differentiation does not automatically raise competition concerns in and of itself. It has been argued that the existence of two equally large competitors is enough to observe a competitive outcome and thus the maximization of and consumer welfare.[4]  Put differently, it is not the number of players in a market which determines the competitive outcome but rather the intensity of competition between the existing players.

The analysis of the foreclosure effects of on-net/off-net price differentiation by the Autorité de la concurrence[5]

In December 2012, the Autorité de la concurrence fined the three main French mobile operators, i.e. France Télécom, Orange France and SFR a total of €183.1 million for supplying their subscribers with unlimited on-net offerings.[6]

According to the Autorité de la concurrence, “these offerings first of all artificially accentuated the “club” effect, that is, the propensity for close relatives to regroup under the same operator, by encouraging consumers to switch operators and join that of their relatives (…). Once the clubs were formed, these offerings “locked” consumers in durably with their operator by significantly raising the exit costs incurred by the subscribers of on net unlimited offerings as well as by their relatives who wish to subscribe to a new offering with a competing operator”.[7]

In addition, these offerings automatically favoured large operators over small operators (“network effect”). In other words, these offerings induced users to subscribe to the dominant incumbents at the expense of smaller independent operators who would undoubtedly have been faced with higher cost structures directly related to the higher off-net calls rates.

The regulation of the mobile sector in South Africa

Unlike the Mauritian telecom market which allows operators to freely set their prices, South Africa regulates call termination rates, which correspond to fees that mobile operators charge each other to carry calls between their networks, via the Independent Communications Authority of South Africa (“ICASA”). ICASA justified new regulations by saying that the rates had driven up the cost to communicate for consumers, making South Africa one of the most expensive places to use a mobile phone.[8]

 

On 29 September 2014, ICASA modified the asymmetric rates, first introduced in February 2014,[9] in order to ensure a level playing field between the mobile operators. The intended effect of these asymmetric rates is to ensure low off-net call rates for operators with low market power.[10]

 

In addition to the regulatory aspects in the hands of ICASA, in October 2013 Cell C lodged a complaint with the South African Competition Commission against MTN and Vodacom in relation to alleged differentiation between on-net/off-net prices. [11]

Conclusion

In conclusion, the efficient functioning of the crucial mobile sector is a delicate task for both regulating bodies and enforcement agencies. It will thus be interesting to see how this investigation progresses and what learnings the CCM is able to draw through the assessment of the on-net/off-net price differentiation by the two main mobile operators in Mauritius.

[1] See Emtel’s price plans presented on their website on 7 September 2015: https://www.emtel.com/price-plans

[2] See the media release of the CCM of 27 August 2015 opening of investigation on monopoly situation in relation to mobile telephony sector.

[3] Section 46(2) of the Mauritius Competition Act prohibits a monopoly situation held by one or several firms which “(a) has the object or effect of preventing, restricting or distorting competition; or (b) in any other way constitutes exploitation of the monopoly situation”.

[4] Frontier Economics “On-net/off-net differentials the potential for large networks to use on-net/off-net differentials or high M2M call, termination charges as a means of foreclosure” March 2004.

[5] That is to say the French Competition Authority.

[6] Decision of the Autorité de la concurrence of 13 December 2012, France Télécom, Orange France and SFR, case no 12-D-24. This decision has been appealed and is currently pending before the Paris Court of Appeal.

[7] Press release of the Autorité de la concurrence: http://www.autoritedelaconcurrence.fr/user/standard.php?id_rub=418&id_article=2014

[8] ICASA, 16 October 2012 Media Release https://www.icasa.org.za/AboutUs/ICASANews/tabid/630/post/consumers-benefitfrom-a-drop-in-the-actual-cost-of-prepaid-mobile-voice-call/Default.aspx INCASA said that “mobile prices are cheaper in over 30 African countries than they are in South Africa

[9] The asymmetric rates adopted by INCASA in February 2014 were declared unlawful and invalid by the High Court on 31 March 2014 as they were objectively irrational and unreasonable.

[10] It must be noted that these new asymmetric rates have been challenged and that the case is still pending. See the following article on ENSafrica: https://www.ensafrica.com/news/the-reformulation-of-call-termination-rates-in-South-Africa?Id=1414&STitle=TMT%20ENSight.

[11] This complaint is still being investigated by the Competition Commission.

Mobile phone provider loses antitrust appeal

malawi

 

 

Mobile phone provider loses antitrust appeal

Airtel Malawi Limited, a company incorporated under the Companies Act, engaged in the provisions of mobile phone and telecommunication services in Malawi has lost its appeal against the decision of the Competition and Fair Trading Commission regarding its application for authorisation of an exclusive distribution arrangement.

In a letter dated 28 May 2013, Airtel applied to the commission for the authorisation of an exclusive dealership agreement with its distributors in respect of the sale of its recharge vouchers and other products. This application is in line with section 44 of the Competition and Fair Trading Act Cap 48:09 of the Laws of Malawi.

Due to the fact that Airtel’s exclusive dealership agreement with its distributors contained a clause to ensure that the Distribution Sales Accountants are employed exclusively to undertake Airtel’s sales activities, the Commission refused its approval. The Commission provided its reasoning in a letter to Airtel dated 1st August 2013, specifically stating that the clause “would negatively affect competition in the distribution of mobile products particularly in rural areas.”

Airtel filed an appeal at the High Court Commercial Division against the Commssion’s order that required the company to remove or amend the clause in issue. Airtel submits that the Commission cannot reasonably expect it to appoint Distributor Sales Accountants who will be engaged in accounting for the sales of Airtel’s competitiors in the market.

Delivering his ruling on the 10th of February 2013, Justice Mtambo upheld the decision of the commission and found the justification for the rejection of Airtel’s application for the approval of distributorship agreement to be reasonable. Justice Mtambo went further and stated that, “it is after all the Appellant who is attempting to regulate the business affairs and conduct of its distributors who are independent businesspersons just because the Appellant has dominance on the market.”

 

The court also ruled that it was within the mandate of the Competition and Fair Trading Commission to require companies that use exclusive distribution arrangements in the distribution of their products or services to amend their standard agreements.

Tech antitrust news: disrupting M-Pesa mobile payment monopoly? cashless NFC mandatory? Dominance of 3 tech cos

Disruption & entry — mandatory cashlessness — and collective dominance

Perhaps they don’t realise it themselves, but the journalists at ITWeb Africa have written antitrust/competition law strories in three of their recent reports, covering the rapidly growing and lucrative tech world in Africa: their stories range (in antitrust terms) from collective dominance in Africa’s tech sphere, to a challenger’s new entry in mobile payments, to a mandatory government-backed mobile NFC system for Kenyan transit commuters that allegedly causes more consumer harm than benefit by going cashless and giving the spoils all to one monopolist.

We take each in turn.

Disruption to M-Pesa’s mobile payment crown?

It looks as though the M-Pesa crown of dominance may be taken through the competitive process (and without active intervention by the competition authority) after all:

Equity Bank is about to join Airtel’s challenge to the dominant position of Safaricom Limited’s M-Pesa service (on which AAT has written extensively before).  The magazine reports that an ultra-thin SIM card technology and the Kenyan bank have reached a pact that will allow them to compete with M-Pesa’s service, on top of existing user SIM cards.

Equity Bank is “determined to challenge” Safaricom’s M-Pesa mobile money service withe help of Taiwanese headquartered Taisys, which claims that the Communications Authority of Kenya “last month tentatively gave Equity Bank the go-ahead to use thin SIMs for one year.”  Equity is reported to be the “largest bank in East Africa with almost 9 million bank accounts.”

The new technology of a “stick-on” slim-SIM card allows the user “to execute mobile banking transactions, releasing the bank from the limitations of a telco-issued banking SIM.”  Safaricom had previously complained to the authority, arguing that PIN theft and denial of service are real risks that counsel against use of new SIMs.

In other related news, second M-Pesa challenger Airtel has secured a contract with the Kenyan Revenue Service that allows Kenyan citizens to pay their taxes using Airtel’s mobile money service.
The cashless economy: is the imminent Kenyan My1963 NFC payment system anti-competitive?

In this story about Nairobi’s public transport system’s much-derided effort to go entirely cashless – dubbed “My1963” -, the magazine reports that the Consumer Federation of Kenya (Cofek) claims that the digital payment system benefits “all except the consumer”.  In Cofek’s statement (“7 reasons why Cofek will fight to stop the #My1963 PSV’s cashless payment fraud“), the federation makes seven distinct arguments against the legality of the scheme.  Two relevant criticisms from the competition-law perspective are the following:

  1. no competitive bidding process: the body alleges that, due to politicians’ ties to banking and other interests, the correct process for entertaining competitive bids was not followed in accordance with proper public procurement rules.
  2. supra-competitive (monopolistic) pricing: an “exorbitant” 3% commission is being charged by the service provider of the system, as agreed between the Kenyan National Transport Safety Authority and the banks.

Cofek also urges the Competition Authority of Kenya (CAK) to “investigate the #My1963 and entire cashless payment system with a view to finding it uncompetitive, predatory and anti-consumer and market interest” [sic].

Viber, WhatsApp, YouTube: dominant in Africa?

In its report on alleged dominance by three tech companies, the paper begins by pointing out the (some more and some less) startling statistics:

WhatsApp is the leading third-party messaging application, Viber has overtaken Skype as the leading VoIP service on several networks and YouTube is the top video streaming app. … on Africa’s mobile networks WhatsApp accounts for 7% of total traffic, while Viber has overtaken Skype as a VoIP service. Streaming video accounts for just over 6% of downstream traffic – significantly lower than North America and Europe where it accounts for more than 30%.

WAP Browsing has seen a significant decline in traffic share thanks to increased adoption of smartphones throughout the region [–Ed.: on the latter point, the journal also has an interesting separate piece, discussing the new era of WiFi connectivity in Africa].

Being called “dominant” may be a badge of honor to the sales staff, but it is a dangerous moniker when viewed by the competition-law enforcers through their monopolisation lens.  WhatsApp, Viber and YouTube (whose parent is, of course, the already dominant Google) may therefore have to begin thinking about treading more lightly in terms of their dealings with competitors on the African continent, lest they wish to prompt governmental scrutiny from the likes of the South African Competition Commission, the Kenyan Competition Authority, or COMESA’s CCC.

Antitrust enforcer subjects mobile payment operator to central bank oversight

kenya

CAK settles with Safaricom, requires non-exclusivity of outlets and forces Central Bank oversight of payment operator

The mobile payments sphere, particularly growing in African countries as we reported previously, is abuzz with news that a competition regulator has now expressly subjected Safaricom (a prominent Kenyan operator) to oversight by the country’s Central Banking authority.  It also cements the (already preemptively and unilaterally undertaken) commitment by M-Pesa to remove the exclusivity provision that previously requred its 85 thousand network members to operate exclusively on the Safaricom mobile-payment network.

The official Kenyan Gazette notice 6856 contains the full, if short, language of the agreement:

IT IS notified for public information that in exercise of the powers conferred by section 38 of the Competition Act, the Competition Authority of Kenya, after an investigation into an alleged infringement of Part III of the prohibitions set out in the Act by Safaricom Limited and its Mobile Money transfer agents, entered into a settlement with Safaricom Limited on the following terms-

(a) that all restrictive clauses in the agreements between Safaricom Limited and its Mobile Money Transfer Agents be expunged immediately, but in any event not later than 18th July, 2014;

(b) that the Mobile Money Agents be at liberty to transact the Mobile Money Transfer Businesses of any other mobile money transfer service providers;

(c) that oversight by Safaricom Limited be thereafter limited to its business with the Agentsl and

(d) that each Mobile Money Service Provider be responsible for ensuring compliance with Central Bank of Kenya Regulations.
Dated the 22nd September, 2014.
WANG’OMBE KARIUKI. Director-General.

MobileWorld Live has reported the following on the settlement between the recently rather active CAK and Safaricom:

A settlement between the Competition Authority of Kenya and Safaricom leaves M-Pesa agents free to work with rival mobile money providers.

An announcement, made in the Kenya Gazette, follows a CAK investigation into an alleged infringement by the operator under the country’s Competition Act.

Back in July, the watchdog said all restrictive clauses in agreements between Safaricom and its agents must be expunged no later than 18 July (actually the operator pre-emptively removed exclusivity ahead of the CAK’s decision).

As we noted in our prior reporting on Safaricom’s troubles with the Kenyan Competition Authority (CAK):

Safaricom offers a product named “M-Pesa” to its customers in Kenya and Tanzania.  M-Pesa is a mobile-phone based money transfer and micro-financing service, launched in 2007 for Safaricom and Vodacom, the two largest mobile network operators in Kenya and Tanzania. The service enables its users to deposit and withdraw money, transfer money to other users and non-users, pay bills, purchase airtime and transfer money between the service and, in Kenya, a bank account.  Users of M-Pesa are charged a service fee for sending and withdrawing money.

By 2010, M-Pesa became the most successful mobile-phone-based financial service in the developing world.

In light of the imminent launch of the Airtel product, Airtel has lodged a complaint with the Competition Authority of Kenya on the basis that Safaricom currently holds 78% of the voice market in Kenya, 96% of the short message service market and 74% of the mobile data market.  In addition, Airtel is of the view that these market shares make it impossible for Kenyan consumers to have a choice in operators. By 2012, 17 million M-Pesa accounts were registered in Kenya alone, which has a population of over 40 million.

There are a total of approximately 31 million mobile-phone subscriptions in Kenya in 2013, of which Safaricom accounted for 68%, Airtel 17%, Essar Group’s “yuMobile” 9% and Telkom Kenya Limited 7%.

 

Kenya competition landscape active

kenya

Zuku pay-TV launched complaint against DStv in Kenya

As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news.  Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.

In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.

The CAK has not indicated whether it is investigating the complaint yet.

Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy

In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.

To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.

The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.

Airtel Kenya requests probe of Safaricom for abuse of dominance in mobile money transfer market

kenya

Mobile payment wars heating up in Kenya

Airtel Networks Kenya Limited (“Airtel”) has joined forces with Kenya-based Equity Bank to launch a similar mobile banking product, M-KESHO in July 2014 to the established product provided by Safaricom Limited (“Safaricom”).

Safaricom offers a product named “M-Pesa” to its customers in Kenya and Tanzania.  M-Pesa is a mobile-phone based money transfer and micro-financing service, launched in 2007 for Safaricom and Vodacom, the two largest mobile network operators in Kenya and Tanzania. The service enables its users to deposit and withdraw money, transfer money to other users and non-users, pay bills, purchase airtime and transfer money between the service and, in Kenya, a bank account.  Users of M-Pesa are charged a service fee for sending and withdrawing money.

By 2010, M-Pesa became the most successful mobile-phone-based financial service in the developing world.

In light of the imminent launch of the Airtel product, Airtel has lodged a complaint with the Competition Authority of Kenya on the basis that Safaricom currently holds 78% of the voice market in Kenya, 96% of the short message service market and 74% of the mobile data market.  In addition, Airtel is of the view that these market shares make it impossible for Kenyan consumers to have a choice in operators. By 2012, 17 million M-Pesa accounts were registered in Kenya alone, which has a population of over 40 million.

There are a total of approximately 31 million mobile-phone subscriptions in Kenya in 2013, of which Safaricom accounted for 68%, Airtel 17%, Essar Group’s “yuMobile” 9% and Telkom Kenya Limited 7%.

However, Safaricom has indicated that cash transfers still account for 98% of the total transactions in Kenya and therefore it is impossible for any mobile-money entity to be a dominant player in the payments market.

The Competition Authority of Kenya has identified telecommunications as one of several markets being scrutinised by the Competition Authority for possible abuses of dominance.  This probe is expected to reach completion by July 2014.

In terms of Kenyan law, if a company controls at least half of the provision of trade of services or goods, the company will be considered to be dominant.  In Kenya, a conviction of abuse of dominance can lead to a five-year prison term and a USD 115 000 penalty

Kenya is quite clearly pushing on in relation to significant cases in sectors which affect the majority of the population, as discussed in the overview of maturing African competition regimes published last week.  However, it is noteworthy that in April 2014, Kenya’s telecommunications regulator granted approval for Safaricom and Airtel to buy Essar Group’s “yuMobile” and it is considering awarding licenses for at least three more telecommunications companies.  Orange SA has indicated that its operations may exit the Kenyan market, where it owns 70 percent of Telkom Kenya (which in turn accounts for 7% of the mobile phone subscriptions in Kenya).

Battle of the Agencies: ICASA vs. CompCom

In dispute over competition-law & merger enforcement in South Africa, Communications agency raises its voice

Jurisdictionally crossed wires and agency disputes in antitrust are no longer the exclusive playground of the FCC and DOJ, of COMESA’s CCC and the Kenyan CAK, or DOJ and FTC.  They have now reached the shores of the Republic of South Africa as well, in the form of the Independent Communication Authority of South Africa (“ICASA”) challenging the country’s Competition Commission’s de facto exclusive right to review merger deals.

Factual Background

ICASA, created in July 2000 by the Independent Communication Authority of South Africa Amendment Act is reported to be in a jurisdictional dispute with the country’s traditional merger watchdog, the South African Competition Commission (“SACC”).  ICASA wants the power to take a closer look at relevant deals such as MTN and Telkom’s network sharing and the announced Vodacom / Neotel deal, on which AAT has reported previously (see Telecom adversaries to remain “principled” in their competing bids for 4G spectrum, Internet & mobile operators at war: merge, acquire, complain, and our prior reports mentioning ICASA here).

ICASA’s specialized “Markets & Competition” division is tasked to deal with promoting “competition, innovation and investment in respect of services and facilities provided in the electronic communications, broadcasting and postal sectors, whilst ensuring account cultural diversity, especially regarding broadcasting content.”  The authority as a whole is “mandated to create competition in the telecommunications, broadcasting and the postal industries. In turn, competition brings about affordable prices for goods and services rendered and provides value for money to consumers.”

Legal Standard – “Public Interest”?

In recent reports by the New Telegraph and HumanIPO, ICASA is said to have voiced discontent with the Competition Commission’s failure to send proposed communications-related M&A deals to the authority.

That said, it is unclear to AAT precisely which legal standard ICASA wishes to impose on any potential future merger review it might undertake.  In the U.S., notably, the FCC’s standard of review is a more flexible public-interest standard, vs. the “classic” antitrust agencies’ (FTC/DOJ) “substantial lessening of competition” standard.

Regardless of (at least our) uncertainty of the legal standard to be applied, ICASA is quoted as saying that deals cleared by the SACC may still require separate approval from the Communications authority, irrespective of any competition-law based decision reached by the Competition Commission:

“While consolidation is a global phenomenon and anticipated in the market, all such deals may require regulatory approval.”

“The authority is aware of what is currently before the Competition Commission; and in accordance with our institutional arrangements with the Competition Commission we will collaborate, however, that in no way negates the regulatory approvals required from ICASA.”

In addition to the previous lack of coordination between the Commission and ICASA on merger reviews, there has also been criticism of the country’s limited allocation of more frequency spectrum to wireless operators.

south_africa

 

Television antitrust saga continues, MultiChoice in the cross-hairs again

Interest group seeks antitrust investigation in free-to-air channels

According to a press release by the Independent Communications Authority of South Africa (ICASA), the organisation proposed last Friday a Competition Commission investigation into purportedly horizontal agreements between the South African Broadcasting Corporation (SABC) and MultiChoice.  “This follows an agreement entered into between the two parties in July 2013 whereby the SABC would have to provide a 24-hour news channel on MultiChoice’s DSTV platform,” spokesman Paseka Maleka said.

south_africa

MultiChoice in the Cross-Hairs

AAT had reported previously on MultiChoice’s competition woes, including its Botswana Pay-TV and Kenya sports broadcasting headaches, as well as the original post on the S.A. sports-TV rights complaint by rival On Digital Media (“ODM”), which resulted in a referral to ICASA.

The South African publication The Citizen also reported the most recent ICASA attack, noting the alleged “restrictive horizontal practices involved collusion and certain competitor agreements and practices, while restrictive vertical practices involved certain customer or supplier arrangements.”

The full text of the ICASA statement follows:

Johannesburg – The Independent Communications Authority of South Africa has recently requested the Competition Commission to investigate a possible restrictive horizontal practice between the South African Broadcasting Corporation (SABC) and MultiChoice. This follows an agreement entered into between the two parties in July 2013 whereby the SABC would have to provide a 24-hour news channel on MultiChoice’ DSTV platform.

News reports at the time indicated that the agreement also contained an obligation relating to set-top-box control in which the SABC is alleged to have agreed that it will transmit its free-to-air channels without encryption.

In the context of the ongoing public dispute between e.tv and MultiChoice over whether free-to-air TV services should utilise set-top-box control, the question arises as to whether the agreement between the SABC and MultiChoice, as it affects the issue of set-top-box control, may constitute a form of restrictive horizontal practice in the television market.

ICASA has requested both the SABC and MultiChoice to provide a copy of the agreement but both parties have failed to honour that request. This failure has made it difficult for the Authority to verify the claim put forward by MultiChoice that `any contractual obligation upon the SABC to continue to transmit its free-to-air channels in the clear (i.e. without encryption) is an incident of the distribution arrangements agreed upon by the SABC and MultiChoice. Such obligation, as indicated forms part of an agreement between parties in a vertical relationship and is not, as alleged, a horizontal restrictive practice’.

As the issue of restrictive horizontal practices falls within the scope of Section 4 of the Competition Act, the Authority has requested that the Competition Commission open an investigation into this matter.

Telecom adversaries to remain “principled” in their competing bids for 4G spectrum

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The telecoms are at it again, and MTN and Vodacom find themselves close together once more.  Last October, we reported on their being jointly targeted by competitor Cell C for predatory “on-net” pricing.  Today, the two top market players are both eyeing additional spectrum for high-speed LTE/4G wireless service — an asset that can potentially be obtained much more swiftly by acquiring an existing firm owning such spectrum, rather than ex ante licensing or bidding at public auction for frequency band… At the moment, Vodacom is attempting a 100% share acquisition of smaller rival Neotel — a deal that might include valuable frequency.

In a South African Tech Central report, MTN’s group CEO is quoted as saying that he would refrain from “automatically” challenging any such acquisition by his main rival:

Asked if MTN would object to a deal between Vodacom and Neotel at the Competition Commission, MTN Group CEO Sifiso Dabengwa said that the operator would not automatically do so. “The issue here is you can’t take a position because of where you are [in the market],” he said. “It has to be principled, no matter which side you’re on.”

It does not take a clairvoyant to see what is behind MTN’s self-imposed restraint: equal hunger for additional spectrum – and acquisitions – which it does not want to stifle by raising rash arguments of anti-competitive effects of the Vodacom/Neotel deal…