Second domino falls in SA liner-shipping cartel investigation

The M/V Thalatta, a WWL High Efficiency RoRo vessel

The M/V Thalatta, a WWL High Efficiency RoRo vessel (image (c) WWL)

WWL settles collusion allegations in South Africa for US $7,500,000

As we reported on 2 July 2015 (see “Shipping Cartel Update: NYK settles in South Africa“), the South African competition-law enforcers have had success in bringing members of the acknowledged international liner-shipping cartel to the settlement table, extracting R104 million (approximately $8,600,000) from NYK.

Now, Wallenius Wilhelmsen Logistics (“WWL”) has become the second investigated party to enter into a settlement agreement with the South African Competition Commission (“SACC”) — presumptively for a decent discount off the maximum possible fine, as outlined in greater detail below.

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On 30 July 2015, it was announced that WWL settled the SACC’s charges stemming from the investigation into the seven shipping companies for fixing prices, allocating markets and collusive tendering.

SACC found that WWL colluded on 11 tenders with its competitors in the transportation of motor vehicles by sea issued by several automotive manufacturers to and from South Africa.

WWL — a 50/50 Swedish/Norwegian liner-shipping conglomerate, which has had a representative office in South Africa since 2013 and previously had “a major Turn Key Project for a copper mine in Zambia, … creating a sub-Saharan hub for moving Breakbulk into and out of Africa” — settled for an amount of R95 million.  As Andreas Stargard, an attorney with the Africa advisory boutique Pr1merio, notes:

“This amount — in today’s dollar terms only about $7,500,000 — is a mere 0.25% of WWL’s global turnover of about $2.9 billion.  In other words, the company got away with only a tiny fraction [namely 2.5%] of the potential maximum fine, which under South African law would have been capped at $290 million or 10% of total group revenue.”

The SACC found that NYK colluded on 14 tenders with its competitors for the transportation of motor vehicles by sea issued by several automotive manufacturers to and from South Africa, including BMW, Toyota Motor Corporation, Nissan, and Honda among others.

The agency filed the WWL settlement agreement with the South African Competition Tribunal on 30 July 2015 for confirmation as an order of the Tribunal.

WWL’s Africa Ties

What is of particular note in the WWL matter is the company’s business commitment to the African continent.  As Mr. Stargard points out, WWL recently published a document entitled, “West Africa – The frontier of opportunity?” in which it states:

The outlook for Africa has long been seen as one of great promise, but with major challenges attached. It certainly is a place of great dimensions and great opportunities, but with immense development needs and complexities to be tackled. According to African Economic Outlook, a recent report published jointly by the OECD, the African Development Bank and the UN Development Program, Africa’s economic growth will gain momentum and reach 4.5 per cent in 2015 and 5 per cent in 2016.  

The world’s attention to Africa has largely been directed towards West Africa in the last few years, as some of the fastest growing economies were to be found there, as well as some of the world’s richest resource bases from oil to rare earth minerals. As of late, the shine has come off a little bit, with West African economies struggling with lower oil income, weakening currencies as well as a lack of economical and societal reform. The Ebola epidemic on top of this effectively served to slow the West African growth somewhat. The region is nevertheless expected to stage a recovery from the Ebola epidemic with 5 per cent growth in 2015.

West African growth is largely driven by the development in Nigeria, Africa’s most populous country and largest economy. Despite the large oil revenue dependency (which naturally is hurting from the recent decline in oil prices), the country has started diversifying its economic base. In the automotive industry, several OEMs have opened assembly plants for complete knock-downs, boosted by the increased import tax for finished vehicles. The slow process towards building more advanced manufacturing capabilities continues, but still remains some way off. 

Other economies in the region are smaller and even more dependent on resource exports. A few have been seeing quite positive development, like Ghana, but we still find some of Africa’s poorest countries in this region, highlighting the large contrasts to be found there. 

Trade patterns for vehicles and heavy equipment are, not surprisingly, dominated by imports, with Europe and Asia being the largest regional trade partners. 

In 2014, the single largest country exporting vehicles and heavy equipment to West Africa was the US followed by China, Japan and Germany. This illustrates the diverse geographical trade interests in the region. Trade has been developing strongly after the crisis, but has weakened over the past couple of years.

Long term, given its population and resource base, West Africa remains sure to be on everyone’s target list when it comes to capturing African opportunities.

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The Gambian take on the benefits of market studies

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The Gambian Competition Authority’s commitment to investigating all prohibited practices in markets of any size

Shortly after the renaming of The Gambia Competition Commission to include consumer protection issues earlier this year, the Gambian Minister of Trade, Integration and Employment, Abdou Kolley, endorsed the ability of The Gambia Competition and Consumer Protection Commission (“GCCPC”) to continue pursuing any evidence of cartels, abuses of dominance and other illegal anti-competitive activities in any sector of the economy, as mandated by the the Competition Act 2007.

 

Minister Kolley

In its Strategic Plan over the next 3 years, the GCCPC indicates that it purposefully did not identify any priority sectors, to allow it to commit to investigating prohibited practices regardless of the market or its size. The Minister endorsed this approach given the need for independent agencies like the GCCPC to ensure that the competition playing field is leveled, that barriers to entry are low and that “the rules of the game” are reasonable. The Minister continued that simply having competition regime cannot produce or ensure competition in the market unless this is facilitated by government policies and enforcement.

Sectoral Market Inquiries: As in South Africa, whose Competition Commission has launched its first-ever market inquiry into the state of competition in the healthcare sector in terms of the Competition Amendment Act of 2009, the GCCPC is also empowered to launch “market studies” under section 15(k) of the Gambian Competition Act. A market study enables the GCCPC to consider both policies and enforcement simultaneously, thereby promoting competition in the economy, according to the Minister. The Minister explained that the aim of the market study was to assess competition in a particular area and recommend ways of improving it to the benefit of the economy and consumers in general.

As noted in our prior reporting, the Minister spoke at the opening of a workshop on the “Tourism Market Study” and to bring the concept of competition law closer to home, he placed emphasis on the increasing awareness about competition law within the tourism fraternity, forums such as the workshop will contribute substantially to the spread of competition culture and improving levels of compliance of the Competition Act, which would be beneficial both for the economy as well as individual businesses.

Gambian competition enforcer discusses tourism market inquiry

Gambia in the antitrust headlines twice in past week

7 days ago, it made news because of its changed name and dawn of a broader enforcement agenda, now including consumer protection matters.  Today, we are covering meeting by Gambia Competition and Consumer Protection Commission (GCCPC) with tourism industry stakeholders, as reported by AllAfrica.

Abdou Kolley, Minister of Trade and Employment, gave a Tuesday speech addressing his competition agency’s tourism market study, undertaken according to section 15(k) of the Competition Act, attempting to garner support for the benefits of free-market competition.  “Competition does not emerge on its own”, noting that the GCCPC’s enforcement and oversight activities were necessary to lower entry barriers and assure the absence of illegal price-fixing and other illicit conduct.

“The GCCPC is mandated by the competition Act 2007 to pursue any evidence of cartels, abuses of dominance and other illegal anti-competitive activities in any sector of the economy and I am confident that they will continue to do so.”

Minister Kolley

The Director General of the Gambia Tourism Board, Benjamin Robert, was quoted as agreeing with the minister, saying that the GCCPC’s report was “timely” and noted that the domestic tourism industry possessed certain characteristics of dominance in some sectors, with over 50% market share by some market players.