Nigeria Competition Law – One More Signature Required

After numerous calls from various stakeholders both locally and internationally, Nigeria seems to be on the verge of finally adopting its long-awaited Federal Competition and Consumer Protection Bill (the Bill) which will introduce competition law in the country.

Moves to enact competition law had started in 2000 and several amendments to the initial proposal had been unsuccessfully presented to the Senate. The subsequent bills had either stalled at first reading stage, or disappeared from the legislative process. However, the Bill received its initial approval earlier in June this year and after being passed into law by the Senate, the Bill now faces the final hurdle of being assented by the President, by which it will become law. This is expected to be a mere formality.

AAT have closely monitored the development of the Bill from its infancy stages and although it has been in the making for some time, the introduction of competition law in Nigeria will be welcomed by most. For additional insights into the Bill, please see the following articles (here and here).

In summary, the Bill. once it comes into force, will replace the Consumer Protection Act and to create a new Federal Competition and Consumer Protection Commission and Tribunal to enforce the Federal Competition and Consumer Protection Act.

The Bill has largely followed the model of other African countries who have successfully implemented antitrust and consumer protection enforcement and seeks to address all areas of competition such as price fixing, market allocation, collusive tendering and abuse of dominance.  In addition hereto, the Bill would also seek to ensure and enhance product safety and consumer protection within Nigeria.

Notably, in line with the approach recently adopted in South Africa, the Bill includes criminal sanctions for individuals engaging in anticompetitive practices.  In this regard, see here for a detailed assessment from AAT guest author Osayomwanbor Bob Enofe.

[The AAT editors thank Charl van Merwe for his assistance with this AAT update]

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ENFORCEMENT ALERT: MINIMUM RESALE PRICE MAINTENANCE – SOUTH AFRICA

The AAT Editors thank Charl van der Merwe for his contribution.

The Competition Tribunal of South Africa (Tribunal) on 26 October 2017 confirmed a consent order filed by the South African Competition Commission (SACC) in terms of which SBS Household Appliances t/a SMEG (Pty) Ltd (SMEG) admitted to contravening Section 5(2) of the South African Competition Act 89 of 1998 (Competition Act).

Section 5(2) of the Competition Act contained a per se prohibition of Minimum Resale Price Maintenance (MRPM), which means that firms operating in South Africa may not set minimum prices at which its downstream customers/retailers are obliged to sell its products.

According to the Tribunal’s order, one of SMEG’s customers lodged a complaint with the SACC in which it was alleged that SMEG refused to supply them with product because they failed to resell a certain product at a price above the minimum recommend price set by SMEG.

The SACC conceded that the price list which SMEG circulated to its retailers had the words “recommended price” appearing next to it – as required under South African competition law. However, the SACC found that in practice when the complainants continued to sell the specific product below the ‘recommended price’ (after SMEG demanding adherence to the ‘recommended price’), SMEG terminated supply of all its product to the complainants. This was done after SMEG received a complaint from one of its other retailers that the complainants had sold the specific product below the ‘recommended price’.

As a mitigating factor, the SACC found this to be an isolated incident, which was not implemented throughout SMEG’s operations. In this regard, the SACC’s investigation into the matter revealed that most of the retailers of SMEG’s products do not necessarily sell at the recommended price and that it was in fact SMEG’s practice to “recommend retail prices, but those were not enforced.”

In light of this mitigating factor, SMEG was only fined R 100 000 (roughly $7000) and agreed to implement a number of behavioural remedies – which includes a commitment to continue to supply the complainants with the respective products.

With regards to the calculation of the penalty, despite some deliberation as to the relevant turnover to be utilised for purposes of calculating the administrative penalty, the Tribunal ultimately fined SMEG based the affected turnover, as “this is a case specific issue” (Retailer specific).

Most notably, the Tribunal elected to move away from its standard procedures in relation to consent orders (not to give any reasons or explanation for its decision) in order to specifically raise awareness on the issue of MRPM in South Africa and deal with the “nature and severity of minimum resale price maintenance” and to “enhance the awareness of the fact that minimum resale price maintenance is prohibited per se in South Africa”.

The SACC in its consent agreement clearly stated that although other jurisdictions such as the US are now treating MRPM as a rule of reason rather than a per se contravention, it remains a per se contravention in terms of the Competition Act and specifically noted that there is no intention to change the Competition Act in relation to the per se nature of MRPM.

The Tribunal also used the opportunity to caution firms against adopting American (or other) antitrust practices in South Africa. In this regard the Tribunal held that “[T]he notion that other jurisdictions may be revisiting their stance on minimum resale price maintenance cannot be construed as a mitigating factor in the matter at hand.”

Finally, the Tribunal reaffirmed its stance on the serious nature of MRPM as a competition offence with reference to the its previous decision on the issue in the case of Competition Commission vs Federal Mogul Aftermarket Southern Africa (Pty) Ltd and Other (08/CR/Feb01) and used the case at hand as an illustration of the detrimental effects of minimum resale price maintenance on customers.

South Africa: Abuse of Dominance Investigations– Out with the Old, In with the New

The South African Competition Commission (SACC) recently announced that it would withdraw its complaint of abuse of dominance levelled against two of the four pharmaceutical companies who had allegedly engaged in excessive pricing in relation to certain cancer medications in South Africa.

The companies who were implicated in the SACC’s investigation were Roche and Genentech, Pfizer, Equity and Aspen.

The SACC indicated that it had withdrawn its complaint in respect of Aspen and Equity as the relevant products only generated a small portion of revenue in South Africa or in the case of Equity, the relevant product is not registered in South Africa and was only imported once into South Africa from Germany (which was the basis for the high price charged in South Africa). The complaint against Roche and Pfizer will, according to the SACC, continue.

In the same week, the SACC announced that it has launched an abuse of dominance investigation against Vodacom for engaging in exclusionary conduct. This investigation by the SACC is somewhat puzzling as it appears from the SACC’s media release that the reason why Vodacom is being investigated is on the basis that Vodacom had won a tender issued by the National Treasury to become the sole provider of mobile telecommunication services to the government.

The SACC alleges that previously, government departments could purchase mobile telecommunication services from any mobile network operator, but following the award of the tender to Vodacom, other departments, including state owned entities and municipalities, will be incentivised to adopt new contracts with Vodacom. In other words, Vodacom would either be precluding government departments or inducing them not to deal with Vodacom’s competitors in contravention of Section 8 of the Competition Act.

In order to sustain an exclusionary conduct complaint, it must be demonstrated that the alleged conduct was in fact anti-competitive and cannot be outweighed by any pro-competitive or other efficiency justifications.

Importantly, the SACC has not indicated that the actual tender process in any way distorted a competitive bid being submitted by Vodacom.

Accordingly, by being awarded the tender, particularly a public tender issued by the National Treasury, one would have anticipated that this would be indicative that Vodacom’s bid was the most competitive offering – why else sign the agreement in the first place. It could hardly be the case that the National Treasury was ‘forced’ into accepting Vodacom’s terms and if there was an irregularity with the tender process, then why lodge a complaint with the Competition Authorities. This would be a public procurement issue.

Accordingly, the message which seems to be imparted from the SACC’s decision to investigate Vodacom is that dominant firms should be particularly cautious about tendering for a particular bid – they may just win.

Although the investigation has only recently been announced by the SACC, Vodacom’s share price dropped 8% following news of the investigation. Regardless, of whether the complaint levelled against Vodacom has any merit, Vodacom is already paying a reputational price which in today’s day and age, can be significantly costly.

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.

 

 

South African Annual Competition Conference 2017: Law versus Policy – A “watch this space” moment

During the final week of August 2017, a number of prominent antitrust practitioners, economists, academics and politicians gathered in Johannesburg for the 11th Annual Competition Law, Economics & Policy Conference (Conference).

The Conference attracted a variety of presenters, both local and international, to grapple and stimulate debate around a number of highly topical issues including ‘big data’, the use of algorithms and the development and success of tech mammoths such as Google and Uber.

South African politicians also took to the stage, including both the Minister of Economic Development, Mr Ebrahim Patel, and the South African Deputy President, Mr Cyril Ramaphosa.

The key message imparted by these two prominent politicians is that more needs to be done to tackle “high concentrations” within the South African economy. A message which has become somewhat of a rhetoric from politicians of late.

Minister Patel again emphasised that legislative changes will soon be brought into force which will assist the competition authorities in de-concentrating the economy and prosecuting alleged abuse of dominance cases in South Africa. It not yet clear whether Minister Patel intends introducing the “complex monopoly” provisions (which have already been passed by the legislature in 2009 but have not yet been brought into force) overnight in a similar manner as the criminal liability provisions were brought into effect or whether there are additional legislative amendments on its way which will provide the Competition Agencies with greater powers to “break up dominant firms”.

The Deputy President reaffirmed Minister Patel’s sentiment and stated that “the way the economy was structured in the past is a problem, which must be rectified through policy” and further added that “competition policy in South Africa cannot be limited merely to the promotion of market efficiency. It must be an instrument to effect fundamental economic and social change” (Our emphasis). Mr Ramaphosa did not, however, proffer any substantive recommendations on how best this should be achieved.

Both Minister Patel as well as Deputy President Ramaphosa spoke with high regard of the efforts of US president Theodore Roosevelt in deconcentrating the US economy decades ago through the so called “no-fault divorce” in terms of which US antitrust regulators could break up dominant companies in a sector whose structure they deemed anticompetitive. The Commissioner of the South African Competition Commission, Tembinkosi Bonakele further told a forum at the Gordon Institute of Business Science (GIBS) that the proposed amendments currently before Cabinet, included granting the Commission the power to apply measures to address concentrations and not to merely make recommendations once evidence of market concentration had been found.

Whatever proposals are ultimately brought to the table to tackle high levels of concentrations would need to take into account the fact that most companies achieve their dominance through efficiencies, innovation and risk taking in the first place which in turn has a positive impact on the economy.

Arguably, effective utilisation of state resources, which is often hampered by corruption and poor administration are far more detrimental to the economy and welfare of South Africans as a whole. South Africa Airways (SAA) is a case at hand. Despite having been found to have engaged in abuse of dominance practices (which led to both the imposition of an administrative penalty and civil follow-on damages). SAA’s current lack of efficiency does not stem from its dominance in the market, but is rather a result of poor leadership and administrative capabilities.

Without any concrete proposals or draft legislative provisions on the table for public comment as of yet, a key issue remains whether the envisaged proposals currently being considered will materially address the socio-economic challenges which South Africa faces and whether the resources dedicated to this cause could be better utilised elsewhere.

Moving to private enforcement, a key issue discussed during the Conference is the importance of civil damages (and collective redress) and its role within the sphere of competition law in South Africa. In this regard, Oxenham, Currie and Van der Merwe’s paper titled “Follow On Damages for Anticompetitive Conduct – A Need for Legislative Intervention?” is particularly enlightening.

In their Paper, the authors explore not only the framework in which civil follow on damages claims in South Africa should be assessed, but also explore some of the key practical issues which plaintiffs, defendants and the Courts are likely to grapple with in future cases. In particular, the Paper highlights key challenges such as: joint and several liability; the apportionment of damages between defendants; prescription and the timing of instituting complaints; the availability of indirect purchaser complaints; and access to information which will invariably shape the strategy and efficiency of a plaintiff’s damages case.

Furthermore, with follow on damages claims and class action litigation a novel but very real feature of South African law, perhaps now is the time that the South African policy makers and legislature should give more thought to providing guidance on key aspects relating to follow on civil redress.

Alleviating the challenges which plaintiffs are likely to face in instituting a damages claim may go further in achieving the very goals which Minister Patel and Deputy President Ramaphosa seek to achieve. The difficulty for the legislature, however, will be in finding an appropriate balance between the various competing interests – such as ensuring that any reform in relation to follow on redress does not deter or prejudice the Competition Commission leniency policy nor deter respondents from seeking to conclude expeditious settlements with the Commission.

Finally, ensuring substantive and inclusive public debate on the proposed policy reforms may go a long way in ensuring that whatever legislative intervention is pursued, the authorities will not be hamstrung by challenges to the legality of the legislative provisions as has been the case with previous amendments to the Competition Act.

 

 

 

Kenya Corporate Leniency Policy: Immunity for both Administrative and Criminal Liability on the Table

By Michael-James Currie

The Competition Authority of Kenya (CAK) has finalised its Leniency Policy Guidelines (Guidelines) as published in the Government Gazette in May 2017. This follows amendments to the Kenyan Competition Ac which now caters for the imposition of a maximum administrative penalty of 10% of a respondent’s turnover if found to have engaged in cartel conduct.

Unlike its South African counter-part, the CAK has sought to provide immunity to whistle-blowers who are “first through the door” from both criminal and administrative liability. A key proviso in respect of obtaining immunity from criminal liability, however, is that the Director of Public Prosecution must concur with the CAK.

The South African Competition Commission’s Corporate Leniency Policy only offers immunity in respect of administrative penalties. Accordingly, directors who caused or knowingly acquiesced in cartel conduct may be criminally prosecuted under South Africa’s leniency policy despite being the whistle-blower.

It should be noted that the CAK will only engage the Director of Public Prosecution when granting conditional immunity. At this stage of the leniency application, the applicant would already have had to disclose its involvement in the cartel conduct and provide the CAK with substantial evidence of the relevant conduct sufficient to establish a contravention of the Competition Act.

Accordingly, the Guidelines do not cater for the possibility that the Director of Public Prosecution may not be willing to forego criminal prosecution in respect of the leniency applicant. It is, therefore, not clear whether the evidence which was disclosed to the CAK as part of a leniency application may be used against the applicant should the Director of Public Prosecution not grant immunity in respect of criminal liability.

In this regard, it would have been useful if the Guidelines catered for this risk. For instance, by expressly affirming that the Director of Public Prosecution would abide by the CAK’s recommendations unless there are compelling reasons not to. Absent this assurance, potential leniency applicants may be reluctant to approach the CAK for leniency until there is, at the very least, a clear indication of the Director of Public Prosecutions involvement in this process.

A welcome feature of the CAK’s Guidelines, however, is that fact that the Guidelines specifically extend leniency to a firm as well as to the firm’s directors and employees. The inherent conflict which may arise between the interests of the company versus the interests of the relevant directors, therefore, has been removed.

A further significant aspect of the Guidelines is that the Guidelines do not limit the granting of leniency (in respect of administrative penalties) to the respondent who is ‘first through the door’ only. A second or third respondent would also be eligible for a reduction of the administrative penalty of 50% and 30% respectively, provided the CAK is provided with material “new evidence”. Only a respondent who is ‘first through the door’, however, will qualify for immunity in respect of criminal liability – provided the respondent is not the “instigator” of the cartel.

The Guidelines also provide a framework which sets out the process which must be followed in applying for leniency including the steps which must be taken in respect of ‘marker’ applications.

As to who may apply for leniency, it is noteworthy that while a parent company is entitled to apply for leniency on behalf of its subsidiary, the reverse is not true on the basis that a subsidiary does not control the parent company. Accordingly, in fully fledged joint ventures for example, only one of the parties to the JV may apply for leniency (to the extent that the JV contravenes the Competition Act) and, therefore, the parent company should be the entity applying for leniency and not the legal entity which is in fact the party to the JV.

[Michael-James Currie is a competition law practitioner practicing in South Africa as well as the broader African region]

South African Market Inquiries: What Lies Ahead and is it Justified?

By Michael-James Currie

The South African Competition Commission (SACC) recently announced that it will be conducting market inquiries into both the Public Passenger Transport sector (Transport Inquiry) as well as investigate the high costs of Data (Data Inquiry).

These inquiries are in addition to the SACC’s market inquiries into the private healthcare sector and grocery retail sector (which are still on-going) and the recently concluded LPG market inquiry.

There are mixed feelings about the benefits of market inquiries in South Africa. Market inquiries are extremely resource intensive (both from the SACC’s perspective as well as for the key participants in the inquiry) and the outcomes of the inquiries which have been concluded (including the informal inquiry in the banking sector) are lukewarm at best. There is little evidence available which suggests that the resources incurred in conducting market inquiries in South Africa are proportional to the perceived or intended pro-competitive outcomes.

Leaving aside this debate for now, the SACC’s most recent market inquiries are particularly interesting for a variety of additional reasons.

Firstly, in relation to the Transport Inquiry, the Terms of Reference (ToR) set out the objectives and the key focus areas of the inquiry. In this regard, the ToR indicate that pricing regulation is one of the key factors which allegedly creates an uneven playing field between metered taxis for example and app-based taxi services such as Uber.

It should be noted that the metered taxi association of South Africa had previously and unsuccessfully submitted a complaint to the SACC against Uber for alleged abuse of dominance. The success of Uber in South Africa has widely been regarded as pro-competitive.

Both prior and subsequent to the complaint against Uber, however, an overwhelming number of metered taxi drivers (both legal and illegal) have resorted to deliberate violent tactics in order to preclude Uber drivers from operating in key areas (i.e. at train stations). In fear of having themselves, their passengers and their vehicles harmed, many Uber drivers oblige. It would be most interesting to see how the SACC tackles this most egregious forms of cartel conduct, namely market allocation (albeit entered into under duress).

Over and above the ‘metered taxi v Uber’ debate, there are additional issues which the Transport Inquiry will focus on – including alleged excessive pricing on certain bus routes, regulated route allocation and ethnic transformation within the industry.

What will likely become a topic (directly or indirectly) during the Transport Inquiry are the allegations, as African Antitrust (AAT) had previously reported, that ‘the “taxi and bus” industry is riddled with collusive behaviour. In light of the fact that most of South Africa’s indigent are fully dependent on taxis for transportation in South Africa and spend a significant portion of their disposal income on taxi fees, this is an issue which needs to be addressed urgently by the competition agencies by acting “without fear, favour or prejudice”’.

In this regard, the ToR indicates that “between 70% and 80% of the South African population is dependent on public passenger transport for its mobility”. The majority of these individuals would make use of ‘minibus taxis’.

The Transport Inquiry ToR do not mention this seemingly most blatant violation of competition law principles and it remains to be seen to what extent the SACC’s is prepared to investigate and assess hardcore collusion in the industry.

In relation to the second market inquiry, the SACC will also conduct an inquiry in relation to the high data costs in South Africa.

The High costs of data in South Africa seems to be key issue from the government’s perspective and the Minister of Economic Development, Mr Ebrahim Patel called for the SACC to conduct an inquiry into this sector. Further, the high costs of data in South Africa seems so important to economic growth and development that the Minister of Finance, Mr Malusi Gigaba, not only echoed Minister Patel’s calls for a market inquiry into high data costs, but identified such a market inquiry as part of his ‘14 point action plan’ to revive the South African economy.

Given that the three formal market inquiries which the SACC has commenced with to date have, only one (the LPG inquiry) has been finalized. Even the LPG inquiry took nearly three years to conclude. The private healthcare inquiry and the grocery retail inquiry which commenced in 2014 and 2015 respectively, still seem someway off from reaching any finality.

The length of time taken to conclude a market inquiry is, however, not the end of the matter from a timeline perspective. Following a market inquiry, recommendations must be made to Parliament. These recommendations may include legislative reforms or other remedies to address identified concerns with the structure of the market. Parliament may or may not adopt these recommended proposal.

Accordingly, it seems unlikely that from the date a market inquiry commences, that there will be any pro-competitive gains to the market within 5-7 years. That is assuming that the market presents anti-competitive features which can be remedies through legislative reform

While there appears to be consensus among most that data costs in South Africa are disproportionately high when compared to a number of other developing economies, the positive results envisaged to flow from a market inquiry is not only difficult to quantify, but will only be felt, if at all, a number of years down the line. Hardly a first step to revive the economy on a medium term outlook (let alone the short term).

Furthermore, and entwined with the SACC’s market inquiry into Data Costs, is that the Independent Communications Authority of South Africa (“ICASA”) decided to also conduct a market inquiry into the telecommunications sector, which includes focusing on the high costs of data.  ICASA has indicated that it will liaise with other regulatory bodies including the SACC.

It is not clear what level of collaboration will exist between the SACC and ICASA although one would hope that due to the resource intensive nature of market inquiries, there is minimal duplication between the two agencies – particularly as their objectives would appear identical.

As a concluding remark, absent evidence which convincingly supports the beneficial outcomes of market inquiries in South Africa, perhaps a key priority for the authorities is to conclude the current inquiries as expeditiously as possible and conduct an assessment of the benefits of market inquiries (particularly in the manner in which they are presently being conducted), before initiating a number of additional market inquiries.

The South African Competition Commission: Two Investigatory Records in One Week

Charl van der Merwe

A day after the South African Competition Commission (SACC) formally charged Stuttaford Van Lines, a furniture removal company, with a record breaking 649 counts of collusive tendering relating to hundreds of tenders in respect of government bids, the SACC on Thursday, 3 August 2017, carried out search and seizure raids (Dawn Raids) at the premises of the Automatic Sprinkler Inspection Bureau (ASIB), as well as 25 fire control and protection services companies across four provinces.

This is the largest search and seizure operation carried out by the SACC which was conducted across the country at the respondents premises situated in Athlone, Milnerton, Stellenbosch, Century City, Westlake, Bellville, Brackenfell, Montague Gardens, (WC) Pinetown, Springfield, Chatsworth, Stamford Hill, Windemere, Morningside (KZN), East London, PE (EC) and Houghton (GP).

The SACC alleges that the ASIB and its members have engaged in price fixing, market allocation and collusive tendering through its adherence to various (legally accepted) rules and standards which essentially constitutes an agreement to exclude non-members from the market.  The SACC, in its media statement indicated that “this is investigation is particularly concerning because of the seemingly prominent role played by consulting engineering companies in facilitating this cartel as well as the confirmation of pervasiveness of cartels in the construction sector.”

Notably, these Dawn Raids form part of the SACC’s ongoing investigation in this sector which has already culminated in several Gauteng companies admitting to collusion and settling with the SACC by way of a consent order.

Consent Orders general impose obligations on respondents to provide on-going assistance to the SACC in its investigation of other respondents. Broadening the scope of the investigation from Gauteng to a national region may be as a result of the evidence which the SACC obtained from those respondents who have already concluded settlement agreements with the SACC.

The Companies raided are: ANS Fire Protection Services CC; Arksun Fire Equipment CC t/a Fire Equipment; BH Fire Protection Services CC; Belfa Fire (Pty) Ltd (Belfa Coastal Cape); Belfa Fire (Pty) Ltd (Belfa Coastal Natal); Bhubesi Fire Projects (Pty) Ltd; Chubb Fire and Security (Pty) Ltd (KwaZulu Natal); Country Contracts CC; Cross Fire Management (Pty) Ltd; Eagle Fire Control CC; Fire and General CC; Fire Check CC; Fire Control Systems KwaZulu-Natal CC; Fire Design CC; Fire Sprinkler Installations CC; Fire Sprinkler Installations CC; FireCo (Pty) Ltd (FireCo Cape); FireCo (Pty) Ltd (FireCo KZN); Jasco Fire Solutions (Pty) Ltd (Jasco Cape); OVG Fire Management (Pty) Ltd (OVG Cape); QD Fire Cape CC; Specifire (Pty) Ltd; Whip Fire Projects (Pty) Ltd; and Ramsin Industrial Supplies CC t/a Fire Unlimited.

 

South African Competition Commission charges furniture removal company with record number of charges

by Meghan Eurelle

The South African Competition Commission has charged Stuttaford Van Lines, a furniture removal company, with 649 counts of collusive tendering related to hundreds of tenders to transport government furniture. This the largest number of charges faced by a single company in the history of anti-cartel enforcement by the Commission.

The tenders include those issued by the Presidency, Parliament, the National Prosecuting Authority, the South African Secret Service, the South African Police Service, the South African Revenue Services and the Public Protector, among others.

It is likely that the case emanates from the 2010 complaint against the industry that uncovered widespread and deep rooted anti-competitive and collusive conduct in the furniture removal market. The Commission’s investigation revealed Stuttaford colluded with its competitors from at least 2007 through cover quotes.

All the companies alleged to have colluded with Stuttafords, such as JH Retief Transport, Cape Express Removals, Patrick Removals and De Lange Transport, have subsequently settled with the Commission but the case against Stuttaford has been referred to the Tribunal for adjudication.

The Commission is asking the Tribunal to fine the furniture removal company 10 percent of its annual turnover on each of the 649 charges. The Commission’s approach of seeking an administrative penalty in respect of each alleged contravention means that the 10% statutory cap will be applied, on the Commission’s version, for each contravention.

Namibian Supreme Court rules Competition Commission has no Jurisdiction Over Medical Aid Fund Members

By AAT contributors Charl van der Merwe and Aurelie Cassagnes

On 19 July 2017, the Namibian Supreme Court, was tasked with settling a long standing dispute (not the first of its kind) as to whether or not the Respondents fell within the jurisdiction of the Namibian Competition Commission (NCC) in terms of the Namibian Competition Act of 2003 (Namibian Act). The case was brought on appeal by the Namibian Medical Aid Funds (NAMAF) and its members (collectively referred to as the Respondents).

After an investigation lasting a couple of years, the NCC announced in November 2015 that it had considered the behaviour of the Respondents in setting a “benchmark tariff” and found that the practice amounted to Price Fixing in contravention of section 23 of the Namibian Act. The Respondents, in pre-empting the commission’s planned litigation, disputed the NCC’s jurisdiction. The High Court found in favour of the NCC which led to the appeal by the Respondents to the Namibian Supreme Court.

Benchmark tariffs, in short, is a recommended fee, payable to doctors, at which medical aid expenses and consultations are covered. The issues surrounding benchmark tariffs has sparked debate across Africa with ‘those for’ arguing that without them, the medical profession would be “nothing short of economic lawlessness” whilst critics argue that it is “quietly killing off the health-care profession”.

The Namibian High Court, in finding against the Respondents, confirmed the NCC’s jurisdiction over the matter and ruled that determining and recommending a benchmark tariff for medical services was unlawful because it amounted to fixing a selling price. The court, in making its decision, held that “The funds’ activities in formulating a benchmark tariff were not ‘designed to achieve a non-commercial socioeconomic objective’. Rather, it was to produce and distribute wealth.” (Own emphasis)

The main issue to be decided on appeal by the Namibian Supreme Court, however, was not whether the benchmark tariff amounted to a contravention of the Namibian Act, but rather, whether the NCC had jurisdiction over the matter. In other words, whether the Respondents were included under the definition of ‘undertakings’ in terms of the Namibian Act.  Chapter 1 of the Namibian Act provides that:

An “’undertaking’ means any business carried on for gain or reward by an individual, a body corporate, an unincorporated body of persons or a trust in the production supply or distribution of goods or the provision of any service”

The Namibian Supreme Court found that the Respondents were not a “business carried on for gain or reward” and, therefore, were not subject to the provisions of the Namibian Act. As such, the Namibian Supreme Court overruled the High Court’s decision, leaving NAMAF and its members to continue the use of benchmark tariffs.

The South African Competition Tribunal (SACT) had similarly dealt with this issue in a series of Orders during the course of 2004 and 2005 (see the Hospital Association of South Africa and the Board of Healthcare Funders of Southern Africa). In this regard, the SACT found that the relevant medical schemes (the Respondents) fell within the ambit of the South African Competition Act 89 of 1998 (South African Act) and, accordingly, imposed an administrative penalty on the Respondents for “benchmarking tariffs”.

In its consent orders, the South African Competition Commission (SACC), despite mentioning that the Respondents were “an association incorporated not for gain in terms of the company laws in South Africa”, held that the Respondents are an association of firms that “determines, recommends and published tariffs to and/or for its members; and which recommendations has the effect of fixing a purchase price

Furthermore, the SACC, condemned the ‘benchmarking tariffs system’ put in place by the Respondents and argued, despite the fact that the health care professionals were still largely free to determine their own fees, publishing these recommendations amounted to price-fixing which is a per se contravention in terms of section 4(1)(b) of the South African Competition Act.

Accordingly, the differing approaches in Namibia and South Africa come down to the interpretation of what entities fall within the umbrella of the respective Competition Acts.