South Africa: Trilogy of Rulings Against the Competition Commission Demonstrates the Importance of Following Proper Procedure

In three recent decisions, two by the Competition Tribunal and one by the Competition Appeal Court, a number of important procedural flaws were exposed in the manner in which certain complaints were initiated against various respondents. The Competition Appeal Court even made an adverse costs order against the Competition Commission in one of the cases. We discuss these important decisions below.

Misjoinder of Parent Company

The South African Competition Commission (“SACC”) had recently alleged that Power Construction (West Cape) Pty Ltd (“West Cape”) and Haw and Inglis (Pty) Ltd (“H&I”) colluded in respect of a tender submitted to South African National Roads Agency (SANRAL). The tender was in respect of maintenance services. The SACC alleges both parties had contravened section 4(1)(b)(ii) and (iii) of the South African Competition Act (the “Act”).  The parent company of West Cape, Power Construction (Pty) Ltd (“Power Construction”) was cited as a respondent on the basis that it would be liable to pay the administrative penalty. Power Construction, had engaged in “with prejudice” settlement negotiations.

The SACC refused the proffer and informed Power Construction that after having  considered the settlement proceed that it was clear that Power Construction and West Cape (being the subsidiary of Power Construction) shared a majority of their respective directors which, according to the SACC, was sufficient to implicate Power Construction in the alleged collusive conduct. Accordingly, the SACC alleged that any Administrative Should be calculated using the higher annual turnover figures of Power Construction.

Power Construction disputed this, arguing that it was never alleged by the SACC that Power Construction had contravened the Act. The SACC then opted to amend its referral to include Power Construction. On application to the South African Competition Tribunal (“Tribunal”), the Tribunal dismissed the proposed amendment on the basis that the SACC had failed to provide any material evidence to establish a prime facia case in favour the relevant amendment, stating that the burden remains on the applicant to prove that it is deserving of the amendment by putting sufficient factual allegations before the Tribunal.

In conclusion, the Tribunal also confirmed that the amendment could regardless have been rendered excipiable based on prescription. In this matter, the alleged conduct ceased more than three years prior to the Commission becoming aware of the conduct.

Prescription

In a further case, namely the Competition Commission and Pickfords Removals SA, regarding the interpretation of section 67(1) of the Act (namely that dealing with prescription), the Competition Appeal Court (“CAC”) was very recently called to decide on the correct date for the running of prescription in terms of section 67(1) of the Act.

The SACC (being the appellant in the matter), brought an appeal to the CAC after the Tribunal held that the complaint initiated by the SACC was time barred in terms of section 67 of the Act.

The SACC disputed this and submitted that prescription in terms of section 67 of the Act should only commence from the date on which the Commissioner or Complainant acquired knowledge of the prohibited practice and, alternatively, that the Tribunal has a discretion to condone non-compliance with this 3-year time period. The latter issue was central to the dispute.

The question was further complicated by the fact that the SACC filed two compliant initiations against the respondents. The SACC submitted that the so called ‘second initiation’ was merely an amendment to the first initiation. So the SACC argued, even if the time period had begun running when the practice had stopped, the time period in question would still not have expired.

In this regard, the CAC held that the SACC has the power to amend a compliant initiation and that it must be taken at its word on whether a second initiation is an amendment to the first or a separate and distinct complaint initiation. This is so, particularly where both complaint initiations concern the same conduct, in the same market and where the first complaint initiation states that the conduct is ongoing.

In relation to the issue of prescription, the CAC held that section 67 cannot be equated with section 12 of the South African Prescription Act which provides for prescription to commence  from the moment on which the “creditor acquires knowledge of the identity of the debtor and the relevant fact from which the debt arises”. Section 49B(1) of the Prescription Act provides for a much lower threshold, being the ‘reasonable suspicion of the existence of a prohibited practice’.

Accordingly, it must be accepted that the time bar in section 67 is intended to be a limitation of the Commissioner’s wide ranging powers (to prevent investigation into historic matters which are no longer in the public interest) and that the knowledge requirement contained in the Prescription Act cannot be read into this limitation as argued by the SACC. It follows then, based on this reasoning that there can similarly be no condonation by the Tribunal or the CAC on these matters.

For completeness sake, the CAC confirmed the general understanding that, for purposes of section 67, the alleged prohibited conduct will be deemed to have ceased on the date on which the respondent last benefited from the prohibited conduct (e.g. the date on which it last received payment under the agreement). In this regard, the Tribunal initially ordered the parties to produce evidence of the date on which the last payment was received. The CAC deemed this appropriate and opted not to interfere with this order.

Condonation and Costs

The Tribunal was also called recently upon to decide two interlocutory applications, the first being a condonation application brought by the SACC in terms of section 54 of the Act for the late filing of its revised trial bundle (containing an additional 1221 pages), which was opposed by the respondents (Much Asphalt and Roadmac Surfing) and finally a counter application for costs against the SACC.

In terms of the condonation application, the SACC sought to revise the trial bundle on the basis that the revised trial bundle contained documents which were essential to its case (which were inadvertently omitted from its initial bundle) and had been re-organized in a manner that was less burdensome for all the parties involved. In support, the SACC argued, that the respondents wouldn’t be prejudiced by the late filing as the extra documents had already been discovered.

The Tribunal confirmed that the test for condonation must be ‘good cause shown’ by the SACC which should be assessed on case by case basis. The Tribunal held that the SACC had not shown good cause in this matter as it had ample time to furnish the respondents with the revised bundle and further found that filing the revised bundle at the 11th hour was unnecessarily prejudicial to the respondents.

south_africaIn terms of applications for costs, the respondents sought an order for wasted costs in relation to the postponement due to the late furnishing of the bundle as well as the cost of defending the application for condonation. Importantly it should be borne in mind that the Tribunal does not as a matter of course make cost orders against the SACC.  In this regard, the Constitutional Court has previously held that the Tribunal does not have the powers to make adverse cost orders against the SACC, even where the SACC has abused its powers. The general rule is that the parties pay their own costs. The Tribunal may only make cost orders against third parties and, accordingly, dismissed the respondent’s application for costs.

John Oxenham, director of Primerio says that these cases demonstrate the objectivity and impartiality of the adjudicative bodies which is an encouraging sign for respondents who do not believe that the case brought against them is procedural or substantively fair.

Fellow competition lawyer, Michael-James Currie says it is unfortunate that only the Competition Appeal Court makes adverse costs rulings and that the Competition Tribunal is precluded from doing so. Adverse costs ruling against the SACC should be reserved for matters in which there was clear negligence in the manner in which a case was investigated, pleaded or prosecuted. Such costs orders would, however, go a long way in ensuring that parties and in particular the prosecution agency, does not refer cases  to the adjudicative bodies (which have limited prospects of success) with no downside risk in losing the case.

Oxenham shares Currie‘s sentiment and suggests that adverse costs orders against the Commission will likely result in a more efficient enforcement regime as cases will be settled more expeditiously and respondents will be more reluctant to oppose the Competition Commission’s complaints with the knowledge that the SACC is confident in its case and prepared to accept the risk of an adverse costs order.

[The Editor wishes to thank Charl van der Merwe for his contribution to this article]

 

 

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KENYA: ENFORCEMENT ALERT

Restrictive Practices

The Competition Authority of Kenya (CAK) recently announced that it had entered into a settlement agreement with local beer producer Kenya Breweries Limited (KBL), a subsidiary of UK Diageo’s East African Breweries Ltd (EABL).

The settlement follows from an investigation by the CAK in terms of section 21 of the Competition Act (12 of 2010) wherein the CAK had found that KBL’s distribution agreements with its downstream distributors – which provides for inter alia, territorial exclusivity  – is anti-competitive and may lead to the lessening of intra-brand competition.

The settlement was reached in terms of section 38 of the Competition Act and requires that KBL establish an internal compliance policy and review and amend the problematic and restrictive clauses in its agreements with distributors.

Michael-James Currie, an African focused competition lawyer, says that the decision is particularly important for companies which use third parties to execute their distribution strategies as the majority of distribution agreements contain restrictions of some kind (often transported from international distribution agreements) which will need to be assessed against the standards of the Competition Act in Kenya as the CAK is actively focusing on these types of restrictive verticals arrangements.

Abuse of Dominance

Styles Industries (Darling Kenya)

Braids supplier, Styles Industries Ltd (Styles) has been found guilty by the CAK for abuse of dominance in contravention of Section 24 of the Competition Act.

The CAK launched an investigation into Styles on the basis of a complaint received by a competitor in the market, Solpia Kenya, claiming that Styles had abused its dominance by imposing unfair selling prices and conditions on suppliers who sell its products.

The CAK’s investigation found that Styles had abused its dominance by imposing unfair trading conditions on its downstream suppliers which it sought to enforce through threatening its downstream suppliers with account closure, removal of discounts and refusal to supply products.

The CAK is currently in negotiations with the parties and have indicated that its finding could result in Styles paying the complainant an amount in damages and/or a fine Sh10 million. In terms of Section 54(3) of the Competition Act, the relevant individuals within Styles could further face imprisonment for a period of up to 5 years.

Kaluworks

The CAK dismissed an abuse of dominance case against cookware manufacturer, Kaluworks Limited (Kaluworks).

The case emanated from a complaint by rival company, Sufuria World (Sufuria) in which it was alleged that Kaluworks had refused to sell to them certain aluminum circles which it required for purposes of manufacturing its aluminum cooking ports. This, Sufuria claimed, amounted to an abuse of dominance in terms of section 23 and 24 of the Competition Act.

The CAK, however, found that the conduct did not amount to abuse of dominance under the Competition Act as Sufuria had other options available to it in that it had the ability to replicate the technologies used by Kaluworks to produce the aluminum circles (as other manufacturers have done) or it could increase its order volumes in order to make it economically feasible for Kaluworks to supply it with the aluminum circles.

This finding was based on the representations made by Kaluworks that:

  • it primarily produces aluminum circles for in-house production for a variety of its own cookware products intended for local and export markets; and
  • it could only manufacture the aluminum circles to third parties where such third parties placed an order which met certain minimum quantities that would guarantee optimal scale of production

In supporting its findings, the CAK stated that in assessing the conduct of a dominant firm and whether it amounts to a ‘refusal to deal’, “is necessary to prove indispensability of the facility to the operation of the complainant or other third parties as arbitrary intervention may hurt innovation.

Market Inquiries

Transport Inquiry

The CAK has recently announced that it has initiated a ‘regional study’ in the Shipping, Trucking and Haulage industry in Kenya, Uganda, Rwanda and Burundi.

According to the announcement, the objective of the inquiry is to identify and remedy features of the market and trade practices which are anti-competitive and which impedes the national and intra-regional trade which in terms slows the potential growth of the manufacturing sector in Kenya.

Leasing Sector

The CAK has further announced a market study into the leasing sector which it will be conducting in conjunction with the Financial Sector Deepening (FSD) Kenya.

The objective of the market study is to assess the level of competition in the sector and to identify areas of concern in order to enhance competition in the market by facilitating SME entrants into the market.

John Oxenham, director at African antitrust advisory firm Primerio, says that market inquiries can be used very effectively, however, they are resource intensive and in order to achieve there objectives must be concluded expeditiously. The CAK should be cognizant of the challenges and experiences of the South African Competition Commission (SACC) where the market inquiries are not being concluded timeously.

[The editor wishes to thank Charl van der Merwe for his contribution to this update]

SOUTH AFRICA COMPETITION LAW: NEW REGULATIONS RE ACCESS TO RECORD

By Charl van der Merwe

The South African Minister of Economic Development, Ebrahim Patel (Minister) last week published the amended Regulation 15 of the Rules for the Conduct of Proceedings in the Competition Commission. The amended regulation is effective from date of publication being 25 January 2019.

The amended Regulation 15 has the effect of restricting access to the Commission’s record and preventing litigants from accessing the Commission’s record for purposes of preparing its defence in a legal matter before any court or administrative body (i.e. the Competition Tribunal).

In terms of the old Rule 15, any person had the right to request access to the Commission’s record, subject to certain rules regarding confidentiality and legal privilege. This led to various cases being brought before the Competition Tribunal and ultimately the Competition Appeal Court (CAC) where respondents requested access to the Commission’s record, prior to pleading and prior to discovery.

Issues regarding the proper interpretation of the old Rule 15 was finally settled by the CAC in the Standard Bank of South Africa Limited v the Competition Commission of South Africa (160/CAC/Nov17) case a mere four months prior to the Minister publishing the draft amended Regulation 15.  See AAT exclusive here

In summary, the CAC in Standard Bank confirmed its earlier judgement in the Group 5 case and held that any member of the public (regardless of whether it is also a litigant/respondent in proceedings before the Tribunal) must be granted access to the Commission’s record within a ‘reasonable time’. The CAC made clear that a member of the public’s right to access the Commission’s record should not be prejudiced by the fact that such an applicant is also a litigant.

Furthermore, the CAC also rejected the Commission’s argument that a reasonable time for purposes of producing its record to a litigant would be at the time of discovery (after pleadings have closed).

The amended Regulation 15 in direct conflict with the CAC’s ruling and further states that any record obtained in a manner that contravenes the Regulation 15 (i.e. in that the record was requested by and provided to a litigant) will not be admissible as evidence unless the court or administrative body finds that the exclusion of the record would be against the interests of justice.

In order to ensure compliance with the right to access to information in the Constitution, the amended Regulation 15 states that a litigant may request access or the production of the record through means of any other laws or rules of any court, including the Tribunal.

The Tribunal Rules deal only with information which has been submitted to the Tribunal and will not contain the Commission’s record prior to discovery (which is when the Commission contents a record must be made available to the respondents).

Furthermore, requiring a litigant to request access to the Commission’s record through means of the Promotion of Access to Information Act, 2002 (PAIA) is simply a shifting of the goalpost, effectively by passing the Competition Tribunal and CAC (which is bound by the CAC’s prior legal precedent). In terms of PAIA an individual or organisation (requester) must apply (by way of a specific form) to the relevant government body. If refused, the applicant must then request an internal appeal (which must be concluded within 30 days) and, only after the applicant has exhausted the internal appeal procedure, may the applicant apply to the High Court for access to the record.

The amended Regulation 15, therefore, effectively means that a litigant must now apply to the High Court (as opposed to the specialist Competition Tribunal and CAC) for access to the Commission’s record in instances where it is a litigant/respondent and where the Commission refuses to allow the litigant/respondent access to its record.

According to competition lawyer Michael-James Currie, while the amendment to Rule 15 is clearly motivated to preclude litigants accessing the Commission’s record prior to pleading, what is less clear is why granting litigants access to their record is such a contentious aspect from the Commission’s perspective. Presumably, the Commission  only refers cases for prosecution once it is in possession of sufficient evidence to sustain the allegations (at least on a prima facie basis). A respondent may, therefore, be better placed to gauge whether to oppose a complaint referral or settle the complaint referral once it has been provided with access to the record. This, says Currie, would go a long way to ensuring matters are resolved expeditiously as opposed to protracted litigation – particularly when the respondents’ representatives and decision makers have no knowledge of the alleged conduct or the conduct is historic, as firms are generally reluctant to settle a case unless they are fully aware of the evidence against it. Providing access to the Commission’s record would more likely result in the expeditious resolution of cases as opposed to being exploited by respondents. It will also ensure that the level of investigatory work is of the highest standard if respondents are granted access to the record prior to pleading.

Whether there are any constitutional challenges to the Regulations remains to be seen.

KENYA: BUYER POWER

By Michael-James Currie

[Michael-James Currie is a competition lawyer practicing across multiple African jurisdictions]

Kenya has in some respects become the leading African authority in the regulation of buyer power in December 2016 when it adopted specific legislative provisions on buyer power through its competition law framework.

The CAK has long viewed buyer power as a concern as in its view, unequal bargaining power, particularly in the retail sector has had serious anti-competitive effects in the market, leading to the foreclosure of suppliers, particularly in the retail sector.

The Competition Authority of Kenya (CAK) formally initiated a market inquiry into the branded retail sector, with one of its key objectives being the bargaining power between retails and their suppliers. See the ATT exclusive here

Ostensibly in light of the identified concerns, the CAK assisted in developing a new industry code (which is being proposed in terms of the Kenya Trade Development Bill). In terms of the industry code, retailers are prohibited inter alia from:

  • Making late payments to suppliers;
  • Forcing suppliers to contribute to marketing costs;
  • Forcing suppliers to pay for shrinkage;
  • Unilaterally terminating commercial agreements (without reasonable notice and on good cause);
  • Imposing unfair risk/liability on suppliers.

The purpose of the code of practice is to encourage self-regulation and harmonise retailers’ and suppliers’ ways of engagement and in so doing, also apply international best practice applicable to the Kenyan situation,” says Kenya Trade Principal Secretary Chris Kiptoo

The industry code also establishes a Retail Trade Dispute Settlement Committee, who will act as an industry ombudsman to settle disputes arising out of the code.

The CAK also formed a specific ‘Buyer Power Unit’ within the CAK to oversee market conduct and to enforce compliance with the buyer power provisions of the Kenya Competition Act which attracts a sanction of imprisonment for a period not exceeding 5 years and/or a fine of Sh10million. Previously, the CAK had limited powers to intervene in commercial dealings between retailers and suppliers.  Ruth Mosoti, director of Primerio Kenya says with the code, together with the provisions of the Competition Act, “we are bound to see an increase in enforcement action by the CAK given that the legal framework is in place as well as the fact that the ‘Buyer Power’ department is fully operational”.

Further south, the South African Department of Economic Development has published draft guidelines on buyer power, in terms of the South African Competition Amendment Bill. The Bill and Draft Guidelines, prohibits a dominant firm from imposing unfair prices or trading conditions on “a supplier that is a small and medium business or a firm controlled or owned by historically disadvantaged persons…”.  It is similarly an offence for the dominant firm to refuse to or avoid purchasing from such a supplier.

According to Andreas Stargard, also at Primerio, these latest developments are in line with the broader public interest initiatives which are increasingly prevalent in African competition enforcement. African competition authorities have identified competition enforcement as a key to driving growth in African economies through the protection and inclusion of local and small businesses.

The role of public interest in competition law enforcement has made competition compliance in these jurisdictions particularly complex as quantifying socio-economic effects is a particularly subjective exercise, says John Oxenham.

South Africa: Competition Tribunal Fines Computicket for Abusing its Dominance

By Charl van der Merwe

On 21 January 2019, the South African Competition Tribunal (Tribunal), ruled in favour of the South African Competition Commission (SACC) who prosecuted Computicket (Pty) Ltd. (Computicket) for abuse of dominance in contravention of the Competition Act.

The Tribunal ruled that Computicket had abused its dominance, in contravention of section 8(d)(i) of the Competition Act (which prohibits dominant entities from inducing customer or suppliers not to deal with competitors) by engaging in exclusionary conduct and fined the company R20 million (approximately US$1.44 million), payable within 60 days.

In terms of section 8(d)(i) of the Competition Act, exclusionary conduct is prohibited unless the dominant firm can show that the anti-competitive effect of the exclusionary conduct is outweighed by technological, efficiency or other pro-competitive gains.

The SACC referred the complaint to the Tribunal in April 2010 after its investigation found that Computicket had entered into long term exclusive agreements with customers for the period 2005 to 2010 (immediately after being acquired by a large South African retailer, Shoprite), thereby excluding new entrants from entering the market. At the hearing of the matter, the SACC produced evidence that Computicket entered into these agreements shortly after being acquired and that employees vigorously enforced the exclusive agreements, particularly when new entrants sought to enter the market.

Computicket denied the allegations, arguing that its long term exclusive contracts had no anti-competitive effects as it was offering a superior service and the exclusive contracts were necessary to safeguard against reputational risks.

The Tribunal rejected the argument on the basis that:

  • Computicket had a near monopoly in the market;
  • there was limited market entry during the relevant period which coincided with the introduction of the longer term exclusivity contracts; and
  • no other theory was put forward as to why entry into the market was so limited and ineffectual.

The Tribunal, however, limited the period of the conduct to that period for which the SACC managed to produce conclusive evidence of anti-competitive effects.

The Tribunal found that while some of the anti-competitive effects were inconclusive, the evidence suggesting that the foreclosure of the market to competition during the period (coupled with the cumulative effect of the other inconclusive theories) is sufficient to prove an anti-competitive effect on a balance of probabilities.

According to John Oxenham, director at Primerio,  the Tribunal’s decision followed  largely on the same principles which were set out in the South African Airways case some years earlier. In terms of principles set out in SAA, the SACC was required to prove that the conduct of a dominate firm constitutes an exclusionary act as defined in section 8(1)(d) and, if so, that the exclusionary act has an anti-competitive effect. In other words, whether the conduct resulted in harm to consumer welfare or was “substantial or significant” in that it led to the foreclosing of market rivals. It is then for the respondent to justify its conduct based on a rule of reason analysis.

Competition lawyer, Michael-James Currie says that although there have been a limited number of abuse of dominance cases in South Africa which have successfully been prosecuted, companies with high market shares should take particular cognizance of the Tribunal’s decision. Tackling abuse of dominance cases is very much on the SACC’s radar and the Competition Amendment Bill (expected to be introduced in early 2019) will assist the SACC in prosecuting abuse of dominance cases by introducing thresholds divorced of competition or consumer welfare standards and placing a reverse onus on respondents to justify its conduct (particularly in relation to the excessive pricing, price discrimination and buyer power prohibitions).

Currie says that over and above the administrative penalty, companies found to have contravened section 8 of the Act are potentially at risk from a civil liability perspective. In this regard, both Currie and Oxenham point to the SAA case which resulted in Comair and Nationwide successfully claiming damages in the first follow-on damages case in South Africa for abuse of dominance conduct.

It appears that Computicket will take the Tribunal’s decision on appeal to the Competition Appeal Court.

 

 

 

South Africa: Competition Tribunal dismisses cartel complaint despite settlements by other respondents

On 15 January 2019, the South African Competition Tribunal (“Tribunal”) dismissed the Competition Commission’s (“Commission”) cartel complaint against Tulisa Cables. Tulisa Cables was one of four respondents to the Commission’s complaint referral.

The other respondents included Aberdare Cables who approached the Commission for leniency and Ocean Electric Wire Company and Alvern Cables who both concluded settlement agreements with the Commission (the latter concluded a settlement agreement on the first day of the hearing before the Tribunal). Alvern paid an administrative penalty of R4.7 million which equated to 5% of its total turnover for 2010. Ocean Wire paid an administrative penalty of approximately R13.3 million.

Tulisa, as the only remaining respondent, opposed the Commission’s complaint referral.

The Commission alleged that for a period between 2001 and 2010, the respondents attended meetings and engaged directly with each other to, inter alia, discuss the price of power cables. Furthermore, that Aberdare would circulate price lists to the respondents and that this constituted a concerted practice between the respondents to fix prices as it was common cause that all the respondents based their own prices off Aberdare’s price lists (which were circulated monthly). The first allegation was therefore that a collusive “agreement” had been reached by the respondents, and secondly that there was a concerted practice between the respondents which amounted to collusive conduct.

Tulisa denied attending meetings as alleged by the Commission. Based on the evidence, the Tribunal found that there was insufficient proof of an agreement having being entered into between Tulisa and the other respondents to collude.

In relation to the concerted practice allegation, Tulisa argued that Aberdare’s price lists were circulated to it via its customers and not directly by Aberdare. Furthermore, Tulisa  argued that it used Aberdare’s price lists to discount off Aberdare’s prices.

Michael-James Currie, a competition lawyer practicing in sub-Saharan Africa says that Tulisa appears to have adopted a “follow the leader” pricing strategy so as not to potentially be undercut by the largest player in the market (Aberdare) were Tulisa to make the first move (from a pricing perspective).

John Oxenham, director of Primerio, says that the Tribunal found that in light of the evidence and the market structure Tulisa’s explanation for its pricing strategy is a plausible one – particularly in oligopoly markets.

Both Currie and Oxenham agree that there are a number of markets in South Africa where “conscious parralism” may be particularly prevalent due to the size of the domestic market. Provided, however, that the market structure and conduct of the players in those markets does not compromise their independent decision, there are ordinarily limited concerns regarding anti-competitive effects in the market. In this regard, Currie points to the following paragraph of the Tribunal’s decision which succinctly summarises the issue as follows:

Tulisa’s actions appear to be consistent with those of a player in an oligopoly market acting rationally and independently of its competitors but well alive to the  actions  of  the  competitors  (referred  to  in  literature  and  case  law  as ‘conscious  parallel  behaviour’  or  ‘conscious  parallelism’).  It is generally accepted that conscious parallel pricing is unlawful if it is the result of a collusive arrangement but is lawful if it is unilateral as a consequence of the market structure. Where the line is drawn between the two is a matter of fact and evidence.

To access the full judgment click here.

 

Namibia: High Court declares Competition Commission’s search and seizure unlawful

On 9 November 2018, the High Court in Namibia declared a dawn raid conducted by the Namibian Competition Commission (NaCC) in September 2016 to be unlawful. The NaCC raided the premises of PUMA Energy on the basis of alleged abuse of dominance conduct in relation to the sale of aviation fuel at two airports in Namibia.

namibiaPUMA Energy challenged the validity of the search warrant and successfully argued that there was no basis for granting the search warrant. Consequently, the NaCC is obliged to return all documents seized during the raid to PUMA Energies.

In June 2018, the South African Competition Commission also lost a High Court challenge where the validity of a search warrant was at issue. The Pietermaritzburg High Court set aside the search warrant on the basis that the SACC failed to demonstrate that there was a bona fide “reasonable belief” that a prohibited act had been engaged in by the respondents in that case.

Competition lawyer, Michael-James Currie says that the use of search and seizure operations as an enforcement tool is being increasingly used across a number of African jurisdictions. Dawn raids have recently been conducted in Egypt, Kenya and Zambia in addition to Namibia and South Africa.

Currie says while dawn raids have been used effectively by well-established antitrust agencies, search and seizure operations are particularly burdensome on the targets and should only be used in those instances were no other less intrusive investigative tools are available. If competition authorities’ powers are not kept in check there is a material risk that search and seizure powers may be used as “fishing expeditions”.

Primerio director, John Oxenham, points out that the evidentiary threshold required in order to obtain a search warrant is relatively low. It is, therefore, concerning if enforcement agencies subject respondent parties to such an intrusive and resource intensive investigative tool without satisfying the requirements for obtaining a search warrant.

Despite these recent challenges to search warrants, Andreas Stargard, also a partner at Primerio, corroborates Oxenham and Currie’s view that the South African and Namibian competition agencies will continue utilising dawn raids as an investigative tool and in light of the increasingly robust enforcement activities, particularly by the younger competition agencies, companies should ensure that they are well prepared to handle a dawn raid should they be subjected to such an investigation.

 

Breaking: South African Competition Amendment Bill passed by Parliament

AAT has closely monitored the progress of the Competition Amendment Bill and provided commentary to the Bill from leading local and international competition practitioners.

This is to update our readers that the Amendment Bill was passed in the National Assembly on 23 October 2018. The Bill still requires the National Council of Provinces to approve the Bill, following that the President’s consent – both of these procedural steps are likely to be mere formalities in light of the National Assembly’s decision to approve the Bill.

AAT expects that the Bill will be brought into effect imminently and likely without any material grace period for parties to assure compliance with its onerous provisions.

The Bill passed by the National Assembly has been amend mended from the draft Bill which was placed before Parliament’s Portfolio Committee.  The key contentious provisions of the Bill, however, remain largely unchanged.

To access a copy of the Bill passed by Parliament, click here.

Panel highlights SA Competition Amendment Bill’s pitfalls

As AAT has reported on extensively, the South African Competition Amendment Bill, currently pending in Parliament, is likely to be adopted in short order in its current draft form.

It carries with it significant, and in our view, adverse, effects that will burden companies trying to conduct business or invest in South Africa. These burdens will be particularly onerous on foreign entities wishing to enter the market by acquisitions, as well as any firm having a market share approaching the presumptive threshold of dominance, namely 35%

On Wednesday, 17 October 2018, the law firms of Primerio and Norton Incorporated held an in-depth seminar and round-table discussion on the ramifications of the Competition Amendment Bill. The setting was an intimate “fireside chat“ with business and in-house legal representatives from leading companies, active across a variety of sectors in the South African economy.

Moderated and given an international pan-African perspective by Primerio partner Andreas Stargard, the panel included colleagues John Oxenham and Michael-James Currie, who delved into the details of the proposed amendments to the existing Competition Act, covered extensively by AAT here.

As of today, 18 October 2018, the Bill appears set to be promulgated.  The SA Parliament’s committee on economic development has rubber-stamped the proposed amendments after a prior committee walk-out staged by the opposition Democratic Alliance (DA), in opposition to the Bill. DA MP and economic development spokesperson Michael Cardo states:

The ANC rammed the Competition Amendment Bill through the committee on economic development, and adopted a report agreeing to various amendments. To make sure they had the numbers for a quorum, the ANC bussed in two never-seen-before members to act as pliant yes men and women. Questions from the DA to the minister… This bill is going to have far-reaching consequences for the economy. It gives both the minister and the competition authorities a great deal of power to try and reshape the economy. It is unfortunate that the ANC, and the committee chair in particular, have suspended their critical faculties to force through this controversial bill and behaved like puppets on a string pulled by the minister of economic development.”

The Amendment Bill introduces significant powers for ministerial intervention and bestows greater powers on the Competition Commission, the investigatory body of the competition authorities in South Africa.

The panel discussion provided invaluable insights into the driving forces behind the Bill and ultimately what this means for companies in South Africa as it certainly won’t be business as usual if the Amendment Bill is brought into effect – particularly not for dominant entities.

[If you attended the panel discussion and would like to provide feedback to the panelists or would generally like to get in touch with the panelists, please send an email to editor@africanantitrust.com and we will put you in touch with the relevant individuals]

 

Namibian Competition Commission Investigates Pharmacies for Cartel Conduct

The Namibian Competition Commission (NaCC) recently announced that it is investigating the pharmacy sector for allegedly fixing prices. The investigation is focused on the Pharmaceutical Society of Namibia (PSN) and over 200 of its members.

The allegations include, inter alia, that the PSN requires its members to impose a 50% mark-up on the dispensing of medicines and that the PSN disciplines members for deviating from the mark-up.

The investigation follows closely on the heels of an earlier announcement that the NaCC is investigating short term insurance companies for allegedly agreeing to cap maximum mark-up rates and maximum labour rates which panel beaters may charge for repairing vehicles.

The Namibian Competition Act prohibits agreements or concerted practices between competitors which have as their object or effect the prevention or lessening of competition in the market.

The recent activity by the NaCC is indicative of the NaCC’s intention to increase competition enforcement in the region and firms doing business in Namibia are increasingly required to self-assess their conduct to ensure compliance with domestic competition laws not only in Namibia but in most sub-Saharan countries.