Competition Commission Releases Online Intermediation Platform Market Inquiry Provisional Summary Report

By Nicola Taljaard

On 13 July 2022, the South African Competition Commission (“Commission”) released a Provisional Summary Report (“Report”) on the Online Intermediation Platforms Market Inquiry (“OIPMI” or “Inquiry”) which was initiated on 19 May 2021. The Commission initiated the Inquiry following reason to believe that certain features of the online intermediation platforms market could be impeding, distorting or restricting competition.

The Commission placed specific emphasis on getting small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”) to participate in the relevant markets, and premised the Inquiry on the following competition and public interest considerations in relation to market features:

  • Hampering competition between the actual platforms;
  • Hindering competition between business users or undermining consumer choice;
  • Giving rise to abusive treatment of business users; and
  • Which may have disadvantageous impacts on the ability of SMEs and/or HDPs to participate in the market.

The Commission further noted a lack of participation by HDPs as a common thread which prevails in the online intermediation platforms market, which seems to languish in an untransformed state relative to the broader South African economy.

The remedial action proposed in the Inquiry ranges in severity based on the impacts which the market features have on competition, particularly in relation to SMEs or HDPs. The leading platforms on which the remedial actions are proposed are the Apple App and Google Play stores, Takealot, Property 24 and Private Property, Autotrader and Cars.co.za, Booking.com and Airbnb, Mr. Delivery and UberEats, and Google. Although the Commission did not consider it necessary to enter a dominance inquiry, it did remark that these platforms show features of dominance when considering their positions in the respective markets.

In addition to the more general constructive proposals, the Commission also suggests provisional remedies which are more robust, including against Google, stating that it plays an integral role in how consumers interact with relevant platforms. In this regard the Commission intends to further its inquiry into the viability of keeping Google Search as the default search on mobile devices in South Africa.

The OIPMI came to the provisional conclusion that the digital economy is deficient in relation the country’s transformation goals and deviates significantly from the transformation trends of other traditional industries. The lack of transformation in most of the industries investigated as part of the intermediation platforms continues to display major barriers to entry for HDP entrepreneurs. This conclusion is particularly pertinent in light of the ever-widening digital divide.  

The Commission has made all of the documents and public submissions in relation to the Inquiry, as well as the Summary Report (which can be accessed here) available on its website. The public has six weeks within which to submit comments to the Summary Report, after which the Inquiry body has committed to consider the views and incorporate changes, where appropriate, to the final report and findings which will be released in November 2022.

South African Competition Tribunal Hands Down Another Price-Gouging Case: Face Masks Supplier Fined Maximum Penalty

By Michael-James Currie and Nicola Taljaard

[Currie is a director at Primerio and Taljaard is a lawyer at Primerio]

On 28 April 2022, the South African Competition Tribunal (“Tribunal”) handed down a decision in which it found Tsutsumani Business Enterprises (“Tsutsumani”) had contravened the excessive pricing prohibition contained in section 8(1)(a) of the Competition Act (“Act”). The conduct relates to the supply of face masks by Tsutsumani to the South African Police Services (“SAPS”) during the early stages of the Covid-19 pandemic.

The case against Tsutsumani is the first time that the Commission has successfully prosecuted a company for price gouging in the context of a public procurement process. The Commission did, however, successfully prosecute two companies for supplying masks at excessive prices at a retail level. In 2020, the Tribunal, in Competition Commission v Babelegi Workwear and Industrial Supplies CC (“Babelegi) and Competition Commission of South Africa v Dis-Chem Pharmacies Limited (Dis-Chem) the Tribunal found the respondents guilty of excessive pricing. In the latter case, the Tribunal warned that ‘material price increases of essential items such as surgical masks, even in the short run, in a health disaster such as the Covid-19 outbreak, warrants its intervention.’ This warning has certainly proved to be a serious one in light of the Tsutsumani case.

Tsutsumani is a general trader who participated in a tender for the urgent supply of face masks to South African Police Services (“SAPS”) during the first hard lock-down in South Africa. The complaint, lodged by SAPS to the Commission on 5 May 2020, alleged that Tsutsumani had engaged in price gouging following a major and unprecedented surge in the demand for face masks.

The Tribunal recognized the precarious position SAPS found themselves in as it required nine million masks per month during the relevant period and found that Tsutsumani acted exploitatively towards the SAPS by quoting the State entity R16.25 million for a 500 000 bulk mask supply order during April 2020. The determination that this price was excessive was made following evidence being led showing that Tsutsumani added a mark-up of 87%, giving them a 46% gross margin per mask. The monetary reward amounted to approximately R5.3 million in excessive profits alone. In accordance with the fines prescribed by legislation, the Tribunal fined Tsutsumani the maximum administrative penalty of 10% of its relevant turnover, amounting to a total of R3 441 689.10.

Assessing the South African price gouging cases purely from a competition law point of view, the Tribunal’s price gouging cases do raise several concerns regarding the extent to which excessive pricing – or abuse of dominance cases more generally – may be prosecuted in future. Most notably, the earlier price gouging cases found a firm which had only a 5% market share to be dominant on the basis that the firm possessed “market power”, albeit for a very short period, as a result of the Covid 19 pandemic. Basic economic principles tell us that price is typically influenced by the demand-supply relationship. Assessing “market power” with reference to a very short time frame notionally means, therefore, that any factors which give rise to a demand surge or supply shortage, may confer “market power” on a firm who may be subject to scrutiny if they increase their prices subject to such demand/supply pressures. Such a short term approach to assessing market power also naturally excludes any assessment to consider likely market entry or incentives to increase supply to respond to the demand surge.

Although the Tribunal and the Competition Appeal Court sought to emphasise the unique market dynamics due to the pandemic, the economic and legal principles set out in these decisions could be expanded to other cases beyond circumstances as significant as a global pandemic. It would be preferable if there were clear rules published as to when firms (even small firms) are at risk by raising prices during a state of national disaster (such as those which were in fact published in South Africa but only after the alleged conduct subject to the price gouging cases took place). While one might have some sympathy for the competition authorities wanting to protect consumers during the pandemic, by departing from traditional approaches to assessing excessive pricing cases so as to address price gouging concerns risks potentially undermining certainty and makes it difficult for firms to internally assess their conduct against the relevant benchmarks. The enforcement and application of competition law, like all laws, should always strive to advance legal certainty. This is why deviating from a body of international precedent and best practice should not be easily departed from. If it was clear that price gouging cases such as those prosecuted to date were only applicable during states of National Disaster that would go a long way to providing such certainty. But there is no basis why complainants are not able to apply the principles set out in the price gouging cases to all sorts of market dynamics which may ordinarily lead to significant price increases. We have already noted the Commission’s public warning to domestic airliners not to increase prices when a certain airliner carrier had its licence temporarily suspended for a few days. A case entirely unrelated to the pandemic.

So, with a lower standard against which to prosecute excessive pricing cases and the introduction of a reverse onus on the respondent to demonstrate that its prices are not excessive (in particular instances), coupled with a potentially much lower threshold against which to find a firm is “dominant” than traditionally the case, we expect to see more excessive pricing complaints being pursued.


South African Competition Commission Prosecutes Facebook for Abuse of Dominance

By: Gina Lodolo

On 14 March 2022, the South African Competition Commission (“Commission”) referred a complaint against Meta Platforms Inc is the parent company of WhatsApp Inc (“WhatsApp”) and Facebook South Africa (hereafter jointly “Meta”), to the Competition Tribunal (“Tribunal”) for allegedly engaging in abuse of dominance.

The referral follows WhatsApp (as part of the  Meta group) attempting to off-board GovChat from the WhatsApp platform. GovChat is a chatbot service connecting government to millions of citizens on issues of public concern (e.g. information on COVID-19 vaccinations and social grants). GovChat is reliant on the WhatsApp platform to function and connect users, without which its entire existence will be prejudiced.

GovChat utilizes WhatsApp for their services due to WhatsApp’s scale and consumer reach, however, Meta has attempted to off-board GovChat by placing reliance on WhatsApp’s terms and conditions to enforce a restriction against monetisation of confidential information through the use of consumer data obtained on the platform.

In this regard, the Commissions media release notes that “Facebook has imposed and/or selectively enforced exclusionary terms and conditions regulating access to the WhatsApp Business API, mainly restrictions on the use of data”.

The selective enforcement by Meta and attempts to off-board GovChat from the WhatsApp platform, according to the Commission, potentially violates Section 8(d)(ii) of the Competition Act 89 of 1998 (as amended) (“Act”) which prohibits a dominant firm from abusing its dominance by “refusing to supply scarce goods or services to a competitor or customer when supplying those goods or services is economically feasible”. In the alternative, the Commission alleges that Meta has engaged in an exclusionary act or refused to give a competitor access to an essential facility when it is economically feasible to do so (under section 8(1)(b) or 8(1)(c) of the Act).

The Commission has requested the Tribunal to:

  1. Impose the maximum penalty permitted under the Act, being 10% of Meta’s turnover;
  2. Interdict Meta from off-boarding GovChat; and
  3. Declare void exclusionary terms and conditions that are selectively applied in a manner that prevents potential competition by restricting access to the WhatsApp platform for potential competitors.

In its media release, the Commission stated that “access to digital markets is dependent on access to digital platforms including as in this case, access to an important digital communication platform”.

Primerio Director, Michael-James Currie notes that this complaint referral follows an interim relief application whcih GovChat successfully obtained against Facebook and WhatsApp in the beginning of 2021 in terms of which WhatsApp was prohibited from off-boarding GovChat.

This case, says Currie also coincides with a very proactive drive by the Competition Commission to consider competitive effects in digital markets in South Africa.

The case also suggests that the Competition Commission considers the existing rules regarding abuse of dominance as being adequate to address competition concerns in the market.

For more background information click here

To access the Competition Commission media release, click here

SOUTH AFRICAN COMPETITION COMMISSION TO LITIGATE AGAINST THE EXCESSIVE PRICING OF BREAST CANCER TREATMENT DRUGS

By Joshua Eveleigh

On 08 February 2022, the Competition Commission (“Commission”) released a press statement indicating that it had referred a matter to the Competition Tribunal (“Tribunal”) for the prosecution of Roche Holding AG (“Roche AG”), and its subsidiaries, Roche Bassel and Roche South Africa.

The nature of the Commission’s referral is premised on allegations that Roche AG and its subsidiaries had imposed excessive prices for Trastuzumab, a breast cancer treatment drug, in contravention of section 8(1)(a) of the Competition Act 89 of 1998 (“Competition Act”). As a result of the alleged conduct, the Commission has estimated that an excess of 10 000 breast cancer patients were unable to afford Trastuzumab between the period of 2011 and 2019.

In its press statement, the Commission placed particular emphasis on the fact that the alleged conduct bore the greatest impact on poor women who “…cannot access essential treatment because they cannot afford to pay for it. This is so even for the minority of women who belong to medical schemes.”

Notably, the recent Constitutional Court decision in Competition Commission v Mediclinic (“Mediclinic”) has had a seemingly profound impact on the Commission’s approach towards the present matter. In Mediclinic, the Constitutional Court emphasised the importance of the Constitution when interpreting and adjudicating competition law – specifically in regard to section 27, the right to have access to health care services. In its judgment, the Constitutional Court referred to both the Tribunal and the Competition Appeal Court (“CAC”) as state institutions that have the obligation to facilitate the Bill of Rights and to promote the right of access to health services. As a result of the Mediclinic judgment, the Commission has stated that the alleged conduct results in the prevention of access to health services, in contravention of section 27(1)(a) of the Constitution.

Due to the egregious nature of the alleged conduct, the Commission states that it is seeking that the maximum penalty be imposed against Rosche AG and its subsidiaries. In this regard, section 59(2) of the Competition Act provides that the maximum administrative penalty that may be imposed “may not exceed 10 per cent of the firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year.”

The Commission’s referral to the Tribunal and the grounds on which it relies, emphasises the overarching significance of the Mediclinic judgment in that an alleged conduct’s impact on the Bill of Rights, and public policy considerations as a result, is now preeminent consideration to be had respect of all aspects of competition law.

Primerio International partner, Michael-James Currie says the South African Competition Commission has been one of the most active agencies globally insofar as prosecuting excessive pricing cases is concerned, but and have had limited success to date. Subsequent to the amendments to the Competition Act in 2018, there has not been a case that has been fully litigated before the adjudicative bodies.

It will be interesting to see how this case progresses and the extent to which non-traditional competition factors are ultimately taken into account in interpreting the scope and application of the excessive pricing provisions contained in the Competition Act.

Nigeria: The Federal Competition and Consumer Protection Commission Talks to Primerio in Relation to Competition Law Enforcement Trends and Policy

*Compiled by Jemma Muller and Tyla Lee Coertzen

Introduction

On 25 November 2021, Primerio International hosted an online “fireside chat” with representatives from the newly established Nigerian Federal Competition and Consumer Protection Commission (the “FCCPC”). The discussion, led by Michael-James Currie (Director at Primerio International), shed light on the FCCPC’s practices and focus points which were highlighted by Eme David-Ojugo (Chief Legal Officer at the FCCPC) and Yemisi Oluyode (FCCPC merger’s analyst).

[If you would like to access the full discussion, click here]

The importance of the newly established FCCPC in Nigeria is undisputed. Nigeria’s GDP is the largest economy on the African continent. As such, good competition law policy is of significant importance not only locally but across the continent more generally. As the African Continental Free Trade Agreement and competition policy in Africa is being negotiated, it is critical that there are strong voices from a variety of national territories and agencies, particularly from those economies which are more developed. This will ensure balanced policy and effective competition enforcement which prioritises free trade.

This Primerio fireside discussion with the FCCPC provided great insight into the current state of play with reference to policy and enforcement trends in Nigeria.

The Status of the Agencies

The FCCPC and the Competition and Consumer Protection Tribunal (the “CCPT”) were established by the Federal Competition and Consumer Protection Act, 2018 (the “FCCPA”) in March 2021 and are the  competition and consumer protection authorities in Nigeria. The authorities were established in order to promote fair, efficient and competitive markets in the Nigerian economy.

The FCCPA is, in many respects, similar to the South African Competition Act,1998 (as amended) (the “SACA”). Furthermore, Ojugo noted that the FCCPC is fortunate to have experience from across the world to utilize and that international antitrust precedent serves as a guide to the FCCPC.

Currently, the FCCPC is active in both merger control and in the enforcement of restrictive practices and has played a proactive role in pursuing its objectives. Ojugo described the FCCPC as having an “open door policy” whereby it encourages parties to engage directly with the FCCPC to assist the FCCPC in developing and improving its practices accordingly.

In 2021, The FCCPC published various Draft Regulations and Guidelines which it is in the process of finalising. Among these are the:

Restrictive Practices Enforcement – the FCCPC’s use of Dawn Raids

During the “fireside chat”, the FCCPC emphasized the use of dawn raids in its investigative processes in accordance with section 27 of the FCCPA. Dawn raids are generally unannounced and provide the authority with various powers to inspect, search and make seizures. In this regard, the FCCPC has received specialist training from the Federal Trade Commission (the “FTC”). The FCCPC has made use of dawn raids, particularly in the freight forwarding industry.

Prior to conducting dawn raids, the FCCPC is required to obtain a warrant from the Judge of the Nigerian Federal Court of Appeal. Under section 29 of the FCCPA, such a warrant permits the FCCPC to:

  • enter and search the place or premises specified on one occasion within 30 days of issue at a reasonable time;
  • use reasonable assistance to do so;
  • use as much force as is necessary to gain entry or breaking open any article or thing;
  • search and remove documents or anything that may be considered relevant to the investigation;
  • make copies of documents that may be considered relevant to the investigation; and
  • to require any person to reproduce or assist in providing relevant information.

The FCCPC is only permitted to conduct a search without a warrant if it has reason to believe that an entity has contravened the FCCPA or any related Regulations. In this instance, a sworn affidavit from the Executive Vice Chairman will be required.

During the “fireside chat”, Currie explored the FCCPC’s due process and procedural fairness standards that would ordinarily be followed by the FCCPC during such investigations. In response, Ojugo mentioned how the FCCPC will either institute investigations on its own initiative or following receipts of third party complaints. With regards to the latter, Ojugo noted that the FCCPC will usually carry out surveillance in order to verify the intel they receive. Ojugo explained that the FCCPC makes use of these types of procedures, as opposed to requesting information or documents, as the FCCPC is well aware that market participants will not generally be willing to provide relevant materials that would assist the FCCPC in its investigations.

Ojugo noted that while the FCCPC is given wide investigative powers, it must obtain authorisation by a Judge of the Federal High Court, and moreover that industries and firms can be assured that the FCCPC will not come in as a “bull in a China shop”. Rather, the FCCPC is intent on developing its capacity and understanding relevant markets before taking drastic interventionist measures. The FCCPC aims to maintain order, inform firms of their rights (particularly to legal representation) and aims to maintain coordination and cooperation in executing a search warrant. Furthermore, while the FCCPC is entitled to search personal items, it will only utilise information that is relevant to its investigations. In this regard, Ojugo pointed out that it is a criminal offence to obstruct the FCCPC’s investigation and the FCCPC may choose to prosecute in this instance. Moreover, refusal to cooperate with the FCCPC will serve as an aggravating factor when the FCCPC considers and calculates any resultant administrative penalties.

Overall, the approach the FCCPC has adopted in relation to restrictive practices enforcement encapsulates sophisticated investigative tools and is commendable. One potential risk foreseen in this regard is that the FCCPC retains possession of all information as opposed to a third party.

Leniency Policy, Penalty Guidelines, Criminal Sanctions

An important discussion point during the fireside chat related to the FCCPC’s approach in relation to leniency, penalties and criminal sanctions.

  • Leniency Policy

According to regulation 26 of the FCCPC Restrictive Agreements and Trade Practices Regulations (the “RATPR”), any party which is involved in a restrictive agreement or trade practice which is in contravention of the FCCPA may apply for immunity from sanctions or for reduced sanctions under the FCCPC’s Leniency Rules. While the RATPR refer to Leniency Rules, it is to be noted that these are not yet available. It is expected that the FCCPC will introduce a formal set of rules with regards to leniency in due course. Currently, the FCCPA does cater for leniency albeit on an informal basis. In this regard, the FCCPC has the discretion to grant immunity and does so to a party who is the first to submit evidence that will assist the FCCPC in its investigation. Moreover, cooperation with the FCCPC may result in it deciding to lessen the administrative penalty which is ultimately levied against the infringing but disclosing party. Furthermore, the FCCPC requires an infringing party to make a full disclosure and admit their liability by way of a written undertaking. However, Ojugo notes that even if a party enters into cooperation with the FCCPC, it does not necessarily mean that such a party is free from prosecution. Ojugo suggested that the FCCPC would require an admission of guilt and full disclosure from alleged offenders in order for the FCCPC to consider providing such an offender with leniency. However, the FCCPC retains discretion in deciding whether leniency is provided. There is a foreseen risk in this regard. Parties who allegedly contravene the FCCPA would have to provide a full disclosure of their conduct if they wish to be granted immunity but immunity is not guaranteed and parties may still be liable for criminal prosecution.

  • Penalty Guidelines

With regards to penalties, the FCCPA includes penalties for specific offences, namely price-fixing, conspiracy and bid-rigging. As mentioned above, the FCCPC recently published Regulations regarding the calculation of administrative penalties. Oluyode confirmed that the formula for calculating administrative penalties is complicated and cannot be done by parties alone. When deciding on a penalty, the FCCPC will utilise mitigating and aggravating factors in order to determine a party’s liability, and ultimately retains the discretion when deciding on the ultimate administrative penalty to be levied. As such, it is imperative that parties cooperate fully with the FCCPC as this will likely work in their favour, depending on the nature of the offence. Oluyode also noted that whether a global firm or a local firm is fined will depend on the circumstances of each case and which firm has caused the violation. The FCCPC will likely fine a firm on its worldwide turnover in an instance where it is the global firm who engages in or causes contraventions of the FCCPA. Local turnover is to be used when the local firm engages in or causes a contravention.

  • Criminal Sanctions

The FPPCA does make provision for criminal offences for competition related violations. In this regard, the FCCPC will exercise its discretion in deciding whether to prosecute criminal offences per section 113(2) of the FFCPA wherein the FCCPC is given powers to prosecute or to refer violations of criminal offences under the FCCPA to the Attorney-General of the Federation and the Minister for Justice. It is, however, the Nigerian courts who are tasked with convicting the crime.

Merger Control

The FCCPC is responsible for analysing merger transactions to prevent any negative impacts on competition arising as a result thereof. It has implemented a suspensory merger regime. Currently, the FCCPC has not rejected any mergers but has approved various mergers subject to structural and behavioural conditions. Currie commended the FCCPC on the implementation of its online merger notification portal which it implemented as a result of the Covid-19 pandemic. It allows parties to notify their mergers and take part in pre-consultation notifications with the FCCPC in an efficient and sophisticated manner. Oluyode noted that since its implementation, the running of the portal has been smooth and merger notifications have been received through the portal.

In the past year, the FCCPC has made significant development in merger control by publishing the various Regulations and Guidelines, which are accessible here on the FCCPC website. The FCCPC has also catered for a Negative Clearance procedure allows merger parties to ascertain clarity on whether their transaction will meet the definition of a merger and whether it must be notified to the FCCPC. The FCCPC recognises that consumer protection requires a joint responsibility by different regulators and agencies. It intended to provide for regulatory overlap in order to ensure complete coverage and protection of consumers. As such, while the FCCPC bears the responsibility of overall oversight over consumer protection, it intends to develop strategic alliances and encourages collaboration with different sector regulators.

 Section 92 of the FCCPA provides that a merger occurs when “one or more undertakings directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another undertaking” and may occur through the purchase or lease of shares; an interest in assets of an undertaking; the amalgamation or other combination with the undertaking; or a joint venture. Notifiable mergers must meet the above mentioned definition of a merger as well as meet the relevant merger thresholds set by the FCCPC. Mergers will be notifiable either where the parties to the merger in Nigeria have an annual turnover of above NGN 1 billion in the year preceding the merger; or where the annual turnover of the Nigerian target firm was more than NGN 500 million in the year preceding the merger. Mergers which do not meet the above threshold are classified as small mergers and need not notify their transaction, although section 95(3) of the FCCPC provides that within six months of the implementation of the merger, the FCCPC may require notification if it is of the opinion that the merger may substantially prevent or lessen competition in the market.

Mergers that meet the thresholds must obtain the FCCPC’s permission prior to implementation of the merger. As mentioned above, small mergers may be implemented without prior permission unless otherwise stipulated by the FCCPC. Oluyode clarified that while previously there was some confusion regarding the filing fees of foreign-to-foreign mergers, the FCCPC requires only the Nigerian local turnover to be used to calculate a filing fee.

In this regard, foreign-to-foreign merger approval is required by the FCCPC where a transaction taking place outside of Nigeria will have the effect of altering the control of a business, any part of a business or any asset of a business existing in Nigeria.

Of increasing importance in African antitrust law is the consideration of public interest factors in merger notifications. While the FCCPC representatives noted that the conditions the FCCPC has already imposed have related mainly to competition-based concerns, as opposed to public interest concerns, this does not mean that the FCCPC does not regard public interest concerns as important. The FCCPA prescribes that the FCCPC will consider whether a transaction can be justified on substantial public interest grounds. In this regard, the FCCPC will consider the factors in section 94(4) of the FCCPA, namely: the effect on a particular industrial sector or region; employment; the ability of national industries to compete in international markets; as well as the ability of small and medium scale enterprises to become competitive. Oluyode confirmed that the Minister of Trade, Industry and Investment may, at any point in time during a merger analysis, make his own representations concerning substantial and merger-specific public interest concerns which will be considered by the FCCPC.

Currently, the FCCPC has not published any of its decisions, however, it intends to begin publishing  its decisions on its website in the course of 2022 for public access.

What to expect going forward:

The FCCPC is set out for success, particularly having regard to the wide range of precedent available to it. As previously mentioned, the FCCPA was modeled off of South African competition legislation and the FCCPC intends to use the precedent of well-established jurisdictions such as those in Europe, the US and South Africa. Currently, the FCCPC is working on finalising its draft regulations and it is important that this is done timeously for the purposes of attaining clarity.

With regards to the extent to which parties who want to attain immunity from the FCCPC must admit their liability,  Currie noted that in many jurisdictions there is question on whether an admission of guilt is required or whether parties should be permitted to pay a penalty without a formal admission of guilt in their settlement. Often, the latter is a preferred option as parties usually prefer to pay a penalty to avoid the costs of litigation and civil follow-on damages. In response, Ojugo noted that as it stands, the FCCPC currently insists that parties take absolute responsibility for their actions. As a result, admission is an absolute requirement if a violating party wishes to benefit from the FCCPC’s leniency program. It remains to be seen whether an admission of guilt will continue to remain an absolute requirement. This will likely be addressed in the FCCPC’s Leniency Rules once they are published.

[Michael-James Currie is a competition lawyer and Director at Primerio. He serves as the Global Law Expert for Competition Law in Nigeria and is considered a leading competition lawyer across Africa including Best Lawyers for Competition Law in South Africa. He can be contacted at m.currie@primerio.international]

UPCOMING – Franklins & Primerio Hosted African Antitrust Event

If you haven’t registered yet, there are a few more hours to go before the Primerio and Franklin société d’avocats (Law Firm) first, of a series, webinar on Regulatory and Investment Risks in Africa kicks off at 3pm CET/SAST: 9am ET on 13 October 2021.

This session will explore antitrust developments in Southern and Western Africa and will be held in English and in French.

See link below to register (for free).

Speakers include: Andreas Stargard John Oxenham Joël Rault Lionel Lesur and Jérôme Michel

Click HERE to register

Mozambican Competition Authority Issues Ministerial Decree to Amend Merger Filing Fees

By Nicola Taljaard

On the 16th of August 2021, the Competition Authority of Mozambique (“CRA”) made certain vital amendments to its merger filing fees as per Decree no. 77/2021 (“Decree”). The amendments come at a crucial time considering the recent operationalisation of the CRA in Mozambique and long period of time for which the filing fees remained exorbitantly high. Until recently, the fees were inordinately high compared to both the neighbouring countries of Mozambique, as well as those on the broader global spectrum. The amendments consequently hold potential for improvement of the steadily strengthening African mergers and acquisitions market, and it is expected that similar developments will continue to follow.

It is provided in the Decree that the applicable filing fees are now 0.11% of the turnover in the year before filing with a maximum filing fee value of 2.25 million Meticais (approx. R530 000 as the exchange rate stands on 25 August 2021). Before this amendment was passed, Ministerial Decree no. 79/2015 set the applicable filing fee as an exceptionally high 5% of the turnover in the year before filing. This position was highly controversial, and potentially dissuaded potential investors.

An issue which remains unresolved following the publication of the Decree is that of the relevant companies’ turnover. Although the legislative procedure intended to clarify exactly which companies’ turnover should be used to determine the notification fee, it has failed to do so. However, upon interpreting Article 12 of the Competition Law Regulation systematically, it may be concluded that the turnover applicable to the transaction is that realised in Mozambique in the preceding financial year by all of the companies who are party to the deal. Such an interpretation is also consistent with common practice.

As of the 23rd of August, the Decree officially entered into force, an consequently should be applied by the CRA to cases both pending and upcoming, insofar as the filing fee has not yet been paid. This rationale is based on Resolution no. 1/2021 which stipulates that notification is only fully effective once payment of the filing fee has occurred. Thus, various notifications which have been submitted to the CRA, but not yet finalised with the relevant payment due to concerns regarding the high notification fees, are predicted to be paid for and processed in accordance with the modified rates soon.

UPDATE: Nigeria Federal Competition and Consumer Protection Commission Publishes Revised Merger Filing Fees

By Jemma Muller and Nicola Taljaard

On 2 August 2021, the Federal Competition and Consumer Protection Commission (“FCCPC”) made important amendments to the filing fees prescribed in the Merger Review Regulations, 2020 (“Regulations”). The amendments provide much needed clarification with regards to fees payable regarding the filing of a merger in Nigeria, particularly where the merger involves a global acquisition. These amendments come at a crucial time as Nigeria’s merger control regime is fast becoming one of the more active on the African continent.

The amendments clarify that the calculation of the filing fees in respect of transactions which involve a global acquisition is only the turnover attributable to the local component in Nigeria. In other words, where previously it was not clear whether the filing fee was to be calculated on the entire consideration of the global transaction, the amendments clarify that it is only the turnover of the Nigerian component (i.e. the parties’ Nigerian derived turnover) of the transaction which should be used.

The amendments also provide clarity in respect of the turnover which should be used for purposes of calculating the filing fee in respect of Private Investment Entities. The turnover for Private Investment Entities is clarified to be the combined turnover of the Fund (in Nigeria) as well as the target.

Other notable changes to the calculation of merger filing fees include the following:

  • The percentages used for purposes of calculating the applicable filing fee for the first N500 million increased from 0.3% to 0.45% in respect of both the consideration of the transaction as well as the last combined annual turnover;
  • The percentages used for purposes of calculating the applicable filing fee for the next N500 million increased from 0.225% to 0.4% in respect of both the consideration of the transaction as well as last combined annual turnover; and
  • In respect of any sum above N1 billion, the percentage applicable to the consideration of the transaction increased from 0.15% to 0.35%, while the percentage in respect of the annual turnover component decreased quite significantly from 0.75% to 0.35%.

Primerio director, Michael-James Currie, says that these amendments are welcomed as they bring filing fees in Nigeria in line closer in line with international best practice and is likely to positively contribute to the Nigerian merger control regime.

SOUTH AFRICA: EXEMPTIONS TO AID CONSUMERS DURING AND AFTER RIOTS

By Charl van der Merwe and Gina Lodolo

On 15 July 2021, Ebrahim Patel, the Minister of Trade Industry and Competition, published a block exemption for the supply of essential goods (“Exemption”), which came into effect on the day of publication and is granted until 15 August 2021, unless extended or withdrawn.

The Exemption is aimed at allowing conduct that would usually fall foul of Section 4 and 5 of the Competition Act 89 of 1998, as amended (“Act”) due to the conduct being a restricted horizontal (conduct between competitors) or vertical (conduct between suppliers and customers) practice.

The authority to grant exemptions is derived from section 10(10) read with section 78(1) of the Act. Section 10(10) of the Act states that the “Minister may, after consultation with the Competition Commission, and in order to give effect to the purposes of this Act as set out in section 2, issue regulations in terms of section 78 exempting a category of agreements or practices from the application of this Chapter”.

These specific Exemptions were granted in light of the recent riots in South Africa, which have caused massive losses at retail level as well as supply chain shortages and disruptions.  The purpose of the Exemption is to prevent a shortage of essential goods within South Africa, especially to poorer households and small businesses. These Exemptions apply to suppliers of essential goods. Essential goods are defined to mean: “basic food and consumer items, emergency products, medical and hygiene supplies (including pharmaceutical products), refined petroleum products and emergency clean-up products. Essential goods include the final good itself as well as all inputs in the supply chain required for the production, distribution and retail of the essential goods” (“Essential Goods Suppliers”).

The Exemption provides that Essential Goods Suppliers may communicate and coordinate with each other to ascertain the loss of stock, the gravity of shortages and their location as well as availability of stock in particular areas to gauge the ability of different Essential Goods Suppliers to supply to areas that are experiencing shortages and have a higher demand, including supply to smaller businesses.

Essential Goods Suppliers may also coordinate on inputs, stock expansion or capacity and equitable distribution between Essential Goods Suppliers. Coordinated distribution of essential goods to different geographical areas within South Africa will be allowed if connected to anticipated shortages of a type of essential good or an anticipated shortage of essential goods in a specific area.

The Exemption contains express provisions to monitor all conduct in terms of the Exemption. Essential Goods Suppliers must keep minutes of all meetings and communication and such minutes, as well as written records of agreements must submitted to the Competition Commission.

The Exemption will provide welcomed relief but is not without risk. Communications between competitors as well as customers/suppliers pose various difficulties not only from a competition law perspective, but also from a commercial perspective. Conduct and exchanges of information in terms of the Exemption may have lasting consequences. It is imperative that firms are fully aware of the perils of so engaging in terms of the Exemption, particularly regarding meeting minutes and the positive duty, in terms of case precedent, to distance yourself from potentially anti-competitive conduct.

Finally, the Exemptions do not allow price-fixing and collusive tendering, nor do they authorize discussions on pricing of essential goods. Firms should be aware that price-gauging is still prohibited in terms of the Consumer and Customer Protection and National Disaster Management Regulations and Directions issued on 19 March 2020.

Primerio Director, Michael-James Currie, says that the Commission published a report following the exemptions granted during the Covid-19 State of Disaster confirming the positive effects that collaboration between competitors can have in certain instances. This calls into question whether the “characterization” test ought to be recognized as a substantive defence to hardcore cartel conduct cases in South Africa.

These Exemptions can be accessed at: https://www.gov.za/sites/default/files/gcis_document/202107/44854gon616.pdf