The level of antitrust enforcement across Africa has increased markedly over the past decade and with more jurisdictions coming on stream and establishing competition law regimes, the role of antitrust laws and the risk of non-compliance is becoming more pronounced than ever before.
Pan-African competition lawyer, Michael-James Currie, says that the role and applicable standards relating to competition law enforcement in developing countries is more divergent from those established in the more developed jurisdictions. A one-size fits all approach to competition law compliance is becoming less feasible – particularly as the role of public interest or non-traditional competition law factors are increasingly being taken into account in competition policy and legislation. Likewise, the thresholds for establishing “dominance” is generally lower across many of the African jurisdictions than those generally utilised in the United States or Europe and firms’ therefore need to be mindful that the traditional assessments of welfare (whether it is total welfare or consumer welfare) is not necessarily the benchmark. The focus of addressing perceived high levels of concentration in the market and opening up the market to smaller players is hallmark of a number of the more developed African agencies – particularly South Africa and Kenya.
Primerio Director, John Oxenham, says that the next decade of competition law enforcement in Africa is likely to be particularly important as the continent moves closer towards establishing the African Continental Free Trade Agreement. The harmonisation between regional bodies and domestic regimes remains an important challenges facing many agencies and this will become all the more relevant as member states negotiate an appropriate competition law framework suitable for the Continent.
Africanantitrust has throughout 2019 provided our readers with updates, opinion pieces and articles capturing the key competition law developments across Africa as they occur and our editors are committed to continuing doing so in 2020.
To start off the year, the editors at AfricanAntitrust provide a snapshot of the key highlights of 2019 as well as some of the most important developments to be expected in 2020 (although there will no doubt be many more).
Nigeria’s new Commission and the recent release of foreign merger control guidelines
In January 2019 the Federal Competition and Consumer Protection Act (the “Act”) was signed into law in Nigeria.
Nigeria did not have a dedicated competition law regime until then. The Act, which is not too dissimilar from the South African Competition Act, will regulate inter alia merger control, cartel conduct, restrictive vertical practices and abuse of dominance.
The Act is not currently being enforced as the Federal Competition and Consumer Commission (the “Commission”) is yet to be formally established although this is expected to take place soon.
In relation to mergers, section 2(3)(d) of the Act empowers the Commission to have regulatory oversight over all indirect transfers/ acquisitions of assets or shares which are located outside of Nigeria, and which results in the change of control of a Nigerian business.
Pursuant to the above-mentioned clause, on 13 November 2019, the Commission published the “Guidelines on the Simplified Process for Foreign to Foreign Mergers with a Nigerian Component”. The Guidelines specifies the type of information which is required in respect of the merging parties, as well as the mandatory supporting documentation which should accompany a filing. Furthermore, the Guidelines assist parties to a foreign to foreign merger by providing explicit rules on how the merger is to be treated, notified as well as the simplified procedure with regards to the merger.
Primerio director, Andreas Stargard notes that the implementation of the Guidelines will be interesting as the Guidelines are the first of its kind in Africa and is largely influenced by the European merger control regime.
The Guidelines also provide information regarding filing fees – although the calculation of filing fees remains somewhat unclear and requires further clarification.
Kenya’s Buyer Power Provisions
In Kenya, the Competition Amendment Act (the Amendment Act) has provided a new provision, Section 24A, which deals with buyer power.
Abusive “buyer power” is now expressly prohibited and any person who engages in such conduct will be considered to have committed an offence. Such an offence carries the penalty of a fine not exceeding 10 million shillings or imprisonment not exceeding 5 years. The abuse of buyer power is, therefore, viewed as a serious offence.
The “abuse of buyer power” is defined in Section 24A (2) of the Amendment Act as the influence exercised by a purchaser to gain more favourable terms, or imposing:
“long-term opportunity cost including harm or withheld benefit, which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings”.
In determining whether an abuse of buyer power exists, the Authority will take into account;
- the nature and determination of contract terms between the concerned undertakings;
- the payment requested for access to infrastructure; and
- the price paid to suppliers as stated in section 24A (5) of the Amendment Act.
The above mentioned provision will likely have the effect of affording suppliers greater protection, particularly small suppliers who have a weak bargaining power in comparison to powerful and dominant purchasers. It is furthermore important to protect such suppliers as the negative effects of the abuse of buyer power are often transferred to consumers, for example high prices.
Most notably, as Michael-James Currie has previously pointed out when critically assessing the new buyer power provisions, it is not a prerequisite to prove that the respondent is “dominant” before the provisions of section 24A(2) may be applicable. Rather, the provision considers the bargaining power between a particular supplier and customer. This provision may be particularly harmful to consumer welfare if suppliers who negotiate favourable prices with suppliers which are passed on to consumers, are deterred from doing so due to the risks associated with contravening this provision.
Recent amendments in the Botswana competition landscape
The Botswana Competition Amendment Act recently came into force on 2 December 2019, and is expected to transform competition law in Botswana in various respects, particularly in terms of horizontal restrictive practices, abuse of dominance, exemptions and merger penalties.
Oxenham says that the previous Act did not provide for criminal liability in respect of cartel conduct, however, under Section 26 of the Amendment Act this position has changed. In terms of the Amendment Act, any director or employee who is found to have engaged in restrictive horizontal practices is liable to a fine not exceeding P100 000 or to a term of imprisonment not exceeding five years or to both.
With respect to abuse of dominance, the Act previously did not list particular conduct that was considered to be an abuse of dominance. The Amendment Act provides clarity on the type of conduct that is likely to be considered abusive. The clarification is welcomed and will hopefully ensure greater compliance since undertakings now have the tools to foster a better understanding of what constitutes abuse of dominance and are better placed to ensure that their conduct does not fall foul of the prohibition.
The Amendment Act also caters for exemptions. The terms and conditions of any exemptions will be determined by the Authority who will take both competition law and public interest factors into account when assessing whether to grant an exemption.
In relation to penalties for gun-jumping (i.e. merger implementation prior to approval), the Amendment Act provides much needed clarity. Section 58(3) of the Acts states that implementing a merger without prior approval by the Authority will attract a fine not exceeding 10% of the consideration or the combined turnover of the parties involved in the merger – whichever is greater. Merging parties are, therefore, advised to ensure timeous notification is made in respect of any merger which meets the thresholds for a mandatory filing to seek merger approval in Botswana.
The Amendment Act has also introduced a provision regarding the consideration of a rejected merger. Parties can apply for reconsideration of a merger within 14 days from the date of rejection. Such a provision provides the parties with an additional opportunity to provide oral evidence which is also a positive development.
Angola’s competition regime coming on stream
The Competition Act in Angola is now fully in force. The Competition Regulatory Authority (the “CRA”) is responsible for prosecuting offences. Conduct which occurred prior to the establishment of the Authority may still be prosecuted in certain circumstances.
The Competition Act prohibits both horizontal and vertical agreements that restrict competition in the Angolan market. Accordingly, undertakings have to be cautious in relation to the types of agreements they enter into as it may result in liability and prosecution by the CRA. The Act does however provide for exemptions from the prohibitions with the exception of abuse of dominance and abuse of economic dependence. Exemptions are only available upon application and the parties must demonstrate that they comply with certain conditions in order to be granted an exemption.
Importantly, Angola’s Competition Act creates a formal merger control regime. Mergers will now be subject to prior notification to the CRA and they have to meet certain specified requirements. The thresholds requiring prior notification are the following:
- the creation, acquisition or reinforcement of a market share which is equal to or higher than 50% in the domestic market or a substantial part of it; or
- the parties involved in the concentration exceeded a combined turnover in Angola of 3.5 billion Kwanzas in the preceding financial year; or
- the creation, acquisition or reinforcement of a market share which is equal to or higher than 30%, but less than 50% in the relevant domestic market or a substantial part of it, if two or more of the undertakings achieved more than 450 million Kwanzas individual turnover in the preceding financial year.
Mergers must not hamper competition and must be consistent with public interest considerations such as:
- a particular economic sector or region;
- the relevant employment level;
- the ability of small or historically disadvantaged enterprises to become competitive; or
- the capability of the industry in Angola to compete internationally.
The sanctions for non-compliance with the Act’s merger provisions could result in the impositions of fines of 1%-10% of a company’s turnover for the preceding year, as well as other conditions which the Authority deems appropriate. Should a party fail to comply with relevant sanctions or conditions imposed by the Authority or provide with false information, the Authority may levy periodic penalty payments of up to 10% of the merging party’s average turnover daily.
In February 2019, the Competition Amendment Act was signed into law and is widely regarded as the most significant amendments to the South African Competition Act in two decades.
The majority of the provisions contained in the Amendment Act have been brought into force. Those amendments – particularly those relating to buyer power, price discrimination and national security approval regarding foreign mergers are expected to be brought into effect in 2020.
Some important aspects of the Amendment Act include:Mergers involving foreign acquiring firms :
The President is to establish a Committee which will be mandated to consider the implementation of mergers which involve a foreign acquiring firm and the potential adverse effect of the merger on the national security interests of the Republic. Essentially this means that a foreign acquiring firm is required to notify both the Competition Commission, as well as file a notice with the Committee. Security interests are broadly defined.
The insertion of Section 8(4)(a) essentially prohibits a dominant firm from requiring or imposing unfair prices or other trading conditions on a supplier that is a small and medium business (“SMEs”) or a firm controlled or owned by historically disadvantaged persons (“HDPs”). This section also introduces a reverse onus on the dominant firm to prove that its trading terms or conditions are not unfair nor that there has been any attempt to refuse to deal with a supplier in order to circumvent the operation of this clause.
The regulations regarding Buyer Power are currently only applicable to the following sectors:
- Grocery retail; and
- Online intermediation services.
In determining price discrimination by a dominant firm, the Amendment Act has created two parallel self-standing tests. The Act has retained the traditional test for price discrimination which requires proof of a substantial lessening of competition, but has also prohibited a dominant firm from engaging in price discrimination which impedes the ability of Small or Medium Enterprises (“SMEs”) or firms controlled by historically disadvantaged persons (HDPs) from “participating effectively” in the market. Dominant firms are also not allowed to avoid or refuse selling goods or services to SMEs or firms owned or controlled by HDPs to circumvent the section. Significantly, and unlike the traditional price discrimination provision, Section 9(1)(a)(ii) does not require a complainant to prove any anti-competitive effects or consumer welfare effects.
The Amendment Act has removed the “yellow-card” principle and administrative penalties will be imposed for any contravention. Previously, penalties for first-time offences were only applicable to cartel conduct, minimum resale price maintenance and certain abuse of dominance conduct (such as excessive pricing or predation).
The role of public interest factors in the merger control assessment has become more prominent by firstly elevating the standard of public interest factors to equal footing with traditional competition law factors (i.e. SLC tests) and also broadening the public interest grounds which must be taken into consideration to specifically include transformation objectives.
In December 2019, the South African Competition Appeal Court heard the appeal from the Tribunal in relation to the “Banking Forex” Matter.
Oxenham says that this case raises a number of jurisdictional issues in relation to the scope and powers of the South African Competition Authorities to impose penalties on foreign firms for engaging in cartel conduct outside of South Africa. Both personal jurisdiction and subject matter jurisdiction is being contested.
In 2019, the Commission fully utilized its powers in Section 43A-G and 23 in initiating and conducting market inquiries as well as its duty to remedy adverse effects on competition. Three market inquiries were conducted in 2019, namely:
- The Health Market Inquiry;
- The Grocery Retail Market Inquiry; and
- The Data Services Market Inquiry
The implementation of the Commission’s recommendations of the abovementioned market inquiries will likely be a controversial topic, and much push-back is expected from parties implicated in the recommendations.