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South Africa-Dawn Raids in Gauteng in Relation to Suppliers of Fire Control and Protection Systems

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The South African Competition Commission (SACC) launched a dawn raid, in terms of Section 48 of the Competition Act, 89 of 1998, on the offices of six companies in Gauteng, who supply fire control and protection systems on 20 March 2015. The companies subjected to the dawn raid include:

  •  Belfa Fire (Pty) Ltd;
  • Cross Fire Management (Pty) Ltd;
  • Fire Control Systems (Pty) Ltd;
  • QD Air (Pty) Ltd;
  • Technological Fire Innovations (Pty) Ltd; and
  • Fireco (Pty) Ltd

According to the SACC’s spokesperson, the SACC has reasonable grounds to believe that these companies have been involved in collusion when bidding for tenders in respect to the provision of fire control and protection systems.  The dawn raid forms part of an on-going investigation into this alleged anti-competitive conduct. This is the first dawn raid conducted in 2015.  The SACC  conducted 3 dawn raids in 2014, after a substantial period of no activity signalling that the trend in 2014 may well continue in 2015.  Some of the dawn raids conducted in 2014 include:

  •  Investchem Pty Ltd (Investchem) and Akulu Marchon Pty Ltd (Akulu Marchon), in Kempton Park, Gauteng (December 2014);
  • Unilever in Durban and Sime Darby Hudson & Knight in Boksburg (April 2014);
  • Precision and Sons, Eldan Auto Body in Pretoria West and the Vehicle Accident Assessment Centre in Centurion (July 2014).

The SACC appears content to increasingly uitilise dawn raids as an investigative tool during its investigations into anti-competitive conduct. The increase in the use of dawn raids coincides with a change of senior management at the SACC.

Kowlessur appointed as head of Mauritian Competition Commission

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New head of CCM announced

Amid some controversy over other past (and some other pending) political appointments and potential nepotism, Mr. Deshmuk Kowlessur has been appointed as new head of the Competition Commission in Mauritius.

An article in Le Mauricien states (French skills required) that the rules have “followed to a T” in Mr. Kowlessur’s case, thereby alleviating readers’ concerns that the Competition Commission’s recent appointment may have been similarly tainted:

Les nominations de proches du MSM continuent conformément à l’engagement donné par Pravind Jugnauth. Et c’est d’ailleurs un proche, Deshmuk Kowlessur, qui décroche le poste de directeur de la Competition Commission en attendant que d’autres affidés du Sun Trust soient casés.

Deshmuk Kowlessur, un professionnel de la gestion qui a occupé divers postes dans le management de quelque grandes compagnies dont Rogers ou Emtel, est le beau-frère du beau-frère du leader du MSM et il avait déjà occupé le poste de président de la SIC lorsque Pravind Jugnauth était vice-Premier ministre et ministre des Finances entre 2003 et 2005. Week-End a toutefois appris que, contrairement à l’ICAC, les procédures et les consultations d’usage ont été respectées à la lettre pour la nomination de M. Kowlessur.

South Africa: Competition Commission makes available draft guidelines for the assessment of the public interest criteria in merger control matters

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In what is certainly a most welcome development, the South African Competition Commission (SACC) has made available for comment draft guidelines for the Assessment of Public Interest Provisions in Merger control.

The Draft Guidelines seek to provide guidance on the Commission’s approach to analysing mergers by indicating the approach that the Commission is likely to follow and the types of information that the Commission may require when evaluating public interest grounds in terms of section 12A(3) of the Act.

The Guidelines come after recent Competition Tribunal and Competition Appeal Court decisions and the ongoing debate among stakeholders on how public interest issues should be assessed in merger investigations. Contributors and editors of AAT have also called for clarity from the SACC.  In this regard see 140822-What-is-competition-good-for-FINAL

Written comments on the guidelines, and not the accompanying background information document, can be e-mailed to Ms. Seema Nunkoo at SeemaN@compcom.co.za. Alternatively, stakeholders can call (012) 394 3203, for further enquires.

The closing date for comments is Monday, 23 February 2015.

AAT welcomes the SACC’s initiative particularly in light of the fact that public interest conditions imposed in the past have been a cause for concern.  In many instances merging parties were faced with public interest conditions with little or no nexus to the transaction which caused delays and unnecessary and significant costs to the parties in having to fulfill the conditions.  Clear guidelines are invaluable to the broader competition law community and particularly to the business community.

Final-Background-Note-to-Public-Interest-Guideline-210115 Final-Public-Interest-Guidelines-public-version-210115

South Africa: Competition Commission publishes its Draft Guidelines for the Determination of Administrative Penalties for Prohibited Practices  

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It in what AAT regards as a highly commendable step, the South African Competition Commission (“Commission“)  has recognised that there has been a need voiced by the Competition Tribunal (“Tribunal”), the Competition Appeal Court (“CAC”) and corporate South Africa for the Commission to develop guidelines for determining administrative penalties.

The Commission has published Guidelines for the Determination of Administrative Penalties for Prohibited Practices (“November Guidelines”), which set out  a proposed methodology which the Commission will (consistently) follow when concluding consent agreements, settlement agreements and when recommending an administrative penalty in a complaint referral before the Tribunal.  The Commission’s methodology is nothing new, it is based on the Tribunal’s six-step approach set out in Competition Commission v. Aveng (Africa) Limited t/a Steeledale, Reinforcing Mesh Solutions (Pty) Ltd, Vulcania Reinforcing (Pty) Ltd and BRC Mesh Reinforcing (Pty) Ltd  and confirmed by the CAC in Reinforcing Mesh Solutions (Pty) Ltd and Vulcania Reinforcing (Pty) Ltd v. Competition Commission.  However, the Commission has now listed factors, which are not explicitly included in the Competition Act, which should be taken into account, such as whether the firm has in any way delayed, obstructed, and/or assisted in expediting the investigation and litigation process and the Commission is also proposing an elaboration of the factors provided for in the Competition Act.  One such example is section 59(3)(c), which deals with the behaviour of the firm in the market during the period of the contravention.  In the November Guidelines, the Commission has provided a list of factors to be taken into account, such as the involvement of directors and/or senior management in the contravention and the firm’s encouragement of staff to participate in the contraventions for example. through personal incentives linked to the success of the contravention.  In addition, the Commission has proposed in its November Guidelines, that it “may impute liability for payment of the final administrative penalty on a holding company (parent company) where its subsidiary has been found to have contravened the Act.”

 The November Guidelines have been made available to the public for comment by Friday, 30 January 2015.  Written comments on the guidelines can be e-mailed to: NellyS@compcom.co.za.

 

South Africa- Competition Commission conducts third dawn raid this year

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Ending off a year of numerous dawn raids, the Commission announced yesterday in a press statement that it had conducted a search and seizure / dawn raid operation at the offices of InvestChem (Pty) Ltd (“InvestChem”) and Akulu Marchon (Pty) Ltd (“Akulu Marchon”) in Kempton Park, Johannesburg. The firms manufacture and supply a range of surfactant products. Surfactants may act as detergents, wetting agents, emulsifiers, foaming agents, dishwashing liquids, soaps, car cleaning products and dispersants.
InvestChem is the South African subsidiary of Inchem Holdings Ltd, which is a Bermuda-based company which has other subsidiaries based in the USA and Portugal. InvestChem develops, manufactures and supplies a range of surfactant products which are used in the detergent and toiletry industries.
Akulu Marchon, which is one of the businesses of AECI Chemicals, supplies chemical raw materials for cosmetics, toiletry and detergent products in Southern Africa. These products include petroleum jelly and white mineral oils for the South African ethnic skin and hair care markets, locally produced and imported specialty surfactants for household, personal care products and chemical specialties for the personal care and cosmetic industries.
The Commission indicated that the dawn raid formed part of the Commission’s ongoing investigation into collusive conduct in the market for the production and supply of a range of surfactants products used as input materials in the manufacture of blended household detergents, cosmetics and toiletry products.
According to the Commission, from 2003, the parties held meetings and agreed to fix the prices for surfactants and allocated customers between each other which is prohibited by the South African Competition Act and the Commission understands the alleged conduct is currently ongoing.
The Commissioner, Tembinkosi Bonakele stated the following in relation to the dawn raid, “I believe that the information that will be obtained from today’s operation will enable the Commission to determine whether or not the parties have indeed engaged in collusive conduct. However, as part of any investigation, we also wish to urge anyone, be it business or individuals with further information to come forward and assist the Commission in concluding this investigation”.
Following a four year dawn raid “drought”, the Commission had conducted a dawn raid in July 2014 at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion. Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles and they are approved auto body repairers to Original Equipment Manufacturers. In April 2014, the Commission conducted a dawn raid at the offices of Unilever South Africa (Pty) Ltd and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.

Tech antitrust news: disrupting M-Pesa mobile payment monopoly? cashless NFC mandatory?

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Disruption & entry — mandatory cashlessness — and alleged collective dominance

Perhaps they don’t realise it themselves, but the journalists at ITWeb Africa have written antitrust/competition law strories in three of their recent reports, covering the rapidly growing and lucrative tech world in Africa: their stories range (in antitrust terms) from collective dominance in Africa’s tech sphere, to a challenger’s new entry in mobile payments, to a mandatory government-backed mobile NFC system for Kenyan transit commuters that allegedly causes more consumer harm than benefit by going cashless and giving the spoils all to one monopolist.

We take each in turn.

Disruption to M-Pesa’s mobile payment crown?

It looks as though the M-Pesa crown may be taken through the competitive process (and without active intervention by the competition authority) after all:

Equity Bank is about to join Airtel’s challenge to the leading position of Safaricom Limited’s M-Pesa service (on which AAT has written extensively before).  The magazine reports that an ultra-thin SIM card technology and the Kenyan bank have reached a pact that will allow them to compete with M-Pesa’s service, on top of existing user SIM cards.

Equity Bank is “determined to challenge” Safaricom’s M-Pesa mobile money service with the help of Taiwanese headquartered Taisys, which claims that the Communications Authority of Kenya “last month tentatively gave Equity Bank the go-ahead to use thin SIMs for one year.”  Equity is reported to be the “largest bank in East Africa with almost 9 million bank accounts.”

The new technology of a “stick-on” slim-SIM card allows the user “to execute mobile banking transactions, releasing the bank from the limitations of a telco-issued banking SIM.”  Safaricom had previously complained to the authority, arguing that PIN theft and denial of service are real risks that counsel against use of new SIMs.

In other related news, second M-Pesa challenger Airtel has secured a contract with the Kenyan Revenue Service that allows Kenyan citizens to pay their taxes using Airtel’s mobile money service.
The cashless economy: is the imminent Kenyan My1963 NFC payment system anti-competitive?

In this story about Nairobi’s public transport system’s much-derided effort to go entirely cashless – dubbed “My1963” -, the magazine reports that the Consumer Federation of Kenya (Cofek) claims that the digital payment system benefits “all except the consumer”.  In Cofek’s statement (“7 reasons why Cofek will fight to stop the #My1963 PSV’s cashless payment fraud“), the federation makes seven distinct arguments against the legality of the scheme.  Two relevant criticisms from the competition-law perspective are the following:

  1. no competitive bidding process: the body alleges that, due to politicians’ ties to banking and other interests, the correct process for entertaining competitive bids was not followed in accordance with proper public procurement rules.
  2. supra-competitive (monopolistic) pricing: an “exorbitant” 3% commission is being charged by the service provider of the system, as agreed between the Kenyan National Transport Safety Authority and the banks.

Cofek also urges the Competition Authority of Kenya (CAK) to “investigate the #My1963 and entire cashless payment system with a view to finding it uncompetitive, predatory and anti-consumer and market interest” [sic].

Viber, WhatsApp, YouTube: dominant in Africa?

In its report on alleged dominance by three tech companies, the paper begins by pointing out the (some more and some less) startling statistics:

WhatsApp is the leading third-party messaging application, Viber has overtaken Skype as the leading VoIP service on several networks and YouTube is the top video streaming app. … on Africa’s mobile networks WhatsApp accounts for 7% of total traffic, while Viber has overtaken Skype as a VoIP service. Streaming video accounts for just over 6% of downstream traffic – significantly lower than North America and Europe where it accounts for more than 30%.

WAP Browsing has seen a significant decline in traffic share thanks to increased adoption of smartphones throughout the region [–Ed.: on the latter point, the journal also has an interesting separate piece, discussing the new era of WiFi connectivity in Africa].

Being called “dominant” may be a badge of honor to the sales staff, but it is a dangerous moniker when viewed by the competition-law enforcers through their monopolisation lens.  WhatsApp, Viber and YouTube (whose parent is, of course, the already dominant Google) may therefore have to begin thinking about treading more lightly in terms of their dealings with competitors on the African continent, lest they wish to prompt governmental scrutiny from the likes of the South African Competition Commission, the Kenyan Competition Authority, or COMESA’s CCC.

South Africa: Holcim and Lafarge “cement deal” to be reconsidered by Competition Tribunal

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The South African Competition Commission (SACC) recently conditionally approved the intermediate merger between Lafarge and Holcim.

The SACC imposed a condition on the transaction which requires that Holcim sell its share in Afrisam within the next three years. (Afrisam, together with PPC Ltd, is one of the top two cement producers in South Africa).

Over and above the shareholding in Afrisam, up until recently, Afrisam and Holcim had an agreement in terms of which Holcim rendered certain technical assistance to Afrisam. The SACC found that, due Holcim’s shareholding in Afrisam and the afirementioned agreement between Afrisam and Holcim, Holcim had access to commercially sensitive information belonging to Afrisam which could lead to anti-competitive effects. Accordingly, the condition was imposed.

The merger is part of a global integration between Holcim and LaFarge, the world’s top two cement producers, to become the world’s biggest cement manufacturer.

The SACC recently announced that the merging parties have filed a request for reconsideration of the SACC’s conditional approval and accordingly the merger will be considered afresh before the South African Competition Tribunal.

South Africa- Competition Tribunal confirms 10% turnover consent order

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The Competition Tribunal confirmed the settlement agreements concluded between the Competition Commission and two small furniture removal companies, Propack Removals and Cape Express Removals. Propack Removals was allegedly involved in over 500 instances of “cover pricing” and received a fine of R454 127, which is equal to the 10% of the firm’s turnover for the 2012 financial year, while Cape Express was allegedly involved in over 1700 instances of “cover pricing” and an administrative penalty of R645 710 has been imposed, which is equal to 10% of its turnover for the 2012 financial year.
The Competition Commission launched an investigation in 2010 against 69 furniture removal companies for colluding on tenders issued by government institutions such as the South African National Defence Force and South African Police Service, as well as corporate companies such as Pretoria Portland Cement. The Commission also conducted dawn raids at the offices of certain removal companies in 2010 to obtain evidence of the collusion.
Furniture removal companies, including well-known removal companies such as Stuttaford Van Lines and Elliott International, allegedly colluded in respect of over 3500 relocation tenders between 2007 and 2012. In terms of the collusive arrangement, the first removal company to be contacted for a quotation would offer to source two or more quotations on behalf of the customer. That removal company would subsequently request two or more of its competitors to provide quotes as “cover prices”. Such a price would have been agreed upon between the colluding bidders and the winner will have been pre-determined amongst the colluding bidders. The competitors would therefore submit a non-competitive quote which is not intended to win the tender for them.
The Commission has indicated that it is currently in discussions with several other removal companies involved in the collusion and it expects to reach settlements by the end of October 2014, which will be considered by the Tribunal.
The imposition of a penalty in the amount of 10% of a companies previous year’s financial turnover is the maximum amount which the Competition Tribunal may impose by way of administrative penalty. It is only imposed for the most serious breaches of the local legislation.

Kenya competition landscape active

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Zuku pay-TV launched complaint against DStv in Kenya

As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news.  Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.

In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.

The CAK has not indicated whether it is investigating the complaint yet.

Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy

In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.

To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.

The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.

Unfair competitors or clever innovators? Lessons from the sharing economy.

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new multi-part seriesInnovators face unfair competition claims

Our AAT multi-part series on innovation & antitrust is being continued by Professor Sofia Ranchordás. The AAT author just published a new paper on the ubiquitous “Sharing Economy” we are witnessing not only in the United States and Europe but also on the African continent (UBER has seen significant successes in Johannesburg and Cape Town, for instance).

Below is the abstract — for the full 45-page PDF article, to be published in the Minnesota Journal of Law, Science and Technology please go to SSRN here.

Sharing economy practices have become increasingly popular in the past years. From swapping systems, network transportation to private kitchens, sharing with strangers appears to be the new urban trend. Although Uber, Airbnb, and other online platforms have democratized the access to a number of services and facilities, multiple concerns have been raised as to the public safety, health and limited liability of these sharing economy practices. In addition, these innovative activities have been contested by professionals offering similar services that claim that sharing economy is opening the door to unfair competition. Regulators are at crossroads: on the one hand, innovation in sharing economy should not be stifled by excessive and outdated regulation; on the other, there is a real need to protect the users of these services from fraud, liability and unskilled service providers. This dilemma is far more complex than it seems since regulators are confronted here with an array of challenging questions: firstly, can these sharing economy practices be qualified as “innovations” worth protecting and encouraging? Secondly, should the regulation of these practices serve the same goals as the existing rules for the equivalent commercial services (e.g. taxi regulations)? Thirdly, how can regulation keep up with the evolving nature of these innovative practices? All these questions, come down to one simple problem: too little is known about the most socially effective ways of consistently regulating and promoting innovation. The solution of these problems implies analyzing two fields of study which still seem to be at an embryonic stage in the legal literature: the study of sharing economy practices and the relationship between innovation and law in this area. In this article, I analyze the challenges of regulating sharing economy from an ‘innovation law perspective’, i.e., I qualify these practices as innovations that should not be stifled by regulations but should not be left unregulated either. I start at an abstract level by defining the concept of innovation and explaining it characteristics. The “innovation law” perspective adopted in this article to analyze sharing economy implies an overreaching study of the relationship between law and innovation. This perspective elects innovation as the ultimate policy and regulatory goal and defends that law should be shaped according to this goal. In this context, I examine the multiple features of the innovation process in the specific case of sharing economy and the role played by different fields of law. Electing innovation as the ultimate policy target may however be devoid of meaning in a world where law is expected to pursue many other — and often conflicting — values. In this article, I examine the challenges of regulating innovation from the lens of sharing economy. This field offers us a solid case study to explore the concept of “innovation”, think about how regulators should look at the innovation process, how inadequate rules may have a negative impact on innovation, and how regulators should fine tune regulations to ensure that the advancement of innovation is balanced with other values such as public health or safety. I argue that the regulation of innovative sharing economy practices requires regulatory “openness”: less, but broader rules that do not stifle innovation while imposing a minimum of legal requirements that take into account the characteristics of innovative sharing economy practices, but that are open for future developments.