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Antitrust amnesty: new regime to go online soon

Posted on by Editor

kenya

Kenya to become latest competition jurisdiction with cartel leniency scheme

As Mugambi Mutegi of the Business Daily reports, Kenya is the latest antitrust jurisdiction to embrace a self-reporting leniency programme.
Mr Wang’ombe Kariuki, director of the CAK

Self-reporting of “hard-core” competition-law offences (such as price-fixing cartel conduct, market division, bid rigging, or group boycotts among horizontal competitors) has long been a staple of antitrust enforcement in the most developed jurisdictions, including the United States and the European Union.  In South Africa, cartel-whistleblowing leniency has just passed its 10th anniversary, and in the EU, the European Commission’s “Notice” on the non-imposition of fines in certain cartel cases (i.e., the EU’s leniency regime) recently celebrated its 18th birthday — nowadays, more than 75% of the EC’s cartel matters are uncovered thanks to one or many cartel members “snitching” on their counterparts, in exchange for full or partial amnesty from antitrust prosecution and attendant fines.

The Competition Authority of Kenya (CAK) has recently upped its rhetoric, threatening criminal sanctions against various business sectors’ potential cartel members and disputing jurisdiction of the multi-national, but still feeble, COMESA competition authority in merger cases.

In Africa, Kenya (AAT archive on CAK issues here) is now becoming a new member of the “Leniency Club”, rewarding whistleblowers with eased penalties for volunteering relevant tips and information on the workings of the cartel.  The CAK is acting to implement the provision of the Kenyan Finance Bill 2014, which allows it to terminate cartel investigations with lighter punishment for whistleblowers, all the way to a full pardon.

“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…”

The agency’s web site — which otherwise (unusually) refers to the Business Daily article quoted here, instead of issuing its own press release — tersely provides as follows:

Cartel firms get amnesty in new CAK regulation

The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.

The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.

Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.

The CAK’s Director General, Francis Wang’ombe Kariuki, is quoted as saying that the authority’s is merely awaiting Parliament’s amendment of the law, and that “[t]he settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts“.

South Africa: Competition Tribunal permits competitor intervention in merger involving Media24 and Paarl Media

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Following an intervention application which was heard by the Competition Tribunal (“Tribunal”) last week, the Tribunal has granted Caxton and CTP Publishers and Printers (“Caxton”) intervention status in the merger involving Media24 (Pty) Ltd (“Media24”), Paarl Media Group (Pty) Ltd, Paarl Media Holdings (Pty) Ltd and Paarl Coldset (Pty) Ltd (collectively referred to the “merger parties”).

The Tribunal has ordered that the intervention will include the control structure of Naspers Limited (”Naspers”), the interests (both direct and indirect) of the Naspers’ shareholders in printing and publishing and the competition effects of such interests in relation to the proposed merger.  In addition, the scope of Caxton’s intervention also includes whether the proposed merger will enhance coordination in the media industry and the effect of the proposed merger on the public interest.  Caxton is also entitled to submit proposed conditions, if any, to the Tribunal.

In addition, the Tribunal, in terms of a directive, ordered the merger parties to disclose all interests of Naspers Beleggings Limited, Keeromstraat 30 Beleggings Limited, Wheatfields 221 (Pty) Ltd, Sholto Investments BVI, De Goedgedacht.

The matter is of significant importance in ensuring South African merger control remains sacrosanct.  Merger control in South Africa  is, as in other jurisdictions,  an important mechanism to assess the impact of transactions on competition, however, it can only be effective if adequate and accurate information is provided by the merging parties to the SACC.  The content of a merger filing is usually vetted by the merging parties’ respective competition lawyers.

Disclosure of all shareholders’ interests (both direct and indirect) is of particular importance in respect of the control structures involved in the proposed transaction, in order to ensure that the Commission is able to conduct a proper assessment of the proposed transaction, taking into account the competitive landscape and the dynamic concomitant impact of the proposed transaction, by properly taking into account the relevant shareholders.  It is important that the merging parties are transparent in all of their dealings with the competition authorities and that the Commission is apprised of all the information during the merger investigation in order to conduct a proper investigation to avoid having the Tribunal send the merger back for further investigation and analysis to the Commission, as was ordered by the Tribunal in the Aspen/ Pfizer matter and more recently, in this decision of the Tribunal.

In addition, the merging parties are obliged to sign the respective Statements of Information (also referred to as the Form CC4(1) and Form CC4(2)) in respect of every merger which is filed with the Commission.  The Form CC4(2) explicitly states that the person authorised to submit the information confirms the accuracy, truthfulness and completeness of the information submitted to the Commission and that such person understands that it is an offence in terms of the Competition Act to provide any manner of false information.

The Tribunal’s directive clearly casts doubt as to whether the content of the original merger filing met the above criteria .

The matter does, however, demonstrate the importance of valid intervention by competitors, despite the intervention regime becoming somewhat tainted due to interventions by government and unions on the basis of alleged “public interest”  concerns.

 

 

Airtel Kenya requests probe of Safaricom for abuse of dominance in mobile money transfer market

Posted on by Editor

kenya

Mobile payment wars heating up in Kenya

Airtel Networks Kenya Limited (“Airtel”) has joined forces with Kenya-based Equity Bank to launch a similar mobile banking product, M-KESHO in July 2014 to the established product provided by Safaricom Limited (“Safaricom”).

Safaricom offers a product named “M-Pesa” to its customers in Kenya and Tanzania.  M-Pesa is a mobile-phone based money transfer and micro-financing service, launched in 2007 for Safaricom and Vodacom, the two largest mobile network operators in Kenya and Tanzania. The service enables its users to deposit and withdraw money, transfer money to other users and non-users, pay bills, purchase airtime and transfer money between the service and, in Kenya, a bank account.  Users of M-Pesa are charged a service fee for sending and withdrawing money.

By 2010, M-Pesa became the most successful mobile-phone-based financial service in the developing world.

In light of the imminent launch of the Airtel product, Airtel has lodged a complaint with the Competition Authority of Kenya on the basis that Safaricom currently holds 78% of the voice market in Kenya, 96% of the short message service market and 74% of the mobile data market.  In addition, Airtel is of the view that these market shares make it impossible for Kenyan consumers to have a choice in operators. By 2012, 17 million M-Pesa accounts were registered in Kenya alone, which has a population of over 40 million.

There are a total of approximately 31 million mobile-phone subscriptions in Kenya in 2013, of which Safaricom accounted for 68%, Airtel 17%, Essar Group’s “yuMobile” 9% and Telkom Kenya Limited 7%.

However, Safaricom has indicated that cash transfers still account for 98% of the total transactions in Kenya and therefore it is impossible for any mobile-money entity to be a dominant player in the payments market.

The Competition Authority of Kenya has identified telecommunications as one of several markets being scrutinised by the Competition Authority for possible abuses of dominance.  This probe is expected to reach completion by July 2014.

In terms of Kenyan law, if a company controls at least half of the provision of trade of services or goods, the company will be considered to be dominant.  In Kenya, a conviction of abuse of dominance can lead to a five-year prison term and a USD 115 000 penalty

Kenya is quite clearly pushing on in relation to significant cases in sectors which affect the majority of the population, as discussed in the overview of maturing African competition regimes published last week.  However, it is noteworthy that in April 2014, Kenya’s telecommunications regulator granted approval for Safaricom and Airtel to buy Essar Group’s “yuMobile” and it is considering awarding licenses for at least three more telecommunications companies.  Orange SA has indicated that its operations may exit the Kenyan market, where it owns 70 percent of Telkom Kenya (which in turn accounts for 7% of the mobile phone subscriptions in Kenya).

South Africa: Surprise search and seizure visit at Unilever and Sime Darby

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south_africa
Dawn Raids Rattle South African Consumer-Goods Brands

The South African Competition Commission (“Commission”) has confirmed that it has conducted such a dawn raid operation at Unilever South Africa (Pty Ltd) (“Unilever”) and Sime Darby’s respective South African offices during the morning of 03 April 2014.

Unilever is one of the largest fast-moving consumer goods companies in South Africa. Unilever’s business activities include laundry, skincare and cleansing, margarine, deodorants, household care, tea, hair care and ice cream. Household names which form part of the Unilever group include Sunlight, Knorr, Lipton, Ola and Omo.

Sime Darby is a Malaysia-based multinational company involved in sectors such as plantation, industrial equipment, motors, property and energy & utilities, with operations in more than twenty countries. It is the world’s top palm oil planter. Its South African operation, namely Sime Darby Hudson & Knight (Pty) Ltd, is located in Boksburg and it produces and sells premium fats and oils to bakery, food service industry and food manufacturers predominantly in South Africa.

“The Commission believes that the information that will be obtained from today’s operation will enable the Commission to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” Acting Commissioner Tembinkosi Bonakele said.

The Commission has indicated that this raid forms part of an ongoing investigation into collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers. The Commission has further indicated that it has reasonable grounds to believe that employees of Unilever and Sime Darby have information which is relevant to the investigation.

The last dawn raid was conducted on 06 May 2010 at the premises of four electrical cables manufacturers and suppliers based in Gauteng province, South Africa. The various premises were searched by the Commission on suspicions of price fixing, market allocation and collusive tendering. This was done subsequent to a complaint initiated by the Commissioner on 16 March 2010 against Aberdare Cables (Pty) Ltd, Alvern Cables (Pty) Ltd, South Ocean Electric Wire Company (Pty) Ltd and Tulisa Cables (Pty) Ltd.

Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.

The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances.

If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.

UPDATE: 23-April-2014:

Based on reporting in a BDLive story, the Commission has said that it “is too early for the commission to say what data or documents were seized. Information and data are being analysed,” noting that it “believes that information that will be obtained from (the) operation will enable (it) to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” acting commissioner Tembinkosi Bonakele said. “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.”

Acting competition commissioner Tembinkosi Bonakele. Picture: FINANCIAL MAIL

“Your choice”: After Botswana and S.A., MultiChoice to be investigated by yet another antitrust authority?

Posted on by andreasstargard

kenya

MultiChoice has now appeared thrice in these blog pages… After having investigations into its alleged abuses of dominance opened in Botswana (reported here) and South Africa (here), the Naspers-controlled company MultiChoice (which owns DStv as well as SuperSport) has now been accused by Kenyan rivals Wananchi Group (Zuku TV) and StarTimes.

Their complaints reportedly focus on dominant MultiChoice locking up key football rights (U.S. readers need not worry: they mean “soccer”, of course).  As any good U.S. plaintiff would do as well, the Kenyan broadcasting competitors plan to lodge formal complaints not only with the Communication Commission of Kenya, but also with the Competition Authority of Kenya.  The focus is, therefore, on antitrust claims against giant MultiChoice.

In general, the monopolization/dominance complaints seem to mirror largely those of, for instance, the South African On Digital Media, which had previously complained to the South African Competition Commission about MultiChoice’s refusal to grant ODM’s “TopTV” subsidiary access to two of MultiChoice’s SuperSport channels.

Whether obtaining exclusive distribution rights to football gems such as the English Premier League and the “Tusker Premier League” constitutes monopolization under Kenyan law remains to be seen.

South African Competition Tribunal approves merger in record time of 4 hours

Posted on by oxenhamjmj

south_africa

The South African Competition Tribunal received notice of, heard and approved the acquisition by construction firm, Stefanutti Stocks (Pty) Ltd, of Energotec, which is a division of First Strut (Pty) Ltd, and approved the merger within four hours of receiving the Competition Commission’s recommendation.

The Tribunal approved the deal on the basis that Energotec, and ultimately First Strut, are in a precarious financial condition (under liquidation).  The parties explained to the Commission and Tribunal that If the merger had not been approved the 667 staff employed by Energotec would have lost their jobs. The parties also relied on the failing firm jusitfication. As a condition for the approval of the merger however the Tribunal ordered that, for a period of 2 years from the date the merger is implemented, Stefanutti Stocks must limit retrenchments resulting from the merger to 16 employees.  This type of public interest condition has become common in South Africa.

It was stated by the parties that the deal will enable the acquirier to offer a more comprehensive service to its clients, making this an attractive opportunity for the construction firm.

The Competition Commission had concluded that the merger was unlikely to cause a substantial lessening of competition. The only customer affected by the transaction, Sasol, had provided support for the deal.

The matter provides useful precedent for future failing firm merger cases.

Dutch suit against “paraffin mafia” cartel moves forward

Posted on by andreasstargard

south_africa

A Dutch district court has set what some believe may be a new landmark precedent in the area of private cartel enforcement in the European Union, including against South African company Sasol.

The case is what appears to be a fairly straight-forward “follow-on” civil action, i.e., a complaint brought in civil court by injured parties (or those who acquired those parties’ rights to sue) that is based entirely on a European Union Commission decision condemning illegal cartel activity within the common EU market.

My neighbors on the Avenue Louise here in Brussels, CDC (Cartel Damages Claims), had bought the rights to sue from various purchasers of paraffin wax and lodged the complaint against the “paraffin mafia” (Shell’s words, quoted by Neelie Kroes – also see here) in September 2011. The 13-year cartel (1992-2005)** may well result in sizeable civil damage awards (Sasol’s reduced EC fine alone was 318 million €) once the procedural and jurisdictional hurdles have been cleared. And this most recent ruling goes a long way in doing so. The key “procedural issues” that had to be resolved first were whether all of the cartel members could be sued in the Netherlands, even though not all of them operated in that country, and whether the pending EU court appeals against the 2008 Commission decision effectively stayed the parallel civil proceedings in the Dutch court.

The court ruled in favour of the plaintiff group on both accounts, holding that all cartelists could be sued together for damages in the jurisdiction in which any one of their fellow co-conspirators has its seat [here, that would notably be Royal Dutch Shell, ironically the cartel’s whistle-blower that escaped the EC ruling with a zero-€ fine] . That is, even though purported ring-leader Sasol or any of the other [non-Dutch] alleged cartelists may not have had any operations in the Netherlands, they can still be subject to a full-blown civil lawsuit there. In effect, the ruling says that the European Union’s antitrust decisions, combined with the civil protections afforded EU companies and citizens, creates a de facto long-arm statute, reaching beyond the traditional geographic jurisdictional boundaries.

In addition, it held that a pending appeal against an EC cartel decision should not result in an automatic stay of any civil proceedings, as this would unduly curtail the fundamental right to seek compensation of injured parties under EU law.

While I don’t read Dutch — and therefore cannot analyse the actual decision of the NL royal court — I trust that CDC summarised its findings accurately, even though the company clearly has a stake in this and thus a likely bias.

** According to Neelie Kroes’s speech, the cartelists initially met at the “Blue Salon” at a Hamburg hotel bar (my home town, coincidentally). I have a feeling it was this place — it’s always fun to visualise cartel activity in the flesh, just like “The Informant” did for moviegoers in 2009…:

Blauer Saal Kempinski Hamburg

What a Valentine’s Day Letter: Kenyan Authorities Question Effect of COMESA’s Regulations

Posted on by andreasstargard

COMESA old flag colorkenya

In an illuminating Valentine’s Day letter to the Head of the COMESA CCC, the Competition Authority of Kenya has stated its view that the CCC’s Competition Regulations may not have become effective yet, due to an allegedly improperly followed publication and public-comment procedure.

Very intriguing.  This provides a helpful factual and analytical backdrop to the other Kenya vs. COMESA-CCC stories we have reported elsewhere here and here.

S.A. mobile operator escapes antitrust investigation

Posted on by andreasstargard

south_africa

South African mobile phone and data provider Cell C has managed to avoid a potential Competition Commission investigation upon having changed its text-message (SMS) pricing scheme.  The industry group that was slated to bring a formal complaint, WASPA (no kidding, that’s their actual acronym), decided not to lodge the complaint in light of the less discriminatory pricing of Cell C’s bulk SMS rates.

Nigerian court rules petro deregulation unconstitutional

Posted on by andreasstargard

Nigeria

Nigeria’s High Court declared the government’s efforts to deregulate the nation’s petroleum industry unconstitutional and therefore illegal.  The government had previously attempted no longer to set the price of petroleum, and to let markets pricing prevail.

More on this case here, at African Manager.