AFRICANANTITRUST UPDATE: Recent referrals and merger prohibitions by the South African Competition Commission

by Michael-James Currie

The mid-year months of June and July has been a particularly eventful one from the South African Competition Commission’s (SACC) perspective. Following the referrals of two separate abuse of dominance cases in the pharmaceutical and rooibos tea industries respectively, the South African Competition Commission has also referred a number of respondents to the Competition Tribunal for allegedly engaging in ‘cartel conduct’ and conducted a further set of dawn raids – this time on a number of feedlot and meat suppliers.

Most notably, however, the SACC has in a space of three weeks, prohibited four intermediate mergers outright and also recommended the outright prohibition of one large merger. Although it is not altogether uncommon that the SACC prohibits an intermediate merger, the SACC usually approves such mergers subject to suitable conditions in order to remedy any competition or public interest concerns. Typically only a nominal number of intermediate mergers are outright prohibited during any given year. It is, therefore, particularly noteworthy that four intermediate mergers have been prohibited in such a short space of time.

Cartels

Referral of the ‘Brick Cartel’

The South African Competition Commission (SACC) has decided to refer its investigation in respect of the ‘brick cartel’ to the Competition Tribunal for adjudication.

The SACC’s referral includes the following brick manufacturing companies: Corobrik, Era Bricks (Pty) Ltd (Era Bricks), Eston Brick and Tile (Pty) Ltd (Eston Brick), De Hoop Brickfields (Pty) Ltd (De Hoop), Clay Industry CC (Clay Industry) and Kopano Brickworks Ltd (Kopano). It is alleged that Corobrick has entered into separate bilaterial agreements with each of the respondents the terms of which amounts to price fixing or market allocation in contravention section 4(1)(b) of the Competition Act, a per se prohibition.

Corobrick has expressed its surprise that the SACC has referred the matter and has indicated that the SACC has misconstrued the nature of the various agreements.

The SACC appears to have concluded its investigation particularly expeditiously given that the investigation commenced in April 2017 and was referred to the Competition Tribunal three months later. Furthermore, it appears as if the SACC has based its case purely on the SACC’s interpretation of the wording of the relevant agreements. The per se nature of a ‘section 4(1)(b)’ contravention necessitates that firms are particularly cognisant of the wording and terms used in any agreement. Particularly if there is conceivably a horizontal relationship between the contracting parties.

Collusive tendering referrals

The SACC also investigated and referred two separate cases to the Competition Tribunal for alleged collusive tendering.

The first was in relation to the stationary industry. The SACC referred eight respondents to the Competition tribunal for allegedly engaging in collusive conduct in relation to the supply of certain stationary products. The SACC found that the respondents colluded in respect of a tender issued by the Free State Provincial Government based on the respondents quoting the same price for the various products as per their respective bill of quantities.

In a separate investigation, the SACC referred four companies for coordinating their bids in relation to a tender issued by the City of Cape Town for the provision of padlocks for high, medium and low voltage access.

Merger control

The SACC has recently decided to prohibit three intermediate mergers based on concerns relating to coordinated effects and one intermediate mergers on the grounds that the merger would likely lead to a substantial lessening of competition in the market. In addition to these intermediate mergers, the SACC also recommended the prohibition of a large merger in its referral to the Competition Tribunal.

Coordinated conduct

The first was in relation to the Jasco Electronic Holdings (Jasco) and Cross Fire Management (Cross Fire) merger. Notably, the SACC prohibited this merger principally on the basis that the merger was likely to reduce the number of firms operating in the relevant markets which would lead to increased coordinated effects. Importantly, a number of respondents in the fire protection sector, including Cross Fire, are embroiled in an investigation by the SACC in respect of alleged cartel conduct. The investigation follows dawn raids which were conducted on the premises of five fire control and protection services companies in March 2015. Two years later, the SACC referred seven respondents to the Competition Tribunal seeking the imposition of an administrative penalty of 10% of each of the respondent’s respective annual turnover.

Two of the respondents settled their case with the SACC by way of a consent order in in June 2017.

In assessing the merger, the SACC noted that Jasco was not implicated in the cartel but concluded nevertheless that “Jasco Fire will be incorporated into the cartel and the consolidation of the market will enhance or strengthen coordinated effects post-merger”.

The prohibition of the Jasco/Fire Cross merger follows soon after the SACC also prohibited the proposed joint venture between Nippon Yusen Kabushiki Kaisha (NYK), Mitsui O.S.K. Lines Ltd (MOL) and Kawasaki Kisen Kaisha Ltd (KL). In June 2017, the SACC found that the joint venture would likely create a platform for collusion and increase co-ordinated conduct in an industry which is being investigated by a number of competition agencies across the globe. The SACC itself is investigating the shipping line industry and NYK were one of two respondents who settled their case with the SACC by way of a consent order in 2015 for approximately R100 million (US$ 8.3 million).

The third merger which the SACC prohibited was the Timrite and Tuffbag intermediate merger. The SACC found that the proposed transaction in polypropylene-mining based support bags industry would facilitate and enhance potential co-ordinated effects and market allocation arrangements in the manufacturing and distribution of PBMS bags.

Andreas Stargard of Primerio states that “firms looking to merge in a sector which has previously or currently been subject to an investigation for collusion, may already be on the ‘back foot’ and will need to be proactive in assuaging the SACC that the transaction will not increase levels for potential coordination”.

Substantial lessening of competition in the market

The first of the two intermediate mergers prohibited on the grounds that they are likely, from the SACC’s perspective, to lessening competition in the market, was the Greif International BV (Greif) and Rheem South Africa (Pty) Ltd (Rheem) merger in the steel drum manufacturing sector. The SACC found that the merger would effectively be a merger to monopoly and that the pro-competitive efficiencies did not outweigh the likely anticompetitive effects.

In addition to the prohibition of the two intermediate mergers (which may be submitted to the Competition Tribunal for re-consideration), the SACC has also recommended that the proposed large merger between Mediclinic and Matlosana Medical Health Services be prohibited by the Competition Tribunal. The SACC is of the view that the proposed transaction would lead to a substantial lessening of competition in the provision of private healthcare services in the relevant geographic region.

In each of the three mergers, the SACC considered potential remedies but concluded that none of the remedies proposed by the merging parties were suitable.

Stargard points out that the “assessment of mergers in terms of both traditional competition tests as well as from a public interest aspect requires, at times, robust and innovative remedies in order to get the deal through in South Africa”.

[AAT is indebted to the continuous support and assistance of Primerio and its directors in sharing their insights and expertise on various African antitrust matters. To contact a Primerio representative, please see the Primerio brochure for contact details. Alternatively, please visit Primerio’s website]

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South Africa: Pharmaceutical Companies in the Spotlight after Excessive Pricing Investigation Announced

On 13 June 2017, the South African Competition Commission (SACC) announced that it would be investigating three pharmaceutical companies namely, Roche Holding AG (Roche), Pfizer Inc (Pfizer) and Aspen Pharmacare Holdings Ltd (Aspen), for allegedly abusing their dominance in relation to certain lung cancer medication.

In the SACC’s press statement, the SACC indicated that it would be investigating the firms for allegedly engaging in “excessive pricing, price discrimination and/or exclusionary conduct”.

The decision to investigate the pharmaceutical companies comes shortly after the BRICS competition agencies apparently agreed to investigate the pharmaceutical companies who conduct business in the BRICS member states. A World Bank Report, which prompted the BRICS agencies to investigate this sector, indicated that the pharmaceutical industry is prone to “cartel like” behavior.

In relation to the SACC’s current investigation, the SACC appears to have identified primarily two areas of concern. Firstly, that the relevant companies are charging ‘excessive prices’ and secondly, that there is a discrepancy between the prices charged to the public versus private healthcare sector – which may amount to price discrimination or exclusionary conduct.

Importantly, neither a contravention in relation to ‘price discrimination’ nor ‘general exclusionary conduct’ carries with it an administrative penalty for a first time offence. In relation to ‘excessive pricing’, however, a firm could be fined an administrative penalty of up to 10% of its annual turnover if found to have contravened section 8(a) of the South African Competition Act.

The seminal case on excessive pricing was the recent Sasol case in which the Competition Appeal Court ultimately over turned the Competition Tribunal’s finding the Sasol had engaged in ‘excessive pricing’. AAT published a paper by John Oxenham and Michael-James Currie which provides an in depth evaluation of the Sasol case and the criteria which must be met by the SACC in order to sustain a case of excessive pricing. AAT followers can access the full article here.

The timing of the SACC’s decision is also particularly noteworthy. As Andreas Stargard, director at Primerio, states “the SACC is currently conducting a market inquiry into the private healthcare sector and the SACC has far reaching powers to obtain information and evidence from third parties – which includes pharmaceutical companies. Whether the SACC’s decision to investigate these companies sprung from submissions received during the market inquiry is not yet clear, but cannot be ruled out at this stage”.

Stargard, however, also points out that “the cost of private healthcare and certain medicinal products has been the focus of a number of agencies worldwide. The Italian, Spanish and UK authorities have recently launched investigations in relation to the prices of certain cancer treatment products. The SACC’s investigation may well be a shaped by broader collaboration between the various competition law agencies”.

As the investigation unfolds, so it will become clearer what the catalyst was for the SACC’s decision to launch this particular investigation.

A particularly noteworthy comment expressed by the Commissioner of the SACC is that the use of patents has potentially resulted in the relevant companies having created monopolistic positions in the market. The interplay between competition and intellectual property law is no doubt going to play a key role in this investigation and the outcome of the SACC’s investigation may have far reaching consequences not only in the pharmaceutical sector but in a number of industries where patents are particularly prevalent.

Although it will be some time before more light is shed on this investigation from the authority’s perspective, the SACC indicated that additional resources have been allocated to this investigation as it has been categorized as a ‘priority’ investigation by the SACC.

South Africa- Market Inquiry Transport Sector

The amendments to the South African Competition Act, (the Act) in 2009 granted the South African Competition Commission (SACC) formal powers to conduct market inquiries. Since then South African business has witnessed a sharp increase in market inquires including: private health care sector, liquefied petroleum gas sector (LPG) as well as the grocery retail market sector.

Fresh off the SACC’s recent conclusion of its market inquiry into the LPG sector, the SACC published a notice in the Government Gazette on 10 May 2017, indicating that it will conduct an inquiry into the Public Passenger Transport sector (PPT Inquiry) which is scheduled to commence on 7 June 2017.

The PPT inquiry, is expected to span two years and will involve public hearings, surveys and meetings with stakeholders which will cover all forms of (land-based) public passenger transport. The SACC indicated in its report that “…it has reason to believe that there are features or a combination of features in the industry that may prevent, distort or restrict competition, and / or to achieve the purpose of the Competition Act”.

Andreas Stargard, who has followed the sector closely since 2013 (when Uber first entered the market), notes that the “SACC’s decision to initiate an inquiry into the PPT sector comes as no surprise”..

As African Antitrust (AAT) had previously reportedthe “taxi and bus” industry is riddled with collusive behaviour. In light of the fact that most of South Africa’s indigent are fully dependent on taxis for transportation in South Africa and spend a significant portion of their disposal income on taxi fees, this is an issue which needs to be addressed urgently by the competition agencies by acting “without fear, favour or prejudice”’.

From the SACC’s perspective, conducting the PPT inquiry without “fear favour or prejudice” will certainly present its challenges as the sector is renowned for its aggressive operators in what is considered to be a “conflict ridden” industry.

Although the SACC has identified various concerns within this sector, which is complex, there can be no doubt that the SACC’s investigation will have to deal with Uber’s entry into the sector and the hostile and violent resistance which Uber has faced from the ‘metered taxi industry’. Accordingly, it will be most interesting to see how the SACC deals with the broader socio-political issues culminating in physical intimation and violent protests which have plagued the taxi industry.

Andreas Stargard notes further, “this inquiry will be crucial within the current South African context as the effects of rising public transport costs is largely experienced and absorbed by the most marginalized members of the South African society”. It is reported that the costs of public transport is estimated to have more than doubled between 2003 and 2013, with half of the workers using public transport suffering a 40% or more reduction in their hourly wage due to transport costs.

Furthermore, the SACC pointed out, in its report, that only 29.8% of South African households own a motor vehicle, which means that the majority of the population (between 70% and 80%) relies on the PPT sector to get them to and from work, school etc. Accordingly, the PPT sector plays an imperative role in providing meaningful mobility to the majority of the population, which is essential in promoting the broader South African development plan of inclusive economic participation.

Although only the LPG market inquiry is the only formal inquiry to have been concluded to date, a question mark remains over whether market inquiries are yielding effective results sufficient to justify the significant resources which accompany such an inquiry.

Market inquiries are extremely burdensome on the relevant market participants and there does appear to be a risk that market inquiries and the SACC’s resources are being used to promote industrial policies at the expense of promoting competition in the market.

South African Competition Commission Publishes Draft Penalty Guidelines for Prior Implementation

  • By Michael-James Currie

The South African Competition Commission (SACC) recently published draft guidelines  for determining the administrative penalty applicable for prior implementing a merger in contravention of the South African Competition Acts’ merger control provisions (the Draft Guidelines).

Although the SACC has published guidelines for the determination of administrative penalties in respect of cartel conduct, the SACC has recognised that different considerations apply when calculating the appropriateness of a penalty for ‘gun-jumping’.

South Africa has a suspensory merger control regime and transactions which fall within the ambit of the Competition Acts merger definition, and which meet the mandatorily notifiable financials thresholds, may not be implemented until approval has been obtained by the Competition authorities.

The financial thresholds distinguish between intermediate mergers and large mergers. Both are mandatorily notifiable. Transactions which do not meet the notification thresholds are considered small mergers and may either be voluntarily notified or must be notified at the insistence of the SACC.

In relation to ‘intermediate mergers’ the Competition Commission is mandated with considering and approving (or prohibiting) an intermediate merger whereas in the case of large mergers, the Competition Tribunal is tasked with evaluating the proposed transaction.

Regardless of whether the merger is an intermediate or large merger, the Competition Act provides for an administrative penalty of up to 10% of the firms’ respective South African generated turnover to be imposed on the merging parties for failing to notify the merger.

In terms of the penalty calculations, the Draft Guidelines prescribe a minimum administrative penalty of R5 million (USD 384 615)  for the prior implementation of an intermediate merger and a R20 million (USD 1.5 million) penalty for implementing a large merger prior to being granted approval. The Draft Guidelines cater further for a number of aggravating or mitigating factors which may influence the quantum of the penalty ultimately imposed.

The Draft Guidelines also provide useful guidance as to when a transaction may amount to a ‘prior implementation’. Some of the examples listed in the Draft Guidelines include:

  • The acquisition of 49% of the issued share capital of a company coupled with control in the form of section 12(2)(c) i.e. the right to appoint the majority of the directors in the company.
  • The acquisition by two wholly-owned subsidiaries of certain properties and the failure to notify those acquisition due to the mistaken belief that the transactions amounted to two small mergers.
  • Where a senior executive of the acquiring firm had been engaging in the day-to-day operations of the target firm and the merging parties were already marketing themselves as a single entity.
  • Where the acquiring firm becomes involved in the strategic planning of the target firm, identifies target markets, develops new products or services, takes charge of ordering raw materials, amends procurement policies or becomes involved in customer relations.
  • Where the merging firms cease marketing in order not to compete with each other.
  • Acquiring firms appointing directors to the board of the target firm as the appointment of even one or two directors might give material influence and thus control.

The above instances are only a few of the examples listed and are based mostly on case precedent before the Competition Authorities. This list is, however, in no way exhaustive.

Importantly, the Draft Guidelines, in their current form appears to draw a distinction between “prior implementation” and a “failure to notify”. In relation to latter, the Draft Guidelines indicate that:

A contravention of failure to notify is committed where:

  1. the transaction constitutes a merger under the Act;
  2. the transaction meets the thresholds for notification under the Act; and
  3. the parties have failed to notify the Commission of the transaction.

Technically, a failure to notify does not amount to a contravention in of itself. A contravention only arises if the transaction was not notified and the transaction was subsequently implemented. In other words, merging parties would not be in breach of the Competition Act if a merger agreement has been concluded, but the parties are yet to notify the SACC thereof. Unlike a number of other jurisdictions, there is not a specified time period in which a transaction which meets the thresholds must be notified. A contravention only arises in the event that such a transaction is implemented prior to approval having been granted. We trust that this technical anomaly will be addressed in the final draft.

In light of recent case precedent, the South African Competition Authorities are increasingly less sympathetic to firms who ‘inadvertently’ fail to notify a mandatorily notifiable merger. The SACC’s decision to adopt specific guidelines for contravening the merger control provisions is clear affirmation that the competition authorities expect firms to familiarise themselves with the precise ambit and scope of the Competition Act.

 

CITIBANK EXECUTIVES FACE CRIMINAL CHARGES IN SOUTH AFRICA FOR ALLEGEDLY ENGAGING IN “CORRUPT” COLLUSIVE CONDUCT

In the wake of Citibank entering into a R69 million settlement agreement with the South African Competition Commission (SACC), the Bank’s executives now face the threat of criminal sanctions as well.

Citibank’s settlement follows the SACC’s complaint referral in which it is alleged that up to 18 banking entities had engaged in collusive conduct in contravention of the Competition Act by allegedly manipulating the Rand/Dollar exchange rate through forex trading.

Citibank was one of the first respondents to settle their case with the SACC, however, on 21 April 2017, an independent organisation, the Black Empowerment Foundation (BEF), formally laid criminal charges against Citibank’s top executives at a South African Police station.

The allegations by the BEF include, inter alia, that Citibank had engaged in corrupt activities resulting in Citibank having “generated profits at the expense of ordinary South Africans”.

The BEF have also indicated that they would write to the President and the National Prosecuting Authority in an effort to elevate and expedite this case.

Importantly, as of 1 May 2016, the Competition Act was amended in order to criminalise cartel conduct – as prohibited in section 4(1)(b) of the Competition Act. It is not yet clear whether the criminal complaint laid by the BEF is based on a section 4(1)(b) contravention or a broader complaint of ‘corruption’ which is dealt with by other legislation, such as the Prevention and Combatting of Corrupt Activities Act.

The introduction of criminal liability for contravening the Competition Act has, however, been contentious. There have been a number of concerns raised by competition law practitioners regarding the manner in which a criminal investigation would be conducted. In this regard, it is important to note that the competition authorities are not responsible for investigating or adjudicating criminal matters. This function is reserved for the National Prosecuting Authority and the criminal courts (i.e. the High Courts).

Furthermore, section 4(1)(b) of the Competition Act prohibits cartel conduct per se (meaning that there is no rule of reason defence available to a respondent) which means that the threshold of contravening the Competition Act is relatively low. It is unlikely that this low threshold would suffice in respect of a criminal case.

It is further unclear to what extent any evidence gathered by the SACC may be used by the National Prosecuting Authority in a subsequent criminal complaint.

It is understood that there is currently a Memorandum of Understanding that is busy being drafted between the SACC and the National Prosecuting Authority which may provide greater clarity in relation to certain of the procedural aspects surrounding a criminal prosecution. To date, however, this MoU has not been published and little guidance has been provided by the respective agencies as to how they intend conducting criminal investigations and prosecutions.

Although it remains to be seen whether the criminal charges laid by the BEF will ultimately be prosecuted by the National Prosecuting Authority, the case is likely to take centre stage in the next few weeks as the entire investigation and referral of the banks by the SACC has been questioned and concerns regarding political influence has dogged the SACC since the decision was taken to refer the matter earlier this year.

It is also not yet clear why the BEF elected only to lay criminal charges against Citibank and not the other respondents. Collusive conduct by its very nature necessitates more than one party to be implicated.  The BEF may simply be waiting until additional banks enter into settlement agreements (in which an admission of liability is generally a requirement) with the SACC before laying further complaints. Regardless, the BEF’s complaint is likely to have a significant impact on other respondents who may be considering settling with the SACC.

With the threat of a maximum prison sentence of up to 10 years and/or a fine of up to R500 000, this complaint will not be taken lightly by Citibank and all eyes will not only on Citibank, but also on the respective enforcement agencies to see how they will respond to the criminal charges brought by the BEF.

Namibia Competition Commission: New Franchise Laws to Address Anti-Competitive Concerns

By AAT Senior Contributor, Michael-James Currie

The CEO of the Namibian Competition Commission (NCC), Mr. Mihe Gaomab II, recently announced that the NCC has made submissions to the Minister of Trade and Industry in relation to proposed legislation which will regulate franchise models in Namibia.

Currently, there is no specific ‘franchise law’ in Namibia and moreover, franchisees are not required to apply to the Minister of Trade and Industry for registration of an ‘approval’ licences. Accordingly, there is minimal regulatory oversight in respect of franchise models.

While recognising the benefits of franchise models, the NCC is, however, concerned that there are a number of franchises in Namibia which may be anti-competitive in that the franchisor-franchisee relationship creates certain barriers to entry.

The NCC has specifically identified the practice, by way of an example, whereby certain franchisors deliberately ensure that there is a lack of competition between franchisees in the downstream market. The rationale behind this commercial strategy is allegedly so that the franchisor may extract greater royalties or franchise fees from the respective franchisees, as the franchisee is assured of a lack of competition.

The NCC views this practice as well as a various similar practices as potentially anti-competitive as the structure of certain franchise models may result in collusion between franchisees.

Unlike a number of jurisdictions, including South Africa, however, collusive conduct is not prohibited per se and a franchise agreement or model will, therefore, only amount to a contravention of the Namibia Competition Act if there is (or likely to be) an anti-competitive effect which cannot be justified or outweighed by other pro-competitive or efficiency arguments (i.e. rule of reason arguments).

The rule of reason analysis also extends to ‘minimum resale price maintenance’ (MRPM) under Namibian competition law. Again, unlike the position in South Africa, MRPM is not a per se prohibition (i.e. there is rule of reason defence available to a respondent). MRPM in terms of the South African Competition Act is a controversial topic as in many instances, the very success of a franchise model is dependent on uniformity in pricing across all franchisees. Furthermore, issues such as protecting brand reputation are also generally acceptable commercial practices which may amount to a contravention due to the strict application of the MRPM provisions under South African law.

In Namibia, franchisors therefore have somewhat more flexibility when recommending minimum resale prices than their South African counterparts. It should be noted, however, that the NCC is monitoring franchise models closely to ensure that franchisors do not overstep the mark by implementing a franchise model which has as its object or effect, the lessening of competition in the market.

MAURITIUS COMPETITION AUTHORITY PENALIZES FIRM FOR ENGAGING IN RESALE PRICE MAINTENANCE

By AAT Senior Contributor, Michael-James Currie

In a landmark judgment, the Competition Commission of Mauritius (CCM) recently concluded its first successful prosecution in relation to Resale Price Maintenance (RPM), which is precluded in terms of Section 43 of the Mauritius Competition Act 25 of 2007 (Competition Act).

The CCM held that Panagora Marketing Company Ltd (Panagora) engaged in prohibited vertical practices by imposing a minimum resale price on its downstream dealers and consequently fined Panagora Rs 29 932 132.00 (US$ 849,138.51) on a ‘per contravention’ basis. In this regard, the CMM held that Panagora had engaged in three separate instances of RPM and accordingly the total penalty paid by Pangora was Rs 3 656 473.00, Rs 22 198 549.00 and 4 007 110.00 respectively for each contravention.

The judgment is important as it not only demonstrates the CCM’s increasing enforcement efforts and risk of non-compliance with the Competition Act (this decisions follows on CCM’s recent findings against firms for engaging in abuse of dominance conduct) but has created a particularly strict threshold on firms in relation to what constitutes price maintenance in terms of Mauritius competition law. RPM is a prohibited vertical practice, in which suppliers restrict or prescribe the manner in which customers resell the relevant products or services. Minimum resale price maintenance is prohibited in most jurisdictions. Whether the contravention is a “per se’ contravention (i.e. that there is no rule of reason defence available to a respondent) or whether proving an anti-competitive effect is a necessary requirement to prove a contravention is generally the key difference in the manner in which competition agencies enforce RPM.

In relation to Panagora,  the company was found to have contravened the Competition Act as a result of having affixed the resale price on two of its ‘Chantecler’ branded chicken products (chilled and frozen), without affixing the words ‘recommended price’ next to the stated price.

In addition, Panagora engaged in promotional sales to dealers  utilising a ‘deal sheet’ which contained the following clause “Le fournisseur se reserve le droit d’annuler le tariff promotionnel au cas ou certains produits sont vendus en dessous du prix normal” (the supplier reserves the right to cancel the promotional price in the event that certain products are sold below the normal price).

Importantly, in reaching its determination, the Executive Director held that although foreign case law, particularly Australian, UK and EU legal precedent serves as a useful guideline. The Mauritius Competition Act (in so far as it relates to RPM), differs vastly from its international counter-parts. In this regard, the Competition Act merely requires evidence supporting the contention that there was an object or effect of directly or indirectly establishing a fixed or minimum price or price level to prove a contravention. The Mauritius Competition Act  does not require that the conduct in any way prevented, restricted or distorted competition in the market.

Andreas Stargard, a competition practitioner with Africa boutique firm Primerio Ltd., notes that ‘[a] further important aspect of the CCM’s ruling is that sanction (or threat of a sanction) is not a requirement to prove a contravention of the RPM prohibition. Accordingly, the inquiry did not consider whether the downstream customer retained the discretion to price below the “stated price”.’

The legal precedent created by the CMM’s ruling provides much needed clarity as to how the CMM will evaluate resale price maintenance cases and firms need to be particularly cautious in relation to the terms of engagement with customers who on-sell their products.

 

Cameroon: Opportunities & Challenges

This past Saturday, 11 March 2017, the Cameroonian Embassy in Paris, France, hosted a conference entitled “Cameroun, Destination d’Opportunités: Potentiel et défis” in conjunction with the Association of Cameroonian Attorneys in France.  The full programme is made available to AAT readers here.

1425573796In its afternoon panel on investment in Cameroons, Primerio Ltd. legal counsel, Dr. Patricia Kipiani spoke at length about the country’s high-growth sectors.  Her co-panellists included the Paris bar’s Lynda Amadagana as moderator, and William Nkontchou (ECP Director) and Hilaire Dongmo (Investment Principal at Actis).

BOTSWANA: COMPETITION AUTHORITY PROHIBITS MERGER POST-IMPLEMENTATION

– by Michael-James Currie

On 17 February 2017, the Competition Authority of Botswana (CA) prohibited a merger between Universal House (Pty) Ltd and Mmegi Investment Holdings (Pty) Ltd.

Furthermore, the merger had already been implemented and, therefore, the CA ordered that the 28.73% interest in Mmegi Investments which Universal Investments had acquired be divested to a third party.

At the stage of ordering the divestiture, a suitable third party had not yet been identified and the merging parties were obliged to sell the 28.73 shares to a third party “with no business interests affiliated in any way with the acquiring entity”. The divestiture is also to take place within three months of the CA’s decisions and, should the thresholds be met for a mandatorily notifiable merger, the CA would require that the proposed divestiture also be notified.

The CA prohibited the merger on the grounds that the transaction was likely to lead to a substantial prevention or lessening of competition in the market. In particular, the CA held that the “market structure in the provision of commercial radio broadcasting services will be altered, and as such raises competition and public interest concerns”.

The CA does not, in its decision, elaborate specifically on what basis the proposed merger would likely lead to a lessening of competition in the market nor is there any mention of the public interest grounds upon which the CA prohibited the merger.

Regardless, the CA’s decision is clear affirmation that, like many competition agencies in Africa, it will not be seen to merely rubber-stamp mergers, but rather embark on substantive investigations in order to assess the impact of a particular transaction on the market, both in terms of traditional competition considerations and also on public interest grounds.

Accordingly, in light of the CA’s increasingly vigorous approach to merger control, firms who are potentially looking at potential mergers or acquisitions in Botswana need to take cognizance of the importance:

  • of ensuring that transactions are notified to the CA prior to implementing such a transaction; and
  • of ensuring that a comprehensive market and competitiveness report is submitted as part of the merger filing to ensure that the merging parties are best placed to demonstrate that a proposed transaction would not have adverse effects on competition in the market or on the public interest grounds.

In addition to engaging in increasingly substantive merger assessments, the CA has also demonstrated that it has the confidence and resources to tackle anti-competitive conduct practices as well as conduct market studies.

The Competition Authority of Botswana is, therefore, fast becoming one of Southern Africa’s more robust competition agencies.

 

 

 

 

SOUTH AFRICA: ZUMA’S STATE OF THE NATION ADDRESS MAY BE HINT AT INTRODUCTION OF COMPLEX MONOPOLY PROVISIONS

While the media headlines are largely filled with the disruptions that took place at the State of the Nation Address (SONA) by President Jacob Zuma on 9 February 2017, the President made an important remark which, if true, may have a significant impact on competition law in South Africa, particular in relation to abuse of dominance cases.

In this regard, the President stated that:

During this year, the Department of Economic Development will bring legislation to Cabinet that will seek to amend the Competition Act. It will among others address the need to have a more inclusive economy and to de-concentrate the high levels of ownership and control we see in many sectors. We will then table the legislation for consideration by parliament.

In this way, we seek to open up the economy to new players, give black South Africans opportunities in the economy and indeed help to make the economy more dynamic, competitive and inclusive. This is our vision of radical economic transformation.”

Patel talksNeither the President nor Minister Patel have given any further clarity as to the proposed legislative amendments other than Patel’s remarks early in January 2017 in which he stated that:

The review covers areas such as the efficacy of the administration of the Competition Act, procedural aspects in the investigation and prosecution of offences, matters relating to abuse of dominance, more effective investigations against cartels and the current public interest provisions of the act.

Says John Oxenham, a competition attorney who has closely followed the legislative and policy developments, “despite the broad non-committal remarks by Minister Patel, it is clear that the Minister is zealous in having the ‘complex monopoly’ provisions brought into force to address in order to address, what the Minister perceives to be, significant abuse of dominance in certain concentrated markets.”

In terms of the provisions, as currently drafted, where five or less firms have 75% market share in the same market, a firm could be found to have engaged in prohibited conduct if any two or more of those firms collectively act in a parallel manner which has the effect of lessening competition in the market (i.e. by creating barriers to entry, charging excessive prices or exclusive dealing and “other market characteristics which indicate coordinated behavior”).

white-collar-crimeDespite having been promulgated in 2009, the ‘complex monopoly’ provisions have not yet been brought into effect largely due to the concerns raised as to how these provisions will be enforced, says Primerio Ltd.’s Andreas Stargard: “It is noteworthy that the introduction of criminal liability for directors and persons with management authority who engage in cartel conduct was also promulgated in 2009, but surprised most (including the Competition Authorities) when it was quite unexpectedly brought into force in 2016.”

Minister Patel was no doubt a key driving force behind the introduction of criminal liability and it would, therefore, not be surprising if the complex monopoly provisions are brought into force with equal swiftness in 2017.