Dutch suit against “paraffin mafia” cartel moves forward

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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

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

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

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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

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.

Public interest criteria and competition law

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The S.A. Competition Commission‘s Trudi Makhaya (LinkedIn and Twitter) posits in this opinion piece in the South African “Business Day that an effective antitrust / competition-law policy can be seen “as an exercise in ’embedded autonomy’.”

Anti-competitive restraints, due to cartels or monopolistic overcharges or output restrictions, have a (relatively) more serious effect on poorer elements of the country’s economy than on the wealthier parts of society, Makhaya argues.  This fact is reflected in the SACC’s “prioritisation framework“, which represents one of the policy tools used by the South African competition authorities that is decidedly outside the “traditional” (read: occidental, euro-U.S. centric) approach to antitrust matters.  In the latter, solely economic (as opposed to social) factors are deemed to play a role that merits the attention by the enforcement agencies.

In a recent roundtable interview with Global Competition Review, AfricanAntitrust.com‘s own editor, John Oxenham, pointed out a parallel facet of merger review in South Africa, stating: “More often developing regimes face difficulties in ensuring their legitimacy or face glaring socio-economic challenges when considering antitrust issues. In South Africa for instance, historical imbalances continue to force the government on a broad-based growth path. The particular public interest criteria which are found in merger control and which the South African authorities are enjoined to use in merger control have, somewhat uniquely, been utilised by South African government departments in intervening in cross-border mergers.”

In light of the eurozone’s economic turmoil and the United States’ rather stagnant emergence (if any) from its recession, the notion of social / public-interest criteria in antitrust law are quite a timely subject.  We are eager to hear our readers’ opinions on this topic…

Competition Authority of Kenya wrests right to control M&A from COMESA.

(See also our prior reporting here: https://africanantitrust.com/2013/01/31/kenyan-competition-authoritys-comesa-jurisdiction-questions/)

COMESA old flag colorkenya
The Competition Authority of Kenya (“CAK”) has won the first round in its apparent jurisdictional battle against COMESA to control acquisition of shares, interest or assets among local firms, ending two months of uncertainty as to who the regulatory authority was for dealmakers. Kenyan Attorney General Githu Muigai has given the CAK the authority to act as the sole agency with the mandate to administer and clear local Kenyan mergers and acquisitions.

This power purports to shield, at least temporarily, local firms from the COMESA competition laws. Under the multi-state competition regime, firms engaging in certain mergers and acquisitions with an effect in two or more member states are required to seek clearance from COMESA’s Competition Commission, a process that comes with significant costs and time delays not expected to the same extent with the CAK procedure.

South African market-inquiry provision comes into effect

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President Jacob Zuma has signed the market inquiry provisions of the South African Competition Amendment Act of 2009 (“Amendment Act”) into force today, 8 March 2013.

The president set 1 April 2013, as the date on which section 6 of the Amendment Act will become effective.

Section 6 empowers the S.A. Competition Commission (“Commission”) to conduct an inquiry into the general state of competition in any market in South Africa, without referring to specific prohibited conduct or a particular firm.  Under this provision, the Commission may initiate a market inquiry when it has reason to believe that any features of an identified market may be distorting or restricting competition in that market, e.g., where a market is not functioning optimally, but where no prohibited conduct, such as cartel activity, has been identified.

Section 6 also regulates how the Commission may conduct such market inquiries.  More specifically, the Commission may use its powers to request information from firms but may not use its search and seizure (i.e., dawn raid) powers to gather information for a market inquiry.

At the conclusion of the market inquiry, the Commission must publish its findings and may also make recommendations to the Minister of Trade and Industry or other regulatory authorities relating to any competition matters identified.

Family feud: Which S.A. agency gets the first bite at the apple?

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Why is the South African government flexing its anti-fraud and corruption laws in the long-running investigation of potential bid-rigging in the construction sector, when it could perhaps more straightforwardly apply its competition law — and only that — to the alleged offences?  In its role as the antitrust watchdog, the SA Competition Commission has been attempting to induce guilty co-conspirators to seek leniency or corporate immunity from prosecution for cartel offences under the country’s Competition Act in exchange for information on rigged bids for construction projects.

Corporate leniency is one thing — personal liability for fraud or other racketeering charges is quite another…  Individual employees or directors of the leniency applicants should beware the double jeopardy they are exposed to, personally, when their employers ink settlements with the CC: The National Prosecuting Authority is not using the country’s civil-offence based competition law to pursue the alleged wrongdoing, even though the accusations raised by them would fall rather neatly within the category of prohibited horizontal agreements among competitors (i.e., cartel conduct).  Rather, the prosecution is applying the Prevention and Combating of Corrupt Activities Act, which — unlike the Competition Act — criminalises the illicit behaviour that allegedly took place.

On the policy side, had the as-of-yet dormant Competition Amendment Act 2009 come into force and the competition law therefore criminalisation “teeth”, we here at AfricanAntitrust.com are wondering whether we’d be seeing parallel, ongoing dual-agency investigations on a scale such as this — or rather an initial battle for jurisdiction between the CC and the NPA’s Hawks?  The S.A. family feud between the twin siblings, fraud laws and antitrust? The purely legal question of “double jeopardy”, raised above, would doubtless also figure in the debate who gets to enforce which law(s).  One of the CC’s public-relations managers, Trudi Makhaya, recently hinted at the potential for greater enforcement powers of the Competition Commission, mentioning the “pending amendments to the Competition Act”. For now, the so-called Construction Fast Track Settlement Project will have to keep churning out non-criminal settlements with offenders.

This specific post will serve as a lead-up into the broader arena of criminalisation of antitrust law, which we will cover soon in its own category.  It brings with it fascinating questions beyond those raised here (including, for instance, the potential for dis-incentives to corporate executives to seek leniency).

As always, we welcome your opinion — this is a question that will sooner or later have to be answered.

3 weeks until UAE competition law goes into effect

UAE
The first true antitrust law of the Emirates will come into force on 23 February 2013.  “Federal Law No. 4 of 2012” (not to be confused with legislation relating to nuclear safety of the same title) was passed by the United Arab Emirates (“UAE”) government last October 2012.

Akin to established competition laws as well as some of its recent pan-African counter-part legislation (e.g., the 2004 COMESA regional antitrust regime that finally went into effect in January 2013), its primary jurisdictional scope encompasses:

  • (1) cartel prosecution and limits on similar restrictive agreements
  • (2) unilateral conduct / abuse of dominance, and
  • (3) mergers and acquisitions.

As to M&A, unlike its COMESA sibling, the law — fortunately — will contain yet-to-be-determined thresholds that limit the notification requirements to deals above certain market shares or deal values.  Yet, the filing requirement is suspensory, and notifiable deals must therefore be put on hold until clearance is obtained from the Competition Regulation Committee (or presumably pre-authorisation has been received from the Ministry of Economy).  The period for review permitted under the law is up to 90 days plus a 45-day extension.

Penalties for breaches of the competition regime (items 1 and 2 above) include suspension of business activities and financial fines that range from AED 500,000 to 5 million [>$1.3m] or about 1m euros], with mandatory doubling of fines for recidivists; failure-to-notify mergers may result in similar fines, based on a 2-5% turnover scale or the same AED 500k-5m range, depending on ascertainability of turnover.

Notably, there are several key business segments excluded from the reach of the competition legislation, including SMEs, the financial and oil & gas sectors; telecoms; pharmaceuticals; and the provision of traditionally state-provided or funded activities (e.g., postal services, electricity, water, sewer, etc.).  Whether these rather far-reaching exclusions are in effect throwing the baby out with the bathwater remains to be seen…

The law also provides for a 6-month grace period.  This transitional period for companies to come into compliance, seek a waiver for non-compliance, or face prosecution under the law, will end on 23 August 2013.

Companies doing, or planning to do, business within the UAE may wish to review their existing business practices, market shares, competitive strategies, merger plans, and update their compliance programmes accordingly.