Category: Zambia

Dawn raids on the increase across Africa

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By Michael-James Currie and Jenna Foley

March 2016 has been a busy month for the competition agencies of South Africa and Kenya respectively. Both agencies carried out search and seizure operations as a result of alleged collusion within various sectors of the economy. While the March dawn raids are not connected, the South African Competition Authority, as part of its advocacy outreach, provided training to the Competition Authority of Kenya relating to inter alia, search and seizure operations.

South Africa

On 23 March 2016, the South African Competition Commission carried out search and seizure operations in the automotive glass fitment industry, as part of its continued investigation into alleged collusion within this sector.

Accordingy to the SACC, the raid was carried out “at the Gauteng premises of PG Glass, Glasfit, Shatterprufe and Digicall as part of its investigation of alleged collusion. PG Glass and Glasfit are automotive glass fitment and repair service providers; Shatterprufe supplies PG Glass and Glasfit with automotive glass while Digicall processes and administers automotive glass related insurance claims on behalf of PG Glass and Glasfit.”

John Oxenham, founding director of Pr1merio, notes that “[t]his most recent dawn raid follows on from those carried out towards the latter part of 2014 and 2015 and confirms that the SACC has adopted a more robust approach to investigating alleged anti-competitive practices.” In this regard, Commissioner, Tembinkosi Bonakele, confirmed at the 9th Annual Competition, Law, Economics and Policy Conference in November last year that the Competition Commission has in the past two years, “conducted more dawn raids than those conducted in preceding years since the Competition Commission came into existence” (nearly 16 years ago).

For an overview of dawn raids and cartel investigations in South Africa, please see the following GCR Article.

Kenya

This month the Competition Authority of Kenya (“CAK”) conducted its first dawn raid. The search and seizure operations were carried out in respect of two fertiliser firms, Mea Limited and the Yara East Africa, based on the CAK’s suspicion of price fixing occurring between these two firms, who together control approximately 60% of the fertiliser market.   The CAK conducted the raid in accordance with Section 32 of the Competition Act, 2011 which provides for the Authority to enter any premises in which persons are believed to be in possession of relevant information and documents and inspect the premises and any goods, documents and records situated thereon. This follows an inquiry which was launched last year by Kenyan competition authorities into what the CAK termed “powerful trade associations exhibiting cartel-like behaviour specifically targeting banks, microfinance institutions, forex bureaus, capital markets as well as the agricultural and insurance lobbies”.  The fact that the CAK has carried out its first dawn raid demonstrates its growing stature.

The fertiliser industry appears to be a priority sector for a number of African jurisdictions as the CAK’s investigation into this sector follows the South African Competition Commission’s investigation into the fertiliser industry (which resulted in a referral before to the South African Competition Tribunal for adjudication some years back). In this regard, the South African Competition Commission’s spokesperson stated that the “fertiliser sector is viewed as a priority sector, due to the its importance as an input in the agricultural sector” (as reported here on African antitrust)

Zambia

Interestingly, the Zambian Competition and Consumer Protection Commission (“CCPC”) had, in 2012, conducted dawn raids at the premises of two fertiliser companies, as a result of alleged collusion within the industry.

On a Path to Harmonisation?

While there are a number of practical and legislative hurdles to effectively carrying out cross border search and seizure operations, it appears that cross border investigations may not be too far off. This is particularly so as the various agencies within the Southern African Region have identified similar priority sectors (as evidenced by both the investigations into the fertiliser sectors as well as the various market inquiries into the grocery retail sector).

The Big Picture: Market-Sector Inquiries in Africa

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AAT the big picture

Market Inquiries in Africa – An Overview

By AAT guest author, Michael-James Currie.

Most African jurisdictions with competition laws have included provisions in their respective legislations that allow the competition authorities to conduct market inquiries.

Market inquiries have proved to be useful tools for competition agencies in numerous jurisdictions, particularly in Europe, and is becoming a common and increasingly popular tool amongst an number of African agencies as well.

Despite the benefits that may flow from a market inquiry, it is important that competition agencies appreciate and have due regard to the costs associated with such inquiries. Market inquiries are very time consuming and onerous for market participants and should be used sparingly. Having said that, the focus of market inquiries in most African jurisdictions tend to be on markets which the relevant authorities have identified as having a large impact on consumers.

In other words, socio-economic considerations appear to be a significant factor during the screening process used in deciding whether to institute a market inquiry. Sectors such as food, healthcare and banking (at an individual consumer level) are some of the common industries which have been ‘prioritised’ or identified as important sectors.

While the number of market inquiries which have been concluded on the African continent is limited, as competition agencies gain more expertise and confidence in their mandates, there is likely to be a significant increase in the number of market inquiries instituted and firms conducting business in Africa, particularly within ‘priority’ sectors, should be cognisant of this.

We set out below a brief overview of the market inquiries which are currently being conducted in the various African jurisdictions.

South Africa

There are currently three market inquiries which are underway, one into the private healthcare sector and the other into the grocery retail market. The third market inquiry is in the liquefied petroleum gas sector.

The private healthcare inquiry was launched on the basis that cost of private health care in South Africa is a concern to the competition authorities. A revised statement of Issues for public comment was announced on 11 February 2016 and comments are to be submitted by 11 March 2016.

The grocery retail inquiry is focussed largely on the stricture of the market and the ability of smaller or informal retailers to compete, but will also address issues such as “long term lease” clauses (which has already been adjudicated upon by the Competition Tribunal).

The third market inquiry is into the LPG which was launched in August 2014 is expected to conclude in March 2016.

The only previous market inquiry concluded in South Africa was into the banking sector. This inquiry was conducted on an informal basis as there were no formal legislative powers bestowed on the competition authorities to conduct market inquiries.

Swaziland

The Swaziland Competition Commission (SCC) announced in January 2016 that a market inquiry has been launched into the retail banking sector. The SCC stated that retail banking service offered to consumers, micro and medium enterprises remained the most important sub-sector of banking. It is, however, the ‘current account’ which is the central product to be used as the starting point for the inquiry.

Zambia

On 1 February 2016, the Zambian Competition Authority (CCPC) announced that it will be conducting a market inquiry into the vehicle towing industry. While the CCPC indicated that it wishes to understand the “conditions of competition in the market”, although the inquiry came about as the CCPC had received numerous complaints from consumers that emergency towing operators were charging high prices. It remains to be seen whether this inquiry is focused predominantly on competition-law issues, or rather consumer-protection laws.

Botswana

The Competition Authority in Botswana (CA) is currently underway with a market inquiry into the grocery retail sector, focusing on shopping malls and in particular, the impact of long term exclusivity leases on competition in the market.

COMESA

Consistent with the competition authorities of South Africa and Botswana, the COMESA Competition Commission (“CCC”) has also launched an investigation into the impact that shopping malls have on competition. The CCC announced that it will carry out their inquiry by taking samples from the member states.

We have previously published articles on the announcement of this market inquiry on AAT which can be accessed by clicking on the following link: https://africanantitrust.com/category/market-study/

COMESA to media reps: “Dr. Livingstone, I presume?”

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COMESA Competition Commission logo

Zambia hosts COMESA Competition Commission workshop to sensitize journalists to antitrust

As many African news outlets are reporting, their journalists were recently invited to take part in a competition-law “sensitization workshop” hosted by high-ranking CCC personnel in Livingstone, Zambia.

In light of COMESA’s currently lackluster merger enforcement and virtually non-existing merger notifications (none since 19 March 2014), this “media sensitization” public relations effort on the part of the CCC leadership comes as no surprise.

Here, we quote from the Seychelles Nation:

 


The Common Market for Eastern and Southern Africa (Comesa) competition commission recently organised a regional sensitisation workshop for business reporters.

The aim of the workshop, held in Livingstone, Zambia, was to enhance the role of the media in exposing anti-competitive business practices and promoting a competition culture in markets. 

The media was explained the role of good reporting on the competition policy within the Comesa, whose prime objective is to promote consumer welfare through encouraging competition among businesses. This objective is achieved by instituting a legal framework aimed at preventing restrictive business practices and other restrictions that deter the efficient operation of the market, thereby enhancing the welfare of consumers in the common market. 

Comesa is a regional economic grouping composed of 19 member states namely; Republic of Burundi, Union of Comoros, Democratic Republic of Congo, Republic of Djibouti, Arab Republic of Egypt, State of Eritrea, Federal Democratic Republic of Ethiopia, Republic of Kenya, Libya, Republic of Madagascar, Republic of Malawi, Republic of Mauritius, Republic of Rwanda, Republic of Seychelles, Republic of Sudan, Kingdom of Swaziland, Republic of Uganda, Republic of Zambia and Republic of Zimbabwe.  The grouping’s objective is for a full free trade area guaranteeing the free movement of goods and services produced within Comesa and the removal of all tariffs and non-tariff barriers.

But only journalists from Kenya, Malawi, Mauritius, Seychelles, Rwanda, Swaziland, Uganda, Zambia and Zimbabwe were present at the workshop. Seychelles was represented by journalist Marylene Julie from the Seychelles NATION newspaper.

The Comesa competition law is, in this regard, a legal framework enforced with the sole aim of enabling the common market attain the full benefits of the regional economic integration agenda by affording a legal platform for promoting fair competition among businesses involved in trade in the common market and protecting consumers from the adverse effects of monopolisation and related business malpractices.

Among the topics discussed at the meeting were the definition and scope of competitive policy;  the relevance of competition policy in ensuring market efficiency and the protection of consumer welfare; overview of the Comesa competition regulations, its legal basis and implementation modalities.

Mergers and acquisitions were also explained and why competition authorities regulate them. 

The media representatives also learned about their role in ensuring businesses notify transactions with competition authorities to avoid the dangers of anti-competitive business.

Hosting the workshop were the director and chief executive of the Comesa competition commission, George K. Lipimile; the manager for enforcement and exemptions Vincent Nkhoma and Willard Mwemba, manager (mergers & acquisitions).

In a message from the secretary general of Comesa Sindiso Ngwenya which was read by Mr Lipimile, Mr Ngwenya welcomed all media guests in Livingstone for the sensitisation workshop.

He said the gathering means that Comesa is reaching out to one of the most important key stakeholders in the region – the media. 

He also said the media plays a great role in advancing the group’s advocacies in the regions and through it Comesa is creating awareness surrounding the current regional trade order and the need for a competition policy for the region.

“Today our specific governments as well as other economic operators and the general public are appreciating that competition policy has a key role to play in creating conditions of governance for the national, regional and global market place,” read the message.

Explaining why the competition policy is an important instrument, Mr Lipimile said it forces companies to run themselves efficiently, ensures a level playing field, forces economic operators to adjust changes and encourages innovation. Competitions lead to lower prices, greater dynamism in industry and most important of all greater job creation.

He added that competitive markets are needed to provide strong incentives for achieving economic efficiency and goods that consumers want in the quantities they want.

Regarding mergers and acquisitions and why competition authorities should regulate mergers, Mr Mwemba said the regulation of mergers is one of the most important components of any competition legislation and policy. 

He explained that sometimes mergers are effected to eliminate competition. 
“Therefore mergers need to be regulated so as not to injure the process of competition and harm consumers,” said Mr Mwemba.

He highlighted that firms merging just to eliminate competition is detrimental to consumers as it results in poor quality goods, high prices, and fewer choices to them.

He also stressed the media’s role in ensuring firms notify their mergers so that they do not merge for ulterior motives. 

The media can also avoid situations where firms  keep the merger a secret as they are mindful competition authority may reject their application. 
“The media should act as watchdog by reporting mergers that have happened in the country,” said Mr Mwemba.

As for Mr Nkhoma, he said there are several ways in which anti-competitive business practices can harm consumer welfare and derail the gains of intra regional trade. 

He said this during his presentation on anti-competitive business practices and the role of the media in enhancing the competition culture. 

He gave examples of two well established firms in a country or region which are engaged in fierce competition with each other. Such competition leads them to independently introduce innovations aimed at outwitting each other on the market such as offering lower prices, discounts, rebates, etc.  The consumer benefits from this rivalry in terms of low prices, high quality, etc. 

He explained the scenario where two firms decide that rather than compete, they agree on what quantities to supply on the market and at what price and quality.  The two firms will end up maximising profits at the expense of consumer welfare. 

“This is what is described as a cartel, a situation where businesses rather than compete, seek to collude to exploit high prices from the market. Markets dominated by cartels will ultimately become complacent in their business decisions and as a result, consumers lose out by way of poor quality products, high prices, etc.,” said Mr Nkhoma.

He also said consumers may also have experienced scenarios where a firm or a collection of firms become so dominant in the market to the extent of behaving without effective constraints from existing competitors or potential competitors. Such dominant firms have an incentive to charge excessive prices knowing that consumers have no alternative of getting similar goods or services anywhere feasible. 

In Seychelles the competition regulator is the Fair Trading Commission (FTC). In a recent press release, FTC said it is setting up a National Competition Policy which comes at a time when Comesa is seeking to harmonise the Comesa competition regulations with domestic competition law. 

The National Competition Policy aims at guiding governments on applying laws, regulations, rules of policies that will allow businesses to compete fairly with one another in order to foster entrepreneurship activity and innovation. 

The policy will also guide the commission in the enforcement of the Fair Competition Act 2009 and will provide a platform upon which national policies can be harmonised with the existing competition law.

The Big Picture: AAT History – Maturing competition-law regimes in Africa

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AAT the big picture

Below, AfricanAntitrust.com provides a brief overview of maturing antitrust jurisdictions in Africa

In the past two decades, 26 African countries implemented domestic competition law regimes, and that number continues to grow.

Many competition authorities who were previously deemed as being rather ineffective in their teething stages, have now begun to actively enforce their respective competition law provisions by launching market inquiries, prohibiting anti-competitive mergers, conducting dawn raids and becoming tough on cartel activity.

Below, we provide a short summary of some of the maturing jurisdictions on the continent (notably excluding matured ones (South Africa) as well as young regimes, including supra-national ones such as COMESA, as they arguably fall outside this definition.)

Botswana

The Competition Authority in Botswana was launched in 2011, and with 33 staff members, of which nearly half comprises economists, and the authority has already conducted more than 20 dawn raids and launched market inquiries launched into various “priority sectors” such as retail, poultry and cement. The competition authority has blocked mergers which impede the empowerment of Botswana’s citizens on the basis of public interest concerns in maintaining sufficient local shareholding in certain key markets such as health care.

Kenya

In 2011, Kenya implemented its Competition Act and now, given the new, and higher, merger filing fees, the budgetary constraints within the Competition Authority of Kenya (“CAK”) will be addressed and alleviated. The Competition Authority of Kenya announced its intention to launch investigations into claims of powerful cartels in the lucrative coffee industry in Kenya. The Competition Authority of Kenya plans to probe abuse of dominance by coffee firms, particularly in relation to marketing. In addition, the Competition Authority of Kenya has initiated an investigation into allegations of abuse of dominance by Lafarge in Kenya, which may result in Lafarge being forced to sell its stake in the East African Portland Cement Company.

Following the dawn raid conducted by the South African Competition Commission on Unilever and Sime Darby in April 2014 in relation to the edible oils industry, the CAK has launched an investigation into the edible oils market, in which local prices have been unresponsive to reductions in the cost of imported feedstock.

Namibia, Zambia & Mauritius

Both the Namibian and Mauritian competition authorities have announced their respective plans to introduce a formal corporate leniency policy to improve their cartel enforcement. In addition, the Mauritian Competition Commission will investigate whether Stage Beverages, of the Castle Group, and Phoenix Beverages Ltd have agreed to divide markets in Mauritius and Madagascar, given that the Mauritian Competition Commission has reason to believe that Stage Beverages and Phoenix Beverages have agreed that Stage Beverages will cease the manufacture and supply of beer in Mauritius, while Phoenix Beverages will do the same in Madagascar.

The Zambian competition authority has recently imposed significant penalties for price-fixing in the vehicle-repair industry. Furthermore, it has conducted dawn raids on two fertiliser companies.

AAT will continue its summaries (which we hope you find helpful in navigating the competition-law map of Africa) in its “Big Picture” series.

COMESA merger stats: January ’14 outperforms first 6 months of 2013

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COMESA Competition Commission logo
Three merger notifications in one month set new record for COMESA Competition Commission.

After commenting on the rather lackluster statistics of the first 11 months A.D. 2013, we observed that some deal-making parties might be “flying under the radar” and asked the question:

Combine Point 4 above (low filing statistics) with the zero-threshold and low nexus requirements that trigger a COMESA merger notification, and the following question inevitably comes to mind: With such low thresholds, and the certain existence of commercial deal activity going on in the COMESA zone, why are there so few notifications?

Well, the young agency’s stats have picked up some steam in 2014, it would seem: based on a review of its online document repository, the CC has received a whopping three notifications in January alone.  They are, in chronological order:

  1. Mail & courier services: FedEx / SupaSwift – a transaction involving the acquisition of a South African courier with operations in multiple COMESA member states, Botswana, Malawi, Mozambique, Namibia, Swaziland and Zambia.
  2. Agricultural distribution and financial services: AgriGroupe / AFGRI Ltd. – Mauritian SPV AgriGroupe seems to be taking AFGRI (listed on the JSE) private.  The target has operations in multiple COMESA countries.
  3. Generic pharmaceuticals: CFR Inversiones SPA / Adcock Ingram Holdings Ltd. – Chilean CFR is buying all of South African off-patent pharmaceuticals manufacturer Adcock’s shares. Notably, the buyer has no COMESA activities; target is active in Kenya, Malawi, Rwanda, Sudan, Swaziland, Uganda and Zimbabwe.
(c) AAT
Merger notification stats for COMESA as of Feb. 2014

Take-aways:

  • Activity has increased dramatically.  Is it a coincidence & a statistically irrelevant blip on the radar screen?  This remains to be seen. The parties are – unlike last year’s – not “repeat parties” and therefore the increase in notifications seems to be natural/organic growth, if you will, rather than a case of the same bear falling into the same honey-trap multiple times…
  • The Competition Commission has listened to its critics (including this blog). Notably, the CC now clearly identifies the affected member-state jurisdictions in the published notice – a commendable practice that it did not follow in all previous instances, and which AAT welcomes.

Post-scriptum: Adding up the total 2013 tally of notifications, the Tractor & Grader Supplies Ltd / Torre Industrial Holdings transaction (notified after our prior statistics post in November 2013) brought the sum-total of COMESA merger filings to 11 for FY2013.

Parties turn a cold shoulder: Is COMESA’s CCC being ignored … ?

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COMESA old flag colorZambia

A pressing question on many COMESA observers’ minds is this: do corporations (and their legal advisers) consciously ignore the CCC‘s jurisdiction and essentially flaunt the supra-national organisation’s merger-notification regime?

As reported by us yesterday, there may be an interesting test case coming up in the Uganda telecommunications sector, which may help clarify whether parties to known merger deals are simply ignoring the notification mandate of COMESA.

Today, we noticed what appears to have been two recent deals in the poultry sector in Zambia (yet another COMESA member state).  As the Zambian newspaper The Times reports, there were two transactions** that have been approved by the Zambian Competition and Consumer Protection Commission (CCPC) Board of Commissioners — seemingly unilaterally and without involvement of COMESA’s CCC.

Again, as with the potential Ugandan test case we discussed, the question now becomes: were the conditions to notifiability at the COMESA level met (likely yes), and if so, did the parties intentionally fail to notify the deal to the CCC … ?  To date, only one deal (Philips/Funai) is known to have been notified to the CCC, as AfricanAntitrust.com reported here.  We would love to hear from a representative of the CCC itself to get their view on the current state of affairs.

One possible explanation of the apparent lack of COMESA notification is that the transactions pre-dated the January 2013 effective date of the COMESA competition regime, but that seems unlikely at this late stage, given that it’s already May and the CCPC is only now giving its green light to the deals.

 

** The names of some of the parties are entertaining, no less, as they are Zamchick and Rainbow Chicken.  Presumably, the merged entity might adopt Rainbow Zamchick?