Zambian Competition Authorities Finalise Guidelines for New Merger Regulations

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zambiaThe Competition and Consumer Protection Commission (“CCPC”) recently published the CCPC Guidelines for Merger Regulations 2015 (the “Guidelines”).[1]

The Guidelines are binding on all “persons” regulated under the Competition and Consumer Protection Act, No 24 of 2010 (the “Act”) insofar as the provisions of the Guidelines are not “inimical” to the Act.

An extensive definition of what constitutes a “merger”

In terms of the Act, a merger is defined as “a transaction between two or more independent parties which results in one party acquiring an interest in the other party”.[2]An “interest” may be acquired through the acquisition of shares, assets or through an agreement such as a joint venture.

The Guidelines confirm that the acquisition of a ‘material interest’ is likely to be considered as a merger. Furthermore, the acquisition of “control” can include indirect control such as the case where minority shareholders are able to exercise veto rights or in the case where a supplier may exercise control over a downstream customer as a result of a long term supply agreement.

The Guidelines have also confirmed that for purposes of establishing an “acquisition”, even a lease agreement over an asset can be considered to be an ‘acquisition’ in certain circumstances. The lease over the asset must, at a minimum, change the competitive situation in the relevant market.

The Guidelines have, therefore, caste the Zambian merger control net broadly in respect of establishing whether control has been acquired (or relinquished).

Clarification regarding joint ventures (“JVs”)

Notably, the Guidelines dedicate a substantial portion to agreements such as JVs. The CCPC has taken a robust approach to JVs and generally JVs will, if the financial thresholds are met, be required to be notified, unless they are “auxiliary” to the activities of their parent enterprises.

A JV will be considered to “auxiliary” if the JV fulfils a specific purposes for their parent company, as opposed to a “full function” JV which operates as an autonomous economic entity on an indefinite basis.

 

Confusion regarding transactions involving foreign enterprises

As far as transactions involving foreign entities are concerned, there appears to be some anomalies in the Guidelines as illustrated by the two scenarios envisaged below.

In the first scenario, the Guidelines state that when a domestic (Zambian) enterprise “falls within the control of a foreign enterprise”, notification will only be required if the “operation has an effect on competition in Zambia”. This requirement seems to place the cart before the horse to some extent in the sense that a competition analysis needs to be performed simply to establish whether the transaction should be notified in the first place. In other words, it appears that if a foreign parent company acquires a domestic company, the merger will not have to be notified (despite meeting all other requirements of a mandatorily notifiable merger), if the proposed transaction would not have an impact on the competitive environment in Zambia.

The second scenario envisaged by the Act, is when a foreign company acquires another foreign company, but where at least one of the parties to the proposed transaction has a “local connection” to Zambia. For instance, a local connection may exist if the foreign entities have subsidiaries based in Zambia or derive at least 10% of its sales in Zambia for a period of at least three years.

In the latter scenario, the mere existence of a local connection is sufficient to trigger a merger notification requirement and no evaluation on the impact of the proposed transaction on competition needs to be considered.

It is likely that the two scenarios should be interpreted simply to confirm that there must be an effect on Zambian commerce before a merger notification requirement is triggered.

Possibility of pre-notification

The Guidelines also make provision for a pre-notification consultation with the CCPC for purposes of clarifying matters such as whether a transaction constitutes a merger or should be notified, as well as obtaining advice in relation to calculating annual turnover, value of assets or market shares.

Risks of prior implementation

Importantly, the Guidelines expressly state that prior implementation of a mandatorily notifiable merger may be result in the firms being liable to a fine of up to 10% of their annual turnover. In this regard, the Guidelines do not limit the ‘10%’ to turnover derived in, into or from Zambia.

The Guidelines further provide for a number of procedural aspects to merger notifications including, inter alia, timelines and the forms required to be completed.

 

Details on the assessment of a merger by the CCPC

As to the substantive evaluation of a merger the Guidelines provide significant guidance.

As a point of departure, the Guidelines recognise the types of mergers and theories of harms which are common to most established competition regulatory regimes.

The Guidelines recognise that most vertical and conglomerate mergers do not raise competition concerns, although there are of course exceptions, especially when a merger can give rise to foreclosure effects.

Importantly, like many African jurisdictions, the CCPC will assess the public interest impact of a proposed merger when deciding whether to approve the merger or not.

The public interest provision is drafted slightly differently to many other legislative instruments containing similar provisions.

In terms of the Guidelines, the CCPC will evaluate whether a merger, which has failed the competition test, should proceed on the basis that there are public interest grounds which justify the approval. The Guidelines do, however recognise that even a pro-competitive merger could be prohibited on public interest grounds. The Guidelines give no more guidance as to how public interest grounds will be considered or evaluated.

The Guidelines provide substantial additional information in relation to how the CCPC will evaluate the various factors taken into account when evaluating the impact of a merger. Some of these factors include:

  • market definitions;
  • market concentrations;
  • counter-factual;
  • market entry, import competition;
  • counter veiling buying power;
  • removal of a vigorous and effective competitor; and
  • and effective remaining competition post merger

The Financial thresholds

On a final note and of considerable importance, the Guidelines, together with the Annexure to the Guidelines, prescribe low financial thresholds for mandatorily notifiable mergers.  In terms of the Guidelines, the combined asset value or turnover figures for merging parties must be at least 50 million fee units to constitute a mandatorily notifiable merger.

The Annex to the Guidelines indicates that 15 million Kwatcha would amount to 50 million fee units, 15 million Kwatcha being approximately (US $ 1 470 000).

The Guidelines also cater for the calculation of filing fees.

[1] See the CCPC’s Guidelines: http://www.ccpc.org.zm/wp-content/uploads/2015/09/CCPC-MERGER-GUIDELINES-FINAL-DOCUMENT-CONSOLIDATED-FINAL-VIEW.pdf

[2] See Section 24 of the Act.

Mauritius competition watchdog places mobile operators under scrutiny

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Mauritius competition watchdog places mobile operators under scrutiny

Julie Tirtiaux writes about an investigation by the CCM into allegedly discriminatory mobile pricing policies by the two main mobile operators in the island nation of about 1.2 million.

On 27 August 2015, the Competition Commission of Mauritius (“CCM”) announced an investigation against two major mobile operators, Emtel and Orange. The CCM has identified similar concerns to those examined in other jurisdictions such as France and South Africa, related to the exclusionary effects of discriminatory pricing policy for calling services.

Price discrimination triggered the investigation

The CCM is concerned that the two major mobile telephony operators may be discriminating between tariffs for calls made between subscribers within the same network (“on-net calls”) and calls to subscribers from other competing networks (“off-net calls”). This raises the question as to why off-net calls are charged at higher rates when compared to on-net calls.

The table below sets out the respective call tariffs charged by Emtel, one of the respondents in the current CCM investigation.[1]

Call direction Per second tariff (Rs) Per Minute (Rs)
Emtel to Emtel Voice call 0.02 1.2
Emtel to Emtel Video call 0.02 1.2
Emtel to other mobile operators 0.06 3.6
Emtel to Fixed land line 0.0575 3.45
Emtel to Emtel Favourite Num 0.016 0.96

The CCM suspects that the higher prices for off-net calls may not be objectively justified by cost differentials. This potential discrimination could thus be “preventing, restricting or distorting competition in the local mobile telephony sector, which ultimately could deter or slow investment, innovation and growth in the sector”.[2] It is argued that such conduct raises a strategic barrier for new and small mobile operators to enter and expand within the mobile market, as rational consumers would likely be inclined to choose the operator which already has a large user base.

mauritius

In other words, this allegedly discriminatory pricing policy for calling services could lead to exclusionary conduct by the duopoly of Emtel and Orange and consequently to the infringement of Section 46(2) of the Mauritius Competition Act of 2007.[3] However, such an infringement will have to be proved by the CCM, as the presence of on-net/off-net price differentiation does not automatically raise competition concerns in and of itself. It has been argued that the existence of two equally large competitors is enough to observe a competitive outcome and thus the maximization of and consumer welfare.[4]  Put differently, it is not the number of players in a market which determines the competitive outcome but rather the intensity of competition between the existing players.

The analysis of the foreclosure effects of on-net/off-net price differentiation by the Autorité de la concurrence[5]

In December 2012, the Autorité de la concurrence fined the three main French mobile operators, i.e. France Télécom, Orange France and SFR a total of €183.1 million for supplying their subscribers with unlimited on-net offerings.[6]

According to the Autorité de la concurrence, “these offerings first of all artificially accentuated the “club” effect, that is, the propensity for close relatives to regroup under the same operator, by encouraging consumers to switch operators and join that of their relatives (…). Once the clubs were formed, these offerings “locked” consumers in durably with their operator by significantly raising the exit costs incurred by the subscribers of on net unlimited offerings as well as by their relatives who wish to subscribe to a new offering with a competing operator”.[7]

In addition, these offerings automatically favoured large operators over small operators (“network effect”). In other words, these offerings induced users to subscribe to the dominant incumbents at the expense of smaller independent operators who would undoubtedly have been faced with higher cost structures directly related to the higher off-net calls rates.

The regulation of the mobile sector in South Africa

Unlike the Mauritian telecom market which allows operators to freely set their prices, South Africa regulates call termination rates, which correspond to fees that mobile operators charge each other to carry calls between their networks, via the Independent Communications Authority of South Africa (“ICASA”). ICASA justified new regulations by saying that the rates had driven up the cost to communicate for consumers, making South Africa one of the most expensive places to use a mobile phone.[8]

 

On 29 September 2014, ICASA modified the asymmetric rates, first introduced in February 2014,[9] in order to ensure a level playing field between the mobile operators. The intended effect of these asymmetric rates is to ensure low off-net call rates for operators with low market power.[10]

 

In addition to the regulatory aspects in the hands of ICASA, in October 2013 Cell C lodged a complaint with the South African Competition Commission against MTN and Vodacom in relation to alleged differentiation between on-net/off-net prices. [11]

Conclusion

In conclusion, the efficient functioning of the crucial mobile sector is a delicate task for both regulating bodies and enforcement agencies. It will thus be interesting to see how this investigation progresses and what learnings the CCM is able to draw through the assessment of the on-net/off-net price differentiation by the two main mobile operators in Mauritius.

[1] See Emtel’s price plans presented on their website on 7 September 2015: https://www.emtel.com/price-plans

[2] See the media release of the CCM of 27 August 2015 opening of investigation on monopoly situation in relation to mobile telephony sector.

[3] Section 46(2) of the Mauritius Competition Act prohibits a monopoly situation held by one or several firms which “(a) has the object or effect of preventing, restricting or distorting competition; or (b) in any other way constitutes exploitation of the monopoly situation”.

[4] Frontier Economics “On-net/off-net differentials the potential for large networks to use on-net/off-net differentials or high M2M call, termination charges as a means of foreclosure” March 2004.

[5] That is to say the French Competition Authority.

[6] Decision of the Autorité de la concurrence of 13 December 2012, France Télécom, Orange France and SFR, case no 12-D-24. This decision has been appealed and is currently pending before the Paris Court of Appeal.

[7] Press release of the Autorité de la concurrence: http://www.autoritedelaconcurrence.fr/user/standard.php?id_rub=418&id_article=2014

[8] ICASA, 16 October 2012 Media Release https://www.icasa.org.za/AboutUs/ICASANews/tabid/630/post/consumers-benefitfrom-a-drop-in-the-actual-cost-of-prepaid-mobile-voice-call/Default.aspx INCASA said that “mobile prices are cheaper in over 30 African countries than they are in South Africa”

[9] The asymmetric rates adopted by INCASA in February 2014 were declared unlawful and invalid by the High Court on 31 March 2014 as they were objectively irrational and unreasonable.

[10] It must be noted that these new asymmetric rates have been challenged and that the case is still pending. See the following article on ENSafrica: https://www.ensafrica.com/news/the-reformulation-of-call-termination-rates-in-South-Africa?Id=1414&STitle=TMT%20ENSight.

[11] This complaint is still being investigated by the Competition Commission.

Antitrust authority’s treatment of Joint Ventures — here, in the Shipping sector

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South African Competition Authorities on Joint Ventures – Shipping Liners in the limelight once again

By Michael Currie

The recent investigation into the shipping cartel brought to the fore an important issue as far as competition regulation and commercial practice is concerned, namely joint ventures.  (AAT previously reported on the container-shipping cartel updates here, here and here).

south_africa

On 12 August 2015, the South African Competition Tribunal (the “Tribunal”) was asked to make a consent agreement, an order of the Tribunal.  The relevant parties involved were Nison Yupen Kaisha Shipping Logistics and BLG Logistics (the “Parties”), who both signed consent agreements with the South African Competition Commission (the “Commission”) in relation to having contravened Section 4(1)(b) of the South African Competition Act, 89 of 1998 (the “Competition Act”). The Parties had entered into a joint venture agreement (“JV”) which contained a number of clauses which the Commission found would essentially prohibit the Parties from competing with one another. The Parties were the only two shareholders whose shareholding was 49% and 51% respectively.

The administrative penalties which the parties agreed to pay were less than US$100 000, which seems nominal compared to the approximate US$8 750 000 administrative penalty which NYK had agreed to pay in respect of the shipping cartel investigation (previously reported on by African antitrust).

Regardless of the quantum of the penalty imposed on the parties, the authorities provided some useful points to consider when deciding to embark on a joint venture.

John Oxenham, with Nortons and Africa consultancy Pr1merio, observes that, “[e]ssentially, the Commission confirmed that joint ventures will be scrutinised and evaluated against the competition regulatory environment with the same degree of scepticism as any other agreement/conduct between competitors. In this regard, it is evident that despite the well-recognised advantages and efficiencies that often flow from joint ventures, the questions and considerations essentially remain the same as far as the competition authorities are concerned.”

In other words, if a joint venture is concluded between competitors that leads to a fixing of the price (or any other restrictive cartel practice), then the parties will be liable to an administrative penalty and there are no ‘rule of reason’ defences available to the parties.

Andreas Stargard, an attorney advising clients on competition law and African legal issues, notes:

“Enforcement agencies must be sure to be careful in their analysis of the JV (including its structure, the degree of integration and actual sharing of manufacturing resources, IP portfolio, and the like) in order not to arrive at a ‘false-positive’ result.  Conversely, companies that do decide to form a JV should consult antitrust counsel in order to ensure compliance with the authorities’ requirements for what constitutes an antitrust-immune joint venture, and which conduct falls outside the scope of protection.”

For in-house counsel advising their corporate clients on JV formation and/or conduct with their joint partners, Pr1merio‘s Stargard suggests some of the following relevant questions to ask outside antitrust experts:

  • What matters most to the legal risk analysis?  (Hint: function matters more than form.  You can call your cooperation with your competitor a “joint venture” on letterhead, corporate registers, and web sites, but it still may not be immune to conspiracy allegations.  The U.S. Supreme Court has held in American Needle v. National Football League that it “eschewed such formalistic distinctions in favor of a functional consideration of how the parties involved in the alleged anticompetitive conduct actually operate.”)
  • Is it advantageous for our business model to withdraw from an existing JV, based on an antitrust audit and/or risk assessment of the JV’s functions, its actual level of integration, and the benefits derived from the joint nature of the business?
  • Should we re-evaluate our information-sharing practices with our JV partners?  (Probably yes)
  • Does our business constitute a “full-function joint venture,” as the EU calls those highly-integrated types of JVs that become wholly independent of their original JV partners as separate economic undertakings (and therefore could in theory be found to conspire with their shareholders, as they are independent economic actors on the market, and also fall under full merger-notification scrutiny).
  • How else could we recognise the significant efficiencies we currently derive from joint conduct with our manufacturing/research & development/or other partner?  Are there other options?

The M/V Thalatta, a WWL High Efficiency RoRo vessel

The M/V Thalatta, a WWL High Efficiency RoRo vessel (image (c) WWL)

An interesting point to note from the South African Shipping case is that the authorities were not only concerned with the JV itself, but analysed whether the JV itself could be used as a mechanism or a vehicle which would enable the Parties to share information with one another. The authorities concluded that that is exactly what the current JV allowed.

In this regard, the Commission stated that they found it “difficult to divorce the conduct of the Parties outside the Joint Venture, with their conduct within the Joint Venture”. Accordingly, the Parties were able to share information within the JV which would lead to a distortion of competition outside the JV.

In other words, the Commission found that the Parties were competitors outside the JV, but through the JV, they became ‘one’.

Ultimately the Parties’ fines were calculated at 3.5% of the JV’s annual turnover in the preceding financial year. Interestingly, however, the penalty was not imposed on the JV itself, but imposed on the Parties, in proportion to their respective shareholding.

The Joint Venture itself, however, was not penalised as the Commission held that this would amount to double-jeopardy considering that the only two parties to the JV were already fined.

Shipping Cartel: Recent approach to fining in SA

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By Michael Currie

AAT previously reported (here and here) that the SACC had been investigating cartel behaviour which allegedly took place between multiple shipping liners who transported vehicles for various Original Equipment Manufacturers (“OEMs”).

The investigation resulted in two consent agreements being concluded between the SACC and Nippon Yusen Kaisha Shipping Company (“NYK”) and Wallenius Wilhelmsen Logistics (“WWL”) respectively (the “Respondents”).

On 12 August 2015, the Competition Tribunal (“Tribunal”) was requested to make the consent agreements, orders of the Tribunal.

south_africa

In terms of the consent agreements, the Respondents had admitted that they had contravened Section 4(1)(b) of the Competition Act, 89 of 1998 (the “Competition Act”) on multiple occasions (between 11 and 14 instances), and accordingly agreed to pay administrative penalties of approximately R95 million ($ 8million) and R103 million (R8.5 million) respectively.

We had noted in our previous article on this matter, that in light of the SACC’s recently adopted Guidelines for the Determination of Administrative Penalties for Prohibited Practices (the “Guidelines”), it would be interesting to see how the SACC and the Tribunal go about calculating and quantifying an administrative penalty, when dealing with factual circumstances similar to this matter.

We had been concerned that in cases which involve cartel conduct relating to tenders (i.e. bid-rigging), the Guidelines will have limited application.  Andreas Stargard, an attorney with the Africa consultancy Pr1merio, notes:

There are two main reasons why there we view only a narrowly circumscribed application of the Guidelines in these particular circumstances:

  • Firstly, the Guidelines require in the case of bid-rigging that the affected turnover to be used for purposes of calculating an administrative penalty must be the higher of: the value of the bid, the value of the contract ultimately concluded, or the amount of money ultimately paid to the successful bidder. While this approach to calculating affected turnover when dealing with tenders such as those in the construction industry may be useful, the Guidelines present an anomaly when one is dealing with a tender, the value of which is subject to one or more variable and the tender contract has not been completed yet at the time of the calculation or imposition of an administrative penalty.

  • Secondly, and perhaps even more problematic, is that the Guidelines envisage that a party involved in cartel conduct should be fined for the tenders that the party successfully ‘won’, as well as being held liable for tenders that the party ‘lost’. In terms of the Guidelines, a party who was involved in ensuring that another company was awarded the tender (due to collusion), the ‘unsuccessful’ party will be subjected to an administrative penalty for such a tender as well. In this regard, the affected turnover that will be utilised to calculate the administrative penalty for the ‘unsuccessful’ party, the SACC would also choose the greater of the actual value of the bid submitted by the ‘unsuccessful party’, or the value of the contract or the amount ultimately paid to the successful bidder.

This in itself creates two further issues. The first is from a policy perspective; in terms of penalising the unsuccessful bidder, the unsuccessful bidder’s affected turnover would in most instances be either than the affected turnover of the successful bidder higher (because when a firm deliberately ‘loses’ a bid, they usually submit a cover bid which is higher than the ‘winning’ bid), or at a minimum the same value as the affected turnover attributed to the successful bidder. Thus it is conceivable that the ‘unsuccessful’ bidder while not having derived any benefit from the bid in question, would be subjected to a similar or greater administrative penalty than the successful bidder.

Furthermore, for purposes of reaching a settlement quantum, it is often not possible for the ‘unsuccessful bidder’ to know or calculate the value of the contract or the amount paid to the successful bidder. The only way to obtain such information would require information sharing between competitors, which raise a host of further competition law concerns.

Accordingly, while the adoption of Guidelines for purposes of ensuring greater certainty and transparency is created for parties who are potentially subjected to administrative penalties, the Guidelines have respectfully fallen short of doing that, when dealing with instances of bid-rigging.

The difficulty of applying the Guidelines to cases of bid-rigging was acknowledged by the SACC during the shipping cartel hearings before the Tribunal, a consequence of which saw the SACC adopt a novel and individualised strategy to calculating the administrative penalties which the Respondents ultimately agree to.

The SACC decided firstly that whichever strategy they adopt for purposes of calculating the Respondents financial liability, must be one that can be consistently and fairly applied to all respondents in the investigation.

Accordingly, the SACC decided to impose a administrative penalty of 3.5% of the Respondents’ turnover derived within or from South Africa, in respect of bids which the Respondents were awarded, and a lesser percentage of turnover was used in respect of bid’s which were not awarded to the Respondents.

The SACC thus acknowledge that it would not be fair to impose the same penalty quantum on the successful bidder on the unsuccessful bidder as well.

The M/V Thalatta, a WWL High Efficiency RoRo vessel

The M/V Thalatta, a WWL High Efficiency RoRo vessel (image (c) WWL)

When pressed on how the SACC reached a value of 3.5%, the SACC indicated that the Respondents’ willingness to engage the SACC and their commitment to settling the process was a weighty factor taken into account.

Importantly, the SACC decided to penalise each of the respondents cumulatively. In other words, for each instance of a contravention, the SACC imposed a penalty equal to 3.5% of the firm’s annual turnover (or a slightly lesser amount if the firm was the unsuccessful bidder’).

Section 59 of the Competition Act limits the amount of affirms administrative penalty to 10% of the firm’s annual turnover derived within or from South Africa in its preceding financial year.

Due to the fact, however, that the SACC ultimately imposed a cumulative penalty, the administrative penalty imposed on the Respondents exceeded 10% of the Respondents annual turnover.

On a side note, the SACC did use the annual turnover of the proceeding financial year as the based upon which to penalise the respondents, but rather opted to use the year 2012 which was the most recent year during which there was evidence of collusion.

Accordingly, the Commission has exercised a considerable degree of discretion when choosing a strategy for purposes of imposing an administrative penalty and while the SACC considered the sic-step approach to calculating an administrative penalty, opted rather to impose a turnover based percentage figure, and thus, we are left none the wiser as to how the Guidelines are actually going to be interpreted and implemented.

MergerMania update: COMESA CCC clears 5 notified mergers

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COMESA old flag color

COMESA CCC clears 5 notified mergers

At their July 29, 2015 meeting, COMESA Competition Commissioners Chikankheni, Langa, and Okilangole rendered decisions in five merger cases notified earlier in the spring.  The affected sectors are: Packaging (Nampak), Retail (Steinhoff), Academic Publishing (Springer Verlag), Telecom Towers (Eaton Towers), and Non-Alcoholic Beverages (Coca-Cola).

Ethos/Nampak MER/03/01/2015 SOM/8/2015 Decision/10/2015  29/07/2015
Steinhoff/Pepkor MER/03/02/2015 SOM/7/2015 Decision/9/2015  29/07/2015
Holtzbrinck PG/ Springer Science MER/04/06/2015 SOM/6/2015 Decision/8/2015  29/07/2015
Eaton Towers/ Kenya, Malawi, Uganda Towers MER/04/05/2015 SOM/5/2015 Decision/7/2015 29/07/2015
Coca-Cola BAL/ Coca-Cola SABCO MER/04/07/2015 SOM/4/2015 Decision/6/2015 29/07/2015

Our statistics (while discrepant with those identified by COMESA head of mergers Mr. Willard Mwemba) show the following numbers for COMESA notifications to date:

COMESA MergerMania July 2015
Number of merger notifications based on CCC-published notices

Insight into COMESA thinking: CCC executives speak

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COMESA old flag color

COMESA officials’ pronouncements: merger enforcement #1, cartel ‘follow-on enforcement’, jurisdictional swamp

As other attendees of the 17 July 2015 regional sensitisation workshop have done, the Zimbabwean daily NewsDay has reported on the Livingstone, Zambia event — a session that has yielded a plethora of rather interesting pronouncements from COMESA Competition Commission (“CCC”) officials, including on non-merger enforcement by the CCC, as we have noted elsewhere.

In light of the additional comments made by CCC officials — in particular George Lipimile, the agency’s CEO, and Willard Mwemba, its head of mergers — we decided to select a few and publish the  “AAT Highlights: COMESA Officials’ Statements” that should be of interest to competition-law practitioners active in the region (in no particular order):

M&A: CCC claims approval of 72 deals since 2014

Willard Mwemba is quoted as saying: “The commission has updated more than 72 mergers and the transaction represented more than $20 million. This money has been invested in the common market through mergers and acquisition.”
We do not know what it means to “update” a merger in this context.  We presume it implies “cleared.”
This figure does not conform to the published statistics on the CCC’s web site, which show the following numbers, based on our latest internal tally, amounting to a total of 30 published notifications since 2013 versus a claimed 72 approved deals since only 2014:
COMESA merger statistics July 2015
Number of merger notifications based on CCC-published notices
This discrepancy opens up the topic of transparency and proper documentation on the part of the CCC on its web site.  The (undated, as we have observed) PDF notices of merger filings simply do not reflect this claimed number of actual merger approvals made by Mr. Mwemba.  We hope that the CCC will enhance and better organise its online documentation of M&A activity.  (Even the very first link to the “Explanatory Note” of mergers remains broken after months, as noted previously, simply leading to a blank page comically headlined “What is Merger?”).
We also wonder about the reference in Mr. Mwemba’s statement to “the transaction” valued at “more than $20m.”  It may be unclear reporting on the part of NewsDay, or perhaps Mr. Mwemba was referring to a specific but unnamed transaction, presumptively in the mining industry.  In any case, Mwemba highlighted the following sectors as key for COMESA M&A transactions: mining, pharmaceuticals, agriculture and energy.
Finally, the claimed CCC’s reduction of the the merger filing fees from half a million dollars “to $200,000” is a topic we shall discuss in a separate post.

Non-Merger Enforcement by COMESA

As we noted in yesterday’s post, the CCC’s head, executive director George Lipimile, foreshadowed non-merger enforcement by the agency, including an inquiry into the “shopping mall sector,” as well as cartel enforcement.  On the latter topic, Mr. Lipimile highlighted cartels in the fertiliser, bread and construction industries as potential targets for the CCC — all of which, of course, would constitute a type of “follow-on enforcement” by the CCC, versus an actual uncovering by the agency itself of novel, collusive conduct within its jurisdictional borders, as John Oxenham, a director at Africa consultancy Pr1merio, notes.
“Here, in particular, the three examples given by Mr. Lipimile merely constitute existing cartel investigations that we know well from the South African experience — indeed, the SA Competition Commission has already launched, and in large part completed, its prosecutions of the three alleged cartels,” says Oxenham.
As AAT has reported since the 2013 inception of the CCC, antitrust practitioners have been of two minds when it comes to the CCC: on the one hand, they have criticised the COMESA merger notification regime, its unclear thresholds and exorbitant fees, in the past.  On the other hand, while perhaps belittling the CCC’s merger experience, the competition community has been anxious to see what non-merger enforcement within COMESA would look like, as this (especially cartel investigations and concomitant fines under the COMESA Regulations) has a potentially significantly larger impact on doing business within the 19-member COMESA jurisdiction than merely making a mandatory, but simple, filing with an otherwise “paper tiger” agency.  Says Andreas Stargard, also with Pr1merio:
“If the CCC steps up its enforcement game in the non-transactional arena, it could become a true force to reckon with in the West.  I can envision a scenario where the CCC becomes capable of launching its own cartel matters and oversees a full-on leniency regime, not having to rely on the ‘follow-on enforcement’ experience from other agencies abroad.  The CCC has great potential, but it must ensure that it fulfills it by showing principled deliberation and full transparency in all of its actions — otherwise it risks continued doubt from outsiders.”

COMESA Judge Proposes Judicial Enhancements

Justice Samuel Rugege, the former principal judge of the COMESA Court of Justice, is quoted as arguing against the COMESA Treaty’s requirement for exhaustion of local remedies prior to bringing a matter before the Court of Justice:
“I think that the rule ought to be removed and members should have access to the courts like the Ecowas Court of Justice. The matter has been raised by the president of the Court and the matter needs to be pursued. It is an obstacle to those who want to come and cannot especially on matters that are likely to be matters of trade and commercial interest. Commercial matters must be resolved in the shortest possible time as economies depend on trade,” Rugege said.
Justice Rugege also highlighted the potential for jurisdictional infighting in the COMESA region (see our prior reporting on this topic here), observing that said COMESA currently lacks any framework for coordinating matters involving countries that are part of both SADC and the COMESA bloc.

COMESA foreshadows first substantive sector study, potential cartel enforcement

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Retail antitrust: “mushrooming” shopping malls vs. SMEs, and possible cartel follow-on enforcement on the horizon for CCC

As reported in the Swazi Observer and other news outlets, the COMESA Competition Commission (“CCC”) recently expressed an interest in investigating the effect that larger shopping malls have had on competition in the common market’s retail sector.

This is one of the first non-M&A investigations undertaken by the CCC, according to a review of public sources.  While observers in the competition-law community have witnessed several merger notifications (and clearances) under COMESA jurisdiction, there has been no conduct enforcement by the young CCC to speak of.  Indeed, CCC executive director George Lipimile stated at a conference in November 2014: “Since we commenced operations in January, 2013 the most active provisions of the Regulations has been the merger control provisions.”  Andreas Stargard, an attorney with the boutique Africa consultancy Pr1merio, notes:

“Looking at the relative absence of enforcement against non-merger conduct (such as monopolisation, unilateral exclusionary practices, cartels, information exchanges among competitors or other conduct investigations), this new ‘shopping mall sectoral inquiry‘ may thus mark the first time the CCC has become active in the non-merger arena — a development worth following closely.  Moreover, the head of the CCC also announced future enforcement action against cartels, albeit only those previously uncovered in other jurisdictions such as South Africa, it appears from his prepared remarks.”

The CCC’s interest in the mall sector was revealed during one of the agency’s “regional sensitisation workshops” for business journalists (AAT previously reported on one of them here).  At the event, Lipimile is quoted as follows:

“The little shops in the locations seem to be slowly disappearing because everybody is going into shopping malls. And these shopping malls and the shops in them are mostly owned by foreigners.”

The investigation will take a sampling from the economies of several of the 19 COMESA member states and attempt to determine whether the “mushrooming” growth of shopping malls negatively affects local small and medium enterprises in the whole common market.

Rajeev Hasnah, a Pr1merio consultant, former Commissioner of the CCC and previously Chief Economist & Deputy Executive Director of the Competition Commission of Mauritius, commented that,

“Conducting market studies is one of the functions of the CCC and it is indeed commendable that the institution would contemplate on conducting such a study in the development of shopping malls across the COMESA region.  I believe that this will then enable the institution to correctly identify and appreciate the competition dynamics in the operations of shopping malls and the impact they have on the economy in general.  The study should also identify whether there are areas of concerns where the CCC could initiate investigations to enable competition to flourish to the benefit of businesses, consumers and the economy in general.  We look forward to the undertaking of such a study and its findings.”

AAT agrees with this view and welcomes the notion of the CCC commencing substantive non-merger investigations.  We observe, however, that the initial reported statements on the part of the CCC tend to show that there is the potential for dangerous local protectionist motives to enter into the legal competition analysis.  As Mr. Lipimile stated at the conference:

“Though [the building of malls] might be seen as a good thing, it may negatively impact on our local entrepreneurship and might lead to poverty. Before shopping malls were built, local entrepreneurs realised sales from their products.  Now malls are taking over. … [A] strong competition policy can be an effective tool to promote social inclusion and reduce inequalities as it tends to open up more affordable options for consumers, acting as an automatic stabiliser for prices”

That said, Mr. Lipimile also stated at the same event, quite astutely, that a “solid competition framework provides a catalyst to increase productivity as it generates the right incentives to attract the most efficient firms.”  In the rational view of antitrust law & economics, if — after an objective review such as the study announced by the CCC — the “most efficient” firm happens to be a larger shopping mall that does not otherwise foreclose equally effective competition, then the Darwinian survival of the fittest in a market economy must not be impeded by regulatory intervention.

George Lipimile, CEO, COMESA Competition Commission
George Lipimile, CEO, COMESA Competition Commission

Mr. Lipimile himself seemed to agree in November 2014, when he said that the 19-member COMESA jurisdiction must have regard to “its trading partners [which] go beyond the Common Market hence, it requires consensus building and a balancing act.”  At this time, “when regional integration is occupying the centre stage as one of the key economic strategies and a rallying point for the development of the African continent,” domestic protectionist strategies have no place in antitrust & competition law.  Said Mr. Lipimile: “[R]egional integration can only be realized by supporting a strong competition culture in the Common Market,” which would not support a more reactionary, closed tactic of a regulatory propping-up of “domestic champions” versus more efficient foreign competition.  As the CCC head recognised, “[t]he purpose of competition law is to facilitate competitive markets, so as to promote economic efficiency, thereby generate lower prices, increase choice and economic growth and thus enhance the welfare of the general community.”

Second domino falls in SA liner-shipping cartel investigation

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The M/V Thalatta, a WWL High Efficiency RoRo vessel
The M/V Thalatta, a WWL High Efficiency RoRo vessel (image (c) WWL)

WWL settles collusion allegations in South Africa for US $7,500,000

As we reported on 2 July 2015 (see “Shipping Cartel Update: NYK settles in South Africa“), the South African competition-law enforcers have had success in bringing members of the acknowledged international liner-shipping cartel to the settlement table, extracting R104 million (approximately $8,600,000) from NYK.

Now, Wallenius Wilhelmsen Logistics (“WWL”) has become the second investigated party to enter into a settlement agreement with the South African Competition Commission (“SACC”) — presumptively for a decent discount off the maximum possible fine, as outlined in greater detail below.

south_africa

On 30 July 2015, it was announced that WWL settled the SACC’s charges stemming from the investigation into the seven shipping companies for fixing prices, allocating markets and collusive tendering.

SACC found that WWL colluded on 11 tenders with its competitors in the transportation of motor vehicles by sea issued by several automotive manufacturers to and from South Africa.

WWL — a 50/50 Swedish/Norwegian liner-shipping conglomerate, which has had a representative office in South Africa since 2013 and previously had “a major Turn Key Project for a copper mine in Zambia, … creating a sub-Saharan hub for moving Breakbulk into and out of Africa” — settled for an amount of R95 million.  As Andreas Stargard, an attorney with the Africa advisory boutique Pr1merio, notes:

“This amount — in today’s dollar terms only about $7,500,000 — is a mere 0.25% of WWL’s global turnover of about $2.9 billion.  In other words, the company got away with only a tiny fraction [namely 2.5%] of the potential maximum fine, which under South African law would have been capped at $290 million or 10% of total group revenue.”

The SACC found that NYK colluded on 14 tenders with its competitors for the transportation of motor vehicles by sea issued by several automotive manufacturers to and from South Africa, including BMW, Toyota Motor Corporation, Nissan, and Honda among others.

The agency filed the WWL settlement agreement with the South African Competition Tribunal on 30 July 2015 for confirmation as an order of the Tribunal.

WWL’s Africa Ties

What is of particular note in the WWL matter is the company’s business commitment to the African continent.  As Mr. Stargard points out, WWL recently published a document entitled, “West Africa – The frontier of opportunity?” in which it states:

The outlook for Africa has long been seen as one of great promise, but with major challenges attached. It certainly is a place of great dimensions and great opportunities, but with immense development needs and complexities to be tackled. According to African Economic Outlook, a recent report published jointly by the OECD, the African Development Bank and the UN Development Program, Africa’s economic growth will gain momentum and reach 4.5 per cent in 2015 and 5 per cent in 2016.  

The world’s attention to Africa has largely been directed towards West Africa in the last few years, as some of the fastest growing economies were to be found there, as well as some of the world’s richest resource bases from oil to rare earth minerals. As of late, the shine has come off a little bit, with West African economies struggling with lower oil income, weakening currencies as well as a lack of economical and societal reform. The Ebola epidemic on top of this effectively served to slow the West African growth somewhat. The region is nevertheless expected to stage a recovery from the Ebola epidemic with 5 per cent growth in 2015.

West African growth is largely driven by the development in Nigeria, Africa’s most populous country and largest economy. Despite the large oil revenue dependency (which naturally is hurting from the recent decline in oil prices), the country has started diversifying its economic base. In the automotive industry, several OEMs have opened assembly plants for complete knock-downs, boosted by the increased import tax for finished vehicles. The slow process towards building more advanced manufacturing capabilities continues, but still remains some way off. 

Other economies in the region are smaller and even more dependent on resource exports. A few have been seeing quite positive development, like Ghana, but we still find some of Africa’s poorest countries in this region, highlighting the large contrasts to be found there. 

Trade patterns for vehicles and heavy equipment are, not surprisingly, dominated by imports, with Europe and Asia being the largest regional trade partners. 

In 2014, the single largest country exporting vehicles and heavy equipment to West Africa was the US followed by China, Japan and Germany. This illustrates the diverse geographical trade interests in the region. Trade has been developing strongly after the crisis, but has weakened over the past couple of years.

Long term, given its population and resource base, West Africa remains sure to be on everyone’s target list when it comes to capturing African opportunities.

THE SWAZILAND COMPETITION COMMISSION POWER TO IMPOSE ADMINISTRATIVE FINES UNDER SPOTLIGHT

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swaziland

By Julie Tirtiaux

On Tuesday 14 July 2015, the Swaziland Competition Commission (the “SCC”) Board heard the substantive issues related to the anticompetitive behavior of Eagles Nest and Usuthu Poultry Farm (the “Parties”). The hearing followed the decisions of the Swaziland High Court and Supreme Court respectively regarding the procedure. The hearing deserves attention as it triggered questions about the SCC’s power to impose administrative fines.

The penalties that were imposed on the Parties

In November 2010, the Parties entered into a supply agreement whereby they agreed to restrict output and allocate customers. Following a complaint raised by the Minister for Commerce, Industry and Trade, the SCC Secretariat, which is the investigative and administrative arm of the Commission, initiated an investigation into this alleged anticompetitive conduct.

In 2013, the SCC Secretariat required the imposition of a fine on the Parties. The SCC Secretariat recommended a fine fixed at 10 percent of Eagles Nest’s affected turnover, while Usuthu Poultry Farm would be fined five percent of its affected turnover. The affected turnover for each company would amount to the total turnover of the companies for the three years that the Parties had allegedly contravened the Swaziland Competition Act, 8 of 2007 (the “Competition Act”).

On 15 July 2013, an appeal was launched by the Parties before the High Court based on procedural grounds as they were denied access to the full record of the SCC Secretariat’s investigations and the hearing suffered from procedural fairness problems.[1] This dispute carried on before the Supreme Court which confirmed the High Court decision by dismissing the appeal. The Supreme Court held that the SCC Board “had not taken real decision on the substantive matter of anticompetitive conduct”.[2]

Consequently, during the hearing on 14 July 2015 the substantive matters were before the SCC Board for determination. Surprisingly, however, the SCC Secretariat, chaired by Nkonzo Hlatjwayo, introduced new issues which were not raised in the first place by requesting the imposition of one of two proposed sanctions;

  1. either both of the egg producers would be required to pay 10 percent of their annual turnover for the period whereby the anti-competitive behavior was occurring; or
  2. alternatively they would be liable to a fine of E250 000 or to five years imprisonment.

In addition, the SCC referred the matter to the director of public prosecution.

What does the Swaziland Competition Act state?

The SCC is empowered to impose the fine of E250 000 or five years imprisonment since Section 42(1)(a) of the Competition Act states that “Any person who contravenes or fails to comply with any provision of this Act (…) commits an offence and shall, on conviction, be liable to a fine not exceeding two hundred and fifty thousand Emalangeni or to imprisonment to a term not exceeding 5 years or to both”.

The first option imposing a fine of 10 percent of the Parties turnover, however, is problematic since in terms of Sections 11(2)(a) and 40 of the Competition Act, the SCC has the power “to issue orders or directives it deems necessary to secure compliance with this Act” (our emphasis). There is therefore no specific provision which empowers the SCC to impose administrative fines or to refer the matter for prosecution.

How should the Swaziland Competition Act be interpreted?

Different interpretations are given to these public enforcement provisions of the Competition Act.

From the SCC’s perspective, Section 11(2)(a) read with Section 40 of the Competition Act provides the SCC with a wide range of powers in so far as the enforcement of the provisions of the Competition Act was concerned. Thus, the Secretariat of the SCC deduces from a teleological approach, based on the effective enforcement of the Competition Act, that the Board has the power to impose administrative fines.

As far as the Parties are concerned, if regard has had to the text of the Competition Act, none of the provisions confer the SCC with the authority to impose administrative penalties.

Why can’t the SCC grant itself a power which was not given by the legislator?

Imposing administrative fines without having the power triggers two main concerns.

Firstly, it leads to unpredictability as to how the factors which determine how the penalties are calculated are to be considered. Accordingly, the silence of the Competition Act and the lack of guidelines in that respect undermine the rights of companies who cannot accurately contest a fine. You cannot contest a fine if you don’t know how it was determined. The lack of clarity would make it challenging for companies to contest the imposition of a fine, if there is no guarantee as to how the fine was calculated.

Secondly, allowing the SCC the power to impose administrative penalties while the Competition Act only empowers the SCC to issue orders or directives to ensure compliance leaves the door open to the SCC to assume other powers, which they would not be entitled to do so without overstepping its bounds defined by the legislature.

We will continue to monitor this matter and eagerly await the decision of the SCC Board expected for the first week of September.

[1] Eagles Nest (Pty) and 5 others v Swaziland Competition Commission & Another (1/2014) [2014] SZSC 39 (30 May 2014, see pages 15-16.

[2] Ibid, see page 60 paragraph 8.

The Big Picture: Public-Interest Factors in Antitrust

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AAT the big picture

Public-Interest Considerations in Competition Policy Take Center Stage… Once Again

By Michael Currie

An increasing trend in South Africa’s competition regulatory environment is the emphasis that the competition authorities and policy makers are placing on what is known as public-interest provisions. While we have authored a number of articles that have been published on African Antitrust highlighting our concern and disapproval of an overly-zealous reliance on public interest provisions, especially in the framework of merger control, the Competition Authorities have become increasingly bold in shaping there policies around public interest and industrial policy agendas.

In this article, we discuss the Vodacom/Neotel merger as well as COSATU’s response to the announcement that market inquiry will be conducted in the grocery retail sector, as these two developments personify the influence that Minister Patel has over the SACC’s policy and the very clear industrial policy agenda’s that Patel is using the SACC to promote.

In the past number of years in South Africa, public interest considerations have been no more prevalent than in merger control. While, to date, there has not been a merger prohibited based purely on public interest grounds, there have been a number of mergers which, despite no finding having been made that such a merger will lessen competition, have been approved subject to significantly onerous conditions, based on public-interest grounds.

south_africaThe Law

The South African Competition Act, 89 of 1998 (“Competition Act”) requires that the competition authorities consider the impact of a merger on certain public interest grounds, which are expressly listed in Section 12A of the Competition Act.

We have, on African Antitrust,[1] consistently stressed the inappropriateness of imposing burdensome conditions on mergers relating to public interest considerations, and raised the legitimate concerns that the South African Competition Authorities are increasingly being utilised as a mechanism by which to promote the government’s industrial policies.

Furthermore, conditions have been imposed on mergers without any substantial assessment done on balancing potential short term losses with long term gains.

Be that as it may, the conditions that have most commonly been imposed on mergers, based on public interest grounds, relates to employment. The impact of a merger on employment is one of the express public interest considerations that is contained in Section 12A.

What is deeply concerning, however, that as we will discuss below, the SACC has recently broadened the scope of public interest considerations to extend well past those grounds listed in Section 12A, effectively ensuring that when it comes to evaluating a merger on public interest grounds, the SACC is effectively, unrestricted.

Vodacom

Vodacom is South Africa’s largest mobile service provider and merging with Neotel would allow Vodacom to fast-track its rollout of a fixed line network.  The merger still needs to be approved by the South African Competition Tribunal (“SACT”).

On 30 June 2015, the SACC made recommendations to the SACT to approve the merger between Vodacom and Neotel, subject to stringent conditions.

The conditions recommended to be imposed on this merger will certainly ring alarm bells for all entities (especially large businesses which have a BEE shareholding) who are considering undertaking a merger in South Africa.

The SACC, who is of the view that the merger will substantially lessen competition in the market, has recommended that the following conditions to be imposed on the merger:

  • There be no retrenchments of Neotel employees;
  • That Vodacom invest R10 billion (approximately $1 billion) into data, connectivity and fixed line infrastructure; and
  • That Vodacom’s Black Economic Empowerment (“BEE”) shareholding is increased by R1.9 billion (the value of Neotel) multiplied by 19%.

The SACC’s recommendation that Vodacom’s BEE shareholding has to increase to a certain value is considerably worrisome, as it is very difficult, in our view, to justify the imposition of such a condition, in terms of the law or in terms of any social policy objective.

As noted above, the competition authorities are obliged, in terms of the Competition Act, to consider the impact that a merger may have on a number of public interest grounds. In terms of the Competition Act, the SACC and SACT, when evaluating a merger, must consider the impact that the merger will have on:

  • “A particular industry sector or region;
  • Employment;
  • The ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to become competitive; and
  • The ability of national industries to compete in international markets.”[2]

Simply put, there is in our view, no justifiable legal basis, upon which to impose a condition relating to the BEE shareholding as proposed by the SACC in this merger.

A Disconcerting Trend Away from Law & Economics

Regardless of whether the merging parties accept the SACC’s recommended conditions, the competition authorities are increasingly using conditions imposed in previous mergers, as precedent to justify and become increasingly ambitious when considering conditions to be imposed on any prospective transaction. Thus, even if the conditions imposed in this particular merger are not overly-burdensome on the parties themselves, it is most likely that the conditions, should they be approved by the SACT, will set new precedent for any future transactions.

The competition authorities are inadvertently creating a ‘threshold’ of conditions. This is evident by the way in which the Commission seems to default to a recommendation of a two-to-three year moratorium on retrenchments, whenever there is a concern arising or pressure placed on the SACC relating to retrenchments.

It is well noted that timing is of critical importance when it comes to the success of a implementing a merger. The fact that the SACC has quite brazenly taken upon itself, the duty to foster and advance the government’s socio-economic and industrial policies no doubt leads to greater uncertainty as to the nature of the conditions that may be imposed on a proposed merger.

In this regard it is worth noting that the SACC has published draft guidelines (currently for public comment) on the Assessment of Public Interest Provisions on Mergers (the “Guidelines”). While the Guidelines are still in draft form, like most of the SACC’s guidelines published to date, it allow for a significant degree of discretion on the part of the SACC.

The Guidelines were an attempt to provide greater clarity and certainty when it comes to assessing the impact that a merger may have on the public interest grounds listed in Section 12A of the Competition Act, however, the Guidelines do not provide guidance with respect to assessing the impact that a merger may have on grounds not listed in Section 12A.

Hence, despite the Guidelines seeking to add clarity and certainty to the issue, the SACC’s expansion of public-interest grounds has for all practical purposes brought us back to square one.

Another Market Inquiry: Grocery/Retail

As mentioned above, public-interest considerations have now been used as the catalyst to drive other competition objectives; most notably, the recently announced market inquiry into the grocery retail sector.

It has been our suspicion from the outset that the market inquiry into the retail sector is driven by an underlying desire to promote Patel’s industrial policies, rather than address any or understand the structure of the market to ensure more competitive market is advanced.

The response by one of South Africa’s largest trade unions, COSATU, has publicly proclaimed its support for the market inquiry, and the reasons advanced in support of the inquiry, very much confirms our suspicions.

In an article published on their website, COSATU has expressed a number of reasons why they support the inquiry. Unsurprisingly, few of the reasons put forward relate to a desire to better understand the functioning of the market from a competition perspective. Much like Mr Patel, the Minister of Economic Development, COSATU has viewed the market inquiry from a socio-economic paradigm as opposed to a competition one.

While the grocery retail market share is largely attributed to the four biggest retailers in the South Africa, the broad ambit of the inquiry coupled with Patel’s comments made in Parliament in which he stated that the retail sector was a great entry point for black South Africans should leave little doubt in any objective observer’s mind that the market inquiry into the grocery sector is steeped in promoting governments industrial policies through the channels of competition regulation.

It should also come as no surprise that Patel was previously a labour activist and previously headed the Southern African Clothing and Textile Workers Union (SACTWU).

COSATU has expressed its support for the market inquiry, largely because COSATU is of the view that the market inquiry will address a number of socio-economic concerns. The following statement made by COSATU clearly illustrates as much:

“It should also be noted that the grocery retail sector is characterized by precarious and atypical employment. Most workers in the sector do not enjoy their basic labour-related socio-economic rights. Negative practices such as labour broking, outsourcing, casualisation and low-pay are prevalent in the sector. COSATU strongly believes that this inquiry is essential for addressing the above-mentioned socio-economic trends.”[3]

The preamble to the Competition Act recognises that Apartheid created a certain concentration of market shares and that South Africa needs a greater spread of ownership. In no way, however, can competition law be used as policy to address, replace and undermine legislation and institutions designed specifically to address identified concerns. In other words, the claim made by COSATU that the market inquiry will address negative labour practices, shows a fundamental flaw in understanding the purpose and nature of competition law and policy.

South Africa has extensive labour legislation and a number of institutions that have been established to deal with negative labour practices.

Placing the responsibility of protecting our labour workforce beyond the scope of the Competition Act, would undermine the efforts of the legislature as well as the institutions entrusted in promoting and enforcing fair labour practices.

Furthermore, even if the market inquiry does in one way or another lead to a greater number of smaller independent retailers, it is difficult to foresee how this will benefit labour conditions. Large retailers’ employees generally belong to trade unions who can act as a voice on their behalf. Employees of small retailers have far less bargaining power.

While it may be that COSATU, as a trade union, need not be too concerned with competition issues as such, trade unions in general have played have had an increasingly significant influence on competition law policy.

It is imperative that an institution such as the SACC remain independent and impartial, yet the SACC’s willingness to align itself with the policies Patel is championing for undoubtedly risks the independence, proper functioning and impartiality of the SACC — a risk the SACC must ensure it protects itself against.

[1] See here, here, and here.

[2] Section 12A(3) of the Competition Act, 89 of 1998.

[3] http://www.cosatu.org.za/show.php?ID=10618#sthash.XLWeNExH.dpuf