The COMESA Competition Commission’s web site (http://www.comesacompetition.org/) has suffered yet another setback, only a month after AAT’s prior investigation into the apparent hacking of its online resources — it has been out of service as of 23-April-2014 (through at least the 25th), showing up as a mere white blank page.
Subordinate pages, such as the extranet page containing sensitive party information from ongoing investigations or merger reviews (http://www.comesacompetition.org/documents/private), are likewise blank.
As before, where we pointed out that the Commission’s hacking event constituted “evidence of a real risk that highly confidential party information (stemming from COMESA merger reviews or other competition investigations) may be vulnerable to accidental or intentional disclosure to unauthorized third parties,” we are alerting current or potential future parties to CCC merger reviews regarding the deficiencies in the competition enforcer’s electronic systems. These may impact the timetable and resulting deadlines of pending merger investigations, and we advise all such interested parties to enquire with the Competition Commission about the procedural effect of the outage.
The Commission’s main document on the “stakeholder engagement meeting last week states as follows regarding its theories of harm:
[I]n order for the market inquiry to make determinations, it has developed a set of ideas or hypothesis about how harmful competitive effects might arise in the relevant markets under consideration. These ideas are generally referred to as “theories of harm”.
‘It is important to emphasise that these theories of harm are simply hypotheses, or tools, that will enable us to identify whether there are features or a combination of features that may prevent, distort, or restrict competition in the private healthcare markets. Theories of harm are not findings of harm; but are simply analytical tools to guide our analysis. They will be deepened and revised as the inquiry’s thinking develops,’ adds former Chief Judge Ngcobo.
Public comments, and timetable
The agency is “inviting stakeholders to make further comments” on its theories of harm, noting that:
The inquiry is set to follow a very precise and tight administrative timetable which is mindful of the timelines for gathering information including an invitation for written submissions, public hearings, site visits, seminars, and workshops and conducting surveys. Broadly, key milestones will include the issuing of information requests no later than 01 August 2014. The first round of public hearings will take place between 01 March 2015 to 30 April 2015 then from May 2015, the inquiry will analyse and review the information gathered. Presently, the panel aims to make provisional findings and recommendations available for public comment in October 2015.
Revelations from Bonakele’s interview with CNBC Africa
South African interim Competition Commissioner Tembinkosi Bonakele called his agency, the Competition Commission (“Commission”), a “kind of reactive” enforcement body, aiming primarily to uncover cartel conduct. In an interview with CNBC Africa‘s “Beyond Markets” segment, journalist Nozipho Mbanjwa asked the acting Commissioner tough questions on the Commission’s enforcement tactics, legislative mandate, fines imposed, the adequacy of the Commission’s capitalization, and whether the South African antitrust watchdog was, in fact, a “toothless dog.”
Bonakele held his ground, referring multiple times to the Commission’s recent successes, including the construction cartel, the bread case, cooking oils, and other “basic products” matters on which he said his agency would place the largest focus going forward.
The Acting Commissioner
Some of the highlights from the interview:
Bonakele is “quite satisfied” with the agency’s funding and performance of its 180 staff, but may ask for “more funding” specifically for the Commission’s sectoral health-care inquiry.
The Commission will focus its cartel-busting efforts on sectors in the basic products category such as foods and health-care.
The Commission will “definitely appeal” its loss of the SABMiller abuse-of-dominance matter, a “very tricky kind of offence in terms of competition law” according to Bonakele. He said he did “not like” the 7-year long duration of the SABMiller saga, but felt compelled to extend the matter by bringing the case before the Competition Appeal Court.
On the much-malignedMultiChoice broadcaster, Bonakele called the company a “monopoly created by legislation” in a regulated market, and deferred to parliament to rectify the situation.
The Commission receives approximately 30% of its funds from revenues that are the result of merger filing fees.
Prof. Tchapga’s research focuses on the market-institutions gap in the economic liberalization process in sub-saharan African countries, aiming to bridge the gap for efficient markets, private-sector development and poverty reduction.
Below is a succinct abstract of the paper (again, in French):
La complexité d’une politique de la concurrence est généralement reconnue, que ce soit dans la phase de conception que dans celle de la mise en oeuvre. Il est aussi admis que le développement d’une telle politique et son efficacité sont des travaux de longue haleine, en particulier dans des pays n’ayant pas traditionnellement une approche libérale en matière de gestion de l’économie. C’est pour cette raison qu’un accompagnement par des programmes de renforcement des capacités dans le domaine du droit et de la politique de la concurrence, est généralement proposé à ces pays par des institutions comme la CNUCED. Ainsi, l’évaluation des progrès réalisés s’inscrit dans la recherche de l’efficacité souhaitée pour la mise en oeuvre d’une politique de la concurrence dans un contexte donné.
Afin d’établir un bilan d’étape sur la mise en oeuvre de la politique de la concurrence au Cameroun, la CNUCED a commandité cette étude d’orientation institutionnelle et organisationnelle, présentant un diagnostic stratégique du dispositif camerounais de promotion et de surveillance de la concurrence. L’objectif de l’étude est de formuler, sur la base du diagnostic stratégique réalisé, des propositions nécessaires pour le renforcement de l’efficacité de la politique de la concurrence au Cameroun, cette efficacité étant mesurée à l’aune de la capacité du dispositif à constituer une voie de progrès pour le consommateur camerounais, et plus généralement pour l’économie camerounaise.
Pour ce faire, le consultant mandaté a participé aux réunions et échanges organisés à cette fin par la CNUCED. L’orientation institutionnelle et organisationnelle souhaitée pour l’étude ne rendait pas indispensable un déplacement au Cameroun afin de rencontrer les principaux acteurs de la concurrence. Au demeurant, le budget alloué à l’étude ne l’aurait pas permis. Aussi, le présent rapport se fonde sur les ressources documentaires disponibles et accessibles à savoir, les rapports et travaux de la CNUCED, ceux des autorités camerounaises ou de leur démembrement. Ces deux sources documentaires sont complétées par des ressources bibliographiques universitaires spécialisées.
La politique de la concurrence est un moyen au service d’une fin qui elle-même dépend des orientations des politiques économiques et sociales définies par les pouvoirs publics dans un contexte et à un moment donnés. Ainsi, l’étude met en évidence, dans un premier temps, les spécificités du contexte socioéconomique camerounais, explique ensuite la nécessité de promouvoir les marchés concurrentiels et d’encadrer le déroulement de la concurrence, et relève enfin les défis auxquels est confrontée la mise en oeuvre de la concurrence avant de formuler, pour terminer, des recommandations.
The South African publication The Citizen also reported the most recent ICASA attack, noting the alleged “restrictive horizontal practices involved collusion and certain competitor agreements and practices, while restrictive vertical practices involved certain customer or supplier arrangements.”
Johannesburg – The Independent Communications Authority of South Africa has recently requested the Competition Commission to investigate a possible restrictive horizontal practice between the South African Broadcasting Corporation (SABC) and MultiChoice. This follows an agreement entered into between the two parties in July 2013 whereby the SABC would have to provide a 24-hour news channel on MultiChoice’ DSTV platform.
News reports at the time indicated that the agreement also contained an obligation relating to set-top-box control in which the SABC is alleged to have agreed that it will transmit its free-to-air channels without encryption.
In the context of the ongoing public dispute between e.tv and MultiChoice over whether free-to-air TV services should utilise set-top-box control, the question arises as to whether the agreement between the SABC and MultiChoice, as it affects the issue of set-top-box control, may constitute a form of restrictive horizontal practice in the television market.
ICASA has requested both the SABC and MultiChoice to provide a copy of the agreement but both parties have failed to honour that request. This failure has made it difficult for the Authority to verify the claim put forward by MultiChoice that `any contractual obligation upon the SABC to continue to transmit its free-to-air channels in the clear (i.e. without encryption) is an incident of the distribution arrangements agreed upon by the SABC and MultiChoice. Such obligation, as indicated forms part of an agreement between parties in a vertical relationship and is not, as alleged, a horizontal restrictive practice’.
As the issue of restrictive horizontal practices falls within the scope of Section 4 of the Competition Act, the Authority has requested that the Competition Commission open an investigation into this matter.
Following up on our initial DOJ extradition victory post last week, here is a more in-depth look at the recent developments in worldwide criminal antitrust cases, and notably their overlap with parallel corruption / fraud / FCPA investigations. Paul Hastings and Nortons Inc. – jointly covering North America, Europe, Asia, and Africa – have extensive experience handling the defense of competition-law and FCPA-based investigations into multi-national corporations and individual executives. The piece below was written by Jeremy Evans, partner in Paul Hastings’ D.C. office, and AAT editor Andreas Stargard, in Brussels.
The long-arm of the U.S. government and its increasing willingness to pursue foreign nationals for alleged violations of U.S. law was further in evidence last Friday when the Antitrust Division of the U.S. Justice Departmentannounced(press release here) that it had extradited Romano Pisciotti, an Italian national, from Germany to the U.S. on a charge filed more than 3½ years ago that he participated in a price-fixing cartel involving the sale of marine hose.
Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison
Pisciotti is the first foreign national to be extradited to the U.S. purely for an antitrust charge, although he joins a large number of foreign nationals in recent years to have been charged criminally by the Division in cartel cases, many of whom have agreed to plea deals requiring them to serve time in U.S. prisons. The Antitrust Division is not alone in its pursuit of foreign nationals; the Fraud Division of the Justice Department has also pursued extraditions of foreign nationals for violations of the Foreign Corrupt Practices Act (“FCPA”) in recent years. Indeed, Pisciotti follows his countryman Flavio Ricotti, who, in 2010, also was arrested in Germany and extradited to the U.S. following his indictment on an FCPA charge. It is clear that in both antitrust cartel and FCPA investigations, the U.S. government is growing ever-confident in its power and ability to bring uncooperative foreign executives to the U.S. to face criminal charges in the U.S., even for conduct that occurred outside the U.S.
The Marine Hose Investigation
Pisciotti’s extradition is the latest chapter in the long-running marine hose cartel investigation. In May 2007, the Antitrust Division arrested eight foreign nationals traveling on business in the U.S. and charged them for their roles in an antitrust conspiracy involving the sale of marine hose used to transport oil. The Division’s investigation was part of a multi-national law enforcement effort that included the European Commission and the U.K.’s Office of Fair Trading and much of the conduct at issue was alleged to have happened overseas. In the years that followed, the Antitrust Division secured over $54 million in fines from five companies, and nine individuals served jail time arising from their alleged involvement in the cartel. Two of these dispositions are worth particular note. The first involved the separate plea agreements by Bridgestone Corporation and Misao Hioki, a Japanese executive, each of which agreed to plead guilty to both an antitrust charge for involvement in the alleged conspiracy, as well as an FCPA charge relating to corrupt payments to government officials in various Latin American countries. These appear to be the only instances in which either a company or an executive has pled to both antitrust and FCPA charges arising from the same investigation. The second involved three British executives arrested in the U.S. at the onset of the investigation. Under a unique arrangement, the three were charged and sentenced by authorities in both the U.S. and the U.K., but the U.S. plea deals permitted them to return to the U.K. where they served their prison sentences concurrently.
Prior to Pisciotti’s extradition, the last criminal disposition involving an executive in the marine hose investigation occurred in 2009. But, what was not publicly known until recently is that the Antitrust Division had secured a sealed indictment of Pisciotti in August 2010 alleging that he rigged bids, fixed prices, and allocated markets in the sale of marine hose. It was this indictment that led to Pisciotti’s arrest in Germany last June and the subsequent extradition proceedings. The Division likely followed the same procedure that it did with Ricotti in the earlier FCPA case, using Pisciotti’s sealed indictment to obtain an Interpol red notice, effectively an international arrest warrant. Under the principle of reciprocal or dual criminality, countries often will only extradite individuals to the U.S. if an extradition treaty exists between the two countries that requires a person’s conduct to be a crime in both countries. Bid rigging is a criminal offense in Germany, thus ensnaring Pisciotti transiting through Germany on business travel and leading to his arrest in a country prepared to extradite him. Pisciotti was flown to Miami on Thursday and arraigned in federal court the following day. He now faces charges that could result in a maximum of 10 years in prison and $1 million in criminal fines.
The U.S. Government and the Ever-Shrinking World
Bill Baer, the assistant attorney general of the Antitrust Division, heralded Pisciotti’s “first of its kind extradition” as a “significant step” in the Division’s cooperation efforts with foreign antitrust enforcers. And, while it marks a new frontier for the Division, it can also be viewed as merely the latest example of the aggressive approach taken by the U.S. government in recent years toward foreign executives in international cartel and bribery cases. A little over a decade ago, the Division agreed to permit foreign executives in cartel cases to plead guilty and serve prison sentences of just a few months. But the more recent plea deals announced in seemingly ever-expanding auto parts cartel cases have seen well over twenty foreign executives face up to two years in jail.
Our experience in these and other cases also teaches that the Antitrust Division will routinely seek U.S. prison terms for conduct that occurred not merely partially or largely outside the U.S., but indeed was wholly undertaken on foreign soil. The example of Pisciotti’s extradition powerfully reaffirms that executives now must worry about the possibility of being extradited to the U.S. if they refuse to cooperate with the Antitrust Division and plead guilty in a cartel investigation, even in situations where the conduct at issue occurred exclusively or mostly overseas. This is in part because an increasing number of countries have criminalized antitrust conduct, or are in the process of doing so, meaning that there are now more jurisdictions than ever willing to extradite an executive for cartel offenses, either at home or when traveling abroad, even in situations where a sealed indictment may leave the executive ignorant of any potential risk.
These same government tactics exist in bribery and FCPA cases. Flavio Ricotti and Ousama Naaman are but two examples of foreign nationals who were extradited to the U.S. in the last five years to face FCPA charges, each apprehended overseas after the U.S. government obtained an indictment in federal court, and each charged based on conduct outside of the U.S. It appears that the U.S. government will continue to take an aggressive enforcement approach toward uncooperative executives, further highlighting the concern for senior foreign executives and their companies caught up in cartel and FCPA investigations.
In what may well affect African and other international price-fixers going forward, the spectre of U.S. extradition for criminal antitrust charges has been reinforced by the recent successful DOJ extradition request in the “Marine Hose” cartel. An Italian national was extradited from Germany to face bid-rigging charges.
Ian Norris, then-CEO of Morgan Crucible, sentenced to serve 18 months in federal U.S. prison
“First-ever”?! Some readers may recall the carbon products cartel and a certain Mr. Ian Norris, the then-Morgan Crucible chief executive, who had been extradited from the U.K. to the United States back in 2010. Yet, that seven-year long procedure was based not a pure antitrust charge — rather, he was extradited on a technicality, if you will, namely the “obstruction of justice” charge, given the lack of reciprocal or dual criminality of the underlying price-fixing offense in the two countries at the time the competition offense had been committed in the early 1990s. Norris’ 1 1/2 year prison sentence ended in November 2011.
The Marine Hose cartel extradition is different: In this case, the DOJ succeeded, for the first time ever, in securing an extradition solely on a competition-law offense being charged.
WASHINGTON — Romano Pisciotti, an Italian national, was extradited from Germany on a charge of participating in a conspiracy to suppress and eliminate competition by rigging bids, fixing prices and allocating market shares for sales of marine hose sold in the United States and elsewhere, the Department of Justice announced today. This marks the first successfully litigated extradition on an antitrust charge.
Pisciotti, a former executive with Parker ITR Srl, a marine hose manufacturer headquartered in Veniano, Italy, was arrested in Germany on June 17, 2013. He arrived in the Southern District of Florida, in Miami, yesterday and is scheduled to make his initial appearance today in the U.S. District Court for the Southern District of Florida in Ft. Lauderdale, at 11:00 a.m. EDT.
“This first of its kind extradition on an antitrust charge allows the department to bring an alleged price fixer to the United States to face charges of participating in a worldwide conspiracy,” said Assistant Attorney General Bill Baer in charge of the Department of Justice’s Antitrust Division. “This marks a significant step forward in our ongoing efforts to work with our international antitrust colleagues to ensure that those who seek to subvert U.S. law are brought to justice.”
Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. During the conspiracy, the cartel affected prices for hundreds of millions of dollars in sales of marine hose and related products sold worldwide.
According to a one-count felony indictment filed under seal on Aug. 26, 2010, and ordered unsealed on Aug. 5, 2013, in U.S. District Court in the Southern District of Florida, Pisciotti carried out the conspiracy by agreeing during meetings, conversations and communications to allocate shares of the marine hose market among the conspirators; use a price list for marine hose in order to implement the conspiracy; and not compete for customers with other marine hose sellers either by not submitting prices or bids or by submitting intentionally high prices or bids, all in accordance with the agreements reached among the conspiring companies. As part of the conspiracy, Pisciotti and his conspirators provided information received from customers in the United States and elsewhere about upcoming marine hose jobs to a co-conspirator who served as the coordinator of the conspiracy. That coordinator acted as a clearinghouse for bidding information that was shared among the conspirators, and was paid by the manufacturers for coordinating the conspiracy. The department said the conspiracy began at least as early as 1999 and continued until at least May 2007. Pisciotti was charged with joining and participating in the conspiracy from at least as early as 1999 until at least November 2006.
Pisciotti is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
As a result of the department’s ongoing marine hose investigation, five companies, including Parker ITR; Bridgestone Corp. of Japan; Manuli SPa of Italy’s Florida subsidiary; Trelleborg of France; and Dunlop Marine and Oil Ltd, of the United Kingdom, and nine individuals have pleaded guilty.
The investigation is being conducted by the Antitrust Division’s Washington Criminal I Section, the Defense Criminal Investigative Service (DCIS) of the Department of Defense’s Office of Inspector General, the U.S. Navy Criminal Investigative Service and the Federal Bureau of Investigation. The U.S. Marshals Service and other law enforcement agencies from multiple foreign jurisdictions are also investigating or assisting in the ongoing matter. The Criminal Division’s Office of International Affairs provided assistance.
Dawn Raids Rattle South African Consumer-Goods Brands
The South African Competition Commission (“Commission”) has confirmed that it has conducted such a dawn raid operation at Unilever South Africa (Pty Ltd) (“Unilever”) and Sime Darby’s respective South African offices during the morning of 03 April 2014.
Unilever is one of the largest fast-moving consumer goods companies in South Africa. Unilever’s business activities include laundry, skincare and cleansing, margarine, deodorants, household care, tea, hair care and ice cream. Household names which form part of the Unilever group include Sunlight, Knorr, Lipton, Ola and Omo.
Sime Darby is a Malaysia-based multinational company involved in sectors such as plantation, industrial equipment, motors, property and energy & utilities, with operations in more than twenty countries. It is the world’s top palm oil planter. Its South African operation, namely Sime Darby Hudson & Knight (Pty) Ltd, is located in Boksburg and it produces and sells premium fats and oils to bakery, food service industry and food manufacturers predominantly in South Africa.
“The Commission believes that the information that will be obtained from today’s operation will enable the Commission to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” Acting Commissioner Tembinkosi Bonakele said.
The Commission has indicated that this raid forms part of an ongoing investigation into collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers. The Commission has further indicated that it has reasonable grounds to believe that employees of Unilever and Sime Darby have information which is relevant to the investigation.
The last dawn raid was conducted on 06 May 2010 at the premises of four electrical cables manufacturers and suppliers based in Gauteng province, South Africa. The various premises were searched by the Commission on suspicions of price fixing, market allocation and collusive tendering. This was done subsequent to a complaint initiated by the Commissioner on 16 March 2010 against Aberdare Cables (Pty) Ltd, Alvern Cables (Pty) Ltd, South Ocean Electric Wire Company (Pty) Ltd and Tulisa Cables (Pty) Ltd.
Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.
The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances.
If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.
UPDATE: 23-April-2014:
Based on reporting in a BDLivestory, the Commission has said that it “is too early for the commission to say what data or documents were seized. Information and data are being analysed,” noting that it “believes that information that will be obtained from (the) operation will enable (it) to determine whether or not Unilever SA and Sime Darby have indeed engaged in collusive conduct,” acting commissioner Tembinkosi Bonakele said. “However, as part of any investigation, we also wish to urge anyone, be it business or individuals, with further information to come forward and assist the commission in concluding this investigation.”
Acting competition commissioner Tembinkosi Bonakele. Picture: FINANCIAL MAIL
South African Breweries distribution case dismissed
The Competition Tribunal of South Africa has dismissed a monopolization case brought by the Competition Commission against South African Breweries (“SAB”). The Tribunal held that the Commission brought insufficient evidence to find that SAB acted in violation of the Competition Act. Particularly in light of the significant resources which the Commission expended on the matter, it is a disappointing loss for the agency.
The Commission had alleged that SAB’s distribution system prevented competition between firms that distributed SAB-branded beers, but the Commission made no case against 90 per cent of SAB’s distribution and focused its case on the system of appointed distributors. This would account for only 10 per cent of SAB’s method of beer distribution. The Commission claimed that SAB has a market share of about 90% of ‘clear beer’ in South Africa. It went on to claim that SAB restricted competition between its distributors as SAB would appoint distributors and allocate exclusive territories.
The Tribunal held that the distributors appointed by SAB were not adequately independent to be in competition with each other and therefore their conduct could not be seen as being restricted. The Tribunal held that SAB’s conduct did not amount to unjustified discrimination.
The decision marks the first occasion that the Tribunal has dealt with the treatment of non-compete restraints in dual distribution arrangements in South African competition law. In deciding the matter, the Tribunal also introduced the novel concept of a “separate basic economic unit“. This concept operates as a measure used to assess the level of independence distributors have from their suppliers, which means that there must be a certain level of independence between a supplier and a distributor in order to contravene the Act.
There has been no indication that the Commission intends to appeal the Tribunal’s dismissal.
African Antitrust & Competition Law 