Airtel Kenya requests probe of Safaricom for abuse of dominance in mobile money transfer market

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kenya

Mobile payment wars heating up in Kenya

Airtel Networks Kenya Limited (“Airtel”) has joined forces with Kenya-based Equity Bank to launch a similar mobile banking product, M-KESHO in July 2014 to the established product provided by Safaricom Limited (“Safaricom”).

Safaricom offers a product named “M-Pesa” to its customers in Kenya and Tanzania.  M-Pesa is a mobile-phone based money transfer and micro-financing service, launched in 2007 for Safaricom and Vodacom, the two largest mobile network operators in Kenya and Tanzania. The service enables its users to deposit and withdraw money, transfer money to other users and non-users, pay bills, purchase airtime and transfer money between the service and, in Kenya, a bank account.  Users of M-Pesa are charged a service fee for sending and withdrawing money.

By 2010, M-Pesa became the most successful mobile-phone-based financial service in the developing world.

In light of the imminent launch of the Airtel product, Airtel has lodged a complaint with the Competition Authority of Kenya on the basis that Safaricom currently holds 78% of the voice market in Kenya, 96% of the short message service market and 74% of the mobile data market.  In addition, Airtel is of the view that these market shares make it impossible for Kenyan consumers to have a choice in operators. By 2012, 17 million M-Pesa accounts were registered in Kenya alone, which has a population of over 40 million.

There are a total of approximately 31 million mobile-phone subscriptions in Kenya in 2013, of which Safaricom accounted for 68%, Airtel 17%, Essar Group’s “yuMobile” 9% and Telkom Kenya Limited 7%.

However, Safaricom has indicated that cash transfers still account for 98% of the total transactions in Kenya and therefore it is impossible for any mobile-money entity to be a dominant player in the payments market.

The Competition Authority of Kenya has identified telecommunications as one of several markets being scrutinised by the Competition Authority for possible abuses of dominance.  This probe is expected to reach completion by July 2014.

In terms of Kenyan law, if a company controls at least half of the provision of trade of services or goods, the company will be considered to be dominant.  In Kenya, a conviction of abuse of dominance can lead to a five-year prison term and a USD 115 000 penalty

Kenya is quite clearly pushing on in relation to significant cases in sectors which affect the majority of the population, as discussed in the overview of maturing African competition regimes published last week.  However, it is noteworthy that in April 2014, Kenya’s telecommunications regulator granted approval for Safaricom and Airtel to buy Essar Group’s “yuMobile” and it is considering awarding licenses for at least three more telecommunications companies.  Orange SA has indicated that its operations may exit the Kenyan market, where it owns 70 percent of Telkom Kenya (which in turn accounts for 7% of the mobile phone subscriptions in Kenya).

“New” antitrust enforcer takes on additional task of consumer protection

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The Gambian Competition Commission has changed its name and enlarged its mandate

With the passage of Consumer Protection Act 2014, the Gambia Competition Commission has changed its name to The Gambia Competition and Consumer Protection Commission (GCCPC).  The rationale for inclusion of the broader task of consumer protection (in addition to antitrust enforcement of the Competition Act of 2007) was, perhaps somewhat analogous to other sister agencies worldwide (e.g., the U.S. Federal Trade Commission, which likewise has a similar dual mandate), described as follows by the the minister for
Trade and Industry, Abdou Kolley:

“Trade goes with competition, and where there is trade there is a need for consumer protection.”

In addition to the GCCPC, the Act envisages the establishment of consumer-protection tribunals throughout The Gambia’s administrative regions to hear and adjudicate consumer-protection complaints.

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Commission details plans for private healthcare sector inquiry

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south_africa

Further details revealed by inquiry panel

On Friday, subsequent to outlining the time table of the project, the South African Competition Commission Competition Commission released important frameworks for its sectoral inquiry into the competitiveness of the private healthcare sector in the RSA. The key documents are a draft “statement of issues” (which the Commission warned may further “evolve” during the course of the inquiry) and “guidelines for participation” for the market inquiry into the private healthcare sector, which is headed by retired Chief Justice Sandile Ngcobo. The public and affected stakeholders are invited to make written submissions on these before Monday, 30 June 2014 (South African Competition Commission direct e-mail address: health@compcom.co.za).

Notably, the statement of issues includes the role of the public sector in competition in the market for healthcare. This was a key sticking point for observers and stakeholders, as the initial framing of the inquiry appeared solely focused on the private players, failing to take into account the competitive restraints imposed by the strong public insurance schemes and other state-related participants in the healthcare arena.  (AAT published on this and related issues here and here.)

Other topics include, predictably from an antitrust point of view, regulation, market power and dominance, barriers to entry, as well as consumer-protection aspects. Taken together, the areas of concern have been grouped by the Commission’s inquiry panel into six possible theories of harm, which the Commission defines as follows: “A theory of harm refers simply to a hypothesis about how harm to competition might arise in a market to the detriment of consumers and to the detriment of efficient and innovative outcomes in that market.” (Statement of Issues at para. 9 and 53, as follows):

  1. Theory of harm 1: Market power and distortions in healthcare
    financing.
  2. Theory of harm 2: Market power and distortions in relation to
    healthcare facilities.
  3. Theory of harm 3: Market power and distortions in relation to
    healthcare practitioners.
  4. Theory of harm 4: Barriers to entry and expansion at various levels
    of the healthcare value chain.
  5. Theory of harm 5: Imperfect information.
  6. Theory of harm 6: Regulatory framework.

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

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AAT the big picture

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

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

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

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

Botswana

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

Kenya

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

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

Namibia, Zambia & Mauritius

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

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

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

Panel bestows cum laude Ph.D. on AAT contributing author

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Ranchordas, Sofia: Tilburg University doctoral dissertation defense

Tilburg University bestows doctorate cum laude  on AAT author Ranchordás

AfricanAntitrust.com contributing writer, assistant professor of law at Tilburg Univ., and lead author of our #InnovationAntitrust series Sofia Ranchordás was honoured yesterday by a distinguished panel of academics at Tilburg University (Netherlands) with a Ph.D. marked cum laude — a distinction granted only to approximately 2% of Dutch doctoral degrees.

She defended her dissertation on experimental legislation, sunset clauses, innovation, of which we publish a short “layman’s terminology” summary extract here.

Congratulations, doctor!

Sofia Ranchordas, Ass't Professor, Tilburg University

Sofia Ranchordás, Ph.D. cum laude, Ass’t Professor, Tilburg University (Law School)

10-Minute Presentation of Ranchordás Ph.D.
Dissertation in Layman’s Terms

Good afternoon ladies and gentlemen,

Thank you for being here today.

I especially welcome my front row guests, in particular my mother, and my sister who managed to convince her boss that it is possible do a PhD in Law, and two young guests that even had to ask permission to skip classes today:

Hallo Tim en Indy, fijn dat jullie er zijn en dat jullie vrij van school konden krijgen.

(Last week one of my students asked me why I had written yet another book to obtain a PhD degree. My straightforward answer was: because no one else has even written about it and the world needs to know more about sunset clauses, experimental legislation and innovation. My student wasn’t totally convinced by my answer, but at the end of these 10/9 minutes I hope you will be.

Experimental legislation, sunset clauses, innovation: three enigmatic words, 3 Pandora boxes to lawmakers, 3 years and 3 months to write one book. [And as you can see, it is a thick one, but not thick enough to ask all the questions that should have been asked or to provide all the answers]. This book tells the story of two legislative instruments which have been overlooked by legislators. Two instruments that seem to have much to offer to that one reality we all seek these days: innovation.‘

1. ‘Sunset clauses’ are dispositions that impose the termination of a law after a determined period, which means that a law or some of its dispositions might only last for 5 years.

2. ‘Experimental legislation’ submits new rules to a test, trying them out in the real world, testing their effectiveness. The new rules are tried in a part of the territory, while the ‘old ones’ remain applicable to the other. At the end of a certain period, results are compared and, in principle, the legislator ‘should allow the best law to win. However, in the lawmaking process the legislative winner does always not take it all. Politics very often does.

3. ‘Innovation’ is a broad concept that cannot be reduced to a brilliant idea: it is more and less than this common perception of the innovative wheel, a light bulb or a pair of Google glasses. Innovation is instead the first successful commercialization of a new idea, brilliant or not, that can improve the existing state of technology of society.

4. Innovation is ‘a kind of magic’: it is our hope in difficult times, the promise for long-term sustainable growth. Innovation is also ‘a crazy little thing’: it is all around us, but it is impossible to grasp and to generate through a simple formula. Instead, it is a very complex process that can be stimulated or impeded by a number of elements, including outdated regulation.

5. It is a difficult mission to regulate innovation but I know two perfect candidates for the job: sunset clauses and experimental legislation. They provide the flexibility and adaptability that regulators need to regulate under uncertain conditions, allow legislators to revise rules as more information about innovative products becomes available, and terminate obsolete dispositions.

6. However, as always, friends get the best jobs, strangers do not. And that is the case of sunset clauses and experimental legislation: they are total strangers to most lawyers and lawmakers. Before I started doing my research, how many of you had ever heard about sunset clauses and experimental regulations? And even now how many would be able to recognize you?

7 In my research, I looked into the reasons why sunset clauses and experimental legislation have not been more often used to regulate innovative fields and there are legal and non-legal reasons underlying this general resistance to these instruments. An apparently simple research question, you might say. However, as life often teaches us, appearances are misleading and this question allowed me to rethink the meaning of different principles of law in a changing world, the meeting of minds between innovators and regulators and the non-legal elements influencing the lawmaking process.

8. There appears to be a widespread belief that these instruments ‘are bad’ because they violate a number of principles of law we hold dear. That is the case of the principle of legal certainty that is often connected with the idea of predictability, stability and continuity of law. However, some laws cannot live forever because they regulate phenomena that evolve rapidly or problems that might be temporary. Sunset clauses and experimental legislation can provide in these cases more temporary certainty, because they do not expose laws to the erosion of time. In my dissertation, I also argue that experimental laws do not endanger the principle of equal treatment. While it is true that not all citizens will be equal before the law, this differentiation will be temporary, objectively justified and it is intrinsic to the main objective of experimental legislation: gather more information about the effects of a new law.

10. The scarce use of sunset clauses and experimental legislation can be attributed to a number of non-legal elements, such as lack of information or expertise, a certain intellectual reluctance towards termination of laws or the experimental method, high costs, fear of being confronted with unpleasant facts, or political rationality. While law is for a great deal about politics, there must be a way to ensure that some legislative decisions are rendered more transparent.

11. The real Achilles heel of experimental legislation and sunset clauses is the lack of a clear legal and methodological framework. Legislators do not know when they should choose temporary laws in detriment of lasting ones, how to enact them and for how long. The main contribution of my dissertation lies in the design of a framework, where guidelines are provided to lawmakers: go for sunset clauses when you expect a technology to evolve rapidly, experiment with new rules when you do not know enough about their effectiveness; make sure experiments are meaningful and truly convert the lawmaking process into a learning one, set transparent evaluation criteria and ask regulators to justify their decisions to follow or reject the results of an experiment. Educate lawmakers and citizens with the truth of the facts and not the power of opinions.

12. Are sunset clauses and experimental legislation a blessing or a curse to innovation? I leave you, ladies and gentlemen, with this question. It results from my research that they are not a curse for a law that keeps up with reality, for a law that lives along the paths of innovation. Instead, they bless the courageous legislators that try new laws to see if they work, allow laws to expire when they are no longer necessary, removing unnecessary burdens from the shoulders and pockets of innovators. However, sunset clauses and experimental legislation will only be blessings for innovation, if they are drafted along the lines of law. However, and excuse me for citing a lawyer in a speech supposed to be to laymen: as Felix Frankfurter affirmed: ‘science and technology cannot reshape society while law maintains its Blackstonian essence’, i.e., in layman’s terms this means: while lawyers try to confer their own interpretation to every single phenomenon, lagging behind reality.

Battle of the Agencies: ICASA vs. CompCom

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In dispute over competition-law & merger enforcement in South Africa, Communications agency raises its voice

Jurisdictionally crossed wires and agency disputes in antitrust are no longer the exclusive playground of the FCC and DOJ, of COMESA’s CCC and the Kenyan CAK, or DOJ and FTC.  They have now reached the shores of the Republic of South Africa as well, in the form of the Independent Communication Authority of South Africa (“ICASA”) challenging the country’s Competition Commission’s de facto exclusive right to review merger deals.

Factual Background

ICASA, created in July 2000 by the Independent Communication Authority of South Africa Amendment Act is reported to be in a jurisdictional dispute with the country’s traditional merger watchdog, the South African Competition Commission (“SACC”).  ICASA wants the power to take a closer look at relevant deals such as MTN and Telkom’s network sharing and the announced Vodacom / Neotel deal, on which AAT has reported previously (see Telecom adversaries to remain “principled” in their competing bids for 4G spectrum, Internet & mobile operators at war: merge, acquire, complain, and our prior reports mentioning ICASA here).

ICASA’s specialized “Markets & Competition” division is tasked to deal with promoting “competition, innovation and investment in respect of services and facilities provided in the electronic communications, broadcasting and postal sectors, whilst ensuring account cultural diversity, especially regarding broadcasting content.”  The authority as a whole is “mandated to create competition in the telecommunications, broadcasting and the postal industries. In turn, competition brings about affordable prices for goods and services rendered and provides value for money to consumers.”

Legal Standard – “Public Interest”?

In recent reports by the New Telegraph and HumanIPO, ICASA is said to have voiced discontent with the Competition Commission’s failure to send proposed communications-related M&A deals to the authority.

That said, it is unclear to AAT precisely which legal standard ICASA wishes to impose on any potential future merger review it might undertake.  In the U.S., notably, the FCC’s standard of review is a more flexible public-interest standard, vs. the “classic” antitrust agencies’ (FTC/DOJ) “substantial lessening of competition” standard.

Regardless of (at least our) uncertainty of the legal standard to be applied, ICASA is quoted as saying that deals cleared by the SACC may still require separate approval from the Communications authority, irrespective of any competition-law based decision reached by the Competition Commission:

“While consolidation is a global phenomenon and anticipated in the market, all such deals may require regulatory approval.”

“The authority is aware of what is currently before the Competition Commission; and in accordance with our institutional arrangements with the Competition Commission we will collaborate, however, that in no way negates the regulatory approvals required from ICASA.”

In addition to the previous lack of coordination between the Commission and ICASA on merger reviews, there has also been criticism of the country’s limited allocation of more frequency spectrum to wireless operators.

south_africa

 

Private Health-Care Sector Inquiry: Time Table & Details

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south_africa

Inquiry panel’s head details logistics

On 16 April 2014, the South African Competition Commission held a media briefing, in which the administrative guidelines, the administrative timetable and statement of issues for the inquiry were announced.  AAT previously reported on the health-care sector investigation here.

Addressing the media and other stakeholders at the briefing, the chairperson of the inquiry, former Chief Justice Sandile Ngcobo, provided a brief explanation of what a market inquiry is, provided an overview of its possible outcomes, the Competition Commission and panel’s approach, the use of information during the inquiry and the management of confidential information.

Furthermore, the former Chief Justice elaborated on the important dates and timelines of the inquiry, the statement of issues, theories of harm and that stakeholders ought to provide accurate information in order to assist the panel.

The important dates are:

Date Event
31 May Statement of Issues and Administrative Guidelines issues for public comment
30 June Deadline for submission of public comment on Statement of Issues and Administrative Guidelines
1 July – 31 July Incorporation of comments on Statement of Issues and Administrative Guidelines
01 August Publication of final Statement of Issues and Administrative Guidelines
01 August Call for submissions on subject matter of the inquiry
March and April 2015 Public hearings
November 2015 Forecasted completion of the inquiry

#antitrustInnovation: Innovation crossing regulatory borders

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new multi-part series

A continuation in our AAT multi-part series on innovation & antitrust as a thematic collection focusing on the concept of innovation markets and how competition and IP laws are able to address the, by definition, novel issues that arise.

By Sofia Ranchordás

In previous posts on the topic of Antitrust & Innovation, we discussed the definition of innovation, its relative character, and the role of regulation in its regulation and advancement, notably in developing countries. In Africa, the lack of a solid regulatory framework may, on the one hand, discourage foreign direct investment, and on the other, fail to stimulate local innovators to invent. However, there are more challenges regarding the advancement of innovation that are impeding a more effective ‘regulation of innovation’. In this short article, attention is paid to the regulatory borders that innovation seems to be crossing at the moment. The next installment shall be focused on two regulatory instruments that might facilitate the regulation of innovation in the dark, not only in Africa but also in other countries.

Democratizing access to finance

The regulation of innovation should start out with understanding the innovation process and its characteristics, notably its uncertain character; the need for diversity, sector-specificity, the complex access to finance, openness to changes and flexibility. An innovation-friendly environment does not exist in most African countries. The lack of flexible rules and the often somewhat inflexible interpretation of existing legal concepts are not helping either. While governments praise innovation as the highest salvation in times of crisis, the list of regulatory obstacles to innovation does not appear to be tackled. This is the case of the poor availability of finance for innovators, insufficient cooperation between public and private parties, or excessive regulation and outdated regulations and procedures.

Think about ‘kickstarter’: while there are already numerous crowdfunding projects supporting startups and non-profit projects in Africa, it is not easy for an African innovator to create this type of crowdfunding accounts from his/her own country and attract anonymous angels. In the case of ‘kickstarter’—one of the platforms with more visibility—this might even be limited to a number of countries (e.g. United States, New Zealand, Australia…) and be subject to specific requirements (e.g. permanent residence).

But what if you do not have a broad network and cannot contact someone reliable in one of those countries? I was recently contacted by a designer from Portugal who had developed an innovative device, but could not create a kickstarter account because he lives in one of the countries where you are not allowed to join this form of crowdfunding (www.dapowa.com). The same would apply to an innovator from an African country, only this one could probably be in a position where he would not even know anyone who would be willing to share his story with you.

There are multiple platforms of crowdfunding that are available worldwide, but the point that I would like to make is that regulators should start paying more attention to this form of democratization of finance. There are obviously risks and controversies behind crowdfunding, but, in a time when we need so much innovation, isn’t it about time we stop adopting an all-or-nothing perspective and rethink the regulatory framework of access to finance? Laissez-faire is not an option, certainly not in the case of finance. Shouldn’t developing countries have more flexible structures allowing their innovators—with properly developed business plans but with a limited social network—to improve access to finance? Funding projects should not necessarily be seen as a mere form of charity. It is a form of philanthropy that should be regarded as a stepping stone for the development of African economies and a complement to foreign direct investment.

Crowdfunding is simply one of the innovations that is putting regulation to the test and making us question the interpretation of existing legal concepts and institutions. Other examples—still less common in Africa—are present in the case of ‘share economy’ (e.g., Uber, Lyft, Airbnb). While ‘share economy’ and crowdfunding are innovative and valuable ideas, they bring along a number of serious risks for consumers (e.g. how many Airbnb houses comply with fire safety regulations? Will the money invested be used for the due purposes?). A ‘laissez faire’ approach might not be enough to conquer the trust of risk-averse consumers, but a stringent regulation of these new forms of democratization of access to finance and facilities will not either.

In this short article, we pose mere questions and alert for the need to think about regulatory solutions for the described democratization. Self-regulation, soft law and experimental regulations might be options to explore. The first step is however to start thinking about this topic, questioning the need for more transparency, and the need for rules. Crowdfunding and share economy will work while they are based on the bona fides of users. However, one incident might be enough to put an end to it all. Rules are created for a purpose and today’s challenge is to make sure that, on the one hand, ‘too much [law] will not kill [innovation]’, ‘if regulators can’ t make up their minds’ and, on the other, ‘too little law’ does not ‘leave [innovation] behind’.

Philips & innovation in Africa: Driving worldwide growth

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Philips’ CEO Frans van Houten recognizes untapped potential, invests in Africa

new multi-part series

In February, AAT launched its multi-part series on innovation & antitrust as a thematic collection focusing on the concept of innovation markets and how competition and IP laws are able to address the, by definition, novel issues that arise.  Recently, and timely so, Philips has joined this debate.

Philips & the future of African innovation: From “things” to “ideas”

For one, Frans van Houten, its President and CEO, has been quoted as saying: “Innovation is our lifeblood and will be the main driver of profitable growth going forward. … I intend to drive innovation with more intensity to help us win new customers.”

Notably, Philips changed its official company slogan from “We make things better” to “We create better ideas.”

Mr. van Houten (source: Philips)

Even more pertinent, Mr. van Houten not only recognizes the crucial forward-looking importance of innovation.  Unlike many Western corporate leaders, he positively links it with the economic growth prospects of Africa.  In an insightful piece entitled “How Africa’s innovation will change the world” (published on the Davos World Economic Forum blog), Mr. van Houten discusses the promises, challenges, and realities of African innovation and resulting economic growth.

The article highlights the intuitive, yet elusive, insight that challenges become opportunities when looked at with an inventive spirit.  It also addresses the importance of multi-disciplinary approaches (such as the one at the foundation of our #AntitrustInnovation series, combining law, economics, and business innovation) and that of partnerships:

Seven years ago, millions of Kenyans were struggling to access basic financial services such as a bank account; they were unable to transfer money or receive microcredit. Then, a locally developed mobile payment system called M-Pesa [see AAT coverage here; — Ed.] radically changed everything. Today, more than two-thirds of Kenya’s population uses M-Pesa to make and receive payments and an estimated 43% of the country’s GDP flows through the system. This is transforming life in the country, increasing income in rural households and spawning a range of start-ups.

This speedy adoption of mobile payments captures the enterprising spirit of African innovation. It reflects the resourcefulness with which people in Africa find local solutions to local issues. It also shows how Africa’s challenges are opportunities in disguise and how the continent can bypass development stages without paying for their replacement. Mobile phones, for example, were rapidly adopted in Africa because of the lack of fixed telecom infrastructure. And solar panels are being adopted faster than in other parts of the world, because kerosene is so expensive that the payback time for investments in solar power is months rather than years.

Healthcare is another exciting area. According to a report from the World Economic Forum, Africa faces 28% of the global disease burden with only 3% of the world’s healthcare workforce. In response, Africa is adopting new operating models and technologies. By training health extension workers to focus on education, family planning and sanitation, Ethiopia achieved a 32% drop in child mortality and 38% drop in maternal mortality. In Kenya, e-learning has taught 12,000 nurses how to treat major diseases such as HIV and malaria, compared to the 100 nurses a year that can be taught in a classroom.

Africa is also embracing new business models that tap into the vitality of the country’s communities. Philips, for example, teamed up with Inyenyeri, a Rwandan NGO, to give families access to an innovative cookstove. Crucially, the cookstove is given away for free and families pay for the stove by harvesting twigs, leaves and grass. This biomass is compressed into fuel pellets, half of which are returned to the family for personal use and half of which are sold by the NGO. The cookstove is produced in Africa, highly energy efficient and, because it is smoke free, significantly healthier.

This example also shows the power of partnerships, without which many African innovations would not come to fruition. Solar-powered light centres, for example, increase the social activity and productivity of communities by generating light after sundown. These communities, however, are often unable to invest in a light centre, so this technology is rolled out through NGOs and governments. Sometimes these light centres are used to power medical equipment such as an ultrasound, or refrigerators that store vaccines. This type of cooperation ensures that innovation generates both financial and social value.

The complexity of Africa’s challenges also requires a multidisciplinary approach to innovation. Kenya, for example, is investing in systems that encourage open innovation. This sees local universities and small and medium enterprises join forces with NGOs, governmental organizations and foreign multinationals such as IBM and Philips, which have set up regional research and innovation centres in Nairobi. Nairobi is also home to iHub, a booming community of local entrepreneurs, investors and some of the world’s leading technology firms.

For innovation to really succeed in Africa, other factors need to be addressed, too. There is a lack of prototyping equipment and workshops, so local innovators depend on Europe or China, making the process costly and cumbersome. And while there are good patent laws in place, there are still too many counterfeit versions of successful products. Also, international firms should source locally and work with local distributors, whenever possible. And governments should focus their development money on stimulating entrepreneurship and innovation.

While in Africa millions of people still live on less than $2.50 a day, the continent looks set to have a brighter future thanks to local solutions for finance, healthcare and energy that could become globally relevant. M-Pesa, for example, has already been rolled out in other African countries, India, Afghanistan and Eastern Europe. Perhaps sooner than we think, African innovations will help the rest of the world create lasting social and economic value.

[Frans van Houten, President and CEO, Royal Philips, emphasis and links added, “How Africa’s innovation will change the world” published on Davos World Economic Forum blog.]

Investment: done

More than just writing op-ed pieces, Philips’ leadership has put its money where it matters: On March 20, 2014, the company (with 23-plus billion Euros in annual revenue) announced that it was establishing a “Research & Innovation Hub” in Nairobi, Kenya.  The full Philips statement says:

  • The Philips Africa Innovation Hub in Kenya will be the center for developing innovations “in Africa-for Africa” in the areas of healthcare, lighting and healthy living

  • Hub underlines Philips’ commitment to invest in Africa and provide Africa-relevant innovations to address key challenges facing the continent

 Nairobi, Kenya – Royal Philips (NYSE: PHG, AEX: PHIA) today announced the establishment of its Africa Innovation Hub in Nairobi, Kenya, which underlines the company’s commitment to invest in Africa. The Philips Africa Innovation Hub will work both on the creation of new inventions, as well as bringing these inventions to the market.

The Philips Africa Innovation Hub will do application-focused scientific and user studies to address key challenges like improving access to lighting and affordable healthcare as well as developing innovations to meet the aspirational needs of the rising middle class in Africa.

The Philips Africa Innovation Hub will be located at the Philips East African Headquarters in Nairobi, where African talents and international researchers will operate on the concept of “open innovation” and will work in close collaboration with the R&D ecosystem of Kenya and Africa. Philips is in discussions with local organizations and Universities on R&D collaborations to co-create meaningful solutions for Africa.

“We welcome the establishment of Philips’ Innovation Hub in Kenya; Philips is a globally recognized innovation powerhouse and their selection of Nairobi as the site to establish their African Innovation hub is a testament to the Kenyan government’s commitment to nurture the drive for research and innovation in the region”, says, Hon’ble Adan Mohammed, Cabinet Secretary for Industrialization. “We lend our full support to the investment being made by Philips and look forward to the outcomes of their Africa-specific research and projects that can contribute to transforming society, business and government across the continent”.

JJ van Dongen, Senior Vice President & CEO Philips Africa states: “Philips is passionate to invent, apply technology and partner to help people succeed. Our ambition is to create impactful innovations that matter to people and address the key challenges that confront society. With Kenya as a leader in the continent in science and entrepreneurship as well as a hub of collaboration on technology and innovation, Nairobi, is the ideal location to establish Philips’ African research presence. We want to tap into the city’s vibrant R&D eco-system and contribute to the process of co-creating new solutions, new business models and meaningful partnerships to provide innovations that make an impact.”
Enhancing people’s lives in Africa though meaningful innovations
Some innovations that Philips was already working on have now become part of the Innovation Hub, hence, the Philips Africa Innovation Hub will kick-off with ventures that are under development as well as in the pilot phase; these include:

Respiratory rate Monitor to support pneumonia diagnosis: Pneumonia is the leading cause of death among children under the age of five, resulting in 1.1 million deaths worldwide annually¹. Of these, 99% of deaths occur in developing countries in low-resource settings, which typically entail rural areas with very limited or poor healthcare facilities or with low-skilled health workers. The current diagnostic tools in such settings are not easy to use, can easily distract the workers from an accurate conclusion, and thus lead to a poor diagnosis.

The Innovation hub is working on the development and clinical testing of a robust and affordable Automated Respiratory Rate Monitor that aims to support the diagnosis of pneumonia among infants and children, using smart sensing technology on the body which is intended to be more accurate and reliable compared to manual processes being currently observed. This device will be specially designed for use by community health workers and nurses in rural areas. In Kenya, discussions are on with the Kenya Medical Research Institute (KEMRI) to further develop this project and co-create an effective solution tailored to circumstances in rural Africa.

Community care services: The development and testing of a work-flow innovation designed to reduce the number of avoidable maternal and child deaths. The purpose of the workflow is to enable remote area health centers to diagnose, triage, treat, stabilize and (prepare for) transport expectant mothers that come in for a check-up and treatment.

Smokeless cook stove: Philips has designed and is manufacturing this innovative stove to improve the lives of those who rely on wood or biomass for their daily cooking. These specially designed stoves are extremely efficient and significantly reduce the use of wood as fuel. The cook stove can reduce smoke and carbon monoxide emissions by more than 90% compared to an open fire² thus reducing the health risks of indoor cooking. The contribution of the innovation hub is to create new go-to-market models for these stoves.

Consumer solar solutions: Today an estimated 560 million Africans live without electricity; Philips is committed to improving access to lighting in Africa, for the majority of the population that lives in off-grid communities. The Innovation hub is designing and developing new consumer products using the combination of solar power and energy efficient LED technology. New go-to-market models are also being established to ensure these solutions become accessible to people that would not be able to afford them otherwise.

The Philips Africa Innovation Hub while headquartered in Kenya, will be responsible for pan-African research and projects and will have operations across Africa, linked to the Philips regional offices across the continent; the hub will be headed by Dr. Maarten van Herpen and will work in close collaboration with the Philips research labs in Bangalore, Shanghai and Eindhoven.

¹ Source : Unicef  www.unicef.org/media/media_70890.html
² Reference source:  Water boiling test version 4.2.2 done at accredited stove laboratory, Aprovecho Research Center, Oregon, USA.

 

Criminalisation of antitrust offences: not on short-term horizon

Posted on by andreasstargard

south_africa

Competition Commission not ready to pursue antitrust cases criminally – plus: AAT‘s recommendations

The newly (permanently) appointed Competition Commissioner, Tembinkosi Bonakele, has referred to a “phased” implementation of the 2009 Competition Amendment Act.  The legislation technically criminalised hard-core antitrust offences such as bid-rigging or price-fixing cartels.  However, it has not yet been implemented or effectively signed into law.

According to a MoneyWeb/ZA report, both he and his boss, Economic Development Minister Ebrahim Patel, had discussions on how and when to implement “to ensure that the necessary institutional capacity is available to apply the amendments.”  The initially effective provisions (relating to the SACC’s market-inquiry powers) went into effect last year, while the criminalisation provisions remain unimplemented.

In a somewhat remarkable and prudent self-assessment, the minister and SACC have now admitted that the Commission currently lacks “the institutional capacity needed to comply with the higher burden of proof in criminal cases,” according to the report.

One notable aspect of potential discord lies in not only in the different standard of proof in civil vs. criminal matters (“more probable than not” vs. “beyond a reasonable doubt”), but perhaps more importantly can be found on the procedural side, preventing rapid implementation of the law: There has been historic friction between various elements of the RSA’s police forces and (special) prosecutorial services, and the power to prosecute crimes notably remains within the hands of the National Prosecuting Authority, supported in its investigations by the South African Police Service.

Historical and Legislative Background – and a bit of Advice

Starting in the spring and summer of 2008, the rumoured legislative clamp-down on corrupt & anti-competitive business practices by the government made the RSA business papers’ headlines.

During a presentation I gave at a Johannesburg conference in September that year (“Criminalising Competition Law: A New Era of ‘Antitrust with Teeth’ in South Africa? Lessons Learned from the U.S. Perspective“), I quoted a few highlights among them, asking somewhat rhetorically whether these were the words of fearmongers or oracles?

  • “Competition Bill to Pave Way for Criminal Liability”
  • “Tough on directors”
  • “Criminalisation of directors by far most controversial”
  • “Bosses Must Pay Fines Themselves”
  • “New leniency regime to turn up heat on cartels”
  • “New era in the application of competition policy in SA”
  • “Likely to give rise to constitutional challenges”
  • “New Bill On Cartels is a Step Too Far”
  • “Fork out huge sums or face jail time if found guilty”
  • “Disqualification from directorships … very career limiting”

I also quoted international precedent-setting institutions and enforcers’ recommendations, all of which tended towards the positive effect of criminal antitrust penalties:

OECD, 3rd Hard-Core Cartel Report (2005):

  • Recommends that governments consider the introduction and imposition of criminal antitrust sanctions against individuals to enhance deterrence and incentives to cooperate through leniency programmes.

U.S. Department of Justice, Tom Barnett (2008):

  • “Jail time creates the most effective, necessary deterrent.”
  • “[N]othing in our enforcement arsenal has as great a deterrent as the threat of substantial jail time in a United States prison, either as a result of a criminal trial or a guilty plea.”

While the presentation contained a lot more detail, the key recommendations that I summarised would seem to continue to hold true today, and may serve as guide-posts for Commissioner Bonakele and the EDD ministry:

Cornerstones of a successful criminal antitrust regime
  • Crystal-clear demarcation of criminal vs. civil conduct
  • Highly effective leniency policy also applies to individuals
  • Standard of proof must be met beyond a reasonable doubt
  • No blanket liability for negligent directors – only actors liable
  • Plea bargaining to be used as an effective tool to reduce sentence
  • Clear pronouncements by enforcement agency to help counsel predict outcomes
Demarcation of criminal vs civil antitrust conduct in U.S.
Demarcation of criminal vs civil antitrust conduct in U.S.