The settlement was finalized by the Competition Tribual on 18 July 2013. Its terms include, importantly for the latest job-related and divisional developments at Telkom, the functional separation between the company’s retail and wholesale divisions, in addition to other pricing commitments, a fine, and ongoing monitoring obligations under the guidance of the Commission. As reported today, the company has now also issued and implemented a new antitrust/competition compliance policy, its so-called “Competition Settlement Code of Conduct Policy,” reportedlya whopping 25-page document.
In this latest round of compliance efforts, Telkom’s CEO Sipho Maseko is said to have sent out communications to all staff, attempting to alleviate media reports about potential large-scale job cuts. He is cited as follows: “While I can’t predict the future, I can unhesitatingly say the 12 months that lie ahead will be demanding. Challenges await, of this we can be certain. We will have to be on top of our game and tackle the issues that influence our business with focus and purpose if we are to unlock our full potential.”
Competition policy: economic necessity vs. budgetary constraint
Professor Flavien TCHAPGA (Economics, University of Versailles, France) published an intriguing paper on developing effective competition policies in Africa and on the inherent tension this effort faces: their economic necessity on one hand vs. the realpolitik of budgetary constraints on the other hand. His analysis — available in full PDF to our valued [francophone] readers here — focuses on the member countries of CEMAC and WAEMU.
Abstract:
Because of the promises of efficient markets (protection of consumer interests, reduction of poverty, innovation and economic dynamism), competition policy is an attractive issue for Central African Economic and Monetary Community (CEMAC) and West African Economic and Monetary Union (WAEMU) countries. However, appropriate financial resources are essential for its effectiveness. This paper assesses the competition policy implementation in these two regions. In particular, it focuses on the balance between the issues at stake and dedicated financial resources since this could signal governments’ commitment to ensure effective implementation of competition legislation for better market outcomes.
According to various reports, the European Commission (specifically, its top management in the energy DG [Oettinger] and its president [Barroso], as well as others) has caved to the Russian energy powerhouse GAZPROM.
N.B.: (1) Yes, this relates to Africa. (2) And yes, this relates to competition.
It relates to competition because the pending antitrust investigation by Mr. Almunia, already hamstrung, is clearly hampered by this development from its adjacent energy DG. One Commissioner has caved, and another (a lame duck by now, who has already announced his retirement from the entire realm of politics) will not even bring a conclusion to his DG’s investigation into GAZPROM. Putin and his friends at the gas giant have (now successfully) challenged the European energy and competition ministers, effectively saying to them: “We will break your laws, and there isn’t a thing you can do about it.”
It relates to Africa, because this is the story of how a BRICS country state-owned enterprise (or at least de facto SOE) is fully capable of defeating the “rule of law” that European proponents of the superiority of Western legal systems often tout. Is EU law hard and fast? Unbreakable? Strictly enforced? Without exceptions, for special friends (or powerful foes)? All the common criticisms that are levied by eurocrats against developing African judicial systems are brought to the fore by this abject failure of the EU to uphold its own laws vis-a-vis a stronger opponent.
Banana Republic Brussels
The answer to the rhetorical questions posed above is – quite clearly as of today at least – a resounding “no“:
The EU has caved. EU laws can be broken. Without any consequences.
Until recently, the GAZPROM contracts with EU member states for its (63 billion cubic metres of gas per year) “South Stream” Project violated EU law, according to prior statements of the relevant EU Commissioners and their spokespeople. The main concerns (here from the energy perspective, not the competition issues) were:
ownership unbundling rules violated by Gazprom being both a producer and a supplier of gas that owns simultaneously production capacity and its own transmission network
3d-party non-discriminatory access endangered by Gazprom being exclusive shipper
South Stream’s pricing structure violates EU energy tariff rules
Yet, after some diplomatic prodding and economic threats, the Commission now has changed its tune and is literally giving GAZPROM a “get-out-of-jail-free card.”
“Gunther Oettinger, the European Commissioner for Energy, told Vedomosti newspaper that Moscow and Brussels will find a solution to honor previous intergovernmental agreements Gazprom has made with European transit countries.” (Source: Vedomosti newspaper, as quoted by rt.com)
Contrast this with what Mr. Oettinger said back in 2011 (note that he also (1) called South Stream a “phantom project” and essentially didn’t believe the Russians would go ahead with its construction in 2012, and (2) was quite clear in his understanding of how market participants operate: “money talks,” baby!):
I understand that certain EU Member States entered into bilateral agreements with the Russian Federation which may partially contradict these principles. If this is true, these Member States will nevertheless have to apply the internal market rules and they are under an obligation to bring their IGAs in line with the EU legislation. (Source: His own speech)
“The Commission has looked into these intergovernmental agreements and came to the conclusion that none of the agreements is in compliance with EU law,” Borchardt said.
“That is the reason why we have told these states that they are under the obligation, either coming from the EU treaties, or from the Energy Community treaty, that they have to ask for re-negotiation with Russia, to bring the intergovernmental agreements in line with EU law,” he added. (Source: EurActiv)
Lesson (not) learned
How to wrap up a piece that essentially sounds the death knell of the rule of law in the EU, especially in Brussels? Well, since this is an AfricanAntitrust.com post (this could arguably be published anywhere), the focus should be on EU lessons learned on the African continent. The key take-away here may be this:
Very simply put: any African (or other BRICS or BRICS-like country) negotiator dealing with an official EU delegate as his or her counterparty should keep the “GAZPROM incident” in mind when faced with a lecture on the superiority and objectivity of EU law over whichever domestic judicial system may be at issue.
Arguably, most if not all of today’s antitrust enforcers would agree that the world’s competition regimes (African or Asian, American or European, established or recently budding) are fundamentally designed to achieve very few, but important, goals. Among these goals are the following: (1) economically, to enhance the market’s allocative efficiency & stimulate growth of production and (2) individually, consistent with Bob Bork‘s key insight, to increase consumer welfare (even if the latter may not be a formally stated aim of some regimes).
Is the world today better for the [working] consumer than it was 123 years ago, when Senator Sherman and the majority of the U.S. legislature decried the unjust and ill-gotten riches of that era’s robber barons and enacted the Sherman Act?
Robber Baron, circa 1890
The paper is interesting but too short to be of real academic or legal value in and of itself, in our view. The infamous photo of the super-yacht on the authors’ blog represents the easy part of what they set out to accomplish – politicizing the issue and driving popular opinion (much akin to the period newspaper cartoon above).
Robber Baron, circa 2014
That said, authors Ricardo Fuentes and Nick Galasso go somewhat beyond the, by now, usual egalitarian quotes (Brandeis’s Depression-era statement: “We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both“) and the well-known head-turner statistics of inequality (e.g., “almost half [of the world’s wealth is] going to the richest one percent; the other half to the remaining 99 percent“), many of which are also found on their blog.
Yet, while they do go a bit deeper than merely scratching the surface with populist platitudes and photos of jetsetter playtoys, they fail to do so on the specific issue of how antitrust fits into the question of global economic inequality. One need not attempt to un-seat Bork from the academic and judicial pedestals he has reigned over for 4 decades, but one could try a bit harder here… The OXFAM study simply does not provide any new insights. To its credit, it does identify the issue – but it does not develop the overall impact of competition law any further than highlighting the one (very particularized) example of the allegedly monopolistic Mexican telecoms sector:
Anti-competition and regulatory failure: the richest man in the world
Weak regulatory environments are ideal settings for anti-competitive business practices. Without competition, firms are free to charge exorbitant prices, which cause consumers to lose out and ultimately increase economic inequality. When elites exploit weak or incompetent anti-trust authorities, price gauging follows as a form of government to big business. By not acting when dominant firms crowd out competition, government tacitly permits big business to capture unearned profits, thereby transferring income from the less well-off sections of society to the rich. Consumer goods become more expensive, and if incomes do not rise, inequality worsens.
Mexico’s privatization of its telecommunications sector 20 years ago provides a clear example of the nexus between monopolistic behavior, weak and insufficient regulatory and legal institutions, and resulting economic inequality.
Mexico’s Carlos Slim moves in and out of the world’s richest person spot, possessing a net worth estimated at $73bn. The enormity of his wealth derives from establishing an almost complete monopoly over fixed line, mobile, and broadband communications services in Mexico. Slim is the CEO and Chairman of América Móvil, which controls nearly 80 percent of fixed line services and 70 percent of mobile services in the country. A recent OECD review on telecommunications policy and regulation in Mexico concluded that the monopoly over the sector has had a significant negative effect on the economy, and a sustained welfare cost to citizens who have had to pay inflated prices for telecommunications.
As the OECD report argues, América Móvil’s ‘incessant’ monopolistic behavior is facilitated by a ‘dysfunctional legal system’, which has replaced the elected government’s right and responsibility to develop economic policy and execute regulation of markets. This system has stunted the emergence of a dynamic and competitive telecommunications market. In fact, many of the regulatory instruments present in most OECD countries are absent in Mexico.
The costs of government failure to curb such monopolistic behavior are large. Mexico has a high level of inequality and has the lowest GDP of all OECD countries. As other OECD countries demonstrate, a more efficient telecommunications (especially broadband) sector can play an important role in driving economic growth and reducing poverty, especially among a large rural population, as in Mexico’s case. The OECD calculates that the market dysfunctions stemming from the telecommunications sector have generated a welfare loss of $129.2bn between 2005 and 2009, or 1.8 percent of GDP per year.
In the end, no matter how deeply or superficially the paper treats its subject, it will likely be of great interest to several of the African competition enforcers that preside over antitrust regimes in which the “public interest” criterion is present (e.g., COMESA, South Africa, and several others). This means in practice: We at AfricanAntitrust.com expect the paper to be cited in the near future by a competition authority near you. So get acquainted with it before it’s too late.
High-level appointments made by acting Competition Commissioner
According to statements made by the interim South African Competition Commissioner, Tembinkosi Bonakele, and based on several news reports (here and here, for instance), the SACC has filled several of its recently (or not-so-recently) emptied ranks:
Chief Economist and Manager of the Policy and Research division: Liberty Mncube
Divisional Manager of Enforcement and Exemptions: Junior Khumalo
Chief Financial Officer: Thomas Kgokolo
The appointments were made effective as of the first of the year. The SACC had been criticised for lack of stability in its leadership and overall staff, given a fairly high turnover rate among its employees and officers. Perhaps to counter this impression, Mr. Bonakele said in the official SACC statement that the “new appointees will provide the necessary leadership to their very important divisions. It is important that we have a very strong and stable senior management team and I have full confidence that this team will take the Commission to higher levels. We are privileged as an institution that we are able to find most candidates internally and thereby ensure continuity.” (Emphasis added).
Focusing on the first new appointment to the Chief Economist role – a position that has sat empty for over a year, according to our recollection – it not only provides for a catchy title but is indeed a noteworthy fact that Mr. Mncube is a graduate student at the moment. We do not know of any other competition enforcement agency that has filled the job of chief economist with someone who is currently pursuing a degree in economics. This comment is not to diminish Mr. Mncube’s accomplishments, nor to take away from his potential to fill the role adequately. It simply states a fact. His past professional biography includes the following, according to a 2011 ICN The Hague conference web site:
[Note: information as of 2011] “Liberty Mncube is a Senior Analyst in the Policy and Research Division of the Competition Commission of South Africa. At the Commission, his responsibilities include managing and coordinating research and policy development; managing and coordinating case analysis; contributing in building capacity for research and knowledge of competition policy; and undertaking analysis related to competition matters with regard to policy and regulation. Prior to joining the Commission, he was a Researcher at the Development Policy Research Unit at the University of Cape Town. Liberty holds an MSc in Economics from the University of York.”
Mr. Mncube’s own LinkedIn profile is updated to reflect his current position:
I am the Chief Economist at the Competition Commission South Africa. I hold a MSc in Economics from the University of York and am currently completing a PhD in Economics at the University of KwaZulu-Natal. I have been a visiting PhD graduate student at the Barcelona Graduate School of Economics.
On 18 December 2013, the Constitutional Court of South Africa (“Constitutional Court”) handed down its decision in an appeal by the Competition Commission (“Commission”) against an unprecedented costs order imposed by the Competition Appeal Court (“CAC”). The costs order related to the CAC’s decision to overturn the decisions of the Commission and the Competition Tribunal (“Tribunal”) to prohibit the merger between Pioneer Hi-Bred International and Pannar Seeds.
The Commission had originally prohibited the proposed merger on 7 December 2010,[1] following a three-month investigation. In the Commission’s assessment, the transaction amounted to a 3 to 2 concentration amongst producers of seeds for the staple food in South Africa, if not much of sub-Saharan Africa. Quite apart from the substance, this sector fell squarely within the Commission’s prioritisation programme, and so was always likely to receive close scrutiny.[2] On the Commission’s assessment, the transaction would give rise to significant unilateral effects, removing an important competitor from the market. The Commission considered the merging parties’ submissions that the transaction would lead to efficiencies from a combination of the two parties’ breeding programmes, but found the claimed benefits unconvincing and unlikely to outweigh the anti-competitive harm.
Following an extensive discovery process and a three-week hearing involving nine witnesses, the Tribunal also decided to prohibit the merger, on 9 December 2011.[3] The Tribunal considered the potential for anti-competitive effects (concluding that the parties were close and effective competitors, and that the transaction would accordingly give rise to very significant anticompetitive effects),[4] and the likelihood of significant efficiencies (concluding that the Parties’ assumptions were “either grossly exaggerated or totally unrealistic”, and that any potential merger-specific efficiencies would lie beyond a 5 year time horizon)[5]. Despite the parties’ characterisation of the industry as a “dynamic innovation market”, maize seeds improve by 1-2% per annum (not exactly Moore’s law)[6] and the wide variety of different growing conditions (and the use of seeds adapted for each region), mean that any particular innovation is unlikely to be universally applied; the Tribunal highlighted the need to account for anticipated non-merger specific innovation as a benchmark against which the parties’ claims should be measured.
Notably, the Tribunal focussed substantial attention on assessing the relevant counterfactual against which the merger should be assessed. While it was common cause that the target firm did not meet the requirements of the failing firm defence, in the course of the Tribunal hearing the parties had argued that the target firm, Pannar, would decline as a competitive force, most rapidly in relation to one specific product area (so-called irrigated region hybrids), but also more generally across its whole product range. Considering local and international approaches to the counterfactual, the Tribunal found that there was no compelling evidence of the certain decline of the target firm (which was still the market leader in relation to the irrigated region hybrids), and concluded that there was no reason not to accept the status quo as the relevant counterfactual.
Following two days of oral argument, the CAC overturned the Tribunal’s prohibition, instead deciding on 28 May 2012[7] that the merger should be allowed subject to conditions, including the imposition of restrictions on price increases on existing Pannar varieties to the level of consumer price inflation for three years, and agreeing to license a list of Pannar varieties for breeding by third parties. The CAC’s reasoning was based on an assumption that the decline of the target firm was “inevitable”[8] albeit uncertain in its timing, although it was again universally accepted that Pannar failed to meet the requirements of a failing firm. On that assumption, the CAC appeared to reverse the onus that would have applied with a failing firm defence, and stated that the Commission[9] had failed to establish the likelihood of an alternative transaction that might preserve Pannar’s assets, in the event of a prohibition. The CAC placed an unusually heavy weight on the interests of private shareholders,[10] as opposed to consumers, which is in distinction to the strict requirements of the failing firm defence, as applied internationally.[11] The CAC ultimately concluded that the relevant counterfactual was the continued decline, eventual demise and exit by Pannar,[12] and against that benchmark, approved the transaction, subject to conditions.
It is unfortunate that the Supreme Court of Appeal denied the Commission leave to appeal on the substance, as the CAC’s approach to the counterfactual has created some uncertainty that may need to be resolved in another case. In any event, the Constitutional Court was only asked to consider the CAC’s costs award.[13]
The CAC had awarded costs against the Commission, not only in respect of the CAC proceedings, but also those before the Tribunal. The Constitutional Court first clarified that the Tribunal has no power to award costs against the Commission (thereby distinguishing the Commission, as a “party”, from a private “complainant” in Tribunal proceedings).[14] Furthermore, the Constitutional Court determined that the CAC is similarly unable to award costs in relation to Tribunal proceedings.[15] Finally, while the CAC has discretion to award costs against the Commission in respect of CAC proceedings, it must properly exercise this discretion.[16] The Constitutional Court noted that while the “Unreasonable, frivolous or vexatious pursuit of a particular stance” may justify a costs order against the Commission, the vigorous pursuit of its case would not. The Court highlighted the distinction between an ordinary civil litigant and the Commission, which is required to pursue its statutory mandate vigorously, often where there is no opposing party or amicus. Ultimately, the Constitutional Court concluded that the lack of reasoning behind the costs award, and the lack of any evidence of “mala fides, irregularity, or unreasonable conduct” by the Commission meant that the costs order had to be set aside.
This is clearly an important result for the Commission’s ongoing activities. The Commission had argued before the Constitutional Court that a costs order would have a serious effect on its budget and its stance in defending similar investigations and findings before the CAC. Ideally, competition enforcement should aim to strike a balance between sufficiently robust enforcement to achieve policy objectives and the need to avoid imposing undue or disproportionate costs on the businesses that ultimately drive competition, growth and job creation. Particularly in a developing country context, a certain degree of prioritisation can be helpful in building institutional capability and making the most effective use of limited resources, as well as minimising the burden of investigations. By focussing the most resources and attention on those cases most likely to cause harm, an agency might maximise the benefits of enforcement, while minimising the potential for any inefficiency caused by the investigation process.
In this case, while the CAC took a different view from the Tribunal (and the Commission), it would be difficult to label the Tribunal’s decision (and hence the Commission’s defence at the CAC) as unreasonable or vexatious. In a nutshell, this was a 3 to 2 combination between direct (“horizontal”)[17] competitors in a priority sector, in an industry that, while increasingly influenced by innovation, is slow moving in comparison with “innovation markets” such as those in the ICT sector.
South African merger control is not characterised by many prohibition decisions. Amongst intermediate and large mergers, this is the most recent prohibition decision issued by the Tribunal. There have been around 500 decisions since the previous prohibition, Telkom/BCX in August 2007.[18] Few prohibitions may well point to the outstanding deterrent effect of the Commission’s historical enforcement efforts, but it seems a stretch to consider that the Commission’s (albeit vigorous) defence of the only large/intermediate prohibition decision by the Tribunal in the past 6 years is an indication of a vexatious or overly aggressive approach.
While the Commission will no doubt be heartened by this decision, it will be interesting to see whether the clarifications provided by the Constitutional Court will have any bearing on the Commission’s stance on contentious matters before the CAC in future, in particular those involving more complex theories of harm. Arguably more important will be the anticipated clarification of the approach to mergers involving declining firms in the light of the CAC’s approach to the counterfactual.
[2] See Roberts, Simon (2008) “South African Competition Policy in 2008: Key Priorities of the Competition Commission” Global Competition Policy, April 23rd, 2008. Prioritisation might justify closer scrutiny, or even firmer enforcement, in particular sectors or industrial areas. For an example of where enforcement might depend on sector characteristics, see EdF/British Energy, European Commission Case No COMP/M.5224, 22/12/2008, at para 31, cited in http://www.compcom.co.za/assets/Uploads/events/Fourth-Competition-Law-Conferece/Session-4B/100812-PS-Paper-for-SACC-conference-DRAFT.pdf.
[3] Pioneer Hi-Bred International Inc and Pannar Seed (Pty) Ltd v The Competition Commission and the African Centre for Biosafety, CT CASE NO: 81/AM/DEC10 (“Tribunal Decision”), http://www.comptrib.co.za/assets/Uploads/81AMDec10.pdf
[13] The Competition Commission v Pioneer Hi-Bred International Inc, Pannar Seed (Pty) Ltd, and the African Centre for Biosafety, Case CCT 58/13 [2013] ZACC 50, (“Constitutional Court Decision”), http://www.saflii.org/za/cases/ZACC/2013/50.html
The past 18 months have witnessed significant developments in the investigation and prosecution of cartel conduct in South African competition law. In summary, these developments are the following:
• The Supreme Court of Appeal recognised the availability of ‘opt
out’ class actions for private damages and set out a procedure
through which plaintiffs can seek certification of a class.
• The Constitutional Court extended the availability of class actions
for private damages by recognising ‘opt-in’ class actions
where the interests of justice permit such a procedure.
• The Competition Commission (the Commission) for the first
time utilised a fast-track settlement process in relation to the
prosecution of a widespread cartel in the construction industry.
• An amendment to the Competition Act, 89 of 1998 (the Act)
was promulgated giving the Commission the power to institute
market enquiries. The Commission has indicated that it wishes
to conduct a market inquiry into the private health-care sector.
• The Supreme Court of Appeal broadened the scope for the
Competition Tribunal (the Tribunal) to adjudicate complaints
prosecuted by the Commission.
• The Supreme Court of Appeal confirmed that leniency applications
submitted to the Commission by a leniency applicant are
subject to legal privilege unless the Commission makes reference
to the application in a complaint referral to the Tribunal
– in which case it will be taken to have waived privilege.
• The North Gauteng High Court found that a leniency applicant
is not protected from private damages claims – even where it
is not cited by the Commission as a respondent in complaint
proceedings brought before the Tribunal.
In September and October, the Botswana Competition Commission (Commission) took its first two rulings on cartel enforcement. Both rulings have a keen (if not almost exhaustive) focus on due process. Given that due process arguments have tended to be prominent only after a wave of cartel enforcement in more established jurisdictions, the cases demonstrate how developing competition jurisdictions are setting their own learning curves by absorbing the lessons from elsewhere.
Having been set up in 2011, the Botswana Competition Authority (Authority) has been primarily active in merger control and has taken a number of prominent decisions, in particular, on the issue of the relevance and scope of public interest considerations in merger control decisions. Unlike other young authorities across the Africa continent, the Authority has also been keen to pursue cartel enforcement as a priority area. While it has undertaken a number of dawn raids in a range of sectors and is in the final stages of adopting a leniency programme, the Authority is only now taken its first steps to establish a clear enforcement record with alleged cartels in the public procurement of food rations and also the panel beating sector.
The first ruling concerns alleged bid-rigging in relation to the supply of food rations to the Botswana government. Super Trading, a food supplier, provided the Authority with details of how one of its directors allegedly provided its competitor,Ya Raheem, with commercially sensitive information which enabled Ya Raheem to win tenders during a sustained period. Following a raid by the Authority, Ya Raheem opted to settle with the Authority and admitted to bid rigging as well as providing details of its involvement.
Notwithstanding Ya Raheem’s admission, on 17 September 2013, the Commission refused to confirm the settlement on the basis that it considered that the Authority had failed to provide any evidence of Ya Raheem’s involvement in the alleged bid rigging. Evidence of payments allegedly received by Super Trading’s director from Ya Raheem did not, in the Commission’s opinion, substantiate any finding of an agreement between competitors. To put it mildly, the Commission was scathing of the Authority’s approach regarding the lack of evidential or material information. Moreover, the Commission dismissed the significance of the joint undertaking between the Authority and Ya Raheem, labeling it “as simply a report that did little to cure the defects in the main application…”
The key question arising from the Commission’s ruling is whether or not due process requires additional evidence (over and above an admission) to support a settlement in a cartel case? Given that Ya Raheem’s involvement in bid rigging was not in dispute, was it necessary for the Commission to insist on further evidence? Moreover, given that Ya Raheemadmitted to and gave details of its involvement in the alleged bid rigging as part of its settlement with the Authority, it is not clear what additional evidence the Commission required to satisfy itself that alleged bid rigging had taken place.
One would expect that an undertaking with a clear statement of the facts and nature of the offence would have satisfied the procedural requirements of the South African settlement procedure, a pertinent observation given the Commission’s reliance on South African precedent on the treatment of evidence in this case.
It could be questioned whether the Commission’s implicitly categorized the settlement as a ‘contested’ proceeding (as opposed to an ‘uncontested’ consent order), which would have inevitably led them to require the Authority to provide sufficient evidence of Ya Raheem’s involvement in bid rigging. Should the significance of this ruling be dismissed asa teething problem regarding the first settlement procedure or does it reflect a fundamental difference in how settlement proceedings will be treated in Botswana? If the latter, it may hamper the Authority’s ability to expeditiously conclude settlement proceedings, a tool that has proved spectacularly successful in South Africa.
The second ruling relates to an alleged concerted practice between panel beaters. Following the referral of the matter to the Commission, the alleged cartelists raised a number of due process issues prior to the substantive hearing of the facts. In particular, it was argued that the Commission was incompetent to rule in the matter as, given its role as both referee and player in the dispute, the parties under investigation were not guaranteed a fair hearing. The parties sought the relief that the matter be stayed pending the establishment of an independent and impartial body.
In sharp contrast to the tone and substance of its previous cartel ruling, on 30 October 2013, the Commission dismissed the procedural challenges in their entirety. Irrespective of the fact that the Commission is formally located within the Authority and also functions as a governing Board for the Authority, the Commission stressed that the roles and functions are clearly delineated in the Competition Act, with the Authority authorized to carry out investigations and then refer matters for adjudication to the Commission.
The Commission emphasized that due process was furtherguaranteed by the jurisdiction of the High Court over rulings of the Commission whereby it can remit matters back to theCommission, revoke, increase or reduce any financial penalty, give any direction of its own in substitution for that of the Commission and make any decision as it sees fit.
Underpinning the Commission’s ruling is an implicit acknowledgement of the fact that the institutional design of a competition regime is a policy decision relative to the best fit for a given jurisdiction (taking into account international best practice). Acknowledging that the Botswana model is a hybrid between the integrated (e.g. European Commission) and bifurcated model (e.g. South Africa), the Commission appeared uncomfortable with second-guessing the legislature’s view as to what model was most suitable for Botswana’s current circumstances.
The ruling demonstrates a welcomed openness to international precedence. The Commission makes explicit reference to ICN guidelines on institutional design, while there is implicit reference to the “full jurisdiction” jurisprudence of the European Court of Human Rights relating to the application of due process to administrative proceedings when the Commission emphasizes the full extent of the High Court’s review of the Commission’s rulings. This review process will be further probed in this case given that the parties have appealed the ruling.
These two recent rulings illustrate how in the relatively short period since their inception, both the Authority and the Commission have absorbed the lessons from more established jurisdictions and are forging their own path in the enforcement of the Competition Act. Both the Authority and the Commission are already grappling with complex issues of due process on par with those confronting their more established counterparts. For example, by contrast, it has taken decades to obtain an arguably definitive ruling on the application of Article 6 of the European Convention of Human Rights to the competition proceedings before the European Commission.
The law constitutes an important milestone for the country’s economy since it establishes an independent competition regulatory authority (‘CRA’), is applicable to most economic activities, and introduces a legal framework for competition in Mozambique. The Mozambique Competition Act addresses anti-competitive practices and merger control. This act came into force on July 10 and should have been implemented by October 8, 2013. It ‘should have’ but its thorough implementation, including the approval of the Statute of the CRA, leniency program and the definition of exact thresholds for the notification of mergers to the CRA, is still out of sight.
In 2007, the Mozambique Competition Policy (Resolution n.º 37/2007, 12.11) was approved. The adoption of this policy document was a step towards the modernization of this country’s framework for business conduct and improvement of competition conditions. It was also an attempt to tackle existing anticompetitive practices taking place in different economic sectors, including predatory pricing, refusals to deal, and horizontal agreements. In 2007, the Council of Ministers acknowledged the need for stricter competition rules and the establishment of an independent competition authority. At the time, Mozambique already knew multiple sectoral dispositions prohibiting anti-competitive practices that were (and still are) enforced by sectoral regulators. However, an all-embracing competition act was still missing. In 2009, the endorsement of the Southern African Development Community (SADC) Declaration on Regional Cooperation in Competition and Consumer Policies increased the pressure for the enactment of a competition act. Mozambique was seriously lagging behind the other members of this regional community, where some countries had effective competition laws and operating competition authorities for years. This was the case of South Africa, Zimbabwe, Tanzania and Malawi.
On April 11, 2013 the long-awaited Mozambique Competition Act (‘MzCA’) was adopted. An attentive reader shall rapidly find the similarities between this act and the 2003 Portuguese Competition Act (replaced in 2012). The MzCA has a comprehensive scope and is applicable to both private and State-owned undertakings, including most economic activities (see the exceptions listed in article 4). This act prohibits both horizontal and vertical agreements and practices susceptible of substantially impeding, distorting or restricting competition (articles 15-18). This act provides however that the mentioned prohibited practices may notably be justified if they generate economic efficiencies, promote the competitiveness of small and medium enterprises, promote innovation, exportations, or result in other pro-competitive gains (article 21 and 22). Although the text of the MzCA is unclear, it appears that the drafting of a leniency policy is one of the elements which shall be regulated in the context of the implementation process of this act.
The prohibition of abuse of dominant position, as defined in article 20, appears to be one of the priorities of this law. Mozambique is characterized by a highly concentrated market and the dominance of previously state-owned companies, which have been recently liberalized.
The MzCA introduces merger control rules in Mozambique, defining mergers as ‘an acquisition of shareholdings, an acquisition of ownerships or the right of use of assets, IP rights, or any agreements granting a decisive influence on the composition or resolution of corporate bodies. Mergers that meet certain thresholds must notify the operation to the CRA within seven working days after the agreement. These thresholds remain until now unknown since their definition has been left to the further regulations which should have been adopted in October this year.
As far as sanctions are concerned, the violation of the prohibitions contained in the MzCA may result in the application of fines up to 5% of a company’s turnover in the previous year. Additional sanctions such as the exclusion of participation in public tenders for a period of up to five years may equally be applied.
The implementation of the MzCA is expected to be gradual and to take into account the characteristics of the Mozambican economy. Considering the dispositions of the MzCA and particularly the extensive powers vested in the CRA, this act, if correctly implemented, may produce a strong impact on most Mozambican economic sectors and compel companies to rethink some of their practices. There is only one small detail: almost nine months have passed and it is still unknown when and how the implementation process of the MzCA will start. If experience from other new competition jurisdictions can be used as a guideline, one may expect the MZ government to hire a law firm or other experts to draft the implementation rules that are still missing, but this – as much else – remains to be seen.
to our valued [francophone] readers here
African Antitrust & Competition Law 