AAT exclusive, BRICS, cartels, collusion, Dawn Raid, Kenya, South Africa, Uncategorized, Zambia

Dawn raids on the increase across Africa

By Michael-James Currie and Jenna Foley

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

South Africa

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

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

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

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

Kenya

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

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

Zambia

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

On a Path to Harmonisation?

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

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compliance, fraud/corruption

CCOs say that with more investigations also comes (slightly) more money

deloittecompliance

In sync with greater enforcement: Firms’ compliance budgets grow

According to a recent survey, the budgets allocated to compliance have grown over the last year, including those of African participants in the study.  Consulting giant Deloitte has released its 2015 Compliance Trends report, the result of its survey in which 20 large corporations across Africa (out of 364 total qualified respondents) participated.

Below, we summarise some its key conclusions on…

The Role of the Chief Compliance Officer

Taken together, these statistics … suggest that most CCOs, especially those at larger corporations, now have an opportunity to participate in high-level discussions about corporate strategy, values, and culture.

The key items under the CCO’s responsibility were:

  1. compliance training,
  2. code of conduct, and
  3. whistleblower hotline.

Primerio director John Oxenham observes that, “unfortunately, the assessment of culture was perceived as the least important among the CCOs’ responsibilities.  This is a serious problem, as pointed out in prior articles emphasising the importance of a culture of compliance, rather than sterile top-down pronouncements that often go unheeded by mid-level management.”

African Companies

While firms from the continent have increased their compliance budgets (about 16% by 10 to 19%, and many more by 1 to 9% over the past year) along with their U.S. and European counterparts, they are perceived to be dilatory in their evaluation of their own compliance efforts and results, and lacking in their ability to make full use of their compliance efforts.  In short, many still (wrongly) view dollars spent compliance as a “grudge cost.”

Significant enforcement in Africa (both in the anti-corruption and competition-law domains) across various sectors of the economy (food, technology, construction, to name a few) have awakened many corporate boardrooms across Africa to the reality of effective home-grown government enforcement.

Information Technology and Compliance

IT Systems have not fared well in the latest report:

One possible disconnect emerges when asking CCOs about the IT systems they use to fulfill their missions: Most are not terribly confident in their IT systems’ ability to do the job. Only 32 percent of respondents were confident or very confident in their IT systems, down from 41 percent in 2014

Interestingly, smaller organisations with less than $5 billion in annual revenues showed higher levels of confidence in their IT systems when juxtaposed to their larger peers.

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