COMESA Competition Commission investigates football broadcasting rights

COMESA old flag colorThe COMESA Competition Commission (CCC) recently announced that it will be investigating allegations of exclusionary conduct in relation to the Confederate of African Football’s (CAF) decision to extend an exclusive marketing of broadcasting rights and sponsorship agreement with Lagardère Sports in relation CAF tournaments.

It is not yet clear whether the CCC is investigating this matter as an ‘abuse of dominance’ case or rather, in terms of Article 16 of the CCC’s Rules, general restrictive practices.

COMESA Article 16 essentially precludes firms from implementing an agreement in the Common Market which has as its object or effect the distortion or prevention of competition in the Common Market, to the extent that it may restrict trade between member states.

The Registrar of the CCC, Meti Demissie Disasa, is quoted as saying: “The aim of the Commission’s investigation is to ensure that competition in the commercialisation and award of media and marketing rights for African Football tournaments is not undermined as a result of anti-competitive practices from market operators and that football fans can benefit from better and more coverage of the games and affordable viewing options.”

“Any agreement which contravenes Article 16 is automatically void. In light of the fact that the CAF agreement in question here is valuable and moreover only set to expire in 2028, a voiding of the contract by the CCC would likely be contested by the parties,” says competition practitioner Andreas Stargard.

cafsoccerThe CCC, which has to date largely focused on merger control, has certainly made clear strides to moving towards a greater enforcement role, as AAT first reported here. While there is still some ways to go, the current investigation follows the CCC’s announcement that it intends to conduct a market inquiry into the grocery retail sector and has also issued an announcement calling on all firms who may have exclusive agreements being implemented in the Common Market to disclose these agreements to the CCC in an effort to obtain authorisation (i.e., an exemption) from the CCC.  In 2016, Eveready applied to the CCC to have a number of distribution agreements “authorised” by the CCC.

The ECA and the CCC signed a Memorandum of Understanding in August 2016 which envisages increased cooperation between the two agencies including information exchanges.

In relation to the CAF complaint, the CCC received the complaint by the Egyptian Competition Authority (ECA) who is in turn also investigating this matter. This raises an interesting question as to whether or not the CCC has exclusive jurisdiction over this matter which, in terms of the CCC’s Rules, the CCC should have but other COMESA member-state competition authorities have challenged in the past.

UPDATE: the official CCC statement seeking stakeholder input includes the following passage regarding the agreements at issue:

It is alleged that on 12th June 2015, CAF entered into an agreement with Lagardère Sports S.A.S. for the exclusive commercialization of marketing and media rights of main regional football competitions in Africa, including the Africa Cup of Nations, African Nations Championship and African Champions League, for the period 2017 to 2028. CAF and Lagardère Sports S.A.S. are alleged to have previously entered into a similar commercialization agreement for marketing and media rights of CAF tournaments for the period 2009 to 2016. Consecutively and cumulatively, the length of the alleged exclusive agreement is twenty years. It should be noted that the commencement of investigations neither presupposes that the conduct being investigated is anti-competitive nor that any of the parties to the agreement has violated the Regulations. The Commission will, in accordance with the provisions of Part 3 of the Regulations, conduct an inquiry into the agreements concluded between CAF and Lagardère Sports S.A.S. to determine whether the alleged conduct has as its object or effect the prevention, restriction or distortion of competition in the Common Market or in a substantial part of it. In view of the foregoing, the Commission hereby gives notice to all interested stakeholders and the general public to submit their representations to the Commission … no later than 21st April 2017.

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Growing Pains: From One-Trick Pony to Full-Fledged Enforcer?

COMESA Competition Commission Expands Enforcement Ambit from Merger Control to Conduct —

CCC Seeks Information on “Potentially” Anti-Competitive Agreements

By AAT Senior Contributor, Michael-James Currie.

Breaking News: The COMESA Competition Commission (CCC) has issued a notice (the “Notice”) calling on firms to notify the CCC of any agreements (both historic and forward looking) that may be anti-competitive, for the purpose of having such agreements ‘authorised’ or ‘exempted’ in terms of Article 20 of the COMESA Competition Regulations (the “Regulations”).

In terms of Article 20 of the Regulations, agreements which are anticompetitive may be exempted by the CCC if such an ‘anticompetitive agreement’ contributes positively to the ‘public interest’ to the extent that the public interest benefit outweighs the anti-competitive effect.

In terms of the CCC’s notice 1/2013, the following agreements may well be considered to be in the public interest when evaluating whether an anti-competitive agreement or concerted practice should be exempted:

  • Joint research and development ventures;
  • Specialisation agreements; and
  • Franchising agreements

As to the agreements or concerted practices which may be anti-competitive, the Notice refers specifically to the restrictive business practices listed in Article 16 of the Regulations which states that:

The following shall be prohibited as incompatible with the Common Market:

all agreements between undertakings, decisions by associations of undertakings and concerted practices which:

(a) may affect trade between Member States; and

(b) have as their object or effect the prevention, restriction or distortion of competition within the Common Market.”

It should be noted that Article 16 is deliberately drafted broadly so as to prohibit conduct which has as its “object” the prevention, restriction or distortion of competition. Certain conduct, such as price fixing, fixing of trading terms or conditions, allocating suppliers or markets or collusive tendering may be considered as having as its ‘object’ the distortion or restriction of competition in the market. Accordingly, firms who have engaged in this type of conduct may be held liable in the absence of any evidence of an anti-competitive effect (whether actual or potential).

Says Andreas Stargard, a competition practitioner with Primerio Ltd., “[t]he CCC’s notice is a clear sign that the agency is gathering momentum in its efforts to detect and prosecute anticompetitive practices within the member states — and is going beyond its ‘one-trick pony’ status as a pure merger-control gatekeeper.  We anticipate a more active role by the CCC in conduct investigations and presumptively also enforcement actions, as opposed to its previous rubber-stamping activity of approving transactions with a COMESA community dimension (and concomitant collection of vast filing fees).”

The CCC has recently signed a number of Memoranda of Understanding and Cooperation Agreements with various member states as well as a tripartite agreement with other broader regional forums such as the Southern African Development Community and the East African Community.

COMESA old flag colorThe web of MoU’s recently concluded, which have as their primary objectives the facilitation of information exchanges and cooperation between competition agencies, is certainly a significant stride made to assist the authorities, including the CCC, in detecting and prosecuting anticompetitive practices which may be taking place across the African continent.

A further indication of the CCC’s growing appetite and confidence to identify anticompetitive practices is that the CCC has announced that it is conducting a market enquiry into the grocery retail sector.  This is the first market inquiry to be conducted by the CCC.

In terms of the CCC’s Notice, firms who have not yet notified the CCC of agreements which may be anticompetitive, have approximately one month to do so. In other words, the CC has offered a leniency ‘window’ to incentivise firms to come forward and obtain an exemption in respect of agreements already implemented which may be in contravention of Article 16 of the Regulations.

 

Antitrust exemption regime: Value-add or underutilized?

Professional Associations in Kenya not Making Use of Exemption Provisions a Major Concern for Competition Authority

Continuing in our series about the burgeoning East African Community and its nascent antitrust regime, AAT contributing author and Pr1merio attorney, Elizabeth Sisenda, writes a second installment covering the exemption regime of the region and its (surprising) underutilized status to date.

Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

Price-fixing in Kenya is prohibited under the Competition Act No. 12 of 2010 under Section 21 (3) (a) which provides that any agreements, decisions or concerted practices which directly or indirectly fix purchase or selling prices or any other trading condition is prohibited under the Act, unless they are exempt in accordance with the provisions of Section D of Part III.

Part III B further prohibits price-fixing by trade associations under Section 22 (b) (i) which provides that the making, indirectly or directly, of a recommendation by a trade association to its members or to any class of its members which relates to the prices charged, or to be charged by such members, or to any class of members, or to the margins included in the prices, or to the pricing formula used in the calculation of those prices, constitutes a restrictive trade practice under the Act.

Section 29 (1) of the Act further outlines the rules for exemptions in respect of professional associations. It provides that a professional association whose rules contain a restriction that has the effect of preventing, distorting or lessening competition in a market must apply in writing or in the prescribed manner to the Competition Authority for an exemption. Sub-section (2) goes on to explain what factors the Authority considers in order to grant an exemption for a specified period. These include:

  • Maintenance of professional standards
  • Maintenance of the ordinary functioning of the profession
  • Internationally applied norms

Section 29 (5) further gives discretion to the Authority to revoke an exemption in respect of such rules or the relevant part of the rules, at any time, if the Authority considers that any rules, either wholly or in part, should no longer be exempt under this section. For instance, if they no longer promote consumer welfare or do not enhance standards in the profession.

Price setting concerns by Law Society of Kenya, LSK

kenyaProfessional fees for advocates in Kenya are set by the Chief Justice under the Advocates Act Chapter 16 of the Laws of Kenya. Part IX Section 44 provides that the Chief Justice may by order prescribe and regulate in such manner as he/she thinks fit the remuneration of advocates in respect of all professional business, whether contentious or non-contentious. Sub-section (2) also provides that the Chief Justice may prescribe a scale of rates of commission or percentage in respect of non-contentious business.

However, Section 45 provides that agreements in respect of remuneration may be made between the advocate and the client subject to permissible professional rules under section 46 of the Act. Therefore, as much as the Chief Justice may set professional fees under the Act, there is an opportunity for the advocate and the client to agree on professional fees subject to the Act. Moreover, a client has redress to apply to the courts under Section 45 (2) to set aside or vary such an agreement on grounds that it is harsh, unconscionable, exorbitant or unreasonable according to professional practice. The decision of the court on this matter is final.

The Chief Justice periodically revises the Advocates Remuneration Order which sets out the scale of professional legal fees. In doing so the Chief Justice considers factors such as inflation and the costs of providing legal fees. The Kenyan Advocates Remuneration Order was last revised upwards in 2014, increasing professional fees by 50%. The Order was last revised in 1997. Advocates had petitioned the Chief Justice to do so in order to enable them cope with tough economic conditions. Recently there was a public discourse on whether advocates should have set fees. Stakeholders argue that the Chief Justice’s decision to adjust fees may not be entirely objective because since he or she has qualifications in law, and could revert to the profession upon retirement from office.

LSK on the other had contends that the minimum fees help protect consumers from poor services, and it reduces the price wars that would occur without the scale of fees. Under the Advocates Act, charging below the set scale of fees amounts to undercutting. This is a professional offense that could result in the concerned advocate being suspended or struck off the roll. Moreover, any agreements or instruments prepared by the concerned advocate are liable to be invalidated by the courts.

The question arose among legal stakeholders as to whether the Authority could intervene in relation to the scale of professional fees under the provisions on price-fixing. The LSK chairperson recently commented that it is beyond the jurisdiction of the Authority, as the Remuneration Order seeks to set minimum fees and not a fixed rate. However, it is clear from the provisions of Section 29 that any professional body whose rules, having regard to internationally applied standards, contain any restrictions which have the effect of preventing or substantially lessening competition in a market, must apply to the Competition Authority for an exemption of the said rules.

Price Setting Concerns by Association of Kenya Reinsurers, AKR

The Association of Kenya Reinsurers is regulated by the Kenya Reinsurance Corporation Limited Act, Cap 487A of the Laws of Kenya. The Association consists of the following companies: Kenya Reinsurance Corporation Limited, Africa Reinsurance Corporation Limited, East Africa Reinsurance Company, Zep – Re and Continental Reinsurance Limited. The Authority recently investigated this association for price fixing following a complaint lodged from the National Intelligence Service (NIS). The association, through a circular dated 2, October 2013, had advised its members on the minimum applicable premiums upon renewal of NIS Group Life Scheme for 2013/2014. Insurance companies are required by their regulator Insurance Regulatory Authority (IRA) to use an independent actuary to come up with their own individual premium rates, which they file with the IRA for approval.

The association is required under the Competition Act Section 29 (1) to apply in the prescribed manner to the Authority for an exemption in relation to any anti-competitive rules. Section 22 (2) (b) also prohibits the making, directly or indirectly, of a recommendation by a trade association to its members, or to any class of its members which relates to the prices charged, or to be charged by such members, or any such class of members, or to the margins included in the prices, or to the prices, or to the pricing formula used in the calculation of those prices. Therefore, the Association is legally bound to seek the approval of the Authority in order to set a minimum fee for any particular group of consumers. Moreover, the association may be in violation of Section 21 (f) of the Competition Act which prohibits any decisions by associations of undertakings which applies dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage, unless they are exempt in accordance with the provisions of Section D of Part III.

Conclusion

In conclusion, professional associations in Kenya should take advantage of the provisions of Section 29 of the Competition Act which allow professional associations to apply rules whose effect is the lessening of competition in the market, provided they are applied to enhance professional standards, the ordinary functioning of the profession or internationally applied norms for the benefit of consumers.

 

 

Regs & Exemptions: more on the EAC

The Exemption Regime under the East African Community’s competition regulations

Continuing in our series about the burgeoning East African Community and its nascent antitrust regime, AAT contributing author Elizabeth Sisenda is highlighting the exemption regime of the populous (146 million inhabitants) and increasingly wealthy ($150 billion GDP) region.  (For more background on the EAC regime, start here.)

Elizabeth Sisenda, LL.M (London) LL.B (CUEA) PGD Law (KSL)

Emerging markets or developing economies only recently adopted competition law and policy as an exclusive legal and economic tool for regulating markets. In previous years, restrictive trade practices were mostly handled under government price control departments or monopolies commissions. Most of the competition legislation and regulations in developing economies were promulgated within the last decade.

EAC: regulations & market conditions

The EAC, in particular, enacted its competition legislation in 2006 and has been setting up the mechanisms for its enforcement to-date through capacity building and mobilizing resources. In 2010, the EAC subsequently enacted competition regulations to assist in implementing the Act. One of the main challenges that has been encountered in the EAC with regards to the implementation of competition law and policy has been the unique economic and market structure of the member states.

The majority of the EAC member states are economies that are transitioning from state-regulation to liberalization. Consequently, several key sectors of these economies are still under quasi-governmental regulation by independent agencies established by the legislature, or explicitly protected by executive policy or subsidiary legislation.

As a result of the progressive liberalization of EAC economies, private entities have been building capacity to supply sectors of the economy where the government once had a monopolistic stake. These private firms, both local and multinational, have faced several challenges in meeting market requirements in terms of capacity. Consequently, the governments of these economies have sometimes adopted a protectionist approach for key sectors of their economies in the public interest. As much as this has often contributed to the substantial lessening of competition in the affected sectors to the detriment of consumers, these regulatory measures have been upheld by the respective governments on the grounds of national interest. The EAC, however, has been very cautious in its provisions for exemptions within the common market that could contribute to the substantial lessening of competition.

The EAC exemptions

Section 6 (3) of the EAC Competition Act provides that the Competition Authority may exempt a category of concerted practices by firms or parties, provided the concerted practice is limited to objectives which lead to an improvement of production or distribution, and whose beneficial effects, in the opinion of the Authority, outweigh its negative effects on competition. However, any exemptions granted by the Authority under this sub-section shall be applicable only if the combined market share of the parties involved in the concerted practice does not exceed 20% of the relevant market, and the agreement relating to the concerted practice does not contain any restrictive trade practice expressly prohibited under the Act. Thus, it may be contended that this exemption does not contribute to the substantial lessening of competition because it only applies to small or medium firms without any hint of market power, having a maximum market share of 10% each. Furthermore, the net effect of the concerted practice is beneficial to consumer welfare by improving access to goods or services. It also gives leeway for small producers to produce more efficiently, thus improving market conditions.

Low shares = more permissible conduct

The Authority under section 6 (1) further allows competitors whose combined market share does not exceed 10% of the relevant market to apply quantitative restraints on investment or input, output or sales, and engage in concerted practices that restrict the movement of goods within the common market. However, such conduct is expressly forbidden by the Act in the case of firms with larger market share. It may be contended that this particular provision is aimed at enabling small and medium enterprises to have a strategic opportunity to operate in an otherwise large and well-exploited market. It also does not limit competition because the firms in question have very little market share. Instead this exemption aims at protecting the competitiveness of the market by ensuring that smaller firms are not driven out of the market by larger, more efficient firms.

R&D and so on

Under section 6 (2) of the Act, the Authority also exempts 3 categories of conduct, namely: joint research and development, specialization of production or distribution and standardization of products or services, by firms whose combined market share does not exceed 20% of the relevant market. This exemption requires that the agreement relating to these categories of concerted practices should not contain any of the expressly prohibited anti-competitive practices under the Act. The Authority may contend that this exemption promotes consumer welfare by enabling smaller firms to collaborate in improving the quality of products or services in the relevant market through standardization and specialization efforts. It also enables smaller firms to participate in innovation through a collaborative effort. Most firms with this extent of combined market share would lack the resources or capacity on their own to engage in these activities that promote consumer welfare and efficiency in the relevant market.

Get permission first!

According to section 7 of the Act, any firm or person must first apply to the Authority, in accordance with the Regulations, for clearance to engage in any concerted practice. The Authority shall thereafter communicate its decision to the applicant within 45 days of receipt of the application. However, if the Authority does not communicate its decision in the specified duration, then the permission for the concerted practice shall be deemed to have been granted. Under the same section, it is an offence, punishable by a fine of not more than $10 000, to omit to seek the permission of the Authority to engage in a concerted practice. The Regulations under section 16 further provide that the undertaking seeking an exemption must pay the prescribed fees, and provide a detailed statement setting out the reasons why the concerted practice should be permitted for consideration to the Authority.

Conclusion

The EAC exemptions are therefore permitted in the common market to exercise a form of economic regulation for the purpose of ensuring that small and medium enterprises can effectively compete in a liberalized market without being driven out by firms with larger market share. In this way, the public interest is promoted to ensure that national or regional interests such as employment, allocative efficiency, specialization agreements and international competitiveness of domestic firms are taken into account. Applying exemptions does not necessarily imply the weakening of competition law enforcement. National economic policy considerations such as the maintenance and promotion of exports, changing productive capacity to stop decline in a particular industry, or maintaining stability in a particular industry are some of the policy considerations that motivate the application of exemptions. However, exemptions must be applied with caution because their application in one sector can perpetuate or induce distortions that can affect economic efficiency.

 

Christmas Eve Exemption: Petroleum industry seeks pass from antitrust provisions

south_africaStrategic Timing of Exemption Application?

Flying somewhat under the radar during the Christmas and year-end holiday season (but not under AAT’s radar), the South African Petroleum Industry Association (made up of BP, Shell, Chevron and other oil heavyweights) have sought a five-year renewal of their currently temporary holdover exemption from certain competition laws, which will expire in June 2016.  The application was made on Christmas Eve 2015 under section 10(6)(a) of the Competition Act.  SAPIA has not posted any news item or press release about its application on its web site to date.

SAPIA is seeking permission to allow its members to “cooperate and co-ordinate” on common industry logistics issues, as Andreas Stargard, a director with African competition-law and anti-corruption advisors Pr1merio notes.

“These include areas such as Single Buoy Mooring, port facilities, shipping, mooring, and interestingly also distribution as well as less well-defined ‘production and manufacturing plant shutdowns.'”

As Stargard observes, from an antitrust perspective, this could be of significant interest: production limitations would necessarily decrease available supply and thereby have the potential to drive up price, he notes.  Under the terms of SAPIA’s application, the plant shutdowns are both scheduled and unscheduled and supposedly relate to upgrades and safety measures only, according to the application.  In practice, however, such an exemption could give possibly provide the oil industry with carte blanche on competition issues and market manipulation.

In order to assuage concerns, the SAPIA members agree, in return for the exemption, that:

Competing participants in exempt agreements and practices may not share competitively sensitive information, except for the purposes described in the exemption application.

SAPIA and its members may not share information relating to setting of margins, imposition of levies and or approval of tariffs, unless required to do so by the DOE or NERSA.

The employees of any operating party who receive such information shall ensure that the information is held, maintained and used separately, confidentially and on need- to-know basis only.

The full text of the request for exemption is located here.  Interested parties and the public have 20 business days to comment on the application.

COMESA news of the day: web site down again; 5 “exemption” letters granted

COMESA Competition Commission logo

Site down – 5 “comfort letters in 5 months – Guidelines revision by June

In an almost farcical repetition of its information-technology woes, the COMESA Competition Commission’s web site (http://www.comesacompetition.org/) is off-line, yet again, after having been successfully hacked multiple times.  Whether the latest outage is due to a similar attack or simply (and hopefully) due to its webmaster’s shoring up the competition enforcer’s IT security measures remains to be seen.  (We have not yet heard back from the agency’s leadership on our request for information on the online data safety of parties’ submissions.)

In more substantive news, IFLR reports that the CCC has issued five so-called “Comfort Letters” since December 2013, exempting otherwise notifiable transactions from the duty to file (as well as the concomitant payment of the (high) filing fees), where the actual nexus to the COMESA region was negligible or non-existent.  This may help explain some of the lackluster filing statistics on which we reported previously.

The report also quotes the CCC’s head of mergers, Mr. Willard Mwemba, as saying that the revision of the Competition Guidelines should be finalised by the end of June 2014.