Resale Price Maintenance in COMESA?

Second Non-Merger Investigation Opened by COMESA Enforcer

Coca-Cola’s Africa operations — recently sold in a majority shareholder exit in late 2016 by Anheuser-Busch InBev (which owned 54.5%) — were due for a major overhaul of the company’s long-term strategic plan to grow its market presence across Africa.  Yet, it is now under investigation for restrictive trade practices by the COMESA Competition Commission (“CCC”).

This is a first, of sorts: After the CCC’s original non-merger investigation into exclusive marketing practices of broadcasting rights and sponsorship agreements in relation to football tournaments (AAT reported here) ended — or hasn’t ended — with something of a thud (nothing having been reported by way of conclusion thereof), we and the world’s largest soft drink manufacturer are bracing ourselves for the outcome, if any, of the latest COMESA salvo delivered by the CCC to prove its worth to its Board.  (We surmise so as this latest, second-ever, non-merger investigation may have been prompted at least in part by the fact that the CCC’s budget was recently slashed by the regional body, and that the Commission wishes to reestablish itself in the eyes of the COMESA directorate as a worthwhile agency to fund and to bolster).

The COMESA “restrictive practices” investigation into Coca-Cola’s distribution agreements may come on the heels of its (announced, yet likely neither begun nor concluded) market enquiry into the grocery retail sector, similar to comparable market-wide investigations undertaken in Kenya and South Africa; moreover, the South African Competition Commission has likewise undertaken past investigations into restrictive vertical distribution practices engaged in by Coca-Cola in South Africa.

Actual or would-be soft drink competitors may have also brought claims of foreclosure to the CCC’s attention — likely alleging resale price maintenance, as well as possibly lack of access to key distributors due to Coca-Cola’s exclusive or quasi-exclusive contracts and the like.  According to the official COMESA Notice, the agency is investigating allegations against The Coca-Cola Company’s African subsidiary (Coca-Cola Africa (Proprietary) Limited) in relation to its distribution agreements with downstream entities in Ethiopia and Comoros, both of which are COMESA member states, albeit historically rather inactive when it comes to competition-law enforcement.

According to the antitrust-specialist publication Global Competition Review, the CCC has stated that Coca-Cola’s alleged restrictive conduct worked as planned only rarely in practice.  Yet, the agency’s spokesperson noted that the risk of anti-competitive effects remained real: “Coca-Cola is dominant in these countries, it is important that they do not abuse that dominance through distribution agreements which frustrate competition in the relevant markets”, the spokesperson said, according to GCR‘s reporting.  The magazine also quoted Pr1merio antitrust lawyer Andreas Stargard as saying that the CCC can issue injunctions and impose fines of up to 10% of Coca-Cola’s turnover in the common market for the year prior to the conduct.

Andreas Stargard

Andreas Stargard

Stargard tells AAT further that “[a]ny agreement contravening Article 16 of the COMESA Regulations is automatically void.  In addition, while the CCC is breaking new ground here (as it has not yet successfully brought any non-merger investigation to conclusion to date), the applicable Regulations foresee not only injunctive relief (cease-and-desist orders and conduct-based injunctions forcing the party to ‘take whatever action the Commission deems necessary to remove and/or diminish the effect of the illegal conduct’) but also fines, as cited above.  However, no such fine has yet been imposed in any anti-competitive conduct investigation by the CCC.”

He continues: “Under the COMESA Competition Regulations, the agency normally has an initial ‘consultative’ time period of 30-45 days to evaluate whether or not to launch a full-fledged investigation.  This period may include meetings with the concerned party or parties, any complainant, or other stakeholders.  Thereafter, if the Commission votes to open an investigation, the latter must be concluded within 180 days from the date of receipt of the request for the investigation, if it was brought by a complainant.  Here, the official Notice provides that an investigation was in fact opened, meaning the clock has begun ticking.”

Interested stakeholders have until February 28, 2018 to issue comments.

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Cartel regulation in S.A. – 2014 Oxenham

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In addition to his highlights of the latest developments in the ZA cartel sphere, AfricanAntitrust.com editor John Oxenham recently published an excellent overview of Cartel Regulation in South Africa.

A must-read.

We are making the full PDF available to our blog readers.  The piece was originally published by Global Competition Review.

John Oxenham, editor

John Oxenham, AAT editor

 

Cartels: Developments in South Africa

south_africa

AfricanAntitrust.com editor John Oxenham recently published a terrific summary of the latest developments in the ZA cartel sphere.

A teaser introduction is below.  His detailed article can be found here (PDF).
John Oxenham, editor

John Oxenham, AAT editor

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.

The article originally appeared in The African and Middle Eastern Antitrust Review 2014, which is published by Global Competition Review and is available online at: http://globalcompetitionreview.com/reviews/59/the-african-middle-eastern-antitrust-review-2014

NB: AfricanAntitrust.com author and economist Patrick Smith recently also published an article in the same edition of the Review, see: Public Interest Factors in African Competition Policy.