Namibia Competition Commission: New Franchise Laws to Address Anti-Competitive Concerns

By AAT Senior Contributor, Michael-James Currie

The CEO of the Namibian Competition Commission (NCC), Mr. Mihe Gaomab II, recently announced that the NCC has made submissions to the Minister of Trade and Industry in relation to proposed legislation which will regulate franchise models in Namibia.

Currently, there is no specific ‘franchise law’ in Namibia and moreover, franchisees are not required to apply to the Minister of Trade and Industry for registration of an ‘approval’ licences. Accordingly, there is minimal regulatory oversight in respect of franchise models.

While recognising the benefits of franchise models, the NCC is, however, concerned that there are a number of franchises in Namibia which may be anti-competitive in that the franchisor-franchisee relationship creates certain barriers to entry.

The NCC has specifically identified the practice, by way of an example, whereby certain franchisors deliberately ensure that there is a lack of competition between franchisees in the downstream market. The rationale behind this commercial strategy is allegedly so that the franchisor may extract greater royalties or franchise fees from the respective franchisees, as the franchisee is assured of a lack of competition.

The NCC views this practice as well as a various similar practices as potentially anti-competitive as the structure of certain franchise models may result in collusion between franchisees.

Unlike a number of jurisdictions, including South Africa, however, collusive conduct is not prohibited per se and a franchise agreement or model will, therefore, only amount to a contravention of the Namibia Competition Act if there is (or likely to be) an anti-competitive effect which cannot be justified or outweighed by other pro-competitive or efficiency arguments (i.e. rule of reason arguments).

The rule of reason analysis also extends to ‘minimum resale price maintenance’ (MRPM) under Namibian competition law. Again, unlike the position in South Africa, MRPM is not a per se prohibition (i.e. there is rule of reason defence available to a respondent). MRPM in terms of the South African Competition Act is a controversial topic as in many instances, the very success of a franchise model is dependent on uniformity in pricing across all franchisees. Furthermore, issues such as protecting brand reputation are also generally acceptable commercial practices which may amount to a contravention due to the strict application of the MRPM provisions under South African law.

In Namibia, franchisors therefore have somewhat more flexibility when recommending minimum resale prices than their South African counterparts. It should be noted, however, that the NCC is monitoring franchise models closely to ensure that franchisors do not overstep the mark by implementing a franchise model which has as its object or effect, the lessening of competition in the market.

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How the bourgeoisie hijacks antitrust: Justice Minister’s dubitable remarks

south_africa

“Bourgeoisie” in the people’s interest?

South African justice ministry’s highest-ranking member calls for strengthened competition enforcement against “monopoly pricing” and creation of “black bourgeoisie”

In an apparently rambling discourse, covering a vast swathe of subject-matter, South Africa‘s Justice Minister Jeff Radebe has been quoted as calling not only for the dismantling of the “over-concentrated” economy “in the hands of a few large companies,” but also for the creation of a “black bourgeoisie,” purportedly to counter-act the remaining racial imbalance in the country’s economic structure, according to an article in the South African Times Live:

On promoting competition in the economy, Radebe said the Competition Act would be strengthened to prevent monopoly pricing of goods such as steel and heavy chemicals.

This would make local manufacturing more competitive, and support infrastructure investment.

“The competition authorities will be further developed to act against cartels and ensure public interests are adequately protected in mergers and acquisitions.”

… Radebe was heckled from opposition benches when he said the emphasis would be on “creating black industrialists in productive sectors of the economy, and developing a patriotic black bourgeoisie”.

He broke from his prepared speech and asked, to laughter: “Why should it only be white bourgeoisie?

Is a “bourgeoisie” reconcilable with populist politics (and competition law)?

One cannot help but wonder what the connection between the elimination of the so-called “white bourgeoisie” and the reduction of “over-concentration” in the economy may be, if any.

Moreover, AAT respectfully expresses its doubt whether creating a “bourgeoisie” — any bourgeoisie (wholly regardless of its race) — is in the general population’s interests, as the Minister seems to think (“It is a people’s plan which has been adopted by the majority of our people and stakeholders. We are therefore calling on all South Africans to rally behind the implementation of the plan, including labour, business and civil society”).  As another article on the topic points out,

In Marxist philosophy, the term bourgeoisie denotes the social class who owns the means of production and whose societal concerns are the value of property and the preservation of capital, in order to ensure the perpetuation of their economic supremacy in society.

The prototypical bourgeois: Molière’s Monsieur Jourdain, the protagonist of the play Le Bourgeois gentilhomme (1670)

Radebe’s vision of a better & more competitive society? Replace Monsieur Jourdain with a new version of Sandton’s bourgeoisie?

Antitrust plan unclear

How the SA antitrust watchdogs (the Competition Commission and the Competition Tribunal) were going to be “further developed” – structurally, scope/jurisdictionally, personnel-based or otherwise – was not immediately clear.

The remarks were part of the minister’s statement in the parliamentary opening debate on the president’s state-of-the-nation address.

Justice Minister Jeff Radebe (Image via Times Live, by: SYDNEY SESHIBEDI)